CORE - Earnings call transcript Q2 2018

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Operator

Welcome to the Core-Mark 2018 Second Quarter Investor Call. My name is Vanessa, and I will be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. And I will now turn the call over to your host Ms. Milton Draper.

Milton Draper

Operator. you, Thank to investor like to second Core-Mark's I welcome XXXX call. quarter would everyone

today our earlier Officer. Joining Executive Scott its our are me McPherson; Core-Mark's Officer. Chris room Matt issued our Chief the Accounting Officer press President Miller, Chief morning. in Financial release Also earnings is Tachouet, this and Chief and

to include release. can GAAP the measures. Relations tab. Investor find under website the financial financial non-GAAP the You these earnings non-GAAP discussion of copy both will measures our A in and of reconciliation it on included GAAP Today's is press

We Scott statements. turn results XX-K periodically the SEC, call subject to for are our now be risks to expectations. will Actual from filed to with that XX-Qs affect may materially you also we current results. management’s McPherson. discussing These forward-looking QX and I’ll a documents to our differ uncertainties. specifically discussion We forward-looking risks of and our refer statements the over

Scott McPherson

and everyone, discuss the morning, will After then detail in more questions. of results we'll Chris thanks and review us. Good it quarter, financial for the for joining open my

which a billion account. sales and performance, EBITDA by on we driven level, Our high At in as quarter grew pretty outlook our our up at are first increased quarter the results confidence year-over-year to summer with and XX.X% in by $XX.X the XX%. came store growing the built and sales showing was second in solid year all through we our the Sales above independent happy the move for important million the same-store on seasons. $X.X focus

declines much since but operational improving, strong more continued we overall operational at dive but transportation, signs are despite division some moment, like held there. I'd cigarette results we but second analyst the improvement distributor segment the the mixed. of Tom's do to in side our in carton number is a share this looking following position I'll you're performance, position investors market. call moderating on a industry first the to expense by the Core-Mark and retirement, traction were current to retail and and C-Store level. our more just the level into and my Results at of We results if industry affectively is priorities. warehouse the strategic saw today set On have convenience our the one largest and

and our executing both front capitalizing leveraging and in in EBITDA acquisitions levels. organically and historical consistent the growth range than but profitability. to our us, have somewhere of We If market the That the highly teens we on everyone, grow mid-to-high shares a account by directions drive which means on and smoothly and share just operate margins single and basis about opportunities a X% better we also in adding multiple annually, industry, is scale scale in which through with end more have in are opportunity to digits basis. a store business stores XX% the on our revenue mid-to-high by operationally produce we to creates fragmented of should

We in goal. of three have that main pursuit priorities

customer drive First store growth our independent segment. and scale the industry. share to drive aim our in we competitive advantages to our profitably same-store more want and than grow across faster We existing market while in sales expanding base

acquisitions portfolio of arrives. opportunity our larger We when and the will C-Store fit build to continue that pursue national criteria upon customers, strong our right

our cross products management evolution. industry market our evolving of to support want convenience and that in and job as solutions. first tobacco, in for foods, help consumption be is retail and The to category we customers the leader objectives, Second habits growth other our it's the through change

on focus food FMI, and all strategies including about our talked as have of you consolidation increasing vendor service. and we've well fresh with We as

We technology identify on that time selves. what our customers need better enable to their also invest reps in real our tools sales

initiatives somewhat right at category on past, to by profits to profits customers talked the extension Helping them the well. about have While independently it's their and management. we've selves in products in these our right their our and sales border a the useful sales think as time maximize sense as about and

division, Third deep use in driving the business of get scale matters. our and we structure. cost technology will roots in better our sales ensure the organization, drivers, at continuously across the continue definitely and leverage business. turning are dollar to out our to to in is cost warehouses not drive every least, improve to We every a we of business we will where our side My efficiency This our and look for and over the additional reduce of at fixed operation Core-Mark you us costs. efficiencies are stone base see

strategy, context with take our a second at So the in performed for as let's that how look quarter. we closer

the top strong growth the were were for that industry another driver non-cigarette Tracking sales we are sales independent strategy overall in X.X%, also XX% overall as mentioned at and our non-cigarette growth sales and XX.X% On trends progress of adding up stores, of Same-store making non-cigarette up I were my quarter. healthy with show at the remarks. is categories. the topline, sales

