CORE - Earnings call transcript Q4 2017

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Operator

Welcome to the Core-Mark 2017 Fourth Quarter Investor Call. My name is Collet, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session [Operator Instructions]. Please note that this conference is being recorded. the to turn now will call Ms. over I Draper. Milton

You may begin.

Milton Draper

Investor and and course Relations Statements Thank recent this portion most the forward-looking would the statements the used differ during in welcome, the on earnings will those may now the Reconciliations press the comparable financial Operator, site. call. use the release financial Non-GAAP the future like materially results forward-looking this about Core-Mark hopes, I in or be statements GAAP everyone. you, measures measures projections. state included made measures that the in Management's beliefs, of available call the to Web are or of prediction to Actual from of Company's presentation. non-GAAP statements. expectations most read are of

factors materially differ update releases. contained our looking concerning our XX-Qs results information statements from statements. these our and those that Form SEC could actual is obligation the to filings, undertake including no forward-looking our in cause to forward Additional XX-Ks, We in press

review holding fourth are to have. answer our you call this to quarter results any questions We and might

If the call at call, questions follow-up me you please additional XXX-XXX-XXXX. have after

Officer of Tachouet, our our Corporate me today is and the is Matt Thomas Officer, in room the Chief Operating Chris Perkins; Controller. and Financial Joining the Officer, Chief Core-Mark, Executive Chief our McPherson; Scott Miller. Also

quarter. the state will discuss for business Our lineup fourth our XXXX discuss who by for the as of Followed financial review Chris, will call today our results Tom Scott outook. strategies, is the and the while will follows:

your questions. call then will for We up the open

over Perkins. I like call to CEO, our Tom turn Now, would to the

Tom Perkins

my commitments after end then t and end the Scott quarter After on call. executed have joining our leading will June many and fourth into years and XXXX and are enjoyed would the We nearly and McPherson. year honor to at the XXXX. strategies family have with reach I discussing like in we my capable thank customers worked Core-Mark company. great we have us We in lead closed you will results like the will of XXXX confidence hands for working plus for and important strong on of company well address I've and in walk financial the Good not by that, order focused the our questions. largest my morning, begin outstanding conference that transitioning others. through leadership and make enjoyed greater for retirement our I will and a Company's Core-Mark on Chris been Walmart individuals in with he last XX year Scott history great to our added detail. to of my those at distinction. detract acquisition five My belief of up what In rather do years. stem plans and future, in Scott your provide take prepared many goals, from XXXX core works either results. that here with that my I’ve commitments the career our from I XX have years this Core-Mark nearly remarks, we desire this of side-by-side our the complete love they summary will while the to or and the retirement a my company made over of in

bode for of our these well achievements All future.

the XXXX, and focus standards. and customers a of perspective, from from took of away disappointing was on our below profitability fundamentals. disruption significant a large major well divisions boarding our boarding XXXX off The to finishing year very percentage However, caused a our in

cost resulted in to ramp the remediate. divisions greatest and unanticipated two volume effectively have growth. added cost We experience up the and also the This struggle overruns to manage significant

that expected meaningful We profitability operational to high have XXXX. on improvements, these divisions levels these of in the changes us to give with back confidence get right combined These are the teams degree other management to divisions. made we two changes, the at track

valuable our Farner-Bocken, products to with our for which improving the of a company. Their One our array service resources member this in the key in outlets of division now food Iowa family category contributions expanding another area offering have was in convenience their our XXXX service the high The been our the channel other of accomplishments will a expertise as expectations menu food our has will of food market. acquisition refer provide all-important leader in insight the this on stores. division. new in our I Iowa and divisions vast and we and these to selling customer to bring

We in our strategies. well also other core performed

and to chain, meeting a retailers out our We vital Our with store in they that partner to their products from sales strategic our creative design also the resulting for K providing of consumer profits they volume, the is to want. cigarette with great our while There fresh ensure customers that you growing to our VCI consumers take and about is are objectives. It the solutions products. fresh demanding continuing totaled effective these incremental and these Circle million and products customers are despite $XX to as are VCI their pressure and while declines. C-Store having better profit to Kroger C transition. importance two replace margin These stores evidence of their initiatives carton must and fresh clear supply also East cost

with In grow whose delivered critical go FMI our to more Group, to strategy. partners on to than role greater plans XXXX, rate. becomes continues over X,XXX a marketing market acceptance retail to Turning we Solutions analytics our as XX% data Core

this growth in We our expect to marketing see plans positive results. impacts from in XXXX accelerated FMI

in a the XXXX In addition, with same-store target element growing growing is stores. profitability. customer’s for is X,XXX critical consistent on our another to existing This our goal Company's re-focus our sales,

also independency CRM core our targets. Group We believe quickly, collect the assist enhanced We The strategies achieving our visibility share to has data to retailers. the profitable. C-Store leverage more our relevant abilities productivity can be operator our to our improving will more Core gain independent for important among market operational Solutions and

the highlights. months wins to approximately year Sales XXXX sales billion. losses. contribution turn from and of customer X% This financial let's includes offset Now net full $XX.X for six increased Farner-Bocken, by

