Core-Mark Holding Company, Inc. (NASDAQ: CORE) ("the Company"), one
of the largest marketers of fresh and broad-line supply solutions
to the convenience retail industry in North America, announced
financial results for the second quarter ended June 30, 2018.
“We closed out a solid second quarter led by
strong sales growth, improved operational performance and bottom
line results headed in the right direction. Our most
significant contributions came from gains in non-cigarette sales,
improved performance in our warehouses and new market share wins,”
said Scott McPherson, President and Chief Executive Officer. “While
we still have more work to do to return performance to the levels
Core-Mark is capable of, we are making good progress toward our
goals. We have entered the important summer season in a good
position, giving us confidence in our financial guidance for
2018.”
Second Quarter Results
Net sales increased 11.2% to $4.2 billion for
the second quarter of 2018 compared to $3.8 billion for the same
period in 2017. The net sales increase was due primarily to
the contributions from the acquisition of Farner-Bocken Company,
which was completed on July 10, 2017, the addition of Walmart Inc.
and incremental non-cigarette sales to existing customers.
Non-cigarette sales increased 22.0% as the Company gained
additional net market share and increased its non-cigarette sales
to existing customers. Non-cigarette sales expanded to 32.7%
of total net sales for the second quarter of 2018 compared to 29.8%
of total net sales for the same period in 2017.
Sales of the Candy category grew 30.3%, driven
by Walmart Inc., while Health, Beauty & General sales increased
36.0%, benefiting from the increasing usage of alternative nicotine
delivery products. In addition, sales in the Food and Fresh
categories increased 17.5% and 18.4%, respectively, compared to the
same period in 2017. Cigarette sales grew 6.6% and benefited
from a 3.3% increase in the average sales price per carton, which
was offset by a 4.0% decline in carton volume.
Gross profit in the second quarter of 2018
increased 16.6% to $216.9 million compared to $186.1 million for
the same period in 2017. The increase in gross profit was
driven primarily by net market share gains and an increase in sales
to existing customers. Gross profit margin increased 23 basis
points to 5.13% of total net sales during the second quarter of
2018 from 4.90% for the same period in 2017, driven primarily by
the shift in sales mix toward higher margin non-cigarette
items. Remaining gross profit, a non-GAAP financial measure,
increased 16.8% to $220.3 million from $188.6 million.
______________________________________Note (1):
See below for the "Reconciliation of Net Income to Adjusted
EBITDA."
The following table reconciles remaining gross
profit, a non-GAAP financial measure, to gross profit, its most
comparable financial measure under U.S. GAAP:
RECONCILIATION OF GROSS PROFIT (U.S. GAAP) TO
REMAINING GROSS PROFIT (NON-GAAP) |
(Unaudited and $ in millions) |
|
|
|
|
|
|
|
|
|
For the Three Months Ended June
30, |
|
|
|
2018 |
|
2017 |
|
|
|
Amounts |
% of Net Sales |
|
Amounts |
% of Net Sales |
|
% Change |
Gross
profit |
$ |
216.9 |
|
5.1 |
% |
|
$ |
186.1 |
|
4.9 |
% |
|
16.6 |
% |
Cigarette inventory
holding gains |
(3.5 |
) |
(0.1 |
)% |
|
(0.9 |
) |
— |
% |
|
|
Other tobacco products
(OTP) tax refunds |
— |
|
— |
% |
|
(1.2 |
) |
— |
% |
|
|
LIFO expense |
6.9 |
|
0.2 |
% |
|
4.6 |
|
0.1 |
% |
|
|
Remaining gross
profit (Non-GAAP) |
$ |
220.3 |
|
5.2 |
% |
|
$ |
188.6 |
|
5.0 |
% |
|
16.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company’s operating expenses for the second
quarter of 2018 were $198.6 million compared to $174.0 million for
the same period in 2017, with Farner-Bocken expenses accounting for
$17.2 million of the $24.6 million increase. The remainder of the
increase in operating expenses was due primarily to sales volume
growth. Operating expenses as a percentage of net sales
increased to 4.7% for the second quarter of 2018 compared to 4.6%
for the second quarter of 2017 due primarily to the shift in sales
mix to non-cigarette products, which have lower price points than
cigarettes.
