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, provided an update on
the impact of the novel coronavirus pandemic (“COVID-19”).
“As the COVID-19 crisis continues to evolve, our
primary focus is on the health and safety of our employees, our
customers and the communities in which we serve,” said Scott E.
McPherson, President and Chief Executive Officer. “Given the
level of uncertainty surrounding this crisis and its duration, we
are withdrawing our 2020 guidance. Despite an initial
retail surge in early March, we have now faced three consecutive
weeks of material year over year volume declines. We have
taken aggressive actions to align our cost structure with the
declining volume trends, while maintaining high levels of service
to our customer partners and preserving the strength of our balance
sheet. Although no one can adequately prepare for a national
crisis of this scale, I am confident in our ability to emerge
quickly, propelled by the incredible efforts of our more than 8,000
dedicated associates and the resilience of our committed customers
across the US and Canada.”
Update on Recent Business TrendsFollowing an
acceleration in year over year sales growth through the first few
weeks of March, Core-Mark experienced a decline in year over year
sales volume through the last week of March and into the first two
weeks of April 2020. For the most recent week ended April 10, 2020,
the Company experienced a year over year sales decline of
approximately 12%, reflecting a 7% decline in cigarette sales and a
20% decline in non-cigarette sales. While the vast majority
of Core-Mark’s customers are convenience retailers that continue to
operate as essential businesses, the unprecedented impact of
COVID-19, including an increase in the level of shelter-in-place
orders by states, provinces, cities and counties, has resulted in a
significant downturn in miles driven, resulting in a decline in
convenience retail store visits across North America.
Core-Mark anticipates a continued decline in year-over-year
sales trends until shelter-in-place orders are lifted and normal
consumer traffic resumes. The change in product mix caused by
COVID-19 will have a negative impact on gross profit margin given
the recent sales trends that reflect a larger decline in
non-cigarette sales relative to cigarette sales.
Additionally, resulting from the crisis, the Company is
incurring material costs related to employee personal protective
equipment, an escalation in facility sanitation processes and
employee costs related to quarantines.
Actions Taken to Reduce Operating Costs and Preserve
LiquidityCore-Mark is taking aggressive steps toward
reducing operating costs to better align with the current sales
volume trends. Approximately 70% of operating expenses in
2019 were driven by employee wages and benefits, many of which are
variable and can fluctuate with volume levels. Core-Mark has
reduced hours worked for non-exempt employees in addition to making
headcount reductions. In addition to right sizing the
workforce to address the pandemic, Core-Mark suspended employer
contributions to the Company’s 401-K plan and made material
revisions to its vacation policies. Core-Mark is also
eliminating non-essential business expenses including travel,
meetings and events and other discretionary expenditures.
Core-Mark believes that these actions will help to mitigate the
impacts of COVID-19 while maintaining the Company’s ability to
provide the high level of service our customers expect and preserve
Core-Mark’s ability to scale up operations upon the eventual
economic recovery.
In addition to steps being taken to reduce operating expenses,
Core-Mark has taken actions to help preserve liquidity including
deferring non-critical capital expenditures, reducing inventory
levels to align with sales volumes and carefully managing accounts
receivable. The Company’s Board of Directors also has reduced
their director cash compensation for the remainder of 2020.
Share Repurchase / DividendCore-Mark is
suspending its share repurchase program due to the volatility
related to COVID-19. The Company has approximately $55 million
remaining under its $60 million share repurchase authorization.
Currently, the Company has no plans to modify its quarterly
dividend.
Strong Balance Sheet and Significant Liquidity
Core-Mark has a strong balance sheet and financial
flexibility. The Company believes it has the liquidity needed
to manage through the duration of this crisis. For
perspective, on Friday April 10, 2020, the Company had
approximately $400 million in availability under its $750 million
revolving credit facility which does not mature until March 2022.
The Company’s current availability under its credit facility
was reduced by a short term build of cigarette inventory of
approximately $100 million in response to Altria’s temporary
facility closure in March.
Update on Full-Year 2020 Financial
GuidanceGiven the rapidly evolving impact of COVID-19 on
economic conditions in both the U.S. and Canada, the Company is
withdrawing its full-year 2020 financial guidance provided on March
2, 2020 and is not providing an updated outlook at this time.
Core-MarkCore-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
Forward-Looking
StatementsStatements 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. 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, the extent and
duration of the disruption to business activities caused by the
global health crisis associated with the COVID-19 outbreak,
including the effects on vehicle miles driven, on the financial
health of our business partners, on supply chains, and on financial
and capital markets; 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, including
product, service and pricing pressures related to COVID-19; 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 and
our ability to maintain favorable supplier arrangements;
disruptions in suppliers’ operations, including the impact of
COVID-19 on our suppliers as well as supply chain, including
potential problems with inventory availability and the potential
result of higher cost of product and freight due to high demand of
products and low supply for an unpredictable period of time;
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; risks related
to changes to our workforce, including reductions to hours,
headcount and benefits as a result of COVID-19; 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 April 14, 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 (NASDAQ:CORE)
Historical Stock Chart
From Mar 2024 to Apr 2024
Core Mark (NASDAQ:CORE)
Historical Stock Chart
From Apr 2023 to Apr 2024