sales. important reflect and These non-cigarette same-store The year at increase fourth the in categories a for the XX% quarter. grew XX% over non-cigarette results in sequential

categories and quarter. we as in growth in trends So the to Manufacturers quarter whole the in our compared some impact fourth products in we these general were vapors to fresh, this carton encouraged in them Same-store fourth and the other carton least to that driver carton quarter, sales growth in The growth sales sales the of a are so for enough at might two a in XXXX. e-cigs X% December good vapors. seeing category mentioned drop being as total impact nicotine impact be being by resolved. or category trend. more fourth remaining e-cigs sales the we OTP. we resulted not the greater trend mixing a have they expect non-cigarette fresh cartons, and helpful are products With reduction merchandise January. The call is We approximate in that X% customers having products the quarter help quarter, rolling have that saw X% that in slightly Certainly, was Unfortunately that carton our is news our by are in fresh in The this sales having growth third decline offset said, quarter. smokers dairy in well carton and November us make off last the on that out same-store including but The other our in migrating in dramatic and nonetheless. into the profit. on to are in that seeing. tobacco fourth from the decline are these position traditional continued gross in declining

associated to have realize benefits an but the of X% delivery warehouse We loss implementing our average issues do not begun the offset hour, warehouse full our carton have We of not pieces improvement expense in reached We a improvement. quarter. the fourth the greater help target did than decline. strategies per in profit and with and see

see but this sales We X-Eleven trending saw in are positive fourth divisions to than leverage improvements quarter, Our business two in the in true in one quarter lower too decline. operating lower carton of in divisions the we reducing an direction. SG&A did we quarter, reduction trouble growth due expenses quarter so cost acceleration in also were I is fourth fourth to as our incremental the a to these the lap am and these planned was the the expectations. say from for third that the black divisions to pleased unable

XXXX pension We in our continue will number benefits cost line XXXX. that in significantly one-time reduction excludes of year, compared XXX.X selling that to for a throughout bottom in at cost EBITDA the plan the a provide is have year The and focus put place our in came below XXX.X be the and improvement expectations. efficiency initiatives to of our previous

initiatives will the we believe driving assist improved in place XXXX in put XXXX. performance we in However, in

over hand our talk it outlook. to plans Scott over will I hand Now, XXXX and to about

Scott McPherson

you mentorship I years. the like I the would to over leadership, you respect and for nothing retirement. begin have XX best and the wish you but in your thanking Tom. utmost great by Thanks, for past friendship your

a our that we customer track of success. our term to From to on returning returning long catalyst are fundamentals the shareholders focus customer has our for company expanding brought been to As the growth. plans we our which perspective, are record independent focused a base, of and XXXX, our

warehouse in mentioned, As effort cost efficiency to kicked we continue will transportation throughput the around improve Tom and our structure. XXXX initiatives leveraging an in off we

the and activities have of focus in last disruptions to all magnitude on fundamentals. the with the that experienced on-boarding us not will allowing year We we XXXX of off-boarding

am on revenues. faster on focus we historical we confident and strategies track I earnings return our our growing leverage, operating our of our will to the core by guidance, than record our Based With from from grow from customers. new independent Farner-Bocken as existing customers least to well contributions Walmart, X%, by sales and at expect growth top driven and sales line as same-store incremental expense

XX% to our XXXX million. performance We a in million of compared $XXX approximately minimum of EBITDA expect to grow $XXX to

the return Our EBITDA underperforming breakeven the guidance for assumes divisions two year. to

have based we we and teams far, management is a place what those good assumption. divisions new two think on so this in put we've the seen Given

the measure your improvements We a also assume warehouse continued to drive higher continue to as in throughput, that critical leverage. is we productivity cost

delivery leveraging we road. delivery, of we achieved cubes stops are by which trucks the expenses, per on reducing our route per increasing the and cost number and our focused have For on we

we how sales our a cost-containment positioned aligned we our targets. of on steady activities, organization have to play track on entering part guidance XXXX, addition in to achieve efforts we our In our major growth. return and EBITDA the our growing are believe will achieving to Based record also guidance

Tom Perkins

in growth in high caught The XXXX. XXXX we Scott. Thank to experienced us

are a determined get we well fundamental to However, long even state circumstances. under to have and difficult performing history of we back steady-eddy our

consumer for this is and and habits three stiff a very evolving back a the While facing resilient competition large going the is history of stomach, very industry share decades. with

very are profitability our partner succeed the refocusing higher customers our in important help in our Chris that over financial strategies expect I our Given Company's we by core reaching while CFO. can future. about will By turn efficiencies and confident to XXXX. the optimistic been call goals. with and margin now challenges we our for ever the they I them space, Miller, than customers. have our am facing improvement driving significant items operations, I also productivity the in on this am C-Store our to more

Chris Miller

morning, are the I'd in press and a Thank schedule, you, share These good like gap supplemental items release. items earnings year. impacting discussing significant of the everyone. in full start EPS fourth part long Tom, couple our which is and by one-time our per to of quarter included

quarter for quarter $X.XX, $X.XX EPS last diluted year fourth the Our year versus was LIFO or $X.XX this to expense. for same the excluding $X.XX compared

per $X year, diluted to compared excluding or last the was $X.XX, For versus $X.XX LIFO the share expense. $X.XX EPS year

quarter is our of pension termination The SG&A a I discuss expenses. resulted which to defined-benefit non-cash first settlement fourth plan, $XX.X the in charge million, in like item legacy included

