AMCON DISTRIBUTING CO

Previous wording

Similar to other retail formats, the convenience retailing sector which we serve continues to experience a challenging operating environment with consumer behavior and discretionary spending lagging. 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 resulted in higher operating costs in areas such as product costs, labor and employee benefits, equipment, and insurance, resulting in additional consolidation across our entire industry.

Current 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, labor and employee benefits, equipment, and insurance.

Previous 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.

Current wording

We continue to monitor the impact that changes in tariff rates may have on our operations. Additionally, we remain focused on proposals from regulatory bodies, including the United States Food and Drug Administration (“FDA”), which is evaluating potential limitations and/or prohibitions on the sale of certain products sold by our Company such as cigarettes (including menthol cigarettes), e-cigarettes, tobacco, and vaping products.

Previous wording

In response to this operating environment, the Company has made a number of strategic investments to enhance its competitive position over time. These strategic investments include, but are not limited to, expanding the depth of our foodservice programs and facilities, the completion of a number of tuck-in acquisitions which have expanded our coverage footprint and ability to service growth-oriented customers, the expansion of our consumer products advertising, design, and electronic display programs, and continued investments in our own proprietary technology solutions. Our Company now ranks as the third largest Convenience Distributor in the United States as measured by territory covered providing an attractive geographic platform to accommodate future growth opportunities.

Current wording

In response to this operating environment, the Company has made a number of strategic investments to enhance its competitive position over time. These strategic investments include expanding the depth of our foodservice programs and facilities, expansion of our geographic coverage footprint to enhance services for growth-oriented customers, and continued investments in proprietary technology solutions.

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 six months ended March 2025.

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 nine months ended June 2025.

Previous 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:

Current wording

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

Previous 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.

Current wording

Sales in our Wholesale Segment increased $20.6 million during Q3 2025 as compared to Q3 2024. Significant items impacting sales during Q3 2025 included an increase of $8.8 million related to the Arrowrock acquisition in Q2 2025, an increase of $26.4 million related to the acquisition of Richmond Master during Q3 2024, a $31.1 million increase in sales related to price increases implemented by cigarette manufacturers, and a $6.0 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 $51.7 million decrease in sales related to the volume and mix of cigarette cartons sold. Sales in our Retail Segment increased approximately $1.1 million during Q3 2025 as compared to Q3 2024, primarily due to higher sales volumes in our existing stores.

Previous 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.

Current wording

Gross profit in our Wholesale Segment increased $1.2 million during Q3 2025 as compared to Q3 2024. Significant items impacting gross profit during Q3 2025 included an increase of $0.5 million related to the Arrowrock acquisition in Q2 2025, an increase of $1.5 million related to the acquisition of Richmond Master during Q3 2024, and a $1.0 million increase in gross profit related to the mix of volumes and promotions in our Other Products category, partially offset by a $1.4 million decrease in gross profit related to the volume and mix of cigarette cartons sold between the comparative periods and 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 increased approximately $0.5 million during Q3 2025 as compared to Q3 2024, primarily due to an increase 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 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.

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 2025 operating expenses increased $2.4 million as compared to Q3 2024. Significant items impacting operating expenses during Q3 2025 included an increase of $0.5 million related to the Arrowrock acquisition in Q2 2025, an increase of $1.1 million related to the acquisition of Richmond Master during Q3 2024, a $1.2 million increase in health and other insurance costs, and a $0.3 million increase in operating expense costs in our Retail Segment, partially offset by a $0.5 million decrease related to employee compensation and benefit costs and a $0.2 million decrease in other Wholesale Segment operating costs. The increase in our Retail Segment was primarily due to an increase in costs associated with our existing stores.

Previous 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.

Current wording

Interest expense decreased $0.2 million in Q3 2025 as compared to Q3 2024, primarily due to lower interest rates in the current period, partially offset by 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.

Previous 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.

Current wording

The change in the Q3 2025 income tax rate as compared to Q3 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.

Previous wording

Sales in our Wholesale Segment increased $83.4 million during the six months ended March 2025 as compared to the same prior year period. Significant items impacting sales during the period included an increase of $5.6 million related to the Arrowrock acquisition in Q2 2025, an increase of $94.5 million related to the combined acquisitions of Burklund and Richmond Master during Q3 2024, a $54.5 million increase in sales related to price increases implemented by cigarette manufacturers and a $9.2 million increase in sales related to the volume and mix of products in our Other Products category, partially offset by a $80.4 million decrease in sales related to the volume and mix of cigarette cartons sold. Sales in our Retail Segment increased approximately $0.5 million during the six months ended March 2025 as compared to the same prior year period. This increase was due to a $1.0 million increase related to the opening of our new Lakewood Ranch, Florida store in Q3 2024 and a $0.6 million increase related to higher sales volumes in our existing stores, partially offset by a $1.1 million decrease related to the closure of three stores between the comparative periods.

Current wording

Sales in our Wholesale Segment increased $104.1 million during the nine months ended June 2025 as compared to the same prior year period. Significant items impacting sales during the period included an increase of $14.4 million related to the Arrowrock acquisition in Q2 2025, an increase of $120.8 million related to the combined acquisitions of Burklund and Richmond Master during Q3 2024, an $85.7 million increase in sales related to price increases implemented by cigarette manufacturers and a $15.3 million increase in sales related to the volume and mix of products in our Other Products category, partially offset by a $132.1 million decrease in sales related to the volume and mix of cigarette cartons sold. Sales in our Retail Segment increased approximately $1.6 million during the nine months ended June 2025 as compared to the same prior year period. This increase was due to a $2.7 million increase related to higher sales volumes in our existing stores, partially offset by a $1.1 million decrease related to the closure of three stores between the comparative periods.

