Core-Mark Holding Company, Inc. (NASDAQ: CORE) (“the
Company”), 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 third quarter
ended September 30, 2020.
“Our results for the third quarter demonstrate
Core-Mark’s resiliency in what remains a challenging business
environment heavily impacted by the pandemic,” said Scott E.
McPherson, President and Chief Executive Officer. “In a year
where sales mix and margins have faced tremendous pressure, we have
delivered year-to-date growth in earnings through a disciplined
approach to cost control and productivity. Equal in
importance to our financial performance has been the company’s
commitment to advance key programs and technologies enhancing our
customer value proposition. Lastly, I am grateful to our
employees for their continued hard work and dedication and want to
thank our customers and vendors for their commitment, cooperation
and support.”
Third Quarter Results
Net sales in the third quarter of 2020 were
$4.50 billion compared to $4.42 billion for the same period in
2019. Sales of both cigarettes and non-cigarette products in the
third quarter of 2020 continued to be impacted by changes in
consumer buying habits as a result of COVID-19. Cigarette
sales increased 4.2% driven by manufacturers’ price increases and
cigarette carton sales that outperformed historical trends,
increasing 0.1% for the third quarter. Non-cigarette sales
decreased 2.6% for the quarter with the largest declines coming
from the food, health, beauty & general and candy
categories. Sales of other tobacco products (“OTP”) continued
their strong growth increasing 9.0% for the third quarter.
Non-cigarette sales decreased to 33.4% of total net sales for the
third quarter of 2020 compared to 34.9% for the same period in
2019.
Gross profit in the third quarter of 2020
decreased 4.7%, or $11.6 million, to $235.0 million from $246.6
million for the same period in 2019, driven primarily by the
year-over-year shortfalls in non-cigarette sales, resulting
primarily from COVID-19 and a $0.5 million decrease in inventory
holding gains. Remaining gross profit, a non-GAAP financial
measure, decreased 5.2% to $234.8 million from $247.8 million.
______________________________________Note (1):
See below for the “Reconciliation of Net Income to Adjusted
EBITDA.”
Gross profit margin for the third quarter was
5.22% of total net sales compared to 5.58% for the same period in
2019. The change in sales mix between cigarettes and
non-cigarettes contributed approximately 40% of the gross profit
margin decline. Within the non-cigarette category, gross
profit margin for the third quarter declined as a result of a shift
in the sales mix toward lower margin items and a decline in margin
rate, most notably in alternative nicotine products.
Cigarette remaining gross profit margin for the third quarter
declined eight basis points due primarily to manufacturer price
increases.
The following table reconciles gross profit to
remaining gross profit, a non-GAAP financial measure, as gross
profit is the 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 September 30, |
|
|
|
For the Nine Months Ended September 30, |
|
|
|
2020 |
|
2019 |
|
|
|
2020 |
|
2019 |
|
|
|
Amounts |
|
Amounts |
|
% Change |
|
Amounts |
|
Amounts |
|
% Change |
Gross profit |
$ |
235.0 |
|
|
$ |
246.6 |
|
|
(4.7 |
) |
% |
|
$ |
666.5 |
|
|
$ |
693.7 |
|
|
(3.9 |
) |
% |
Cigarette inventory holding
gains |
(5.6 |
) |
|
(0.3 |
) |
|
|
|
(22.4 |
) |
|
(12.9 |
) |
|
|
Candy inventory holding
gains |
— |
|
|
(5.8 |
) |
|
|
|
— |
|
|
(5.8 |
) |
|
|
LIFO expense |
5.4 |
|
|
7.3 |
|
|
|
|
21.5 |
|
|
21.7 |
|
|
|
Remaining gross profit
(Non-GAAP) |
$ |
234.8 |
|
|
$ |
247.8 |
|
|
(5.2 |
) |
% |
|
$ |
665.6 |
|
|
$ |
696.7 |
|
|
(4.5 |
) |
% |
The Company’s operating expenses decreased 5.9%
to $200.2 million from $212.7 million for the same period in
2019. The decrease in operating expenses was driven primarily
by increased productivity and cost savings initiatives implemented
mainly in response to COVID-19. Operating expenses as a
percentage of remaining gross profit decreased to 85.3% compared to
85.8% for the third quarter of 2019.
Net income was $23.0 million for the third
quarter of 2020 compared to $22.5 million for the same period in
2019. Adjusted EBITDA, a non-GAAP financial measure, was
$59.3 million compared to $59.2 million for the third quarter of
2019.