existing these are driver margin additions year-to-date. than more fit Typically so profitable well they XXX reps, us. for on the added have into We stores stores

neighborhood our which the quarter. result. growth Gross for norms. in X.XX% were Same-store declines, is declines X.X% now for the factor in carton margins are key the a continued of the moderation second solid about Another of carton more historical quarter sales was cigarette

the increase margins Vaping the products We consumption margins products. and to nicotine by alternative in higher driven mix carry cigarettes. than particular are gross of increased seeing shift non-cigarettes year-over-year and

volume doing do job So trends while impact. organization the in the in our nicotine cigarette U.S. the replace lost emerging declines I'm in don't on they they sales the the is smoking capitalizing pleased category. with the mitigate

meeting obviously data suggest X.X% at in the X.X% softened what our generate there recently, but trade finishing and at food as to fresh growth in respectively not sales, Industry in store of continue has category and fresh QX, we Looking expectations. is. is are growth bit the it speculation convenience numbers service same a to those

more aggressive promotional and to fresh customers. to and the claim continue restaurants, to healthier in category play think food market. stake a fast will they It is an Regardless casual offerings reasons important role food the to we and initiative service remains us evolve seek for continuing attributed the and of activity fast menus. It from Some to focused growing. for on C-store the priority our expand as we're

overtime that a We're us signs focus. divisions also positioning seeing we warehouse has lot mentioned helped for In seeing this we progress customer I want and from area that I'm our Iowa progress a to see the improved optimistic but the victory with continue good talking manageable. results through quarter period also divisions staffing the both two the results. the declaring our track. service positive financially us had before is so time summer of continue from as I'm On QX about with perspective. of I quarter a prior both a busy an division's performance spend are performance. very to key the of that for remains pleased efforts on calls. summer the exceptionally increase some transportation, last that we're but job saw side, done operating we the with on in good and we keep throughput levels and We're pleased

and San divisions better and is a more the our cost of location and a first nationwide quarter. solid the year on make We to to central Area winning long development our will do. the efficiency will will the the Being cost was to continued finalized this the cost future. now first closer second. but got in dramatically out home, said, traction and areas Worth offers are taxes plan we've would The will plans Francisco held and around up, Recently our to for we create delivery that Overall item relocate we expanded progress we operating by momentum business to emphasis corporate have Fort in positive Bay half summer of Wrapping drivers our to is to to place a both customers from quarter the I The time performance the while line independent expectations. over central through efficiency and years. logistical Chris continue to good on the will provide relative our know first SG&A more half take business. Dallas All Francisco is find area. on Sales with warehouse continuing during of for place overall third of detail what one move staffing XXXX. the the for to a has us. Core-Mark’s lower operating benefit but optimize SG&A Dallas in headquarters that trends stores. more high into areas San like have key

Solid Core-Mark additional strategy always, growth key for warehousing And place but cigarette and QX sight is have return for expect what here's we us. into investors our to outlook again. to now in The on more as non-cigarette normalized environment to line improvement. the need to sales operating side good cartons. of especially improving picture we do and drive the the and year us have a and Chris. should steady as growth, confident profitable from in clear we're in Thanks our is

Chris Miller

the start by that first morning our good the factors results profitability the strong and Scott and drove for you, quarter. I'll reviewing Thank financial metrics everyone. key

to acquisition share and income $X.X the healthy As of lapped increase include the in a in quarter results and and share we for $X.XX $X.XX second $XX additional quarter year. the per Walmart per reminder, last Net July Iowa compared or showed million with our the which million a respectively. financial May

strong share to ahead, $X.XX quarter our in perspective, sales which XX.X% improved increase LIFO $XX.X year non-cigarette third billion net performance. a contributed grew EPS And our of billion. second gains. share quarter EBITDA the addition last the while an X.X% mainly non-cigarette from $X.XX cigarette trends Adjusted we strengthened looking $XX.X carton to decrease sales in and tax $X.XX Iowa still last to our categories The historical in discussed results was market which this increased in XX% $X.X the expense our of confidence Sales diluted driven in guidance. was earnings for $X.XX in we which of the first the compared sales topline, half increased From grew and the of categories diversification million performance quarter the the with to the operational profitability consistent improved federal quarter. our for same-store our first a million represents per and growth the increase in compared strong rate benefited quarter, Walmart to of critical and The declined categories primarily to $X.X by continued the improvement result which year. at our non-cigarette and sales approximately have due year. year in in now achieving compared from Excluding our QX offerings X% with overall one-third in for which to the and XX% product net continued was Iowa

