Core-Mark Holding Company, Inc. (NASDAQ:CORE) Q1 2018 Earnings Conference Call - Final Transcript

May 08, 2018 • 12:00 pm ET


Core-Mark Holding Company, Inc. (NASDAQ:CORE) Q1 2018 Earnings Conference Call - Final Transcript


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Welcome to the Core-Mark 2018 First Quarter Investor Conference Call. My name is Jane, and I will be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded.

I will now turn the call over to Ms. Milton Draper. Ms. Draper, you may begin.

Milton Draper

Thank you, operator. I would like to welcome everyone to Core-Mark's first quarter 2018 investor call. Joining me today are Thomas Perkins, our Chief Executive Officer; and Scott McPherson, our President and Chief Operating Officer and designated Chief Executive Officer. We also have Chris Miller, our Chief Financial Officer; and Matt Tachouet, our Chief Accounting Officer on the call.

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

We will also be discussing forward-looking statements. These forward-looking statements are subject to risk and uncertainties that may have caused actual results to differ materially from management's current expectations. We refer you to the documents we periodically filed with the SEC, specifically our 10-K and our 10-Qs for a discussion of risks that may affect our future results.

I'll now turn the call over to Tom Perkins.

Thomas Perkins

Good morning and thank you for joining us on our 2018 first quarter conference call. I would characterize the quarter's result as solid as we were able to grow our top line sales and our EBITDA at healthy rate despite some significant headwinds. We are encouraged by that accomplishment, but we all know the first quarter only represents a small percentage of our annual EBITDA.

The good news for the quarter is two divisions that struggled in 2017 benefited from significant improvements in their warehouses and delivery expense and are performing well. We are encouraged by these results and are optimistic that these early wins are indicative of how they will perform through the busy season. The most significant headwinds we face in the quarter was the continued weakness in carton sales in a challenging retail environment. The quarter continued to accelerate with steeper than normal decline in carton sales. This headwind was tempered by accelerated growth in vapor and other nicotine products. We do not believe these two trends are entirely unrelated. We are seeing signs and hearing from the manufacturers that carton decline will moderate. While these trends in cartons and nicotine products ever hurt very rapidly. We have been strategic in our approach to pricing and focused on our carton decline initiatives. I have every confidence that Core-Mark will make the proper adjustments to how it serves its customers given these circumstances.

I would like to provide an update on our strategies, our VCI fresh incremental sales totaled about $15 million, despite having to replace fresh and VCI volume resulting from the Kroger transition in a soft retail environment. These two strategic initiatives