Core-Mark Holding Company, Inc. (NASDAQ: CORE), one of the largest
marketers of fresh, food and broad-line supply solutions to the
convenience retail industry in North America, announced financial
results for the fourth quarter and year ended December 31, 2019.
“Our results in 2019 reflect successful
execution of our key strategic priorities, including non-cigarette
sales growth, margin expansion and cost leverage,” said Scott E.
McPherson, President and Chief Executive Officer. “I am
pleased with our performance in 2019 and positioning as we enter
2020. We are focused on generating quality revenue growth,
continued margin expansion, along with leveraging our cost
structure and strong balance sheet to bring meaningful returns to
our shareholders.”
Fourth Quarter Results
Net sales increased 1.6% to $4.15 billion for
the fourth quarter of 2019 compared to $4.09 billion for the same
period in 2018. Non-cigarette sales increased 5.4%, due
primarily to strong sales of fresh foods, candy and other nicotine
products. Non-cigarette sales increased to 34.7% of total net
sales for the fourth quarter of 2019 compared to 33.5% of total net
sales in the fourth quarter of 2018. Cigarette sales
decreased 0.3% driven by declines in cigarette consumption,
partially offset by net market share gains and manufacturer price
increases.
_________________________________________(1) See
the reconciliation of Net Income (U.S. GAAP) to Adjusted EBITDA
(Non-GAAP) in the tables below. See the reconciliation of
Diluted Earnings Per Share (U.S. GAAP) to Diluted EPS excluding
LIFO (Non-GAAP) in “Supplemental Schedule for Items Impacting
Diluted EPS.”
Gross profit increased 6.2% to $230.5 million
compared to $217.0 million for the same period in 2018. The
gross profit increase was driven primarily by an increase in
non-cigarette sales to existing customers, net market share gains
and increased inventory holding gains. Gross profit in the
fourth quarter of 2019 included $11.2 million of inventory holding
gains, compared to $3.1 million in the same period of the prior
year. The increase in holding gains was due primarily to the
timing and magnitude of cigarette manufacturer price increases and
inventory management. Remaining gross profit, a non-GAAP
financial measure, increased $6.1 million, or 2.8% to $225.2
million.
Gross profit margin expanded 24 basis points to
5.55% of total net sales from 5.31% for the same period in 2018,
driven primarily by higher inventory holding gains and increased
margins from non-cigarette products. Remaining gross profit
margin expanded 6 basis points to 5.42% reflecting a shift in sales
mix towards higher margin non-cigarette products and continued
margin expansion in non-cigarette products driven primarily by the
Company’s strategic pricing initiatives and growth in higher margin
categories such as food and fresh. Non-cigarette remaining
gross profit margin expansion was partially offset by a decline in
cigarette remaining gross profit margin due to a decrease in
certain manufacturer incentives and higher inflation.
The following table reconciles remaining gross
profit to gross profit, its most directly 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 MonthsEnded December
31, |
|
|
|
2019 |
|
2018 |
|
|
|
Amounts |
|
% of Net Sales |
|
Amounts |
|
% of Net Sales |
|
% Change |
Gross profit |
$ |
230.5 |
|
|
5.55 |
% |
|
$ |
217.0 |
|
|
5.31 |
% |
|
6.2 |
% |
Cigarette inventory holding
gains |
(10.1 |
) |
|
(0.24 |
)% |
|
(3.1 |
) |
|
(0.08 |
)% |
|
|
Candy inventory holding
gains |
(1.1 |
) |
|
(0.03 |
)% |
|
— |
|
|
— |
% |
|
|
LIFO expense |
5.9 |
|
|
0.14 |
% |
|
5.2 |
|
|
0.13 |
% |
|
|
Remaining gross
profit |
$ |
225.2 |
|
|
5.42 |
% |
|
$ |
219.1 |
|
|
5.36 |
% |
|
2.8 |
% |
|
The Company’s operating expenses for the fourth
quarter of 2019 were $205.6 million compared to $200.0 million for
the same period in 2018. The increase in operating expenses
was due primarily to higher warehousing and distribution costs and
higher employee bonus and incentives. Operating expenses as a
percentage of remaining gross profit were 91.3% for the fourth
quarter of 2019 and 2018.
