10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2013
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

(Exact name of registrant as specified in its charter)

Delaware	47-0702918
(State or other jurisdiction	(I.R.S. Employer
of incorporation or organization)	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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files) Yes xo No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer o	Non-accelerated filer o	Smaller reporting company x
	(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes o No x

The Registrant had 611,432 shares of its $.01 par value common stock outstanding as of January 20, 2014.

Form 10-Q

1st Quarter

INDEX

	PAGE
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed consolidated balance sheets at December 31, 2013 (unaudited) and September 30, 2013	3
Condensed consolidated unaudited statements of operations for the three months ended December 31, 2013 and 2012	4
Condensed consolidated unaudited statements of cash flows for the three months ended December 31, 2013 and 2012	5
Notes to condensed consolidated unaudited financial statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3. Quantitative and Qualitative Disclosures About Market Risk	20
Item 4. Controls and Procedures	20
PART II — OTHER INFORMATION
Item 1. Legal Proceedings	21
Item 1A. Risk Factors	21
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 3. Defaults Upon Senior Securities	23
Item 4. Mine Safety Disclosures	23
Item 5. Other Information	23
Item 6. Exhibits	23

2

PART I — FINANCIAL INFORMATION

Item 1.      Financial Statements

AMCON Distributing Company and Subsidiaries

Condensed Consolidated Balance Sheets

December 31, 2013 and September 30, 2013

	December 2013			September 2013
	(Unaudited)
ASSETS
Current assets:
Cash	$	326,390		$	275,036
Accounts receivable, less allowance for doubtful accounts of $1.2 million and $1.1 million at December 2013 and September 2013, respectively	32,092,060			28,383,205
Inventories, net	50,987,078			46,125,187
Deferred income taxes	1,437,481			1,831,933
Prepaid and other current assets	7,032,830			5,001,992
Total current assets	91,875,839			81,617,353
Property and equipment, net	13,527,259			13,088,859
Goodwill	6,349,827			6,349,827
Other intangible assets, net	4,729,728			4,820,978
Other assets	433,084			497,882
	$	116,915,737		$	106,374,899
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	15,847,759		$	15,859,636
Accrued expenses	5,438,389			6,714,444
Accrued wages, salaries and bonuses	2,272,813			2,754,136
Income taxes payable	253,329			1,922,351
Current maturities of long-term debt	781,123			998,788
Total current liabilities	24,593,413			28,249,355
Credit facility	28,749,737			14,841,712
Deferred income taxes	3,417,396			3,327,010
Long-term debt, less current maturities	3,992,481			4,076,892
Other long-term liabilities	237,385			239,396
Series A cumulative, Convertible Preferred Stock, $.01 par value 100,000 sharesauthorized and issued, and a total liquidation preference of $2.5 million at bothDecember 2013 and September 2013.	2,500,000			2,500,000
Series B cumulative, Convertible Preferred Stock, $.01 par value 80,000 sharesauthorized, 16,000 shares issued and outstanding at both December 2013 andSeptember 2013, and a total liquidation preference of $0.4 million at bothDecember 2013 and September 2013.	400,000			400,000
Shareholders’ equity:
Preferred stock, $0.01 par value, 1,000,000 shares authorized, 116,000shares outstanding and issued in Series A and B referred to above	—			—
Common stock, $.01 par value, 3,000,000 shares authorized, 611,432 sharesoutstanding at December 2013 and 623,115 shares outstanding at September 2013	6,677			6,543
Additional paid-in capital	13,610,519			12,502,135
Retained earnings	44,651,003			43,532,812
Treasury stock at cost	(5,242,874		)	(3,300,956		)
Total shareholders’ equity	53,025,325			52,740,534
	$	116,915,737		$	106,374,899

The accompanying notes are an integral part of these condensed consolidated unaudited financial statements.

3

AMCON Distributing Company and Subsidiaries

Condensed Consolidated Unaudited Statements of Operations

for the three months ended December 31, 2013 and 2012

	2013			2012
Sales (including excise taxes of $97.3 million and $98.0 million at December 2013 and December 2012, respectively)	$	305,625,557		$	302,218,321
Cost of sales	285,984,494			282,988,532
Gross profit	19,641,063			19,229,789
Selling, general and administrative expenses	16,492,263			15,848,472
Depreciation and amortization	624,040			593,862
	17,116,303			16,442,334
Operating income	2,524,760			2,787,455
Other expense (income):
Interest expense	301,995			316,052
Other (income), net	(30,231		)	(61,349		)
	271,764			254,703
Income from operations before income tax expense	2,252,996			2,532,752
Income tax expense	965,000			1,070,000
Net income	1,287,996			1,462,752
Preferred stock dividend requirements	(49,177		)	(59,291		)
Net income available to common shareholders	$	1,238,819		$	1,403,461
Basic earnings per share available to common shareholders	$	1.99		$	2.26
Diluted earnings per share available to common shareholders	$	1.73		$	1.90
Basic weighted average shares outstanding	622,226			622,277
Diluted weighted average shares outstanding	744,568			767,957

The accompanying notes are an integral part of these condensed consolidated unaudited financial statements.

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AMCON Distributing Company and Subsidiaries

Condensed Consolidated Unaudited Statements of Cash Flows

for the three months ended December 31, 2013 and 2012

	2013			2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	1,287,996		$	1,462,752
Adjustments to reconcile net income from operationsto net cash flows from operating activities:
Depreciation	532,790			502,612
Amortization	91,250			91,250
Gain on sale of property and equipment	(7,704		)	(70,631		)
Equity-based compensation	342,160			327,476
Deferred income taxes	484,838			419,627
Provision for losses on doubtful accounts	130,000			105,000
Provision for losses on inventory obsolescence	38,803			71,603
Other	(2,011		)	(2,011		)
Changes in assets and liabilities:
Accounts receivable	(3,838,855		)	241,773
Inventories	(4,900,694		)	(11,412,393		)
Prepaid and other current assets	(2,030,838		)	(878,343		)
Other assets	64,798			56,705
Accounts payable	995			(2,021,716		)
Accrued expenses and accrued wages, salaries and bonuses	(928,307		)	(500,789		)
Income tax payable	(1,669,022		)	(1,569,182		)
Net cash flows from operating activities	(10,403,801		)	(13,176,267		)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(985,678		)	(330,228		)
Proceeds from sales of property and equipment	9,320			139,040
Net cash flows from investing activities	(976,358		)	(191,188		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on bank credit agreements	13,908,025			16,025,449
Principal payments on long-term debt	(302,076		)	(292,345		)
Repurchase of common stock and Series B Convertible Preferred Stock	(1,941,918		)	(2,572,085		)
Dividends paid on convertible preferred stock	(49,177		)	(59,291		)
Dividends on common stock	(120,628		)	(117,428		)
Proceeds from exercise of stock options	—			1,180
Withholdings on the exercise of equity-based awards	(62,713		)	(74,610		)
Net cash flows from financing activities	11,431,513			12,910,870
Net change in cash	51,354			(456,585		)
Cash, beginning of period	275,036			491,387
Cash, end of period	$	326,390		$	34,802

The accompanying notes are an integral part of these condensed consolidated unaudited financial statements.

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	2013		2012
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	274,796	$	279,667
Cash paid during the period for income taxes	2,149,184		2,219,555
Supplemental disclosure of non-cash information:
Equipment acquisitions classified as accounts payable	$	60,332	$	64,042
Issuance of common stock in connection with the vesting and exercise of equity-based awards	1,154,869		1,389,258
Conversion by holder of Series B Convertible Preferred Stock to common stock	—		100,000
Common stock acquired with other consideration	—		760,871

The accompanying notes are an integral part of these condensed consolidated unaudited financial statements.

6

AMCON Distributing Company and Subsidiaries

Notes to Condensed Consolidated Unaudited Financial Statements

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

AMCON Distributing Company and Subsidiaries (“AMCON” or the “Company”) operate two business segments:

·Our wholesale distribution segment (“Wholesale Segment”) distributes consumer products in the Central, Rocky Mountain, and Southern regions of the United States. Additionally, our Wholesale Segment provides a full range of programs and services to assist our customers in managing their business and profitability.

·Our retail health food segment (“Retail Segment”) operates sixteen health food retail stores located throughout the Midwest and Florida.

WHOLESALE SEGMENT

Our Wholesale Segment is one of the largest wholesale distributors in the United States serving approximately 4,500 retail outlets including convenience stores, grocery stores, liquor stores, drug stores, and tobacco shops. We currently distribute over 16,000 different consumer products, including cigarettes and tobacco products, candy and other confectionery, beverages, groceries, paper products, health and beauty care products, frozen and chilled products and institutional foodservice products. We also provide a full range of consultative services to our customers in the areas of marketing, merchandising, inventory optimization, and information systems that allow our customers to compete and maximize their profitability. Convenience stores represent our largest customer category.  In October 2013, Convenience Store News ranked us as the seventh (7th) largest convenience store distributor in the United States based on annual sales.

Our Wholesale Segment operates six distribution centers located in Illinois, Missouri, Nebraska, North Dakota, South Dakota, and Tennessee. These distribution centers, combined with cross dock facilities, include approximately 602,000 square feet of permanent floor space. Our principal suppliers include Altria, RJ Reynolds, Commonwealth Brands, Lorillard, Hershey, Kellogg’s, Kraft, and Mars. We also market private label lines of water, candy products, batteries, film, and other products. The Company does not maintain long term purchase contracts with its suppliers.

RETAIL SEGMENT

Our Retail Segment is a specialty retailer of natural/organic groceries and dietary supplements which focuses on providing high quality products at affordable prices, with an exceptional level of customer service and nutritional consultation. All of the products carried in our stores must meet strict quality and ingredient guidelines, and include offerings such as gluten-free and antibiotic-free groceries and meat products, as well as products containing no artificial colors, flavors, preservatives, or partially hydrogenated oils. We design our retail sites in an efficient and flexible small-store format, which emphasizes a high energy and shopper-friendly environment.

We operate within the natural products retail industry, which is a subset of the large and stable U.S. grocery industry. This industry includes conventional, natural, gourmet and specialty food markets, mass and discount retailers, warehouse clubs, health food stores, dietary supplement retailers, drug stores, farmers markets, mail order and online retailers, and multi-level marketers. According to The Natural Foods Merchandiser, a leading industry trade publication, retail sales in the natural foods industry exceeded $80 billion during the 2012 calendar year.

Our Retail Segment operates sixteen retail health food stores as Chamberlin’s Market & Café and Akin’s Natural Foods Market. These stores carry over 32,000 different national and regionally branded and private label products including high-quality natural, organic, and specialty foods consisting of produce, baked goods, frozen foods, nutritional supplements, personal care items, and general merchandise. Chamberlin’s, which was established in 1935, operates six stores in and around Orlando, Florida. Akin’s, which was also established in 1935, has a total of ten locations in Arkansas, Kansas, Missouri, Nebraska, and Oklahoma.

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FINANCIAL STATEMENTS

The Company’s fiscal year ends on September 30. The results for the interim period included with this Quarterly Report may not be indicative of the results which could be expected for the entire fiscal year. All significant intercompany transactions and balances have been eliminated in consolidation. Certain information and footnote disclosures normally included in our annual financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) have been condensed or omitted. In the opinion of management, the accompanying condensed consolidated unaudited financial statements (“financial statements”) contain all adjustments necessary to fairly present the financial information included herein, such as adjustments consisting of normal recurring items. The Company believes that although the disclosures contained herein are adequate to prevent the information presented from being misleading, these financial statements should be read in conjunction with the Company’s annual audited consolidated financial statements for the fiscal year ended September 30, 2013, as filed with the Securities and Exchange Commission on Form 10-K. For purposes of this report, unless the context indicates otherwise, all references to “we”, “us”, “our”, the “Company”, and “AMCON” shall mean AMCON Distributing Company and its subsidiaries. Additionally, the three month fiscal periods ended December 31, 2013 and December 31, 2012 have been referred to throughout this quarterly report as Q1 2014 and Q1 2013, respectively. The fiscal balance sheet dates as of December 31, 2013, December 31, 2012, and September 30, 2013 have been referred to as December 2013, December 2012, and September 2013, respectively.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

The Company is currently evaluating the impact of implementing the following new accounting standard:

In July 2013, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists”, which states that entities should present the unrecognized tax benefit as a reduction of the deferred tax asset for a net operating loss (“NOL”) or similar tax loss or tax credit carryforward rather than as a liability when the uncertain tax position would reduce the NOL or other carryforward under the tax law. The Company will be required to adopt this new standard on a prospective basis in the first interim reporting period of fiscal 2015, however, early adoption is permitted as is a retrospective application.

2. CONVERTIBLE PREFERRED STOCK

The Company has two series of convertible preferred stock outstanding at December 2013 as identified in the following table:

	Series A			Series B
Date of issuance:	June 17, 2004			October 8, 2004
Optionally redeemable beginning	June 18, 2006			October 9, 2006
Par value (gross proceeds):	$	2,500,000		$	400,000
Number of shares outstanding at December 2013:	100,000			16,000
Liquidation preference per share:	$	25.00		$	25.00
Conversion price per share:	$	30.31		$	24.65
Number of common shares in which to be converted:	82,481			16,227
Dividend rate:	6.785		%	6.37		%

The Series A Convertible Preferred Stock (“Series A”) and Series B Convertible Preferred Stock (“Series B”), (collectively, the “Preferred Stock”), are convertible at any time by the holders into a number of shares of AMCON common stock equal to the number of preferred shares being converted multiplied by a fraction equal to $25.00 divided by the conversion price. The conversion prices for the Preferred Stock are subject to customary adjustments in the event of stock splits, stock dividends, and certain other distributions on the Common Stock. Cumulative dividends for the Preferred Stock are payable in arrears, when, and if declared by the Board of Directors, on March 31, June 30, September 30 and December 31 of each year.

