<PAGE>
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________to____________________
Commission file number 333-14217
============
CORE-MARK INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 91-1295550
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
395 OYSTER POINT BOULEVARD, SUITE 415 94080
SOUTH SAN FRANCISCO, CA (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (415) 589-9445
============
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
--- ---
Registrant's Common Stock outstanding at October 31, 1996 was 5,500,000 shares.
===============================================
<PAGE>
CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets as of December 31, 1995 and September 30, 1996 3
Condensed Consolidated Statements of Income for the three and nine months ended September 30, 1995 and 1996 4
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 1995 and 1996 5
Notes to Condensed Consolidated Financial Statements 6
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8
PART II - OTHER INFORMATION
Item 1: Legal Proceedings 12
Item 2: Changes in Securities 12
Item 3: Defaults upon Senior Securities 12
Item 4: Submission of Matters to a Vote of Security Holders 12
Item 5: Other information 12
Item 6: Exhibits and Reports on Form 8-K 12
Signature 13
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
----------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 24,447 $ 16,394
Receivables:
Trade accounts, less allowance for doubtful accounts of $3,600 and
$3,823, respectively 91,858 83,672
Other 13,332 9,310
Inventories, net of LIFO allowance of $11,076 and $12,436, respectively 96,703 73,296
Prepaid expenses and other 4,542 5,713
--------- --------
Total current assets 230,882 188,385
--------- --------
Property and equipment 40,746 44,478
Less accumulated depreciation (20,217) (23,140)
--------- --------
Net property and equipment 20,529 21,338
Other assets 6,700 9,245
Goodwill, net of accumulated amortization of $13,242 and $14,726, respectively 66,425 64,941
--------- --------
$ 324,536 $283,909
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 47,205 $ 43,880
Cigarette and tobacco taxes payable 40,613 38,861
Income taxes payable 3,057 2,915
Deferred income taxes 7,274 6,798
Other accrued liabilities 28,503 27,626
-------- --------
Total current liabilities 126,652 120,080
-------- --------
Long-term debt 101,598 163,339
Other accrued liabilities and deferred income taxes 8,617 8,563
-------- --------
Total liabilities 236,867 291,982
-------- --------
Commitments and contingencies
Shareholders' equity:
Common stock; $.01 par value; 3,000 shares authorized; 100 shares issued and outstanding in 1995 -- --
Common stock; $.01 par value; 10,000,000 shares authorized;
5,500,000 shares issued and outstanding in 1996 -- 55
Additional paid-in capital 128,351 26,121
Accumulated deficit (35,790) (29,569)
Cumulative currency translation adjustments (1,313) (1,101)
Additional minimum pension liability (3,579) (3,579)
-------- --------
Total shareholders' equity (deficit) 87,669 (8,073)
-------- --------
$324,536 $283,909
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
3
<PAGE>
CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
-------------------- -----------------------
1995 1996 1995 1996
--------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $545,275 $568,691 $1,528,710 $1,637,266
Cost of goods sold 507,291 529,338 1,420,099 1,518,946
--------- -------- ---------- ----------
Gross profit 37,984 39,353 108,611 118,320
Operating and administrative expenses 31,905 32,886 92,583 97,402
--------- -------- ---------- ----------
Operating income 6,079 6,467 16,028 20,918
Interest expense, net 1,649 2,694 5,408 5,665
Debt refinancing and issuance costs 320 293 746 928
--------- -------- ---------- ----------
Income before income taxes and extraordinary item 4,110 3,480 9,874 14,325
Income tax expense 1,832 1,645 4,456 6,274
--------- -------- ---------- ----------
Income before extraordinary item 2,278 1,835 5,418 8,051
Extraordinary item, net of tax (Note 2) --- (1,830) --- (1,830)
--------- -------- ---------- ----------
Net income $ 2,278 $ 5 $ 5,418 $ 6,221
========= ======== ========== ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30,
-------------------------
1995 1996
--------- --------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 34,223 $ 43,668
INVESTING ACTIVITIES:
