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Core-Mark Announces 2016 Fourth Quarter and Full Year Financial Results
- Record Annual Sales of
$14.5 Billion , and Diluted EPS of$1.17 - Non-cigarette Sales increased 25.2% in the Fourth Quarter, Fresh Sales Increased 18.4%
- Expect 2017 Sales of
$15.2 Billion to$15.5 Billion - Expect 2017 Diluted EPS of
$1.18 to$1.25 and excluding LIFO expense (Non-GAAP)(1) of$1.42 to$1.49 - Announced
$0.09 Dividend PayableMarch 28, 2017
"
Fourth Quarter Results
Net sales increased 36.3% to
Gross profit increased 17.0% to
Note (1): See the reconciliation of Diluted EPS to Diluted EPS excluding LIFO in "Supplemental Schedule for Items Impacting Diluted EPS."
RECONCILIATION OF GROSS PROFIT (U.S.GAAP) TO REMAINING GROSS PROFIT (Non-GAAP) | |||||||||||||||
(Unaudited and $ in millions) | |||||||||||||||
For the Three Months Ended | |||||||||||||||
2016 | 2015 | ||||||||||||||
Amounts | % of | Amounts | % of | % Change | |||||||||||
Gross profit | $ | 199.0 | 5.2 | % | $ | 170.1 | 6.0 | % | 17.0 | % | |||||
Cigarette inventory holding gains | (6.9 | ) | (0.2 | )% | (4.7 | ) | (0.2 | )% | |||||||
Cigarette tax stamp inventory holding gains | — | — | % | (0.7 | ) | — | % | ||||||||
LIFO expense (income) | 3.2 | 0.1 | % | (7.3 | ) | (0.2 | )% | ||||||||
Remaining gross profit | $ | 195.3 | 5.1 | % | $ | 157.4 | 5.6 | % | 24.1 | % | |||||
The Company's operating expenses for the fourth quarter of 2016 were
Net income increased 5.6% to
RECONCILIATION OF NET INCOME (U.S.GAAP) TO ADJUSTED EBITDA (Non-GAAP) | ||||||||||
(Unaudited and $ in millions) | ||||||||||
For the Three Months Ended | ||||||||||
2016 | 2015 | % Change | ||||||||
Net income | $ | 18.7 | $ | 17.7 | 5.6 | % | ||||
Interest expense, net (1) | 1.9 | 0.5 | ||||||||
Provision for income taxes | 11.0 | 10.5 | ||||||||
Depreciation & amortization | 11.7 | 9.6 | ||||||||
LIFO expense (income) | 3.2 | (7.3 | ) | |||||||
Stock-based compensation expense | 0.6 | 2.0 | ||||||||
Foreign currency transaction (gains) losses, net | (0.6 | ) | 0.5 | |||||||
Adjusted EBITDA | $ | 46.5 | $ | 33.5 | 38.8 | % | ||||
Note (1): Interest expense, net, is reported net of interest income. | ||||||||||
Diluted earnings per-share were
2016 Full Year Results
Net sales increased 31.3% to
Gross profit increased 15.5% to
RECONCILIATION OF GROSS PROFIT (U.S.GAAP) TO REMAINING GROSS PROFIT (Non-GAAP) | |||||||||||||||
(Unaudited and $ in millions) | |||||||||||||||
For the Twelve Months Ended | |||||||||||||||
2016 | 2015 | ||||||||||||||
Amounts | % of | Amounts | % of | % Change | |||||||||||
Gross profit | $ | 736.9 | 5.1 | % | $ | 637.9 | 5.8 | % | 15.5 | % | |||||
Cigarette inventory holding gains | (15.3 | ) | (0.1 | )% | (10.1 | ) | (0.1 | )% | |||||||
Cigarette tax stamp inventory holding gains | — | — | % | (9.0 | ) | (0.1 | )% | ||||||||
Other Tobacco Products (OTP )tax refunds | — | — | % | (1.8 | ) | — | % | ||||||||
LIFO expense | 13.2 | 0.1 | % | 1.9 | — | % | |||||||||
Remaining gross profit | $ | 734.8 | 5.1 | % | $ | 618.9 | 5.6 | % | 18.7 | % | |||||
The Company's operating expenses for 2016 were
Net income increased 5.2% to
RECONCILIATION OF NET INCOME (U.S.GAAP) TO ADJUSTED EBITDA (Non-GAAP) | ||||||||||
(Unaudited and $ in millions) | ||||||||||
For the Twelve Months Ended | ||||||||||
2016 | 2015 | % Change | ||||||||
Net income | $ | 54.2 | $ | 51.5 | 5.2 | % | ||||
Interest expense, net (1) | 5.1 | 2.0 | ||||||||
Provision for income taxes | 31.3 | 31.4 | ||||||||
Depreciation & amortization | 42.9 | 37.9 | ||||||||
LIFO expense | 13.2 | 1.9 | ||||||||
Stock-based compensation expense | 6.1 | 8.7 | ||||||||
Foreign currency transaction (gains) losses, net | (0.5 | ) | 1.8 | |||||||
Adjusted EBITDA | $ | 152.3 | $ | 135.2 | 12.6 | % | ||||
Note (1): Interest expense, net, is reported net of interest income. | ||||||||||
Diluted earnings per share were
Dividend
2017 Full Year Guidance
The Company expects 2017 net sales to be between
Adjusted EBITDA for 2017 is expected to be between
Capital expenditures for 2017 are expected to be 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, 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.
