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Core-Mark Announces Third Quarter 2015 Financial Results
- Sales Increased 8.9% to
$3.0 Billion - Net Income was
$15.1 Million & EPS was$0.65 per diluted share - Adjusted EBITDA Increased by 13.2% to
$41.3 Million - The Company Adjusted its 2015 EPS Guidance for Expansion Activities, LIFO & Foreign Exchange Rates
- Dividend Increased
$0.03 , or 23%, to$0.16 per share quarterly, or$0.64 per share annually.
"
Third Quarter Results
Net sales increased 8.9% to
Gross profit increased 13.3% to
RECONCILIATION OF GROSS PROFIT TO REMAINING GROSS PROFIT | |||||||||||
(Unaudited and $ in millions) | |||||||||||
For the Three Months Ended |
|||||||||||
2015 | 2014 | % Change | |||||||||
Gross profit | $ | 171.6 | $ | 151.4 | 13.3 | % | |||||
Cigarette inventory holding gains | (0.6 | ) | (0.2 | ) | |||||||
Candy inventory holding gains | -- | (5.2 | ) | ||||||||
Cigarette tax stamp inventory holding gains | (8.3 | ) | -- | ||||||||
OTP tax items | -- | (2.3 | ) | ||||||||
LIFO expense | 3.3 | 6.5 | |||||||||
Remaining gross profit | $ | 166.0 | $ | 150.2 | 10.5 | % | |||||
The Company's operating expenses for the third quarter of 2015 were
Net income for the third quarter of 2015 was
RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA | ||||||||||
(Unaudited and $ in millions) | ||||||||||
For the Three Months Ended |
||||||||||
2015 | 2014 | % Change | ||||||||
Net income | $ | 15.1 | $ | 13.7 | 10.2 | % | ||||
Interest expense, net (1) | 0.5 | 0.4 | ||||||||
Provision for income taxes | 9.1 | 6.3 | ||||||||
Depreciation & amortization | 9.9 | 8.3 | ||||||||
LIFO expense | 3.3 | 6.5 | ||||||||
Stock-based compensation expense | 2.7 | 1.5 | ||||||||
Foreign currency transaction losses (gains), net | 0.7 | (0.2 | ) | |||||||
Adjusted EBITDA | $ | 41.3 | $ | 36.5 | 13.2 | % | ||||
(1) Interest expense, net, is reported net of interest income. |
Diluted earnings per-share ("EPS") were
First Nine Months of 2015
Net sales increased 7.6% to
Gross profit increased 11.6% to
RECONCILIATION OF GROSS PROFIT TO REMAINING GROSS PROFIT | |||||||||||
(Unaudited and $ in millions) | |||||||||||
For the Nine Months Ended |
|||||||||||
2015 | 2014 | % Change | |||||||||
Gross profit | $ | 467.8 | $ | 419.1 | 11.6 | % | |||||
Cigarette inventory holding gains | (5.4 | ) | (4.0 | ) | |||||||
Candy inventory holding gains | -- | (5.2 | ) | ||||||||
Cigarette tax stamp inventory holding gains | (8.3 | ) | -- | ||||||||
OTP tax items | (1.8 | ) | (2.3 | ) | |||||||
LIFO expense | 9.2 | 13.6 | |||||||||
Remaining gross profit | $ | 461.5 | $ | 421.2 | 9.6 | % | |||||
The Company's operating expenses for the first nine months of 2015 were
Net income for the first nine months of 2015 was
RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA | |||||||||
(Unaudited and $ in millions) | |||||||||
For the Nine Months Ended |
|||||||||
2015 | 2014 | % Change | |||||||
Net income | $ | 33.8 | $ | 28.1 | 20.3 | % | |||
Interest expense, net (1) | 1.5 | 1.4 | |||||||
Provision for income taxes | 20.9 | 15.8 | |||||||
Depreciation & amortization | 28.3 | 23.4 | |||||||
LIFO expense | 9.2 | 13.6 | |||||||
Stock-based compensation expense | 6.7 | 4.3 | |||||||
Foreign currency transaction losses, net | 1.3 | -- | |||||||
Adjusted EBITDA | $ | 101.7 | $ | 86.6 | 17.4 | % | |||
(1) Interest expense, net, is reported net of interest income. |
Diluted EPS were
Dividend
Guidance for 2015
The Company has reiterated its net sales and Adjusted EBITDA guidance for the full year of 2015. Net sales are expected to be between
The Company has adjusted its diluted EPS guidance for the full year due to higher than expected foreign currency transaction losses, additional expansion costs related to onboarding its large customer wins, offset by a reduction in LIFO expense. Reflecting the aforementioned items, diluted EPS is now expected to be between
The Company reaffirmed capital expenditure estimates for 2015 of approximately
Conference Call and Webcast Information
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.