In the event of a liquidation of the Company, the holders of the Preferred Stock are entitled to receive the liquidation preference plus any accrued and unpaid dividends prior to the distribution of any amount to the holders of the Common Stock. The shares of Preferred Stock are optionally redeemable by the Company beginning on various dates, as listed in the above table, at redemption prices equal to 112% of the liquidation preference. The redemption prices decrease 1% annually thereafter until the redemption price equals the liquidation preference, after which date it remains the liquidation preference. The Preferred Stock is redeemable at the liquidation value and at the option of the holder. The Series A Preferred Stock and 8,000 shares of the Series B Preferred Stock are owned by Mr. Christopher Atayan, AMCON’s Chief Executive Officer and Chairman of the Board. The Series B Preferred Stock holders have the right to elect one member of our Board of Directors, pursuant to the voting rights in the Certificate of Designation creating the Series B. Christopher H. Atayan was first nominated and elected to this seat in 2004.

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3. INVENTORIES

At December 2013 and September 2013, inventories consisted of finished goods and are stated at the lower of cost determined on a First-in First-out (“FIFO”) basis or market. The wholesale distribution and retail health food segment inventories consist of finished products purchased in bulk quantities to be redistributed to the Company’s customers or sold at retail. Finished goods included total reserves of approximately $0.9 million and $0.8 million at December 2013 and September 2013, respectively. These reserves include the Company’s obsolescence allowance, which reflects estimated unsaleable or non-refundable inventory based upon an evaluation of slow moving and discontinued products.

4. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill by reporting segment of the Company consisted of the following:

	December2013		September2013
Wholesale Segment	$	4,436,950	$	4,436,950
Retail Segment	1,912,877		1,912,877
	$	6,349,827	$	6,349,827

Other intangible assets of the Company consisted of the following:

	December2013		September2013
Trademarks and tradenames	$	3,373,269	$	3,373,269
Non-competition agreement (less accumulated amortization of approximately $0.3 millionat December 2013 and $0.2 million at September 2013)	241,667		266,667
Customer relationships (less accumulated amortization of $1.0 millionand $0.9 million at December 2013 and September 2013, respectively)	1,114,792		1,181,042
	$	4,729,728	$	4,820,978

Goodwill, trademarks, and tradenames are considered to have indefinite useful lives and therefore no amortization has been taken on these assets. At December 2013, identifiable intangible assets considered to have finite lives were represented by customer relationships and the value of a non-competition agreement acquired as part of acquisitions. The customer relationships are being amortized over eight years and the value of the non-competition agreement is being amortized over five years. These intangible assets are evaluated for accelerated attrition or amortization adjustments if warranted. Amortization expense related to identifiable intangible assets was $0.1 million during both Q1 2014 and Q1 2013.

Estimated future amortization expense related to identifiable intangible assets with finite lives is as follows at December 2013:

	December2013
Fiscal 2014 (1)	$	273,750
Fiscal 2015	365,000
Fiscal 2016	331,667
Fiscal 2017	265,000
Fiscal 2018	79,375
Thereafter	41,667
	$	1,356,459

(1)  Represents amortization for the remaining nine months of Fiscal 2014.

5. DIVIDENDS

The Company paid cash dividends on its common stock and convertible preferred stock totaling $0.2 million during both Q1 2014 and  Q1 2013.

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6. EARNINGS PER SHARE

Basic earnings per share available to common shareholders is calculated by dividing net income less preferred stock dividend requirements by the weighted average common shares outstanding for each period. Diluted earnings per share available to common shareholders is calculated by dividing income from operations less preferred stock dividend requirements (when anti-dilutive) by the sum of the weighted average common shares outstanding and the weighted average dilutive options, using the treasury stock method.

	For the three months ended December
	2013					2012
	Basic			Diluted		Basic			Diluted
Weighted average common shares outstanding	622,226			622,226		622,277			622,277
Weighted average of net additional shares outstanding assuming dilutive options exercised and proceeds used to purchase treasury stock and conversion of preferred stock (1)	—			122,342		—			145,680
Weighted average number of shares outstanding	622,226			744,568		622,277			767,957
Net income	$	1,287,996		$	1,287,996	$	1,462,752		$	1,462,752
Deduct: convertible preferred stock dividends (2)	(49,177		)	—		(59,291		)	—
Net income available to common shareholders	$	1,238,819		$	1,287,996	$	1,403,461		$	1,462,752
Net earnings per share available to common shareholders	$	1.99		$	1.73	$	2.26		$	1.90

(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.

7. DEBT

The Company primarily finances its operations through a credit facility provided under an agreement with Bank of America (the “Facility”).  The Facility included the following significant terms at December 2013:

·A July 2018 maturity date without a penalty for prepayment.

·$70.0 million revolving credit limit.

·Loan accordion allowing the Company to increase the size of the credit facility agreement by $25.0 million.

·A provision providing an additional $10.0 million of credit advances for certain inventory purchases.

·Evergreen renewal clause automatically renewing the agreement for one year unless either the borrower or lender provides written notice terminating the agreement at least 90 days prior to the end of any original or renewal term of the agreement.

·The Facility bears interest at either the bank’s prime rate, or at LIBOR plus 125 - 175 basis points depending on certain credit facility utilization measures, at the election of the Company.

·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.

·A financial covenant requiring a fixed charge coverage ratio of at least 1.0 as measured by the previous twelve month period then ended only if excess availability falls below 10% of the maximum loan limit as defined in the credit agreement.

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·Provides that the Company may not pay dividends on its common stock in excess of $1.00 per share on an annual basis.  There is, however, no limit on common stock dividends if certain excess availability measurements have been maintained for the thirty day period immediately prior to the payment of any such dividends or distributions and if immediately after giving effect to any such dividend or distribution payments the Company has a Fixed Charge Coverage Ratio of at least 1.10 to 1.0 as defined in the credit facility agreement.

Cross Default and Co-Terminus Provisions

The Company’s owned real estate in Bismarck, ND, Quincy, IL, and Rapid City, SD, is financed through a term loan with BMO Harris, NA (“BMO”) which is also a participant lender on the Company’s revolving line of credit. The BMO loan contains cross default provisions which cause the loan with BMO to be considered in default if the loans where BMO is a lender, including the revolving credit facility, is in default. There were no such cross defaults at December 2013. In addition, the BMO loan contain co-terminus provisions which require all loans with BMO to be paid in full if any of the loans are paid in full prior to the end of their specified terms.

Other

AMCON has issued a letter of credit in the amount of approximately $0.4 million to its workers’ compensation insurance carrier as part of its self-insured loss control program.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements.

8. EQUITY-BASED INCENTIVE AWARDS

Omnibus Plan

The Company has an Omnibus Incentive Plan (“the Omnibus Plan”) which provides for equity incentives to employees. The Omnibus Plan was designed with the intent of encouraging employees to acquire a vested interest in the growth and performance of the Company. The Omnibus Plan permits the issuance of up to 150,000 shares of the Company’s common stock in the form of stock options, restricted stock awards, restricted stock units, performance share awards as well as awards such as stock appreciation rights, performance units, performance shares, bonus shares, and dividend share awards payable in the form of common stock or cash. The number of shares issuable under the Omnibus Plan is subject to customary adjustments in the event of stock splits, stock dividends, and certain other distributions on the Company’s common stock.  At December 2013, awards with respect to a total of 147,700 shares, net of forfeitures, had been awarded pursuant to the Omnibus Plan and awards with respect to another 2,300 shares may be awarded under the plan.

Stock Options

The stock options issued by the Company expire ten years from the grant date and include graded vesting schedules ranging between three and five years. Stock options issued and outstanding at December 2013 are summarized as follows:

			Remaining			Exercisable
	Exercise Price	Number Outstanding	Weighted-Average Contractual Life	Weighted-Average Exercise Price		Number Exercisable	Weighted-Average Exercise Price
Fiscal 2007	$18.00	25,000	2.95 years	$	18.00	25,000	$	18.00
Fiscal 2010	$51.50	5,500	6.33 years	$	51.50	3,300	$	51.50
Fiscal 2012	$53.80 - $65.97	6,500	7.84 years	$	54.74	2,500	$	54.29
Fiscal 2013	$62.33	8,000	8.82 years	$	62.33	1,600	$	62.33
		45,000		$	35.28	32,400	$	26.40

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Restricted Stock Units

During Q1 2014, the Company issued 17,900 restricted stock unit awards to members of its management team pursuant to the provisions of the Company’s Omnibus Plan.  Nonvested restricted stock units at December 2013 are as follows:

	Restricted Stock Units(1)		Restricted Stock Units(2)		Restricted Stock Units(3)
Date of award:	October 26, 2011		October 23, 2012		October 22, 2013
Original number of awards issued:	15,900		15,000		17,900
Service period:	36 months		36 months		36-60 months
Estimated fair value of award at grant date	$	855,000	$	935,000	$	1,486,000
Awards outstanding at December 2013	5,300		10,000		17,900
Fair value of non-vested awards at December 2013:	$	424,000	$	799,000	$	1,431,000

(1)10,600 of the restricted stock units were vested as of December 2013. The remaining 5,300 restricted stock units will vest on October 25, 2014.

(2)5,000 of the restricted stock units were vested as of December 2013.  The remaining 10,000 restricted stock units will vest in equal amounts on October 23, 2014 and October 23, 2015.

(3)14,000 restricted stock units will vest in equal amounts on October 22, 2014, October 22, 2015, and October 22, 2016.  The remaining 3,900 restricted stock units will vest in equal amounts on October 22, 2014, October 22, 2015, October 22, 2016, October 22, 2017, and October 22, 2018.

There is no direct cost to the recipients of the restricted stock units, except for any applicable taxes. The recipients of the restricted stock units are entitled to the customary adjustments in the event of stock splits, stock dividends, and certain other distributions on the Company’s common stock. All cash dividends and/or distributions payable to restricted stock recipients will be held in escrow until all the conditions of vesting have been met.

The restricted stock units provide that the recipients can elect, at their option, to receive either common stock in the Company, or a cash settlement based upon the closing price of the Company’s shares, at the time of vesting. Based on these award provisions, the compensation expense recorded in the Company’s Condensed Statement of Operations reflects the straight-line amortized fair value based on the period end closing price.

	Number of Shares		Weighted Average Fair Value
Nonvested restricted stock units at September 2013	29,600		$	81.89
Granted	17,900		83.03
Vested	(14,300	)	80.68
Expired	—		—
Nonvested restricted stock units at December 2013	33,200		$	79.93

All Equity-Based Awards (stock options and restricted stock units)

Net income before income taxes included compensation expense of approximately $0.3 million during both Q1 2014 and Q1 2013 related to the amortization of all equity-based compensation awards.  Total unamortized compensation expense related to these awards at December 2013 and December 2012 was approximately $2.5 million and $1.9 million, respectively.

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9. BUSINESS SEGMENTS

AMCON has two reportable business segments: the wholesale distribution of consumer products and the retail sale of health and natural food products. The retail health food stores’ operations are aggregated to comprise the Retail Segment because such operations have similar economic characteristics, as well as similar characteristics with respect to the nature of products sold, the type and class of customers for the health food products and the methods used to sell the products.  Included in the “Other” column are intercompany eliminations, and assets held and charges incurred by our holding company.  The segments are evaluated on revenues, gross margins, operating income (loss), and income before taxes.

	WholesaleSegment		RetailSegment			Other			Consolidated
THREE MONTHS ENDED DECEMBER 2013:
External revenue:
Cigarettes	$	221,151,811	$	—		$	—		$	221,151,811
Confectionery	18,203,191		—			—			18,203,191
Health food	—		8,523,278			—			8,523,278
Tobacco, food service & other	57,747,277		—			—			57,747,277
Total external revenue	297,102,279		8,523,278			—			305,625,557
Depreciation	403,342		128,510			938			532,790
Amortization	91,250		—			—			91,250
Operating income (loss)	3,795,962		52,190			(1,323,392		)	2,524,760
Interest expense	43,797		60,776			197,422			301,995
Income (loss) from operations before taxes	3,759,523		(3,628		)	(1,502,899		)	2,252,996
Total assets	103,144,703		13,564,621			206,413			116,915,737
Capital expenditures	918,542		67,136			—			985,678
THREE MONTHS ENDED DECEMBER 2012:
External revenue:
Cigarettes	$	221,730,182	$	—		$	—		$	221,730,182
Confectionery	17,956,072		—			—			17,956,072
Health food	—		8,704,643			—			8,704,643
Tobacco, food service & other	53,827,424		—			—			53,827,424
Total external revenue	293,513,678		8,704,643			—			302,218,321
Depreciation	408,743		92,932			937			502,612
Amortization	91,250		—			—			91,250
Operating income (loss)	3,802,737		371,798			(1,387,080		)	2,787,455
Interest expense	55,132		58,968			201,952			316,052
Income (loss) from operations before taxes	3,753,457		317,770			(1,538,475		)	2,532,752
Total assets	103,284,807		12,358,555			187,260			115,830,622
Capital expenditures	293,650		36,578			—			330,228

10. COMMON STOCK REPURCHASE

During Q1 2014, the Company repurchased 25,057 shares of its common stock from an independent third party for cash totaling approximately $1.9 million.  All repurchased shares are recorded in treasury stock at cost.  Subsequent to the share repurchase, the Company’s Board of Directors reauthorized additional repurchases of up to 50,000 shares of its common stock.