Net income was $11.0 million for the second
quarter of 2018 compared to net income of $6.9 million for the same
period in 2017, a 59.4% increase. Adjusted EBITDA, a non-GAAP
financial measure, increased 40.9% to $42.4 million for the second
quarter of 2018 compared to $30.1 million for the second quarter of
2017. This improvement was driven by Farner-Bocken, increased
non-cigarette sales to existing customers and operational
improvements.
The following table reconciles Adjusted EBITDA
to net income, its most comparable financial measure under U.S.
GAAP:
RECONCILIATION OF NET INCOME (U.S. GAAP) TO ADJUSTED
EBITDA (NON-GAAP) |
(Unaudited and $ in millions) |
|
|
|
|
|
|
|
For the Three Months Ended June
30, |
|
|
|
2018 |
|
2017 |
|
% Change |
|
|
|
|
|
|
Net
income |
$ |
11.0 |
|
|
$ |
6.9 |
|
|
59.4 |
% |
Interest expense, net
(1) |
3.4 |
|
|
2.0 |
|
|
|
Provision for income
taxes |
4.4 |
|
|
4.3 |
|
|
|
Depreciation and
amortization |
14.7 |
|
|
12.2 |
|
|
|
LIFO expense |
6.9 |
|
|
4.6 |
|
|
|
Stock-based
compensation expense |
2.5 |
|
|
1.2 |
|
|
|
Foreign currency
transaction gains, net |
(0.5 |
) |
|
(1.1 |
) |
|
|
Adjusted EBITDA
(Non-GAAP) |
$ |
42.4 |
|
|
$ |
30.1 |
|
|
40.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
______________________________________________
(1) Interest expense, net, is reported net of interest
income.
Diluted Earnings per Share (EPS) was $0.24 for
the second quarter of 2018 compared to Diluted EPS of $0.15 for the
second quarter of 2017. Diluted EPS excluding LIFO expense, a
non-GAAP financial measure, was $0.35 for the second quarter of
2018 compared to $0.21 for the second quarter of 2017. See
the attached “Supplemental Schedule for Items Impacting Diluted
EPS.”
First Six Months of 2018
Net sales increased 10.0% to $8.0 billion for
the first six months of 2018 compared to $7.3 billion for the same
period in 2017. Non-cigarette sales increased 23.2% while
cigarette sales increased 4.4%. Non-cigarette sales were
33.0% of total net sales for the first six months of 2018 compared
to 29.5% of total net sales for the same period in 2017.
The increase in non-cigarette sales was driven
primarily by net market share gains including Walmart Inc. and
Farner-Bocken and incremental non-cigarette sales to existing
customers. The addition of Walmart Inc. was the primary
driver of the 42.3% increase in the Candy category. The
Health, Beauty & General category sales increased 32.1%,
benefiting from the increasing usage of alternative nicotine
delivery products. In addition, sales in the Food and Fresh
categories increased 17.2% and 16.1%, respectively, compared to the
same period in 2017. The increase in cigarette sales was
driven primarily by the addition of carton sales from Farner-Bocken
and a 5.3% increase in the average sales price per carton, offset
by an 8.3% carton sales decrease for the remaining business.
Gross profit in the first half of 2018 increased
15.7% to $416.7 million from $360.1 million for the same period in
2017. Gross profit margin increased 26 basis points to 5.19%
for the six months ended June 30, 2018 from 4.93% for the same
period in 2017, driven primarily by a shift towards non-cigarette
products which have higher margins. Remaining gross profit
increased 16.3% from $360.2 million to $418.9 million for the six
months ended June 30, 2018.