The following table reconciles net income to
Adjusted EBITDA, a non-GAAP financial measure, as net income is the
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 September 30, |
|
|
|
For the Nine Months Ended September 30, |
|
|
|
2020 |
|
2019 |
|
% Change |
|
2020 |
|
2019 |
|
% Change |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
$ |
23.0 |
|
|
$ |
22.5 |
|
|
2.2 |
% |
|
$ |
44.2 |
|
|
$ |
41.5 |
|
|
6.5 |
% |
Interest expense, net(1) |
2.1 |
|
|
4.2 |
|
|
|
|
8.4 |
|
|
10.8 |
|
|
|
Provision for income
taxes |
9.2 |
|
|
8.1 |
|
|
|
|
16.7 |
|
|
15.1 |
|
|
|
Depreciation and
amortization |
16.5 |
|
|
14.9 |
|
|
|
|
48.9 |
|
|
45.8 |
|
|
|
LIFO expense |
5.4 |
|
|
7.3 |
|
|
|
|
21.5 |
|
|
21.7 |
|
|
|
Stock-based compensation
expense |
2.6 |
|
|
3.1 |
|
|
|
|
6.7 |
|
|
7.2 |
|
|
|
Foreign currency transaction
losses (gains), net |
0.5 |
|
|
(0.9 |
) |
|
|
|
0.7 |
|
|
0.3 |
|
|
|
Adjusted EBITDA
(Non-GAAP) |
$ |
59.3 |
|
|
$ |
59.2 |
|
|
0.2 |
% |
|
$ |
147.1 |
|
|
$ |
142.4 |
|
|
3.3 |
% |
______________________________________________
(1) Interest expense, net, is reported net of interest
income.
Diluted Earnings per Share (EPS) increased to
$0.51 for the third quarter of 2020 compared to $0.49 for the same
period in 2019. Diluted EPS excluding LIFO expense, a
non-GAAP financial measure, was $0.60 for both the third quarter of
2020 and 2019. See the attached “Supplemental Schedule for
Items Impacting Diluted EPS.”
LIQUIDITY FINANCIAL METRICS |
(Unaudited and $ in millions) |
|
|
|
|
|
September 30, |
|
December 31, |
|
2020 |
|
2019 |
|
|
|
|
Cash and Cash Equivalents |
$ |
11.7 |
|
|
$ |
14.1 |
|
Long-term
Debt |
444.7 |
|
|
382.1 |
|
Cash and Cash Equivalents were $11.7 million as
of September 30, 2020 compared with $14.1 million at
December 31, 2019. The outstanding balance on the
Company’s revolving credit facility (the “Credit Facility”) was
$363.0 million as of September 30, 2020 compared with $324.8
million as of December 31, 2019. Availability under the
Credit Facility was $352.1 million as of September 30,
2020 compared with $341.7 million as of December 31,
2019. The increase in the Credit Facility balance is due
primarily to higher cigarette inventory on hand at
September 30, 2020 in anticipation of manufacturer price
increases.
Net cash used in operating activities for the
first nine months of 2020 was $7.7 million, an improvement of
$103.4 million compared with the same period in 2019. This
improvement was driven primarily by a reduction in accounts
receivable and other working capital changes due primarily to the
timing of certain cigarette manufacturers’ price increases.
Dividend
Core-Mark’s Board of Directors has approved a
$0.13 cash dividend per common share, or $0.52 on an annualized
basis. The dividend is payable on December 18, 2020 to
stockholders of record as of the close of business on
November 20, 2020.
2020 Full Year Guidance
The Company has increased its 2020 guidance for
net sales, diluted earnings per share and adjusted EBITDA.
Net sales are expected to be between $16.8 billion and $16.9
billion, compared with prior guidance of $16.5 billion to
$16.8 billion. Adjusted EBITDA is now expected to be between
$186 million and $190 million, compared with prior guidance of $173
million to $183 million. The revised guidance ranges
anticipate year-over-year carton declines in the 0% to 3% range in
the fourth quarter of 2020 and continued impact from COVID-19 on
non-cigarette sales and margins. Guidance also assumes full
year inventory holding gains in the range of $26 to $27
million. The guidance ranges above are based on current
expectations and do not contemplate significant changes in the
impact of COVID-19 or economic conditions on the Company’s
business.