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Item 2.      Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections, contains forward-looking statements that are subject to risks and uncertainties and which reflect management’s current beliefs and estimates of future economic circumstances, industry conditions, company performance and financial results. Forward-looking statements include information concerning the possible or assumed future results of operations of the Company and those statements preceded by, followed by or that include the words “future,” “position,” “anticipate(s),” “expect,” “believe(s),” “see,” “plan,” “further improve,” “outlook,” “should” or similar expressions. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward- looking statements are not guarantees of future performance or results. They involve risks, uncertainties and assumptions.

You should understand that the following important factors, in addition to those discussed elsewhere in this document, could affect the future results of the Company and could cause those results to differ materially from those expressed in our forward-looking statements:

·increases in state and federal excise taxes on cigarette and tobacco products,

·increasing health care costs and the potential impact on discretionary consumer spending,

·changes in laws and regulations and ongoing compliance with the Patient Protection and Affordable Care Act,

·the expansion of large and well capitalized national and regional health food retail store chains,

·integration risk related to acquisitions or other efforts to expand,

·higher commodity prices which could impact food ingredient costs for many of the products we sell,

·regulation of cigarette and tobacco products by the FDA, in addition to existing state and federal regulations by other agencies,

·potential bans or restrictions imposed by the FDA on the manufacture, distribution, and sale of certain cigarette and tobacco products,

·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,

·the opening of new health food retail stores,

·domestic regulatory and legislative risks,

·competition,

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·poor weather conditions,

·increases in fuel prices,

·consolidation trends within the retail health food, convenience store, and wholesale distribution industries,

·natural disasters and domestic unrest,

·other risks over which the Company has little or no control, and any other factors not identified herein.

Changes in these factors could result in significantly different results. Consequently, future results may differ from management’s expectations. Moreover, past financial performance should not be considered a reliable indicator of future performance. Any forward-looking statement contained herein is made as of the date of this document. Except as required by law, the Company undertakes no obligation to publicly update or correct any of these forward-looking statements in the future to reflect changed assumptions, the occurrence of material events or changes in future operating results, financial conditions or business over time.

CRITICAL ACCOUNTING ESTIMATES

Certain accounting estimates used in the preparation of the Company’s financial statements require us to make judgments and estimates and the financial results we report may vary depending on how we make these judgments and estimates. Our critical accounting estimates are set forth in our annual report on Form 10-K for the fiscal year ended September 30, 2013, as filed with the Securities and Exchange Commission. There have been no significant changes with respect to these policies during our fiscal quarter ended December 2013.

FIRST FISCAL QUARTER 2014 (Q1 2014)

The following discussion and analysis includes the Company’s results of operations for the three months ended December 2013 and December 2012.

Wholesale Segment

Our Wholesale Segment is one of the largest wholesale distributors in the United States serving approximately 4,500 retail outlets including convenience stores, grocery stores, liquor stores, drug stores, and tobacco shops. We currently distribute over 16,000 different consumer products, including cigarettes and tobacco products, candy and other confectionery, beverages, groceries, paper products, health and beauty care products, frozen and chilled products and institutional foodservice products. We also provide a full range of consultative services to our customers in the areas of marketing, merchandising, inventory optimization, and information systems that allow our customers to compete and maximize their profitability. Convenience stores represent our largest customer category. In October 2013, Convenience Store News ranked us as the seventh (7th) largest convenience store distributor in the United States based on annual sales.

Our Wholesale Segment operates six distribution centers located in Illinois, Missouri, Nebraska, North Dakota, South Dakota, and Tennessee. These distribution centers, combined with cross-dock facilities, include approximately 602,000 square feet of permanent floor space. Our principal suppliers include Altria, RJ Reynolds, Commonwealth Brands, Lorillard, Hershey, Kellogg’s, Kraft, and Mars. We also market private label lines of water, candy products, batteries, film, and other products.  The Company does not maintain long term purchase contracts with its suppliers.

Retail Segment

Our Retail Segment is a specialty retailer of natural/organic groceries and dietary supplements which focuses on providing high quality products at affordable prices, with an exceptional level of customer service and nutritional consultation. All of the products carried in our stores must meet strict quality and ingredient guidelines, and include offerings such as gluten-free and antibiotic-free groceries and meat products, as well as products containing no artificial colors, flavors, preservatives, or partially hydrogenated oils. We design our retail sites in an efficient and flexible small-store format, which emphasizes a high energy and shopper-friendly environment.

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We operate within the natural products retail industry, which is a subset of the large and stable U.S. grocery industry. This industry includes conventional, natural, gourmet and specialty food markets, mass and discount retailers, warehouse clubs, health food stores, dietary supplement retailers, drug stores, farmers markets, mail order and online retailers, and multi-level marketers. According to The Natural Foods Merchandiser, a leading industry trade publication, retail sales in the natural foods industry exceeded $80 billion during the 2012 calendar year.

Our Retail Segment operates sixteen retail health food stores as Chamberlin’s Market & Café and Akin’s Natural Foods Market. These stores carry over 32,000 different national and regionally branded and private label products including high-quality natural, organic, and specialty foods consisting of produce, baked goods, frozen foods, nutritional supplements, personal care items, and general merchandise. Chamberlin’s, which was established in 1935, operates six stores in and around Orlando, Florida. Akin’s, which was also established in 1935, has a total of ten locations in Arkansas, Kansas, Missouri, Nebraska, and Oklahoma.

Business Update — Wholesale Segment

The demand for convenience shopping in the United States remains strong.  Competition, however, remains brisk as various other retail sales channels such as drug stores, dollar stores, and quick-service restaurants continue to pursue many of the same customers traditionally serviced by convenience stores, our largest customer segment.

Much of our efforts in the coming year will be focused on enhancing our merchandising programs to improve sales turnover and profit margins. Categories such as “snacks” and “fresh bakery items” have recently experienced a tremendous wave of innovation around flavors, healthy alternatives, and consumer friendly packing (i.e. non-spill or resealable containers). Additionally, items such as gourmet sandwiches and wraps, specialty drinks and juices, and yogurts offer new growth areas and alternatives to declining cigarette sales.

In an effort to further differentiate our Company from “price-only” competition, we will also be emphasizing our services around store re-imaging and technology. Store re-imaging has become more important as customer expectations around store design and layout, lighting, color schemes, and cleanliness standards are being lifted industry-wide by the most progressive convenience store chains.  We also see technology as an effective way to counter “price only” competition and will be focused on developing new customer facing technologies such as mobile applications that provide information about product specials or the ability to place orders remotely.

While the convenience store distribution industry is consolidating, it still remains largely fragmented. As one of the largest distributors in the industry, we feel our Company is well positioned to capitalize on the ongoing consolidation trends.  Accordingly, we have made identifying strategic growth opportunities a top priority for the coming years.

Business Update — Retail Segment

The growing demand for natural products has attracted a wide range of well financed competitors, creating a highly competitive operating environment.  Regional and national retailers such as Whole Foods Market, Trader Joe’s, Sprouts Farmers Market, Natural Grocers, Vitamin Shoppe, and General Nutrition Center (“GNC”) have all engaged in aggressive new store expansion strategies, often opening new retail sites in close proximity to our existing stores. Additionally, the purchase of consumer health products over the internet continues to grow and compete with brick and mortar retailers. Our Midwestern United States stores in particular have experienced an increase in competition over the past year which has pressured sales and gross profit.  We expect this highly competitive environment to persist and potentially accelerate into the foreseeable future.

Organic sales growth will remain a top priority for our management team in the coming year.  We continue to develop and enhance our marketing and promotional activities to assist in customer retention and attract a new generation of younger customers who are increasingly embracing natural foods and products.

For over 75 years, our health food stores have succeeded with a simple value proposition; helping our customers maintain good health. While consumer tastes and product offerings will evolve and change over time, we believe our customer focused philosophy will remain attractive.

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RESULTS OF OPERATIONS

	For the three months ended December
	2013			2012			Incr(Decr)			% Change
CONSOLIDATED:
Sales (1)	$	305,625,557		$	302,218,321		$	3,407,236		1.1
Cost of sales	285,984,494			282,988,532			2,995,962			1.1
Gross profit	19,641,063			19,229,789			411,274			2.1
Gross profit percentage	6.4		%	6.4		%
Operating expense	17,116,303			16,442,334			673,969			4.1
Operating income	2,524,760			2,787,455			(262,695		)	(9.4	)
Interest expense	301,995			316,052			(14,057		)	(4.4	)
Income tax expense	965,000			1,070,000			(105,000		)	(9.8	)
Net income	1,287,996			1,462,752			(174,756		)	(11.9	)
BUSINESS SEGMENTS:
Wholesale
Sales	$	297,102,279		$	293,513,678		$	3,588,601		1.2
Gross profit	16,005,570			15,562,002			443,568			2.9
Gross profit percentage	5.4		%	5.3		%
Retail
Sales	$	8,523,278		$	8,704,643		$	(181,365	)	(2.1	)
Gross profit	3,635,493			3,667,787			(32,294		)	(0.9	)
Gross profit percentage	42.7		%	42.1		%

(1)Sales are reported net of costs associated with incentives provided to retailers. These incentives totaled $4.9 million in Q1 2014 and $4.6 million in Q1 2013.

SALES:

Changes in sales are driven by two primary components:

(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 — Q1 2014 vs. Q1 2013

Sales in our Wholesale Segment increased $3.6 million during Q1 2014 as compared to Q1 2013.  Significant items impacting sales during Q1 2014 included a $5.9 million increase in sales related to price increases implemented by cigarette manufacturers and a $4.2 increase in sales related to higher sales in our  tobacco, beverage, snacks, candy, grocery, health & beauty products, automotive, food service, and store supplies categories (“Other Products”).  These increases were partially offset by a $6.5 million decrease in sales related to the volume and mix of cigarette cartons sold.

Sales in our Retail Segment decreased $0.2 million in Q1 2014 as compared to Q1 2013.  During Q1 2014, our Akin’s retail stores experienced lower sales due to increased competition from national and regional health food chains. This decrease in sales was partially offset by revenue generated at our two new retail health food stores which were opened during the second half of our prior fiscal year (fiscal 2013).

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GROSS PROFIT — Q1 2014 vs. Q1 2013

Our gross profit does not include fulfillment costs and costs related to the distribution network which are included in selling, general and administrative costs, and may not be comparable to those of other entities. Some entities may classify such costs as a component of cost of sales. Cost of sales, a component used in determining gross profit, for the wholesale and retail segments includes the cost of products purchased from manufacturers, less incentives we receive which are netted against such costs.

Gross profit in our Wholesale Segment increased $0.4 million in Q1 2014 as compared to Q1 2013.  This increase in gross profit was primarily related to higher sales volume in our Other Products categories.  Gross profit in our Retail Segment for Q1 2014 was approximately the same as that for Q1 2013.

OPERATING EXPENSE — Q1 2014 vs. Q1 2013

Operating expense includes selling, general and administrative expenses and depreciation and amortization. Selling, general, and administrative expenses include costs related to our sales, warehouse, delivery and administrative departments for all segments. Specifically, purchasing and receiving costs, warehousing costs and costs of picking and loading customer orders are all classified as selling, general and administrative expenses. Our most significant expenses relate to employee costs, facility and equipment leases, transportation costs, fuel costs, insurance, and professional fees.

Our Q1 2014 operating expenses increased $0.7 million as compared to Q1 2013.  Significant items impacting operating costs during the period included a $0.6 million increase in insurance and employee costs and a $0.4 million increase in operating expenses related to our two new retail health food stores which were opened during the second half of the prior fiscal year (fiscal 2013).  These increases were partially offset by a $0.3 million decrease in other operating expenses.

LIQUIDITY AND CAPITAL RESOURCES

Overview

·General.  The Company requires cash to pay operating expenses, purchase inventory, and make capital investments.  In general, the Company finances its cash flow requirements with cash generated from operating activities and credit facility borrowings.

·Operating Activities.  During Q1 2014, the Company used cash of approximately $10.4 million for operating activities.  Significant uses of cash during Q1 2014 included increases in accounts receivable, inventory, prepaid and other current assets, and decreases in accrued expenses and income taxes payable.  These uses of cash were partially offset by the impact of net earnings.

Our variability in cash flows from operating activities is dependent on the timing of inventory purchases and seasonal fluctuations. For example, periodically we have inventory “buy-in” opportunities which offer more favorable pricing terms. As a result, we may have to hold inventory for a period longer than the payment terms. This generates a cash outflow from operating activities which we expect to reverse in later periods. Additionally, during the warm weather months, which is our peak time of operations, we generally carry higher amounts of inventory to ensure high fill rates and customer satisfaction.