The following table reconciles remaining gross
profit, a non-GAAP financial measure, to gross profit, its most
comparable financial measure under U.S. GAAP:
RECONCILIATION OF GROSS PROFIT (U.S. GAAP) TO
REMAINING GROSS PROFIT (NON-GAAP) |
(Unaudited and $ in millions) |
|
|
|
|
|
|
|
|
|
For the Six Months Ended June
30, |
|
|
|
2018 |
|
2017 |
|
|
|
Amounts |
% of Net Sales |
|
Amounts |
% of Net Sales |
|
% Change |
Gross
profit |
$ |
416.7 |
|
5.2 |
% |
|
$ |
360.1 |
|
4.9 |
% |
|
15.7 |
% |
Cigarette inventory
holding gains |
(10.6 |
) |
(0.2 |
)% |
|
(7.5 |
) |
(0.1 |
)% |
|
|
Other tobacco products
(OTP) tax refunds |
— |
|
— |
% |
|
(1.2 |
) |
— |
% |
|
|
LIFO expense |
12.8 |
|
0.2 |
% |
|
8.8 |
|
0.1 |
% |
|
|
Remaining gross
profit (Non-GAAP) |
$ |
418.9 |
|
5.2 |
% |
|
$ |
360.2 |
|
4.9 |
% |
|
16.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company’s operating expenses for the first
six months of 2018 were $396.8 million compared to $345.8 million
for the same period in 2017, with Farner-Bocken expenses accounting
for $37.6 million of the $51.0 million increase. The
remainder of the increase in operating expenses was due primarily
to sales volume growth. Operating expenses as a percentage of
net sales increased to 4.9% for the first half of 2018 compared to
4.7% for the first half of 2017 due to the shift in sales mix to
non-cigarette products, which have lower price points than
cigarettes.
Net income was $9.7 million for the first six
months of 2018 compared to net income of $9.0 million for the same
period in 2017, an 8% increase. Adjusted EBITDA, a non-GAAP
financial measure, was $66.7 million for the first half of 2018
compared to $49.7 million for the first half of 2017, a 34%
increase. Adjusted EBITDA benefited from the Farner-Bocken
acquisition, the shift in sales mix and operational
improvements.
The following table reconciles Adjusted EBITDA
to net income, its most comparable financial measure under U.S.
GAAP:
RECONCILIATION OF NET INCOME (U.S. GAAP) TO ADJUSTED
EBITDA (NON-GAAP) |
(Unaudited and $ in millions) |
|
|
|
|
|
|
|
For the Six Months Ended June 30, |
|
|
|
2018 |
|
2017 |
|
% Change |
|
|
|
|
|
|
Net
income |
$ |
9.7 |
|
|
$ |
9.0 |
|
|
7.8 |
% |
Interest expense, net
(1) |
7.2 |
|
|
3.9 |
|
|
|
Provision for income
taxes |
3.9 |
|
|
3.1 |
|
|
|
Depreciation and
amortization |
29.6 |
|
|
24.3 |
|
|
|
LIFO expense |
12.8 |
|
|
8.8 |
|
|
|
Stock-based
compensation expense |
4.4 |
|
|
2.3 |
|
|
|
Foreign currency
transaction gains, net |
(0.9 |
) |
|
(1.7 |
) |
|
|
Adjusted EBITDA
(Non-GAAP) |
$ |
66.7 |
|
|
$ |
49.7 |
|
|
34.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
______________________________________________
(1) Interest expense, net, is reported net of interest
income.
Diluted Earnings per Share (EPS) was $0.21 for
the first six months of 2018 compared to Diluted EPS of $0.20 for
the same period in 2017. Diluted EPS excluding LIFO expense,
a non-GAAP financial measure, was $0.42 for the first six months of
2018 compared to $0.32 for the same period in 2017. See the
attached “Supplemental Schedule for Items Impacting Diluted
EPS.”
Dividend
Core-Mark also announced today that its Board of
Directors has approved a $0.10 cash dividend per common
share. The dividend is payable on September 14, 2018 to
stockholders of record as of the close of business on
August 28, 2018.
Guidance for 2018
The Company reaffirms its guidance for the full
year of 2018. Annual net sales for 2018 are expected to be
between $16.6 billion and $16.8 billion. Diluted EPS for the
year are estimated to be between $0.84 and $1.00 and Diluted EPS
excluding LIFO expense are expected to be between $1.13 to
$1.29. The Company expects Adjusted EBITDA to be between
$157.0 million and $167.0 million. Key assumptions include
$18 million in LIFO expense, a 25% tax rate and 46.4 million fully
diluted shares outstanding. The Company's projections include
cigarette inventory holding gains, but do not include any other
significant holding gains. Capital expenditures for 2018 are
expected to be approximately $30 million.
Conference Call and Webcast Information
Core-Mark will host an earnings call on Tuesday,
August 7, 2018 at 9:00 a.m. Pacific time during which
management will review the results of the second quarter of
2018. The call may be accessed by dialing 1-800-588-4973
using the code 47275643. The call may also be listened to on
the Company’s website at www.core-mark.com.
