CORE-MARK HOLDING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
(Unaudited)
December 31, December 31,
2009 2008
------------ ------------
Assets
Current assets:
Cash and cash equivalents $ 17.7 $ 15.7
Restricted cash 12.4 11.4
Accounts receivable, net of allowance for
doubtful accounts of $9.1 and $8.8,
respectively 161.1 146.9
Other receivables, net 39.6 34.1
Inventories, net 275.5 238.4
Deposits and prepayments 42.2 26.5
Deferred income taxes 3.6 12.2
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Total current assets 552.1 485.2
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Property and equipment, net 83.8 74.2
Deferred income taxes 5.3 12.1
Goodwill 3.7 3.7
Other non-current assets, net 33.0 37.4
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Total assets $ 677.9 $ 612.6
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 63.2 $ 66.0
Book overdrafts 19.4 17.8
Cigarette and tobacco taxes payable 132.3 103.2
Accrued liabilities 59.6 58.1
Deferred income taxes 0.6 1.6
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Total current liabilities 275.1 246.7
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Long-term debt, net 20.0 30.8
Other long-term liabilities 4.3 11.1
Claims liabilities, net of current portion 32.6 31.3
Pension liabilities 15.7 19.1
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Total liabilities 347.7 339.0
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Stockholders' equity:
Common stock; $0.01 par value (50,000,000
shares authorized, 11,001,632 and 10,746,416
shares issued; and 10,506,270 and 10,349,700
shares outstanding at December 31, 2009 and
2008, respectively) 0.1 0.1
Additional paid-in capital 216.2 209.3
Treasury stock at cost (495,362 and 396,716
shares of common stock at December 31, 2009
and 2008, respectively) (13.2) (11.0)
Retained earnings 129.6 82.3
Accumulated other comprehensive loss (2.5) (7.1)
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Total stockholders' equity 330.2 273.6
------------ ------------
Total liabilities and stockholders'
equity $ 677.9 $ 612.6
============ ============
CORE-MARK HOLDING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
2009 2008 2009 2008
--------- --------- --------- ---------
Net sales $ 1,651.9 $ 1,492.2 $ 6,531.6 $ 6,044.9
Cost of goods sold 1,557.8 1,399.3 6,130.0 5,685.8
--------- --------- --------- ---------
Gross profit 94.1 92.9 401.6 359.1
--------- --------- --------- ---------
Warehousing and distribution
expenses 51.0 46.4 197.3 197.6
Selling, general and
administrative expenses 34.0 33.9 137.3 129.4
Amortization of intangible
assets 0.4 0.5 2.0 2.0
--------- --------- --------- ---------
Total operating expenses 85.4 80.8 336.6 329.0
--------- --------- --------- ---------
Income from operations 8.7 12.1 65.0 30.1
Interest expense 0.4 0.6 1.7 2.2
Interest income (0.1) (0.1) (0.3) (1.0)
Foreign currency transaction
(gains) losses, net (0.2) 3.7 (2.2) 6.3
--------- --------- --------- ---------
Income before income taxes 8.6 7.9 65.8 22.6
Provision for income taxes 0.1 0.5 18.5 4.7
--------- --------- --------- ---------
Net income $ 8.5 $ 7.4 $ 47.3 $ 17.9
========= ========= ========= =========
Basic income per common share $ 0.82 $ 0.71 $ 4.53 $ 1.71
========= ========= ========= =========
Diluted income per common share $ 0.76 $ 0.70 $ 4.35 $ 1.64
========= ========= ========= =========
Basic weighted-average shares 10.5 10.4 10.5 10.5
Diluted weighted-average shares 11.1 10.5 10.9 10.9
Note (1): Basic and diluted earnings per share are calculated based on
unrounded actual amounts.
