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    Core-Mark Pleased with Q4, Year-End Results

    Performance driven by two new divisions and increases in its non-cigarette categories.

    SOUTH SAN FRANCISCO, Calif. -- Core-Mark Holding Co., one of the leading wholesale distributors to the convenience retail industry in North America, saw net sales of $1.49 billion for the fourth quarter of 2008, compared to $1.37 billion for the same period in 2007—an 8.7 percent increase, or 1.9 percent excluding the company's new Toronto and New England divisions.

    Cigarette carton sales increased 6.4 percent and non-cigarette sales increased 11.3 percent. Excluding the two new divisions, these categories increased 1.1 percent and 5.3 percent respectively, Core-Mark reported.

    Gross profit for the fourth quarter 2008 was $92.9 million compared to $75.3 million for the same period last year. Gross profit, excluding cigarette holding profits, other tobacco products’ (OTP) tax refunds and other expenses, grew from $78.6 million in the fourth quarter of 2007 to $90.2 million this year, a 14.8 percent increase. This improvement was driven primarily by incremental gross profit generated by the two new divisions and a 12.6 percent increase in the non-cigarette categories from existing divisions.

    The company's operating expenses for the fourth quarter of 2008 increased $11.1 million to $80.8 million, compared to $69.7 million in the fourth quarter of 2007. As a percent to sales, warehousing and distribution expenses decreased 20 basis points while selling, general and administrative (SG&A) costs increased 55 basis points.

    More than 65 percent of the SG&A percentage point increase was related to favorable workers' compensation benefits recorded during the fourth quarter of 2007, and another 43 percent of the basis point increase was due to many employees not qualifying for bonuses during 2007, as a result of the large bad debt expense incurred and the large 2007 OTP tax refund, which was excluded from the results used to determine bonuses.

    Net income for the fourth quarter of 2008 was $7.4 million compared to net income of $5.1 million for the same period in 2007. Included in net income for the fourth quarter of 2008 was a pre-tax foreign exchange loss of $3.7 million, the company stated.

    "We are pleased with the relative strength of our business and the improvement in our core profits, and have great confidence in the competitive position of our fresh offerings," said Michael Walsh, president and chief executive officer of Core-Mark.

    For the full year, net sales were $6.04 billion for 2008 compared to $5.56 billion in 2007—an 8.7 percent increase, or 4.1 percent excluding the two new divisions. Cigarette carton sales increased 2.2 percent and non-cigarette sales increased 13.1 percent. Excluding the two new divisions, cigarette cartons sales decreased 1.0 percent while non-cigarette sales increased 8.2 percent.

    Gross profit for 2008 was $359.1 million compared to $332.6 million last year. Gross profit, excluding cigarette holding profits, OTP tax refunds, and other expenses, grew 12.4 percent, from $325.2 million in 2007 to $365.5 million in 2008. This improvement was driven primarily by incremental gross profit generated by the two new divisions and a 12.1 percent increase in the non-cigarette categories from existing divisions.

    The company's operating expenses for the year increased $34.1 million to $329.0 million, compared to $294.9 million during 2007. Last year's operating expenses included a $5.9 million bad debt charge partially offset by a $3.1 million workers compensation benefit. Excluding these two items, operating expenses increased $36.9 million in 2008, or 19 basis points as a percent of sales. The largest contributors to this increase were health care and workers' compensation costs—bonus expenses for reasons previously stated and operating expenses from the two new divisions.

    Net income for 2008 was $17.9 million compared to net income of $24.1 million in 2007.

    Core-Mark reiterated its annual guidance for 2009 of $6.3 billion in net sales, which is approximately a 4-percent increase compared to 2008. However, the company said this does not include the impact of the recently passed SCHIP legislation. Management said it does not expect capital expenditures to exceed $27 million for 2009.

    Core-Mark provides distribution and logistics services, as well as marketing programs, to roughly 24,000 retail locations in 50 states and five Canadian provinces through 26 distribution centers, two of which Core-Mark operates as third-party logistics providers.

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