An audio replay will be available for
approximately one month following the call by dialing
1-888-843-7419 using the same code provided above. The replay
will also be available via webcast at www.core-mark.com for
approximately 90 days following the call.
Core-Mark
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 45,000 customer locations in the U.S.
and Canada through 32 distribution centers (excluding two
distribution facilities the Company operates as a third-party
logistics provider). Core-Mark services traditional
convenience stores, grocers, drug stores, big box & supercenter
stores, liquor and specialty stores, and other stores that carry
convenience products. For more information, please visit
www.core-mark.com.
About Non-GAAP Financial Measures
This press release includes non-GAAP financial
measures including Diluted EPS excluding LIFO expense, Adjusted
EBITDA, and remaining gross profit. We believe these non-GAAP
financial measures provide meaningful supplemental information for
investors regarding the performance of our business and facilitate
a meaningful period-to-period evaluation. We also believe
these measures allow investors to view results in a manner similar
to the method used by our management. We use these non-GAAP
financial measures in order to have comparable financial results to
analyze changes in our underlying business. These non-GAAP
measures should be considered as a supplement to, and not as a
substitute for, or superior to, financial measures calculated in
accordance with GAAP. These measures may be defined
differently than other companies and therefore such measures may
not be comparable to ours. We strongly encourage investors
and stockholders to review our financial statements and publicly
filed reports in their entirety and not to rely on any single
financial measure.
Adjusted EBITDA is a measure used by us to
measure operating performance. Adjusted EBITDA is also among
the primary measures used externally by our investors, analysts and
peers in our industry for purposes of valuation and comparing our
results to other companies. Adjusted EBITDA is equal to net
income adding back net interest expense, provision for income
taxes, depreciation and amortization, LIFO expense, stock-based
compensation expense, and net foreign currency transaction
gains.
Diluted EPS excluding LIFO expense is a measure
used by us to measure financial performance. Diluted EPS is
also among the primary measures used externally by our investors,
analysts and peers in our industry for purposes of valuation and
comparing our results to other companies. Remaining gross
profit is a non-GAAP financial measure. We provide this
metric to segregate the effects of LIFO expense, cigarette
inventory holding gains and other items that significantly affect
the comparability of gross profit.
We do not provide a reconciliation for non-GAAP
estimates on a forward-looking basis (including the information
under “Guidance for 2018” above) where we are unable to provide a
meaningful calculation or estimation of reconciling items and the
information is not available without unreasonable effort.
This is due to the inherent difficulty of forecasting the timing or
amount of various items that would impact the most directly
comparable forward-looking GAAP financial measure, that have not
yet occurred, are out of the Company’s control and/or cannot be
reasonably predicted. For the same reasons, we are unable to
address the probable significance of the unavailable
information. Forward-looking non-GAAP financial measures
provided without the most directly comparable GAAP financial
measures may vary materially from the corresponding GAAP financial
measures.
The tables in this press release contain more
details on the GAAP financial measures that are most directly
comparable to non-GAAP financial measures and the related
reconciliations between these financial measures.
Forward-Looking Statements
Statements in this press release that are not
statements of historical fact are forward-looking statements made
pursuant to the safe-harbor provisions of the Securities Exchange
Act of 1934 and the Securities Act of 1933. These statements
include statements regarding our guidance for 2018 net sales,
Adjusted EBITDA, diluted earnings per share, diluted earnings per
share excluding LIFO expense, capital expenditures and related
disclosures. Forward-looking statements in some cases can be
identified by the use of words such as “may,” “will,” “should,”
“potential,” “intend,” “expect,” “seek,” “anticipate,” “estimate,”
“believe,” “could,” “would,” “project,” “predict,” “continue,”
“plan,” “propose” or other similar words or expressions.
Forward-looking statements are made only as of the date of this
press release and are based on our current intent, beliefs, plans
and expectations. They involve risks and uncertainties that could
cause actual future results, performance or developments to differ
materially from historical results or those described in or implied
by such forward-looking statements.