Excluding demand for sales healthier non-cigarette as sales division XX.X% looking respectively. Iowa total and and XX.X% at from increased to food And key we products. Walmart sales Total X%. both sales customer increased the continue for fresh OTP and increased XX% categories meet

sales in Our by continues to declines in growth across company beauty to XX%. level produced cigarette XX.X% category demand which consumptions. the which and health, show Driven alternative products nicotine increased strong Walmart. of general to Candy mainly highest products attributable growth helping offset grew the the

LIFO was while XX reforms points million increased increased million profit increased mix Remaining LIFO million prior million. the due of non-cigarette As XX.X% which in OTP up quarter gross quarter. million $X.X million increase year manufacturing last gross tax remaining higher the $XX.X for non-cigarette gross $XXX.X to points QX Cigarette healthy and XX.X% to year. were X.X shift increases overall primarily second margin remaining the Non-cigarette prices. margin the inventory driven to over profit quarter. expense excludes compared up this up to by expense X.X% Iowa remaining the sales compared holding in second cigarette gross in profit of in second margin basis X.X% XX.X% gross year. products. profit sales $XXX.X Remaining and a $XXX.X to year’s showed $XXX.X for last quarter to in quarter profit the to X.X% the million they gains increased profit basis increased XX Gross

margins this Iowa improved Walmart the these substantially last profit OpEx gross of the OpEx impact from lower XX.X% leverage basis margin for the non-cigarette shift XX.X% in increase sales OpEx the slight non-cigarette sales non-cigarette shift the of the division. products. quarter and million was in X.X% the significantly at non-cigarette by price percent Total the addition look profit Operating year as million to a to earnings. comparison which The and expenses quarter increase which margin with a a focus expenses as than net million a the remaining operating during the year. gross the unfavorably improvements were the Iowa X.X% business our margins increase to $XX.X sales to $XX.X key in due in of over quarter in categories. XXXX. our percentage second yielded which to driven compared mix Non-cigarette a more Excluding Improving points of increased XXX.X impacted of quarter XX drive QX OTP of for approximately organization points, for have get To is the higher we sales other of of lower a meaningful remaining products. by came this

remaining throughput. intensify So our $X.X warehouse saw On in drivers second labor other we profit represents in transportation and in year XX% putting of we've for last on-time XX.X% as quarter. million strong bulk fuel improving. were increased $XX.X not to our the expenses leverage our costs positive or versus and and SG&A on mention clearly our to a cost continued transportation of last the our delivery costs increased continued pressure this overall and million our million overall $XX.X seen year. escalation Warehouse delivery XX.X% expenses. perspective, year’s gross with has front, improvement metrics the are to expenses compared XX.X% prices. Overall, key during delivery leverage market the a quarter. Warehouse From

Iowa X.X% the Excluding expenses XX division, last increased or of the addition expenses SG&A year. forward

our XX.X% last year. profit, SG&A remaining percentage for this QX expenses XX% gross a As the were compared with year

months define we Our from free less Through for the through operations six $XXX.X flow, cash this quarter. which of was debt million $XXX to end second compared this the substantial six last free first was net a compared year, the of capitalize generated $XXX in At million million of million the generated months, quarter, the QX. $XX.X million cash improvement for which our end flow and the CapEx six first as months end from we $XX.X first net the first of software long-term was increased year. the cash with we the the at

in progress down debt. good made we've paying So,

of EBITDA We expect range XXXX. our Xx debt end the in leverage to X.Xx adjusted at to be of the

share During the cash used of repurchase price of Approximately $XX average and remains $X.X approximately was the quarter million million our at capital share. XXX,XXX million per an we under $X plan. spending shares authorized repurchase to $XX

represents XXXX, year $XX.X of XX% to to August are in excluding XX, we $X.XX billion XXXX. over and the the is quarterly share over outlook to in between XX, on $X.XX we to shareholders of of XX% guidance. XX%. next be million, per expected is payable $X XXXX growth on with X% XXXX. growth to LIFO dividend which be the Adjusted Diluted million be X% previous earnings of financial for are EBITDA over $XXX and expense, $X.XX $X.XX, $XX.X to a per expected looking representing Our per between Sales representing expected is share rate and full to growth $X record $XXX XXXX. our of and billion, our reported XX% at range XXXX share the September dividend And to reaffirming