Net income increased to $16.2 million during the
fourth quarter of 2019 compared to $12.1 million for the same
period in 2018. Adjusted EBITDA, a non-GAAP financial
measure, increased 23.8% to $48.3 million in the fourth quarter of
2019 compared to $39.0 million in the fourth quarter of 2018.
Excluding inventory holding gains of $11.2 million in the fourth
quarter of 2019 and $3.1 million in the same quarter of the prior
year, Adjusted EBITDA increased by 3.3%.
The following table reconciles Adjusted EBITDA
to net income, its most directly 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 December 31, |
|
|
|
2019 |
|
2018 |
|
% Change |
|
|
|
|
|
|
Net income |
$ |
16.2 |
|
|
$ |
12.1 |
|
|
33.9 |
% |
Interest expense, net(1) |
3.6 |
|
|
3.1 |
|
|
|
Provision for income
taxes |
4.6 |
|
|
3.1 |
|
|
|
Depreciation &
amortization |
15.1 |
|
|
15.0 |
|
|
|
LIFO expense |
5.9 |
|
|
5.2 |
|
|
|
Stock-based compensation
expense |
2.4 |
|
|
1.8 |
|
|
|
Foreign currency transaction
losses (gains), net |
0.5 |
|
|
(1.3 |
) |
|
|
Adjusted
EBITDA |
$ |
48.3 |
|
|
$ |
39.0 |
|
|
23.8 |
% |
Note (1):
Interest expense, net, is reported net of interest income. |
|
Diluted earnings per-share (EPS) was $0.35 for
the fourth quarter of 2019 compared to $0.26 for the fourth quarter
of 2018. Diluted EPS excluding the impact of LIFO, a non-GAAP
financial measure, was $0.45 in the fourth quarter compared to
$0.34 for the fourth quarter of 2018. See the attached
“Supplemental Schedule for Items Impacting Diluted EPS” following
the financial schedules for a reconciliation of Diluted EPS to
Diluted EPS excluding LIFO expense.
2019 Full Year Results
Net sales increased 1.7% to $16.7 billion for
2019 compared to $16.4 billion for 2018, due primarily to an
increase in non-cigarette sales of 6.6%. The growth in
non-cigarette sales was due primarily to an increase in sales to
existing customers and net market share gains. Non-cigarette
sales increased to 34.7% of total net sales compared to 33.1% for
the same period in 2018. Cigarette sales decreased 0.7%
driven primarily by declines in carton sales which were partially
offset by manufacturer price increases and net market share
gains.
Gross profit increased 6.5% to $924.2 million in
2019 compared to $867.5 million in 2018. The increase in
gross profit was driven primarily by an increase in non-cigarette
sales to existing customers and net market share gains, partially
offset by a decline in cigarette cartons sold. Remaining
gross profit, a non-GAAP financial measure, increased 6.5% to
$921.9 million from $865.7 million.
Gross profit margin increased 25 basis points to
5.54% of total net sales compared to 5.29% in
2018. Remaining gross profit margin improved 25 basis points
to 5.53% from 5.28%, driven primarily by a shift in sales mix
toward higher margin non-cigarette products and margin expansion in
non-cigarette products. Non-cigarette margins increased due
primarily to growth in higher margin categories including fresh
foods, candy and alternative nicotine and the Company’s strategic
pricing initiatives.
The following table reconciles remaining gross
profit to gross profit, its most directly 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 Twelve MonthsEnded December
31, |
|
|
|
2019 |
|
2018 |
|
|
|
Amounts |
|
% of Net Sales |
|
Amounts |
|
% of Net Sales |
|
% Change |
Gross
profit |
$ |
924.2 |
|
|
5.54 |
% |
|
$ |
867.5 |
|
|
5.29 |
% |
|
6.5 |
% |
Cigarette inventory holding gains |
(23.0 |
) |
|
(0.14 |
)% |
|
(19.6 |
) |
|
(0.12 |
)% |
|
|
Other inventory holding gains(1) |
(6.9 |
) |
|
(0.04 |
)% |
|
(7.4 |
) |
|
(0.05 |
)% |
|
|
LIFO expense |
27.6 |
|
|
0.17 |
% |
|
25.2 |
|
|
0.15 |
% |
|
|
Remaining gross profit |
$ |
921.9 |
|
|
5.53 |
% |
|
$ |
865.7 |
|
|
5.28 |
% |
|
6.5 |
% |
Note (1): Other inventory holding gains consist of
$6.9 million in candy inventory holding gains in 2019 and $7.4
million in cigarette tax stamp inventory holding gains in
2018. |
|
The Company’s operating expenses were $831.6
million compared to $795.7 million the prior year. The
increase was due primarily to higher warehousing and distribution
expenses, costs related to the relocation of our headquarters and
an increase in bad debt expense. Operating expenses as a
percentage of remaining gross profit decreased to 90.2% compared to
91.9% in 2018 due primarily to the shift in sales mix to higher
margin non-cigarette products and operating expense leverage.
