amcon distributing final

AMCON Distributing Investment PitchJanuary 13, 2011

AMCON DISTRIBUTING COMPANY (AMEX: DIT)

Price: $78.00 Target Price: $150

Recommendation: Buy

Sector: Food DistributorsInvestment Summary

AMCON Distributing Co. (“AMCON”) is undervalued: Based on a variety of valuation methodologies including Earnings Power Value, Discount Cash Flow – Perpetuity Growth Method, and Discount Cash Flow – EBITDA Multiple Method, the analysis suggests a valuation range of $73 - $160 million with a median range of $118 - $142 million. (For the two discount cash flow methods, sales growth was projected at 1.6% for the next five years.) There is only one other publicly traded company with a similar product mix (70% tobacco) that distributes products to primarily to convenience stores (C-stores), Core-Mark Holding Company (NASDAQ: CORE); thus, comparable companies analysis does not offer particularly useful insight for valuation. For the fiscal year ending September 30, 2010, AMCON had $17.3 million in EBITDA, $11.0 million in Free Cash Flow to Equity, and was trading at EV/EBITDA of 4.3x (versus CORE’s 5.6x). AMCON’s current market capitalization of $45.0 million suggests the Company is undervalued.

Debt service has become more manageable: AMCON’s market valuation has historically reflected the Company’s risk of default. Over the last four years, the Company has shed underperforming businesses and used retained earnings to reduce the balance on its Credit Facility with Bank of America. For FY 2006, the Company had a Credit Facility balance of $48.8 million and Long-Term Debt of $7.5 million; for the FY 2010, the Company had a Credit Facility balance of $18.8 million and Long-Term Debt of $5.2 million. EBITDA has expanded over the same period from $8.6 million (FY 2006) to $17.3 million (FY 2010). Related ratios have reflected the reduction in risk of default. Interest Coverage has improved from 1.4 (FY 2006) to 10.3 (FY 2010); Total Liabilities/EBITDA has fallen from 11.2 (FY 2006) to 3.4 (FY 2010); Debt to Market Capitalization has fallen from 836% (FY 2006) to 70% (FY 2010); Debt to Total Capitalization has fallen from 59% (FY 2006) to 27% (FY 2010). As AMCON continues to grow, I expect the Company will continue to pay off its Credit Facility and the market valuation to reflect the increasing viability of AMCON as a going concern.

Strong market player in its geographic market: AMCON’s primary business is the distribution of cigarettes and tobacco-related products to 4,300 retail outlets (C-stores, grocery stores, liquor stores, drug stores, and tobacco shops) across Arkansas, Colorado, Iowa, Illinois, Indiana, Kansas, Minnesota, Missouri, Mississippi, Montana, North Dakota, Nebraska, Oklahoma, South Dakota, Tennessee, Virginia, Wisconsin, and Wyoming. According to an October 2010 report by Convenience Store News, AMCON is the 9th largest distributor to C-stores in the U.S.

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Market Profile

52 Week Price Range $46.61-80.50

Average Daily Range (3 mo.) 966

Beta 1.22

Dividend Yield 0.92%

Shares Outstanding 577,432

Market Capitalizaiton ($MM) $45.0

EV ($MM) $74.1

Institutional/ Insider 8%/ 43%

P/ E 6.5

Book Value Per Share $56.76

Debt to Total Capital 27%

Return on Equity 31%


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Market Profile

52 Week Price Range $46.61-80.50

Average Daily Range (3 mo.) 966

Beta 1.22

Dividend Yield 0.92%

Shares Outstanding 577,432

Market Capitalizaiton ($MM) $45.0

EV ($MM) $74.1

Institutional/ Insider 8%/ 43%

P/ E 6.5

Book Value Per Share $56.76

Debt to Total Capital 27%

Return on Equity 31%Earnings per Share - Continuing Operations (Basic)

Dec. Mar. June Sept. Year P/E

FY 2008 $1.76 $2.16 $2.57 $3.16 $9.65 $2.47

FY 2009 $2.38 $3.43 $3.97 $4.67 $14.45 $4.16

FY 2010 $2.95 $3.05 $4.72 $4.64 $15.36 $4.01

Earnings per Share - Continuing Operations (Diluted)

Dec. Mar. June Sept. Year P/E

FY 2008 $1.23 $1.48 $1.75 $2.11 $6.57 $3.62

FY 2009 $1.64 $2.72 $3.11 $3.40 $10.87 $5.53

FY 2010 $2.32 $2.40 $3.67 $3.60 $11.99 $5.13


Good Management: Christopher Atayan joined AMCON in October 2006 as CEO and became the Chairman of the Board in January 2008. Mr. Atayan has led a turnaround of the Company’s operations and strategy. Since joining the Company, AMCON has shed underperforming assets, settled complex litigation issues, and used excess cash to pay off debt. Mr. Atayan is also a consultant to Draupnir LLC (the parent of Draupnir Capital, LLC), has served as the Senior Managing Director of Slusser Associates, a private equity and investment banking firm, since 1988, and has been engaged in private equity and investment banking since 1982. During the 1980s, Mr. Atayan worked in High-Yield and Leveraged Finance at PaineWebber, Equities at Goldman Sachs, and M&A at Morgan Stanley. He has an MBA from the University Of Chicago Graduate School Of Business where he was a Vehon Scholar and Paine Webber Scholar.

Company Description

Founded in 1986 and headquartered in Omaha, Nebraska, AMCON operates both a wholesale and a retail segment. AMCON’s wholesale segment distributes 14,000 different consumer products to approximately 4,300 retail outlets in the Central Rocky Mountain and Southern regions of the United States. Retail outlets include convenience stores, grocery stores, liquor stores, drug stores, and tobacco shops. The Company employs 674 full-time and 111 part-time employees. Notably, the distribution of cigarettes represented 72.4% of total sales. Confectionary distribution and the retail segment represented 6.5% and 3.6% of total sales, respectively. The Company’s retail segment operates six Chamberlin’s Market and Café stores around Orlando, Florida and eight Akin’s Natural Foods Market stores in Oklahoma, Nebraska, Missouri, and Kansas. These two health food store chains offer over 30,000 different national and regionally branded and private label products. Both health food store chains were founded in 1935. For the fiscal year ended September 30, 2010, AMCON generated over $1 billion in annual sales.

Figure 1: Daily Stock Price of AMCON

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Source: Bigcharts.com

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Risks

Distributor (Thin) Margins: Gross margin, operating margin, EBITDA margin, and net margin were 7.1%, 1.6%, 1.7%, and 0.9%, respectively. These slim margins suggest that AMCON has very little room to make mistakes with acquisitions, product mix, capital expenditures, or strategy.

Leverage: Despite reducing its debt profile over the years, AMCON relies on a credit facility and long-term debt that represents 27% of its total capitalization and 70% of market capitalization. Interest expense, thus, requires management to be disciplined in its operations. The credit facility restricts annual dividends to $0.72 per share.

Credit Facility terminates January 1, 2012: AMCON has a $55 million credit facility with Bank of America. The Company has steadily reduced the balance from an initial $49.1 million on September 30, 2005 to the $19.6 million balance as of September 30, 2010. AMCON has amended the credit facility three times before. There is no indication that Bank of America will not renegotiate/extend the credit agreement after the existing one expires January 1, 2012. There is a risk that the spread will widen as credit conditions have deteriorated since the credit crisis. According to the terms of the credit agreement, the interest rate is either the bank’s prime rate (currently 3.25%) or at LIBOR (1 month: 0.26%) plus 250 bps – at the election of the Company.

