SOUTH SAN FRANCISCO, CA--(Marketwire - November 6, 2009) - Core-Mark Holding Company, Inc.
(
NASDAQ:
CORE), one of the leading wholesale distributors to the
convenience retail industry in North America, announced financial results
for the third quarter and nine months ended September 30, 2009.
Third Quarter of 2009
Net sales were $1.78 billion for the third quarter of 2009 compared to
$1.67 billion for the same period in 2008, a 6.2% increase. On a constant
currency basis, net sales increased 7.1%. Net sales increased by
approximately $170 million resulting from U.S. cigarette manufacturer price
increases in response to the passage of the State Children's Health
Insurance Program (SCHIP). The third quarter also reflects a 9.9% decrease
in carton sales.
Gross profit for the third quarter of 2009 was $101.9 million compared to
$93.9 million for the same period last year. Gross profit included $0.2
million of LIFO expense compared to $6.0 million of LIFO expense last year.
Excluding cigarette holding profits/losses and LIFO expense, gross profit
increased to $102.2 million this quarter from $99.7 million in the third
quarter of 2008, a 2.5% increase. Gross profit included higher
non-cigarette floor stock gains last year compared to this year due to less
inflation in certain categories.
The Company's operating expenses for the third quarter of 2009 increased
slightly to $85.8 million compared to $85.3 million in the same quarter in
2008. As a percent of net sales, total operating expenses decreased by 27
basis points driven primarily by the increase in cigarette prices.
Selling, general and administration costs included higher incentive based
compensation, investments in our selling and operational support
infrastructure and less vendor support funds than in the third quarter of
2008, while warehouse and distribution expenses were lower due primarily to
a decrease in net fuel costs and increased operating efficiencies.
Net income for the third quarter of 2009 was $11.3 million, or $1.02 per
diluted share compared to $5.3 million, or $0.49 per diluted share for the
same period in 2008. Results included a $0.4 million pre-tax foreign
exchange gain this quarter compared to a $1.5 million pre-tax loss in the
third quarter last year. Diluted earnings per share were 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
$0.89 for the third quarter this year compared to $0.76 in the third
quarter of 2008.
"We continue to have solid earnings in a challenging economy. Continued
investments in our infrastructure will help us build sales and allow us to
leverage our costs," said Michael Walsh, President and Chief Executive
Officer of Core-Mark. "We are very focused on programs that will help our
customers increase sales profitably with our fresh and VCI offerings."
First Nine Months of 2009
Net sales were $4.88 billion for the first nine months of 2009 compared to
$4.55 billion for the same period in 2008, a 7.2% increase. On a constant
currency basis, net sales increased 9.4%. This increase was due primarily
to SCHIP related cigarette price increases that added approximately $377
million to cigarette sales and incremental sales from our New England
division. Year-to-date carton sales declined 5.7%.
Gross profit for the first nine months of 2009 was $307.5 million compared
to $266.2 million for the same period last year. Cigarette holding
profits, net of the federal excise tax (FET), was $23.6 million compared to
$1.5 million and LIFO expense was $5.3 million compared to $10.7 million
for year-to-date 2009 and 2008 respectively. Gross profit, excluding
cigarette holding profits and LIFO expense, grew to $289.2 million for the
first three quarters of 2009 compared to $275.4 million in 2008, a 5.0%
increase.
The Company's operating expenses for the first nine months of 2009
increased to $251.2 million compared to $248.2 million for the same period
in 2008. As a percent of net sales, operating expenses decreased by 30
basis points primarily driven by the impact of the SCHIP related cigarette
price increase on net sales. Increases in bonus expense, stock
compensation and health care costs, were offset substantially by a
reduction in net fuel expense.
Net income for the first nine months of 2009 was $38.8 million, or $3.59
per diluted share compared to $10.5 million, or $0.95 per diluted share for
the same period in 2008. Pre-tax cigarette holding profit, net of FET, was
$23.6 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 $2.07
for the first nine months this year compared to $1.44 in the first nine
months of 2008.
Guidance for 2009
The Company increased its annual guidance from $6.4 billion to $6.5 billion
in net sales for 2009. This guidance contemplates an 8% to 10% decline in
carton sales and relatively flat sales in the other product categories.
Management lowered its expected capital expenditures from approximately $24
million to $22 million for 2009.
Investors Conference Call
Core-Mark will host an earnings call on Monday, November 9, 2009 at 9:00
a.m. Pacific time during which management will review the results of the
quarter ended September 30, 2009. The call may be accessed by dialing
1-800-588-4973 using the code 25754848. 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.
