##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the transition period from _________ to _________
 Commission File Number 1-15589
 
 
 AMCON Distributing Company
  Delaware
    
    47-0702918(State or other jurisdiction 
of incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 7405 Irvington Road, Omaha NE
    
    68122(Address of principal executive offices)
    
    (Zip code)
 Registrants telephone number, including area code: (402) 331-3727
 þ o
 Yes o No o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ




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##### 



Form 10-Q
2nd Quarter
 INDEX
 PAGEPART I   FINANCIAL INFORMATIONItem 1. Financial Statements:Condensed consolidated balance sheets at
March 31, 2010 (unaudited) and September 30, 2009
    
    
    3Condensed consolidated unaudited statements of operations for the three
and six months ended March 31, 2010
and 2009
    
    
    4Condensed consolidated unaudited statements of cash flows
for the six months ended March 31, 2010 and 2009
    
    
    5Notes to condensed consolidated unaudited
financial statements
    
    
    7Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    21Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    31Item 4. Controls and Procedures
    
    
    31PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    32Item 1A. Risk Factors
    
    
    32Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    32Item 3. Defaults Upon Senior Securities
    
    
    32Item 4.
[Removed and Reserved]
    
    
    32Item 5. Other Information
    
    
    32Item 6. Exhibits
    
    
    33Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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##### Table of Contents



PART I   FINANCIAL INFORMATION
 
 Item 1.
    
    Financial Statements
 AMCON Distributing Company and Subsidiaries
 
 Condensed Consolidated Balance Sheets
 March 31, 2010 and September 30, 2009
 March 2010
    
    
    September 2009(Unaudited)ASSETSCurrent assets:Cash
    
    $
    529,408
    
    
    $
    309,914Accounts receivable, less allowance for doubtful
accounts of $1.1 million and $0.9 million,
at March 2010 and September 2009
    
    
    27,723,560
    
    
    
    28,393,198Inventories, net
    
    
    35,325,691
    
    
    
    34,486,027Deferred income taxes
    
    
    1,706,641
    
    
    
    1,701,568Prepaid and other current assets
    
    
    2,243,351
    
    
    
    1,728,576Total current assets
    
    
    67,528,651
    
    
    
    66,619,283Property and equipment, net
    
    
    11,863,643
    
    
    
    11,256,627Goodwill
    
    
    6,149,168
    
    
    
    5,848,808Other intangible assets
    
    
    4,908,894
    
    
    
    3,373,269Other assets
    
    
    1,073,482
    
    
    
    1,026,395$
    91,523,838
    
    
    $
    88,124,382LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    16,453,293
    
    
    $
    15,222,689Accrued expenses
    
    
    5,706,747
    
    
    
    6,768,924Accrued wages, salaries and bonuses
    
    
    2,441,473
    
    
    
    3,257,832Income taxes payable
    
    
    876,919
    
    
    
    3,984,258Current maturities of credit facility
    
    
    76,267
    
    
    
    177,867Current maturities of long-term debt
    
    
    965,905
    
    
    
    1,470,445Total current liabilities
    
    
    26,520,604
    
    
    
    30,882,015Credit facility, less current maturities
    
    
    25,782,537
    
    
    
    22,655,861Deferred income taxes
    
    
    1,227,590
    
    
    
    1,256,713Long-term debt, less current maturities
    
    
    5,637,282
    
    
    
    5,066,185Other long-term liabilities
    
    
    459,966
    
    
    
    Series A cumulative, convertible preferred stock, $.01 par value
100,000 shares authorized and issued, liquidation preference
$25.00 per share
    
    
    2,500,000
    
    
    
    2,500,000Series B cumulative, convertible preferred stock, $.01 par value
80,000 shares authorized and issued, liquidation preference
$25.00 per share
    
    
    2,000,000
    
    
    
    2,000,000Shareholders equity:Preferred stock, $0.01 par, 1,000,000 shares authorized,
180,000 shares outstanding and issued in Series A and B
referred to above
    
    
    
    
    
    
    Common stock, $0.01 par value, 3,000,000 shares authorized,
575,508 shares outstanding at March 2010 and 573,232 shares
outstanding at September 2009
    
    
    5,755
    
    
    
    5,732Additional paid-in capital
    
    
    8,084,026
    
    
    
    7,617,494Retained earnings
    
    
    19,306,078
    
    
    
    16,140,382Total shareholders equity
    
    
    27,395,859
    
    
    
    23,763,608$
    91,523,838
    
    
    $
    88,124,382
   3




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AMCON Distributing Company and Subsidiaries
 
 Condensed Consolidated Unaudited Statements of Operations
 for the three and six months ended March 31, 2010 and 2009
 For the three months
    
    
    For the six monthsended March
    
    
    ended March2010
    
    
    2009
    
    
    2010
    
    
    2009Sales (including excise taxes of $76.9
million and $43.3 million, and $158.4
million and $93.6 million, respectively)
    
    $
    230,499,129
    
    
    $
    195,442,246
    
    
    $
    474,440,167
    
    
    $
    412,819,608Cost of sales
    
    
    213,558,955
    
    
    
    178,195,212
    
    
    
    440,271,980
    
    
    
    379,727,926Gross profit
    
    
    16,940,174
    
    
    
    17,247,034
    
    
    
    34,168,187
    
    
    
    33,091,682Selling, general and administrative expenses
    
    
    13,365,802
    
    
    
    13,027,140
    
    
    
    27,144,541
    
    
    
    25,824,722Depreciation and amortization
    
    
    415,572
    
    
    