New cigarette/tobacco regulation could negatively affect sales: On June 22, 2009, President Obama signed the Family Smoking Prevention and Tobacco Control Act, landmark legislation that gives the U.S. Food and Drug Administration authority to regulate the manufacturing and marketing of tobacco. Two months earlier, federal taxes on cigarettes increased from 39 cents per pack to $1.01 per pack. Federal and state taxes have steadily increased to discourage smoking.

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Figure 2: Cigarette Taxes by State

In April 2010, President Obama signed the Prevent All Cigarette Trafficking (PACT) Act which restricts remote sales of cigarette and tobacco products. Remote sellers are required to charge applicable state cigarette and sales taxes when they ship tobacco products, and the U.S. Postal Service (USPS) is prohibited from delivering tobacco products. USPS was one of few shipping methods left for tobacco products, as other carriers including Fedex and DHL had previously adopted policies against delivering tobacco products. The PACT should boost sales that had been diverted to online cigarette sellers.

Illiquidity: Daily volume of shares is less than a thousand shares. Low trading volumes with wide bid-ask spreads prevent an investor from actively trading the stock and require the investor take a long-term view on the company.

Company Background

Founded in 1986 and headquartered in Omaha, Nebraska, AMCON operates both a wholesale and a retail segment. The Company employs 674 full-time and 111 part-time employees. For the fiscal year ended September 30, 2010, AMCON generated over $1 billion in annual sales. Notably, the distribution of cigarettes represented 72.4% of total sales. Confectionary distribution and the retail segment represented 6.5% and 3.6% of total sales, respectively.

Wholesale Segment

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AMCON’s wholesale segment distributes 14,000 different consumer products to approximately 4,300 retail outlets in the Central Rocky Mountain and Southern regions of the United States. Retail outlets include C-stores, grocery stores, liquor stores, drug stores, and tobacco shops. These products include cigarettes, tobacco products, candy, beverages, groceries, paper products, health and beauty care products, frozen and chilled products, and institutional food service products. The Company also markets private label snuff, water, candy products, batteries, and film. In October 2010, Convenience Store News ranked AMCON as the ninth largest C-store distributor based on annual sales.

Figure 3: AMCON Distributing Revenues FY 2006-2010

FY 2006

FY 2007

FY 2008

FY 2009

FY 2010

$0

$200,000

$400,000

$600,000

$800,000

Wholesale - CigarettesWholesale - Con-fectionaryWholesale - TobaccoRetail (Akin's & Chamberlin's)

Source: Company reports

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$ i

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hou

san

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Figure 4: AMCON Distributing FY 2010 Revenue Breakdown

Wholesale - Cigarettes

72%

Wholesale - Confectionary

7%

Wholesale - Tobacco

17%

Retail (Akin's & Chamberlin's)

4%


Distribution

AMCON operates five distribution centers in Illinois, Missouri, North Dakota, Nebraska, and South Dakota. The Company owns the three facilities in Illinois, North Dakota, and South Dakota and is subject to non-cancellable operating and capital leases in Missouri and South Dakota. All five distribution facilities have 487,000 square feet among them.

Convenience stores represent the largest portion of the Wholesale Segment customer base. The C-store sales channel is a highly fragmented industry comprised of national, regional, and “mom and pop” owners. With over 144,000 locations at the end of 2009, convenience stores outnumbered all other sales channels.

Suppliers

AMCON’s principal suppliers include Philip Morris USA, RJ Reynolds Tobacco, Proctor & Gamble, Hershey, Mars, Quaker and Nabisco. The Company does not have any long-term purchase contracts with suppliers.

Competition

The Wholesale sector is highly fragmented.

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Figure 5: Top 25 Convenience Store Wholesalers

Est. Sales ($ MM) Retail % of Sales Warehouses Employees

Rank Company Latest FY Previous FY % Change Trading Area Locations Chain No. Sq. Ft. Full Part Sales 1 McLane Co. 26,600 24,200 9.9% 50 states 37,676 96 20 10,402 13,051 61 270

2 Core-Mark Holding Co.

6,530 6,045 8.0% 50 states plus 5 Canadian provinces

25,000 50 26 3,000 4,000 120 990

3 Eby-Brown Co. 4,500 4,500 0.0% Eastern half of US 13,500 70 7 2,500 2,000 25 200

4 H.T. Hackey Co. 3,600 3,600 0.0% AL, AR, FL, GA, MS, NC, SC, TN, LA, TX, KY, OH,

25,000 NA 28 NA NA NA NA

5 GSC Enterprises 1,200 1,200 0.0% TX, NM, AR, AL, FL, GA, IL, IN, IA, KS, KY, LA, MS,

8,000 68 6 1,676 1,315 68 126

6 Harold Levinson Associates

1,000 853 17.2% NY, MI, PA, CT, RI, MA, DE

15,000 10 1 550 420 0 110

7 S. Abraham & Sons 977 914 6.9% MN, WI, IL, MI, IN, KY, OH, PA

3,534 64 2 440 521 4 102

8 Imperial/ Harrison Super Regional

875 800 9.4% LA, MS, AL, AR, TN, TX, OK, KS,

2,350 68 3 314 407 11 58

9 Amcon Distributing Co.

871 821 6.1% AR, CO, IA, IL, IN, KS, MN, MO, MS, MT, ND, NE, OK, SD, TN, VA, WI, WY

4,500 72 5 487 495 12 87

10 Forrest City Grocery Co.

772 750 2.9% AR, LA, MO, MS, TN, AL

2,000 25 2 300 240 4 25

11 Chambers & Owen 737 709 3.9% WI, IL, IN, IA, MN, MI

NA 50 1 265 330 0 37

12 Garber Bros. 685 650 5.4% ME, NH, VT, MA, RI, CT, NY, NJ,

2,000 60 2 200 287 6 45

13 Consumer Products Distribution

680 675 0.7% MA, CT, RI, NY, NH, VT, ME

4,000 23 3 270 450 15 110

14 Liberty USA 650 600 8.3% PA, OH, WV, MD, DE, KY, NY, VA

2,000 70 1 150 300 50 60

15 J.T. Davenport & Sons

612 612 0.0% NC, SC, VA, WV, MD, OH, KY

1,800 70 2 205 275 10 45

16 Cooper-Booth Wholesale Co.

457 367 24.5% PA, MD DE, NJ, NY, DE, VA, WV

1,625 30 1 105 188 2 20

17 Farner-Bocken Co. 410 410 0.0% IA, NE, MO, IL, MN, OK, AR, KS, CO, WY, MT, SD,

12,000 35 1 400 NA NA NA

18 Tripifoods 397 348 14.1% NY, PA, OH, IL, IN, WV

2,810 93 1 250 210 40 11

19 Atlantic Dominion Distributors

392 374 4.8% VA, NC, DE, MD, GA, DC, FL, TN

2,100 67 2 180 195 6 21

20 Pine State Trading Co.

390 390 0.0% ME, NH, VT, MA 3,320 55 5 246 445 6 106

21 Stephenson Wholesale Co.

380 354 7.3% OK, TX 3,663 30 3 194 311 10 56

22 Harbor Wholesale Grocery

357 300 19.0% WA, OR, ID, CA, MT, AK

2,000 25 2 170 280 20 42

23 Southco Distributing Co.

303 272 11.4% NC, SC, VA, TN, WV, GA, OH

1,300 55 1 220 175 25 33

24 Richmond-Master Distributors

295 223 32.3% IL, IN, KY, MI, OH

1,400 30 5 210 184 6 18

25 Thomas & Howard Co.

250 250 0.0% SC, NC, GA 1,562 47 3 303 303 20 55

Source: Convenience Store News Market Research, October 2010

Retail Segment

The Company’s retail segment operates six Chamberlin’s Market and Café stores around Orlando, Florida and eight Akin’s Natural Foods Market stores in Oklahoma, Nebraska, Missouri, and Kansas. These two health food store chains offer over 30,000 different national and regionally branded and private label products. Both health food store chains were founded in 1935.