Additions to property and equipment (4,763) (3,983)
Net assets of acquired businesses (9,610) ---
Other (2) (64)
--------- --------
Net cash used in investing activities (14,375) (4,047)
--------- --------
FINANCING ACTIVITIES:
Issuance of senior subordinated notes -- 75,000
Net payments under revolving credit agreement (15,956) (13,259)
Debt refinancing and issuance costs (5,380) (7,474)
Net proceeds from sale of common stock -- 39,075
Purchase of common shares (195) (141,250)
--------- --------
Net cash used in financing activities (21,531) (47,908)
--------- --------
Effects of changes in foreign exchange rates 476 234
--------- --------
Decrease in cash (1,207) (8,053)
Cash, beginning of period 17,080 24,447
--------- --------
CASH, END OF PERIOD $ 15,873 $ 16,394
--------- --------
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments during the period for:
Interest $ 5,162 $ 5,270
Income taxes 4,847 5,565
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
1. BASIS OF PRESENTATION
The condensed consolidated balance sheet as of September 30, 1996, the
condensed consolidated statements of income for the three-month and
nine-month periods ended September 30, 1995 and 1996, and the condensed
consolidated statements of cash flows for the nine-month periods ended
September 30, 1995 and 1996, have been prepared by Core-Mark International,
Inc. (the Company). In the opinion of management, all adjustments, consisting
only of normal recurring adjustments, necessary to present fairly the
financial position of the Company (subject to year-end adjustments) with
respect to the interim financial statements, and of the results of its
operations and cash flows for the interim periods then ended, have been
included. The results of operations for the interim periods are not
necessarily indicative of the operating results for the full year.
The condensed consolidated balance sheet as of December 31, 1995, is
derived from the audited financial statements but does not include all
disclosures required by generally accepted accounting principles. The notes
accompanying the consolidated financial statements in the Company's
Registration Statement on Form S-4 filed under the Securities Act of 1933 (File
No. 333-14217) on October 16, 1996 include accounting policies and
additional information pertinent to an understanding of both the December 31,
1995 balance sheet and the interim financial statements included herein.
2. RECAPITALIZATION
On August 7, 1996, the Company completed a recapitalization (the
"Recapitalization") which resulted in the purchase of newly issued common
stock of the company by Jupiter Partners L.P. ("Jupiter") for $41.3 million
in cash, the redemption of all of the common stock held by three financial
institutions and a portion of the common stock held by six members of senior
management ("Senior Management") for $135.0 million in cash and $6.3 million
initial value of subordinated notes due 2004. Pursuant to the stock
subscription agreement between the Company and Jupiter, the Company paid an
affiliate of Jupiter a transaction fee of $2.2 million on August 7, 1996.
Upon completion of the Recapitalization, Jupiter and Senior Management owned
75% and 25%, respectively, of the outstanding common stock of the Company.
Jupiter also purchased from the Company an $18.8 million subordinated note
due 2004. Both of these subordinated notes were repaid prior to September 30,
1996, as discussed in Note 3.
In connection with the Recapitalization, the Company entered into a
credit facility with a group of banks, which provides for aggregate
borrowings of up to $210.0 million, consisting of: (i) a $35.0 million term
loan (the "Term Loan"), which was repaid as discussed in Note 3, and (ii) a
revolving credit facility (the "Revolving Credit Facility"), under which
borrowings in the amount of up to $175.0 million are available (subject to
compliance with a borrowing base) for working capital and general corporate
purposes. Under the Revolving Credit Facility the Company has the option to
borrow under Eurodollar Rate Advances, which bear interest at 2.5% above the
bank's Eurodollar Rate, or Base Rate Advances which bear interest at 1.5%
above the bank's Base Rate. The bank's Base Rate and Eurodollar Rate was
8.25% and 5.41%, respectively, at September 30, 1996. There is a commitment
fee of 0.5% on the unused portion of the Revolving Credit Facility.