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 and recent 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 and collective bargaining agreements; product liability claims
and manufacturer recalls of products; fuel price increases; our dependence
on our senior management and key personnel; 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 United States; earthquake and natural disaster damage;
failure or disruptions to our information systems; a general decline in
cigarette sales volume; and competition from sales of deep-discount brands
and illicit and other low priced sales of cigarettes. Refer to Part II,
Item 1A, "Risk Factors" of our Form 10-Q and to our Annual Report on Form
10-K for the year ended December 31, 2008 filed with the SEC on March 13,
2009. 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.
CORE-MARK HOLDING COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
(Unaudited)
September 30, December 31,
2009 2008
------------- -------------
Assets
Current assets:
Cash and cash equivalents $ 21.3 $ 15.7
Restricted cash 14.4 11.4
Accounts receivable, net of allowance for
doubtful accounts of $9.3 and $8.8
million, respectively 165.0 146.9
Other receivables, net 41.7 34.1
Inventories, net 221.4 238.4
Deposits and prepayments 32.2 26.5
Deferred income taxes 10.5 12.2
------------- -------------
Total current assets 506.5 485.2
------------- -------------
Property and equipment, net 80.1 74.2
Deferred income taxes 9.0 12.1
Goodwill 3.7 3.7
Other non-current assets, net 34.3 37.4
------------- -------------
Total assets $ 633.6 $ 612.6
============= =============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 72.6 $ 66.0
Book overdrafts 13.9 17.8
Cigarette and tobacco taxes payable 104.7 103.2
Accrued liabilities 64.1 58.1
Income taxes payable 0.3 -
Deferred income taxes 1.8 1.6
------------- -------------
Total current liabilities 257.4 246.7
------------- -------------
Long-term debt, net 0.8 30.8
Other long-term liabilities 7.8 11.1
Claims liabilities, net of current portion 32.1 31.3
Pension liabilities 19.5 19.1
------------- -------------
Total liabilities 317.6 339.0
------------- -------------
Stockholders' equity:
Common stock; $0.01 par value (50,000,000
shares authorized; 10,923,871 and
10,746,416 shares issued; and 10,428,509
and 10,349,700 shares outstanding at
September 30, 2009 and December 31, 2008,
respectively) 0.1 0.1
Additional paid-in capital 213.7 209.3
Treasury stock at cost, 495,362 and 396,716
shares of common stock at September 30,
2009 and December 31, 2008, respectively (13.2) (11.0)
Retained earnings 121.1 82.3
Accumulated other comprehensive loss (5.7) (7.1)
------------- -------------
Total stockholders' equity 316.0 273.6
------------- -------------
Total liabilities and stockholders'
equity $ 633.6 $ 612.6
============= =============
CORE-MARK HOLDING COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
--------- --------- --------- ---------
Net sales $ 1,776.1 $ 1,672.7 $ 4,879.7 $ 4,552.7
Cost of goods sold 1,674.2 1,578.8 4,572.2 4,286.5
--------- --------- --------- ---------
Gross profit 101.9 93.9 307.5 266.2
--------- --------- --------- ---------
Warehousing and distribution
expenses 51.1 54.3 146.3 151.2
Selling, general and
administrative expenses 34.2 30.5 103.3 95.5
Amortization of intangible
assets 0.5 0.5 1.6 1.5
--------- --------- --------- ---------
Total operating expenses 85.8 85.3 251.2 248.2
--------- --------- --------- ---------
Income from operations 16.1 8.6 56.3 18.0
Interest expense 0.4 0.7 1.3 1.6
Interest income - (0.2) (0.2) (0.9)
Foreign currency transaction
(gains) losses, net (0.4) 1.5 (2.0) 2.6
--------- --------- --------- ---------
Income before income taxes 16.1 6.6 57.2 14.7
Provision for income taxes 4.8 1.3 18.4 4.2
--------- --------- --------- ---------
Net income $ 11.3 $ 5.3 $ 38.8 $ 10.5
========= ========= ========= =========
Basic income per common share $ 1.08 $ 0.51 $ 3.71 $ 1.00
========= ========= ========= =========
Diluted income per common share $ 1.02 $ 0.49 $ 3.59 $ 0.95
========= ========= ========= =========
Basic weighted average shares 10.5 10.4 10.5 10.5
Diluted weighted average shares 11.0 10.9 10.8 11.0
Note (1): Basic and diluted earnings per share are calculated based on
unrounded actual amounts.