CORE-MARK HOLDING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Twelve Months Ended
December 31,
2009 2008
------------ ------------
Cash flows from operating activities:
Net income $ 47.3 $ 17.9
Adjustments to reconcile net income to net
cash provided by operating activities:
LIFO and inventory provisions 7.1 11.0
Amortization of debt issuance costs 0.5 0.5
Amortization of stock-based
compensation 5.1 3.9
Bad debt expense, net 1.8 1.6
Depreciation and amortization 18.7 17.4
Foreign currency transaction (gains)
losses, net (2.2) 6.3
Deferred income taxes 14.5 (4.9)
Changes in operating assets and liabilities:
Accounts receivable (13.8) (2.9)
Other receivables (4.3) (4.2)
Inventories (36.7) (31.9)
Deposits, prepayments and other
non-current assets (16.7) 4.4
Accounts payable (4.4) 13.8
Cigarette and tobacco taxes payable 22.8 16.2
Pension, claims and other accrued
liabilities (6.6) 6.2
Income taxes payable - 0.3
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Net cash provided by operating
activities 33.1 55.6
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Cash flows from investing activities:
Restricted cash 0.7 (2.2)
Acquisition of business, net of cash acquired - (26.4)
Additions to property and equipment, net (21.1) (19.9)
Capitalization of software (0.3) (0.7)
Proceeds from sale of fixed assets 0.1 0.1
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Net cash used in investing activities (20.6) (49.1)
------------ ------------
Cash flows from financing activities:
(Repayments) borrowings under revolving
credit facility, net (10.7) 0.1
Repurchases of common stock (treasury stock) (2.2) (11.0)
Proceeds from exercise of common stock
options and warrants 2.2 2.5
Tax withholdings related to net share
settlements of restricted stock units (0.5) -
Excess tax deductions associated with
stock-based compensation 0.4 0.6
Increase (decrease) in book overdrafts 1.6 (3.2)
------------ ------------
Net cash used in financing activities (9.2) (11.0)
------------ ------------
Effects of changes in foreign exchange rates (1.3) (1.1)
------------ ------------
Increase (decrease) in cash and cash
equivalents 2.0 (5.6)
Cash and cash equivalents, beginning of period 15.7 21.3
------------ ------------
Cash and cash equivalents, end of period $ 17.7 $ 15.7
============ ============
Supplemental disclosures:
Cash paid during the period for:
Income taxes, net of refunds $ 11.7 $ 7.5
Interest $ 1.0 $ 1.7
CORE-MARK HOLDING COMPANY, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP DILUTED EPS
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
--------------------------- ---------------------------
% Increase/ % Increase/
2009(a) 2008(a) (Decrease) 2009(a) 2008(a) (Decrease)
------- ------- --------- ------- ------- ---------
Net Income 8.5 7.4 14.9% 47.3 17.9 164.2%
======= ======= ========= ======= ======= =========
Diluted shares 11.1 10.5 5.7% 10.9 10.9 (0.0%)
------- ------- --------- ------- ------- ---------
GAAP Diluted EPS $ 0.76 $ 0.70 $ 4.35 $ 1.64
OTP tax
refunds(1) - (0.08) (0.03) (0.08)
LIFO expense 0.08 0.02 0.37 0.61
Cigarette
inventory
holding
profits(2) (0.08) (0.09) (2.04) (0.17)
Net federal
floor stock
tax(3) - - 0.64 -
Start-up &
conversion
costs for
Toronto & New
England(4) - - 0.05 0.06
Foreign
exchange
(gain) / loss (0.01) 0.21 (0.12) 0.35
Tax items(5) (0.22) (0.12) (0.61) (0.24)
Non-GAAP Diluted
EPS(6) $ 0.53 $ 0.64 (17.3%) $ 2.61 $ 2.17 20.2%
------- ------- --------- ------- ------- ---------
(1) OTP tax refunds
In November 2008, we recorded a $1.4 million refund related to the
overpayment of taxes on Other Tobacco Products (OTP) with the State of
Texas for the period of April 1, 2003 through August 31, 2007. We received
OTP tax refunds of $0.6 million from the State of Florida in September
2009.
(2) Cigarette inventory holding profits
Cigarette holding profits were $1.5 million for both the three months ended
December 31, 2009 and 2008. For the twelve months ended December 31, 2009
cigarette holding profits were $36.7 million compared to $3.1 million for
the same period in 2008. The increase in cigarette inventory holding
profits for the twelve months ended December 31, 2009 is due primarily to
increases in cigarette prices by manufacturers in response to the increase
in federal excise taxes mandated by the State Children's Health Insurance
Program (SCHIP) legislation.
(3) Net federal floor stock tax
The net federal floor stock tax, which was imposed as part of the SCHIP
legislation for the twelve months ended December 31, 2009, was $11.5
million.
(4) Toronto start-up costs and New England conversion costs
In January 2008, we opened our distribution facility near Toronto, Ontario
and incurred approximately $1.0 million of start-up costs. During the first
half of 2009, we incurred approximately $0.9 million related to the
integration of our New England division, which we acquired in June 2008,
onto our information technology platform.
(5) Tax items
Included in the provision for income taxes for the three months ended
December 31, 2009 is a net benefit of $2.6 million, inclusive of a net
interest recovery of $0.9 million, compared to a net benefit of $1.4
million for the same period in 2008. The net benefits relate primarily to
the expiration of the statute of limitations for uncertain tax positions,
changes to prior year estimates based upon finalization of tax returns and
state tax credits claimed for prior years.