Net income increased to $57.7 million in 2019
compared to $45.5 million for 2018. Adjusted EBITDA, a
non-GAAP financial measure, increased 15.8% to $190.7 million in
2019 compared to $164.7 million last year. The increases in
net income and Adjusted EBITDA were due primarily to the shift
toward a more favorable mix of higher margin non-cigarette
products, the benefit of the strategic pricing initiatives and
operating expense leverage.
The following table reconciles Adjusted EBITDA
to net income, its most directly 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 Twelve Months Ended December 31, |
|
|
|
2019 |
|
2018 |
|
% Change |
|
|
|
|
|
|
Net
income |
$ |
57.7 |
|
|
$ |
45.5 |
|
|
26.8 |
% |
Interest expense, net(1) |
14.4 |
|
|
13.7 |
|
|
|
Provision for income taxes |
19.7 |
|
|
14.4 |
|
|
|
Depreciation & amortization |
60.9 |
|
|
59.5 |
|
|
|
LIFO expense |
27.6 |
|
|
25.2 |
|
|
|
Stock-based compensation expense |
9.6 |
|
|
8.2 |
|
|
|
Foreign currency transaction losses (gains), net |
0.8 |
|
|
(1.8 |
) |
|
|
Adjusted EBITDA |
$ |
190.7 |
|
|
$ |
164.7 |
|
|
15.8 |
% |
Note (1):
Interest expense, net, is reported net of interest income. |
|
Diluted EPS was $1.25 for 2019 compared to $0.99
in 2018. Diluted EPS excluding the impact of LIFO, a Non-GAAP
financial measure, was $1.69 for 2019 and $1.39 for 2018. See
the attached “Supplemental Schedule for Items Impacting Diluted
EPS” following the financial schedules for a reconciliation of
Diluted EPS to Diluted EPS excluding LIFO expense.
Balance Sheet and LiquidityThe
outstanding balance on the revolving credit facility (“Credit
Facility”) was $324.8 million compared to $320.0 million at the end
of 2018. The increase in the outstanding balance in
2019 was due primarily to a larger than expected increase in
working capital as a result of the timing of year end cigarette
purchases in advance of an anticipated cigarette price increase in
early 2020. The average borrowings during the year were
$303.2 million compared to $336.8 million in 2018. The amount
available to draw on the Credit Facility as of December 31, 2019
was $341.7 million. Free cash flow for 2019 was approximately
$61 million, the majority of which was used to fund dividend
payments of $20.7 million and repurchases of common stock of $22.0
million.
Dividend
Core-Mark also announced today that its Board of Directors has
declared a cash dividend of $0.12 per common share. The
dividend is payable on March 27, 2020 to stockholders of
record as of the close of business on March 16, 2020.
2020 Full Year Guidance
The Company expects 2020 net sales to be between
$16.9 billion and $17.1 billion. Adjusted EBITDA is expected
to be between $190 million and $200 million. This guidance
assumes $20 million in cigarette inventory holding gains and does
not include any other significant holding gains. Adjusted
EBITDA of $190.7 million in 2019 included $6.9 million in
candy inventory holding gains and $23.0 million in cigarette
inventory holding gains. The 2019 candy inventory holding
gains resulted from manufacturer price increases that have
historically only occurred every 3 to 4 years and are not expected
to recur in 2020. Cigarette inventory holding gains of $23.0
million in 2019 exceeded our 2019 guidance of $19 million due
largely to manufacturer price increases that were well above prior
year levels. Adjusted to exclude the 2019 candy holding gain
of $6.9 million and $4.0 million in cigarette holding gains in
excess of our 2019 guidance, our normalized 2019 Adjusted EBITDA
would have been $179.8 million.