CORE-MARK HOLDING COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Nine Months
Ended
September 30,
2009 2008
------ ------
Cash flows from operating activities:
Net income $ 38.8 $ 10.5
Adjustments to reconcile net income to net cash
provided by operating activities:
LIFO and inventory provisions 5.3 10.8
Amortization of debt issuance costs 0.4 0.4
Amortization of stock-based compensation expense 3.8 2.8
Bad debt expense, net 1.4 1.1
Depreciation and amortization 13.6 12.9
Foreign currency transaction (gains) losses, net (2.0) 2.6
Deferred income taxes 4.9 -
Changes in operating assets and liabilities:
Accounts receivable (17.8) (16.4)
Other receivables (6.7) (2.6)
Inventories 16.6 (28.5)
Deposits, prepayments and other non-current assets (6.1) (5.9)
Accounts payable 5.2 24.4
Cigarette and tobacco taxes payable (3.3) 7.8
Pension, claims and other accrued liabilities 1.8 3.2
Income taxes payable 0.1 0.1
Net cash provided by operating activities 56.0 23.2
------ ------
Cash flows from investing activities:
Restricted cash (1.5) (1.6)
Acquisition of business, net of cash acquired - (26.4)
Additions to property and equipment, net (13.5) (13.9)
Capitalization of software (0.3) (0.7)
Net cash used in investing activities (15.3) (42.6)
------ ------
Cash flows from financing activities:
(Repayments) borrowings under revolving credit
facility, net (30.0) 27.8
Repurchases of common stock shares (treasury stock) (2.2) (11.0)
Proceeds from exercise of common stock options 1.0 2.5
Tax withholdings related to net share settlements of
restricted stock units (0.3) -
Excess tax deductions associated with stock-based
compensation 0.2 0.6
Decrease in book overdrafts (4.0) (6.8)
Net cash (used in) provided by financing
activities (35.3) 13.1
------ ------
Effects of changes in foreign exchange rates 0.2 (1.1)
------ ------
Increase (decrease) in cash and cash equivalents 5.6 (7.4)
Cash and cash equivalents, beginning of period 15.7 21.3
------ ------
Cash and cash equivalents, end of period $ 21.3 $ 13.9
====== ======
Supplemental disclosures:
Cash paid during the period for:
Income taxes, net of refunds $ 11.5 $ 5.8
Interest $ 0.8 $ 1.1
CORE-MARK HOLDING COMPANY, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP DILUTED EPS
(Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
------------------------- -------------------------
% %
Increase/ Increase/
2009(a) 2008(a) (Decrease) 2009(a) 2008(a) (Decrease)
------- ------- ------- ------- ------- -------
Net Income 11.3 5.3 113.2% 38.8 10.5 269.5%
======= ======= ======= ======= ======= =======
Diluted shares 11.0 10.9 10.8 11.0
------- ------- ------- ------- ------- -------
GAAP Diluted EPS $ 1.02 $ 0.49 $ 3.59 $ 0.95
LIFO expense 0.01 0.33 0.30 0.59
Cigarette
inventory holding
losses (profits)(1) 0.01 (0.01) (1.97) (0.08)
Net federal floor
stock tax(2) - - 0.65 -
Foreign exchange
(gains) losses (0.02) 0.08 (0.11) 0.14
Tax items(3) (0.13) (0.13) (0.39) (0.16)
Non-GAAP Diluted
EPS(4) $ 0.89 $ 0.76 17.7% $ 2.07 $ 1.44 43.8%
------- ------- ------- ------- ------- -------
(1) Cigarette inventory holding losses/profits
Cigarette holding losses/profits for the three months ended
September 30, 2009 were a loss of $0.1 million compared to a profit of
$0.2 million for the same period in 2008. For the nine months ended
September 30, 2009 cigarette holding profits were $35.1 million compared to
$1.5 million for the same period in 2008. The increase in cigarette
inventory holding profits for the nine months ended September 30, 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.
(2) Net federal floor stock tax
The net Federal floor stock tax which was imposed as part of the SCHIP
legislation for the nine months ended September 30, 2009 was $11.5 million.
(3) Tax items
Included in the provision for income taxes for the three months ended
September 30, 2009 is a net benefit of $1.4 million compared to a net
benefit of $1.3 million for the three months ended September 30, 2008. The
net benefits relate primarily to the expiration of the statute of
limitations for uncertain tax positions, adjustments of prior year's
estimates and state tax credits claimed for prior years.
Included in the provision for income taxes for the nine months ended
September 30, 2009 is a net benefit of $4.1 million, inclusive of a net
interest recovery of $1.2 million related to unrecognized tax benefits,
compared to a net benefit of $1.7 million, inclusive of net interest
expense of $0.1 million, for the nine months ended September 30, 2008.
The net benefits relate primarily to the expiration of the statute of
limitations for uncertain tax positions, adjustments of prior year's
estimates and state tax credits claimed for prior years.
(4) 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(3).
(a) Amounts and percentages have been rounded for presentation purposes and
might differ from unrounded results.
Contact Information: Contact:
Ms. Milton Gray Draper
Director of Investor Relations
650-589-9445 x 3027
mdraper@core-mark.com