Simultaneously with the closing of the stock purchase and the
redemptions, the Company fully repaid the outstanding debt under a
previous credit facility. The early extinguishment of the previously
existing debt resulted in a one-time extraordinary charge to income to
write-off unamortized debt refinancing costs of $1.8 million which is net of
a $1.2 million income tax benefit.
6
<PAGE>
3. NOTE OFFERING
On September 27, 1996, the Company issued $75.0 million of 11 3/8% Senior
Subordinated Notes (the "Notes") which mature on September 15, 2003, the
proceeds of which were used to repay in full the subordinated notes and Term
Loan discussed in Note 2. Interest on the Notes is payable semi-annually on
March 15 and September 15 of each year commencing on March 15, 1997.
4. INVENTORIES
The condensed consolidated financial statements have been prepared using
the LIFO method of accounting for inventories. An increase in cost of goods
sold and a decrease in inventories resulted using the LIFO method of $713,000
and $633,000 for the three months ended September 30, 1995 and 1996,
respectively, and $1,846,000 and $1,360,000 for the nine months ended
September 30, 1995 and 1996, respectively. Interim LIFO calculations are
based on management's estimates of year-end inventory levels and inflation
rates for the year.
5. EXCISE TAXES
State and provincial excise taxes paid by the Company on cigarettes were
$124,233,000 and $123,325,000 for the three months ended September 30, 1995
and 1996, respectively, and $346,208,000 and $361,118,000 for the nine months
ended September 30, 1995 and 1996, respectively. These amounts are included
in net sales and cost of goods sold for the periods indicated.
7
<PAGE>
ITEM 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion should be read in conjunction with Management's
Discussion and Analysis included in the Company's Registration
Statement on Form S-4 filed under the Securities Act of 1933 (File No.
333-14217) on October 16, 1996.
GENERAL
The Company is a broad-line, full-service wholesale distributor of
packaged consumer products to the convenience retail industry in North
America. The products distributed by the Company include cigarettes, food
products such as candy, fast food, snacks, groceries, and non-alcoholic
beverages, and non-food products such as film, batteries, and other sundries,
health and beauty care products and tobacco products other than cigarettes.
RECAPITALIZATION AND NOTE OFFERING
Recapitalization
Prior to August 7, 1996, the Company was owned by six members of senior
management ("Senior Management") and by three financial institutions (the
"Institutional Shareholders"). On August 7, 1996, the Company completed a
recapitalization (the "Recapitalization") pursuant to which:
1. Jupiter Partners L.P.("Jupiter") purchased for $41.3 million in cash
newly issued common stock of the Company which, following the
Recapitalization, represents 75% of the Company's outstanding
common stock.
2. Jupiter purchased from the Company for $18.8 million a subordinated
note due 2004, which was repaid prior to September 30, 1996.
3. The Company redeemed all of the common stock held by the
Institutional Shareholders and a portion of the common stock held by
Senior Management for $135.0 million in cash and $6.3 million initial
value of subordinated notes due 2004, which was repaid prior to
September 30, 1996.
4. Senior Management retained 25% of the common stock of the Company.
As a result of the transactions comprising this Recapitalization, the
Company has a total shareholders' deficit as of September 30, 1996.
In connection with the Recapitalization, the Company entered into a
credit facility (the "Senior Credit Facility") with a group of banks, which
provides for aggregate borrowings of up to $210.0 million, consisting of: (i)
a $35.0 million term loan (the "Term Loan") (which was repaid from the
proceeds of the Note Offering described below), and (ii) a revolving credit
facility (the "Revolving Credit Facility"), under which borrowings in the
amount of up to $175.0 million are available (subject to compliance with a
borrowing base) for working capital and general corporate purposes. Under
the Revolving Credit Facility, the Company has the option to borrow under
Eurodollar Rate Advances which bear interest at 2.5% above the bank's
Eurodollar Rate or Base Rate Advances which bear interest at 1.5% above the
bank's Base Rate. The bank's Base Rate and Eurodollar Rate was 8.25% and
5.41%, respectively, at September 30, 1996. There is a commitment fee of 0.5%
on the unused portion of the Revolving Credit Facility.