Akin’s Natural Foods Market operates eight natural foods markets with five stores in Oklahoma and one store in Nebraska, Missouri, and Kansas.

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These stores offer vitamins and supplements, cruelty-free cosmetics, organic groceries, organic produce, fresh packaged foods, pet supplies, and unusual cooking and gift items.

Chamberlin’s Market and Café operates six full service natural foods grocery stores in the Orlando, Florida area. These grocery stores include fresh organic produce, baked goods, natural supplements and remedies, cruelty-free and all-natural personal care items, and healthy-fast food and beverages.

Business Strategy

AMCON has maintained a policy of growing by acquisition and organic growth. Over time, the company has tried to distribute products other than cigarettes and candy. In November 2009, AMCON acquired the C-store distribution assets of Discount Distributors from Harps Food Stores, Inc., an operator of C-stores. Since the arrival of Mr. Atayan, the Company has focused on tobacco and confectionary products.

Employees

As of September 30, 2010, the Company had 674 full-time and 111 part-time employees. Approximately 30 of the Company’s wholesale delivery employees in the Quincy, IL distribution center are represented by the International Association of Machinists and Aerospace Workers. The current labor agreement with the union is effective through December 2011.

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Key Developments

November 2009: AMCON acquired the C-store distribution assets of Discount Distributors from Harps Food Stores, Inc., an operator of convenience stores. Discount Distributors was a wholesale distributor to convenience stores in Arkansas, Oklahoma, and Missouri with annual sales of approximately $59.6 million. The Company paid $3.1 million cash, issued $0.5 million note payable in quarterly installments over two years and could pay an additional $1.0 million in contingent consideration for certain fixed assets, inventory, and customer lists of Discount Distributors. The contingent consideration is based on achieving predetermined two-year revenue targets. This transaction was funded through the Company’s existing credit facility. No significant liabilities were assumed in connection with the transaction and costs incurred to effect the acquisition were not significant and were expensed as incurred. The acquisition expands the Company’s strategic footprint in the southern portion of the US and enhances its ability to service customers in the region.

May 2009: Trinity Springs Inc. (TSI), a wholly owned subsidiary of the Company, and Crystal Paradise Holdings (CPH) completed a transaction in which CPH exchanged a $5.0 million note receivable plus $0.1 million in accrued interest due from TSI, for the operating assets of TSI. The Company recorded a $4.7 million pre-tax gain ($3.0 million after-tax) in conjunction with the transaction, which included the recognition of a $1.5 million deferred gain attributable to a previously executed Mutual Release and Settlement Agreement between the Company, TSI, and CPH. The $4.7 million gain has been reflected in the Statement of Operations as a component of discontinued operations.

March 2, 2009: the holder of the Company’s Series C Convertible Preferred Stock redeemed all 80,000 shares of the issuance. The Series C issuance had been outstanding since 2006, paid a dividend of 6.00% per annum, and was convertible into 146,842 shares of common stock. AMCON paid the liquidation value, or $2.0 million, plus accumulated and unpaid dividends to fully redeem all of the outstanding shares. The redemption was funded through borrowings on the Company’s credit facility and satisfied all of the Company’s obligations under the Series C Convertible Preferred Stock Agreement.

February 4, 2008: Christopher Atayan, the Company’s Chief Executive Officer, named Chairman of the Board.

October 4, 2007: the Company fully settled all residual litigation among and between AMCON, TSI, and Crystal Paradise Holdings, Inc. ("CPH") regarding TSI's fiscal 2004 purchase of assets from CPH. In connection with this settlement, the Company recorded a $1.5 million deferred gain during the fourth quarter of fiscal 2007. As part of the agreement, CPH has received an option to purchase TSI's assets from the Company for a period of up to eighteen months.

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August 2, 2007: The Company settled its outstanding litigation with Television Events & Marketing, Inc. (TEAM). The settlement did not result in any material impact on AMCON’s operating results and provided for certain promotional considerations to be rendered by TEAM to AMCON.

November 28, 2006: AMCON sold substantially all of the assets of Hawaiian Natural Water Company, Inc. to a newly formed investor group, Hawaiian Springs, LLC. The purchase price for the assets was $3.8 million in cash; in addition Hawaiian Springs, LLC assumed operating and capital leases. Proceeds were used to reduce outstanding debt and capitalized liabilities. “Historically HNWC has incurred significant operating losses which have hampered earnings. With this transaction, we will no longer have to absorb reported losses from this business which totaled approximately $6.2 million before tax for all of fiscal 2005 and $1.6 million before tax for the nine months ended June 30, 2006,” noted Andrew Plummer, AMCON’s Acting Chief Financial Officer.

October 4, 2006: AMCON named Christopher Atayan as Chief Executive Officer.

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Publicly Traded Comparable Company Profiles

Core-Mark Holding Company (NASDAQ: CORE): Engages in the business of distributing packaged consumer products to C-stores in the United States and Canada. Seventy percent of Net Sales are from cigarettes to C-stores. It distributes approximately 42,000 stock keeping units of packaged consumable goods, including cigarettes, tobacco products, candy, snacks, fast food, fresh products, groceries, dairy, non-alcoholic beverages, general merchandise, and health and beauty care products. As of March 12, 2010, it provided distribution and logistics services, as well as marketing programs to approximately 24,000 retail locations in 50 states, and 5 Canadian provinces through 26 distribution centers. The company was founded in 1888 and is headquartered in South San Francisco, CA.

Nash-Finch Company (NASDAQ: NAFC): NAFC operates as the second largest, publicly traded wholesale food distributor in the US in terms of revenues. The company serves the retail grocery industry and military commissary and exchange systems. Nash Finch Company operates as a food distribution company. Its Food Distribution segment sells and distributes various nationally branded and private label grocery products and perishable food products to approximately 1,700 independent retail locations in 28 states across the United States. It also provides services, including promotional, advertising, and merchandising programs; installation of computerized ordering, receiving, and scanning systems; retail equipment procurement assistance; accounting, budgeting, and payroll services; consumer and market research; remodeling and store development services; and supply chain through Internet services. The company was founded in 1885 and is based in Minneapolis, Minnesota.