Diluted EPS for the full year is now expected to
be between $1.13 and $1.20 compared to prior guidance of $0.90 and
$1.06. Diluted EPS, excluding LIFO expense, is expected to be
between $1.62 and $1.69 compared to prior guidance of $1.42 to
$1.59. In terms of other key assumptions, LIFO expense is now
expected to be $30 million compared with $32 million in prior
guidance, a 27% annual tax rate compared to 26% in prior guidance
and the estimate for fully diluted shares outstanding remains
unchanged at 45.3 million. Capital expenditures for 2020 are
expected to be approximately $35 million, consistent with prior
guidance. The Company’s guidance assumes no new acquisitions
or large customer market share gains.
Conference Call and Webcast
Information
Core-Mark will host an earnings call on
Thursday, November 5, 2020 at 8:00 a.m. Central time during
which management will review the results of the third quarter of
2020. The call may be accessed by dialing 1-800-588-4973
using the code 49992941. 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, 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 41,000 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, mass merchants, liquor
and specialty stores, and other 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, Free Cash
Flow, Adjusted EBITDA, remaining gross profit, 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. 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 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. Diluted EPS
excluding LIFO expense 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.
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 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. 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, the extent and
duration of the disruption to business activities caused by the
global health crisis associated with the novel coronavirus pandemic
(“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, 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, including ongoing litigation
related to Juul 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, including
increased regulation of electronic cigarette and other alternative
nicotine products; 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 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
November 5, 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) |
|
|
|
|
|
September 30, |
|
December 31, |
|
2020 |
|
2019 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
11.7 |
|
|
$ |
14.1 |
|
Accounts receivable, net of allowance for credit losses of $15.2
and $14.5 as of September 30, 2020 and December 31, 2019,
respectively |
387.3 |
|
|
402.9 |
|
Other receivables, net |
110.1 |
|
|
96.2 |
|
Inventories, net |
832.2 |
|
|
670.9 |
|
Deposits and prepayments |
86.4 |
|
|
116.0 |
|
Total current assets |
1,427.7 |
|
|
1,300.1 |
|
Property and equipment,
net |
269.1 |
|
|
249.9 |
|
Operating lease right-of-use
assets |
174.7 |
|
|
199.8 |
|
Goodwill |
72.8 |
|
|
72.8 |
|
Other intangible assets,
net |
42.4 |
|
|
47.2 |
|
Other non-current assets,
net |
25.3 |
|
|
28.6 |
|
Total assets |
$ |
2,012.0 |
|
|
$ |
1,898.4 |
|
Liabilities and Stockholders’ Equity |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
242.7 |
|
|
$ |
192.2 |
|
Book overdrafts |
43.3 |
|
|
23.9 |
|
Cigarette and tobacco taxes payable |
225.2 |
|
|
280.1 |
|
Operating lease liabilities |
33.3 |
|
|
39.5 |
|
Accrued liabilities |
176.6 |
|
|
151.0 |
|
Total current liabilities |
721.1 |