on high expenditures market and support million, share This the thorough cash the is on and our which the the higher strategy, capital reduction the operations be however the of half dividends. in call. repurchases provide year. I on level our free investments capital QX of inventory investors dependent share free and is expect to the in will our includes and our the executing This range cash growth, $XX in flow capital plan allocation of level which returning flow debt flexibility end purchases to to closer of mentioned We second in

driving inventory several are year, year, what the million increases to shares months to of expected Our consistent subject an guidance and assumes two is reducing we business. our be the be which strong experienced factoring cigarette increases. second the are rate years. expected $X $XX quarter and $XX.X Diluted expense LIFO and scaling between to million interest tax with $XX making costs, in assuming six outstanding any prices the Overall, be last forecasted effective and is during XX%. $X million this progress first steady had million, we holding XXXX, had million is gains of over operational for year. interest rate year, to for and we are efficiencies, Incremental a

confidence Our growth we positions head XXXX. of second and strong future and our results half into our outlook summer in reinforces Core-Mark for the opportunities, season important as

Now the for questions. I call Operator the will turn to

Operator

Bienvenue first Instructions] from with And Stephens. our we [Operator Ben have question

Daniel Imbro

is Ben. for start taking that? more on Imbro our cigarette volume and congrats Daniel the consumer but anything what This I trends, any to year is actually I improved you excise obviously the is can but sequentially Wanted think on quarter. - on over did last Thanks maybe on for tax guys mean color you questions saw, else increases see there add on happening? going lap the we things with the think you driving

Scott McPherson

tax big big the the and the lapping mean was pointed a I the in Yes, biggest over probably then out excise quarter-over-quarter. a which - trough buy I think impact you was

if think decline carton events. in We some divisions thing we saw of seen the of markets. a to at improvement some of service that balance the we've look their that’s East, disruption overall I some kind QX expectation had in had But other the the that was weather kind of year. and we say my some for of average the I that I’d first which year it in significant saw part half The out, major QX is, material

Daniel Imbro

to out little guys line business, in Tampa guys of DC kind good that's think do you about then that down to talked coming had your a capacity, back X-Eleven, you servicing bringing Coast, independent have ramping there. job over bit profitability. the might how curious And done progressing? Moving West the add towards years But you at you need towards capacity continue similar

Scott McPherson

So Obviously X-Eleven they markets got Western very so are We where we expand the future more really, where expand we down and in depend I talk and divisions West back some like have opportunity need the obviously a and you have if capacity operating do of partnership it’s we’ll or well. of we’ll right said overall, we've capacity opportunities. them think the have target still in capacity. capacity the capital kind to there about X-Eleven to we definitely markets and on we’ve we as sit got areas but good if the to it,

is As never progress the year focused growing that independent that I’d definitely of I steady first through and the on what made far getting there. Tampa Tampa's laser as but say going, they're want

Daniel Imbro

nice the your ending focused in your you the improving sounds more from do next operations quarter, guys in leverage envision one the year. Last a Leverage on It down me. quarters. the step few took what like

balance So it is preferred absence use of the of excess flow, delever sheet in what’s to the just cash or. M&A the

Scott McPherson

been short is for value. we we building acquisition buybacks successful the well, year, very small next or to any it’s in our our year other say acquisitions. grow paying this a balance been to expansion decrease our in other position year some for if is or leverage us We've continue some but in and make focus saw debt. down you to to share business with I think share focused we've via early of that. things? We position via the and the to done made would or opportunity run sure think expansion that I we're And want We've as a buyback Yes, do on

Operator

And our with Loop Andrew Capital Wolf next comes from question Markets.