    300,988
    
    
    
    802,841
    
    
    
    611,32213,781,374
    
    
    
    13,328,128
    
    
    
    27,947,382
    
    
    
    26,436,044Operating income
    
    
    3,158,800
    
    
    
    3,918,906
    
    
    
    6,220,805
    
    
    
    6,655,638Other expense (income):Interest expense
    
    
    368,425
    
    
    
    408,587
    
    
    
    773,670
    
    
    
    897,786Other (income), net
    
    
    (23,046
    )
    
    
    (26,476
    )
    
    
    (36,426
    )
    
    
    (40,543
    )345,379
    
    
    
    382,111
    
    
    
    737,244
    
    
    
    857,243Income from continuing operations
before income tax
    
    
    2,813,421
    
    
    
    3,536,795
    
    
    
    5,483,561
    
    
    
    5,798,395Income tax expense
    
    
    1,022,000
    
    
    
    1,343,000
    
    
    
    1,963,000
    
    
    
    2,203,000Income from continuing operations
    
    
    1,791,421
    
    
    
    2,193,795
    
    
    
    3,520,561
    
    
    
    3,595,395Loss from discontinued operations,
net of income tax benefit of $0.1
million in each fiscal period
    
    
    
    
    
    
    (97,437
    )
    
    
    
    
    
    
    (199,475
    )Net income
    
    
    1,791,421
    
    
    
    2,096,358
    
    
    
    3,520,561
    
    
    
    3,395,920Preferred stock dividend requirements
    
    
    (73,239
    )
    
    
    (314,201
    )
    
    
    (148,106
    )
    
    
    (419,734
    )Net income available to common shareholders
    
    $
    1,718,182
    
    
    $
    1,782,157
    
    
    $
    3,372,455
    
    
    $
    2,976,186Basic earnings (loss) per share
available to common shareholders:Continuing operations
    
    $
    3.05
    
    
    $
    3.43
    
    
    $
    6.00
    
    
    $
    5.80Discontinued operations
    
    
    
    
    
    
    (0.18
    )
    
    
    
    
    
    
    (0.36
    )Net basic earnings per share
available to common shareholders
    
    $
    3.05
    
    
    $
    3.25
    
    
    $
    6.00
    
    
    $
    5.44Diluted earnings (loss) per share
available to common shareholders:Continuing operations
    
    $
    2.40
    
    
    $
    2.72
    
    
    $
    4.72
    
    
    $
    4.33Discontinued operations
    
    
    
    
    
    
    (0.12
    )
    
    
    
    
    
    
    (0.24
    )Net diluted earnings per share
available to common shareholders
    
    $
    2.40
    
    
    $
    2.60
    
    
    $
    4.72
    
    
    $
    4.09Weighted average shares outstanding:Basic
    
    
    564,216
    
    
    
    548,619
    
    
    
    562,145
    
    
    
    547,089Diluted
    
    
    746,873
    
    
    
    805,236
    
    
    
    745,773
    
    
    
    830,923
   4




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AMCON Distributing Company and Subsidiaries
 
 Condensed Consolidated Unaudited Statements of Cash Flows
for the six months ended March 31, 2010 and 2009
 2010
    
    
    2009CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    3,520,561
    
    
    $
    3,395,920Deduct: Loss from discontinued operations, net of tax
    
    
    
    
    
    
    (199,475
    )Income from continuing operations
    
    
    3,520,561
    
    
    
    3,595,395Adjustments to reconcile net income from
continuing operations to net cash flows
from operating activities:Depreciation
    
    
    678,860
    
    
    
    611,322Amortization
    
    
    123,981
    
    
    
    Gain on sale of property and equipment
    
    
    (16,935
    )
    
    
    (47,700
    )Stock based compensation
    
    
    267,464
    
    
    
    265,800Net excess tax (benefit) deficiency on equity-based awards
    
    
    (130,126
    )
    
    
    16,592Deferred income taxes
    
    
    (34,196
    )
    
    
    (222,412
    )Provision for losses on doubtful accounts
    
    
    178,367
    
    
    
    346,000Provision for losses on inventory obsolescence
    
    
    16,393
    
    
    
    327,673Changes in assets and liabilities:Accounts receivable
    
    
    491,271
    
    
    
    5,859,370Inventories
    
    
    1,125,441
    
    
    
    6,480,136Prepaid and other current assets
    
    
    (519,415
    )
    
    
    (735,490
    )Other assets
    
    
    (47,087
    )
    
    
    107,646Accounts payable
    
    
    1,144,665
    
    
    
    (2,852,021
    )Accrued expenses and accrued wages, salaries and bonuses
    
    
    (1,878,536
    )
    
    
    2,641,991Income tax payable
    
    
    (2,977,213
    )
    
    
    2,045,058Net cash flows from operating activities  continuing operations
    
    
    1,943,495
    
    
    
    18,439,360Net cash flows from operating activities  discontinued operations
    
    
    
    
    
    
    42,692Net cash flows from operating activities
    
    
    1,943,495
    
    
    
    18,482,052CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of property and equipment
    
    
    (1,102,929
    )
    
    
    (497,401
    )Proceeds from sales of property and equipment
    
    
    42,905
    
    
    
    76,405Acquisition
    
    
    (3,099,836
    )
    
    
    Net cash flows from investing activities
    
    
    (4,159,860
    )
    
    
    (420,996
    )CASH FLOWS FROM FINANCING ACTIVITIES:Net borrowings (payments) on bank credit agreements
    
    
    3,025,076
    
    
    