|
|
686.7 |
|
Long-term debt |
444.7 |
|
|
382.1 |
|
Deferred income taxes |
22.9 |
|
|
22.6 |
|
Long-term operating lease
liabilities |
151.4 |
|
|
173.4 |
|
Other long-term
liabilities |
15.9 |
|
|
5.6 |
|
Claims liabilities |
37.4 |
|
|
36.1 |
|
Total liabilities |
1,393.4 |
|
|
1,306.5 |
|
Stockholders’ equity: |
|
|
|
Common stock, $0.01 par value (150,000,000 shares authorized;
52,916,459 and 52,702,551 shares issued; 45,092,286 and 45,113,722
shares outstanding at September 30, 2020 and December 31,
2019, respectively) |
0.5 |
|
|
0.5 |
|
Additional paid-in capital |
294.8 |
|
|
290.6 |
|
Treasury stock at cost (7,824,173 and 7,588,829 shares of common
stock at September 30, 2020 and December 31, 2019,
respectively) |
(118.0 |
) |
|
(112.6 |
) |
Retained earnings |
446.6 |
|
|
418.5 |
|
Accumulated other comprehensive loss |
(5.3 |
) |
|
(5.1 |
) |
Total stockholders’ equity |
618.6 |
|
|
591.9 |
|
Total liabilities and stockholders’ equity |
$ |
2,012.0 |
|
|
$ |
1,898.4 |
|
CORE-MARK
HOLDING COMPANY, INC. AND SUBSIDIARIES |
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS |
(In millions, except
per share data) |
(Unaudited) |
|
Three Months Ended |
|
Nine Months Ended |
|
September 30, |
|
September 30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Net sales |
$ |
4,502.6 |
|
|
$ |
4,422.6 |
|
|
$ |
12,705.8 |
|
|
$ |
12,515.7 |
|
Cost of goods sold |
4,267.6 |
|
|
4,176.0 |
|
|
12,039.3 |
|
|
11,822.0 |
|
Gross profit |
235.0 |
|
|
246.6 |
|
|
666.5 |
|
|
693.7 |
|
Warehousing and distribution expenses |
140.4 |
|
|
148.6 |
|
|
408.3 |
|
|
426.0 |
|
Selling, general and administrative expenses |
57.3 |
|
|
61.8 |
|
|
181.0 |
|
|
192.3 |
|
Amortization of intangible assets |
2.5 |
|
|
2.3 |
|
|
7.2 |
|
|
7.7 |
|
Total operating expenses |
200.2 |
|
|
212.7 |
|
|
596.5 |
|
|
626.0 |
|
Income from operations |
34.8 |
|
|
33.9 |
|
|
70.0 |
|
|
67.7 |
|
Interest expense, net |
(2.1 |
) |
|
(4.2 |
) |
|
(8.4 |
) |
|
(10.8 |
) |
Foreign currency transaction (losses) gains, net |
(0.5 |
) |
|
0.9 |
|
|
(0.7 |
) |
|
(0.3 |
) |
Income before income taxes |
32.2 |
|
|
30.6 |
|
|
60.9 |
|
|
56.6 |
|
Provision for income taxes |
(9.2 |
) |
|
(8.1 |
) |
|
(16.7 |
) |
|
(15.1 |
) |
Net income |
$ |
23.0 |
|
|
$ |
22.5 |
|
|
$ |
44.2 |
|
|
$ |
41.5 |
|
|
|
|
|
|
|
|
|
Basic earnings per common share (1) |
$ |
0.51 |
|
|
$ |
0.49 |
|
|
$ |
0.98 |
|
|
$ |
0.91 |
|
|
|
|
|
|
|
|
|
Diluted earnings per common share (1) |
$ |
0.51 |
|
|
$ |
0.49 |
|
|
$ |
0.98 |
|
|
$ |
0.90 |
|
|
|
|
|
|
|
|
|
Basic weighted-average shares |
45.1 |
|
|
45.8 |
|
|
45.1 |
|
|
45.8 |
|
|
|
|
|
|
|
|
|
Diluted weighted-average shares |
45.4 |
|
|
46.1 |
|
|
45.3 |
|
|
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) |
|
Nine Months Ended |
|
September 30, |
|
2020 |
|
2019 |
Cash flows from
operating activities: |
|
|
|
Net income |
$ |
44.2 |
|
|
$ |
41.5 |
|
Adjustments to reconcile net income to net cash used in operating
activities: |
|
|
|
LIFO and inventory provisions |
21.6 |
|
|
21.4 |
|
Amortization of debt issuance costs |
0.6 |
|
|
0.6 |
|
Stock-based compensation expense |
6.7 |
|
|
7.2 |
|
Credit loss expense, net |
5.7 |
|
|
5.4 |
|
Impairment charge and other |
0.3 |
|
|
— |
|
Loss on disposals |
0.1 |
|
|
0.1 |
|
Depreciation and amortization |
48.9 |
|
|
45.8 |
|
Foreign currency losses, net |
0.7 |
|
|
0.3 |
|
Deferred income taxes |
0.3 |
|
|
0.5 |
|
Changes in operating assets and liabilities: |
|
|
|
Accounts receivable, net |
9.1 |
|
|