Andrew Wolf

power where other are DCs their and EBITDA in Sacramento split much to we how impacted year of the you operations, quarter's of your in ask that to also inning growing last some a Wanted between to more as kind the what assess increasing the of there, were back normal back of and sort earnings normal business getting try rate? this to

Scott McPherson

fifth the people fifth way the are there, sixth the the independents inning into to into it nine the inning two peak teams they the the very good divisions operating ninth-innings with game. and the and standpoint. management put mode surround And in would we’re at is have to What those seventh, of there may a summer guess with. profitability dropping those we’re that gets I themselves growing bottom say very I’m I or that inning of be a six, back growth their with well. getting in eighth divisions a and line us from with business really pleased and

So we’re say to I be. about I to would where halfway want

Andrew Wolf

guess didn't quarter kind a after be. you was you such think why could where you the estimate of good I certainly or higher-end indicate maybe And is the guidance consensus my raise versus that

need were You was and operate - the the want little them plan a the and to to just to is all low? perform or your just close we you way quarter just operations

Scott McPherson

to you close our quarter is that business was lion the I in of the share would to profitability. got our in QX a but plan, keep say mind

this the at executing focused take look stage of stand a where So at end we’re and that. in we’ll QX at on we

Andrew Wolf

question this ask even sale. mentioned other come you more one always up year, the for you to can operations that but wanted you when just said, and assets had M&A track if control And on

is a size were? now decent business you good put I market auction, a mean, where could you and at place do deal if were your were So if the hand forced a into asset think conditions

Scott McPherson

done. it have right we I it feel the multiple was think get and it that times confident Chris if about and both Yes. we I go opportunity, talked would

Andrew Wolf

backslide fifth going already already you're of inning out or More busy necessity the not of need. is in it’s the if it's the or integration? to not business even that -- doing out whatever But

Scott McPherson

Right.

Andrew Wolf

if stores, a or I that will if The that XXX could. housekeeping, number is new Quick -- net? you net is independent not

Scott McPherson

Yes.

Andrew Wolf

have So – lost it's given or whatever might of the closed you've you doors. net

Operator

our And Capital Markets. Kelly question with is Bania from next BMO

Kelly Bania

to on it little on expenses, line. Iowa what Curious a to if division color could us top more You what added but line? you just gave top numbers give the added

Just trying growth how get what and to couple quarters? just a last of compares for sense was organic the to the that quarter of

Chris Miller

mentioned So, or… kind Walmart, you if X%, I've on that what Iowa about of non-cigarettes we is grew out and take for you were looking

Kelly Bania

I was looking non-Iowa non-cigarettes. for not

Chris Miller

in Just total sales?

Kelly Bania

Really just in trying growth. zero on of to organic kind

Chris Miller

X.X% same-store the was, then we haven't XXX While up the independent, that as don't typically sales And separately mentioned, -- added the called Scott for we We quarter. stores. out the

Scott McPherson

at the look way can look that indication. probably pretty acquisition what they at don't specifically go and you divisions and another we and out call good do you but can in our revenues Kelly, back you give it, figure would a

Kelly Bania

quarters couple I Yes, think our organic. where next going the thinking quarters of be kind it's about just guess -- I I to am mostly

am to run think just So of rate of kind organic about sales? I trying what the

Chris Miller

Right.

Kelly Bania

improvement Or is in if in trend. and a there trend change

can non-foods comment So, there any is chain either any your comment cigarettes sales momentum independents, talk it and pretty see of any is terms overall, okay the your there? just you customers can or about versus make at underlying you you -- in on difference similar,

Scott McPherson

have independents I in same-store same-store but not overall consistent. pretty our sales -- it’s growth independent our slightly on our So change but outpaced say sales, delta a in would it's big

Kelly Bania

decline. was the the the environment? I characterize ago stabilized you some challenging, mean, just of to like characterize or so you and few that's how carton with environment, as And broader soft of characterized Do kind would the the maybe trends improvement in it a quarters feel

Scott McPherson

on had in strong. gallons were Yes, market still They July. and the expected we so we're just today August release in strong

some we've the some in nicotine mean, the which there, has in that I in market releases strength solid. characterize as the you and service OTP And think food space. seen whole. my Where that just And what softness and beverage, just in if kind I pretty fresh, obviously remarks, seeing So retailer is at growth in some mentioned have traffic historically. last as we few look of slowdown have and and has some I not of by I around service come market solid. the the the been seen days, been store and a we've progress We've seen market food echoed snack fresh it's do in but out seen aggressive still

Kelly Bania

then look And transportation, opportunity just terms as think over where next you should where of in end an get terms is as that to in of year. and possibly the you could of the to still it that much warehousing for be? dollars about up out How the you couple years you think

Scott McPherson

-- answer, let question to answer like Tough would say it I me Kelly. this.