The of year. pension with on result the diluted termination, a has for associated equates the plan. EPS no $X.XX $X.XX the charge basis a quarter obligations and settlement for or fourth risk company As the the to financial non-cash further

tax The second new and deferred to legislation. rate to the item of lower impacting Tax the this law. EPS under legislation is balances passage passage Act The Cuts Jobs tax required the related of revalue the using us our

of benefit I’ll the sales of the expiration approximately contributions These for addition from to tax acquisition the of financial one-time division, East $X.X sales XX.X%, to contributions increased quarter. for share approximately quarter. fourth driven Total again by increase and now an Circle growth the Iowa million sales which recognize per primarily Kroger in the non-cigarette the X-Eleven the we division, Walmart This Iowa and reflecting same-store the of earlier year. cover X-Eleven. billion and the offset categories Walmart $XX.X quarter, to in compared incremental Sales from result, $X.X increased quarter translates of a highlights sales X.X% As by X%. for for the and K XXXX. the were in the billion was fourth $X.XX last contracts

primarily sales in in and Walmart to see continue robust all-in. food very category XX% growth XX% saw to XX% increase in at growing candy due over We accounts. fresh the the We approximately

X.X% growth cigarette approximately additional the same-store e-cig quarter over by in XX% sales OTP general the was X.X% where Tom products offset In profit the XX.X% to our billion we’re category prices products Iowa on growing Kroger. to And volume gross in increased refunds, last primarily taking from by gross decline in the in for by seeing same-store year. addition, tax steps grew inventory decline Walmart inventory with compared quarter. profit, merchandise year. of to were million we’re increasing refunds gains, non-cigarette profit K Iowa loss increased Sales to was OTP in division OTP million to LIFO East The X.X% sales offset $XX.X compared sales the strong lost $X.X division, $X.X and benefited of of and or the the earlier in The and sales year and from are of in $X.X expense XX%. with in in expense business new increase remaining and These holding included, Non-cigarette X-Eleven California. in as and offset in excise of this decrease or LIFO strength. fourth Gross the the same-store from the for Circle from X.X% XX.X% the this incremental million driven the fourth our cartons addition of increase Kroger the which Gross particularly offset challenged by year. and quarter the total carton sales profit increases excludes QX of Circle Remaining vapor profit last cigarette million taxes, mentioned, and and increases East K XXXX. increased overall from $XX.X loss incremental a XXXX gains and tax in $X.X. nicotine holding

fourth X% category, the Walmart The agreements, and cigarette cigarette Non-cigarette primarily $XX.X increase the significantly remaining our the addition the remaining manufacturer shift gross for mix basis quarter, up various has sales declining or in driven XX to business lower gross mix sales. year. increased inflation the profit during business. margin effects profit XX Iowa remaining had quarter. at the in gross rest carton contributions compared basis by profit gross taxes. with than compressing the points profit in Circle the and were decreases profit X% profit these remaining expiration gross margin positive Iowa to sales. was $X.X while by non-cigarettes the million gross in sales Looking by decrease approximately relative states sales remaining to excise margin a Kroger Offsetting prices million non-cigarette gross or higher decreased OTP, attributable XX%, quarter remaining the products decreased increases mainly margin was and which from same-store of The of Cigarette to in margins last non-cigarette K lower of by the points of commodities. and a shift margins primarily due and which of Remaining the division, points our driven and profit decreased non-cigarette driven to was basis East gross and e-cigarette profit other increase XX primarily remaining

As large profit a lower from margins customers. gross reminder, chain we typically earn

working generally return us most allowing customers less capital, on chain favorable require offer achieve in prices cases large our to a to investments. lower However,

independently large margins. overall is XX% stores, gross and million have of Our to between business fourth store generally focus $XXX.X which the in Total chain convenience operating strike profit owned million approximately market and a the balance higher comprise expenses $XX.X increased convenience to quarter.

Warehouse contributed the approximate $XX to and expenses. QX In $XX.X during addition to six division was productivity delivery incremental efficiencies of or months expenses fourth fully Iowa the not increase approximate expenses of delivery expenses lack improvements overall the increased compared approximately were $XX operating and charge, XX% the pension year. as of initiatives million The last and new quarter million warehouse our driven reduction by and in from realized. million Iowa an cost

of a SG&A increased increased year. expenses sales, percent million the $XX fourth period last XX As to the expenses in warehouse same compared delivery quarter and basis points.

charge $X.X percent from lower primarily Excluding X sales. increased from million a pension sales one-time SG&A and points expenses or incremental as carton Iowa, due to de-leveraging the basis of

Turning flows. to cash

flow, free CapEx compared taking operations to software, Our net in $XXX XXXX. which a for million approximately cash from $XX and calculated net less cash is by XXXX of usage flow cash capitalized totaled million net

at our of year-end the purchase asset to inventory $XXX position XXst total our end maximize layers. incentives debt was maintain inventory and The increase incremental inventory compared the to manufacturer $XXX million buys December as the Farner-Bocken Our primarily long-term of was to of million due likely debt -- in and XXXX.