(29.9 |
) |
Other receivables, net |
(14.1 |
) |
|
(21.6 |
) |
Inventories, net |
(185.4 |
) |
|
(199.5 |
) |
Deposits, prepayments and other non-current assets |
23.3 |
|
|
(22.9 |
) |
Accounts payable |
51.2 |
|
|
74.2 |
|
Cigarette and tobacco taxes payable |
(53.6 |
) |
|
(61.3 |
) |
Claims, accrued and other long-term liabilities |
32.7 |
|
|
27.1 |
|
Net cash used in operating activities |
(7.7 |
) |
|
(111.1 |
) |
Cash flows from
investing activities: |
|
|
|
Acquisition of business |
— |
|
|
(2.5 |
) |
Additions to property and equipment, net |
(17.9 |
) |
|
(15.3 |
) |
Capitalization of software and related development costs |
(2.7 |
) |
|
(3.3 |
) |
Proceeds from sale of property and equipment, net |
— |
|
|
0.2 |
|
Proceeds from sale of other non-current assets |
1.1 |
|
|
— |
|
Net cash used in investing activities |
(19.5 |
) |
|
(20.9 |
) |
Cash flows from
financing activities: |
|
|
|
Borrowings under the Credit Facility |
1,424.5 |
|
|
1,334.6 |
|
Repayments under the Credit Facility |
(1,386.3 |
) |
|
(1,166.6 |
) |
Payments on finance leases |
(8.9 |
) |
|
(3.6 |
) |
Dividends paid |
(16.5 |
) |
|
(15.2 |
) |
Repurchases of common stock |
(5.4 |
) |
|
(8.1 |
) |
Tax withholdings related to net share settlements of restricted
stock units |
(2.5 |
) |
|
(2.2 |
) |
Increase (decrease) in book overdrafts |
19.4 |
|
|
(7.7 |
) |
Net cash provided by financing activities |
24.3 |
|
|
131.2 |
|
Effects of changes in foreign
exchange rates |
0.5 |
|
|
(0.5 |
) |
Change in cash and cash
equivalents |
(2.4 |
) |
|
(1.3 |
) |
Cash and cash equivalents,
beginning of period |
14.1 |
|
|
27.3 |
|
Cash and cash equivalents, end
of period |
$ |
11.7 |
|
|
$ |
26.0 |
|
Supplemental
disclosures: |
|
|
|
Cash (paid) received during the period for: |
|
|
|
Income taxes, net |
$ |
(22.3 |
) |
|
$ |
(13.6 |
) |
Interest |
$ |
(8.2 |
) |
|
$ |
(9.1 |
) |
Operating lease liabilities arising from obtaining new right-of-use
assets |
$ |
5.2 |
|
|
$ |
7.0 |
|
Finance lease liabilities arising from obtaining new right-of-use
assets |
$ |
36.9 |
|
|
$ |
29.3 |
|
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 September 30, |
|
Nine Months Ended September 30, |
|
2020 (a)(b) |
|
2019 (a)(b) |
|
% Change |
|
2020 (a)(b) |
|
2019 (a)(b) |
|
% Change |
Net
income |
$ |
23.0 |
|
|
$ |
22.5 |
|
|
2.2 |
% |
|
$ |
44.2 |
|
|
$ |
41.5 |
|
|
6.5 |
% |
Diluted shares |
45.4 |
|
|
46.1 |
|
|
|
|
45.3 |
|
|
46.1 |
|
|
|
Diluted EPS |
$ |
0.51 |
|
|
$ |
0.49 |
|
|
4.1 |
% |
|
$ |
0.98 |
|
|
$ |
0.90 |
|
|
8.9 |
% |
LIFO expense |
0.09 |
|
|
0.11 |
|
|
|
|
0.35 |
|
|
0.34 |
|
|
|
Diluted EPS excluding
LIFO expense (Non-GAAP) |
$ |
0.60 |
|
|
$ |
0.60 |
|
|
— |
% |
|
$ |
1.33 |
|
|
$ |
1.24 |
|
|
7.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Additional Items Impacting Diluted EPS: |
|
|
|
|
|
|
|
|
|
|
|
Cigarette inventory holding gains(1) |
$ |
0.09 |
|
|
$ |
0.01 |
|
|
|
|
$ |
0.36 |
|
|
$ |
0.20 |
|
|
|
Candy inventory holding gains(2) |
— |
|
|
0.09 |
|
|
|
|
— |
|
|
0.09 |
|
|
|
Headquarters relocation expenses(3) |
— |
|
|
(0.01 |
) |
|
|
|
— |
|
|
(0.04 |
) |
|
|
Legacy bad debt expense(4) |
— |
|
|
— |
|
|
|
|
— |
|
|
(0.03 |
) |
|
|
Foreign exchange (losses)/gains(5) |
(0.01 |
) |
|
0.01 |
|
|
|
|
(0.01 |
) |
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
27.4% and 26.5% for the three and nine months ended September 30,
2020, respectively, versus 28.7% and 27.7% for the same periods in
2019. |
(1)
Cigarette inventory holding gains |
Cigarette inventory