Simultaneously with the closing of the stock purchase and the
redemptions, the Company fully repaid the outstanding debt under a
previous credit facility. The early extinguishment of the previously
existing debt resulted in a one-time extraordinary charge to income to
write-off unamortized bank fees of $1.8 million which is net of a $1.2
million income tax benefit.
8
<PAGE>
Note Offering
On September 27, 1996, the Company issued $75.0 million of 11 3/8% Senior
Subordinated Notes (the "Notes") which mature on September 15, 2003.
Interest on the Notes is payable semi-annually on March 15 and September 15
of each year commencing on March 15, 1997.
The net proceeds available to the Company from the sale of the Notes,
after deducting estimated expenses incurred in connection with such sale,
were approximately $71.8 million. Such net proceeds were used principally to
repay the indebtedness under the Term Loan ($35.0 million principal amount
plus accrued interest thereon) and the subordinated notes ($25.0 million
initial value plus accreted interest thereon). The balance of the net
proceeds (approximately $12.3 million) was used to reduce outstanding
balances under the Revolving Credit Facility.
Summary
The Company incurred additional debt as a result of the Recapitalization
and Note Offering of approximately $110.8 million to finance the cost of the
stock purchase and redemptions of $100.0 million, plus total transactions
costs (including both paid and accrued costs) of $10.8 million.
Since the subordinated notes and the Term Loan were repaid as part of the
Note Offering only a short time after their original issuance, the sources
and uses of funds of the Recapitalization and the Note Offering transactions
are summarized by assuming they both occurred on August 7, 1996, the date of
the Recapitalization, as follows (in millions):
<TABLE>
<CAPTION>
Sources Uses
- ------------------------------- -------------------------------------
<S> <C> <C> <C>
Sale of Common Stock to Jupiter $41.3 Redemption of Common Stock $ 141.3
Senior Credit Facility 88.0 Repayment of previous credit facility 52.2
Note Offering 75.0 Debt refinancing and issuance costs 8.6
Recapitalization transaction costs 2.2
------- -------
Total Sources $ 204.3 Total Uses $ 204.3
------- -------
------- -------
</TABLE>
RESULTS OF OPERATIONS
The following table sets forth certain operating results as a percentage of net
sales for the periods indicated:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
September 30, September 30,
---------------- ----------------
1995 1996 1995 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 93.0 93.1 92.9 92.8
------ ------ ------ ------
Gross profit 7.0 6.9 7.1 7.2
Operating & administrative expenses 5.9 5.8 6.1 5.9
------ ------ ------ ------
Operating income 1.1% 1.1% 1.0% 1.3%
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
9
<PAGE>
THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1995
NET SALES. Net sales for the three months ended September 30, 1996 were
$568.7 million, an increase of $23.4 million or 4.3% compared to the same
period in 1995. The increase was due to growth in all product categories of
the Company's operations.
Cigarette net sales for the three months ended September 30, 1996 were
$388.4 million, an increase of $5.2 million or 1.4% compared to the same
period in 1995 as a result of increases in prices of both U.S. and Canadian
cigarettes, offset by a slight decrease in unit volumes. The Company's total
cigarette unit sales for the three months ended September 30, 1996 were 23.3
million cartons, a decrease of 0.2 million cartons compared to the same
period in 1995.
Net sales of food and non-food products for the three months ended
September 30, 1996 were $180.3 million, an increase of $18.2 million or 11.3%
compared to the same period in 1995. The increase was primarily due to the
Company's focus on increasing food and non-food product sales. The increase
primarily occurred in candy sales, which increased $4.4 million or 8.3%,
other tobacco sales, which increased $3.6 million or 12.8% and general
merchandise sales, which increased $3.5 million or 29.4%.
GROSS PROFIT. Gross profit for the three months ended September 30, 1996
was $39.4 million, an increase of $1.4 million or 3.6% compared to 1995. For
the three months ended September 30, 1996, the Company recognized LIFO
expense of $0.6 million compared to $0.7 million for the same period in 1995.
