AMCON DISTRIBUTING CO

Previous wording

We continue to closely monitor regulatory actions and proposals from federal and state governmental and regulatory bodies, including the United States Food and Drug Administration (“FDA”), which is evaluating the possible prohibition and/or limitations on the sale of certain cigarette, e-cigarette, tobacco, and vaping products, including menthol cigarettes. If such further regulations or further product sale limitations were to be implemented, they may limit the range of products we are able to sell in related product categories and decrease overall consumer demand. Any such changes may negatively impact our revenues, gross margins, and financial results.

Current wording

We are closely monitoring the fluid nature of proposed tariffs and any impact they may have on our operations. Additionally, we remain focused on proposals from federal and state governmental and other regulatory bodies, including the United States Food and Drug Administration (“FDA”), which is evaluating the possible prohibition and/or limitation on the sale of certain cigarette, e-cigarette, tobacco, and vaping products, including menthol cigarettes. If such proposed tariffs and/or federal/state regulatory actions limit or prohibit certain products we can sell in these categories, our revenues, gross margins, and financial results may be negatively impacted.

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, 2024, as filed with the Securities and Exchange Commission. There have been no significant changes with respect to these estimates and related policies during the three months ended December 2024.

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, 2024, 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 2025.

Previous wording

The following discussion and analysis includes the Company’s results of operations for the three months ended December 2024 and December 2023:

Current wording

The following discussion and analysis includes the Company’s results of operations for the three and six months ended March 2025 and March 2024:

Previous wording

Sales in our Wholesale Segment increased $66.5 million during Q1 2025 as compared to Q1 2024. Significant items impacting sales during Q1 2025 included an increase of $56.7 million related to the combined acquisitions of Burklund and Richmond Master during Q3 2024, a $29.2 million increase in sales related to price increases implemented by cigarette manufacturers and a $9.7 million increase in sales related to the volume and mix of products in our tobacco, confectionery, foodservice, and other categories (“Other Products”), partially offset by a $29.1 million decrease in sales related to the volume and mix of cigarette cartons sold. Sales in our Retail Segment decreased $0.2 million during Q1 2025 as compared to Q1 2024. This decrease was due to approximately a $0.8 million decrease related to the closure of three stores between the comparative periods, partially offset by a $0.4 million increase related to the opening of our new Lakewood Ranch, Florida store in Q3 2024 and a $0.2 million increase related to higher sales volumes in our existing stores.

Current wording

Sales in our Wholesale Segment increased $16.9 million during Q2 2025 as compared to Q2 2024. Significant items impacting sales during Q2 2025 included an increase of $5.6 million related to the Arrowrock acquisition in Q2 2025, an increase of $37.7 million related to the combined acquisitions of Burklund and Richmond Master during Q3 2024 and a $25.3 million increase in sales related to price increases implemented by cigarette manufacturers, partially offset by a $51.3 million decrease in sales related to the volume and mix of cigarette cartons sold and a $0.4 million decrease 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 increased approximately $0.7 million during Q2 2025 as compared to Q2 2024. This increase was due to a $0.6 million increase related to the opening of our new Lakewood Ranch, Florida store in Q3 2024 and a $0.5 million increase related to higher sales volumes in our existing stores, partially offset by a $0.4 million decrease related to the closure of one store between the comparative periods.

Previous wording

Gross profit in our Wholesale Segment increased $3.8 million during Q1 2025 as compared to Q1 2024. Significant items impacting gross profit during Q1 2025 included an increase of $3.2 million related to the combined acquisitions of Burklund and Richmond Master during Q3 2024, a $0.5 million increase in gross profit related to the mix of volumes and promotions in our Other Products category, and a $0.1 million increase in gross profit due to the timing and related benefits of cigarette manufacturer price increases. Gross profit in our Retail Segment decreased $0.2 million during Q1 2025 as compared to Q1 2024. This change was primarily related to a $0.3 million decrease related to the closure of three stores between the comparative periods, partially offset by a $0.1 million increase related to the opening of our new Lakewood Ranch store in Q3 2024.

Current wording

Gross profit in our Wholesale Segment increased $0.4 million during Q2 2025 as compared to Q2 2024. Significant items impacting gross profit during Q2 2025 included an increase of $0.3 million related to the Arrowrock acquisition in Q2 2025 and an increase of $2.1 million related to the combined acquisitions of Burklund and Richmond Master during Q3 2024, partially offset by a $1.0 million decrease in gross profit related to the volume and mix of cigarette cartons sold between the comparative periods, a $0.8 million decrease in gross profit related to the mix of volumes and promotions in our Other Products category, and a $0.2 million decrease in gross profit due to the timing and related benefits of cigarette manufacturer price increases. Gross profit in our Retail Segment increased approximately $0.3 million during Q2 2025 as compared to Q2 2024. This change was primarily related to a $0.3 million increase in gross profit related to same store sales and a $0.2 million increase related to the opening of our new Lakewood Ranch store in Q3 2024, partially offset by a $0.2 million decrease related to the closure of one store between the comparative periods.