Sysco Corporation (NYSE: SYY): Markets and distributes a range of food and related products primarily to the foodservice industry in the US. It distributes a line of frozen foods, such as meats, fully prepared entrees, fruits, vegetables, and desserts; a line of canned and dry foods; fresh meats; dairy products; beverage products; imported specialties; and fresh produce. The company also supplies various non-food items, including paper products, such as disposable napkins, plates, and cups; tableware comprising china and silverware; cookware consisting of pots, pans, and utensils; restaurant and kitchen equipment and supplies; and cleaning supplies. Sysco Corporation offers its products to restaurants, hospitals and nursing homes, schools and colleges, hotels and motels, lodging establishments, and industrial caterers. As of June 27, 2009, it operated 186 distribution facilities serving approximately 400,000 customers. The company was founded in 1969 and is headquartered in Houston, Texas.

United Natural Foods, Inc. (NASDAQ: UNFI): Distributes natural, organic, and specialty foods, as well as non-food products in the United States. It carries approximately 60,000 products, consisting of national brand, regional brand,

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private label, and master distribution products in 6 product categories: grocery and general merchandise, produce, perishables and frozen foods, nutritional supplements, bulk and food service products, and personal care items. The company serves approximately 17,000 customer locations primarily located across the United States, which include independently owned natural products retailers, supernatural chains, conventional supermarkets, and food service centers. Its other distribution channels include international mass market chains and buying clubs. The company also owns and operates natural products retail stores. As of August 1, 2009, it had 13 natural products retail stores located primarily in Florida. In addition, the company engages in the international importing, roasting, packaging, and distribution of nuts, seeds, dried fruits, and snack items. It sells these items in bulk in its own packaged snack lines, EXPRESSnacks, Woodfield Farms, and Woodstock Farms, as well as through private label packaging arrangements. The company was founded in 1978 and is headquartered in Providence, Rhode Island.

Figure 6: Comparable Companies Analysis

LTM Market EV/ Trailing Margin($ in millions) Ticker Sales Cap EV EBITDA P/E Gross EBIT EBITDA NetTobacco Distributors

Core-Mark Holding Company CORE $7,062 $398 $354 5.6x 8.5 5.5% 0.5% 0.9% 0.7%AMCON Distributing DIT 1,011 45 74 4.3x 5.2 7.1% 1.5% 1.7% 0.9%

Food DistributorsNash-Finch Company NAFC $5,068 $515 $836 6.4x NM 8.0% 1.8% 2.6% NMSysco Corp. SYY 37,913 18,029 20,075 8.4x 15.6 19.0% 5.2% 6.3% 3.0%United Natural Foods, Inc. UNFI 3,925 1,658 1,846 12.2x 23.6 18.5% 3.1% 3.9% 1.8%

Median $5,068 $1,658 $1,846 8.4x 19.6x 18.5% 3.1% 3.9% 2.4%Mean 15,635 6,734 7,586 9.0x 19.6x 15.1% 3.4% 4.2% 2.4%


Industry Background: Convenience Stores

A convenience store (C-store) is a small store that sells a limited variety of items including tobacco, soft drinks, confectionary items, alcohol, newspapers, and magazines. C-stores that are part of gas stations may sell automobile-related products such as motor oil and maps; some convenience stores may also serve hot food and beverages. C-stores may be part of national/regional company-operated chains or may be operated as franchisee/licensee stores. At the end of 2009, there were over 144,000 C-stores in the U.S. For the year ending May 2010, C-store growth was 0.3 percent or 389 stores; C-stores are a mature retail channel.

Despite the involvement of large players, the C-store industry is highly fragmented. According to Convenience Store News, the top 100 C-store chains operated nearly 40 percent (57,800 stores as of May 2010) of the total industry store count. With over 6,500 C-Stores, 7-Eleven has the most total stores and the most

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franchised/licensed outlets (4,815 C-stores). There is a trend within the industry for the largest chains to rely on franchising/licensing for store growth.

Figure 7: Largest Convenience Store Chains by Total Stores

Total Company- Franchisee/ Annual Company Store Count Operates Stores Licensee ACV ($MM)* Store Names

1 7-Eleven Inc. 6,523 1708 4,815 $13,709 7-Eleven, White Hen2 BP North America 4,727 37 4,690 15,999 Amoco, ampm, Arco, Arco Thrifty, BP, BP Connect, BP

Shop3 Shell Oil Product US/ Motiva

Enterprises LLC4,636 29 0 0 Shell

4 Exxon Mobil Corp. 4,060 717 3,343 9,094 Exxon Mobil5 Chevron Corp. 4,015 397 3,618 9,660 Chevron, Chevron Extra Mile, Texaco6 Alimentation Couche-Tard 3,455 2910 545 12,832 Circle K, Dairy Mart, Discount Beverage Outlet,

Spectrum7 Speedway SuperAmerica LLC 2,759 1526 1,233 9,593 Marathon, Rich Oil, Speedway, SuperAmerica8 CITGO 1,820 0 1,820 3,828 CITGO9 Sunoco 1,811 368 1,443 6,052 A Plus, Coastal, Optima, Sunoco10 Valero Energy Corp. 1,671 999 672 6,744 Beacon, Corner Store, Diamond Shamrock, Total,

Ultramar, Valero

* All Commodity Value (ACV) figures are annualized ranges of the estimated retail sales volume of all items sold in a store that pass through a

retailer's cash register. Lottery sales are not included; gas sales are included where applicable

Source: Nielsen TDLinx, Convenience Store News Market Research Report, May 2010

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Figure 8: Top 10 Company-Owned Chains

# of CompanyCompany -Operated Stores % of Total

1 Alimentation Couche-Tard 2,910 84.22 7-Eleven 1,708 26.23 The Pantry 1,662 100.04 Speedway SuperAmerica LLC 1,526 55.35 Casey's General Stores 1,521 100.06 Valero Energy Corp. 999 59.87 Kroger Co. 791 100.08 Exxon Mobil Corp. 717 17.79 Hess Corp. 664 93.510 Cumberland Farms 585 68.7

Source: Nielsen TDLinx

Figure 9: In-Store Sales by Category

% of In-Store Sales Average Store Sales Total Industry SalesMerchandise 2009 2008 2009 % Change 2009 % Change

Cigarettes 33.7 30.8 $412,056 14.4 $58,304 14.1Packaged Beverages 11.3 12.0 137,556 (2.0) 19,453 (2.2)Beer/ Malt Beverages 10.3 10.7 126,062 0.5 17,831 0.3Edible Grocery 5.4 5.7 65,415 (2.5) 9,256 (2.8)Other Tobacco Products 4.1 3.9 50,376 9.4 7,133 9.1General Merchandise 3.4 3.8 41,695 (5.0) 5,893 (5.3)Candy/ Gum 3.1 3.1 38,271 4.3 5,412 4.1Fluid Milk Products 2.4 2.9 29,468 (13.8) 4,167 (14.0)Salty Snacks 2.3 2.4 28,489 2.9 4,032 2.7Nonedible Grocery 2.3 2.5 27,633 (4.0) 3,916 (4.2)Wine & Liquor 1.1 1.2 13,205 (7.1) 1,872 (7.3)Other 7.7 8.2 93,660 NA 13,249 NAMerchandise Subtotal 87.0 87.1 $1,063,887 4.3 $150,518 4.1