The gross profit margin for the three months ended September 30, 1996
decreased slightly compared to the same period in 1995, primarily due to a
slight decline in cigarette gross profit margins.
OPERATING AND ADMINISTRATIVE EXPENSES. Operating and administrative
expenses for the three months ended September 30, 1996 were $32.9 million, an
increase of $1.0 million or 3.1% compared to 1995. However, such expenses
for the three months ended September 30, 1996 decreased to 5.8% of net sales
as compared to 5.9% for the same period last year due to relatively flat
general and administrative expenses.
OPERATING INCOME. As a result of the above, operating income for the
three months ended September 30, 1996 was $6.5 million, an increase of $0.4
million or 6.4% as compared to the same period in 1995. As a percentage of
net sales, operating income for the three months ended September 30, 1996 and
1995 were the same at 1.1%.
NET INTEREST EXPENSE. Net interest expense for the three months ended
September 30, 1996 was $2.7 million, an increase of $1.0 million or 63.4%
compared to the same period in 1995. The net increase resulted from an
increase in average debt levels due to the Recapitalization, offset by
slightly lower interest rates.
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1995
NET SALES. Net sales for the nine months ended September 30, 1996 were
$1,637.3 million, an increase of $108.6 million or 7.1% compared to the same
period in 1995. The increase was due to growth in all product categories
of the Company's operations. In the second quarter of 1995, the
Company acquired selected assets of two businesses, increasing net sales
for the nine months ended September 30, 1996 by approximately $16 million
compared to the same period in 1995.
Cigarette net sales for the nine months ended September 30, 1996 were
$1,133.0 million, an increase of $57.0 million or 5.3% compared to the same
period in 1995 as a result of increases in unit volumes and increases in
prices of both U.S. and Canadian cigarettes. This increase was also
partially due to the acquisitions described above (approximately $11
million). The Company's total cigarette unit sales for the nine months ended
September 30, 1996 were 68.6 million cartons, an increase of 2.5 million
cartons compared to the same period in 1995. Of this increase, 0.7 million
cartons were attributable to the acquisitions described above.
10
<PAGE>
Net sales of food and non-food products for the nine months ended
September 30, 1996 were $504.2 million, an increase of $51.6 million or 11.4%
compared to the same period in 1995. This increase was partially due to the
acquisitions described above (which contributed approximately $5 million) and
the Company's focus on increasing food and non-food product sales. The
increase primarily occurred in candy sales, which increased $14.0 million or
9.1%, other tobacco sales, which increased $10.9 million or 13.4% and general
merchandise sales, which increased $8.3 million or 25.8%.
GROSS PROFIT. Gross profit for the nine months ended September 30, 1996
was $118.3 million, an increase of $9.7 million or 8.9% compared to 1995.
For the nine months ended September 30, 1996, the Company recognized LIFO
expense of $1.4 million compared to $1.8 million for the same period in 1995.
The increase in gross profit margin of 0.1% for the nine months ended
September 30, 1996 as compared to the same period in 1995 was principally
the result of higher profits from forward buying of cigarettes in advance of
price increases which occurred in the second quarter of both periods.
The gross profit margin on food and non-food sales increased slightly
compared to the prior year, primarily as a result of a candy price increase
in late 1995.
OPERATING AND ADMINISTRATIVE EXPENSES. Operating and administrative
expenses for the nine months ended September 30, 1996 were $97.4 million, an
increase of $4.8 million or 5.2% compared to 1995. However, such expenses
for the nine months ended September 30, 1996 decreased to 5.9% of net sales
as compared to 6.1% for the same period last year due to relatively flat
general and administrative expenses.
OPERATING INCOME. As a result of the above, operating income for the
nine months ended September 30, 1996 was $20.9 million, an increase of $4.9
million or 30.5% as compared to the same period in 1995. As a percentage of
net sales, operating income for the nine months ended September 30, 1996 was
1.3%, as compared to 1.0% for the same period in 1995.