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 Q1 2025 operating expenses increased $3.7 million as compared to Q1 2024. Significant items impacting operating expenses during Q1 2025 included an increase of $2.7 million related to the combined acquisitions of Burklund and Richmond Master during Q3 2024, a $1.1 million increase in other Wholesale Segment operating costs, a $1.0 million increase in health insurance costs, a $0.2 million increase related to employee compensation and benefit costs, and a $0.2 million increase in operating expense costs in our Retail Segment, partially offset by a $1.5 million decrease related to the fair value adjustment of a contingent consideration liability. The increase in our Retail Segment was primarily due to a $0.3 million increase related to the opening of our new Lakewood Ranch store in Q3 2024, an increase of $0.2 million in our existing stores, partially offset by a $0.3 million decrease related to the closure of three stores between the comparative periods.

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 Q2 2025 operating expenses increased $3.6 million as compared to Q2 2024. Significant items impacting operating expenses during Q2 2025 included an increase of $0.4 million related to the Arrowrock acquisition in Q2 2025, an increase of $2.6 million related to the combined acquisitions of Burklund and Richmond Master during Q3 2024, a $0.5 million increase in other Wholesale Segment operating costs, a $0.1 million increase in health insurance costs, and a $0.3 million increase in operating expense costs in our Retail Segment, partially offset by a $0.3 million decrease related to employee compensation and benefit costs. The increase in our Retail Segment was primarily due to a $0.3 million increase related to the opening of our new Lakewood Ranch store in Q3 2024, an increase of $0.2 million in our existing stores, partially offset by a $0.2 million decrease related to the closure of one store between the comparative periods.

Previous wording

Interest expense increased $0.5 million in Q1 2025 as compared to Q1 2024, primarily related to higher outstanding debt balances in the current period related to the acquisitions of Burklund and Richmond Master in Q3 2024 and increased capital expenditures.

Current wording

Interest expense increased less than $0.1 million in Q2 2025 as compared to Q2 2024, primarily due to higher outstanding debt balances in the current period related to the acquisitions of Arrowrock in Q2 2025 and Burklund and Richmond Master in Q3 2024, partially offset by lower interest rates in the current period.

Previous wording

The change in the Q1 2025 income tax rate as compared to Q1 2024 was primarily related to non-deductible compensation expense in relation to the amount of income from operations before income tax expense and variances in the average effective state income tax rates between the comparative periods.

Current wording

The change in the Q2 2025 income tax rate as compared to Q2 2024 was primarily related to non-deductible compensation expense 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. In Q1 2025, the Company amended the Henry’s Facility, increasing its aggregate borrowing capacity from $40.0 million to $45.0 million and extending the maturity date to February 2028. In Q1 2025, the Company amended the Team Sledd Facility to designate the Secured Overnight Financing Rate (“SOFR”) as the primary borrowing rate.

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 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.

Previous wording

At December 2024, the Facilities had a total combined borrowing capacity of $305.0 million, which includes provisions for up to $30.0 million in credit advances for certain inventory purchases, which are limited by accounts receivable and inventory qualifications, and the value of certain real estate collateral. The AMCON Facility matures in June 2027, the Henry’s Facility matures in February 2028, and the Team Sledd Facility matures in March 2028, each without a penalty for prepayment. Obligations under the Facilities are collateralized by substantially all of the Company’s respective equipment, intangibles, inventories, accounts receivable, and certain real estate. The Facilities each feature an unused commitment fee and springing financial covenants. Borrowings under the Facilities bear interest at SOFR, plus any applicable spreads.

Current wording

At March 2025, the Facilities had a total combined borrowing capacity of $305.0 million, which includes provisions for up to $30.0 million in credit advances for certain inventory purchases, which are limited by accounts receivable and inventory qualifications, and the value of certain real estate collateral. The AMCON Facility matures in June 2027, the Henry’s Facility matures in February 2028, and the Team Sledd Facility matures in March 2028, each without a penalty for prepayment. Obligations under the Facilities are collateralized by substantially all of the Company’s respective

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 December 2024 was $247.5 million, of which $165.9 million was outstanding, leaving $81.6 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. Based on the collateral and loan limits as defined in the Facility agreements, the credit limit of the combined Facilities at March 2025 was $220.7 million, of which $142.3 million was outstanding, leaving $78.4 million available.

Previous wording

The average interest rate of the Facilities was 5.96% at December 2024. For the three months ended December 2024, the peak borrowings under the Facilities was $197.1 million, and the average borrowings and average availability under the Facilities was $162.1 million and $73.4 million, respectively.

Current wording

The average interest rate of the Facilities was 5.76% at March 2025. For the six months ended March 2025, the peak borrowings under the Facilities was $197.1 million, and the average borrowings and average availability under the Facilities was $158.9 million and $73.2 million, respectively.

Previous wording

The Company has issued letters of credit totaling $2.0 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 $3.1 million to its workers’ compensation insurance carriers as part of its self-insured loss control program.