Remaining gross profit is a non-GAAP financial measure. We provide this metric to segregate the effects of LIFO expense, cigarette and candy inventory holding gains and other items that significantly affect the comparability of gross profit.
We do not provide a reconciliation for non-GAAP estimates on a forward-looking basis (including the information under ("Guidance for 2017" above) where we are unable to provide a meaningful calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing or amount of various items that would impact the most directly comparable forward-looking GAAP financial measure, that have not yet occurred, are out of the company's control and/or cannot be reasonably predicted. For the same reasons, we are unable to address the probable significance of the unavailable information. Forward-looking non-GAAP financial measures provided without the most directly comparable GAAP financial measures may vary materially from the corresponding GAAP financial measures.
The tables in this press release contain more details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliations between these financial measures.
Forward-Looking Statements
Statements in this press release that are not statements of historical fact are forward-looking statements. These statements include statements regarding our guidance for 2017 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 labor costs related to contract 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; 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; and changes to accounting rules or regulations. Refer to the "Risk Factors" section of our Annual Report on Form 10-K filed with the
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
(In millions, except share and per share data) | |||||||
(Unaudited) | |||||||
2016 | 2015 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 26.4 | $ | 12.5 | |||
Restricted cash | 15.3 | 8.5 | |||||
Accounts receivable, net of allowance for doubtful accounts of | |||||||
at | 365.9 | 272.7 | |||||
Other receivables, net | 106.5 | 69.4 | |||||
Inventories, net | 596.6 | 407.4 | |||||
Deposits and prepayments | 82.8 | 65.0 | |||||
Deferred income taxes | 4.7 | 1.8 | |||||
Total current assets | 1,198.2 | 837.3 | |||||
Property and equipment, net | 194.7 | 159.5 | |||||
36.0 | 22.9 | ||||||
Other intangible assets, net | 41.5 | 29.5 | |||||
Other non-current assets, net | 26.6 | 28.1 | |||||
Total assets | $ | 1,497.0 | $ | 1,077.3 | |||
Liabilities and Stockholders' Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 119.2 | $ | 129.6 | |||
Book overdrafts | 37.9 | 29.2 | |||||
Cigarette and tobacco taxes payable | 259.8 | 193.6 | |||||
Accrued liabilities | 131.8 | 106.9 | |||||
Deferred income taxes | 0.1 | 0.3 | |||||
Total current liabilities | 548.8 | 459.6 | |||||
Long-term debt | 347.7 | 60.4 | |||||
Deferred income taxes | 30.0 | 18.6 | |||||
Other long-term liabilities | 11.5 | 10.6 | |||||
Claims liabilities | 26.8 | 26.6 | |||||
Pension liabilities | 2.4 | 7.5 | |||||
Total liabilities | 967.2 | 583.3 | |||||
Stockholders' equity: | |||||||
Common stock, | |||||||
51,953,354 shares issued; 46,152,958 and 46,116,670 shares outstanding at | |||||||
0.5 | 0.5 | ||||||
Additional paid-in capital | 275.5 | 271.6 | |||||
(70.7 | ) | (61.8 | ) | ||||
Retained earnings | 338.7 | 300.0 | |||||
Accumulated other comprehensive loss | (14.2 | ) | (16.3 | ) | |||
Total stockholders' equity | 529.8 | 494.0 | |||||
Total liabilities and stockholders' equity | $ | 1,497.0 | $ | 1,077.3 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||
(In millions, except per share data) | |||||||||||||||
(Unaudited) | |||||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Net sales | $ | 3,836.8 | $ | 2,815.1 | $ | 14,529.4 | $ | 11,069.4 | |||||||