About Non-GAAP Financial Measures
This press release includes non-GAAP financial measures including diluted earnings per share 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. 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 a supplement to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. 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. These statements include statements regarding our guidance for 2015 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 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; competition in our distribution markets; 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; 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; risks and costs associated with efforts to grow our business through acquisitions; 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; failure or disruptions of our information technology systems; unexpected outcomes in legal proceedings; our dependence on qualified labor, our senior management and other key personnel; attempts by unions to organize our employees; increasing expenses related to employee health benefits; 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; declining cigarette sales volumes; 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; changes in the
funding of our pension plans; reduction in the payment of dividends; currency exchange rate fluctuations; our ability to borrow additional capital; restrictive covenants in our Credit Facility; changes to accounting rules or regulations; and compliance with governmental regulations. Refer to the "Risk Factors" section of our Annual Report on Form 10-K for the year ended
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||||
(In millions, except share and per share data) | ||||||||||
(Unaudited) | ||||||||||
2015 | 2014 | |||||||||
Assets | ||||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | 9.4 | $ | 14.4 | ||||||
Restricted cash | 9.7 | 13.0 | ||||||||
Accounts receivable, net of allowance for doubtful accounts of |
278.6 | 245.3 | ||||||||
Other receivables, net | 63.9 | 61.5 | ||||||||
Inventories, net | 350.1 | 417.8 | ||||||||
Deposits and prepayments | 58.0 | 43.7 | ||||||||
Deferred income taxes | 9.1 | 8.4 | ||||||||
Total current assets | 778.8 | 804.1 | ||||||||
Property and equipment, net | 157.1 | 148.9 | ||||||||
22.9 | 22.9 | |||||||||
Other intangible assets, net | 28.4 | 22.6 | ||||||||
Other non-current assets, net | 29.6 | 31.1 | ||||||||
Total assets | $ | 1,016.8 | $ | 1,029.6 | ||||||
Liabilities and Stockholders' Equity | ||||||||||
Current liabilities: | ||||||||||
Accounts payable | $ | 148.1 | $ | 128.4 | ||||||
Book overdrafts | 28.0 | 29.1 | ||||||||
Cigarette and tobacco taxes payable | 170.9 | 187.3 | ||||||||
Accrued liabilities | 108.1 | 93.4 | ||||||||
Deferred income taxes | 0.2 | 0.3 | ||||||||
Total current liabilities | 455.3 | 438.5 | ||||||||
Long-term debt | 19.4 | 68.2 | ||||||||
Deferred income taxes | 16.6 | 16.2 | ||||||||
Other long-term liabilities | 11.5 | 11.9 | ||||||||
Claims liabilities | 27.7 | 27.5 | ||||||||
Pension liabilities | 8.2 | 6.0 | ||||||||
Total liabilities | 538.7 | 568.3 | ||||||||
Contingencies | ||||||||||
Stockholders' equity: | ||||||||||
Common stock, |
0.3 | 0.3 | ||||||||
Additional paid-in capital | 269.7 | 263.8 | ||||||||
(61.6 | ) | (52.6 | ) | |||||||
Retained earnings | 286.1 | 261.4 | ||||||||
Accumulated other comprehensive loss | (16.4 | ) | (11.6 | ) | ||||||
Total stockholders' equity | 478.1 | 461.3 | ||||||||
Total liabilities and stockholders' equity | $ | 1,016.8 | $ | 1,029.6 | ||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||||
