CORE-MARK HOLDING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
(Unaudited)
December 31, December 31,
2010 2009
----------- -----------
Assets
Current assets:
Cash and cash equivalents $ 16.1 $ 17.7
Restricted cash 12.8 12.4
Accounts receivable, net of allowance for
doubtful accounts of $8.7 and $9.1,
respectively 179.3 161.1
Other receivables, net 43.5 39.6
Inventories, net 290.7 275.5
Deposits and prepayments 42.2 42.2
Deferred income taxes 3.6 3.6
----------- -----------
Total current assets 588.2 552.1
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Property and equipment, net 84.7 83.8
Deferred income taxes - 5.3
Goodwill 4.6 3.7
Other non-current assets, net 31.3 33.0
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Total assets $ 708.8 $ 677.9
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 57.3 $ 63.2
Book overdrafts 6.5 19.4
Cigarette and tobacco taxes payable 166.8 132.3
Accrued liabilities 66.8 59.6
Deferred income taxes 0.3 0.6
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Total current liabilities 297.7 275.1
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Long-term debt 0.8 20.0
Other long-term liabilities 4.7 4.3
Claims liabilities, net 30.6 32.6
Pension liabilities 12.3 15.7
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Total liabilities 346.1 347.7
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Stockholders' equity:
Common stock; $0.01 par value (50,000,000
shares authorized, 11,613,525 and 11,001,632
shares issued; 11,118,163 and 10,506,270
shares outstanding at December 31, 2010 and
2009, respectively) 0.1 0.1
Additional paid-in capital 229.6 216.2
Treasury stock at cost (495,362 shares of
common stock at December 31, 2010 and 2009) (13.2) (13.2)
Retained earnings 147.3 129.6
Accumulated other comprehensive loss (1.1) (2.5)
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Total stockholders' equity 362.7 330.2
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Total liabilities and stockholders' equity $ 708.8 $ 677.9
=========== ===========
CORE-MARK HOLDING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except share data)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------ ------------------
2010 2009 2010 2009
-------- -------- -------- --------
Net sales $1,856.8 $1,651.9 $7,266.8 $6,531.6
Cost of goods sold 1,762.5 1,557.8 6,881.5 6,130.0
-------- -------- -------- --------
Gross profit 94.3 94.1 385.3 401.6
-------- -------- -------- --------
Warehousing and distribution
expenses 54.8 51.0 211.8 197.3
Selling, general and administrative
expenses 38.7 34.0 142.5 137.3
Amortization of intangible assets 0.6 0.4 2.1 2.0
-------- -------- -------- --------
Total operating expenses 94.1 85.4 356.4 336.6
-------- -------- -------- --------
Income from operations 0.2 8.7 28.9 65.0
Interest expense (0.7) (0.4) (2.6) (1.7)
Interest income 0.1 0.1 0.4 0.3
Foreign currency transaction gains,
net 0.7 0.2 0.5 2.2
-------- -------- -------- --------
Income before income taxes 0.3 8.6 27.2 65.8
Income tax (provision) benefit 0.6 (0.1) (9.5) (18.5)
-------- -------- -------- --------
Net income $ 0.9 $ 8.5 $ 17.7 $ 47.3
======== ======== ======== ========
Basic net income per common
share (1) $ 0.08 $ 0.82 $ 1.64 $ 4.53
Diluted net income per common
share (1) $ 0.08 $ 0.76 $ 1.55 $ 4.35
Basic weighted-average shares 11.0 10.5 10.8 10.5
Diluted weighted-average shares 11.7 11.1 11.4 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,
--------------
2010 2009
------ ------
Cash flows from operating activities:
Net income $ 17.7 $ 47.3
Adjustments to reconcile net income to net cash provided
by operating activities:
LIFO and inventory provisions 16.5 7.1
Amortization of debt issuance costs 0.5 0.5
Amortization of stock-based compensation 4.8 5.1
Bad debt expense, net 1.4 1.8
Loss on disposals 0.7 -
Depreciation and amortization 19.7 18.7