Diluted EPS for the full year is expected to be
between $1.15 and $1.30. Diluted EPS, excluding LIFO expense,
is expected to be between $1.66 and $1.81. Key assumptions in
the guidance include $32.0 million of LIFO expense, a 26% tax rate
and 46.0 million fully diluted shares outstanding. The
Company’s guidance assumes no new acquisitions or large customer
market share gains. In addition, capital expenditures for 2020 are
expected to be approximately $45 million, which will be used
for recurring maintenance projects, as well as upgrades to certain
distribution facilities and the relocation of one distribution
facility.
Conference Call and Webcast
Information
Core-Mark will host an earnings call on Monday,
March 2, 2020 at 8:00 a.m. Central time, during which
management will review the results of the fourth quarter and full
year. The call may be accessed by dialing 1-800-588-4973
using the code 49407142. The call may also be listened to on
the Company’s website 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, food 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 42,000 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 retailers, drug stores, box or supercenter stores,
grocery stores, liquor stores and other specialty and small format
stores that carry convenience products. For more information,
please visit www.core-mark.com.
Contact: David Lawrence, Vice President of Treasury and Investor
Relations, 1-800-622-1713 x 7923 or
david.lawrence@core-mark.com
About Non-GAAP Financial Measures
This press release includes non-GAAP financial
measures including diluted EPS excluding LIFO expense, Adjusted
EBITDA, remaining gross profit, remaining gross profit margin, and
operating expenses as a percentage of 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. Management uses 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 used by other companies 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 management
to measure operating performance. We believe Adjusted EBITDA
is also one of 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 (benefit) for income taxes, depreciation and
amortization, LIFO expense, stock-based compensation expense, and
net foreign currency transaction gains or losses.
Free Cash Flow is a measure used by management
to measure operating performance. We believe Free Cash Flow
is also one of 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. Free
Cash Flow is equal to net cash provided by operating activities
less additions to property, plant and equipment and capitalization
of software and related development costs.
Diluted EPS excluding LIFO expense is a measure
used by us to measure financial performance. We believe
Diluted EPS is also one of 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 and remaining gross profit margin are
non-GAAP financial measures. We provide these metrics to
segregate the effects of LIFO expense, cigarette and candy
inventory holding gains and other items that significantly affect
the comparability of gross profit. Operating expenses as a
percentage of remaining gross profit is a non-GAAP financial
measure used by us to measure operating leverage.
We do not provide a reconciliation for non-GAAP
estimates on a forward-looking basis (including the information
under “2020 Full Year Guidance” 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, which
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 Exchange Act of 1934