(In millions, except per share data) | ||||||||||||||||||
(Unaudited) | ||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||||
Net sales | $ | 2,991.6 | $ | 2,747.4 | $ | 8,254.3 | $ | 7,671.5 | ||||||||||
Cost of goods sold | 2,820.0 | 2,596.0 | 7,786.5 | 7,252.4 | ||||||||||||||
Gross profit | 171.6 | 151.4 | 467.8 | 419.1 | ||||||||||||||
Warehousing and distribution expenses | 92.8 | 83.5 | 260.9 | 236.9 | ||||||||||||||
Selling, general and administrative expenses | 52.8 | 47.0 | 147.6 | 134.9 | ||||||||||||||
Amortization of intangible assets | 0.6 | 0.7 | 1.8 | 2.0 | ||||||||||||||
Total operating expenses | 146.2 | 131.2 | 410.3 | 373.8 | ||||||||||||||
Income from operations | 25.4 | 20.2 | 57.5 | 45.3 | ||||||||||||||
Interest expense | (0.6 | ) | (0.5 | ) | (1.9 | ) | (1.8 | ) | ||||||||||
Interest income | 0.1 | 0.1 | 0.4 | 0.4 | ||||||||||||||
Foreign currency transaction gains (losses), net | (0.7 | ) | 0.2 | (1.3 | ) | -- | ||||||||||||
Income before income taxes | 24.2 | 20.0 | 54.7 | 43.9 | ||||||||||||||
Provision for income taxes | (9.1 | ) | (6.3 | ) | (20.9 | ) | (15.8 | ) | ||||||||||
Net income | $ | 15.1 | $ | 13.7 | $ | 33.8 | $ | 28.1 | ||||||||||
Basic net income per common share (1) | $ | 0.65 | $ | 0.59 | $ | 1.46 | $ | 1.22 | ||||||||||
Diluted net income per common share (1) | $ | 0.65 | $ | 0.59 | $ | 1.45 | $ | 1.21 | ||||||||||
Basic weighted-average shares | 23.1 | 23.1 | 23.1 | 23.1 | ||||||||||||||
Diluted weighted-average shares | 23.3 | 23.3 | 23.3 | 23.2 | ||||||||||||||
(1) Basic and diluted earnings per share are calculated based on unrounded actual amounts. |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||
(In millions) | |||||||||||
(Unaudited) | |||||||||||
Nine Months Ended | |||||||||||
2015 | 2014 | ||||||||||
Cash flows from operating activities: | |||||||||||
Net income | $ | 33.8 | $ | 28.1 | |||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
LIFO and inventory provisions | 9.2 | 13.4 | |||||||||
Amortization of debt issuance costs | 0.2 | 0.2 | |||||||||
Stock-based compensation expense | 6.7 | 4.3 | |||||||||
Bad debt expense, net | 1.1 | 1.3 | |||||||||
Depreciation and amortization | 28.3 | 23.4 | |||||||||
Foreign currency transaction losses, net | 1.3 | -- | |||||||||
Deferred income taxes | (0.3 | ) | 1.5 | ||||||||
Changes in operating assets and liabilities: | |||||||||||
Accounts receivable, net | (33.3 | ) | (32.5 | ) | |||||||
Other receivables, net | (3.3 | ) | (2.5 | ) | |||||||
Inventories, net | 53.9 | 34.6 | |||||||||
Deposits, prepayments and other non-current assets | (18.0 | ) | (10.4 | ) | |||||||
Excess tax deductions associated with stock-based compensation | (2.0 | ) | (2.4 | ) | |||||||
Accounts payable | 22.3 | 23.6 | |||||||||
Cigarette and tobacco taxes payable | (10.2 | ) | (18.0 | ) | |||||||
Pension, claims, accrued and other long-term liabilities | 16.2 | 4.9 | |||||||||
Net cash provided by operating activities | 105.9 | 69.5 | |||||||||
Cash flows from investing activities: | |||||||||||
Acquisition of business, net of cash acquired | (8.0 | ) | -- | ||||||||
Change in restricted cash | 3.3 | 0.4 | |||||||||
Additions to property and equipment, net | (24.7 | ) | (24.1 | ) | |||||||
Capitalization of software and related development costs | (7.5 | ) | (3.2 | ) | |||||||
Proceeds from sale of fixed assets | 0.3 | -- | |||||||||
Net cash used in investing activities | (36.6 | ) | (26.9 | ) | |||||||
Cash flows from financing activities: | |||||||||||
Repayments under revolving credit facility, net | (50.6 | ) | (17.7 | ) | |||||||