is we've up very annualized. to of pleased this million $X around of which each units. And talked communicated almost improvement a have We been with we've is five the throughput you guys a year, number times year about unit and that throughput

proud area the that and would beyond. our XXXX think be that I is able few forward biggest I'd look and transportation that there we're there more in of to really say, companies we to challenge. we’re Transportation to the say one I logistics as runway say is industry. is probably the

products year much we -- Company more still on our around the hear Our across the a on-time driver, than put delivery That said, have last is performance this was significant you essentially that trucks. mainly really with year Board. that opportunity and and and staffing, despite everything fleet And a on is challenges. better it as

is not capacity. near out Our fleet going anywhere

pretty So I a there's costs. again, sizable think runway around our transportation

Kelly Bania

either and see year just about the you through cycle end you with on could where last for as bid the existing from And or into think maybe one that for any XXXX? then your update on up the bid I to customers come me, your guess RFP of contracts, the cycle

Scott McPherson

that this in good a really beyond that. we December ours we process now go a of I’ll I the really haven't nothing major year XXXX, in but bidding have disclosed. but months. that it's and of But And We the this half of do really partner the right next have XXXX, half we're couple 'XX. in back those nothing XX major second for that call, of in look didn't of at first and

Operator

comes call next from with Mandeville Jefferies. Our Christopher

Christopher Mandeville

Sticking with products logistics, in and Do Scott, of from community supplier and the of or on from where intend plans this any just any with you to the they you the your foresee receive there? pressures. challenges seeing of ability timing any shortly, suppliers has taking tightness that cost affected heard transportation have price are

Scott McPherson

of half your first the Chris, again? on question was that price what

Christopher Mandeville

cost or is like those costs? community how some today, can back you do of the of realizing you intentions to increases heard true really vendor on look actually Just foresee

Scott McPherson

is, biggest nothing So seen that's pressure just rates we've increases, price third-party we take some there, I drivers, although warehouses rate wholesale abnormal driver inflation, the been say Candy that some impact scale but it's price we but kind candy stuff, kind increases again, price had on have we little The wouldn't Probably we had we've I -- our but of in increases prices seen material price internal have we've freight We've nothing affected arena, on ourselves overly we've wages. and bit seen not some seen But of full impact products pop-up. our is or the say material increase. that some on seen only other pressure business. logistics distribute, freight a would in inflation. some have ancillary seen

it's handful been a markets. I definitely now. year, acute more hasn't it that a early But becoming year. issue, of it And in been last seen isolated was saying have were it's the We huge

So we're on. we've focused something obviously got that

Christopher Mandeville

something the also And realizing. to which cost I also pressures vendors that assume would as much key your are are

recently in comes to interest of all your to trucks? or the argument maybe at you conversation on of to making that it it be the has deliveries suited best consolidate best changed when all, that So

Scott McPherson

and Our I there's message to question is folks to in increase really to have pressure better that on folks, and are stores – or is been their the had, cost start so that where do has have full of our pose to present – consistent. for some we're with. market? that looking some see us. opportunities we in our those to that impact folks to the avenue a opportunities DSD products some Currently, discussions of couple their distribution get DSD think and they network more very there product that a an there's The DSD a is, the see DSD bringing in you that existing to you is traditionally posed believe I is, going we're may good question it

Christopher Mandeville

basis, when transitioning And non-cigarette gross that go about earlier. Chris to the you us help we on Kelley, alluded can forward margin, to as think

half back most have clean I year Walmart going Farner-Bocken. some of for the in You're anyways to think the compares and and the part

progression how do going we think about margins So forward? product

Chris Miller

So quarter in the that about lap basis we is quarter, Walmart right. XX compress in this margins points

impact. that So have won't we

return back historical to, So I'd more say we for category. should margins non-cigarette the

because category the been substantially pointed we – has lower. also as Although their OTP compressing out are margins margins

all a to – things – trending extent been than should they've to be that the little bit time. are our being better compress a non-cigarette little and But So over higher of some bit. the those back will margin maybe we than equal, other categories sales higher

Christopher Mandeville

any at of here, from there transition early there on move already Dallas And in months really additional XX in savings the your provide from the to point or been committed one and first the this on color who potential XXXX ability more to expected last headquarters is to and move? are employees the making that this conveyed message to actually as the REITs any is those me