    (15,380,790
    )Principal payments on long-term debt
    
    
    (433,443
    )
    
    
    (397,410
    )Proceeds from exercise of stock options
    
    
    68,965
    
    
    
    Net excess tax benefit (deficiency) on equity-based awards
    
    
    130,126
    
    
    
    (16,592
    )Redemption of Series C convertible preferred stock
    
    
    
    
    
    
    (2,000,000
    )Dividends paid on preferred stock
    
    
    (148,106
    )
    
    
    (198,106
    )Dividends on common stock
    
    
    (206,759
    )
    
    
    (114,079
    )Net cash flows from financing activities
    
    
    2,435,859
    
    
    
    (18,106,977
    )Net change in cash
    
    
    219,494
    
    
    
    (45,921
    )Cash, beginning of period
    
    
    309,914
    
    
    
    457,681Cash, end of period
    
    $
    529,408
    
    
    $
    411,760
  5




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##### Table of Contents



2010
    
    
    2009Supplemental disclosure of cash flow information:Cash paid during the period for interest
    
    $
    760,727
    
    
    $
    968,296Cash paid during the period for income taxes
    
    
    4,974,408
    
    
    
    264,355Supplemental disclosure of non-cash information:Equipment acquisitions classified as accounts payable
    
    
    85,939
    
    
    
    Constructive dividends on Series A, B, and C
Convertible Preferred Stock
    
    
    
    
    
    
    221,628Business acquisition (see Note 2):Inventory
    
    
    1,981,498
    
    
    
    Property and equipment
    
    
    122,978
    
    
    
    Customer relationships intangible asset
    
    
    1,620,000
    
    
    
    Goodwill
    
    
    300,360
    
    
    
    Note payable
    
    
    500,000
    
    
    
    Contingent consideration
    
    
    425,000
    
    
    
    
   6




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AMCON Distributing Company and Subsidiaries
 
 Notes to Condensed Consolidated Unaudited Financial Statements
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
  
    
    Our wholesale distribution segment (ADC) distributes consumer products in the Central and
Rocky Mountain regions of the United States.
    
    Our retail health food segment operates fourteen health food retail stores located
throughout the Midwest and Florida.
 WHOLESALE
DISTRIBUTION SEGMENT
   RETAIL
HEALTH FOOD SEGMENT
   7




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FINANCIAL
STATEMENTS
  Adoption of New Accounting Standards
    Recently Issued Accounting Pronouncements
  (Accounting for Transfers of Financial Assets)
 (Amendments to FASB Interpretation: Consolidation of Variable Interest Entities)
  8




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##### Table of Contents



2. ACQUISITION
   Total
Consideration (in millions):
    
    AmountCash
    
    $
    3.1Note payable
    
    
    0.5Fair value of contingent consideration
    
    
    0.4Fair value of consideration transferred
    
    $
    4.0
 WeightedAverageAmortizationRecognized
amounts of identifiable assets acquired (in millions):
    
    Amount
    
    
    PeriodInventory
    
    $
    2.0
    
    
    
    Property and equipment
    
    
    0.1
    
    
    5 yearsIdentifiable intangible assets:Customer relationships
    
    
    1.6
    
    
    8 yearsTotal identifiable net assets
    
    
    3.7Goodwill
    
    
    0.3Total identifiable assets and goodwill
    
    $
    4.0
  9




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##### Table of Contents



Three months ended
    
    
    Six months endedMarch
    
    
    March(In millions)
    
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Revenue  Actual Results
    
    
    $
    12.9
    
    
    $
    
    
    
    $
    22.2
    
    
    $
    Revenue  Supplemental pro forma results
    
    
    $
    12.9
    
    
    $
    12.9
    
    
    $
    27.2
    
    
    $
    24.5Net Income  Actual Results
    
    
    $
    0.1
    
    
    $
    
    
    
    $
    0.2
    
    
    $
    Net Income  Supplemental pro forma results
    
    
    $
    0.1
    
    
    $
    0.2
    
    
    $
    0.2
    
    
    $
    0.2
 3. CONVERTIBLE PREFERRED STOCK
  Series A
    
    
    Series BDate of issuance:
    
    June 17, 2004
    
    
    October 8, 2004Optionally redeemable beginning
    
    June 18, 2006
    
    
    October 9, 2006Par value (gross proceeds):
    
    $
    2,500,000
    
    
    $
    2,000,000Number of shares:
    
    
    100,000
    
    
    
    80,000Liquidation preference per share:
    
    $
    25.00
    
    
    $
    25.00Conversion price per share:
    
    $
    30.31
    
    
    $
    24.65Number of common shares in
which to be converted:
    
    
    82,481
    
    
    
    81,136Dividend rate:
    
    
    6.785
    %
    
    
    6.37
    %
   10




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##### Table of Contents



4. INVENTORIES
  5. GOODWILL AND OTHER INTANGIBLE ASSETS
  March
    
    
    September2010
    
    
    2009Wholesale Distribution Segment
    
    $
    4,236,291
    
    
    $
    3,935,931Retail Health Food Segment
    
    
    1,912,877
    
    
    
    1,912,877$
    6,149,168
    
    
    $
    5,848,808
  March
    
    
    September2010
    
    
    2009Trademarks and tradenames
    
    $
    3,373,269
    
    
    $
    3,373,269Customer relationships (less accumulated
amortization of $84,375)
    
    
    1,535,625
    
    
    
    $
    4,908,894
    
    
    $
    3,373,269
  11




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##### Table of Contents



Fiscal
    
    
    Fiscal
    
    
    Fiscal
    
    
    Fiscal2010/1/
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    ThereafterCustomer relationships
    