Previous wording

Gross profit in our Wholesale Segment increased $4.2 million during the six months ended March 2025 as compared to the same prior year period. Significant items impacting gross profit during the period included an increase of $0.3 million related to the Arrowrock acquisition in Q2 2025 and an increase of $5.3 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 $0.3 million decrease in gross profit related to the mix of volumes and promotions in our Other Products category, and a $0.1 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 $0.2 million during the six months ended March 2025 as compared to the same prior year period. This change was primarily related to a $0.3 million increase in gross profit related to same store sales and a $0.3 million increase

Current wording

Gross profit in our Wholesale Segment increased $5.3 million during the nine months ended June 2025 as compared to the same prior year period. Significant items impacting gross profit during the period included an increase of $0.8 million related to the Arrowrock acquisition in Q2 2025, an increase of $6.8 million related to the combined acquisitions of Burklund and Richmond Master during Q3 2024, and a $0.7 million increase in gross profit related to the mix of volumes and promotions in our Other Products category, partially offset by a $2.5 million decrease in gross profit related to the volume and mix of cigarette cartons sold between the comparative periods, and 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 increased approximately $0.6 million during the nine months ended June 2025 as compared to the same prior year period. This change was primarily related to a $1.0 million increase in gross profit related to same store sales, partially offset by a $0.4 million decrease related to the closure of three stores between the comparative periods.

Previous wording

Operating expenses increased $7.3 million during the six months ended March 2025 as compared to the same prior year period. Significant items impacting operating expenses during the period included an increase of $0.4 million related to the Arrowrock acquisition in Q2 2025, an increase of $5.4 million related to the combined acquisitions of Burklund and Richmond Master during Q3 2024, a $1.5 million increase in other Wholesale Segment operating costs, a $1.0 million increase in health insurance costs, and a $0.5 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 $0.6 million increase related to the opening of our new Lakewood Ranch store in Q3 2024 and an increase of $0.4 million in our existing stores, partially offset by a $0.5 million decrease related to the closure of three stores between the comparative periods.

Current wording

Operating expenses increased $9.8 million during the nine months ended June 2025 as compared to the same prior year period. Significant items impacting operating expenses during the period included an increase of $0.9 million related to the Arrowrock acquisition in Q2 2025, an increase of $6.5 million related to the combined acquisitions of Burklund and Richmond Master during Q3 2024, a $2.3 million increase in health and other insurance costs, a $1.3 million increase in other Wholesale Segment operating costs, and a $0.8 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 and a $0.5 million decrease related to employee compensation and benefit costs. The increase in our Retail Segment was primarily due to a $1.3 million increase in costs associated with our existing stores, partially offset by a $0.5 million decrease related to the closure of three stores between the comparative periods.

Previous wording

Interest expense increased $0.6 million during the six months ended March 2025 as compared to the same prior year period, 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.

Current wording

Interest expense increased $0.3 million during the nine months ended June 2025 as compared to the same prior year period, 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 Company’s effective tax rate during the six month period ended March 2025 as compared to the respective prior year period 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.

Current wording

The change in the Company’s effective tax rate during the nine month period ended June 2025 as compared to the respective prior year period 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.

Previous 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

Current wording

At June 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 equipment, intangibles, inventories, accounts receivable, and certain real estate. The Facilities each feature an unused commitment fee

Previous wording

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

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 2025 was $220.7 million, of which $142.3 million was outstanding, leaving $78.4 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 June 2025 was $241.0 million, of which $154.6 million was outstanding, leaving $86.4 million available.

Previous 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.

Current wording

The average interest rate of the Facilities was 5.77% at June 2025. For the nine months ended June 2025, the peak borrowings under the Facilities was $197.1 million, and the average borrowings and average availability under the Facilities was $161.8 million and $74.7 million, respectively.

Previous wording

Team Sledd’s two notes payable and the Team Sledd Facility contain cross default provisions. The Henry’s note payable and the Henry’s Facility contain cross default provisions. There were no such cross defaults for either Team Sledd or Henry’s at March 2025. Additionally, the Team Sledd Facility and the Henry’s Facility are non-recourse to AMCON Distributing Company, are not guaranteed by AMCON Distributing Company and have no cross default provisions applicable to AMCON Distributing Company. The Company and its subsidiaries, including Team Sledd and Henry’s, were in compliance with all of the financial covenants under the respective Facilities at March 2025.

Current wording

The Team Sledd Facility and Team Sledd’s two notes payable contain cross default provisions. The Henry’s Facility and the Henry’s note payable also contain cross default provisions. There were no such cross defaults for either Team Sledd or Henry’s at June 2025. Additionally, the Team Sledd Facility and the Henry’s Facility are non-recourse to AMCON Distributing Company, are not guaranteed by AMCON Distributing Company and have no cross default provisions applicable to AMCON Distributing Company. The Company and its subsidiaries, including Team Sledd and Henry’s, were in compliance with all of the financial covenants under the respective Facilities at June 2025.

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 2025, respectively, and $0.3 million and $0.4 million for the three- and six-month periods ended March 2024, 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 2025, respectively, and $0.1 million and $0.5 million for the three- and nine-month periods ended June 2024, respectively.