and the Securities Act of 1933. These statements include
statements regarding our guidance for 2020 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 may cause or contribute to such
differences include, but are not limited to, declining cigarette
sales volumes; our dependence on the convenience retail industry
for our revenues; our dependence on qualified labor, our senior
management and other key personnel; 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, regulations and other
matters negatively affecting the cigarette, tobacco and alternative
nicotine 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,
2019 filed with the SEC on March 2, 2020 and Part II,
Item 1A, “Risk Factors” of any quarterly report on Form 10-Q
for a more comprehensive discussion of these and other risk
factors. In addition, please note that the date of this press
release is March 2, 2020, 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) |
|
|
|
|
|
December 31, |
|
2019 |
|
2018 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
14.1 |
|
|
$ |
27.3 |
|
Accounts receivable, net of allowance for doubtful accounts of
$14.5 and $8.3 at December 31, 2019 and December 31, 2018,
respectively |
402.9 |
|
|
403.5 |
|
Other receivables, net |
96.2 |
|
|
89.4 |
|
Inventories, net |
670.9 |
|
|
689.0 |
|
Deposits and prepayments |
116.0 |
|
|
78.8 |
|
Total current assets |
1,300.1 |
|
|
1,288.0 |
|
Property and equipment,
net |
249.9 |
|
|
229.0 |
|
Operating lease right-of-use
assets |
199.8 |
|
|
— |
|
Goodwill |
72.8 |
|
|
72.8 |
|
Other intangible assets,
net |
47.2 |
|
|
51.1 |
|
Other non-current assets,
net |
28.6 |
|
|
25.2 |
|
Total assets |
$ |
1,898.4 |
|
|
$ |
1,666.1 |
|
Liabilities and Stockholders’ Equity |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
192.2 |
|
|
$ |
199.8 |
|
Book overdrafts |
23.9 |
|
|
49.4 |
|
Cigarette and tobacco taxes payable |
280.1 |
|
|
297.8 |
|
Operating lease liabilities |
39.5 |
|
|
— |
|
Accrued liabilities |
151.0 |
|
|
134.0 |
|
Total current liabilities |
686.7 |
|
|
681.0 |
|
Long-term debt |
382.1 |
|
|
346.2 |
|
Deferred income taxes |
22.6 |
|
|
27.1 |
|
Long-term operating lease
liabilities |
173.4 |
|
|
— |
|
Other long-term
liabilities |
5.6 |
|
|
14.6 |
|
Claims liabilities |
36.1 |
|
|
30.2 |
|
Total liabilities |
1,306.5 |
|
|
1,099.1 |
|
Stockholders’ equity: |
|
|
|
Common stock, $0.01 par value (150,000,000 shares authorized;
52,702,551 and 52,524,853 shares issued; 45,113,722 and 45,703,705
shares outstanding at December 31, 2019 and 2018,
respectively) |
0.5 |
|
|
0.5 |
|
Additional paid-in capital |
290.6 |
|
|
283.3 |
|
Treasury stock at cost (7,588,829 and 6,821,148 shares of common
stock at December 31, 2019 and 2018, respectively) |
(112.6 |
) |
|
(90.6 |
) |
Retained earnings |
418.5 |
|
|
381.6 |
|
Accumulated other comprehensive loss |
(5.1 |
) |
|
(7.8 |
) |
Total stockholders’ equity |
591.9 |
|
|
567.0 |
|
Total liabilities and stockholders’ equity |
$ |
1,898.4 |
|
|
$ |
1,666.1 |
|
|
CORE-MARK
HOLDING COMPANY, INC. AND SUBSIDIARIES |
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS |
(In millions, except
per share data) |
(Unaudited) |
|
Three Months Ended |
|
Twelve Months Ended |
|
December 31, |
|
December 31, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Net sales |
$ |
4,154.8 |
|
|
$ |
4,089.7 |
|
|
$ |
16,670.5 |
|
|
$ |
16,395.3 |
|
Cost of goods sold |
3,924.3 |
|
|
3,872.7 |
|
|
15,746.3 |
|
|
15,527.8 |
|
Gross profit |
230.5 |
|
|
217.0 |
|