    
    101,250
    
    
    
    202,500
    
    
    
    202,500
    
    
    
    202,500
    
    
    
    826,875
 /1/
    
    Represents amortization for the remaining six months of Fiscal 2010. 6. DIVIDENDS:
  7. EARNINGS (LOSS) PER SHARE
   12




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For the three months ended March2010
    
    
    2009Basic
    
    
    Diluted
    
    
    Basic
    
    
    DilutedWeighted average common
shares outstanding
    
    
    564,216
    
    
    
    564,216
    
    
    
    548,619
    
    
    
    548,619Weighted average of net
additional shares outstanding
assuming dilutive options
exercised and proceeds
used to purchase treasury
stock and conversion of
preferred stock /1/
    
    
    
    
    
    
    182,657
    
    
    
    
    
    
    
    256,617Weighted average number of
shares outstanding
    
    
    564,216
    
    
    
    746,873
    
    
    
    548,619
    
    
    
    805,236Income from continuing operations
    
    $
    1,791,421
    
    
    $
    1,791,421
    
    
    $
    2,193,795
    
    
    $
    2,193,795Deduct: convertible preferred
stock dividends /2/
    
    
    (73,239
    )
    
    
    
    
    
    
    (314,201
    )
    
    
    1,718,182
    
    
    
    1,791,421
    
    
    
    1,879,594
    
    
    
    2,193,795Loss from discontinued operations
    
    $
    
    
    
    $
    
    
    
    $
    (97,437
    )
    
    $
    (97,437
    )Net income available
to common shareholders
    
    $
    1,718,182
    
    
    $
    1,791,421
    
    
    $
    1,782,157
    
    
    $
    2,096,358Income per share from
continuing operations
    
    $
    3.05
    
    
    $
    2.40
    
    
    $
    3.43
    
    
    $
    2.72Loss per share from
discontinued operations
    
    $
    
    
    
    $
    
    
    
    $
    (0.18
    )
    
    $
    (0.12
    )Net earnings per share
available to common shareholders
    
    $
    3.05
    
    
    $
    2.40
    
    
    $
    3.25
    
    
    $
    2.60
 /1/
    
    Diluted earnings per share calculation includes all stock options,
convertible preferred stock, and restricted stock deemed to be
dilutive./2/
    
    Diluted earnings per share calculation excludes dividends for
convertible preferred stock deemed to be dilutive, as those amounts
are assumed to have been converted to common stock of the Company.  13




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##### Table of Contents



For the six months ended March2010
    
    
    2009Basic
    
    
    Diluted
    
    
    Basic
    
    
    DilutedWeighted average common
shares outstanding
    
    
    562,145
    
    
    
    562,145
    
    
    
    547,089
    
    
    
    547,089Weighted average of net
additional shares outstanding
assuming dilutive options
exercised and proceeds
used to purchase treasury
stock and conversion of
preferred stock /1/
    
    
    
    
    
    
    183,628
    
    
    
    
    
    
    
    283,834Weighted average number of
shares outstanding
    
    
    562,145
    
    
    
    745,773
    
    
    
    547,089
    
    
    
    830,923Income from continuing operations
    
    $
    3,520,561
    
    
    $
    3,520,561
    
    
    $
    3,595,395
    
    
    $
    3,595,395Deduct: convertible preferred
stock dividends /2/
    
    
    (148,106
    )
    
    
    
    
    
    
    (419,734
    )
    
    
    3,372,455
    
    
    
    3,520,561
    
    
    
    3,175,661
    
    
    
    3,595,395Loss from discontinued operations
    
    $
    
    
    
    $
    
    
    
    $
    (199,475
    )
    
    $
    (199,475
    )Net income available
to common shareholders
    
    $
    3,372,455
    
    
    $
    3,520,561
    
    
    $
    2,976,186
    
    
    $
    3,395,920Income per share from
continuing operations
    
    $
    6.00
    
    
    $
    4.72
    
    
    $
    5.80
    
    
    $
    4.33Loss per share from
discontinued operations
    
    $
    
    
    
    $
    
    
    
    $
    (0.36
    )
    
    $
    (0.24
    )Net earnings per share
available to common shareholders
    
    $
    6.00
    
    
    $
    4.72
    
    
    $
    5.44
    
    
    $
    4.09
 /1/
    
    Diluted earnings per share calculation includes all stock options,
convertible preferred stock, and restricted stock deemed to be
dilutive./2/
    
    Diluted earnings per share calculation excludes dividends for
convertible preferred stock deemed to be dilutive, as those amounts
are assumed to have been converted to common stock of the Company.  14




---



##### Table of Contents



8. DEBT
  
    
    A June 2011 maturity date.
    
    A $55.0 million revolving credit limit, plus the outstanding balance
on Term Note A. Term Note A had an outstanding balance of $0.1
million at March 2010.
    
    The Facility bears interest at either the banks prime rate or at
LIBOR plus 250 basis points, at the election of the Company.
    
    The Facility provides for an additional $5.0 million of credit
advances available for certain inventory purchases. These advances
bear interest at the banks prime rate plus one-quarter of one-percent
(1/4%) per annum and are payable within 45 days of each advance.
    
    Lending limits that are subject to accounts receivable and inventory
limitations.
    
    An unused commitment fee for the facility is payable 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.
    
    Provides that the Company may not pay dividends on its common stock in
excess of $0.72 per share on an annual basis.
    