Foreign currency transaction gains, net (0.5) (2.2)
Deferred income taxes 5.2 14.5
Changes in operating assets and liabilities:
Accounts receivable 2.5 (13.8)
Other receivables (3.5) (4.3)
Inventories (18.8) (36.7)
Deposits, prepayments and other non-current assets 2.3 (16.7)
Accounts payable (6.4) (4.4)
Cigarette and tobacco taxes payable 32.1 22.8
Pension, claims and other accrued liabilities 0.6 (6.6)
Income taxes payable 0.1 -
------ ------
Net cash provided by operating activities 74.9 33.1
------ ------
Cash flows from investing activities:
Acquisition of business, net of cash acquired (35.9) -
Restricted cash 0.2 0.7
Additions to property and equipment, net (13.9) (21.1)
Capitalization of software (1.0) (0.3)
Proceeds from sale of fixed assets 0.1 0.1
------ ------
Net cash used in investing activities (50.5) (20.6)
------ ------
Cash flows from financing activities:
Repayments under revolving credit facility, net (19.2) (10.7)
Payments of financing costs (1.8) -
Repurchases of common stock (treasury stock) - (2.2)
Proceeds from exercise of common stock options and
warrants 8.3 2.2
Tax withholdings related to net share settlements of
restricted stock units (1.7) (0.5)
Excess tax deductions associated with stock-based
compensation 2.0 0.4
(Decrease) increase in book overdrafts (12.9) 1.6
------ ------
Net cash used in financing activities (25.3) (9.2)
------ ------
Effects of changes in foreign exchange rates (0.7) (1.3)
------ ------
(Decrease) increase in cash and cash equivalents (1.6) 2.0
Cash and cash equivalents, beginning of period 17.7 15.7
------ ------
Cash and cash equivalents, end of period $ 16.1 $ 17.7
====== ======
Supplemental disclosures:
Cash paid during the period for:
Income taxes, net of refunds $ 10.6 $ 11.7
Interest 1.7 1.0
Non-cash investing activities:
Contingent consideration related to acquisition of
business $ 1.0 $ -
CORE-MARK HOLDING COMPANY, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP DILUTED EPS
(In millions, except per share data)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
-------------------- --------------------
% %
2010 2009 Increase/ 2010 2009 Increase/
(a) (a) (Decrease) (a) (a) (Decrease)
----- ----- ------ ----- ----- ------
Net Income $ 0.9 $ 8.5 (89.4%) $17.7 $47.3 (62.6%)
----- ----- ------ ----- ----- ------
Diluted shares 11.7 11.1 11.4 10.9
----- ----- ------ ----- ----- ------
GAAP Diluted EPS $0.08 $0.76 $1.55 $4.35
LIFO expense 0.46 0.08 0.88 0.37
Cigarette inventory
holding profits / FET(1) (0.16) (0.08) (0.32) (1.40)
Deferred vendor income(2) - - (0.04) -
Certain other costs(3) 0.15 - 0.29 0.05
Foreign exchange gains (0.03) (0.01) (0.03) (0.12)
Tax items(4) (0.02) (0.22) (0.06) (0.61)
Effect of increase in
diluted shares(5) 0.02 - 0.11 -
----- ----- ------ ----- ----- ------
Non-GAAP Diluted EPS(6) $0.50 $0.53 (5.7%) $2.38 $2.64 (9.8%)
----- ----- ------ ----- ----- ------
GAAP diluted EPS for the three months ended December 31, 2010 was impacted
by an increase of $0.3 million in non-cigarette income primarily from
higher floor gains. Conversely, for the full year of 2010, GAAP diluted EPS
was impacted by $5.3 million less in non-cigarette income primarily from
lower floor gains.
(1) Cigarette inventory holding profits / FET
Cigarette holding profits for the three months ended December 31, 2010 and
2009, were $3.1 million and $1.5 million, respectively. For the year ended
December 31, 2010, cigarette holding profits were $6.1 million compared to
$36.7 million, partially offset by $11.5 million of net federal floor stock
tax, for the same period in 2009. The significant cigarette holding profits
for the year ended December 31, 2009 were due primarily to increases in
cigarette prices by manufacturers in response to the increase in federal
excise taxes (FET) mandated by the State Children's Health Insurance
Program (SCHIP) legislation.