Factors that might cause or contribute to such
differences include, but are not limited to, our dependence on the
convenience retail industry for our revenues; our dependence on
qualified labor, our senior management and other key personnel;
declining cigarette sales volumes; competition in our distribution
markets; risks and costs associated with efforts to grow our
business through acquisitions; the dependence of some of our
distribution centers on a few relatively large customers;
manufacturers or retail customers adopting direct distribution
channels; fuel and other transportation costs; failure, disruptions
or security breaches of our information technology systems; the
low-margin nature of cigarette and consumable goods distribution;
our reliance on manufacturer discount and incentive programs and
cigarette excise stamping allowances; our dependence on relatively
few suppliers; product liability and counterfeit product claims and
manufacturer recalls of products; our ability to achieve the
expected benefits of implementation of marketing initiatives;
failing to maintain our brand and reputation; unexpected outcomes
in legal proceedings; attempts by unions to organize our employees;
increasing expenses related to employee health benefits; changes to
minimum wage laws; failure to comply with governmental regulations
or substantial changes to governmental regulations; earthquake and
natural disaster damage; increases in the number or severity of
insurance and claims expenses; legislation and other matters
negatively affecting the cigarette and tobacco industry; increases
in excise taxes or reduction in credit terms by taxing
jurisdictions; potential liabilities associated with sales of
cigarettes and other tobacco products; changes to federal, state or
provincial income tax legislation; reduction in the payment of
dividends; currency exchange rate fluctuations; our ability to
borrow additional capital; restrictive covenants in our Credit
Facility; and changes to accounting rules or regulations.
Refer to the “Risk Factors” section of our Annual Report on Form
10-K for the year ended December 31, 2017 filed with the SEC
on March 1, 2018 and Part II, Item 1A, “Risk Factors” of
any quarterly report on Form 10-Q subsequently filed by us for a
more comprehensive discussion of these and other risk
factors. In addition, please note that the date of this press
release is August 7, 2018, and any forward-looking statements
contained herein are based on assumptions that we believe to be
reasonable as of this date. We undertake no obligation to update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
CORE-MARK HOLDING COMPANY, INC. AND
SUBSIDIARIES |
CONDENSED CONSOLIDATED BALANCE SHEETS |
(In millions, except share and per share data) |
(Unaudited) |
|
|
|
|
|
June 30, |
|
December 31, |
|
2018 |
|
2017 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and
cash equivalents |
$ |
33.2 |
|
|
$ |
41.6 |
|
Accounts
receivable, net of allowance for doubtful accounts of $6.8 and $7.3
as ofJune 30, 2018 and December 31, 2017, respectively |
462.8 |
|
|
442.3 |
|
Other
receivables, net |
83.1 |
|
|
94.4 |
|
Inventories, net |
504.4 |