|
924.2 |
|
|
867.5 |
|
Warehousing and distribution
expenses |
140.2 |
|
|
136.4 |
|
|
566.2 |
|
|
540.6 |
|
Selling, general and
administrative expenses |
63.1 |
|
|
61.2 |
|
|
255.4 |
|
|
245.1 |
|
Amortization of intangible
assets |
2.3 |
|
|
2.4 |
|
|
10.0 |
|
|
10.0 |
|
Total operating expenses |
205.6 |
|
|
200.0 |
|
|
831.6 |
|
|
795.7 |
|
Income from operations |
24.9 |
|
|
17.0 |
|
|
92.6 |
|
|
71.8 |
|
Interest expense, net |
(3.6 |
) |
|
(3.1 |
) |
|
(14.4 |
) |
|
(13.7 |
) |
Foreign currency transaction
(losses) gains, net |
(0.5 |
) |
|
1.3 |
|
|
(0.8 |
) |
|
1.8 |
|
Income before income taxes |
20.8 |
|
|
15.2 |
|
|
77.4 |
|
|
59.9 |
|
Provision for income
taxes |
(4.6 |
) |
|
(3.1 |
) |
|
(19.7 |
) |
|
(14.4 |
) |
Net income |
$ |
16.2 |
|
|
$ |
12.1 |
|
|
$ |
57.7 |
|
|
$ |
45.5 |
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
Basic(1) |
$ |
0.35 |
|
|
$ |
0.26 |
|
|
$ |
1.26 |
|
|
$ |
0.99 |
|
Diluted(1) |
$ |
0.35 |
|
|
$ |
0.26 |
|
|
$ |
1.25 |
|
|
$ |
0.99 |
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding: |
|
|
|
|
|
|
|
Basic(1) |
45.7 |
|
|
45.7 |
|
|
45.7 |
|
|
46.0 |
|
Diluted(1) |
46.0 |
|
|
46.0 |
|
|
46.0 |
|
|
46.1 |
|
|
|
|
|
|
|
|
|
(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) |
|
Twelve Months Ended |
|
December 31, |
|
2019 |
|
2018 |
Cash flows from operating
activities: |
|
|
|
Net income |
$ |
57.7 |
|
|
$ |
45.5 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
LIFO and inventory provisions |
27.7 |
|
|
25.9 |
|
Amortization of debt issuance costs |
0.8 |
|
|
0.8 |
|
Stock-based compensation expense |
9.6 |
|
|
8.2 |
|
Bad debt expense, net |
7.1 |
|
|
3.6 |
|
Loss on disposals |
— |
|
|
0.6 |
|
Depreciation and amortization |
60.9 |
|
|
59.5 |
|
Foreign currency transaction losses (gains) |
0.8 |
|
|
(1.8 |
) |
Deferred income taxes |
(4.7 |
) |
|
(0.1 |
) |
Changes in operating assets and liabilities: |
|
|
|
Accounts receivable, net |
(5.2 |
) |
|
29.0 |
|
Other receivables, net |
(6.2 |
) |
|
4.3 |
|
Inventories, net |
(5.0 |
) |
|
(34.4 |
) |
Deposits, prepayments and other non-current assets |
(42.9 |
) |
|
23.6 |
|
Accounts payable |
(8.6 |
) |
|
31.0 |
|
Cigarette and tobacco taxes payable |
(20.0 |
) |
|
(2.3 |
) |
Claims, accrued and other long-term liabilities |
17.7 |
|
|
17.8 |
|
Net cash provided by operating activities |
89.7 |
|
|
211.2 |
|
Cash
flows from investing activities: |
|
|
|
Acquisition of business, net of cash acquired |
(2.5 |
) |
|
(2.5 |
) |
Additions to property and equipment, net |
(22.8 |
) |
|
(20.1 |
) |
Capitalization of software and related development costs |
(6.0 |
) |
|
(2.0 |
) |
Proceeds from sale of property and equipment |
0.3 |
|
|
0.2 |
|
Net cash used in investing activities |
(31.0 |
) |
|
(24.4 |
) |
Cash
flows from financing activities: |
|
|
|
Borrowings under revolving credit facility |
1,692.6 |
|
|
1,769.9 |
|
Repayments under revolving credit facility |
(1,687.8 |
) |
|
(1,938.1 |
) |
Payments of financing costs |
— |
|
|
— |
|
Payments of finance leases |
(5.6 |
) |
|
(3.0 |
) |
Dividends paid |
(20.7 |
) |
|
(18.9 |
) |
Repurchases of common stock |
(22.0 |
) |
|
(15.5 |
) |
Tax withholdings related to net share settlements of restricted
stock units |
(2.2 |
) |
|
(1.7 |
) |
(Decrease) Increase in book overdrafts, net |
(25.5 |
) |
|
4.1 |
|
Net cash used in financing activities |
(71.2 |
) |
|
(203.2 |
) |
Effects of changes in foreign exchange rates |
(0.7 |
) |
|
2.1 |
|