and maximizing is million XXXX decreased million sold debt of million for for level. A in inventory. flow lot January us through is totaled our $XX.X to debt XXXX. $XX.X approximately Capital focus our $XXX for spending compared free a year we reducing as Our cash this key

in leasehold included $X.XX on additional release. quarterly new our and items annually next March XXXX the larger XXth. of increase dividend Some shareholders will to announced We on $X.XX service record or share the to an be to Walmart $X.XX paid quarterly dividend quarter Northeast new in in investments share March in earnings The trailers. in our ticket per our consolidation third XXth of including the per investments center of and a business, needed improvements

approximately growth $XXX a to to a This a million XX%. $XXX between and our in in excluding per to between represents to guidance LIFO and million and to in is approximately expense, X%. XX% grow Revenue $XX.X rate to growth $X.XX to is of and $XXX.X grow XXXX. turning share of XXXX billion Adjusted billion to in EBITDA represents in represents expected guidance. from per grow $XX.X $X per rate XXXX, rate $X.XX Earnings to XXXX billion in XXXX Now from $XX.X from of million XXXX. to for X% all This XX% share XX%. is share, expected growth between

We cash for year-end million depending expect XXXX CapEx approximately free year. flow forecast million million cash and free to on between $XX the assumes inventory the Also for $XX flow spending buys. our be $XX of of degree

the our to gains to consistent cigarette assumption for guidance inventory the provided Scott already price business million, several during addition assumes which last In holding XXXX years. with increases the -- also $XX year of assumes

independent operational help grow. holding drive time to real we Act. Incremental that interest of rate significant as to XXXX, of At impact outstanding is shares $X to million. share in million for effective you market leverage Cuts subject tax LIFO and included We expected XXXX and million a between We to in other bottom questions. XXXX with and the have execute open of And solid diluted customers our view our core be interest hikes $XX.X which not of our guidance. rate same of on XX% the pace for this order and the fundamentals reflects year, the generate for expense assumed line the our over $XX an We've million year. the Jobs strategies operator line. $X to any our now gain gains Tax as returns may opportunity

Operator

you. Thank

Mandeville [Operator Instructions]. from question will answer comes first Jefferies. go We And the begin question and Please ahead. session our from now Chris

Chris Mandeville

the impacted? for about that range. X% Tom, your in to-date You decline trends And that year? year or as how yet doesn’t maybe volumes. be it you then the iron the full flex we Can can should that cigarette prepared on as show that show that bar assumptions think that thinking improvement if negative if progressing you or up. but share metric and the throughout that noted quarter move materially we you seeing think How quickly profitability throughout to year, it

TomPerkins

for quarter variety was the of reasons. and a especially Definitely, December November surprise a and fourth

a And I results, California. quarter. think carton and we and three because all in really decline impacted California big brand that is impacted in higher definitely at third looking saw had then Marlboro that the a their

As I cigarette at consistent XXXX should. But impact, the one, volume stores the also new store. that bit manufacturers probably C-Store the little proximity look implementing an I the in January I up in programs mild trends, having February. they do convenient to improvement a have is are had customers said as definitely the retail believe will to a And Definitely more if competitive. get especially as of be get dollar

of stores is categories. carton service, cigarette profits goal about food getting growth already customers because to and X.X% have and and help we’re the really et of for overall really It’s their we’re too But that and back ready we move plans to share are. But what doing specific of want much So more customers the the the really a that in that in it’s normal it the those to product, the don't in to cetera. about decline loss stores right will X%. to or fresh offset we declines get spite having the our think customers

lot we leverage push. we And a really can have of so

we we our first want prices, raise categories, our profits that’s I customers last is in thing think other do really grow help the but goal. want to to

Chris Mandeville

your robust a What volume mentioned on I you dollar just And up just preview store basis. an versus of that up unit very apples-to-apples type stores. curious quickly they’re get does as a dollar the putting but as traditional… to growth know follow

TomPerkins

About it’s a XX, XX lot It’s C-Store third just they it’s of or say that XXX have it’s average, so if XX. so the of let’s if stores too. or a

Chris Mandeville

then category also just your out customers of rolled believe you before. said fresh and mentioned recently that you And I two back

that about think things how the non-cigarette thinking is for X% should long we QX about effectively several over category? So the next comp in quarters the

TomPerkins

I think so.