Included in the provision for income taxes for the twelve months ended
December 31, 2009 is a net benefit of $6.7 million, inclusive of a net
interest recovery of $2.1 million related to unrecognized tax benefits,
compared to a net benefit of $3.2 million, inclusive of net interest
expense of $0.1 million, for the same period in 2008. The net benefits
relate primarily to the expiration of the statute of limitations for
uncertain tax positions, changes to prior year estimates based upon
finalization of tax returns and state tax credits claimed for prior years.
(6) Non-GAAP Diluted EPS
The diluted earnings per share impacts of the above items were calculated
using a tax rate of approximately 39.30% for 2009 and 39.32% for 2008,
except for the tax items. During the fourth quarter 2009 we recorded $4.3
million less in non-cigarette floor stock income earned from manufacturer
price increases compared to the same period in 2008, that were concentrated
primarily in the candy category. For the twelve months ended December 31,
2009, we recorded $8.1 million less in non-cigarette floor stock income
earned from manufacturer price increases compared to 2008.
(a) Amounts and percentages have been rounded for presentation purposes and
might differ from unrounded results.
Core-Mark Announces 4th Quarter Earnings and Record 2009 Results
| Source: Core-Mark Holding Company, Inc.
SOUTH SAN FRANCISCO, CA--(Marketwire - March 12, 2010) - Core-Mark Holding Company, Inc.
(NASDAQ : CORE ), one of the largest marketers of fresh and broad-line supply
solutions to the convenience retail industry in North America, announced
financial results for the fourth quarter and year ended December 31, 2009.
"The political and economic dynamics of 2009 led to a very unusual year;
extraordinary high cigarette holding gains, declining carton volume,
generally flat food/non-food sales, overall respectable margins and
positive momentum for our fresh initiatives. The industry is accelerating
the transition to more efficient ways of getting new products to market
that the consumer will buy. We believe that Core-Mark is well positioned
to support our retail customers as they migrate through this change," said
Michael Walsh, President and Chief Executive Officer of Core-Mark.
Fourth Quarter of 2009
Net sales were $1.65 billion for the fourth quarter of 2009 compared to
$1.49 billion for the same period in 2008, a 10.7% increase, or 8.3%
excluding the effects of foreign currency fluctuations. The largest
contributor to this increase was approximately $157 million of cigarette
price inflation which the Company believes was related to the passage of
the State Children's Health Insurance Program (SCHIP).
Gross profit for the fourth quarter of 2009 was $94.1 million compared to
$92.9 million for the same period in 2008. Gross profit, excluding
cigarette holding profits, other tobacco product (OTP) tax refunds and LIFO
expense, grew to $94.0 million in the fourth quarter of 2009 from $90.3
million in the fourth quarter of 2008, a 4.1% increase. The fourth quarter
of 2008 included $4.3 million more in non-cigarette floor stock gains due
to manufacturer price increases than in the fourth quarter of 2009.
The Company's operating expenses for the fourth quarter of 2009 increased
to $85.4 million compared to $80.8 million in the same quarter in 2008.
This $4.6 million increase was due primarily to warehouse and delivery
expenses which included a $2.7 million increase in healthcare and workers
compensation costs and a $0.7 million increase in net fuel expense. As a
percentage of net sales, total operating expenses decreased by 24 basis
points.
Net income for the fourth quarter of 2009 was $8.5 million, or $0.76 per
diluted share compared to $7.4 million, or $0.70 per diluted share, for the
same period in 2008. Diluted earnings per share was impacted by several
items, which are reconciled in the attached table. Excluding these items,
diluted earnings per share on a non-GAAP basis would have been $0.53 for
the fourth quarter this year compared to $0.64 in the fourth quarter of
2008.
2009 Results
Net sales were $6.53 billion for 2009 compared to $6.04 billion for the
same period in 2008, an 8.1% increase. Excluding the effects of foreign
currency fluctuations, net sales increased 9.1% for the year.
Approximately $534 million of this increase resulted from U.S. cigarette
manufacturer price increases in response to the passage of SCHIP.
Gross profit for 2009 was $401.6 million compared to $359.1 million in
2008. Cigarette inventory holding profits were $36.7 million, offset by
$11.5 million of Federal excise tax (FET), net of manufacturers'
reimbursements, in 2009 compared to a gain of $3.1 million in 2008. Gross
profit, excluding cigarette inventory holding profits, FET, OTP tax refunds
and LIFO expense, grew to $382.5 million in 2009 compared to $365.6 million
in 2008, a 4.6% increase. Gross profit improved despite non-cigarette
floor stock income earned from manufacturer price increases being $8.1
million lower than in 2008.
The Company's operating expenses increased to $336.6 million in 2009
compared to $329.0 million in the previous year. This $7.6 million
increase was due largely to incremental expenses of $6.5 million from the
New England division and a $3.6 million increase in healthcare and worker's
compensation costs, offset by a $4.5 million reduction in net fuel expense.