Change in cash and cash equivalents |
(13.2 |
) |
|
(14.3 |
) |
Cash
and cash equivalents, beginning of period |
27.3 |
|
|
41.6 |
|
Cash
and cash equivalents, end of period |
$ |
14.1 |
|
|
$ |
27.3 |
|
Supplemental disclosures: |
|
|
|
Cash received (paid) during the period for: |
|
|
|
Income taxes, net |
$ |
(18.7 |
) |
|
$ |
10.1 |
|
Interest paid |
$ |
(12.0 |
) |
|
$ |
(13.0 |
) |
Unpaid property and equipment purchases included in accrued
liabilities |
$ |
— |
|
|
$ |
0.1 |
|
Non-cash transactions between other non-current assets and other
long-term liabilities |
$ |
4.7 |
|
|
$ |
— |
|
|
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 December 31, |
|
Twelve Months Ended December 31, |
|
2019(a)(b) |
|
2018(a)(b) |
|
% Change |
|
2019(a)(b) |
|
2018(a)(b) |
|
% Change |
Net
income |
$ |
16.2 |
|
|
$ |
12.1 |
|
|
33.9 |
% |
|
$ |
57.7 |
|
|
$ |
45.5 |
|
|
26.8 |
% |
Diluted shares |
46.0 |
|
|
46.0 |
|
|
|
|
46.0 |
|
|
46.1 |
|
|
|
Diluted EPS |
$ |
0.35 |
|
|
$ |
0.26 |
|
|
34.6 |
% |
|
$ |
1.25 |
|
|
$ |
0.99 |
|
|
26.3 |
% |
LIFO expense |
0.10 |
|
|
0.08 |
|
|
|
|
0.44 |
|
|
0.40 |
|
|
|
Diluted EPS excluding LIFO expense |
$ |
0.45 |
|
|
$ |
0.34 |
|
|
32.4 |
% |
|
$ |
1.69 |
|
|
$ |
1.39 |
|
|
21.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Additional Items Impacting Diluted EPS: |
|
|
|
|
|
|
|
|
|
|
|
Cigarette inventory holding gains(1) |
0.17 |
|
|
0.05 |
|
|
|
|
0.37 |
|
|
0.31 |
|
|
|
Cigarette tax stamp inventory holding gains(2) |
— |
|
|
— |
|
|
|
|
— |
|
|
0.12 |
|
|
|
Candy inventory holding
gains (3) |
0.02 |
|
|
— |
|
|
|
|
0.11 |
|
|
— |
|
|
|
Business expansion and integration costs(4) |
— |
|
|
(0.02 |
) |
|
|
|
— |
|
|
(0.04 |
) |
|
|
Net OTP tax items(5) |
— |
|
|
— |
|
|
|
|
— |
|
|
(0.01 |
) |
|
|
Headquarters relocation expenses(6) |
— |
|
|
— |
|
|
|
|
(0.05 |
) |
|
— |
|
|
|
Legacy bad debt expense(7) |
— |
|
|
— |
|
|
|
|
(0.03 |
) |
|
— |
|
|
|
Legal settlement costs & related fees(8) |
— |
|
|
— |
|
|
|
|
— |
|
|
(0.05 |
) |
|
|
Foreign exchange (losses)/gains(9) |
(0.01 |
) |
|
0.02 |
|
|
|
|
(0.01 |
) |
|
0.03 |
|
|
|
(a) Amounts and percentages have been rounded for presentation
purposes and may differ from unrounded results. (b) The per share
impacts of the above items were calculated using a tax rate of
24.0% and 26.7% for the three and twelve months ended December 31,
2019, respectively, versus 27.6% and 26.0% for the same periods in
2018. |
(1) Cigarette inventory holding gains |
Cigarette inventory holding gains were $10.1 million and $23.0
million for the three months and twelve months ended December 31,
2019, respectively, versus $3.1 million and $19.6 million for the
three and twelve months ended December 31, 2018. |
(2) Cigarette tax stamp inventory holding
gains |
Cigarette tax stamp inventory holding gains were $7.4 million for
the twelve months ended December 31, 2018. |
(3) Candy
inventory holding gains |
Candy inventory
holding gains were $1.1 million and $6.9 million for the three and
twelve months ended December 31, 2019, respectively. |
(4) Business
expansion and integration costs |
During the three and twelve months ended December 31, 2018, the
Company incurred $1.4 million and $2.7 million in identifiable
business expansion expenses due primarily to integration of
acquisitions, respectively. |
(5) Net OTP
tax items |
During the twelve months ended December 31, 2018, the Company
recognized excise tax adjustments of $0.7 million. |
(6) Headquarters relocation expenses |
