"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, [image-nocss] president and CEO 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."
Net sales were $1.86 billion for fourth-quarter 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 fourth-quarter 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 million this quarter compared to $94 million in fourth-quarter of 2009, a 6.4% increase.
The company's operating expenses for fourth-quarter 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 $600,000 in insurance claims inherited from the Fleming bankruptcy. The company also incurred $800,000 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 fourth-quarter 2010 was $900,000, or 8 cents per diluted share, compared to $8.5 million, or 76 cents 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.
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.
South San Francisco, Calif.-based 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 United States 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.
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