Scott McPherson

us. sensitive employees important conveyed. obviously fairly -- we're So office as the it call topic that a on they're has have we and a Chris is we decentralized company. very - this to But corporate have And our been – are

X,XXX Our consists people company. about a office as of our of corporate XXX

cost of there customers that our were a quality that's be why getting to we life beyond I decision cost think not it's decision. of lot us position high that the service friendly. to as factors material but company employee of savings, to factors better made it does say, a us leverage one move. was in I'd just it’s market cost much a It So, savings a into that the really huge nationwide in a went not so and is, really help With a

Operator

question from Raymond We James. a Ben with now have Brownlow

Ben Brownlow

and kind concerns that come you be quarter. that an timeframe – than a the XX from was expense challenge expected, leverage appear structure. color modest was in second for of standpoint size Obviously was to go the was concerns, didn't of day, second to out leverage give said my any OpEx one any right sort better losses, that and our quarter? any Can the you and the headwinds there or handling of The just or I – previously And think better, contract that.

Scott McPherson

they of they was with contributor for I challenging a rightsizing real kind would it's and would a say – disappointing company. to them and fantastic being a service profitable They to job great on continuing lose that customer our I a this felt did provide that although to. of operation, very

to hats division. So off that

Ben Brownlow

in And little improved Can questions follow-up bit of down when sales half early improvement, kind you on give third to quarter. EBITDA, range what's granular just movement. about of what on the carton some and think implied assumed on around CORE. Obviously lower more prior And that sort cigarette seeing returns second you're same-store that about end the you a upper to guidance X.X. that

Scott McPherson

My kind first year. down be kind that reiterated first at of I of that well historical in of the would be X% early communicated range, quarter, to in expectation second to for the before. in quarter the We X.X% back the the carton norm said what as X% in balance the as same-store to quarter. expectation X% as were I year I the going that we're in to X% my

Ben Brownlow

quarter-to-date? around color Any seeing you're what

Scott McPherson

yet. No color

Operator

Ryan from William And question Domyancic Blair. our comes with next

Ryan Domyancic

the So internal transportation sounds ahead so comments running of like it costs far, a based expectations. on bit

the guidance some than second the transportation need to of or costs? another So the transportation there savings half, those to part for higher anticipated offerings do potentially contributor cost you is realize kind EBITDA additional meet business that or

Scott McPherson

that's assessment, fair a Yes, Ryan. probably

to some not warehouse's think is and I'd kind of health to I it say is offset it we expected I where trans be, be. warehouse and where want of that.

So about I where I'd overall. say to be those two kind them of are expected combined

can definitely in more back trans the half So, leverage us. get help some if out the ends that year of of we will

Ryan Domyancic

to you going back in deal driver to if think initiatives, you know put out savings, the out back you then in the look how take those kind those the you wanted internally? be at at January are the trans when higher you with it's wages if controllables to trans realize of you about you progressing up year, those costs, hard of on And Do fuel cost. I start that against

Scott McPherson

with talked say about on – that's was And most is call not flat. expectation would that one and cubes I've everybody my the to the load the I we're flat. per -- be

every reroute focused So seasonal QX to loads. I’m as our we're continue year, to leverage on we trying do

turnover able has per in being Our driver gaining real cubes a to not to and obviously been challenge been have has efficient workforce load. able This just leverage leverage. that driver that's

year-to-date So be, we're we sure. to where not want for

Ryan Domyancic

see Okay good topics carrying nicotine growth stores? switching look to many quick, think about I just locations about because alternative quarters are the could real category, of but many it, how in added XX,XXX and just – products? those that trying the your customer see way very guess I'm sure parts when now how or not if you much is then how think – growth more more current just of strong that time getting we the to at I'm to this you

Scott McPherson

stores, this. So say of your the I'd XX,XXX not traditional I roughly those traditional the would those are much maybe break in so convenience lower. stores XX,XXX penetration is is it out convenience XX,XXX stores, like

some of even types carry of don’t And products. those them

that's And or is what's of the are probably the them. XX% some say the XX% I to XX,XXX said, in them XX% market being the products, convenience out So of penetration have volume. vap that stores, the of today in that their plus devices would driving than new form That driving more of vapor e-cigarette obviously range. XX% is the market, and what's

So there's some definitely runway there.