·Investing Activities.  The Company used approximately $1.0 million of cash during Q1 2014 for investing activities, primarily related to capital expenditures for property and equipment.

·Financing Activities.  The Company generated cash of $11.4 million from financing activities during Q1 2014.  Of this amount, approximately $13.9 million related to net borrowings on the Company’s credit facility.  This was partially offset by $0.3 million related to repayments on long-term debt, $1.9 million related to a repurchase of the Company’s common stock, $0.2 million related to dividends on the Company’s common and preferred stock, and $0.1 million related to equity-based awards.

·Cash on Hand/Working Capital.   At December 2013, the Company had cash on hand of $0.3 million and working capital (current assets less current liabilities) of $67.3 million.  This compares to cash on hand of $0.3 million and working capital of $53.4 million at September 2013.

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CREDIT AGREEMENT

The Company primarily finances its operations through a credit agreement (the “Facility”) with Bank of America. The Facility included the following significant terms at December 2013:

·A July 2018 maturity date without a penalty for prepayment.

·$70.0 million revolving credit limit.

·Loan accordion allowing the Company to increase the size of the credit facility agreement by $25.0 million.

·A provision providing an additional $10.0 million of credit advances for certain inventory purchases.

·Evergreen renewal clause automatically renewing the agreement for one year unless either the borrower or lender provides written notice terminating the agreement at least 90 days prior to the end of any original or renewal term of the agreement.

·The Facility bears interest at either the bank’s prime rate, or at LIBOR plus 125 - 175 basis points depending on certain credit facility utilization measures, at the election of the Company.

·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.

·A financial covenant requiring a fixed charge coverage ratio of at least 1.0 as measured by the previous twelve month period then ended only if excess availability falls below 10% of the maximum loan limit as defined in the credit agreement.

·Provides that the Company may not pay dividends on its common stock in excess of $1.00 per share on an annual basis. There is, however, no limit on common stock dividends if certain excess availability measurements have been maintained for the thirty day period immediately prior to the payment of any such dividends or distributions and if immediately after giving effect to any such dividend or distribution payments the Company has a Fixed Charge Coverage Ratio of at least 1.10 to 1.0 as defined in the credit facility agreement.

The amount available for use on the Facility at any given time is subject to a number of factors including eligible accounts receivable and inventory balances that fluctuate day-to-day. Based on our collateral and loan limits as defined in the Facility agreement, the credit limit of the Facility at December 2013 was $69.6 million, of which $28.7 million was outstanding, leaving $40.9 million available.

At December 2013, the revolving portion of the Company’s Facility balance bore interest based on the bank’s prime rate and various short-term LIBOR rate elections made by the Company. The average interest rate was 1.91% at December 2013.

During Q1 2014, our peak borrowings under the Facility were $54.0 million, and our average borrowings and average availability under the Facility were $39.1 million and $29.9 million, respectively.  Our availability to borrow under the Facility generally decreases as inventory and accounts receivable levels increase because of the borrowing limitations that are placed on collateralized assets.

Cross Default and Co-Terminus Provisions

The Company’s owned real estate in Bismarck, ND, Quincy, IL, and Rapid City, SD, is financed through a term loan with BMO Harris, NA (“BMO”) which is also a participant lender on the Company’s revolving line of credit. The BMO loan contains cross default provisions which cause the loan with BMO to be considered in default if the loans where BMO is a lender, including the revolving credit facility, is in default. There were no such cross defaults at December 2013. In addition, the BMO loan contain co-terminus provisions which require all loans with BMO to be paid in full if any of the loans are paid in full prior to the end of their specified terms.

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Dividends Payments

The Company paid cash dividends on its common stock and convertible preferred stock totaling $0.2 million during both Q1 2014 and Q1 2013.

Contractual Obligations

There have been no significant changes to the Company’s contractual obligations as set forth in the Company’s annual report on Form 10-K for the fiscal period ended September 30, 2013.

OTHER

AMCON has issued a letter of credit in the amount of approximately $0.4 million to its workers’ compensation insurance carrier as part of its self-insured loss control program.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements.

Liquidity Risk

The Company’s liquidity position is significantly influenced by its ability to maintain sufficient levels of working capital. For our Company and industry in general, customer credit risk and ongoing access to bank credit heavily influence liquidity positions.

The Company does not currently hedge its exposure to interest rate risk or fuel costs. Accordingly, significant price movements in these areas can and do impact the Company’s profitability.

The Company believes its liquidity position going forward will be adequate to sustain operations. However, a precipitous change in operating environment could materially impact the Company’s future revenue stream as well as its ability to collect on customer accounts receivable or secure bank credit.

Item 3.      Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 4.      Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in company reports filed or submitted under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

As required by Rules 13a-15(b) and 15d-15(b) under the Exchange Act, an evaluation of the effectiveness of our disclosure controls and procedures as of December 31, 2013 was made under the supervision and with the participation of our senior management, including our principal executive officer and principal financial officer. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

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Limitations on Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls and procedures will prevent all errors and fraud. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. Further, the design of a control system must reflect the fact that there are resource constraints, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management’s override of the control.

The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control that occurred during the fiscal quarter ended December 31, 2013, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1.      Legal Proceedings

None.

Item 1A.      Risk Factors

There have been no material changes to the Company’s risk factors as previously disclosed in Item 1A “Risk Factors” of the Company’s annual report on Form 10-K for the fiscal year ended September 30, 2013.

Item 2.      Unregistered Sales of Equity Securities and Use of Proceeds

On October 22, 2013, the Company awarded 17,900 restricted stock units (“RSUs”) under the AMCON Distributing Company 2007 Omnibus Incentive Plan (the “Plan”), including 13,000 RSUs to three executives of our Company (namely: Christopher H. Atayan, Andrew C. Plummer, and Philip E. Campbell), 1,000 RSUs to independent non-executive directors of the Company, and 3,900 RSUs to thirteen other employees of the Company.  The RSUs provide the award recipient with the right to receive, subject to being employed on the applicable vesting date, (i) an amount of cash equal to the per share fair market value of our Company’s common stock as of the vesting date multiplied by the number of shares underlying the RSUs then becoming vested and held by the award recipient or (ii) a number of shares of common stock equal to the whole number of shares underlying the RSUs then becoming vested and held by the award recipient, as elected by the award recipient.

Subject to earlier forfeiture under certain limited circumstances, the 14,000 RSUs awarded to the three executives and independent non-executive directors of the Company will vest evenly over three years with one-third vesting on October 22, 2014, October 22, 2015, and October 22, 2016.  The remaining 3,900 RSUs issued to thirteen other Company employees will vest evenly over five years with one-fifth vesting on October 22, 2014, October 22, 2015, October 22, 2016, October 22, 2017, and October 22, 2018.  If all RSUs were to fully vest and be settled in shares of our Company’s common stock, a total of 17,900 shares of our Company’s common stock would be issued.

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On October 23, 2013, our Company issued a total of 4,867 shares of common stock, par value $.01 per share, pursuant to the settlement of restricted stock units previously awarded under the Plan to four executives of our company (namely: Christopher H. Atayan, Andrew C. Plummer, Eric J. Hinkefent, and Philip E. Campbell).

On October 25, 2013, our Company issued a total of 4,976 shares of common stock, par value $.01 per share, pursuant to the settlement of restricted stock units previously awarded under the Plan to four executives of our company (namely: Christopher H. Atayan, Andrew C. Plummer, Eric J. Hinkefent, and Philip E. Campbell).

On November 22, 2013, our Company issued a total of 3,531 shares of common stock, par value $.01 per share, pursuant to the settlement of restricted stock units previously awarded under the Plan to four executives of our company (namely: Christopher H. Atayan, Andrew C. Plummer, Eric J. Hinkefent, and Philip E. Campbell).

The securities described above in this item were issued for services and in furtherance of the Plan’s purpose of encouraging employees of our company and its affiliates to acquire a proprietary and vested interest in the growth and performance of our company.  The securities were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933 for transactions not involving any public offering. Our company received no payment in connection with such issuances.  No underwriters were involved with the issuance of the securities described in this item and no commissions were paid in connection with such issuances.  There was no advertisement or general solicitation made in connection with the issuance of the securities described in this item.

The following table summarizes the purchases made by or on behalf of our Company or certain affiliated purchasers of shares of our common stock during the quarterly period ended December 31, 2013:

Period	(a) Total Number of Shares (or Units) Purchased	(b) Average Price Paid per Share (or Unit)		(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs *
October 1-31, 2013	—	—		—	50,000
November 1-30, 2013	25,057	$	77.50	25,057	24,943
December 1-31, 2013	—	—		—	50,000
Total	25,057	$	77.50	25,057	50,000

*On December 20, 2013 the Company’s Board of Directors authorized additional purchases of up to 50,000 shares of the Company’s common stock in open market or negotiated transactions. Management was given discretion to determine the number and pricing of the shares to be purchased, as well as, the timing of any such purchases.

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Item 3.      Defaults Upon Senior Securities

Not Applicable

Item 4.      Mine Safety Disclosures

Not Applicable

Item 5.      Other Information

Not applicable.

Item 6.      Exhibits

(a) Exhibits

31.1Certification by Christopher H. Atayan, Chief Executive Officer and Chairman, furnished pursuant to section 302 of the Sarbanes-Oxley Act

31.2Certification by Andrew C. Plummer, Vice President, Chief Financial Officer, and Principal Financial Officer furnished pursuant to section 302 of the Sarbanes-Oxley Act

32.1Certification by Christopher H. Atayan, Chief Executive Officer and Chairman, furnished pursuant to section 906 of the Sarbanes-Oxley Act

32.2Certification by Andrew C. Plummer, Vice President, Chief Financial Officer, and Principal Financial Officer furnished pursuant to section 906 of the Sarbanes-Oxley Act

101Interactive Data File (filed herewithin electronically)

23

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	AMCON DISTRIBUTING COMPANY
	(registrant)
Date: January 21, 2014	/s/ Christopher H. Atayan
	Christopher H. Atayan,
	Chief Executive Officer and Chairman
Date: January 21, 2014	/s/ Andrew C. Plummer
	Andrew C. Plummer,
	Vice President, Chief Financial Officer
	(Principal Financial and Accounting Officer)

24

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Christopher H. Atayan, certify that:

1. I have reviewed this report on Form 10-Q of AMCON Distributing Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrants’ fiscal fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: January 21, 2014	/s/ Christopher H. Atayan
	Christopher H. Atayan,
	Chief Executive Officer and Chairman

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Andrew C. Plummer, certify that:

1. I have reviewed this report on Form 10-Q of AMCON Distributing Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrants’ fiscal fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: January 21, 2014	/s/ Andrew C. Plummer
	Andrew C. Plummer, Vice President,
	Chief Financial Officer and Secretary

EX-32.1

EXHIBIT 32.1

CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Quarterly Report on Form 10-Q (the “Report”) of AMCON Distributing Company (the “Company”) for the fiscal quarter ended December 31, 2013, I, Christopher H. Atayan, Chief Executive Officer and Principal Executive Officer of the Company, have executed this certification for furnishing to the Securities and Exchange Commission. I hereby certify that, to the best of my knowledge and belief:

1.the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: January 21, 2014	/s/ Christopher H. Atayan
	Title: Chief Executive Officer and Chairman

A signed original of this written statement required by Section 906 has been provided to AMCON Distributing Company and will be retained by AMCON Distributing Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Quarterly Report on Form 10-Q (the “Report”) of AMCON Distributing Company (the “Company”) for the fiscal quarter ended December 31, 2013, I, Andrew C. Plummer, Vice President and Chief Financial Officer of the Company, have executed this certification for furnishing to the Securities and Exchange Commission. I hereby certify that, to the best of my knowledge and belief:

1.the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: January 21, 2014	/s/ Andrew C. Plummer
	Title: Vice President,
	Chief Financial Officer and Secretary

A signed original of this written statement required by Section 906 has been provided to AMCON Distributing Company and will be retained by AMCON Distributing Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

EQUITY-BASED INCENTIVE AWARDS (Details 2) (USD $)	3 Months Ended			0 Months Ended		0 Months Ended		0 Months Ended				0 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013 Restricted Stock Units	Oct. 26, 2011 Restricted Stock Units 1	Dec. 31, 2013 Restricted Stock Units 1	Oct. 23, 2012 Restricted Stock Units 2	Dec. 31, 2013 Restricted Stock Units 2	Oct. 22, 2013 Restricted Stock Units 3	Dec. 31, 2013 Restricted Stock Units 3	Dec. 31, 2013 Restricted Stock Units 3 Vesting of awards equally in three anniversaries from the date of grant	Dec. 31, 2013 Restricted Stock Units 3 Vesting of awards equally in five anniversaries from the date of grant	Oct. 22, 2013 Restricted Stock Units 3 Minimum	Oct. 22, 2013 Restricted Stock Units 3 Maximum
Restricted stock units
Service period				36 months		36 months						36 months	60 months
Estimated fair value of award at grant date				$ 855,000		$ 935,000		$ 1,486,000
Award outstanding at the end of the period (in shares)			33,200		5,300		10,000		17,900	14,000	3,900
Fair value of non-vested awards at the end of the period					424,000		799,000		1,431,000
Vested as of the balance sheet date (in shares)					10,600		5,000
Direct cost to the recipients of the restricted stock units			0
Number of Shares
Nonvested restricted stock units at the beginning of the period (in shares)			29,600		5,300		10,000		17,900	14,000	3,900
Granted (in shares)			17,900	15,900		15,000		17,900
Vested (in shares)			(14,300)
Nonvested restricted stock units at the end of the period (in shares)			33,200		5,300		10,000		17,900	14,000	3,900
Weighted Average Fair Value
Nonvested restricted stock units at the beginning of the period (in dollars per share)			$ 81.89
Granted (in dollars per share)			$ 83.03
Vested (in dollars per share)			$ 80.68
Nonvested restricted stock units at the end of the period (in dollars per share)			$ 79.93
All Equity-Based Awards (stock options and restricted stock units)
Total unamortized compensation expense	300,000	300,000
Compensation expense related to the amortization of all equity - based compensation awards	$ 2,500,000	$ 1,900,000

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INVENTORIES (Details) (USD $) In Millions, unless otherwise specified	Dec. 31, 2013	Sep. 30, 2013
INVENTORIES
Total reserves on finished goods	$ 0.9	$ 0.8

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INVENTORIES

3 Months Ended

Dec. 31, 2013

INVENTORIES

INVENTORIES

3. INVENTORIES

At December 2013 and September 2013, inventories consisted of finished goods and are stated at the lower of cost determined on a First-in First-out (“FIFO”) basis or market. The wholesale distribution and retail health food segment inventories consist of finished products purchased in bulk quantities to be redistributed to the Company’s customers or sold at retail. Finished goods included total reserves of approximately $0.9 million and $0.8 million at December 2013 and September 2013, respectively. These reserves include the Company’s obsolescence allowance, which reflects estimated unsaleable or non-refundable inventory based upon an evaluation of slow moving and discontinued products.

