CORE Coremark Jan 2016 Investor Presentation

8/20/2019 CORE Coremark Jan 2016 Investor Presentation

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Core-Mark Holding Company2016 ICR Conference, Orlando FL

January 12, 2016


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Safe Harbor & SEC Regulation G

Safe Harbor –Statements made in the course of this presentation that state the company’s or management’s hopes, beliefs, expectations or

predictions of the future are forward-looking statements made pursuant to the safe-harbor provisions of the Private Securities

Litigation Reform Act of 1995. Actual results and performance could differ materially from those set forth in the forward-looking

statements. Additional information about forward-looking statements and factors that could cause or contribute to actual resultsdiffering materially from those in the forward-looking statements is contained in our filings with the Securities and Exchange

Commission (SEC), including our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q and our Current Reports on Form

8-K. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new

information, future events or otherwise.

Non-GAAP Information -This presentation includes non-GAAP financial measures, including net sales less excise taxes, remaining gross profit, free cash flow

and adjusted earnings, before interest, taxes, depreciation and amortization (EBITDA) after certain items. These measures are

classified as non-GAAP financial measures by the SEC and may be different from non-GAAP measures used by other companies. We

believe these non-GAAP financial measures provide meaningful supplemental information for investors regarding the performance of

our business and allow investors to view results in a manner similar to the method used by our management. EBITDA is also among

the primary measures used externally by our investors, analysts and peers in our industry for purposes of valuation and comparing

our results to other companies in our industry. Our management uses net sales less excise taxes and remaining gross profit to

separate changes in sales and profitability due to actual sales and other changes in core operations from the effects of increases in

excise taxes, LIFO accounting, inventory holding profits and certain other items. Our presentation of this information is not intended

to be considered in isolation, and these non-GAAP measures should be considered as a supplement to, and not as a substitute for, or

superior to, financial measures calculated in accordance with GAAP. Reconciliations of these non-GAAP financial measures to the

most comparable measures prepared in accordance with GAAP are included in the appendix to this presentation.

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THOMAS PERKINSChief Executive Officer

Milton Draper

Director of Investor Relations

650-589-9445

[email protected]


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Agenda

Core-Mark & Industry OverviewFinancial Overview

Strategies for Growth

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Key Investments Considerations

Market Leader in Highly Fragmented Industry

Only 5% of Market Share with Large Opportunity to Grow

Significant Cash Flow Generation from Cigarette Volume

Cash Invested in Growth Initiatives with Higher Margin Products

Strong Balance Sheet, Supporting Growth & Return of Capital

Adjusted EBITDA* CAGR 12% from 2008 to 2014

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CORE-MARK & INDUSTRY OVERVIEW


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Core-Mark Overview

• Established in 1888

• Fortune 500 Company

• Experienced Management Team

• 30 distribution centers across North America

• Annual Sales in 2015 Expected to Exceed $11 Billion

Our Mission:To be the most valued marketer of fresh & broad-line

supply solutions to the convenience retail industry.

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Core-Mark plays a critical role for consumer package goods

wherever they are sold in a convenient format

~96 million cubic feet per year

~53,000 SKUs & 4,900 vendors

Through 30 distribution

centers* and ~760 tractors

& tri-temperature trailers**

to ~38K retail locations

Core-Mark’s Supply Chain

** 80% of trailers are tri-temperature as of 12/31/14* Distribution centers includes two 3PLs which we run on behalf of two large customers

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Core-Mark Locations

National footprint with local expertise provides competitive advantage

Headquarters

IT OfficeCore-Mark West

Core-Mark East

Core-Mark Canada

Allied Merchandising Industry

AMI-Artic East

Arizona Distribution Center (ADC)

Artic Cascade

Retail Distribution Center (RDC)

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Core-Mark’s Customers

Core-Mark distributes to best in class retailers

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http://www.google.com/url?sa=i&source=images&cd=&ved=0CAgQjRw&url=http://logo-kid.com/sunoco-logo-png.htm&ei=HXM6VbTVNYHvoASmzoEo&psig=AFQjCNHjNPWWRg8WEM9R7VdTgYkiLeVcPg&ust=1429980317996736http://www.turkeyhillstores.com/default.asphttp://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&uact=8&docid=FbeX5nvPxbQ9KM&tbnid=oIcHFgDwjvAokM:&ved=0CAYQjRw&url=http://sshssh.blogspot.com/2010/01/keuntungan-hari-ini.html&ei=BL0gU7aPFIeo2gWhvIGICg&bvm=bv.62788935,d.b2I&psig=AFQjCNHSQx8Zdva11TNJ3z2hzajTufhNyw&ust=1394740845465782