% of In-Store Sales Average Store Sales Total Industry SalesFoodservice 2009 2008 2009 % Change 2009 % Change

Prepared Food 7.8 7.6 $95,861 7.3 $13,568 7.1Hot Dispensed Beverage 3.5 3.6 42,306 1.5 5,982 1.3Cold Dispensed Beverage 1.1 1.1 13,205 5.8 1,874 5.6Frozen Disepensed Beverage 0.6 0.6 7,459 4.8 1,047 4.6Foodservice Subtotal 13.0 12.9 158,831 5.5 22,471 5.3

Total In-Store 100.0 100.0 $1,222,718 4.5 $172,989 4.2

Source: Convenience Store News, Industry Report 2010

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Figure 10: Cigarette Unit Volume Market Share

Convenience Stores Tobacco Stores SupermarketsDrug Stores Other

Source: ALCS STARS Database

Figure 11: Convenience Store Cigarettes Sales

Average sales per store Industry total (in $MM)2009 % Change 2009 % Change

Premium $347,472 14.0% $49,160 13.7%Branded 27,213 15.8 3,850 15.6Sub-Generic/ Private Label 26,375 18.2 3,731 17.9Fourth Tier 7,335 19.7 1,038 19.4Imports 3,709 2.9 525 2.7

$412,104 14.4% $58,304 14.1%

Source: Convenience Store News Market Research, 2010

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Appendix A: Balance Sheet

($ in thousands) 9/30/2006 9/30/2007 9/30/2008 9/30/2009 9/30/2010ASSETSCurrent Assets

Cash $481 $718 $458 $310 $357Accounts Receivable 27,816 27,849 27,198 28,393 27,904 Inventories, net 24,443 29,739 37,331 34,486 35,006 Deferred Income Taxes 1,973 1,446 1,261 1,702 1,906 Current Assets of Discontinued Operations 1,173 19 19 - - Prepaid and Other Current Assets 5,369 5,935 3,520 1,729 3,013 Total Current Assets $61,255 $65,706 $69,786 $66,619 $68,186

Property and Equipment, net 12,529 11,191 10,908 11,257 11,856 Goodwill 5,849 5,849 5,849 5,849 6,149 Other Intangible Assets, net 3,440 3,400 3,373 3,373 4,808 Deferred Income Taxes 6,773 2,768 234 - - Non-Current Assets of Discontinued Operations 3,774 2,057 2,032 - - Other Assets 1,247 1,093 1,123 1,026 1,069

Total Assets $94,867 $92,064 $93,305 $88,124 $92,067

Current LiabilitiesAccounts Payable $14,633 $15,254 $14,738 $15,223 $16,656Accrued Expenses 4,688 5,294 5,276 6,769 6,008 Accrued Wages, Salaries, and Bonuses 1,880 2,203 2,637 3,258 3,162 Income Taxes Payable 169 368 313 3,984 2,367 Current Liabilities of Discontinued Operations 7,462 4,036 4,042 - - Current Maturities of Credit Facility 3,896 3,046 3,046 178 - Current Maturities of Long-Term Debt 524 568 787 1,470 893 Total Current Liabilities $33,251 $30,768 $30,839 $30,882 $29,086

Credit Facility, Less Current Maturities 44,927 35,808 32,155 22,656 18,817 Deferred Income Taxes - - - 1,257 1,076 Long-Term Debt, Less Current Maturities 7,069 7,123 6,526 5,066 5,227 Noncurrent Liabilities of Discontinued Operations 5,087 6,542 6,542 - - Other Long-Term Liabilities - - - - 587 Series A Cumulative, Convertible Preferred Stock 2,438 2,438 2,438 2,500 2,500 Series B Cumulative, Convertible Preferred Stock 1,858 1,858 1,858 2,000 2,000 Series C Cumulative, Convertible Preferred Stock 1,982 1,982 1,982 - - Total Liabilities $96,614 $86,520 $82,340 $64,361 $59,293

Total Shareholders' Equity ($1,747) $5,544 $10,965 $23,764 $32,775

Total Liabilities and Shareholders' Equity $94,867 $92,064 $93,305 $88,124 $92,067

18


Appendix B: Income Statement

($ in thousands) 9/30/2006 9/30/2007 9/30/2008 9/30/2009 9/30/2010Sales $839,540 $853,567 $860,451 $907,953 $1,010,538

Wholesale - Cigarettes 605,798 607,832 604,064 646,410 731,385 Wholesale - Confectionary 55,428 57,515 61,832 65,005 66,055 Wholesale - Tobacco 141,465 150,339 155,337 159,922 176,329 Retail (Akin's & Chamberlin's) 36,848 37,880 39,218 36,616 36,769

Cost of Sales 779,189 789,318 795,775 839,813 938,830 Gross Profit $60,350 $64,249 $64,676 $68,140 $71,708

SG&A 51,722 50,964 51,631 51,540 54,445 EBITDA $8,629 $13,285 $13,045 $16,600 $17,263

Depreciation & Amortization 1,937 1,832 1,386 1,216 1,737 EBIT $6,692 $11,453 $11,659 $15,384 $15,526

Interest Expense $4,858 $4,816 $2,986 $1,627 $1,505Other (Income), net (137) (195) (115) (104) (86)

Pretax Income $1,971 $6,832 $8,787 $13,861 $14,107

Income Tax Expense 514 2,626 3,194 5,367 5,141 Income from Continuing Operations $1,457 $4,206 $5,593 $8,494 $8,966Discontinued Operations

Gain on Asset Disposal and Debt Settlement, net - 829 - 4,666 - Loss from Discontinued Operations, net (2,436) (595) (261) (186) -

Income from Discontinued Operations (2,436) 235 (261) 4,480 - Net Income ($979) $4,440 $5,332 $12,974 $8,966

Preferred Stock Dividend Requirements (366) (419) (420) (569) (297) NI Available to Common Shareholders ($1,345) $4,022 $4,912 $12,405 $8,669

Earnings per Share NM $4.68 $5.77 $15.88 $11.59

RatiosSales by Segment

Total 100.0% 100.0% 100.0% 100.0% 100.0%Wholesale - Cigarettes 72.2% 71.2% 70.2% 71.2% 72.4%Wholesale - Confectionary 6.6% 6.7% 7.2% 7.2% 6.5%Wholesale - Tobacco 16.9% 17.6% 18.1% 17.6% 17.4%Retail (Akin's & Chamberlin's) 4.4% 4.4% 4.6% 4.0% 3.6%

Sales Growth RateTotal 1.7% 0.8% 5.5% 11.3%Wholesale - Cigarettes 0.3% -0.6% 7.0% 13.1%Wholesale - Confectionary 3.8% 7.5% 5.1% 1.6%Wholesale - Tobacco 6.3% 3.3% 3.0% 10.3%Retail (Akin's & Chamberlin's) 2.8% 3.5% -6.6% 0.4%

Gross Margin 7.2% 7.5% 7.5% 7.5% 7.1%SG&A Expenses (as a % of Sales) 6.2% 6.0% 6.0% 5.7% 5.4%Other (Income) ($ Amount) (137) (195) (115) (104) (86) Effective Tax Rate 26.1% 38.4% 36.3% 38.7% 36.4%