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DIVIDENDS (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
DIVIDENDS
Cash dividends paid on common stock and convertible preferred stock issuances	$ 0.2	$ 0.2

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GOODWILL AND OTHER INTANGIBLE ASSETS (Details 3) (USD $)	Dec. 31, 2013
Estimated future amortization expense related to identifiable intangible assets with finite lives
Fiscal 2014	$ 273,750
Fiscal 2015	365,000
Fiscal 2016	331,667
Fiscal 2017	265,000
Fiscal 2018	79,375
Thereafter	41,667
Total	$ 1,356,459

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EARNINGS PER SHARE (Details) (USD $)	3 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
EARNINGS PER SHARE
Weighted average common shares outstanding, Basic	622,226	622,277
Weighted average of net additional shares outstanding assuming dilutive options exercised and proceeds used to purchase treasury stock and conversion of preferred stock	122,342	145,680
Weighted average number of shares outstanding, Diluted	744,568	767,957
Net income	$ 1,287,996	$ 1,462,752
Deduct: convertible preferred stock dividends	(49,177)	(59,291)
Net income available to common shareholders	1,238,819	1,403,461
Net income available to common shareholders, diluted	$ 1,287,996	$ 1,462,752
Net earnings per share available to common shareholders, Basic (in dollars per share)	$ 1.99	$ 2.26
Net earnings per share available to common shareholders, Diluted (in dollars per share)	$ 1.73	$ 1.90

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DEBT (Details) (USD $) In Millions, except Per Share data, unless otherwise specified	3 Months Ended
	Dec. 31, 2013
Other
Letter of credit issued for worker's compensation insurance carrier as part of the entity's self-insured loss control program	$ 0.4
Facility
Revolving credit facility
Revolving credit limit	70.0
Increase in borrowing capacity available under loan accordion	25.0
Additional credit advances for certain inventory purchases	$ 10.0
Automatic renewal period of agreement unless terminated	1 year
Unused commitment fee (as a percent)	0.25%
Period considered for computing fixed charge coverage ratio	12 months
Threshold of excess availability of credit as a percentage of maximum loan limit, required for financial covenant compliance	10.00%
Facility | LIBOR
Revolving credit facility
Variable rate basis	LIBOR
Facility | Prime rate
Revolving credit facility
Variable rate basis	Prime rate
Facility | Minimum
Revolving credit facility
Notice period prior to the end of any original or renewal term of the agreement required for terminating the agreement either by the borrower or lender	90 days
Fixed charge coverage ratio	1.0
Fixed charge coverage ratio required to be maintained immediately after giving effect to any such dividend or distribution payments	1.10
Facility | Minimum | LIBOR
Revolving credit facility
Basis points added to reference rate (as a percent)	1.25%
Facility | Maximum
Revolving credit facility
Restricted amount of dividends on common stock (in dollars per share)	$ 1.00
Facility | Maximum | LIBOR
Revolving credit facility
Basis points added to reference rate (as a percent)	1.75%

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CONVERTIBLE PREFERRED STOCK

3 Months Ended

Dec. 31, 2013

CONVERTIBLE PREFERRED STOCK

CONVERTIBLE PREFERRED STOCK

2. CONVERTIBLE PREFERRED STOCK

The Company has two series of convertible preferred stock outstanding at December 2013 as identified in the following table:

	Series A			Series B
Date of issuance:	June 17, 2004			October 8, 2004
Optionally redeemable beginning	June 18, 2006			October 9, 2006
Par value (gross proceeds):	$	2,500,000		$	400,000
Number of shares outstanding at December 2013:	100,000			16,000
Liquidation preference per share:	$	25.00		$	25.00
Conversion price per share:	$	30.31		$	24.65
Number of common shares in which to be converted:	82,481			16,227
Dividend rate:	6.785		%	6.37		%

The Series A Convertible Preferred Stock (“Series A”) and Series B Convertible Preferred Stock (“Series B”), (collectively, the “Preferred Stock”), are convertible at any time by the holders into a number of shares of AMCON common stock equal to the number of preferred shares being converted multiplied by a fraction equal to $25.00 divided by the conversion price. The conversion prices for the Preferred Stock are subject to customary adjustments in the event of stock splits, stock dividends, and certain other distributions on the Common Stock. Cumulative dividends for the Preferred Stock are payable in arrears, when, and if declared by the Board of Directors, on March 31, June 30, September 30 and December 31 of each year.

In the event of a liquidation of the Company, the holders of the Preferred Stock are entitled to receive the liquidation preference plus any accrued and unpaid dividends prior to the distribution of any amount to the holders of the Common Stock. The shares of Preferred Stock are optionally redeemable by the Company beginning on various dates, as listed in the above table, at redemption prices equal to 112% of the liquidation preference. The redemption prices decrease 1% annually thereafter until the redemption price equals the liquidation preference, after which date it remains the liquidation preference. The Preferred Stock is redeemable at the liquidation value and at the option of the holder. The Series A Preferred Stock and 8,000 shares of the Series B Preferred Stock are owned by Mr. Christopher Atayan, AMCON’s Chief Executive Officer and Chairman of the Board. The Series B Preferred Stock holders have the right to elect one member of our Board of Directors, pursuant to the voting rights in the Certificate of Designation creating the Series B. Christopher H. Atayan was first nominated and elected to this seat in 2004.

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EQUITY-BASED INCENTIVE AWARDS (Details) (USD $)	3 Months Ended
	Dec. 31, 2013
EQUITY-BASED INCENTIVE AWARDS
Number of shares of the company's common stock permitted for issuance under the plan	150,000
Number of shares awarded pursuant to the plan	147,700
Number of shares that may be awarded under the plan	2,300
Stock Options
Omnibus plan and stock option activity
Expiration period	10 years
Stock options issued and outstanding
Number Outstanding (in shares)	45,000
Weighted-Average Exercise Price (in dollars per share)	$ 35.28
Number Exercisable (in shares)	32,400
Exercisable, Weighted-Average Exercise Price (in dollars per share)	$ 26.40
Stock Options | Minimum
Omnibus plan and stock option activity
Vesting period	3 years
Stock Options | Maximum
Omnibus plan and stock option activity
Vesting period	5 years
Stock Options | Fiscal 2007
Stock options issued and outstanding
Number Outstanding (in shares)	25,000
Remaining Weighted-Average Contractual Life	2 years 11 months 12 days
Weighted-Average Exercise Price (in dollars per share)	$ 18.00
Number Exercisable (in shares)	25,000
Exercisable, Weighted-Average Exercise Price (in dollars per share)	$ 18.00
Stock Options | Fiscal 2010
Stock options issued and outstanding
Number Outstanding (in shares)	5,500
Remaining Weighted-Average Contractual Life	6 years 3 months 29 days
Weighted-Average Exercise Price (in dollars per share)	$ 51.50
Number Exercisable (in shares)	3,300
Exercisable, Weighted-Average Exercise Price (in dollars per share)	$ 51.50
Stock Options | Fiscal 2012
Stock options issued and outstanding
Number Outstanding (in shares)	6,500
Remaining Weighted-Average Contractual Life	7 years 10 months 2 days
Weighted-Average Exercise Price (in dollars per share)	$ 54.74
Number Exercisable (in shares)	2,500
Exercisable, Weighted-Average Exercise Price (in dollars per share)	$ 54.29
Stock Options | Fiscal 2012 | Minimum
Stock options issued and outstanding
Weighted-Average Exercise Price (in dollars per share)	$ 53.80
Stock Options | Fiscal 2012 | Maximum
Stock options issued and outstanding
Weighted-Average Exercise Price (in dollars per share)	$ 65.97
Stock Options | Fiscal 2013
Stock options issued and outstanding
Number Outstanding (in shares)	8,000
Remaining Weighted-Average Contractual Life	8 years 9 months 25 days
Weighted-Average Exercise Price (in dollars per share)	$ 62.33
Number Exercisable (in shares)	1,600
Exercisable, Weighted-Average Exercise Price (in dollars per share)	$ 62.33

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Condensed Consolidated Balance Sheets (USD $)	Dec. 31, 2013	Sep. 30, 2013
Current assets:
Cash	$ 326,390	$ 275,036
Accounts receivable, less allowance for doubtful accounts of $1.2 million and $1.1 million at December 2013 and September 2013, respectively	32,092,060	28,383,205
Inventories, net	50,987,078	46,125,187
Deferred income taxes	1,437,481	1,831,933
Prepaid and other current assets	7,032,830	5,001,992
Total current assets	91,875,839	81,617,353
Property and equipment, net	13,527,259	13,088,859
Goodwill	6,349,827	6,349,827
Other intangible assets, net	4,729,728	4,820,978
Other assets	433,084	497,882
TOTAL ASSETS	116,915,737	106,374,899
Current liabilities:
Accounts payable	15,847,759	15,859,636
Accrued expenses	5,438,389	6,714,444
Accrued wages, salaries and bonuses	2,272,813	2,754,136
Income taxes payable	253,329	1,922,351
Current maturities of long-term debt	781,123	998,788
Total current liabilities	24,593,413	28,249,355
Credit facility	28,749,737	14,841,712
Deferred income taxes	3,417,396	3,327,010
Long-term debt, less current maturities	3,992,481	4,076,892
Other long-term liabilities	237,385	239,396
Shareholders' equity:
Preferred stock, $0.01 par value, 1,000,000 shares authorized, 116,000 shares outstanding and issued in Series A and B referred to above
Common stock, $.01 par value, 3,000,000 shares authorized, 611,432 shares outstanding at December 2013 and 623,115 shares outstanding at September 2013	6,677	6,543
Additional paid-in capital	13,610,519	12,502,135
Retained earnings	44,651,003	43,532,812
Treasury stock at cost	(5,242,874)	(3,300,956)
Total shareholders' equity	53,025,325	52,740,534
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	116,915,737	106,374,899
Series A Preferred Stock
Cumulative, Convertible Preferred Stock
Cumulative, Convertible Preferred Stock	2,500,000	2,500,000
Series B Preferred Stock
Cumulative, Convertible Preferred Stock
Cumulative, Convertible Preferred Stock	$ 400,000	$ 400,000

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Condensed Consolidated Statements of Cash Flows (USD $)	3 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 1,287,996	$ 1,462,752
Adjustments to reconcile net income from operations to net cash flows from operating activities:
Depreciation	532,790	502,612
Amortization	91,250	91,250
Gain on sale of property and equipment	(7,704)	(70,631)
Equity-based compensation	342,160	327,476
Deferred income taxes	484,838	419,627
Provision for losses on doubtful accounts	130,000	105,000
Provision for losses on inventory obsolescence	38,803	71,603
Other	(2,011)	(2,011)
Changes in assets and liabilities:
Accounts receivable	(3,838,855)	241,773
Inventories	(4,900,694)	(11,412,393)
Prepaid and other current assets	(2,030,838)	(878,343)
Other assets	64,798	56,705
Accounts payable	995	(2,021,716)
Accrued expenses and accrued wages, salaries and bonuses	(928,307)	(500,789)
Income tax payable	(1,669,022)	(1,569,182)
Net cash flows from operating activities	(10,403,801)	(13,176,267)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(985,678)	(330,228)
Proceeds from sales of property and equipment	9,320	139,040
Net cash flows from investing activities	(976,358)	(191,188)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on bank credit agreements	13,908,025	16,025,449
Principal payments on long-term debt	(302,076)	(292,345)
Repurchase of common stock and Series B Convertible Preferred Stock	(1,941,918)	(2,572,085)
Dividends paid on convertible preferred stock	(49,177)	(59,291)
Dividends on common stock	(120,628)	(117,428)
Proceeds from exercise of stock options		1,180
Withholdings on the exercise of equity-based awards	(62,713)	(74,610)
Net cash flows from financing activities	11,431,513	12,910,870
Net change in cash	51,354	(456,585)
Cash, beginning of period	275,036	491,387
Cash, end of period	326,390	34,802
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	274,796	279,667
Cash paid during the period for income taxes	2,149,184	2,219,555
Supplemental disclosure of non-cash information:
Equipment acquisitions classified as accounts payable	60,332	64,042
Issuance of common stock in connection with the vesting and exercise of equity-based awards	1,154,869	1,389,258
Conversion by holder of Series B Convertible Preferred Stock to common stock		100,000
Common stock acquired with other consideration		$ 760,871