    The Facility includes a prepayment penalty equal to one-half of one
percent (1/2%) of the original maximum loan limit ($60.4 million) if
the Company prepays the entire Facility or terminates the credit
agreement on or before June 30, 2010.
     15




---



##### Table of Contents



Cross Default and Co-Terminus Provisions
  OTHER
  Off-Balance Sheet Arrangements
  9. EQUITY-BASED INCENTIVE AWARDS
 Stock Options
  Number ofOptions
    
    
    NumberDate
    
    
    Exercise Price
    
    
    Outstanding
    
    
    ExercisableFiscal 2000
    
    
    $
    34.50
    
    
    
    1,380
    
    
    
    1,380Fiscal 2003
    
    
    $
    28.80
    
    
    
    627
    
    
    
    627Fiscal 2007
    
    
    $
    18.00
    
    
    
    25,000
    
    
    
    25,00027,007
    
    
    
    27,007
  Number ofOptions
    
    
    NumberDate
    
    
    Exercise Price
    
    
    Outstanding
    
    
    ExercisableFiscal 2002
    
    
    $
    26.94
    
    
    
    834
    
    
    
    834
  16




---



##### Table of Contents



Remaining
    
    
    
    
    
    
    ExercisableWeighted
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    Average
    
    
    
    
    
    
    AverageExercise
    
    
    Number
    
    
    Contractual
    
    
    Exercise
    
    
    Number
    
    
    ExercisePrice
    
    
    Outstanding
    
    
    Life
    
    
    Price
    
    
    Exercisable
    
    
    Price2000 Options
    
    $
    34.50
    
    
    
    1,380
    
    
    0.20 years
    
    
    $
    34.50
    
    
    
    1,380
    
    
    $
    34.502002 Options
    
    $
    26.94
    
    
    
    834
    
    
    2.37 years
    
    
    $
    26.94
    
    
    
    834
    
    
    $
    26.942003 Options
    
    $
    28.80
    
    
    
    627
    
    
    2.56 years
    
    
    $
    28.80
    
    
    
    627
    
    
    $
    28.802007 Options
    
    $
    18.00
    
    
    
    25,000
    
    
    6.70 years
    
    
    $
    18.00
    
    
    
    25,000
    
    
    $
    18.0027,841
    
    
    
    
    
    
    $
    19.33
    
    
    
    27,841
    
    
    $
    19.33
  WeightedNumber
    
    
    Averageof
    
    
    ExerciseShares
    
    
    PriceOutstanding at September 2009
    
    
    30,117
    
    
    $
    20.16Granted
    
    
    
    
    
    
    Exercised
    
    
    (2,276
    )
    
    $
    30.24Forfeited/Expired
    
    
    
    
    
    
    Outstanding at March 2010
    
    
    27,841
    
    
    $
    19.33
  Omnibus Plan
   17




---



##### Table of Contents



Restricted Stock /1/
    
    
    Restricted Stock /2/Date of award:
    
    December 6, 2007
    
    
    January 29, 2008Number of shares:
    
    
    24,000
    
    
    
    7,500Service period:
    
    34 months
    
    
    36 monthsEstimated fair value of award at grant date /3/:
    
    $
    963,000
    
    
    $
    229,000Intrinsic value of awards outstanding at March 2010:
    
    $
    477,000
    
    
    $
    149,000
 /1/
    
    16,000 shares were vested at March 2010. The remaining 8,000 shares
will vest on October 16, 2010./2/
    
    5,000 shares were vested at March 2010. The remaining 2,500 shares
will vest on January 29, 2011./3/
    
    Amount is net of estimated forfeitures.    Number
    
    
    Weighted Averageof
    
    
    Grant DateShares
    
    
    Fair ValueNonvested restricted stock at September 2009
    
    
    21,000
    
    
    $
    40.16Granted
    
    
    
    
    
    
    Vested
    
    
    (10,500
    )
    
    $
    40.16Expired
    
    
    
    
    
    
    Nonvested restricted stock at March 2010
    
    
    10,500
    
    
    $
    40.16
  18




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##### Table of Contents



10. BUSINESS SEGMENTS
  WholesaleDistribution
    
    
    Retail
    
    
    Other /1/
    
    
    ConsolidatedTHREE MONTHS ENDED MARCH 2010:External revenue:Cigarettes
    
    $
    166,914,751
    
    
    $
    
    
    
    $
    
    
    
    $
    166,914,751Confectionery
    
    
    14,887,515
    
    
    
    
    
    
    
    
    
    
    
    14,887,515Health food
    
    
    
    
    
    
    9,492,904
    
    
    
    
    
    
    
    9,492,904Tobacco, food service & other
    
    
    39,203,959
    
    
    
    
    
    
    
    
    
    
    
    39,203,959Total external revenue
    
    
    221,006,225
    
    
    
    9,492,904
    
    
    
    
    
    
    
    230,499,129Depreciation
    
    
    271,131
    
    
    
    68,483
    
    
    
    1,147
    
    
    
    340,761Amortization
    
    
    74,811
    
    
    
    
    
    
    
    
    
    
    
    74,811Operating income (loss)
    
    
    3,535,284
    
    
    
    1,093,182
    
    
    
    (1,469,666
    )
    
    
    3,158,800Interest expense
    
    
    124,994
    
    
    
    115,666
    
    
    
    127,765
    
    
    
    368,425Income (loss) from continuing
operations before taxes
    
    
    3,422,768
    
    
    
    987,668
    
    
    
    (1,597,015
    )
    
    
    2,813,421Total assets
    
    
    78,290,787
    
    
    