19


Appendix C: Statement of Cash Flows

($ in thousands) 9/ 30/ 2006 9/ 30/ 2007 9/ 30/ 2008 9/ 30/ 2009 9/ 30/ 2010Net Income ($979) $4,440 $5,332 $12,974 $8,966Deduct: Income from Discontinued Operations, net (2,436) 235 (261) 4,480 0Income from Continuing Operations $1,457 $4,206 $5,593 $8,494 $8,966Adjustments to Reconcile Income from ContinuingOperations to Net Cash Flows from Operating Activities

Depreciation $1,897 $1,792 $1,359 $1,216 $1,459Amortization 40 40 27 0 278(Gain) Loss on Sale of Property & Equipment 30 27 (40) 25 (33)Stock Based Compensation 60 71 435 532 486Net Excess Tax Benefit on Equity Based Awards 0 0 (17) (2) (141)Deferred Income Taxes (723) 2,621 2,720 1,050 (385)Provision for Losses on Doubtful Accounts 179 (250) 505 125 686Provision for (Recoveries) Losses on Inventory Obsolescence 78 52 102 299 (74)Other 0 0 0 0 75

Changes in Assets and LiabilitiesAccounts Receivable (815) 217 146 (1,319) (197)Inventories (1,396) (384) (7,694) 2,546 1,536Prepaid and Other Current Assets (206) (566) 2,416 1,791 (1,290)Other Assets (11) 254 (30) 97 (43)Accounts Payable (805) 739 (515) (80) 1,395Accrued Expenses and Accrued Wages, Salaries & Bonuses 642 1,574 416 2,113 (857)Income Taxes Payable 50 199 (38) 3,673 (1,476)

Net Cash Flows from Operating Activities - Continuing Operations $478 $10,593 $5,384 $20,558 $10,385Net Cash Flows from Operating Activities - Discontinued Operations (821) (1,929) (230) (2,674) 0Net Cash Flows from Operating Activities ($343) $8,664 $5,154 $17,885 $10,385

CASH FLOW FRO INVESTING ACTIVITIESPurchase of Property & Equipment ($981) ($514) ($845) ($1,673) ($1,921)Proceeds from Sales of Property & Equipment 40 101 86 107 72Purchase of Trademark (15) 0 0 0 0Acquisition 0 0 0 0 (3,100)Net Cash Flows from Investing Activities - Continuing Operations ($956) ($413) ($759) ($1,566) ($4,949)Net Cash Flows from Investing Activities - Discontinued Operations (17) 3,965 0 0 0Net Cash Flows from Investing Activities ($973) $3,552 ($759) ($1,566) ($4,949)

CASH FLOWS FROM FINANCING ACTIVITIESNet Payments on Bank Credit Agreements ($339) ($9,969) ($3,653) ($12,367) ($4,017)Net Proceeds from Preferred Stock Issuance 1,982 0 0 0 0Proceeds from Borrowings on Long-Term Debt 237 0 0 0 0Principal Payments on Long-Term Debt (671) (734) (656) (789) (932)Proceeds from Exercise of Stock Options 0 47 148 88 132Net Excess Tax Benefit on Equity-Based Awards 0 0 17 2 141Redemption on Series C Convertible Preferred Stock 0 (100) 0 (2,000) 0Dividends Paid on Convertible Preferred Stock (366) (419) (420) (347) (297)Dividends on Common Stock 0 0 (91) (228) (417)Net Cash from Financing Activities - Continuing Operations $844 ($11,176) ($4,655) ($15,641) ($5,390)Net Cash from Financing Activities - Discontinued Operations 407 (804) 0 (825) 0Net Cash from Financing Activities $1,251 ($11,980) ($4,655) ($16,466) ($5,390)

Net Change in Cash ($65) $236 ($260) ($148) $47Cash, Beginning of Year 546 481 718 458 310Cash, End of Year $481 $718 $458 $310 $357

20


Appendix D: Ratio Analysis

($ in thousands) 9/ 30/ 2006 9/ 30/ 2007 9/ 30/ 2008 9/ 30/ 2009 9/ 30/ 2010

EBIT 6,692 11,453 11,659 15,384 15,526

(+) Plus D&A 1,937 1,832 1,386 1,216 1,737

EBITDA 8,629 13,285 13,045 16,600 17,263

(-) Change in Noncash WC - (3,620) (4,495) 9,270 (2,561)

Cash From Operations (CFO) 8,629 16,905 17,540 7,330 19,823

Capital Expenditures (981) (514) (845) (1,673) (1,921)

Dividends (366) (419) (420) (569) (297)

Interest Expense (4,858) (4,816) (2,986) (1,627) (1,505)

Taxes Paid (514) (2,626) (3,194) (5,367) (5,141)

Free Cash Flow (FCF) 1,910 8,530 10,094 (1,907) 10,960

Liquidity:

Current Ratio 1.8 2.1 2.3 2.2 2.3

Quick Ratio 1.1 1.2 1.1 1.0 1.1

Activity:

Sales Growth (yoy) -0.8% 1.7% 0.8% 5.5% 11.3%

Fixed Assets Turnover 64,472 71,972 77,875 81,930 87,446

Total Assets Turnover 8,829 9,132 9,284 10,009 11,216

Working Capital Turnover 21.3 19.5 21.8 26.3

Receivable Turnover (days) 12.1 11.9 11.5 11.4 10.1

Inventory Turnover (days) 11.4 13.8 17.1 15.0 13.6

Payables Turnover (days) 6.9 7.1 6.8 6.6 6.5

Cash Cycle 16.7 18.6 21.9 19.8 17.2

Leverage:

Total Liabilities/ Total Assets 1.02 0.94 0.88 0.73 0.64

Total Liabilities/ Total Equity NM 15.61 7.51 2.71 1.81

Total Bank Debt/ Total Equity NM 7.01 3.21 0.96 0.57

Total Debt/ Total Equity NM 8.40 3.88 1.24 0.76

LT Liabilities/ Total Equity NM 10.1 4.7 1.4 0.9

Current Liabilities/ Total Equity NM 5.6 2.8 1.3 0.9

Total Bank Debt/ EBITDA (x) 5.7 x 2.9 x 2.7 x 1.4 x 1.1 x

Net Debt/ EBITDA (x) 6.5 x 3.4 x 3.2 x 1.8 x 1.4 x

Debt/ Total Capitalization 59% 51% 46% 33% 27%

Debt/ Market Capitalization 836% 331% 313% 85% 70%

21


($ in thousands) 9/ 30/ 2006 9/ 30/ 2007 9/ 30/ 2008 9/ 30/ 2009 9/ 30/ 2010

Profitability:

Gross margin 7.2% 7.5% 7.5% 7.5% 7.1%

Operating margin 0.8% 1.3% 1.4% 1.7% 1.6%

EBITDA margin 1.0% 1.6% 1.5% 1.8% 1.7%

Net margin NM 0.5% 0.6% 1.4% 0.9%

ROAA -1.4% 4.3% 5.3% 13.7% 9.6%

ROAE 136.1% 211.9% 59.5% 71.4% 30.7%

Coverage Ratios:

EBITDA/ Interest Expense 1.8 2.8 4.4 10.2 11.5

(EBITDA - CapEx)/ Int. Exp. 1.6 2.7 4.1 9.2 10.2

Total Liabilities/ EBITDA 11.2 6.5 6.3 3.9 3.4

EBIT/ Interest Expense 1.4 2.4 3.9 9.5 10.3

CFO/ Interest Expense 1.8 3.5 5.9 4.5 13.2

FCF/ Interest Expense 0.4 1.8 3.4 NM 7.3

1/ 13/ 2011

Basic Shares (thousands) 527 529 570 573 577 577

Common Stock Price 12.80$ 26.57$ 23.81$ 60.06$ 61.52$ 78.00$

Market Capitalization 6,746 14,067 13,581 34,428 35,524 45,040

Debt 56,417 46,546 42,514 29,370 24,937 24,937

Convertible Preferred Stock 6,278 6,278 6,278 4,500 4,500 4,500

Cash (481) (718) (458) (310) (357) (357)

Enterprise Value 68,961 66,174 61,916 67,989 64,603 74,120

EV/ EBITDA (x) 8.0 5.0 4.7 4.1 3.7 4.3

22

AMCON Distributing Investment Pitch January 13, 2011

Appendix E: Discount Cash Flow Analysis – EBITDA Multiple Method

($ in thousands) 9/ 30/ 2011 9/ 30/ 2012 9/ 30/ 2013 9/ 30/ 2014 9/ 30/ 2015 Value Date 1/ 13/ 2011Sales 1,026,485 1,042,802 1,059,499 1,076,590 1,094,086 Shares O/ S: 577 thousandsGrowth (%) 1.6% 1.6% 1.6% 1.6% 1.6%

EBITDA 17,535 17,814 18,099 18,391 18,690 Risk Prem. ke WACCMargin (%) 1.7% 1.7% 1.7% 1.7% 1.7% 3.0% 7.0% 5.9%

3.5% 7.6% 6.3%Less: Taxes 5,960 6,054 6,151 6,249 6,350 4.0% 8.2% 6.6%Tax-effected EBITDA 11,575 11,759 11,948 12,142 12,340 4.5% 8.8% 7.0%Less: CapEx (1,950) (1,981) (2,013) (2,046) (2,079) 5.0% 9.4% 7.4%Less: Changes in NWC (6,221) (729) (746) (764) (782) Free Cash Flow 3,404 9,049 9,189 9,333 9,479 Growth (%) -55.4% 165.8% 1.5% 1.6% 1.6%

End Date 365 730 1095 1460 1825Valuation Date 75 75 75 75 75Discount Period 0.79 1.79 2.79 3.79 4.79PV of FCF @

5.9% 3,253 8,166 7,831 7,511 7,204 6.3% 3,244 8,115 7,755 7,412 7,085 6.6% 3,235 8,065 7,680 7,315 6,968 7.0% 3,226 8,015 7,607 7,220 6,854 7.4% 3,217 7,965 7,534 7,126 6,742

EBITDA EXIT MULTIPLE METHOD

A + B = C

Discounted PV of Terminal Value as a Firm ValueCash Flows Multiple of TV EBITDA

WACC 2011-2015 4.5x 5.0x 5.5x 6.0x 6.5x 4.5x 5.0x 5.5x 6.0x 6.5x5.9% 33,964$ 63,918$ 71,020$ 78,122$ 85,224$ 92,326$ 97,882$ 104,984$ 112,086$ 119,188$ 126,290$ 6.3% 33,611 62,861 69,846 76,830 83,815 90,799 96,472 103,456 110,441 117,426 124,410 6.6% 33,263 61,825 68,695 75,564 82,434 89,303 95,088 101,958 108,827 115,697 122,566 7.0% 32,921 60,810 67,566 74,323 81,080 87,836 93,731 100,488 107,244 114,001 120,758 7.4% 32,584 59,815 66,461 73,107 79,753 86,399 92,399 99,045 105,691 112,337 118,983

- D = E ==> F

Net Debt Total Equity Value Implied Share PriceWACC + P/ ST 4.5x 5.0x 5.5x 6.0x 6.5x 4.5x 5.0x 5.5x 6.0x 6.5x5.9% 29,080$ 68,802$ 75,904$ 83,006$ 90,108$ 97,210$ 119$ 131$ 144$ 156$ 168$ 6.3% 29,080 67,392 74,377 81,361 88,346 95,330 117 129 141 153 165 6.6% 29,080 66,009 72,878 79,747 86,617 93,486 114 126 138 150 162 7.0% 29,080 64,651 71,408 78,164 84,921 91,678 112 124 135 147 159 7.4% 29,080 63,319 69,965 76,611 83,257 89,903 110 121 133 144 156

23

AMCON Distributing Investment Pitch January 13, 2011

Appendix F: Discount Cash Flow Analysis – Perpetuity Growth Method

($ in thousands) 9/ 30/ 2011 9/ 30/ 2012 9/ 30/ 2013 9/ 30/ 2014 9/ 30/ 2015 Value Date 1/ 13/ 2011Sales 1,026,485 1,042,802 1,059,499 1,076,590 1,094,086 Shares O/ S: 577 thousandsGrowth (%) 1.6% 1.6% 1.6% 1.6% 1.6%

EBITDA 17,535 17,814 18,099 18,391 18,690 Risk Prem. ke WACCMargin (%) 1.7% 1.7% 1.7% 1.7% 1.7% 3.0% 7.0% 5.9%

3.5% 7.6% 6.3%Less: Taxes 5,960 6,054 6,151 6,249 6,350 4.0% 8.2% 6.6%Tax-effected EBITDA 11,575 11,759 11,948 12,142 12,340 4.5% 8.8% 7.0%Less: CapEx (1,950) (1,981) (2,013) (2,046) (2,079) 5.0% 9.4% 7.4%Less: Changes in NWC (6,221) (729) (746) (764) (782) Free Cash Flow 3,404 9,049 9,189 9,333 9,479 Growth (%) -55.4% 165.8% 1.5% 1.6% 1.6%

End Date 365 730 1095 1460 1825Valuation Date 75 75 75 75 75Discount Period 0.79 1.79 2.79 3.79 4.79PV of FCF @

5.9% 3,253 8,166 7,831 7,511 7,204 6.3% 3,244 8,115 7,755 7,412 7,085 6.6% 3,235 8,065 7,680 7,315 6,968 7.0% 3,226 8,015 7,607 7,220 6,854 7.4% 3,217 7,965 7,534 7,126 6,742

Perpetual Growth Model

A + B = C

Discounted PV of Terminal Value using Firm ValueCash Flows Long-Term Growth Rate

WACC 2011-2015 0.0% 0.5% 1.0% 1.5% 2.0% 0.0% 0.5% 1.0% 1.5% 2.0%5.9% 33,964$ 122,280$ 134,289$ 148,752$ 166,509$ 188,828$ 156,244$ 168,253$ 182,716$ 200,473$ 222,792$ 6.3% 33,611 113,172 123,610 136,033 151,065 169,626 146,783 157,221 169,644 184,676 203,237 6.6% 33,263 105,113 114,256 125,024 137,890 153,536 138,376 147,519 158,287 171,153 186,799 7.0% 32,921 97,937 106,000 115,407 126,526 139,869 130,858 138,921 148,329 159,447 172,790 7.4% 32,584 91,510 98,664 106,942 116,630 128,123 124,095 131,248 139,526 149,214 160,708