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COMMON STOCK REPURCHASE (Details) (Common Stock, USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended
	Dec. 31, 2013
REPURCHASE OF COMMON STOCK
Shares repurchased	25,057
Value of shares repurchased	$ 1.9
Maximum
REPURCHASE OF COMMON STOCK
Number of shares of common stock authorized to be repurchased	50,000

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BUSINESS SEGMENTS (Tables)

3 Months Ended

Dec. 31, 2013

BUSINESS SEGMENTS

Schedule of segment information

	WholesaleSegment		RetailSegment			Other			Consolidated
THREE MONTHS ENDED DECEMBER 2013:
External revenue:
Cigarettes	$	221,151,811	$	—		$	—		$	221,151,811
Confectionery	18,203,191		—			—			18,203,191
Health food	—		8,523,278			—			8,523,278
Tobacco, food service & other	57,747,277		—			—			57,747,277
Total external revenue	297,102,279		8,523,278			—			305,625,557
Depreciation	403,342		128,510			938			532,790
Amortization	91,250		—			—			91,250
Operating income (loss)	3,795,962		52,190			(1,323,392		)	2,524,760
Interest expense	43,797		60,776			197,422			301,995
Income (loss) from operations before taxes	3,759,523		(3,628		)	(1,502,899		)	2,252,996
Total assets	103,144,703		13,564,621			206,413			116,915,737
Capital expenditures	918,542		67,136			—			985,678
THREE MONTHS ENDED DECEMBER 2012:
External revenue:
Cigarettes	$	221,730,182	$	—		$	—		$	221,730,182
Confectionery	17,956,072		—			—			17,956,072
Health food	—		8,704,643			—			8,704,643
Tobacco, food service & other	53,827,424		—			—			53,827,424
Total external revenue	293,513,678		8,704,643			—			302,218,321
Depreciation	408,743		92,932			937			502,612
Amortization	91,250		—			—			91,250
Operating income (loss)	3,802,737		371,798			(1,387,080		)	2,787,455
Interest expense	55,132		58,968			201,952			316,052
Income (loss) from operations before taxes	3,753,457		317,770			(1,538,475		)	2,532,752
Total assets	103,284,807		12,358,555			187,260			115,830,622
Capital expenditures	293,650		36,578			—			330,228

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CONVERTIBLE PREFERRED STOCK (Details) (USD $)	3 Months Ended
	Dec. 31, 2013	Sep. 30, 2013
CONVERTIBLE PREFERRED STOCK
Number of series of convertible preferred stock outstanding	2
Series A
Convertible preferred stock
Par value (gross proceeds):	$ 2,500,000
Number of shares outstanding	100,000	100,000
Liquidation preference per share:	$ 25.00
Conversion price per share:	$ 30.31
Number of common shares in which to be converted:	82,481
Dividend rate: (as a percent)	6.785%
Numerator of the multiplier used to calculate number of common shares in which the preferred stock are convertible	25.00
Redemption price as a percentage of liquidation preference	112.00%
Annual percentage decrease in redemption price until the redemption price equals the liquidation preference	1.00%
Series B
Convertible preferred stock
Par value (gross proceeds):	400,000
Number of shares outstanding	16,000	16,000
Liquidation preference per share:	$ 25.00
Conversion price per share:	$ 24.65
Number of common shares in which to be converted:	16,227
Dividend rate: (as a percent)	6.37%
Numerator of the multiplier used to calculate number of common shares in which the preferred stock are convertible	$ 25.00
Redemption price as a percentage of liquidation preference	112.00%
Annual percentage decrease in redemption price until the redemption price equals the liquidation preference	1.00%
Number of directors who can be elected by an institutional investor, pursuant to the voting rights in the certificate of designation	1
Series B | Chief Executive Officer
Convertible preferred stock
Closely held shares of Series B Preferred Stock	8,000

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

3 Months Ended

Dec. 31, 2013

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

AMCON Distributing Company and Subsidiaries (“AMCON” or the “Company”) operate two business segments:

· Our wholesale distribution segment (“Wholesale Segment”) distributes consumer products in the Central, Rocky Mountain, and Southern regions of the United States. Additionally, our Wholesale Segment provides a full range of programs and services to assist our customers in managing their business and profitability.

· Our retail health food segment (“Retail Segment”) operates sixteen health food retail stores located throughout the Midwest and Florida.

WHOLESALE SEGMENT

Our Wholesale Segment is one of the largest wholesale distributors in the United States serving approximately 4,500 retail outlets including convenience stores, grocery stores, liquor stores, drug stores, and tobacco shops. We currently distribute over 16,000 different consumer products, including cigarettes and tobacco products, candy and other confectionery, beverages, groceries, paper products, health and beauty care products, frozen and chilled products and institutional foodservice products. We also provide a full range of consultative services to our customers in the areas of marketing, merchandising, inventory optimization, and information systems that allow our customers to compete and maximize their profitability. Convenience stores represent our largest customer category.  In October 2013, Convenience Store News ranked us as the seventh (7th) largest convenience store distributor in the United States based on annual sales.

Our Wholesale Segment operates six distribution centers located in Illinois, Missouri, Nebraska, North Dakota, South Dakota, and Tennessee. These distribution centers, combined with cross dock facilities, include approximately 602,000 square feet of permanent floor space. Our principal suppliers include Altria, RJ Reynolds, Commonwealth Brands, Lorillard, Hershey, Kellogg’s, Kraft, and Mars. We also market private label lines of water, candy products, batteries, film, and other products. The Company does not maintain long term purchase contracts with its suppliers.

RETAIL SEGMENT

Our Retail Segment is a specialty retailer of natural/organic groceries and dietary supplements which focuses on providing high quality products at affordable prices, with an exceptional level of customer service and nutritional consultation. All of the products carried in our stores must meet strict quality and ingredient guidelines, and include offerings such as gluten-free and antibiotic-free groceries and meat products, as well as products containing no artificial colors, flavors, preservatives, or partially hydrogenated oils. We design our retail sites in an efficient and flexible small-store format, which emphasizes a high energy and shopper-friendly environment.

We operate within the natural products retail industry, which is a subset of the large and stable U.S. grocery industry. This industry includes conventional, natural, gourmet and specialty food markets, mass and discount retailers, warehouse clubs, health food stores, dietary supplement retailers, drug stores, farmers markets, mail order and online retailers, and multi-level marketers. According to The Natural Foods Merchandiser, a leading industry trade publication, retail sales in the natural foods industry exceeded $80 billion during the 2012 calendar year.

Our Retail Segment operates sixteen retail health food stores as Chamberlin’s Market & Café and Akin’s Natural Foods Market. These stores carry over 32,000 different national and regionally branded and private label products including high-quality natural, organic, and specialty foods consisting of produce, baked goods, frozen foods, nutritional supplements, personal care items, and general merchandise. Chamberlin’s, which was established in 1935, operates six stores in and around Orlando, Florida. Akin’s, which was also established in 1935, has a total of ten locations in Arkansas, Kansas, Missouri, Nebraska, and Oklahoma.

FINANCIAL STATEMENTS

The Company’s fiscal year ends on September 30. The results for the interim period included with this Quarterly Report may not be indicative of the results which could be expected for the entire fiscal year. All significant intercompany transactions and balances have been eliminated in consolidation. Certain information and footnote disclosures normally included in our annual financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) have been condensed or omitted. In the opinion of management, the accompanying condensed consolidated unaudited financial statements (“financial statements”) contain all adjustments necessary to fairly present the financial information included herein, such as adjustments consisting of normal recurring items. The Company believes that although the disclosures contained herein are adequate to prevent the information presented from being misleading, these financial statements should be read in conjunction with the Company’s annual audited consolidated financial statements for the fiscal year ended September 30, 2013, as filed with the Securities and Exchange Commission on Form 10-K. For purposes of this report, unless the context indicates otherwise, all references to “we”, “us”, “our”, the “Company”, and “AMCON” shall mean AMCON Distributing Company and its subsidiaries. Additionally, the three month fiscal periods ended December 31, 2013 and December 31, 2012 have been referred to throughout this quarterly report as Q1 2014 and Q1 2013, respectively. The fiscal balance sheet dates as of December 31, 2013, December 31, 2012, and September 30, 2013 have been referred to as December 2013, December 2012, and September 2013, respectively.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

The Company is currently evaluating the impact of implementing the following new accounting standard:

In July 2013, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists”, which states that entities should present the unrecognized tax benefit as a reduction of the deferred tax asset for a net operating loss (“NOL”) or similar tax loss or tax credit carryforward rather than as a liability when the uncertain tax position would reduce the NOL or other carryforward under the tax law. The Company will be required to adopt this new standard on a prospective basis in the first interim reporting period of fiscal 2015, however, early adoption is permitted as is a retrospective application.

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $) In Millions, except Share data, unless otherwise specified	Dec. 31, 2013	Sep. 30, 2013
Accounts receivable, allowance for doubtful accounts (in dollars)	$ 1.2	$ 1.1
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares outstanding	116,000	116,000
Preferred stock, shares issued	116,000	116,000
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	3,000,000	3,000,000
Common stock, shares outstanding	611,432	623,115
Series A Preferred Stock
Cumulative, Convertible Preferred Stock, par value (in dollars per share)	$ 0.01	$ 0.01
Cumulative, Convertible Preferred Stock, shares authorized	100,000	100,000
Cumulative, Convertible Preferred Stock, shares issued	100,000	100,000
Cumulative, Convertible Preferred Stock, liquidation preference (in dollars)	2.5	2.5
Series B Preferred Stock
Cumulative, Convertible Preferred Stock, par value (in dollars per share)	$ 0.01	$ 0.01
Cumulative, Convertible Preferred Stock, shares authorized	80,000	80,000
Cumulative, Convertible Preferred Stock, shares issued	16,000	16,000
Cumulative, Convertible Preferred Stock, shares outstanding	16,000	16,000
Cumulative, Convertible Preferred Stock, liquidation preference (in dollars)	$ 0.4	$ 0.4

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (Policies)

3 Months Ended

Dec. 31, 2013

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

WHOLESALE SEGMENT and RETAIL SEGMENT

WHOLESALE SEGMENT

Our Wholesale Segment is one of the largest wholesale distributors in the United States serving approximately 4,500 retail outlets including convenience stores, grocery stores, liquor stores, drug stores, and tobacco shops. We currently distribute over 16,000 different consumer products, including cigarettes and tobacco products, candy and other confectionery, beverages, groceries, paper products, health and beauty care products, frozen and chilled products and institutional foodservice products. We also provide a full range of consultative services to our customers in the areas of marketing, merchandising, inventory optimization, and information systems that allow our customers to compete and maximize their profitability. Convenience stores represent our largest customer category.  In October 2013, Convenience Store News ranked us as the seventh (7th) largest convenience store distributor in the United States based on annual sales.

Our Wholesale Segment operates six distribution centers located in Illinois, Missouri, Nebraska, North Dakota, South Dakota, and Tennessee. These distribution centers, combined with cross dock facilities, include approximately 602,000 square feet of permanent floor space. Our principal suppliers include Altria, RJ Reynolds, Commonwealth Brands, Lorillard, Hershey, Kellogg’s, Kraft, and Mars. We also market private label lines of water, candy products, batteries, film, and other products. The Company does not maintain long term purchase contracts with its suppliers.

RETAIL SEGMENT

Our Retail Segment is a specialty retailer of natural/organic groceries and dietary supplements which focuses on providing high quality products at affordable prices, with an exceptional level of customer service and nutritional consultation. All of the products carried in our stores must meet strict quality and ingredient guidelines, and include offerings such as gluten-free and antibiotic-free groceries and meat products, as well as products containing no artificial colors, flavors, preservatives, or partially hydrogenated oils. We design our retail sites in an efficient and flexible small-store format, which emphasizes a high energy and shopper-friendly environment.

We operate within the natural products retail industry, which is a subset of the large and stable U.S. grocery industry. This industry includes conventional, natural, gourmet and specialty food markets, mass and discount retailers, warehouse clubs, health food stores, dietary supplement retailers, drug stores, farmers markets, mail order and online retailers, and multi-level marketers. According to The Natural Foods Merchandiser, a leading industry trade publication, retail sales in the natural foods industry exceeded $80 billion during the 2012 calendar year.

Our Retail Segment operates sixteen retail health food stores as Chamberlin’s Market & Café and Akin’s Natural Foods Market. These stores carry over 32,000 different national and regionally branded and private label products including high-quality natural, organic, and specialty foods consisting of produce, baked goods, frozen foods, nutritional supplements, personal care items, and general merchandise. Chamberlin’s, which was established in 1935, operates six stores in and around Orlando, Florida. Akin’s, which was also established in 1935, has a total of ten locations in Arkansas, Kansas, Missouri, Nebraska, and Oklahoma.