    12,198,955
    
    
    
    1,034,096
    
    
    
    91,523,838Capital expenditures
    
    
    166,270
    
    
    
    340,048
    
    
    
    
    
    
    
    506,318THREE MONTHS ENDED MARCH 2009:External revenue:Cigarettes
    
    $
    136,018,967
    
    
    $
    
    
    
    $
    
    
    
    $
    136,018,967Confectionery
    
    
    14,667,301
    
    
    
    
    
    
    
    
    
    
    
    14,667,301Health food
    
    
    
    
    
    
    9,564,810
    
    
    
    
    
    
    
    9,564,810Tobacco, food service & other
    
    
    35,191,168
    
    
    
    
    
    
    
    
    
    
    
    35,191,168Total external revenue
    
    
    185,877,436
    
    
    
    9,564,810
    
    
    
    
    
    
    
    195,442,246Depreciation
    
    
    244,988
    
    
    
    54,854
    
    
    
    1,146
    
    
    
    300,988Amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    4,180,906
    
    
    
    1,076,330
    
    
    
    (1,338,330
    )
    
    
    3,918,906Interest expense
    
    
    126,365
    
    
    
    140,313
    
    
    
    141,909
    
    
    
    408,587Income (loss) from continuing
operations before taxes
    
    
    4,070,742
    
    
    
    946,290
    
    
    
    (1,480,237
    )
    
    
    3,536,795Total assets
    
    
    65,160,730
    
    
    
    11,416,692
    
    
    
    4,366,108
    
    
    
    80,943,530Capital expenditures
    
    
    174,540
    
    
    
    56,890
    
    
    
    
    
    
    
    231,430
 /1/
    
    Includes intercompany eliminations, charges incurred by the holding company, and the assets
of discontinued operations.  19




---



##### Table of Contents



WholesaleDistribution
    
    
    Retail
    
    
    Other /1/
    
    
    ConsolidatedSIX MONTHS ENDED MARCH 2010:External revenue:Cigarettes
    
    $
    344,498,796
    
    
    $
    
    
    
    $
    
    
    
    $
    344,498,796Confectionery
    
    
    30,195,336
    
    
    
    
    
    
    
    
    
    
    
    30,195,336Health food
    
    
    
    
    
    
    18,419,393
    
    
    
    
    
    
    
    18,419,393Tobacco, food service & other
    
    
    81,326,642
    
    
    
    
    
    
    
    
    
    
    
    81,326,642Total external revenue
    
    
    456,020,774
    
    
    
    18,419,393
    
    
    
    
    
    
    
    474,440,167Depreciation
    
    
    537,711
    
    
    
    138,855
    
    
    
    2,294
    
    
    
    678,860Amortization
    
    
    123,981
    
    
    
    
    
    
    
    
    
    
    
    123,981Operating income (loss)
    
    
    7,533,896
    
    
    
    2,010,489
    
    
    
    (3,323,580
    )
    
    
    6,220,805Interest expense
    
    
    247,191
    
    
    
    240,290
    
    
    
    286,189
    
    
    
    773,670Income (loss) from continuing
operations before taxes
    
    
    7,302,417
    
    
    
    1,790,498
    
    
    
    (3,609,354
    )
    
    
    5,483,561Total assets
    
    
    78,290,787
    
    
    
    12,198,955
    
    
    
    1,034,096
    
    
    
    91,523,838Capital expenditures
    
    
    603,584
    
    
    
    499,345
    
    
    
    
    
    
    
    1,102,929SIX MONTHS ENDED MARCH 2009:External revenue:Cigarettes
    
    $
    288,281,912
    
    
    $
    
    
    
    $
    
    
    
    $
    288,281,912Confectionery
    
    
    30,128,997
    
    
    
    
    
    
    
    
    
    
    
    30,128,997Health food
    
    
    
    
    
    
    18,545,603
    
    
    
    
    
    
    
    18,545,603Tobacco, food service & other
    
    
    75,863,096
    
    
    
    
    
    
    
    
    
    
    
    75,863,096Total external revenue
    
    
    394,274,005
    
    
    
    18,545,603
    
    
    
    
    
    
    
    412,819,608Depreciation
    
    
    493,152
    
    
    
    115,877
    
    
    
    2,293
    
    
    
    611,322Amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    7,468,983
    
    
    
    1,664,169
    
    
    
    (2,477,514
    )
    
    
    6,655,638Interest expense
    
    
    259,044
    
    
    
    309,858
    
    
    
    328,884
    
    
    
    897,786Income (loss) from continuing
operations before taxes
    
    
    7,229,893
    
    
    
    1,374,899
    
    
    
    (2,806,397
    )
    
    
    5,798,395Total assets
    
    
    65,160,730
    
    
    
    11,416,692
    
    
    
    4,366,108
    
    
    
    80,943,530Capital expenditures
    
    
    303,030
    
    
    
    194,371
    
    
    
    
    
    
    
    497,401
 /1/
    
    Includes intercompany eliminations, charges incurred by the holding company, and the assets
of discontinued operations.  20