NET INTEREST EXPENSE. Net interest expense for the nine months ended
September 30, 1996 was $5.7 million, an increase of $0.3 million or 4.8%
compared to the same period in 1995. The net increase resulted from an
increase in average debt levels due to the Recapitalization, partially offset
by lower average interest rates.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs arise primarily from the funding of its
working capital needs, capital expenditure programs, and debt service
requirements with respect to its Revolving Credit Facility and Notes. The
Company has no mandatory payments of principal on the Notes scheduled prior
to their final maturity and has no mandatory payments of principal scheduled
under the Revolving Credit Facility, which matures June 30, 2001. The
Company has historically financed its operations through internally generated
funds and borrowings under its credit facilities.
The Company's debt obligations totaled $163.3 million at September 30,
1996, an increase of $61.7 million from $101.6 million at December 31, 1995.
The net increase in outstanding debt is due primarily to the Recapitalization
described above, partially offset by a reduction in working capital funding
requirements resulting principally from decreases in inventory and accounts
receivable. Debt requirements are generally the highest at December 31 when
the Company historically carries higher inventories.
The Company's principal sources of liquidity are net cash provided by
operating activities and its Revolving Credit Facility. At year end the
Company typically carries higher inventories which are then liquidated in
future periods. Therefore, net cash provided by operating activities is
typically lower at the end of any fiscal year compared to interim periods.
Net cash used in investing activities of $4.0 million was for capital
expenditures for the nine months ended September 30, 1996.
11
<PAGE>
PART II - OTHER INFORMATION
Item 1: Legal Proceedings
In May 1996, the court of Appeals for the Fifth Circuit decertified a
federal class action purportedly brought on behalf of all cigarette smokers
in the United States. Following the decertification, lawyers for the class
brought state class action lawsuits in a number of states, with the
objective of filing such lawsuits in all fifty states, the District of
Columbia and Puerto Rico. Several of these state lawsuits name cigarette
distributors such as the Company as defendants. In June 1996, a subsidiary
of the Company was named as a defendant in a class action lawsuit filed in
state court in New Mexico. The action was later voluntarily dismissed
without prejudice in order to permit a realignment of the parties. The
lawsuit was subsequently refiled in September 1996 and voluntarily
dismissed October 2, 1996.
The New Mexico lawsuit was most recently refiled on
October 10, 1996. A subsidiary of the Company is named as a defendant
in the complaint. The other defendants include the principal
U.S. tobacco manufacturers as well as other distributors. The
case is brought on behalf of a putative class of smokers who
reside in New Mexico, each of whom is allegedly nicotine
dependent. The suit seeks, on behalf of the class, compensatory
damages, punitive damages and equitable relief, including medical
monitoring of the class members. The Company has been indemnified
with respect to certain claims alleged in this suit.
On October 2, 1996, the Company was served with a summons and
complaint in an action brought by the County of Los Angeles against
major tobacco manufacturers, the Company and other distributors of
tobacco products. The complaint seeks, inter alia, damages and
restitution for monies expended by the County for the health care of
smokers. The Company has been indemnified with respect to certain
claims alleged in this suit.
The Company does not believe that these actions will have a
material adverse effect on the Company's financial condition.
In addition, the Company is a party to other lawsuits incurred in
the ordinary course of its business. The Company believes it is
adequately insured with respect to such lawsuits or that such lawsuits
will not result in losses material to its consolidated financial
position or results of operations.
Item 2: Changes in Securities
Not applicable
Item 3: Defaults Upon Senior Securities
Not applicable
Item 5: Other Information
Not applicable
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during this quarter
12
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CORE-MARK INTERNATIONAL, INC.
(Registrant)
Date: November 13, 1996 By: /s/ Leo F. Korman
----------------- ------------------------
Senior Vice President and
Chief Financial Officer
(Principal Accounting Officer and
duly authorized officer)
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 16,394
<SECURITIES> 0
<RECEIVABLES> 92,982
<ALLOWANCES> 3,823
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0
0
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</TABLE>