I think that's is. what intent the

and as I really commensurate interesting think in OTP have e-cigs in non-cigarettes we’ve vapors. particular, OTP the seen in California carton it also think e-cig. our that and seen in a is I And we and decline in we've California, increase

but there to definitely a I'm in our trend So purchases that that the shift doing that. power is percent, strategies nicotine everything continues hoping with in definitely that we're X% drive and core the

Chris Mandeville

midpoint. $XX did called expecting in And quarters. leverage million $XX then $XX I use the sheet. the recent million could year in million flow proceedings expectations, violent of about shouldn't million or down in swings CapEx most end think working Since reform balance you roughly and your pretty we XX-ish out roughly tax help this cash cash up you by coming you $XX free but the year? just And be capital Can us to did think year-end. where in generation greater Why free have cash maybe flow EBITDA on some comes you

Chris Miller

that’s why really than year the what XX probably XX that of lower of it's thinking. buys year said I and will for end assumes there to inventory at you're be level some the Chris, maybe the and

to range again think end the subject the that higher what towards of we're at it’s the but purchase So probably to end of going year. I

TomPerkins

company to And free flow in against or debt with that I is tax the reduction flows the goal think be that cash as reduction. rates cash our a is going our really going

to our use throughout that. the We debt pay goal year. as to to we down the really use is is out go purposes believe right So our

Operator

question from go next comes Ben Stephens. Bienvenu Our ahead. Please from

Daniel Imbro

I progress Coast. start to operational on on want the West the

of it profitability, last that to of In are path as year? guys and you one Where mentioned then move they with glide towards what breakeven think is the currently terms quarter. profitable this

Scott McPherson

was currently think mentioned, fourth I had a that Tom one in as we breakeven. the quarter

are performing divisions where the both we think them be. expected to I currently

to path in far of that think we operational the guidance, those our as glide metrics right right on that that we're they’re I both now very pleased with good teams the a divisions So overall as generating. contributes have are they now management and and

would I say now on track. right are they So

Daniel Imbro

XX changed business guys And the experienced you’ve learn year? business. challenges then either you or about you pursue approach how what you’ve this made How the maybe operational continuing past as operationally months. on new Can any talk you that, new given philosophically given that changes you

Scott McPherson

I say this. think, guess I I would

we breath. a a last is XXXX the take think over a breather I of year, a lot so had two We've lot divisions of affecting activity years.

Walmart we enough and I those is of divisions, over I But not of refer I division-by-division multitude plan. good we think sophisticated and smarter. those talked chains, really already I bread-and-butter pocket and about forward, those chains, a amount chains our And bring value in XX tremendous much going regional again, maybe a strategic really really on When think think where think bring job complex did well, it’s we a we’ve we’re we stores I to you X-Eleven. store X-Eleven Walmart, really and chains XX spread do that it's those or too.

amount So I up. make chains. if And opportunistic kind right be comes at return to we think other want that’s focused where day, the end really be those have those really it on down for the we is customers. will business chain to again, again we those But on the investments of then of to of comes

acquisitions. that's so how in And customer I look at potential changes our

Daniel Imbro

housekeeping me, bit from little And of question. last then one

any if feeling you impact regional lot feeling Are the a where hearing of less? commentary of guys so, labor discrepancy We’re any more it that? are or around market. there tightening And of you’re

Scott McPherson

really pressures on worked I regional We’ve done company. this think hard our always plan. our the we staffing last same year. thing there year seasonal is across But

a we far making when feel will we’re lot standpoint. drivers we’ve job points easier. And we’re is a to pretty about hiring labor. us of so we’re that sure from done talking And a most lot pinch a make I that conversation competitive Obviously, that year. of things like think and the their in around this we’re good position And help

Operator

comes from Wolf Loop Markets. from ahead. Capital Andrew go question Please next Our

Andrew Wolf

which Tom, when XX issues we look points. XX-XX guys you split of the maybe Could is X.X% particularly your postmortem give the a a can earnings earnings within get around say volumes up at basis industry, is proxy out power company? and peak at control us as the this return about how company the painting potential sense EBITDA in between model down you cigarette we you margin that least on operational sensibly for for power, can at is year the can't the that issues so so how we what a control

TomPerkins

it’s the Murphy interesting today. -- you when between and -- actually and is automatically percentage will Andrew, to ’XX, the like tobacco account, EBITDA XXXX sales. cigarette well we which One a which added compare think, I percentage, XXXX write down is large of

our And so up fourth results to mix getting is quarter XX%. plays now. sales our the really a was huge which non-cigarette reassuring And is part in it

sales. into that, we will a of -- And as higher will EBITDA so as that see we a drive percentage automatically drive

two things. our The If those under operating control was think talked that expenses, thing. and was one at I that's a we’ve in XXXX, biggest So I particularly couple area look divisions about.

be. good control they cost get last back on as where Scott that's under because year systems, so of the those a that not productive. that’s reiterated had And lot we strongly out their very believe divisions to our should cost of a that was really to are And driving track incremental and I

to it's XX when cartons it it and is profits. Cuba again impacts customer, XX you a if leverage, you -- thing on definitely because three hard -- little sales, concerning But well a truck but down product. are it declines, cartons bit impacts cartons per let's route hardened impacts little say Second about over have that's customers got that

you same productive. the decline. warehouse, of are So truck-off reduce cigarettes the because thing the in And can't the carton very road

really be to smarter. have we So

our coming to in increasing to warehouses. delivery have cost We up the with be on of well as aggressive as solutions more throughput lower the

that end same-store really the really XXXX. make I as money in growing the it’s our and return drives higher of well account base it performance, higher sales higher in a all-important as growing and going independent the So more non-cigarette share will that being independent it's market that’s' commodities, of accounts, drive margins. in a lot we day, at performance the to think And the

know And the it's how get going X.X to a really sales all back is were, on mix what perspective. don't the cigarette so we from but our depended be mix get where we back that's if just because we’ll to of

