WESTLAKE, Texas, Nov. 05, 2020 (GLOBE NEWSWIRE) -- 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 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.

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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.

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.

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.