Cost of goods sold | 3,637.8 | 2,645.0 | 13,792.5 | 10,431.5 | |||||||||||
Gross profit | 199.0 | 170.1 | 736.9 | 637.9 | |||||||||||
Warehousing and distribution expenses | 116.2 | 91.7 | 431.2 | 352.6 | |||||||||||
Selling, general and administrative expenses | 50.3 | 48.4 | 210.3 | 196.0 | |||||||||||
Amortization of intangible assets | 1.5 | 0.8 | 5.3 | 2.6 | |||||||||||
Total operating expenses | 168.0 | 140.9 | 646.8 | 551.2 | |||||||||||
Income from operations | 31.0 | 29.2 | 90.1 | 86.7 | |||||||||||
Interest expense | (2.0 | ) | (0.6 | ) | (5.3 | ) | (2.5 | ) | |||||||
Interest income | 0.1 | 0.1 | 0.2 | 0.5 | |||||||||||
Foreign currency transaction gains (losses), net | 0.6 | (0.5 | ) | 0.5 | (1.8 | ) | |||||||||
Income before income taxes | 29.7 | 28.2 | 85.5 | 82.9 | |||||||||||
Provision for income taxes | (11.0 | ) | (10.5 | ) | (31.3 | ) | (31.4 | ) | |||||||
Net income | $ | 18.7 | $ | 17.7 | $ | 54.2 | $ | 51.5 | |||||||
Basic net income per common share (1) | $ | 0.41 | $ | 0.39 | $ | 1.17 | $ | 1.12 | |||||||
Diluted net income per common share (1) | $ | 0.41 | $ | 0.38 | $ | 1.17 | $ | 1.11 | |||||||
Basic weighted-average shares | 46.2 | 46.4 | 46.3 | 46.2 | |||||||||||
Diluted weighted-average shares | 46.4 | 46.8 | 46.5 | 46.6 | |||||||||||
(1) Basic and diluted earnings per share are calculated based on unrounded actual amounts. |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
(In millions) | |||||||
(Unaudited) | |||||||
Twelve Months Ended | |||||||
2016 | 2015 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 54.2 | $ | 51.5 | |||
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | |||||||
LIFO and inventory provisions | 13.2 | 2.0 | |||||
Amortization of debt issuance costs | 0.5 | 0.3 | |||||
Stock-based compensation expense | 6.1 | 8.7 | |||||
Bad debt expense, net | 2.0 | 1.3 | |||||
Depreciation and amortization | 42.9 | 37.9 | |||||
Foreign currency transaction (gains) losses, net | (0.5 | ) | 1.8 | ||||
Deferred income taxes | 8.4 | 8.9 | |||||
Settlement charge | 1.3 | 1.6 | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable, net | (59.2 | ) | (28.1 | ) | |||
Other receivables, net | (37.0 | ) | (8.9 | ) | |||
Inventories, net | (180.4 | ) | 1.5 | ||||
Deposits, prepayments and other non-current assets | (19.9 | ) | (25.9 | ) | |||
Excess tax deductions associated with stock-based compensation | (2.9 | ) | (2.2 | ) | |||
Accounts payable | (11.0 | ) | 4.0 | ||||
Cigarette and tobacco taxes payable | 65.5 | 13.8 | |||||
Pension, claims, accrued and other long-term liabilities | 18.8 | 9.0 | |||||
Net cash (used in) provided by operating activities | (98.0 | ) | 77.2 | ||||
Cash flows from investing activities: | |||||||
Acquisition of business, net of cash acquired | (88.4 | ) | (9.0 | ) | |||
Change of restricted cash | (6.8 | ) | 4.5 | ||||
Additions to property and equipment, net | (54.3 | ) | (30.3 | ) | |||
Capitalization of software and related development costs | (7.7 | ) | (8.7 | ) | |||
Proceeds from sale of property and equipment | — | 0.3 | |||||
Net cash used in investing activities | (157.2 | ) | (43.2 | ) | |||
Cash flows from financing activities: | |||||||
Borrowings under revolving credit facility | 1,638.7 | 936.2 | |||||
Repayments under revolving credit facility | (1,349.7 | ) | (945.1 | ) | |||
Payments of financing costs | (2.0 | ) | (0.4 | ) | |||
Dividends paid | (15.5 | ) | (12.8 | ) | |||
Payments of capital leases | (2.4 | ) | (2.3 | ) | |||
Repurchases of common stock | (8.9 | ) | (9.2 | ) | |||
Proceeds from exercise of common stock options | 0.3 | 0.4 | |||||
Tax withholdings related to net share settlements of restricted stock units | (5.4 | ) | (3.3 | ) | |||
Excess tax deductions associated with stock-based compensation | 2.9 | 2.2 | |||||