In connection with the Company's headquarters relocation, the
Company recognized expenses of $0.2 million and $3.0 million for
the three and twelve months ended December 31, 2019,
respectively. |
(7) Legacy bad debt expense |
For the twelve months ended December 31, 2019, a bad debt reserve
of $2.0 million was recorded to reserve for the balance of
un-reserved receivables pertaining to specific customers with
receivable balances exceeding twelve months past due and are no
longer deemed collectable. |
(8) Legal settlement costs & related fees |
The Company recognized legal settlement costs and related legal
fees of $3.0 million during the twelve months ended December 31,
2018. |
(9) Foreign exchange (losses)/gains |
Foreign exchange losses were ($0.5) million and ($0.8) million for
the three and twelve months ended December 31, 2019, respectively,
versus foreign exchange gains of $1.3 million and $1.8 million for
the three and twelve months ended December 31, 2018. |
|
CORE-MARK HOLDING COMPANY, INC. AND
SUBSIDIARIES |
RECONCILIATION OF OPERATING EXPENSES AS A PERCENTAGE OF REMAINING
GROSS PROFIT (NON-GAAP) |
(In millions, except percentages) |
(Unaudited) |
|
|
Three Months Ended |
|
Twelve Months Ended |
|
|
December 31, |
|
December 31, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Gross profit |
|
$ |
230.5 |
|
|
$ |
217.0 |
|
|
$ |
924.2 |
|
|
$ |
867.5 |
|
Cigarette inventory holding
gains |
|
(10.1 |
) |
|
(3.1 |
) |
|
(23.0 |
) |
|
(19.6 |
) |
Other holding gains(1) |
|
(1.1 |
) |
|
— |
|
|
(6.9 |
) |
|
(7.4 |
) |
LIFO expense |
|
5.9 |
|
|
5.2 |
|
|
27.6 |
|
|
25.2 |
|
Remaining gross profit
(non-GAAP) |
|
$ |
225.2 |
|
|
$ |
219.1 |
|
|
$ |
921.9 |
|
|
$ |
865.7 |
|
|
|
|
|
|
|
|
|
|
Warehousing and distribution
expenses |
|
$ |
140.2 |
|
|
$ |
136.4 |
|
|
$ |
566.2 |
|
|
$ |
540.6 |
|
Selling, general and
administrative expenses |
|
63.1 |
|
|
61.2 |
|
|
255.4 |
|
|
245.1 |
|
Amortization of intangible
assets |
|
2.3 |
|
|
2.4 |
|
|
10.0 |
|
|
10.0 |
|
Total operating expenses |
|
$ |
205.6 |
|
|
$ |
200.0 |
|
|
$ |
831.6 |
|
|
$ |
795.7 |
|
|
|
|
|
|
|
|
|
|
Warehouse and distribution
expenses as a percentage of remaining gross profit (non-GAAP) |
|
62.3 |
% |
|
62.3 |
% |
|
61.4 |
% |
|
62.4 |
% |
Selling, general and
administrative expenses as a percentage of remaining gross profit
(non-GAAP) |
|
28.0 |
% |
|
27.9 |
% |
|
27.7 |
% |
|
28.3 |
% |
Amortization of intangible
assets as a percentage of remaining gross profit (non-GAAP) |
|
1.0 |
% |
|
1.1 |
% |
|
1.1 |
% |
|
1.2 |
% |
Total operating expenses as a
percentage of remaining gross profit (non-GAAP) |
|
91.3 |
% |
|
91.3 |
% |
|
90.2 |
% |
|
91.9 |
% |
Note (1): Other
inventory holding gains consist of candy inventory holding gains of
$1.1 million and $6.9 million for the three and twelve months ended
December 31, 2019, respectively, and cigarette tax stamps inventory
holding gains of $7.4 million for the twelve months ended December
31, 2018. |
|
RECONCILIATION OF NET CASH PROVIDED BY OPERATING
ACTIVITIES TO FREE CASH FLOW(Unaudited and in millions)
|
Year Ended December 31, |
|
2019 |
|
2018 |
Net cash provided by operating activities |
$ |
89.7 |
|
|
$ |
211.2 |
|
Additions to property and
equipment, net |
(22.8 |
) |
|
(20.1 |
) |
Capitalization of software and
related development costs |
(6.0 |
) |
|
(2.0 |
) |
Free Cash Flow (non-GAAP) |
$ |
60.9 |
|
|
$ |
189.1 |
|
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