Andrew Wolf

feel at a and with of a get them could order areas switch I and about I you efficiency, you drop Getting guess unfold we throughput, and into you just guess delivery a that -- you talked of about Scott retention. talked the where doing? getting give some can 'XX we how and route I to so you’re you and sense sizes how And expecting as which those at those us then, you're year sense about and I'll what see better look here you're

Scott McPherson

summer the the largest start with And the to our opportunity single in we of and real reroute opportunity that start we come on into that's our cubes I’d opportunity off last reduce fleet And for when probably season April, road. routes load transportation number on us leveraging the transportation the March, for season. is year. come real summer per was to capitalize a

February fourth really we only really we But the continued that. first for bang but for XX months the continuing are summer now, we've we’re piece, we days season. worked out so see. and to would have I preparing fourth We've right good like seen couple last quarter -- in fleet. saw through see the results see to our months, into as quarter see into as closing year-over-year And first The of But the standpoint. the we quite throughput wasn't big on to from come will when couple throughput strong the leverage a

both had, but good of since really would then in initiatives. a started made say I'd window, that So we've I it's you been ICR those progress I we’ve short since say

Andrew Wolf

on for fourth results? a side. quarter that And changes, quarter housekeeping fourth there less California But that workers auctorial anything the is Just lacked you, in impacted get with some that the accruals particularly I in often legislation know companies onerous. little company's like and compensation. the it's

TomPerkins

and expect We were there we’ll but higher see have to blip. a was in claims definitely last mean like higher seem about bit see costs welfare We health But expenses over also some don’t a QX. the expected than $X comp we our little health it I so be, million bit in year. higher, two. the fourth workers’ to it were and did just a between quarter little where welfare or And yes, of the and

Operator

Please Our Capital next BMO Market. Kelly question Bania ahead. from comes from go

Kelly Bania

like back that fourth timing are go expectations to expecting you divisions it challenges. remarks understanding line, there the into quarter then the that method maybe but the want to that quarter and there your there having get the then in the that were sounds thought said you’re back prepared first just on Just I track it’s message on in I'm and the during timing is on two to they in What XXXX? track. difference is not was any below

TomPerkins

were probably confused currently XXXX. on track what expectations definitely and they from on you, they’re But but based expectations we the are think in -- there XXXX, below I our quarter. for the fourth again, our in

perspective. So a to them financial expect to what achieve from you achieve we performance

Kelly Bania

of quarter. of terms housekeeping this in And lot adjustments

settlement $X.XX, you looking If the you to Are tax way LIFO, of were about out the the EPS to it? think pension that adjusted right take at and benefit. is

Chris Miller

for adding That’s the for $X.XX for $X.XX. adjusting for back is is the so $X.XX and its so And $X.XX there tax. pension then LIFO, right. $X.XX it’s $X.XX the So $X.XX, you're LIFO

Kelly Bania

that the for And rate in now. run terms that assuming Farner-Bocken, should sales we of of be is then what

the but not what am are any the trends when and we think out there go I business they there. I first comments sure as think exactly just or come half, about filters

TomPerkins

in -- activity their we’ll of one a division, versus assumes lapping XXXX. have the share guidance it think six-month come We definitely Iowa And really effective we I information assumes, go and the out business March. But end about don't with it. really particular our

So that’s been included in our sales guidance number.

Operator

The Please go ahead. next question comes from Ben Brownlow from James. Raymond

BenBrownlow

Following and up cost question efficiencies root an and around earlier then delivery retention. on the per

the year of the of And cost to these you parts in last of a think taking moving you million initiatives trending Can ’XX? all to quarter, half and $X you where you point, sum in specifically first structure just of you how ’XX, much first the expense $X overrun. and around at commented you second and have had right are up this notable how relative overrun were all reduction cost. sized cost I million think I half just, the

TomPerkins

improvement in two definitely are a of XXXX. a coming that that lot And say think, half divisions first were We of and money divisions the an again would half I I first those those versus in we seeing that of getting lot -- only stabilize. from spend trouble.

are perspective. routing structure. get a where said, from cost route improvement important think definitely to our and is continues showing our itself in seeing our our see we in we and that we it's improvement as so improvement Scott I going So an And that’s to bigger throughput and are Like efficiencies. summer that into improve in

BenBrownlow

cost mean less prior say improvement, you than than had in -- year? less you overruns you when And what

TomPerkins

Correct, yes, lower cost.