FINANCIAL STATEMENTS

FINANCIAL STATEMENTS

The Company’s fiscal year ends on September 30. The results for the interim period included with this Quarterly Report may not be indicative of the results which could be expected for the entire fiscal year. All significant intercompany transactions and balances have been eliminated in consolidation. Certain information and footnote disclosures normally included in our annual financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) have been condensed or omitted. In the opinion of management, the accompanying condensed consolidated unaudited financial statements (“financial statements”) contain all adjustments necessary to fairly present the financial information included herein, such as adjustments consisting of normal recurring items. The Company believes that although the disclosures contained herein are adequate to prevent the information presented from being misleading, these financial statements should be read in conjunction with the Company’s annual audited consolidated financial statements for the fiscal year ended September 30, 2013, as filed with the Securities and Exchange Commission on Form 10-K. For purposes of this report, unless the context indicates otherwise, all references to “we”, “us”, “our”, the “Company”, and “AMCON” shall mean AMCON Distributing Company and its subsidiaries. Additionally, the three month fiscal periods ended December 31, 2013 and December 31, 2012 have been referred to throughout this quarterly report as Q1 2014 and Q1 2013, respectively. The fiscal balance sheet dates as of December 31, 2013, December 31, 2012, and September 30, 2013 have been referred to as December 2013, December 2012, and September 2013, respectively.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

The Company is currently evaluating the impact of implementing the following new accounting standard:

In July 2013, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists”, which states that entities should present the unrecognized tax benefit as a reduction of the deferred tax asset for a net operating loss (“NOL”) or similar tax loss or tax credit carryforward rather than as a liability when the uncertain tax position would reduce the NOL or other carryforward under the tax law. The Company will be required to adopt this new standard on a prospective basis in the first interim reporting period of fiscal 2015, however, early adoption is permitted as is a retrospective application.

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Document and Entity Information	3 Months Ended
	Dec. 31, 2013	Jan. 20, 2014
Document and Entity Information
Entity Registrant Name	AMCON DISTRIBUTING CO
Entity Central Index Key	0000928465
Document Type	10-Q
Document Period End Date	Dec. 31, 2013
Amendment Flag	false
Current Fiscal Year End Date	--09-30
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		611,432
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q1

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CONVERTIBLE PREFERRED STOCK (Tables)

3 Months Ended

Dec. 31, 2013

CONVERTIBLE PREFERRED STOCK

Schedule of two series of convertible preferred stock outstanding

	Series A			Series B
Date of issuance:	June 17, 2004			October 8, 2004
Optionally redeemable beginning	June 18, 2006			October 9, 2006
Par value (gross proceeds):	$	2,500,000		$	400,000
Number of shares outstanding at December 2013:	100,000			16,000
Liquidation preference per share:	$	25.00		$	25.00
Conversion price per share:	$	30.31		$	24.65
Number of common shares in which to be converted:	82,481			16,227
Dividend rate:	6.785		%	6.37		%

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Condensed Consolidated Statements of Operations (USD $)	3 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Condensed Consolidated Statements of Operations
Sales (including excise taxes of $97.3 million and $98.0 million at December 2013 and December 2012, respectively)	$ 305,625,557	$ 302,218,321
Cost of sales	285,984,494	282,988,532
Gross profit	19,641,063	19,229,789
Selling, general and administrative expenses	16,492,263	15,848,472
Depreciation and amortization	624,040	593,862
Total operating expenses	17,116,303	16,442,334
Operating income	2,524,760	2,787,455
Other expense (income):
Interest expense	301,995	316,052
Other (income), net	(30,231)	(61,349)
Total other expenses (income)	271,764	254,703
Income from operations before income tax expense	2,252,996	2,532,752
Income tax expense	965,000	1,070,000
Net income	1,287,996	1,462,752
Preferred stock dividend requirements	(49,177)	(59,291)
Net income available to common shareholders	$ 1,238,819	$ 1,403,461
Basic earnings per share available to common shareholders (in dollars per share)	$ 1.99	$ 2.26
Diluted earnings per share available to common shareholders (in dollars per share)	$ 1.73	$ 1.90
Basic weighted average shares outstanding (in shares)	622,226	622,277
Diluted weighted average shares outstanding (in shares)	744,568	767,957

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EARNINGS PER SHARE

3 Months Ended

Dec. 31, 2013

EARNINGS PER SHARE

EARNINGS PER SHARE

6. EARNINGS PER SHARE

Basic earnings per share available to common shareholders is calculated by dividing net income less preferred stock dividend requirements by the weighted average common shares outstanding for each period. Diluted earnings per share available to common shareholders is calculated by dividing income from operations less preferred stock dividend requirements (when anti-dilutive) by the sum of the weighted average common shares outstanding and the weighted average dilutive options, using the treasury stock method.

	For the three months ended December
	2013					2012
	Basic			Diluted		Basic			Diluted
Weighted average common shares outstanding	622,226			622,226		622,277			622,277
Weighted average of net additional shares outstanding assuming dilutive options exercised and proceeds used to purchase treasury stock and conversion of preferred stock (1)	—			122,342		—			145,680
Weighted average number of shares outstanding	622,226			744,568		622,277			767,957
Net income	$	1,287,996		$	1,287,996	$	1,462,752		$	1,462,752
Deduct: convertible preferred stock dividends (2)	(49,177		)	—		(59,291		)	—
Net income available to common shareholders	$	1,238,819		$	1,287,996	$	1,403,461		$	1,462,752
Net earnings per share available to common shareholders	$	1.99		$	1.73	$	2.26		$	1.90

(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.

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DIVIDENDS

3 Months Ended

Dec. 31, 2013

DIVIDENDS

DIVIDENDS

5. DIVIDENDS

The Company paid cash dividends on its common stock and convertible preferred stock totaling $0.2 million during both Q1 2014 and  Q1 2013.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (Details) (USD $) In Billions, unless otherwise specified	3 Months Ended	1 Months Ended	3 Months Ended		12 Months Ended
	Dec. 31, 2013 item	Oct. 31, 2013 Wholesale distribution business item	Dec. 31, 2013 Wholesale distribution business item sqft	Dec. 31, 2013 Retail stores item	Sep. 30, 2012 Retail stores	Dec. 31, 2013 Retail stores Florida item	Dec. 31, 2013 Retail stores Midwest item
Business segment
Number of business segments	2
Company operations
Number of operating health food retail stores				16		6	10
Number of retail outlets served			4,500
Number of products sold or distributed			16,000	32,000
Rank assigned by Convenience Store News		7
Number of distribution centers			6
Floor space occupied by distribution centers (in square feet)			602,000
Sales increase in natural foods industry according to The Natural Foods Merchandiser					$ 80

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GOODWILL AND OTHER INTANGIBLE ASSETS (Tables)

3 Months Ended

Dec. 31, 2013

GOODWILL AND OTHER INTANGIBLE ASSETS

Schedule of goodwill by reporting segment

	December2013		September2013
Wholesale Segment	$	4,436,950	$	4,436,950
Retail Segment	1,912,877		1,912,877
	$	6,349,827	$	6,349,827

Schedule of other intangible assets

	December2013		September2013
Trademarks and tradenames	$	3,373,269	$	3,373,269
Non-competition agreement (less accumulated amortization of approximately $0.3 million at December 2013 and $0.2 million at September 2013)	241,667		266,667
Customer relationships (less accumulated amortization of $1.0 million and $0.9 million at December 2013 and September 2013, respectively)	1,114,792		1,181,042
	$	4,729,728	$	4,820,978

Schedule of estimated future amortization expense related to identifiable intangible assets with finite lives

	December2013
Fiscal 2014 (1)	$	273,750
Fiscal 2015	365,000
Fiscal 2016	331,667
Fiscal 2017	265,000
Fiscal 2018	79,375
Thereafter	41,667
	$	1,356,459

(1)  Represents amortization for the remaining nine months of Fiscal 2014.

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BUSINESS SEGMENTS

3 Months Ended

Dec. 31, 2013

BUSINESS SEGMENTS

BUSINESS SEGMENTS

9. BUSINESS SEGMENTS

AMCON has two reportable business segments: the wholesale distribution of consumer products and the retail sale of health and natural food products. The retail health food stores’ operations are aggregated to comprise the Retail Segment because such operations have similar economic characteristics, as well as similar characteristics with respect to the nature of products sold, the type and class of customers for the health food products and the methods used to sell the products.  Included in the “Other” column are intercompany eliminations, and assets held and charges incurred by our holding company.  The segments are evaluated on revenues, gross margins, operating income (loss), and income before taxes.

	WholesaleSegment		RetailSegment			Other			Consolidated
THREE MONTHS ENDED DECEMBER 2013:
External revenue:
Cigarettes	$	221,151,811	$	—		$	—		$	221,151,811
Confectionery	18,203,191		—			—			18,203,191
Health food	—		8,523,278			—			8,523,278
Tobacco, food service & other	57,747,277		—			—			57,747,277
Total external revenue	297,102,279		8,523,278			—			305,625,557
Depreciation	403,342		128,510			938			532,790
Amortization	91,250		—			—			91,250
Operating income (loss)	3,795,962		52,190			(1,323,392		)	2,524,760
Interest expense	43,797		60,776			197,422			301,995
Income (loss) from operations before taxes	3,759,523		(3,628		)	(1,502,899		)	2,252,996
Total assets	103,144,703		13,564,621			206,413			116,915,737
Capital expenditures	918,542		67,136			—			985,678
THREE MONTHS ENDED DECEMBER 2012:
External revenue:
Cigarettes	$	221,730,182	$	—		$	—		$	221,730,182
Confectionery	17,956,072		—			—			17,956,072
Health food	—		8,704,643			—			8,704,643
Tobacco, food service & other	53,827,424		—			—			53,827,424
Total external revenue	293,513,678		8,704,643			—			302,218,321
Depreciation	408,743		92,932			937			502,612
Amortization	91,250		—			—			91,250
Operating income (loss)	3,802,737		371,798			(1,387,080		)	2,787,455
Interest expense	55,132		58,968			201,952			316,052
Income (loss) from operations before taxes	3,753,457		317,770			(1,538,475		)	2,532,752
Total assets	103,284,807		12,358,555			187,260			115,830,622
Capital expenditures	293,650		36,578			—			330,228

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DEBT

3 Months Ended

Dec. 31, 2013

DEBT

DEBT

7. DEBT

The Company primarily finances its operations through a credit facility provided under an agreement with Bank of America (the “Facility”).  The Facility included the following significant terms at December 2013:

· A July 2018 maturity date without a penalty for prepayment.

· $70.0 million revolving credit limit.

· Loan accordion allowing the Company to increase the size of the credit facility agreement by $25.0 million.

· A provision providing an additional $10.0 million of credit advances for certain inventory purchases.

· Evergreen renewal clause automatically renewing the agreement for one year unless either the borrower or lender provides written notice terminating the agreement at least 90 days prior to the end of any original or renewal term of the agreement.

· The Facility bears interest at either the bank’s prime rate, or at LIBOR plus 125 - 175 basis points depending on certain credit facility utilization measures, at the election of the Company.

· 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.

· A financial covenant requiring a fixed charge coverage ratio of at least 1.0 as measured by the previous twelve month period then ended only if excess availability falls below 10% of the maximum loan limit as defined in the credit agreement.

· Provides that the Company may not pay dividends on its common stock in excess of $1.00 per share on an annual basis.  There is, however, no limit on common stock dividends if certain excess availability measurements have been maintained for the thirty day period immediately prior to the payment of any such dividends or distributions and if immediately after giving effect to any such dividend or distribution payments the Company has a Fixed Charge Coverage Ratio of at least 1.10 to 1.0 as defined in the credit facility agreement.

Cross Default and Co-Terminus Provisions

The Company’s owned real estate in Bismarck, ND, Quincy, IL, and Rapid City, SD, is financed through a term loan with BMO Harris, NA (“BMO”) which is also a participant lender on the Company’s revolving line of credit. The BMO loan contains cross default provisions which cause the loan with BMO to be considered in default if the loans where BMO is a lender, including the revolving credit facility, is in default. There were no such cross defaults at December 2013. In addition, the BMO loan contain co-terminus provisions which require all loans with BMO to be paid in full if any of the loans are paid in full prior to the end of their specified terms.

Other

AMCON has issued a letter of credit in the amount of approximately $0.4 million to its workers’ compensation insurance carrier as part of its self-insured loss control program.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements.

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EQUITY-BASED INCENTIVE AWARDS

3 Months Ended

Dec. 31, 2013

EQUITY-BASED INCENTIVE AWARDS

EQUITY-BASED INCENTIVE AWARDS

8. EQUITY-BASED INCENTIVE AWARDS

Omnibus Plan

The Company has an Omnibus Incentive Plan (“the Omnibus Plan”) which provides for equity incentives to employees. The Omnibus Plan was designed with the intent of encouraging employees to acquire a vested interest in the growth and performance of the Company. The Omnibus Plan permits the issuance of up to 150,000 shares of the Company’s common stock in the form of stock options, restricted stock awards, restricted stock units, performance share awards as well as awards such as stock appreciation rights, performance units, performance shares, bonus shares, and dividend share awards payable in the form of common stock or cash. The number of shares issuable under the Omnibus Plan is subject to customary adjustments in the event of stock splits, stock dividends, and certain other distributions on the Company’s common stock.  At December 2013, awards with respect to a total of 147,700 shares, net of forfeitures, had been awarded pursuant to the Omnibus Plan and awards with respect to another 2,300 shares may be awarded under the plan.