As a percentage of net sales, total operating expenses decreased by 29
basis points.
Net income for 2009 was $47.3 million, or $4.35 per diluted share compared
to $17.9 million, or $1.64 per diluted share, for 2008. Pre-tax cigarette
holding profits, net of FET, was $25.2 million and contributed
significantly to the improvement in net income. In addition, diluted
earnings per share was impacted by several other items, which are
reconciled in the attached table. Excluding these items, diluted earnings
per share on a non-GAAP basis would have been $2.61 for the year compared
to $2.17 in 2008.
Guidance for 2010
The Company reiterated its annual guidance of $6.9 billion in net sales for
2010. This guidance contemplates a decline in cigarette carton volumes
offset by higher cigarette taxes and manufacturers' price increases. The
non-cigarette categories are expected to benefit from further progress in
implementing key strategies including "Fresh" and the Vendor Consolidation
Initiative. Management also reiterated its expected capital expenditures
of approximately $20 million for 2010.
Investors Conference Call
Core-Mark will host an earnings call on Monday, March 15, 2010 at 9:00 a.m.
Pacific time during which management will review the results of the fourth
quarter and year ended December 31, 2009. The call may be accessed by
dialing 1-800-588-4973 using the code 26161515. The call may also be
listened to on the Company's internet website www.core-mark.com.
An audio replay will be available for two weeks following the call by
dialing 888-843-8996 using the same code. The replay will also be
available via webcast at www.core-mark.com for approximately 90 days
following the call.
Core-Mark
Core-Mark is one of the largest marketers of fresh and broad-line supply
solutions to the convenience retail industry in North America. Founded in
1888, Core-Mark provides distribution and logistics services as well as
marketing programs to over 24,000 retail locations in 50 U.S. states and
five Canadian provinces through 26 distribution centers, two of which
Core-Mark operates as third party logistics providers. Core-Mark services
traditional convenience retailers, grocers, drug, liquor and specialty
stores, and other stores that carry consumer packaged goods. For more
information, please visit www.core-mark.com.
SEC Regulation G - Non-GAAP Information
This press release includes non-GAAP diluted earnings per share. We believe
this non-GAAP financial measure provides meaningful supplemental
information for investors regarding the performance of our business and
facilitates a meaningful period to period evaluation of our diluted
earnings per share. Management uses this non-GAAP financial measure in
order to have comparable financial results to analyze changes in our
underlying business. This non-GAAP measure should be considered as a
supplement to, and not as a substitute for, or superior to, financial
measures calculated in accordance with GAAP.
Safe Harbor
Except for historical information, the statements made in this press
release are forward-looking statements made pursuant to the safe-harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are based on certain assumptions or estimates,
discuss future expectations, describe future plans and strategies, contain
projections of results of operations or of financial condition or state
other forward-looking information. Our ability to predict results or the
actual effect of future plans or strategies is inherently uncertain.
Forward-looking statements in some cases can be identified by the use of
words such as "may," "will," "should," "potential," "intend," "expect,"
"seek," "anticipate," "estimate," "believe," "could," "would," "project,"
"predict," "continue," "plan," "propose" or other similar words or
expressions. These forward-looking statements are based on the current
plans and expectations of our management and are subject to certain risks
and uncertainties that could cause actual results to differ materially from
historical results or those discussed in such forward-looking statements.
Factors that might cause or contribute to such differences include, but are
not limited to, our dependence on the convenience retail industry for our
revenues; uncertain economic conditions; competition; price increases; our
dependence on relatively few suppliers; the low-margin nature of cigarette
and consumable goods distribution; certain distribution centers' dependence
on a few relatively large customers; competition in the labor market;
product liability claims and manufacturer recalls of products; fuel price
increases; our dependence on our senior management; integration of acquired
businesses; currency exchange rate fluctuations; our ability to borrow
additional capital; governmental regulations and changes thereto including
the Family Smoking Prevention and Tobacco Control Act which was signed into
law in June 2009 which granted the U.S. federal Food & Drug Administration
("FDA") the authority to regulate the production and marketing of tobacco
products in the U. S.; earthquake and natural disaster damage; failure or
disruptions to our information systems; a greater decline than anticipated
in cigarette sales volume; our ability to implement marketing strategies
and competition from sales of deep-discount brands and illicit and other
low priced sales of cigarettes. Refer to the "Risk Factors" section of our
Annual Report on Form 10-K for the year ended December 31, 2009 filed with
the SEC on March 12, 2010 and Part II, Item 1A, "Risk Factors" of any
quarterly report on Form 10-Q subsequently filed by us. Except as provided
by law, we undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.