BenBrownlow

that you with again number deleveraging. us Circle question up you and the about XXXX? losses wins loss what large How of of what differently for go. come prepare remind as What that just renewals revenue from learned is short-term should and contract, maybe chain in loss And And think reporting from are threshold doing K. the just we you and following last with the the the on

Chris Miller

and just piece touch on So go. maybe come and Farner-Bocken the

obviously that had of feel and is learnings dedicated somewhat call of about recent how they from go as leverage there Iowa year about So warehouse out with areas inflow division and a and transportation. lot good go. that really a are were the as to were going customer come yesterday, we we outflow and I The they and last to and group one come thing that servicing number unique were had a

in situations routes much easier the what fixed So throughout all and is eliminating and integrated it’s than those variable not. your costs when

But I plan and learned still going lot our definitely fixed contemplated to we’re how year about we So volume get an yes, going level think last we to a infrastructure. them And applying back other I to to some that working division. that think of in on it’s we and efficiency the days that trends, we’re definitely away. XX cost that take feel leverage good warehouse goes once to

and that guidance. our So our into we’ve worked plan

TomPerkins

get wins And chains changes. right threshold think our large losses of materiality threshold or I we in $XXX look either million, we for at bigger now. the

BenBrownlow

and XXXX? rollovers are in that go of there of aware And come no we’re outside

TomPerkins

of only in The XXXX. April stopped one is. so Kroger there shipping middle to the No, -- of we Kroger

versus we’re business, of think about months the lapping ’XX months and X.X because picking incremental I we’re -- started So up also but May. definitely those Walmart five Walmart we then for also middle in of

at those an certain offset a So to you can almost look extent. being

BenBrownlow

up that the so integration X% one And that it of second G&A obviously. Farner-Bocken, think if for by I was of back we should more that half, you year? this charges But second first should about the or can year-over-year in growth driven how half is G&A for in just the around half out and the on the expenses, pension squeeze 'XX when

TomPerkins

the there. yes, Farner-Bocken in because have cost Well, you will

you probably I Farner-Bocken be if have have yes, should think are But in would I’ve that's Because certainly to you do and script driving right. that. close all nut a Chris's out that probably we we back listened things normalization lower pretty those sometimes. growth that

Operator

The question comes from go from William Domyancic Ryan next the Blair. Please of line ahead.

Ryan Domyancic

cigarettes between about carton prepared what slower about provide detail take sales. remarks, offset in gross some bit some the decline or delivering burn product? versus profit the So not you gross the difference you saw to OTP more Can helping with cigarette of time a profit dollar products we talked heat is some the

TomPerkins

I Here is look cigarette X%. at is is about the it margins way

Our double margin the X% OTP it's e-cigs, on probably digits. is probably then about on and

it and but seeing e-cigs Basically users. or this we’re decline consumption in cigarette as OTP, got a companies definitely okay multi-users call say so big you vapors. And -- the then poly and cigarettes, combustible got and it's they in increase cigarette you

So people and are going back forth.

almost cigars. the it's total, vapors e-cigs includes looking at you to the mix which category the and then So the got look cigarettes, in moist, the at like teen

those on categories combustible offset grow we margins the decline. other the is hopefully intent besides helps cigarette the so And

all cigarettes. But definitely seen if some hopefully of is help and will haven't not out three margins the yet burn that it that profit loss We out help decline. when some to the offset it gets it's iQOS from our and approved there will comes -- help maybe product of from offset that combustible that to but going heat carton

Ryan Domyancic

still drive And work products think burn base have once out there those they internal have demand for selection… a your your or build that with these which customers of Do not to your on these you shelf, terms then help about more customers getting full of we the heat alternative customers. offering in products do

TomPerkins

everything I they would they do that -- should that but don't they it's not caring. have probably say be

Chris Miller

very that component big we but a and dynamic education because -- Ryan, that a own have time we've been sales for starting is changing even next sales meeting selling significant every mean I e-cigs the whole is organization, day. that of and whole week arena for long actually a our

significant and we've products things the JUUL a go certainly there's gotten think seen we’ve market. I other and into like So opportunity those crazy as just

for definitely us help opportunity think there's to educate an I So customers.

Ryan Domyancic

that for assumes gears or the what guidance there throughout of improvement will be question. need to in how cognizant the profitability shifting terms cost cadence last Are throughout looks that of that any year. quick The year we like? And scale then

TomPerkins

our seasonality, normal and quarter to in starts is overall third profit our the down in guidance. our our greatest quarter grow first is the degree in to the and certain provide second flips smallest then to contribution quarter. It the contributor fourth it quarter back a It’s usually

trends historical in. profit normally -- of that’s how So our how that comes

Operator

Please from question Palmer. Lawrence next comes Coker from ahead. John Our go

John Lawrence

anything we can categories earnings guys those Tom you mean a certainly they’ve ago in see talking is I at compared like for And just situation? contrast some there there? your talk you higher decline looks days bit. and ’XX. the thing Can off with is landscape about few We industry, about the little of million since compare intense fresh you Can to you what from about McLean look those made competitive some competition? it your margin, acquisitions. profile and a $XXX when know talk of start

TomPerkins

the it’s I small, would competitive if bid the -- very say is are out It’s volume RPs any. the there,

months. be it or few shows competitive distributor and growth, for profits distributors or retail decline will because more is haven't do what and a stagnant one that it of a know distributor or customers RFP store and we saying your definitely difficult cigarettes, we candy been if into competitive local our distributors, sales But industry cigarettes, becomes in really to and but slower more it’s and old got you in focused local not, that tobacco convenience and big really because say process as across the also you're on snacks going shows the So that are board be a only to not large you are punished. style the a industry

store the that comment up. from your other doesn't traffic. profit is they increase And is where to they they our the and there. is count, they the the so profitability decline. see what need our that And normally thing their cigarette part that distributor their happened opportunity competition customers see that, and products we're make that’s of because latter what hearing is competitive store And there provide need lies, and their to But

wholesale definitive smaller distributors. that's so we advantage large and a both And where have against competitive

and sales having and independents, offset within And right our and so can increasing as their increasing I it’s store them same-store we on because believe the grow profits the said increasing products. share strategies help traffic those in that's -- Scott on strategies through have by really focused the market