Ryan Domyancic

or just Is the due vast up and contributing in there anything Beauty to these quick then follow that else majority nicotine And that of a products? growth General of on line newer the to that. Health, is

Scott McPherson

in definitely majority. a wouldn't beyond merchandise majority, it I general it's, there's we'll for call definitely sure. it's and vast it, call e-cig growth vap But but

Operator

question Coker next our with Palmer. Lawrence John We have from

John Lawrence

Yes - there you adding West mentioned Scott, you started those would I Coast about - Give and just a X-Eleven. a add when us a talk you assume go to bit, having adding ability some trouble to accounts. bit and little try back the little cadence and

that progression trying can back marketing slowed accounts? those You going the reengage down some is probably events about to there how you talk of

Scott McPherson

that had say that because And only would would that second today divisions I anybody their say some not they know I really service. anybody that slowdown last with. you not - the John, service that in of departure they we about specifically probably second Yes talked activities, year, is really the did and customer to couple solid compete they channel the

are at stage have growing in engaged regaining on customers now would may recruiting say lost they focused new they're So this that they fully the and and volume. anybody that I

So operations. back division Core-Mark to normal,

John Lawrence

more gross saw food and those a is Secondly, in and because softness Iowa food you your the that higher - was with division mix what of Board a with bit across division, little additional the little how of fresh, overall fresh? comments, there much the

Scott McPherson

growth I definitely, and food totally that's question. our would heavy not was mix. obviously big got in their I Iowa your that contributor. was part a And I'm a sure say of fresh

were our So big a two those they to contributor growth in definitely categories.

John Lawrence

a When softer in areas, there softness was you been would even contributor, though was said year-over-year? it no some it strong

Scott McPherson

No, they got go minus well and go. that, but well you come in out performed those - the actually of definitely of fact outside come and take that to the departure had areas. they they They'll

John Lawrence

discussions want at well, as parts thoughts country? of performed the you’ve So of Any any to other Walmart, you last the expand in why question. the

Scott McPherson

that on But we I see strong. and relationship that our our say But we conversations best will that positive the leads I the be with focused we're on where doing have would that's for right service and contract us. is will And hopefully that the under and all that today. are just Walmart future. very a conversation can now focus performing

Operator

and from we question have Chris our McGinnis [Operator Instructions] with And Company. next Sidoti

Chris McGinnis

trending where on already, an the I you on that's If it, update how they’ve missed for after And could maybe at? so program those customer you FMI, give on then maybe I just been quickly just said are Just apologize. you?

Scott McPherson

up Chris, remember you FMI if production. last we our ramped year yes - So, is from

hit on customers pace through So, midyear XXXX we're to year. the for

So got - there. of We've very improved the is that some we've part of well. going it processes

so, the And coming product non-cigarette. on pleased it am results that's solid I work continues show with and there, really to out of

than we see Our non-FMI incremental what growth non-cigarette higher is stores. in $XXXs sales our

Operator

And Andrew our from Capital comes Market. Wolf Loop with next question

Andrew Wolf

FMI, of on a question price. anything who if your that Sam's business my for asked distributor the would actually if that can not that a don't help that or know of nearby business. have kind compete anecdotally, thing impact as lot, is customers a but your Chris sure with wholesale I the Club distribution have out customers cigarette I'm the you or but won't the to got

Scott McPherson

their of in windfall have I'm and a a cigarettes aware that be last cigarette heard of not news weeks be not for would openings that business. some that big think if that us. and BJ's, I said, they of me. the locations, out to of the of I I business I two down unless Club don't cigarettes number know something of they So, the Costco but the got out that's stores they're But and out don't think Sam's out business of. think would do they've know shut and got I some taken they've new you've

that I share to take get them. the to happy would they lot if capture power We'd all their absolutely, definitely of think to we a out, market be and cartons. so want

Operator

questions. call Thank we seems to remarks. now you. for I no Mr. Milton further the back closing over And have will it turn Draper

Milton Draper

our really call, we for thank in Guys, you appreciate. participating

any at you Thanks. can questions, have X-XXX-XXXX. give call a bye. follow-up me Bye, you If

Operator

This and for ladies concludes thank you for conference our We And gentlemen. thank today. you participating.

You may now disconnect.

Core-Mark Hldg (CORE) 7 Aug 182018 Q2 Earnings call transcript