Fourth Quarter 2010 Results Compared to Fourth Quarter 2009
(See accompanying financial schedules for full financial details and reconciliations of Non-GAAP financial measures to their GAAP equivalents.)
- Sales were $147.1 million compared to $154.0 million last year, a decline of $6.9 million or 4.5 percent. We estimate that sales increased 3.1 percent due to commodity inflation, but decreased approximately 7.6 percent due to volume and competitive pricing pressure.
- Gross margin percentage was 19.1 percent, down from 19.7 percent, a 0.6 percentage point decrease, which was primarily due to competitive pricing pressure.
- SG&A expenses decreased $4.1 million, or 8.3 percent. As a percentage of sales, SG&A expense decreased from 32.3 percent in 2009 to 31.0 percent in 2010, on $6.9 million less sales. Average full-time equivalent employees, excluding discontinued operations, for the fourth quarter 2010 were down 4.9 percent from the fourth quarter 2009 average. Our salaries and benefits expense, excluding stock compensation expense, was essentially flat at $26.1 million for the current quarter compared to $25.9 million for the same quarter last year. Office G&A expense fell $3.3 million or 42.3 percent, due primarily to $3.0 million of recapitalization costs we incurred in the fourth quarter of 2009. Delivery expense fell $0.8 million, or 8.3 percent, occupancy expense fell $0.2 million or 4.9 percent, and bad debt expense fell $0.9 million from the same quarter last year.
- Interest expense was $6.9 million in the current quarter, a decrease of $0.6 million from the fourth quarter of 2009.
- We recorded an income tax benefit of $0.1 million during the quarter compared to $33.2 million in the fourth quarter of 2009. Our benefit during the current quarter was reduced by an after-tax, non-cash valuation allowance of $9.4 million, or $0.10 per diluted share, related to our net deferred tax assets. Our benefit was increased in the fourth quarter of 2009 by a reduction of the after-tax, non-cash valuation allowance of $21.1 million, or $0.53 per diluted share, primarily due to tax legislation that allowed for an extended carry-back of net operating losses generated in 2009. Absent the valuation allowance, our tax benefit rate would have been 38.9 percent for the fourth quarter of 2010. Absent the valuation allowance and impacts of changes in tax law, our tax benefit rate would have been 36.9 percent for the fourth quarter of 2009.
- Income (loss) from continuing operations was a loss of $24.5 million, or $0.26 loss per diluted share, compared to income of $6.2 million, or $0.16 per diluted share, in the same quarter last year. Excluding the valuation allowance and debt issuance cost write-offs, our loss from continuing operations per diluted share was $0.15 for the current quarter, compared to a loss of $0.33 per diluted share for the fourth quarter of 2009, excluding the valuation allowance and recapitalization costs.
- Income (loss) from discontinued operations, which includes the results of our discontinued Ohio and New Jersey operations, represented a loss of $0.1 million, or $0.00 per diluted share, for the fourth quarter of 2010, compared to income of $0.3 million, or $0.01 per diluted share, for the fourth quarter of 2009.
- Net loss for the fourth quarter of 2010 was $24.6 million, or $0.26 loss per diluted share, compared to net income of $6.6 million, or $.17 per diluted share, in the fourth quarter of 2009.
- Diluted weighted average shares outstanding were 94.9 million compared to 39.9 million. Approximately 58.6 million additional shares were issued in the first quarter of 2010 as part of our rights offering and debt exchange.
- Adjusted EBITDA was a loss of $12.5 million compared to a loss of $12.2 million in the same quarter last year. See reconciliation attached.
Liquidity and Capital Resources
- Our total liquidity at December 31, 2010 was $125.8 million, which included $103.2 million in available cash and $22.6 million in borrowing availability under our revolver. Outstanding borrowings under our revolver were $20.0 million at the end of 2010 and 2009, respectively.
- In November of 2010, we amended our 2007 senior secured revolving credit facility. The amendment provides us with up to $25.0 million of additional borrowing availability by reducing our minimum liquidity requirement, which was previously set at $35.0 million. The amendment also reduced the maximum borrowing capacity under the facility from $250.0 million to $150.0 million, thus decreasing our annual interest expense related to commitment fees by approximately $0.4 million.
- Operating cash flow was negative $17.6 million for the fourth quarter of 2010, as compared to negative $12.5 million for the same quarter last year.
- Capital expenditures were $0.8 million for the current quarter, compared to $0.1 million for 2009.