holding gains were $5.6 million and $22.4 million for the three and
nine months ended September 30, 2020, respectively, versus $0.3
million and $12.9 million for the three and nine months ended
September 30, 2019, respectively. |
(2) Candy
inventory holding gains |
Candy inventory
holding gains were $5.8 million for each of the three and nine
months ended September 30, 2019. |
(3)
Headquarters relocation expenses |
In connection with
the Company’s headquarters relocation, the Company recognized
expenses of $0.4 million and $2.8 million for the three and nine
months ended September 30, 2019, respectively. |
(4) Legacy
bad debt expense |
For the nine months
ended September 30, 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 were no longer deemed collectable. |
(5) Foreign
exchange (losses)/gains |
Foreign exchange
(losses)/gains were ($0.5) million and ($0.7) million for the three
and nine months ended September 30, 2020, respectively, versus $0.9
million and ($0.3) million for the three and nine months ended
September 30, 2019, respectively. |
CORE-MARK HOLDING COMPANY, INC. AND
SUBSIDIARIES |
RECONCILIATION OF OPERATING EXPENSES AS A PERCENTAGE OF REMAINING
GROSS PROFIT (NON-GAAP) |
(In millions, except percentages)(1) |
(Unaudited) |
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
|
September 30, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Gross profit |
|
$ |
235.0 |
|
|
|
$ |
246.6 |
|
|
|
$ |
666.5 |
|
|
|
$ |
693.7 |
|
|
Cigarette inventory holding
gains |
|
(5.6 |
) |
|
|
(0.3 |
) |
|
|
(22.4 |
) |
|
|
(12.9 |
) |
|
Candy inventory holding
gains |
|
— |
|
|
|
(5.8 |
) |
|
|
— |
|
|
|
(5.8 |
) |
|
LIFO expense |
|
5.4 |
|
|
|
7.3 |
|
|
|
21.5 |
|
|
|
21.7 |
|
|
Remaining gross profit
(non-GAAP) |
|
$ |
234.8 |
|
|
|
$ |
247.8 |
|
|
|
$ |
665.6 |
|
|
|
$ |
696.7 |
|
|
|
|
|
|
|
|
|
|
|
Warehousing and distribution
expenses |
|
$ |
140.4 |
|
|
|
$ |
148.6 |
|
|
|
$ |
408.3 |
|
|
|
$ |
426.0 |
|
|
Selling, general and
administrative expenses |
|
57.3 |
|
|
|
61.8 |
|
|
|
181.0 |
|
|
|
192.3 |
|
|
Amortization of intangible
assets |
|
2.5 |
|
|
|
2.3 |
|
|
|
7.2 |
|
|
|
7.7 |
|
|
Total operating expenses |
|
$ |
200.2 |
|
|
|
$ |
212.7 |
|
|
|
$ |
596.5 |
|
|
|
$ |
626.0 |
|
|
|
|
|
|
|
|
|
|
|
Warehouse and distribution
expense as a percentage of remaining gross profit (non-GAAP) |
|
59.8 |
|
% |
|
60.0 |
|
% |
|
61.3 |
|
% |
|
61.1 |
|
% |
Selling, general and
administrative expense as a percentage of remaining gross profit
(non-GAAP) |
|
24.4 |
|
% |
|
24.9 |
|
% |
|
27.2 |
|
% |
|
27.6 |
|
% |
Amortization of intangible
assets as a percentage of remaining gross profit (non-GAAP) |
|
1.1 |
|
% |
|
0.9 |
|
% |
|
1.1 |
|
% |
|
1.1 |
|
% |
Total operating expense as a
percentage of remaining gross profit (non-GAAP) |
|
85.3 |
|
% |
|
85.8 |
|
% |
|
89.6 |
|
% |
|
89.9 |
|
% |
______________________________________________
(1) Amounts and
percentages have been rounded for presentation purposes and may
differ from unrounded results.
RECONCILIATION OF NET CASH PROVIDED BY OPERATING
ACTIVITIES TO FREE CASH FLOW(Unaudited and in millions)
|
Nine Months Ended September 30, |
|
2020 |
|
2019 |
Net cash used in operating activities |
$ |
(7.7 |
) |
|
$ |
(111.1 |
) |
Additions to property and
equipment, net |
(17.9 |
) |
|
(15.3 |
) |
Capitalization of software and
related development costs |
(2.7 |
) |
|
(3.3 |
) |
Free Cash Flow (non-GAAP) |
$ |
(28.3 |
) |
|
$ |
(129.7 |
) |
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