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Core-Mark seeks confirmatory waiver due to accounting errors
By Elaine Rigoli
Tampa, Fla., March 24 - Core-Mark Holding Co., Inc. said it is asking its bank lenders to confirm that no breach or default has occurred under its credit agreement due to errors in its accounting.
The company announced Friday that due to errors relating to the accounting of foreign currency translation adjustments related to intercompany balances its financial statements should no longer be relied upon.
Specifically, the company said it has determined that foreign currency translation adjustments related to intercompany balances at its Canadian branch were recorded as a component of comprehensive income directly to stockholders' equity because those intercompany balances were incorrectly thought to be of a permanent nature.
Based on a preliminary analysis, the company believes the correction will increase income from continuing operations before income taxes by $2.4 million for the period from Aug. 23, 2004 to Dec. 31, 2004 and decrease income from continuing operations before income taxes by $0.6 million for the nine months to Sept. 30, 2005.
Core-Mark will also correct a $0.4 million inventory undervaluation error and a corresponding overstatement of cost of goods sold for the period from Aug. 23, 2004 to Dec. 31, 2004 and a related $0.4 million overvaluation error and corresponding understatement of cost of goods sold for the six months ended June 30, 2005.
The problems could be deemed to have caused a breach of covenants or default under the company's $250 million revolving credit facility, according to a news release.
Core-Mark said it does not believe that a breach or default has occurred, but is in the process of seeking a confirmatory waiver from the lenders.
Core-Mark, based in South San Francisco, Calif., is a wholesale distributor of packaged consumer products to the convenience retail industry in North America.
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