- D = E ==> F

Net Debt Total Equity Value Implied Share PriceWACC + P/ ST 0.0% 0.5% 1.0% 1.5% 2.0% 0.0% 0.5% 1.0% 1.5% 2.0%5.9% 29,080$ 127,164$ 139,173$ 153,636$ 171,393$ 193,713$ 220$ 241$ 266$ 297$ 335$ 6.3% 29,080 117,703 128,141 140,564 155,596 174,157 204 222 243 269 302 6.6% 29,080 109,296 118,440 129,207 142,074 157,720 189 205 224 246 273 7.0% 29,080 101,778 109,841 119,249 130,367 143,710 176 190 207 226 249 7.4% 29,080 95,015 102,169 110,446 120,134 131,628 165 177 191 208 228

24


Appendix G: Replacement Cost Analysis and Earnings Power Value

Adjusted($ in thousands) 9/ 30/ 2010 Adj. Factor ValueASSETSCurrent Assets

Cash $357 100% $357Accounts Receivable 27,904 75% 20,928 Inventories, net 35,006 75% 26,254 Deferred Income Taxes 1,906 100% 1,906 Current Assets of Discontinued Operations - - Prepaid and Other Current Assets 3,013 0% -

Total Current Assets $68,186 $49,445Property and Equipment, net 11,856 See Below 23,140 Goodwill 6,149 0% - Other Intangible Assets, net 4,808 0% - Other Assets 1,069 50% 535

Total Assets $92,067 $73,120

Current LiabilitiesAccounts payable $16,656 100% $16,656Accrued expenses 6,008 100% 6,008 Accrued wages and salaries 3,162 100% 3,162 Income taxes payable 2,367 100% 2,367 Current maturities of LT debt 893 100% 893 Total current liabilities 29,086 100% 29,086

Credit facility, less current maturities 18,817 100% 18,817 Deferred income taxes 1,076 100% 1,076 Long-term debt, less current maturities 5,227 100% 5,227 Other long-term liabilities 587 100% 587 Series A cumulative, conv. P/ ST 2,500 100% 2,500 Series B cumulative, conv. P/ ST 2,000 100% 2,000 Series C cumulative, conv. P/ ST - 100% - Total Liabilities $59,293 $59,293

Shareholders' equity 32,775 $13,827

Total Liabilities and Shareholders' Equity $92,067 $73,120Balance Check - -

25


Property and Equipment 9/ 30/ 2010 AdjustedLand $649 125% $811 Land bought in 2000Buildings & Improvements 9,149 125% 11,436 Buildings bought in 2001Warehouse equipment 7,992 75% 5,994 Furniture, fixtures, and other 8,092 50% 4,046 Vehicles 1,707 50% 854 Construction in progress 151 0% - Land, Buildings & Equipment 27,740$ $23,140Capital equipment leases 396 0% -

$28,136 $23,140Less: accumulated depreciation

Owned buildings and equipment ($16,023)Capital equipment leases (258)

$11,856

Earnings Power Value and Total Value Analysis

EBIT - after tax adjusted 3 Year

($ in thousands) 9/ 30/ 2008 9/ 30/ 2009 9/ 30/ 2010 AverageEBIT 11,659$ 15,384$ 15,526$ Tax rate 36.3% 38.7% 36.4%EBIT after tax 7,421$ 9,427$ 9,868$ D&A 1,386 1,216 1,737 CapEx (845) (1,673) (1,921) EBIT after tax adjusted (EBIT-ATA) 7,962$ 8,970$ 9,684$ 8,872$

EBIT-ATA as a % of Total Revenues 0.9% 1.0% 1.0% 1.0%

Avg. EBIT-ATA 3 Year Avg.

($ in thousands) Current (1) as % Rev. (2) EBIT-ATA (3)

EBIT after tax adjusted $9,684 $9,673 $8,872WACC 6.6%EPV $146,078 $145,909 $133,830Asset Value 13,827 13,827 13,827 Total Value $159,905 $159,737 $147,657Shares Outstanding 577 Price per share $277 $277 $256

(1) Used the EBIT-ATA for the fiscal year ending 2010(2) Determined by multiplying 3 year average of EBIT-ATA margin with 2010 revenues(3) Determined by using the 3 year average of EBIT - ATA

26


Appendix H: Management Profiles

CHRISTOPHER H. ATAYAN has served as the Company’s Chairman of the Board since January 2008, its Chief Executive Officer since October 2006, and has been a director of the Company since 2004. From March 2006 to October 2006, he served the Company in various capacities including Vice Chairman and Chief Corporate Officer. Mr. Atayan is also a consultant to Draupnir LLC (the parent of Draupnir Capital, LLC), has served as the Senior Managing Director of Slusser Associates, a private equity and investment banking firm, since 1988, and has been engaged in private equity and investment banking since 1982. Prior thereto to he worked at PaineWebber Incorporated, Goldman Sachs and Morgan Stanley.

Mr. Atayan is also a director of Eastek International, Discovery Toys LLC, Hotlink Inc. and AMCON Corporation.

Atayan was also the financial advisor to the Alexander Dawson Schools which operates highly regarded schools in Colorado and Nevada. The School in Colorado was rated recently rated number one in Colorado.

He is an honors graduate of the University of Wisconsin Madison and attended the University Of Chicago Graduate School Of Business where he was a Morris Vehon Scholar.

KATHLEEN M. EVANS has been President of the Company since 1991. Prior to that time, Ms. Evans served as Vice President of the AMCON Corporation (the former parent of the Company) from 1985 to 1991. From 1978 to 1985, Ms. Evans acted in various capacities with AMCON Corporation and its operating subsidiaries.

ANDREW C. PLUMMER has served as the Company’s Chief Financial Officer and Secretary since January 2007. From 2004 to 2007, Mr. Plummer served the Company in various roles including Acting Chief Financial Officer, Corporate Controller, and Manager of SEC Compliance. Prior to joining AMCON in 2004, Mr. Plummer practiced public accounting, primarily with the accounting firm Deloitte and Touche, LLP.

Although not an executive officer of our Company, Eric. J. Hinkefent is an executive officer of two of our subsidiaries. His business experience is as follows:

ERIC J. HINKEFENT has served as President of both Chamberlin’s Natural Foods, Inc. and Health Food Associates, Inc. since October 2001. Prior to that time, Mr. Hinkefent served as President of Health Food Associates, Inc.

27


Appendix I: Credit Facility:

As of September 30, 2010, the Credit Facility had a balance of $18.8 million.

The Facility includes the following significant terms:

A January 1, 2012 maturity date and a $55.0 million revolving credit limit. The Facility bears interest at either the bank’s prime rate or LIBOR plus 250

basis points, at the election of the Company The Facility provides an additional $5.0 million of credit advances 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 subject to accounts receivable and inventory limitations An unused commitment fee equal to one-quarter of one percent (1/4%) per

annum on the difference between the maximum loan limit and average monthly borrowings

Secured by collateral including all of the Company’s equipment, intangibles, inventories, and accounts receivable.

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 January 1, 2011.

The Facility includes a final covenant which requires the Company to maintain a debt service ratio of 1.0 to 1.0 as measured by the previous twelve month period that ended. The Company was in compliance with this covenant at September 2010.

28