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##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and
Results of Operations
 FORWARD-LOOKING STATEMENTS
  
    
    increases in state and federal excise taxes on cigarette and tobacco products, including recent increases in federal excise
taxes imposed in connection with the State Childrens Health Insurance Program (SCHIP) law,
    
    regulation of cigarette and tobacco products by the U.S. Food and Drug Administration (FDA), in addition to existing
state and federal regulations by other agencies,
    
    increases in manufacturer prices,
    
    increases in inventory carrying costs and customer credit risk,
    
    changes in promotional and incentive programs offered by manufacturers,
    
    decreased availability of capital resources
    
    demand for the Companys products, particularly cigarette and tobacco products,
    
    new business ventures or acquisitions,
    
    domestic regulatory and legislative risks,
    
    competition,
    
    poor weather conditions,
    
    increases in fuel prices,
    
    consolidation within the convenience store industry,
    
    other risks over which the Company has little or no control, and
    
    any other factors not identified herein.
   21




---



##### Table of Contents



CRITICAL ACCOUNTING ESTIMATES
  SECOND FISCAL QUARTER 2010 (Q2 2010)
   
    
    opened a new Akins Natural Foods Market store in Tulsa, OK.
    
    recorded net income available to common shareholders of $1.7 million.
    
    paid a $0.18 dividend per common share.
 Wholesale Distribution Segment (ADC)
   RETAIL HEALTH FOOD SEGMENT
   22




---



##### Table of Contents



Business Update  General
   Business Update  Wholesale Distribution Segment
   Business Update  Retail Health Food Segment
     23




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##### Table of Contents



RESULTS OF OPERATIONS  Continuing Operations
 For the three monthsended MarchIncr2010
    
    
    2009
    
    
    (Decr)
    
    
    % ChangeCONSOLIDATED:Sales /1/
    
    $
    230,499,129
    
    
    $
    195,442,246
    
    
    $
    35,056,883
    
    
    
    17.9Cost of sales
    
    
    213,558,955
    
    
    
    178,195,212
    
    
    
    35,363,743
    
    
    
    19.8Gross profit
    
    
    16,940,174
    
    
    
    17,247,034
    
    
    
    (306,860
    )
    
    
    (1.8
    )Gross profit percentage
    
    
    7.3
    %
    
    
    8.8
    %Operating expense
    
    
    13,781,374
    
    
    
    13,328,128
    
    
    
    453,246
    
    
    
    3.4Operating income
    
    
    3,158,800
    
    
    
    3,918,906
    
    
    
    (760,106
    )
    
    
    (19.4
    )Interest expense
    
    
    368,425
    
    
    
    408,587
    
    
    
    (40,162
    )
    
    
    (9.8
    )Income tax expense
    
    
    1,022,000
    
    
    
    1,343,000
    
    
    
    (321,000
    )
    
    
    (23.9
    )Income from continuing operations
    
    
    1,791,421
    
    
    
    2,193,795
    
    
    
    (402,374
    )
    
    
    (18.3
    )BUSINESS SEGMENTS:WholesaleSales
    
    $
    221,006,225
    
    
    $
    185,877,436
    
    
    $
    35,128,789
    
    
    
    18.9Gross profit
    
    
    12,809,400
    
    
    
    13,241,596
    
    
    
    (432,196
    )
    
    
    (3.3
    )Gross profit percentage
    
    
    5.8
    %
    
    
    7.1
    %RetailSales
    
    $
    9,492,904
    
    
    $
    9,564,810
    
    
    $
    (71,906
    )
    
    
    (0.8
    )Gross profit
    
    
    4,130,774
    
    
    
    4,005,438
    
    
    
    125,336
    
    
    
    3.1Gross profit percentage
    
    
    43.5
    %
    
    
    41.9
    %
 /1/
    
    Sales are reported net of costs associated with incentives provided to retailers. These
incentives totaled $3.7 million in Q2 2010 and $4.0 million in Q2 2009. SALES:
  (i)
    
    changes to selling prices, which are largely controlled by our product
suppliers, and excise taxes imposed on cigarettes and tobacco products by various
states; and
 (ii)
    
    changes in the volume of products sold to our customers, either due to a change
in purchasing patterns resulting from consumer preferences or the fluctuation in the
comparable number of business days in our reporting period.
 SALES  Q2 2010 vs. Q2 2009
  
    
    $12.9 million increase related to our acquisition of Discount
Distributors.
    
    $21.2 million increase due to cigarette price increases implemented by
manufacturers.
    
    $0.8 million decrease, primarily related to a reduction in cigarette
cartons sold.
    
    $1.8 million increase in our tobacco, beverages, snacks, candy,
grocery, health & beauty products, automotive, food service, and store
supplies categories (Other Products).
  24




---



##### Table of Contents



GROSS PROFIT  Q2 2010 vs. Q2 2009
    OPERATING EXPENSE  Q2 2010 vs. Q2 2009
   INTEREST EXPENSE  Q2 2010 vs. Q2 2009
   25




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##### Table of Contents



RESULTS OF OPERATIONS  SIX MONTHS ENDED MARCH 2010:
 For the six monthsended MarchIncr2010
    
    
    2009
    
    
    (Decr)
    
    
    % ChangeCONSOLIDATED:Sales /1/
    
    $
    474,440,167
    
    
    $
    412,819,608
    
    
    $
    61,620,559
    
    
    
    14.9Cost of sales
    
    
    440,271,980
    
    
    
    379,727,926
    
    
    
    60,544,054
    
    
    
    15.9Gross profit
    
    
    34,168,187
    
    
    
    33,091,682
    
    
    
    1,076,505
    
    
    
    3.3Gross profit percentage
    
    
    7.2
    %
    
    
    8.0
    %Operating expenses
    
    
    27,947,382
    
    
    
    26,436,044
    
    
    
    1,511,338
    
    
    
    5.7Operating income
    
    
    6,220,805
    
    
    
    6,655,638
    
    
    
    (434,833
    )
    
    
    (6.5
    )Interest expense
    
    
    773,670
    
    
    