(2) Deferred vendor income
During the year ended December 31, 2010, we recorded an $0.7 million out of
period adjustment related to the recognition of vendor income. The
adjustment is immaterial to any prior period.
(3) Certain other costs
For the three months ended December 31, 2010, certain other costs consist
of $1.5 million, or $0.08 per diluted share, of integration expenses
associated with the FDI acquisition, $0.6 million, or $0.03 per diluted
share, of costs related to the settlement of insurance claims we inherited
from Fleming, our former parent, and $0.8 million, or $0.04 per diluted
share, of expenses for advisory and due diligence activities necessary to
analyze multiple offers from potential acquirers.
For the year ended December 31, 2010, certain other costs consist of $2.8
million, or $0.15 per diluted share, of integration expenses associated
with the FDI acquisition, $1.6 million, or $0.08 per diluted share, of
costs related to the settlement of insurance claims we inherited from
Fleming, our former parent, and $1.1 million, or $0.06 per diluted share,
of expenses for advisory and due diligence activities necessary to analyze
multiple offers from potential acquirers. During the year ended December
31, 2009, we incurred approximately $0.9 million, or $0.05 per diluted
share, of costs related to the integration of our New England division onto
our information technology platform.
(4) Tax items
The provision for income taxes for the year ended December 31, 2010,
included a $0.7 million net benefit including $0.1 million of interest
recovery, compared to a $6.7 million net benefit including $2.1 million of
interest recovery for the same period in 2009. The net benefits related
primarily to the expiration of the statute of limitations for uncertain tax
positions and revisions to prior year estimates based on finalization of
tax returns.
(5) Effect of increase in diluted shares
During the three months and year ended December 31, 2010, diluted earnings
per share was negatively impacted by $0.02 and $0.11, respectively, as a
result of an increase in diluted shares compared to the same periods in
2009.
(6) Non-GAAP Diluted EPS
The diluted earnings per share impacts of the above items were calculated
using a tax rate of approximately 39.65% for the three months and year
ended December 31, 2010 and approximately 39.30% for the same periods in
2009, except for the tax items.
(a) Amounts and percentages have been rounded for presentation purposes and
might differ from unrounded results.
Core-Mark Net Sales Grow by More Than 12% in the Fourth Quarter and 11% for the Year
| Source: Core-Mark Holding Company, Inc.
SOUTH SAN FRANCISCO, CA--(Marketwire - March 15, 2011) - 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, 2010.
"I would characterize our year-end and fourth quarter results as showing
good revenue momentum but reflecting the margin erosion that occurred at
the end of the first quarter. While we have made some progress in margin
restoration in the markets affected, we still have work ahead of us," said
Michael Walsh, President and Chief Executive Officer of Core-Mark. "We were
able to exercise improved cost control, despite rising fuel prices.
Overall, our key strategies to increase our relevancy to the convenience
retailer are working."
Fourth Quarter
Net sales were $1.86 billion for the fourth quarter of 2010 compared to
$1.65 billion for the same period in 2009, a 12.4% increase. On a constant
currency basis, net sales increased 11.7%. The primary drivers were
increased volume, excise tax inflation and sales generated from the
Company's acquisition of Finkle Distributors, Inc. (FDI) during the third
quarter.
Gross profit for the fourth quarter of 2010 was $94.3 million compared to
$94.1 million for the same period last year. Remaining gross profit, which
excludes cigarette holding profits, other tobacco tax gains and LIFO
expense, was $100.0 million this quarter compared to $94.0 million in the
fourth quarter of 2009, a 6.4% increase.
