SOUTH SAN FRANCISCO, CA--(Marketwire - March 14, 2008) - Core-Mark Holding Company, Inc. (NASDAQ: CORE), one of the leading broad-line distributors in North America, announced financial results for the fourth quarter and year ended December 31, 2007.
Net sales for 2007 increased 4.6% to $5.56 billion compared to $5.31 billion for 2006. This improvement was accomplished despite the net loss of $254 million in sales for Imperial Tobacco who decided to self-distribute commencing September 2006. This loss in sales was substantially offset by incremental sales of $232 million from the Company's Pennsylvania division acquired in June 2006. Sales for 2007 reflect a 1.4% decline in cigarette carton sales. However, non-cigarette sales for 2007 increased 10.9% over last year as the Company's marketing initiatives for its higher margin categories continued to gain momentum.
Net income for 2007 was $24.1 million, or $2.15 per diluted share, compared with $20.6 million, or $1.87 per diluted share for 2006. On a pre-tax basis, LIFO expense for 2007 was $13.1 million compared to $2.9 million in 2006, while cigarette holding profits were $7.3 million in 2007 compared to $4.1 million in 2006. In addition, pre-tax results for 2007 include a $13.3 million refund for other tobacco tax, a bad debt charge of $5.9 million and other items described in the attached table.
"I am pleased that our non-cigarette sales and related gross profits grew over 10% this year as we continue to believe this will be the driver of improvements in profitability for the foreseeable future," said Michael Walsh, President and Chief Executive Officer of Core-Mark.
Net sales were $1.37 billion for the fourth quarter of 2007 as compared to $1.31 billion for the same time period in 2006. This increase in sales was accomplished despite a 4.7% decline in cigarette carton sales. Non-cigarette sales grew over 9% in the fourth quarter of 2007 compared to the same quarter in 2006.
Net income for the fourth quarter of 2007 was $5.1 million, or $0.46 per diluted share, compared with $7.6 million, or $0.69 per diluted share, for the same period in 2006. On a pre-tax basis, LIFO expense in the fourth quarter was $3.9 million compared to $0.8 million of LIFO income in the fourth quarter of 2006. In addition, pre-tax results include the cigarette holding profits of $0.6 million in the fourth quarter of 2007 compared to $3.5 million for the same time period in 2006. Please refer to the attached table which describes these and other items which affect comparability for both periods in the quarter as well as the full year.
The Company estimates that annual sales for 2008 will approximate $6.0 billion. This 8% increase in sales is primarily driven by market share gains and assumes continued weakness in cigarette carton sales in existing business. Capital expenditures are expected to be approximately $20 million for 2008.
Core-Mark has scheduled its annual meeting for June 3, 2008 at 2:00 p.m. in Burlingame, California at the Hyatt Regency located at 1333 Bayshore Highway. Stockholders of record as of April 7, 2008 will be entitled to vote at the Annual Meeting.
Core-Mark will host an earnings call on Tuesday, March 18th, 2008 at 9:00 a.m. Pacific time during which management will review the results of the fourth quarter and year ended December 31, 2007. The call may be accessed by dialing 1-800-661-2563 using the code 20706449. The call can also be listened to on the internet website www.core-mark.com.
In April 2007, we entered into a settlement agreement with the State of Washington Department of Revenue which resulted in a refund of Other Tobacco Product (OTP) tax of approximately $13.3 million, representing 25% of the OTP tax we paid to the State for the periods ranging from 1991 to 2005. This refund was received in July 2007.
The increase in LIFO expense in 2007 results from higher annual producer price index amounts primarily for cigarettes, grocery, and confectionery products.
The cigarette inventory holding profits relate to increases in manufacturer prices and excise taxes.
As a result of operational issues in our Calgary division, adjustments of $0.9 were made during the fourth quarter of 2007 related to excise taxes and rebates. Approximately $0.5 million of these adjustments related to the first three quarters of 2007 and $0.4 million related to 2006.
During 2007, two of our customers experienced deteriorating financial conditions which led to their filing for bankruptcy under Chapter 11 during the fourth quarter of 2007. Based on management's evaluation of the customers' ability to make future payments, including the legal options available, we increased the allowance for doubtful accounts by $5.2 million in the third quarter of 2007 and an additional $0.7 million in the fourth quarter.
In 2006 we had $1.0 million of integration costs related to our acquisition in June of 2006 of Klein Candy Co., which is now our Pennsylvania division and $0.6 million in cost related to consolidation and termination costs of our Victoria facility in British Columbia, Canada, which operations were consolidated with our Vancouver distribution center in Canada.
During the second quarter of 2007 we had organizational changes in our Canadian operations resulting in severance costs of $0.6 million.
These benefits represent a reduction in workers' compensation costs resulting from favorable claims experience for prior years as well as settlement of amounts owed to us for claims inherited in connection with the Fleming bankruptcy.
During the year ended December 31, 2006 we benefited from reversal of vendor payables determined not due and the favorable settlement of previously written-off receivables totaling $1.6 million.
In the fourth quarter of 2006 we received $1.6 million of insurance reimbursements related to a fire at our Denver facility in 2002.
In April 2007, we announced our plan to open a new distribution facility near Toronto, Ontario by February 2008. This new facility will expand our existing market geography in Canada. We estimate total start-up costs of approximately $1.5 million of which $0.8 million was expensed in 2007 and the remainder will be expensed in 2008.