|
|
689.1 |
|
Deposits
and prepayments |
151.5 |
|
|
108.0 |
|
Total
current assets |
1,235.0 |
|
|
1,375.4 |
|
Property and equipment,
net |
237.5 |
|
|
249.0 |
|
Goodwill |
72.8 |
|
|
72.8 |
|
Other intangible
assets, net |
55.3 |
|
|
59.1 |
|
Other non-current
assets, net |
27.2 |
|
|
26.2 |
|
Total
assets |
$ |
1,627.8 |
|
|
$ |
1,782.5 |
|
Liabilities and Stockholders’ Equity |
|
|
|
Current
liabilities: |
|
|
|
Accounts
payable |
$ |
224.4 |
|
|
$ |
169.9 |
|
Book
overdrafts |
45.4 |
|
|
45.3 |
|
Cigarette
and tobacco taxes payable |
245.5 |
|
|
304.5 |
|
Accrued
liabilities |
127.7 |
|
|
124.8 |
|
Total
current liabilities |
643.0 |
|
|
644.5 |
|
Long-term debt |
363.3 |
|
|
512.9 |
|
Deferred income
taxes |
28.0 |
|
|
27.4 |
|
Other long-term
liabilities |
16.8 |
|
|
16.2 |
|
Claims liabilities |
28.8 |
|
|
26.3 |
|
Total
liabilities |
1,079.9 |
|
|
1,227.3 |
|
Stockholders’
equity: |
|
|
|
Common
stock, $0.01 par value (150,000,000 and 100,000,000 shares
authorized,52,509,932 and 52,397,668 shares issued; 45,921,165 and
46,165,009 sharesoutstanding at June 30, 2018 and December 31,
2017, respectively) |
0.5 |
|
|
0.5 |
|
Additional paid-in capital |
279.6 |
|
|
276.8 |
|
Treasury
stock at cost (6,588,767 and 6,232,659 shares of common stock at
June 30,2018 and December 31, 2017, respectively) |
(82.6 |
) |
|
(75.1 |
) |
Retained
earnings |
356.5 |
|
|
355.1 |
|
Accumulated other comprehensive loss |
(6.1 |
) |
|
(2.1 |
) |
Total
stockholders’ equity |
547.9 |
|
|
555.2 |
|
Total
liabilities and stockholders’ equity |
$ |
1,627.8 |
|
|
$ |
1,782.5 |
|
|
|
|
|
|
|
|
|
CORE-MARK HOLDING COMPANY, INC. AND
SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
(In millions, except per share data) |
(Unaudited) |
|
Three Months Ended |
|
Six Months Ended |
|
June 30, |
|
June 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Net sales |
$ |
4,226.5 |
|
|
$ |
3,800.7 |
|
|
$ |
8,032.4 |
|
|
$ |
7,304.9 |
|
Cost of goods sold |
4,009.6 |
|
|
3,614.6 |
|
|
7,615.7 |
|
|
6,944.8 |
|
Gross
profit |
216.9 |
|
|
186.1 |
|
|
416.7 |
|
|
360.1 |
|
Warehousing and
distribution expenses |
134.3 |
|
|
118.0 |
|
|
266.6 |
|
|
232.7 |
|
Selling, general and
administrative expenses |
61.7 |
|
|
54.2 |
|
|
125.1 |
|
|
109.5 |
|
Amortization of
intangible assets |
2.6 |
|
|
1.8 |
|
|
5.1 |
|
|
3.6 |
|
Total
operating expenses |
198.6 |
|
|
174.0 |
|
|
396.8 |
|
|
345.8 |
|
Income
from operations |
18.3 |
|
|
12.1 |
|
|
19.9 |
|
|
14.3 |
|
Interest expense,
net |
(3.4 |
) |
|
(2.0 |
) |
|
(7.2 |
) |
|
(3.9 |
) |
Foreign currency
transaction gains, net |
0.5 |
|
|
1.1 |
|
|
0.9 |
|
|
1.7 |
|
Income
before income taxes |
15.4 |
|
|
11.2 |
|
|
13.6 |
|
|
12.1 |
|
Provision for income
taxes |
(4.4 |
) |
|
(4.3 |
) |
|
(3.9 |
) |
|
(3.1 |
) |
Net
income |
$ |
11.0 |
|
|
$ |
6.9 |
|
|
$ |
9.7 |
|
|
$ |
9.0 |
|
|
|
|
|
|
|
|
|
Basic and diluted net
income per common share (1) |
$ |
0.24 |
|
|
$ |
0.15 |
|
|
$ |
0.21 |
|
|
$ |
0.20 |
|
|
|
|
|
|
|
|
|
Basic weighted-average
shares |
46.0 |
|
|
46.3 |
|
|
46.1 |
|
|
46.3 |
|
|
|
|
|
|
|
|
|
Diluted
weighted-average shares |
46.1 |
|
|
46.4 |
|
|
46.2 |
|
|
46.4 |
|
|
|
|
|
|
|
|
|
Dividends declared and