    897,786
    
    
    
    (124,116
    )
    
    
    (13.8
    )Income tax expense
    
    
    1,963,000
    
    
    
    2,203,000
    
    
    
    (240,000
    )
    
    
    (10.9
    )Income from continuing operations
    
    
    3,520,561
    
    
    
    3,595,395
    
    
    
    (74,834
    )
    
    
    (2.1
    )BUSINESS SEGMENTS:WholesaleSales
    
    $
    456,020,774
    
    
    $
    394,274,005
    
    
    $
    61,746,769
    
    
    
    15.7Gross profit
    
    
    26,196,176
    
    
    
    25,438,624
    
    
    
    757,552
    
    
    
    3.0Gross profit percentage
    
    
    5.7
    %
    
    
    6.5
    %RetailSales
    
    $
    18,419,393
    
    
    $
    18,545,603
    
    
    $
    (126,210
    )
    
    
    (0.7
    )Gross profit
    
    
    7,972,011
    
    
    
    7,653,058
    
    
    
    318,953
    
    
    
    4.2Gross profit percentage
    
    
    43.3
    %
    
    
    41.3
    %
 /1/
    
    Sales are reported net of costs associated with incentives provided to retailers. These
incentives totaled $7.5 million for the six months ended March 2010 and $7.9 million for the
six months ended March 2009. SALES  Six Months Ended March 2010
  
    
    $22.2 million increase related to our acquisition of Discount
Distributors.
    
    $53.2 million increase due to cigarette price increases implemented by
manufacturers.
    
    $14.9 million decrease, primarily related to a reduction in cigarette
cartons sold.
    
    $1.2 million increase in our Other Products category.
   26




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##### Table of Contents



GROSS PROFIT  Six Months Ended March 2010
   OPERATING EXPENSE  Six Months Ended March 2010
  INTEREST EXPENSE  Six Months Ended March 2010
  DISCONTINUED OPERATIONS  Q2 2010 vs. Q2 2009
   Three months ended
    
    
    Six months endedMarch
    
    
    March2010
    
    
    2009
    
    
    2010
    
    
    2009Operating loss
    
    
    
    
    
    
    (41,434
    )
    
    
    
    
    
    
    (85,562
    )Interest expense
    
    
    
    
    
    
    (114,003
    )
    
    
    
    
    
    
    (230,012
    )Income tax benefit
    
    
    
    
    
    
    (58,000
    )
    
    
    
    
    
    
    (116,000
    )Loss from discontinued operations
    
    
    
    
    
    
    (97,437
    )
    
    
    
    
    
    
    (199,475
    )
  27




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
 Overview
 Operating Activities
  Investing Activities
 Financing Activities
 Cash on Hand/Working Capital
 CREDIT AGREEMENT
  
    
    A June 2011 maturity date.
    
    A $55.0 million revolving credit limit, plus the outstanding balance
on Term Note A. Term Note A had an outstanding balance of $0.1
million at March 2010.
  28




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##### Table of Contents



CREDIT AGREEMENT (continued)
 
    
    The Facility bears interest at either the banks prime rate or at
LIBOR plus 250 basis points, at the election of the Company.
    
    The Facility provides for an additional $5.0 million of credit
advances available for certain inventory purchases. These advances
bear interest at the banks prime rate plus one-quarter of one-percent
(1/4%) per annum and are payable within 45 days of each advance.
    
    Lending limits that are subject to accounts receivable and inventory
limitations.
    
    An unused commitment fee for the facility is payable 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.
    
    Provides that the Company may not pay dividends on its common stock in
excess of $0.72 per share on an annual basis.
    
    The Facility includes a prepayment penalty equal to one-half of one
percent (1/2%) of the original maximum loan limit ($60.4 million) if
the Company prepays the entire Facility or terminates the credit
agreement on or before June 30, 2010.
       29




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##### Table of Contents



Cross Default and Co-Terminus Provisions
  Dividend Payments
   Contractual Obligations
  OTHER
  Off-Balance Sheet Arrangements
  Liquidity Risk
    30




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##### Table of Contents



Liquidity Risk (continued)
   
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   Limitations on Effectiveness of Controls
   31




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##### Table of Contents



Changes in Internal Control Over Financial Reporting
  
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4.
[Removed and Reserved]
 
 Item 5. Other Information
   32




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##### Table of Contents



Item 6. Exhibits
 31.1
    
    
    Certification by Christopher H. Atayan, Chief Executive Officer and Chairman, furnished
pursuant to section 302 of the Sarbanes-Oxley Act31.2
    
    
    Certification by Andrew C. Plummer, Vice President, Chief Financial Officer, and Principal
Financial Officer furnished pursuant to section 302 of the Sarbanes-Oxley Act32.1
    
    
    Certification by Christopher H. Atayan, Chief Executive Officer and Chairman, furnished
pursuant to section 906 of the Sarbanes-Oxley Act32.2
    
    
    Certification by Andrew C. Plummer, Vice President, Chief Financial Officer, and Principal
Financial Officer furnished pursuant to section 906 of the Sarbanes-Oxley Act
  33




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##### Table of Contents



SIGNATURES
  AMCON DISTRIBUTING COMPANY
                    
   (registrant)Date:     April 16, 2010
    /s/ Christopher H. AtayanChristopher H. Atayan,Chief Executive Officer and ChairmanDate:     April 16, 2010
    /s/ Andrew C. PlummerAndrew C. Plummer,Vice President, Chief Financial Officer, and
Principal Financial Officer  34