Dividends paid | (9.1 | ) | (7.7 | ) | |||||||
Payments on capital leases | (1.6 | ) | (1.3 | ) | |||||||
Repurchases of common stock | (9.0 | ) | (5.3 | ) | |||||||
Proceeds from exercise of common stock options | 0.3 | 1.9 | |||||||||
Tax withholdings related to net share settlements of restricted stock units | (3.2 | ) | (1.4 | ) | |||||||
Excess tax deductions associated with stock-based compensation | 2.0 | 2.4 | |||||||||
Increase (decrease) in book overdrafts | (1.1 | ) | 0.5 | ||||||||
Net cash used in financing activities | (72.3 | ) | (28.6 | ) | |||||||
Effects of changes in foreign exchange rates | (2.0 | ) | (0.8 | ) | |||||||
Change in cash and cash equivalents | (5.0 | ) | 13.2 | ||||||||
Cash and cash equivalents, beginning of period | 14.4 | 11.0 | |||||||||
Cash and cash equivalents, end of period | $ | 9.4 | $ | 24.2 | |||||||
Supplemental disclosures: | |||||||||||
Cash paid during the period for: | |||||||||||
Income taxes, net | $ | 21.1 | $ | 15.4 | |||||||
Interest | $ | 1.0 | $ | 0.7 | |||||||
Non-cash capital lease obligations incurred | $ | 5.2 | $ | 4.7 | |||||||
Unpaid property and equipment purchases included in accrued liabilities | $ | 1.5 | $ | 7.8 | |||||||
SUPPLEMENTAL SCHEDULE FOR ITEMS IMPACTING DILUTED EPS | |||||||||||||||||||||||
(In millions, except per share data) | |||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||
Three Months Ended |
Nine Months Ended |
||||||||||||||||||||||
2015 (a)(b | ) | 2014 (a)(b | ) | % Change | 2015 (a)(b | ) | 2014 (a)(b | ) | % Change | ||||||||||||||
Net income | $ | 15.1 | $ | 13.7 | 10.2 | % | $ | 33.8 | $ | 28.1 | 20.3 | % | |||||||||||
Diluted shares | 23.3 | 23.3 | 23.3 | 23.2 | |||||||||||||||||||
Diluted EPS | $ | 0.65 | $ | 0.59 | 10.2 | % | $ | 1.45 | $ | 1.21 | 19.8 | % | |||||||||||
LIFO expense | 0.08 | 0.17 | 0.24 | 0.36 | |||||||||||||||||||
Diluted EPS excluding LIFO expense | $ | 0.73 | $ | 0.76 | (3.9 | )% | $ | 1.69 | $ | 1.57 | 7.6 | % | |||||||||||
Additional Items Impacting Diluted EPS: | |||||||||||||||||||||||
Cigarette inventory holding gains (1) | $ | 0.02 | $ | 0.01 | $ | 0.13 | $ | 0.10 | |||||||||||||||
Candy inventory holding gains (2) | -- | 0.14 | -- | 0.14 | |||||||||||||||||||
Cigarette tax stamp inventory holding gains (3) | 0.21 | -- | 0.21 | -- | |||||||||||||||||||
Net OTP tax items (4) | -- | 0.05 | 0.04 | 0.05 | |||||||||||||||||||
Business expansion and integration costs (5) | (0.01 | ) | (0.02 | ) | (0.04 | ) | (0.02 | ) | |||||||||||||||
Pension liability settlement (6) | (0.02 | ) | -- | (0.02 | ) | -- | |||||||||||||||||
Tax items (7) | 0.02 | 0.07 | 0.01 | 0.07 | |||||||||||||||||||
Foreign exchange losses (8) | (0.03 | ) | -- | (0.02 | ) | -- | |||||||||||||||||
(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 normal tax rate of approximately 38.8% and 39.3% for the three and nine months ended |
(1) Cigarette inventory holding gains |
Cigarette inventory holding gains were |
(2) Candy inventory holding gains |
Candy inventory holding gains were |
(3) Cigarette tax stamp inventory holding gains |
During both the three and nine months ended |
(4) Net OTP tax items |
There was no OTP tax refund for the three months ended |
(5) Business expansion and integration costs |
During the three and nine months ended |
(6) Pension liability settlement |
For the three and nine months ended |
(7) Tax items |
The provision for income taxes for both the three and nine months ended |
(8) Foreign exchange losses |
During the three and nine months ended |
Source:
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