paid per common share |
$ |
0.10 |
|
|
$ |
0.09 |
|
|
$ |
0.20 |
|
|
$ |
0.18 |
|
|
|
|
|
|
|
|
|
(1) Basic and diluted
earnings per share are calculated based on unrounded actual
amounts. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CORE-MARK HOLDING COMPANY, INC. AND
SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
(In millions) |
(Unaudited) |
|
Six Months Ended |
|
June 30, |
|
2018 |
|
2017 |
Cash flows from
operating activities: |
|
|
|
Net
income |
$ |
9.7 |
|
|
$ |
9.0 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
LIFO and
inventory provisions |
13.1 |
|
|
8.8 |
|
Amortization of debt issuance costs |
0.4 |
|
|
0.4 |
|
Stock-based compensation expense |
4.4 |
|
|
2.3 |
|
Bad debt
expense, net |
1.4 |
|
|
0.4 |
|
Loss on
disposals |
0.4 |
|
|
— |
|
Depreciation and amortization |
29.6 |
|
|
24.3 |
|
Foreign
currency gains, net |
(0.9 |
) |
|
(1.7 |
) |
Deferred
income taxes |
0.6 |
|
|
0.6 |
|
Changes
in operating assets and liabilities: |
|
|
|
Accounts
receivable, net |
(27.4 |
) |
|
(46.8 |
) |
Other
receivables, net |
11.1 |
|
|
16.6 |
|
Inventories, net |
167.6 |
|
|
60.0 |
|
Deposits,
prepayments and other non-current assets |
(46.7 |
) |
|
(17.3 |
) |
Accounts
payable |
55.0 |
|
|
66.1 |
|
Cigarette
and tobacco taxes payable |
(56.6 |
) |
|
(1.8 |
) |
Claims,
accrued and other long-term liabilities |
7.6 |
|
|
(12.9 |
) |
Net cash
provided by operating activities |
169.3 |
|
|
108.0 |
|
Cash flows from
investing activities: |
|
|
|
Additions
to property and equipment, net |
(9.2 |
) |
|
(30.8 |
) |
Capitalization of software and related development costs |
(1.2 |
) |
|
(2.8 |
) |
Net cash
used in investing activities |
(10.4 |
) |
|
(33.6 |
) |
Cash flows from
financing activities: |
|
|
|
Borrowings under revolving credit facility |
867.5 |
|
|
616.2 |
|
Repayments under revolving credit facility |
(1,015.7 |
) |
|
(731.7 |
) |
Payments
of financing costs |
— |
|
|
(1.8 |
) |
Payments
on capital leases |
(1.3 |
) |
|
(1.0 |
) |
Dividends
paid |
(9.3 |
) |
|
(8.4 |
) |
Repurchases of common stock |
(7.5 |
) |
|
— |
|
Tax
withholdings related to net share settlements of restricted stock
units |
(1.4 |
) |
|
(3.6 |
) |
Increase
in book overdrafts |
0.1 |
|
|
56.9 |
|
Net cash
used in financing activities |
(167.6 |
) |
|
(73.4 |
) |
Effects of changes in
foreign exchange rates |
0.3 |
|
|
(1.6 |
) |
Change in cash and
cash equivalents |
(8.4 |
) |
|
(0.6 |
) |
Cash and cash
equivalents, beginning of period |
41.6 |
|
|
41.7 |
|
Cash and cash
equivalents, end of period |
$ |
33.2 |
|
|
$ |
41.1 |
|
Supplemental
disclosures: |
|
|
|
Cash
received (paid) during the period for: |
|
|
|
Income
taxes, net |
$ |
9.9 |
|
|
$ |
(10.3 |
) |
Interest,
net |
$ |
(5.9 |
) |
|
$ |
(3.1 |
) |
Non-cash
capital lease obligations incurred |
$ |
0.1 |
|
|
$ |
0.6 |
|
Unpaid
property and equipment purchases included in accrued
liabilities |
$ |
1.1 |
|
|
$ |
4.1 |
|
Non-cash
adjustment between accounts receivable and accrued liabilities |
$ |
4.2 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
CORE-MARK HOLDING COMPANY, INC. AND
SUBSIDIARIES |
RECONCILIATION OF DILUTED EARNINGS PER SHARE (U.S.