Stock Options

The stock options issued by the Company expire ten years from the grant date and include graded vesting schedules ranging between three and five years. Stock options issued and outstanding at December 2013 are summarized as follows:

			Remaining			Exercisable
	Exercise Price	Number Outstanding	Weighted-Average Contractual Life	Weighted-Average Exercise Price		Number Exercisable	Weighted-Average Exercise Price
Fiscal 2007	$18.00	25,000	2.95 years	$	18.00	25,000	$	18.00
Fiscal 2010	$51.50	5,500	6.33 years	$	51.50	3,300	$	51.50
Fiscal 2012	$53.80 - $65.97	6,500	7.84 years	$	54.74	2,500	$	54.29
Fiscal 2013	$62.33	8,000	8.82 years	$	62.33	1,600	$	62.33
		45,000		$	35.28	32,400	$	26.40

Restricted Stock Units

During Q1 2014, the Company issued 17,900 restricted stock unit awards to members of its management team pursuant to the provisions of the Company’s Omnibus Plan.  Nonvested restricted stock units at December 2013 are as follows:

	Restricted Stock Units(1)		Restricted Stock Units(2)		Restricted Stock Units(3)
Date of award:	October 26, 2011		October 23, 2012		October 22, 2013
Original number of awards issued:	15,900		15,000		17,900
Service period:	36 months		36 months		36-60 months
Estimated fair value of award at grant date	$	855,000	$	935,000	$	1,486,000
Awards outstanding at December 2013	5,300		10,000		17,900
Fair value of non-vested awards at December 2013:	$	424,000	$	799,000	$	1,431,000

(1) 10,600 of the restricted stock units were vested as of December 2013. The remaining 5,300 restricted stock units will vest on October 25, 2014.

(2) 5,000 of the restricted stock units were vested as of December 2013.  The remaining 10,000 restricted stock units will vest in equal amounts on October 23, 2014 and October 23, 2015.

(3) 14,000 restricted stock units will vest in equal amounts on October 22, 2014, October 22, 2015, and October 22, 2016.  The remaining 3,900 restricted stock units will vest in equal amounts on October 22, 2014, October 22, 2015, October 22, 2016, October 22, 2017, and October 22, 2018.

There is no direct cost to the recipients of the restricted stock units, except for any applicable taxes. The recipients of the restricted stock units are entitled to the customary adjustments in the event of stock splits, stock dividends, and certain other distributions on the Company’s common stock. All cash dividends and/or distributions payable to restricted stock recipients will be held in escrow until all the conditions of vesting have been met.

The restricted stock units provide that the recipients can elect, at their option, to receive either common stock in the Company, or a cash settlement based upon the closing price of the Company’s shares, at the time of vesting. Based on these award provisions, the compensation expense recorded in the Company’s Condensed Statement of Operations reflects the straight-line amortized fair value based on the period end closing price.

	Number of Shares		Weighted Average Fair Value
Nonvested restricted stock units at September 2013	29,600		$	81.89
Granted	17,900		83.03
Vested	(14,300	)	80.68
Expired	—		—
Nonvested restricted stock units at December 2013	33,200		$	79.93

All Equity-Based Awards (stock options and restricted stock units)

Net income before income taxes included compensation expense of approximately $0.3 million during both Q1 2014 and Q1 2013 related to the amortization of all equity-based compensation awards.  Total unamortized compensation expense related to these awards at December 2013 and December 2012 was approximately $2.5 million and $1.9 million, respectively.

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COMMON STOCK REPURCHASE

3 Months Ended

Dec. 31, 2013

COMMON STOCK REPURCHASE

COMMON STOCK REPURCHASE

10. COMMON STOCK REPURCHASE

During Q1 2014, the Company repurchased 25,057 shares of its common stock from an independent third party for cash totaling approximately $1.9 million.  All repurchased shares are recorded in treasury stock at cost.  Subsequent to the share repurchase, the Company’s Board of Directors reauthorized additional repurchases of up to 50,000 shares of its common stock.

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BUSINESS SEGMENTS (Details) (USD $)	3 Months Ended
	Dec. 31, 2013 item	Dec. 31, 2012	Sep. 30, 2013
BUSINESS SEGMENTS
Number of reportable business segments	2
Information by business segments
Total external revenue	$ 305,625,557	$ 302,218,321
Depreciation	532,790	502,612
Amortization	91,250	91,250
Operating income (loss)	2,524,760	2,787,455
Interest expense	301,995	316,052
Income (loss) from operations before taxes	2,252,996	2,532,752
Total assets	116,915,737	115,830,622	106,374,899
Capital expenditures	985,678	330,228
Cigarettes
Information by business segments
Total external revenue	221,151,811	221,730,182
Confectionery
Information by business segments
Total external revenue	18,203,191	17,956,072
Health food
Information by business segments
Total external revenue	8,523,278	8,704,643
Tobacco, food service & other
Information by business segments
Total external revenue	57,747,277	53,827,424
Wholesale Segment
Information by business segments
Total external revenue	297,102,279	293,513,678
Wholesale Segment | Cigarettes
Information by business segments
Total external revenue	221,151,811	221,730,182
Wholesale Segment | Confectionery
Information by business segments
Total external revenue	18,203,191	17,956,072
Wholesale Segment | Tobacco, food service & other
Information by business segments
Total external revenue	57,747,277	53,827,424
Retail Segment
Information by business segments
Total external revenue	8,523,278	8,704,643
Retail Segment | Health food
Information by business segments
Total external revenue	8,523,278	8,704,643
Operating Segments | Wholesale Segment
Information by business segments
Depreciation	403,342	408,743
Amortization	91,250	91,250
Operating income (loss)	3,795,962	3,802,737
Interest expense	43,797	55,132
Income (loss) from operations before taxes	3,759,523	3,753,457
Total assets	103,144,703	103,284,807
Capital expenditures	918,542	293,650
Operating Segments | Retail Segment
Information by business segments
Depreciation	128,510	92,932
Operating income (loss)	52,190	371,798
Interest expense	60,776	58,968
Income (loss) from operations before taxes	(3,628)	317,770
Total assets	13,564,621	12,358,555
Capital expenditures	67,136	36,578
Other
Information by business segments
Depreciation	938	937
Operating income (loss)	(1,323,392)	(1,387,080)
Interest expense	197,422	201,952
Income (loss) from operations before taxes	(1,502,899)	(1,538,475)
Total assets	$ 206,413	$ 187,260

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EQUITY-BASED INCENTIVE AWARDS (Tables)

3 Months Ended

Dec. 31, 2013

EQUITY-BASED INCENTIVE AWARDS

Schedule of stock options issued and outstanding by grant year

Stock options issued and outstanding at December 2013 are summarized as follows:

			Remaining			Exercisable
	Exercise Price	Number Outstanding	Weighted-Average Contractual Life	Weighted-Average Exercise Price		Number Exercisable	Weighted-Average Exercise Price
Fiscal 2007	$18.00	25,000	2.95 years	$	18.00	25,000	$	18.00
Fiscal 2010	$51.50	5,500	6.33 years	$	51.50	3,300	$	51.50
Fiscal 2012	$53.80 - $65.97	6,500	7.84 years	$	54.74	2,500	$	54.29
Fiscal 2013	$62.33	8,000	8.82 years	$	62.33	1,600	$	62.33
		45,000		$	35.28	32,400	$	26.40

Schedule of nonvested restricted stock units

	Restricted Stock Units(1)		Restricted Stock Units(2)		Restricted Stock Units(3)
Date of award:	October 26, 2011		October 23, 2012		October 22, 2013
Original number of awards issued:	15,900		15,000		17,900
Service period:	36 months		36 months		36-60 months
Estimated fair value of award at grant date	$	855,000	$	935,000	$	1,486,000
Awards outstanding at December 2013	5,300		10,000		17,900
Fair value of non-vested awards at December 2013:	$	424,000	$	799,000	$	1,431,000

(1) 10,600 of the restricted stock units were vested as of December 2013. The remaining 5,300 restricted stock units will vest on October 25, 2014.

(2) 5,000 of the restricted stock units were vested as of December 2013.  The remaining 10,000 restricted stock units will vest in equal amounts on October 23, 2014 and October 23, 2015.

(3) 14,000 restricted stock units will vest in equal amounts on October 22, 2014, October 22, 2015, and October 22, 2016.  The remaining 3,900 restricted stock units will vest in equal amounts on October 22, 2014, October 22, 2015, October 22, 2016, October 22, 2017, and October 22, 2018.

Summary of restricted stock unit activity

	Number of Shares		Weighted Average Fair Value
Nonvested restricted stock units at September 2013	29,600		$	81.89
Granted	17,900		83.03
Vested	(14,300	)	80.68
Expired	—		—
Nonvested restricted stock units at December 2013	33,200		$	79.93

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GOODWILL AND OTHER INTANGIBLE ASSETS (Details) (USD $)	Dec. 31, 2013	Sep. 30, 2013
Goodwill by reporting segment
Goodwill	$ 6,349,827	$ 6,349,827
Wholesale Segment
Goodwill by reporting segment
Goodwill	4,436,950	4,436,950
Retail Segment
Goodwill by reporting segment
Goodwill	$ 1,912,877	$ 1,912,877

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Condensed Consolidated Statements of Operations (Parenthetical) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Condensed Consolidated Statements of Operations
Sales, excise taxes	$ 97.3	$ 98.0

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GOODWILL AND OTHER INTANGIBLE ASSETS

3 Months Ended

Dec. 31, 2013

GOODWILL AND OTHER INTANGIBLE ASSETS

GOODWILL AND OTHER INTANGIBLE ASSETS

4. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill by reporting segment of the Company consisted of the following:

	December2013		September2013
Wholesale Segment	$	4,436,950	$	4,436,950
Retail Segment	1,912,877		1,912,877
	$	6,349,827	$	6,349,827

Other intangible assets of the Company consisted of the following:

	December2013		September2013
Trademarks and tradenames	$	3,373,269	$	3,373,269
Non-competition agreement (less accumulated amortization of approximately $0.3 million at December 2013 and $0.2 million at September 2013)	241,667		266,667
Customer relationships (less accumulated amortization of $1.0 million and $0.9 million at December 2013 and September 2013, respectively)	1,114,792		1,181,042
	$	4,729,728	$	4,820,978

Goodwill, trademarks, and tradenames are considered to have indefinite useful lives and therefore no amortization has been taken on these assets. At December 2013, identifiable intangible assets considered to have finite lives were represented by customer relationships and the value of a non-competition agreement acquired as part of acquisitions. The customer relationships are being amortized over eight years and the value of the non-competition agreement is being amortized over five years. These intangible assets are evaluated for accelerated attrition or amortization adjustments if warranted. Amortization expense related to identifiable intangible assets was $0.1 million during both Q1 2014 and Q1 2013.

Estimated future amortization expense related to identifiable intangible assets with finite lives is as follows at December 2013:

	December2013
Fiscal 2014 (1)	$	273,750
Fiscal 2015	365,000
Fiscal 2016	331,667
Fiscal 2017	265,000
Fiscal 2018	79,375
Thereafter	41,667
	$	1,356,459

(1)  Represents amortization for the remaining nine months of Fiscal 2014.

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GOODWILL AND OTHER INTANGIBLE ASSETS (Details 2) (USD $)	3 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Sep. 30, 2013
Other intangible assets
Other intangible assets, net	$ 4,729,728		$ 4,820,978
Amortization expense related to identifiable intangible assets	100,000	100,000
Non-competition agreement
Other intangible assets
Other intangible assets, net	241,667		266,667
Accumulated amortization	300,000		200,000
Amortization period	5 years
Customer relationships
Other intangible assets
Other intangible assets, net	1,114,792		1,181,042
Accumulated amortization	1,000,000		900,000
Amortization period	8 years
Trademarks and tradenames
Other intangible assets
Other intangible assets, net	$ 3,373,269		$ 3,373,269

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EARNINGS PER SHARE (Tables)

3 Months Ended

Dec. 31, 2013

EARNINGS PER SHARE

Schedule of net earnings per share available to common shareholders

	For the three months ended December
	2013					2012
	Basic			Diluted		Basic			Diluted
Weighted average common shares outstanding	622,226			622,226		622,277			622,277
Weighted average of net additional shares outstanding assuming dilutive options exercised and proceeds used to purchase treasury stock and conversion of preferred stock (1)	—			122,342		—			145,680
Weighted average number of shares outstanding	622,226			744,568		622,277			767,957
Net income	$	1,287,996		$	1,287,996	$	1,462,752		$	1,462,752
Deduct: convertible preferred stock dividends (2)	(49,177		)	—		(59,291		)	—
Net income available to common shareholders	$	1,238,819		$	1,287,996	$	1,403,461		$	1,462,752
Net earnings per share available to common shareholders	$	1.99		$	1.73	$	2.26		$	1.90

(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.