Book overdrafts, net | 8.7 | 0.1 | |||||
Net cash provided by (used in) financing activities | 266.7 | (34.2 | ) | ||||
Effects of changes in foreign exchange rates | 2.4 | (1.7 | ) | ||||
Change in cash and cash equivalents | 13.9 | (1.9 | ) | ||||
Cash and cash equivalents, beginning of period | 12.5 | 14.4 | |||||
Cash and cash equivalents, end of period | $ | 26.4 | $ | 12.5 | |||
Supplemental disclosures: | |||||||
Cash paid during the period for: | |||||||
Income taxes paid, net | $ | 20.9 | $ | 26.8 | |||
Interest paid | $ | 3.7 | $ | 1.3 | |||
Unpaid property and equipment purchases included in accrued liabilities | $ | 2.9 | $ | 5.1 | |||
Non-cash capital lease obligations incurred | $ | 0.1 | $ | 5.4 |
RECONCILIATION OF DILUTED EARNINGS PER SHARE (U.S.GAAP) TO DILUTED EARNINGS PER SHARE EXCLUDING LIFO EXPENSE (INCOME) (NON-GAAP) AND | |||||||||||||||||||||
SUPPLEMENTAL SCHEDULE FOR ITEMS IMPACTING DILUTED EPS | |||||||||||||||||||||
(In millions, except per share data) | |||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||
Three Months Ended | Twelve
Months Ended | ||||||||||||||||||||
2016 (a)(b)(c) | 2015 (a)(b)(c) | % Change | 2016 (a)(b)(c) | 2015 (a)(b)(c) | % Change | ||||||||||||||||
Net income | $ | 18.7 | $ | 17.7 | 5.6 | % | $ | 54.2 | $ | 51.5 | 5.2 | % | |||||||||
Diluted shares | 46.4 | 46.8 | 46.5 | 46.6 | |||||||||||||||||
Diluted EPS | $ | 0.41 | $ | 0.38 | 7.9 | % | $ | 1.17 | $ | 1.11 | 5.9 | % | |||||||||
LIFO expense (income) | 0.04 | (0.10 | ) | 0.18 | 0.03 | ||||||||||||||||
Diluted EPS excluding LIFO expense (income) | $ | 0.45 | $ | 0.28 | 60.7 | % | $ | 1.35 | $ | 1.14 | 18.9 | % | |||||||||
Additional Items Impacting Diluted EPS: | |||||||||||||||||||||
Cigarette inventory holding gains (1) | 0.09 | 0.06 | 0.21 | 0.13 | |||||||||||||||||
Cigarette tax stamp inventory holding gains (2) | — | 0.01 | — | 0.11 | |||||||||||||||||
Net OTP tax items (3) | — | — | — | 0.02 | |||||||||||||||||
Business expansion and integration costs (4) | (0.04 | ) | (0.02 | ) | (0.10 | ) | (0.04 | ) | |||||||||||||
Investment spending (5) | — | (0.03 | ) | — | (0.08 | ) | |||||||||||||||
Legal settlement (6) | — | — | 0.03 | — | |||||||||||||||||
Pension liability settlement (7) | — | (0.01 | ) | (0.02 | ) | (0.02 | ) | ||||||||||||||
Foreign exchange gains (losses) (8) | 0.01 | (0.01 | ) | 0.01 | (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 tax rate of 38.8% and 38.5% for the three and twelve months ended | |||||||||||||||||||||
(c) Diluted earnings per share amounts have been retroactively adjusted to reflect the two-for one stock split for all periods presented. | |||||||||||||||||||||
(1) Cigarette inventory holding gains | |||||||||||||||||||||
Cigarette inventory holding gains were | |||||||||||||||||||||
(2) Cigarette tax stamp inventory holding gains | |||||||||||||||||||||
Cigarette tax stamp inventory holding gains, net of fees, were | |||||||||||||||||||||
(3) Net OTP tax items | |||||||||||||||||||||
During the twelve months ended | |||||||||||||||||||||
(4) Business expansion and integration costs | |||||||||||||||||||||
During the three months and twelve months ended | |||||||||||||||||||||
(5) Investment spending | |||||||||||||||||||||
During the three months and twelve months ended | |||||||||||||||||||||
(6) Legal settlement | |||||||||||||||||||||
During the twelve months ended | |||||||||||||||||||||
(7) Pension liability settlement | |||||||||||||||||||||
For the three and twelve months ended | |||||||||||||||||||||
(8) Foreign exchange gains (losses) | |||||||||||||||||||||
For the three and twelve months ended |
Contact: Ms.Source:Milton Gray Draper , Director of Investor Relations at 650-589-9445 x 3027 or at mdraper@core-mark.com
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