John Lawrence

the they had to again, about. one but the the West to to talked there these Can are able and simply be simple about is were talked that for XX. which still phases. or as maybe productivity granularly? here deliveries those then better a employees product led a little and reasons not remain? last instead XX-XX and just we the simplistic because of just three far of pieces I of we’ve explanation to there, would newer of not of getting quarter to would and is pieces And problem where take full those Coast as curve pick take where various Number minutes follow about up belabor a just puzzles timing the -- stops, being And lot you the guess trucks get problems you talk which

Scott McPherson

point. looking of both we're times position year we in bodies, Matter were some our we to from of is a a say in your staffing just divisions because standpoint, have improved, stable. had very to the go, let last at were which of divisions warm the -- we earlier lower performers I’d one fact efficiency

So I And in in as strong we’re we’re as there both a reduction staffing standpoint a warehouse, divisions. drivers well. very turnover think really from we’ve well and stable seen commensurate

getting When hour those divisions an of stop of quality we improves now XX our headcount have ratchet efficiency a our high a continuing focus lot So Obviously, stuff store staffing And and at improve our and shape. around times to routing. standpoint, done XXs over times of I our think down the timeframe. from ratchet your the stuff now down, at on to minute and throughput in into in order down. turning we’re we’re we’re try for the routes. perspective, one were the and come point good up We've both

So we’ve stop progress made well. as a of lot in times

Operator

ahead. and Please Sidoti Chris [Operator from Our from McGinnis Instructions] next question comes Company. go

Chris McGinnis

XX if then for coming just quickly have the talk for contracts just months? outlook the about renewal year next or market also you up can maybe over I big the this you and bid any guess,

TomPerkins

the so goal one to the without expires to try our have and at refine is mean chain bid. large in going the end I year, customer we’re We discussions. of contract our

So right our focus that's now that customer. with

we regional that like of the store I or looking our chain, I around But is to tell, that is have. here pretty other folks like they're next we’re for sales, there years, out definitely massive more of at. up But much enough opportunities. some not XXX something have customer other chain there. the we customers, pretty much chain activity The but profits are They’re goal our tied maybe smaller there opportunities chain ones, think couple no the the of so a sales large drive we

driving And definitely profitability structure our comes is its into existing customers is profits the along critical that so great, now. if our but of fits right something

Operator

go Our next from question Please Mandeville ahead. comes from Jefferies. Chris

Chris Mandeville

more after when referenced were comes you plan for wholesalers. you breather those tough chains. it tougher Tom, And it that major the when surely going little subscale seems get as bit and I'm channel, a taking sophisticated opportunistic. times saying this not you to also a year just in on

applies as just So M&A also if to well? that wondering

TomPerkins

so. Yes, I think

State we onto in northern our this division, have of think the projects converting I system. couple -- of New one fourth we have the quarter England year our is Pine

we Davenport, that. I but never with of really it. focused think that is focus definitely as I never drive Farner-Bocken. we about business two as And of Since end well again bought the the have, State and and we largest sure three make XXXX, of -- the distributors Pine JP think and So again business profits have on need we the would say the listen, we on are to the

our I and definitely profits never year is but all acquisitions now that’s really really driving focus same-store from And the say bigger And sales learning's the come the bucks driving bang rest of growth and XXXX. think But never, I for so our from those store the is where the this into could in growth. independent divisions.

Chris Mandeville

quarter guys is COGS sales final any of what's if to Just question lot the wholesalers call, or ability costs. curious Does avoid around the one any that can't freight we to since there disclose? or really and to percentage do any that for hearing can been then maybe impact seem in we’ve subject have sales. you any which two And my up a since you

TomPerkins

so No, vendors that there. the receive the there because -- we really that's the manufacturer isn't, cost our or majority vendors from product of again our

trucking area haven't we is hire have offset pay we our consolidated we warehouses we other where freight. and those So costs the yet. firm, have they use costs they seen and to prices outside The those raised only where

But to starting the I that's going impacted going see think prices we it's offset And to that they're raise if see cost area on costs. if our but dependent those only so inflation be have we’re those to there and freight wouldn’t we’ll vendors really by comes to to incremental increases around. some

Operator

Draper I now comments. turn to Milton the will for call Ms. closing back

Milton Draper

conference for support. We you interest call our continued for participation Thank and your Core-Mark. appreciate in in your your

call give If questions, have to at you a Thanks. additional please XXX-XXX-XXXX. me free feel

Operator

now for and ladies concludes you, Thank And you participating. you may gentlemen. disconnect. This Thank conference. today's

Core-Mark Hldg (CORE) 3 Mar 182017 Q4 Earnings call transcript