GAAP) TO DILUTED EARNINGS PER SHARE EXCLUDING LIFO EXPENSE
(NON-GAAP) AND |
SUPPLEMENTAL SCHEDULE FOR ITEMS IMPACTING DILUTED
EPS |
(In millions, except per share data) |
(Unaudited) |
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2018 (a)(b) |
|
2017 (a)(b) |
|
% Change |
|
2018 (a)(b) |
|
2017 (a)(b) |
|
% Change |
Net
income |
$ |
11.0 |
|
|
$ |
6.9 |
|
|
59.4 |
% |
|
$ |
9.7 |
|
|
$ |
9.0 |
|
|
7.8 |
% |
Diluted
shares |
46.1 |
|
|
46.4 |
|
|
|
|
46.2 |
|
|
46.4 |
|
|
|
Diluted
EPS |
$ |
0.24 |
|
|
$ |
0.15 |
|
|
60.0 |
% |
|
$ |
0.21 |
|
|
$ |
0.20 |
|
|
5.0 |
% |
LIFO
expense |
0.11 |
|
|
0.06 |
|
|
|
|
0.21 |
|
|
0.12 |
|
|
|
Diluted EPS
excluding LIFO expense (Non-GAAP) |
$ |
0.35 |
|
|
$ |
0.21 |
|
|
66.7 |
% |
|
$ |
0.42 |
|
|
$ |
0.32 |
|
|
31.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Additional
Items Impacting Diluted EPS: |
|
|
|
|
|
|
|
|
|
|
|
Cigarette
inventory holding gains (1) |
$ |
0.06 |
|
|
$ |
0.01 |
|
|
|
|
$ |
0.17 |
|
|
$ |
0.10 |
|
|
|
Business
expansion and integration costs (2) |
— |
|
|
(0.03 |
) |
|
|
|
— |
|
|
(0.05 |
) |
|
|
Net OTP
tax items (3) |
— |
|
|
0.01 |
|
|
|
|
— |
|
|
0.01 |
|
|
|
Legal
settlement (4) |
(0.02 |
) |
|
— |
|
|
|
|
(0.02 |
) |
|
— |
|
|
|
Interest
expense, net (5) |
(0.05 |
) |
|
(0.03 |
) |
|
|
|
(0.12 |
) |
|
(0.05 |
) |
|
|
Foreign
exchange gains (6) |
0.01 |
|
|
0.01 |
|
|
|
|
0.02 |
|
|
0.02 |
|
|
|
Tax items
(7) |
— |
|
|
— |
|
|
|
|
— |
|
|
0.03 |
|
|
|
Tax rate
differential (8) |
— |
|
|
0.03 |
|
|
|
|
— |
|
|
0.03 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
Amounts and percentages have been rounded for presentation purposes
and might differ from unrounded results.(b) The per share impacts
of the above items were calculated using a tax rate of 25.8% for
the three and six months ended June 30, 2018 versus 38.8% for the
same periods in 2017. |
(1) Cigarette inventory holding gains |
|
|
|
|
|
|
Cigarette inventory holding gains were $3.5 and $10.6
million for the three and six months ended June 30, 2018 versus
$0.9 and $7.5 million the three and six months ended June 30,
2017. |
(2) Business expansion and integration costs |
|
|
|
|
|
|
During the three and six months ended June 30, 2017,
the Company incurred $2.4 and $3.6 million in identifiable business
and integration expenses due primarily to the onboarding of Walmart
Inc. and the acquisition of Farner-Bocken Company. |
(3) Net OTP tax items |
|
|
|
|
|
|
During the
three and six months ended June 30, 2017, the Company recognized
other tobacco products tax items, net of fees, of $1.0 million
related to prior years' taxes. |
(4) Legal settlement |
|
|
|
|
|
|
The
Company recognized a legal settlement of $1.0M during the three and
six months ended June 30, 2018. |
(5) Interest expense, net |
|
|
|
|
|
|
Interest
expense, net was $3.4 and $7.2 million for the three and six months
ended June 30, 2018 versus $2.0 and $3.9 million for the three and
six months ended June 30, 2017. |
(6) Foreign exchange gains |
|
|
|
|
|
|
Foreign exchange gains were $0.5 and $0.9 million for
the three and six months ended June 30, 2018 versus $1.1 and $1.7
million for the three and six months ended June 30, 2017. |
(7) Tax items |
|
|
|
|
|
|
During the six months ended, June 30, 2017, the
Company recognized an income tax benefit of $1.5 million related to
the excess tax benefit from share-based award payments under ASU
2016-09, which the Company implemented in the first quarter of
2017. |
(8) Tax rate differential |
|
|
|
|
|
|
As a result of the Tax Cuts and Jobs Act, the
Company's tax rate reduced to approximately 25.8% for the current
periods presented, compared to approximately 38.8% for prior
periods presented. If the reduced rate had been effective in
the prior periods, the Company would have benefited by
approximately $1.5 and $1.6 million for the three and six months
ended June 30, 2017. |
|
Contact: Ms. Milton Gray Draper, Director of Investor Relations, 650-589-9445 x 3027 or at mdraper@core-mark.com
Core Mark (NASDAQ:CORE)
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