The Company's operating expenses for the fourth quarter of 2010 increased
to $94.1 million compared to $85.4 million in the same quarter in 2009. As
a percentage of net sales, total operating expenses decreased by 10 basis
points despite a $1.2 million increase in net fuel expense. This quarter
also included additional expenses of $1.5 million in integration costs
associated with the FDI acquisition and $0.6 million in insurance claims
inherited from the Fleming bankruptcy. The Company also incurred $0.8
million for advisory fees and due diligence expenses necessary to analyze
multiple offers from potential acquirers, which did not result in a
completed transaction. Excluding these three additional items, operating
expenses as a percentage of net sales decreased 26 basis points.
Net income for the fourth quarter of 2010 was $0.9 million, or $0.08 per
diluted share, compared to $8.5 million, or $0.76 per diluted share, for
the same period in 2009. Diluted earnings per share were 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 $0.50
for the fourth quarter in 2010 compared to $0.53 for the same quarter last
year largely influenced by the margin pressure previously mentioned.
2010 Results
Net sales were $7.27 billion for 2010 compared to $6.53 billion for 2009,
an 11.3% increase. On a constant currency basis, net sales increased 9.7%.
The primary drivers were increased volume including sales from the FDI
acquisition, cigarette price increases, excise tax inflation and favorable
foreign exchange rates.
Gross profit for 2010 was $385.3 million compared to $401.6 million last
year. Cigarette holding profits, net of Federal Excise Tax (FET) and
manufacturer's reimbursements, were $25.2 million in 2009 compared to $6.1
million this year. Remaining gross profit, which excludes cigarette
holding profits, other tobacco tax gains, FET and LIFO expense, was $395.2
million in 2010 compared to $382.5 million in 2009, an increase of $12.7
million. This year's remaining gross profit was impacted by a $5.3 million
reduction in non-cigarette income compared to 2009 due mainly to a decline
in floor stock gains.
The Company's operating expenses for 2010 were $356.4 million compared to
$336.6 million in 2009. As a percentage of net sales, total operating
expenses decreased by 25 basis points despite a $4.6 million increase in
net fuel expense. This year also included additional expenses of $2.8
million in integration costs associated with the FDI acquisition, $1.6
million related to the settlement of insurance claims inherited from the
Fleming bankruptcy, and $1.1 million in expenses for advisory fees and due
diligence activities previously mentioned. Excluding these three
additional items and $0.9 million in acquisition integration costs in 2009,
operating expenses as a percentage of sales decreased 31 basis points.
Net income for 2010 was $17.7 million, or $1.55 per diluted share, compared
to $47.3 million, or $4.35 per diluted share, in 2009. Diluted earnings
per share were impacted by several items, including the large disparity in
cigarette holding profits, which are reconciled in the attached table.
Excluding these items, diluted earnings per share on a non-GAAP basis would
have been $2.38 this year compared to $2.64 in 2009.
Guidance for 2011
The Company reiterates its annual sales guidance of $7.7 billion for 2011,
including expected sales from its FDI acquisition. Management estimates its
capital expenditures will total $24 million in 2011.
Investors Conference Call
Core-Mark will host an earnings call on Wednesday, March 16, 2011 at 9:00
a.m. Pacific time during which management will review the results of the
fourth quarter and year ended December 31, 2010. The call may be accessed
by dialing 1-800-588-4973 using the code 29023189. The call may also be
listened to on the Company's 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 offers a full range of products, marketing programs and
technology solutions to approximately 26,000 customer locations in the U.S.
and Canada through 24 distribution centers (excluding two distribution
facilities the Company operates as a third party logistics provider).
Core-Mark services traditional convenience retailers, grocers, drug, liquor
and specialty stores, and other stores that carry convenience products. 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 conditions or state
other forward-looking information. Our ability to predict results or the
actual effect of future plans or strategies is inherently uncertain.
Although we believe that the expectations reflected in such forward-looking
statements are based on reasonable assumptions, actual results and
performance could differ materially from those set forth in the
forward-looking statements. 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; our ability to
successfully integrate 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 and granted
the U.S. Food & Drug Administration 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; our reliance on manufacturer discount
and incentive programs; tobacco and other product liability claims; and
competition from sales of deep-discount cigarette 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, 2010
filed with the SEC on March 15, 2011 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.