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Convenience Store Industry

~67%

~15%

Industry Fast Facts*

Source: Combination of 2014 NACS data for US & 2013 CCSA data for Canada

~ 34% of all retail outlets in the US are convenience stores

~ 175K Convenience Stores in US & Canada

~ 63% are single store operators

~ 45%-55% of product is provided by broad-line distributors;remaining by a myriad of DSD vendors

~ Traditional C-Stores – inside sales estimated at $240 billion in

North America representing ~ $190 billion at wholesale11


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Convenience Industry Stores

1 to 10

11 to 50

51 to 200

200 to 500

> 500

~67%

~15%

Single Store Operators continue to Dominate the Convenience

Store Channel with 67% owning 10 stores or less

Source: NACS 2014 State of the Industry Report (on 2013 data)

Number of stores owned:

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C-Store Industry - Inside the Store

Trends

• Focus on Fresh & Food Service• De-emphasis on Center of Store

• Need for efficient Supply Chain

• Modernization of Stores

• More Natural and “Better forYou” products

*Center store includes candy, sweet, salty and alternative snacks

So ur ce : Source: NACS 2015 State of the Industry Report (on 2014 data)

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36%

19%

15%

11%

7% 11%

2014 In Store Sales by Commodity

Tobacco

Foodservice

Pkg Bev

Center Store

Beer

Other


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STRATEGIES FOR GROWTH


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Strategy #1 Vendor Consolidation Initiative (VCI)

Broadline Distr.

Coke/Pepsi/Frito/Beer

DSD Vendors

Targets Inefficiencies in the C-Store Supply Chain

Core-Mark’s VCI & Fresh Incremental Sales were over

$500 Million over the Last Five Years

VCI

Opportunity

In-Store Sales in the C-store Industry ~$240 Billion (at retail)

~24%

~30%

~46%

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Strategy #2 Fresh & FoodserviceIncreasing Relevancy to the Retailer

Supporting Fresh & Foodservice forwardstrategies for convenience retailers• Providing Retailers with solutions that consumers demand

• Targeting $100 million Incremental Sales per year – combined

with VCI• Margins are considerably higher than traditional categories

focus on 20-25 Basis Point improvement in FNF RGP

• Penetration with Existing Customers Still Big Opportunity

59% of consumers say that they sought more healthy food

options at convenience stores than in the previous year.Source: Technomic

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Fresh Opportunity*

* Selected Fresh Sub-Categories based on Dec 2014 MTD -U.S. and Canada

1719.2%

15.9%

28.2%

25.6%

27.8%

23.2%

38.4%

53.2%

Whole Produce

Fresh Bakery

Fresh Bread

Fresh Sandwiches

Yogurt

Salads/Cut Fruit

Fresh Milk*

Fresh Juices

Percentage of Existing Customers Buying "Fresh"


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Roadmap to Fresh Success

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Strategy #3 - FMITransformative Consulting & Category Management

Harnessing the Power of

Big Data…Growing Independent C-Store Profits

• Real Time Customer AnalyticsProviding Critical Insights

Available Through CORE-DATA.

• Focused MARKETING PlansProviding Retail Solutions.

• Utilization of the CORE-CRM to

Drive Market Share.

FMI 2015 Fast Facts

3,010 FMI Marketing Plans completed.

FMI stores incremental Non-Cigarette

Sales growth running ~2x that of non-

FMI locations.

Churn for FMI customers ~30% less

than non-FMI customers.

Profit improvement of ~20%19


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Core Strategies are WorkingNon Cigarette Same Store Sales Improving

* Metric is based on a subset of stores that have comparable sales YOY representing approximately 50 – 60% of total FNF sales in any given period.

18 consecutive quarters of SSS growth

Q3-2015 up 3.4%

Indicative of Future Growth & Impact

of Key Strategies on Product Mix

Non Cigarette Same Store Sales*

Comparable Same Store Sales Driven by

Success in our Core Strategies

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0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

Q1 Q2 Q3 Q4

2011 vs. 2010

2012 vs 2011

2013 vs 2012

2014 vs. 2013

2014 vs 2015


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Headquarters

IT Office

Core-Mark Distribution West

Core-Mark Distribution East

Core-Mark New DCs/ Acquisitions

Consolidation Centers

Arizona Distribution Center (ADC)

Retail Distribution Center (RDC)

Strategy #4 Acquisition & Expansion

Expansion of our Infrastructure, Focused on Areas with Store Density

Six Acquisitions plus Three New Warehouses since 2006

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U.S. Convenience Stores

10 STATES ACCOUNT FOR 50% OF ALL C-STORES IN THE U.S.

REGION 6

14.4%(incl. Alaska & Hawaii)

REGION 1

20.9%

REGION 2

24.7%

REGION 3

15.3%

REGION 5

8.8%

REGION 4

15.9%

Represents Top 10 C-Store states

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FINANCIAL OVERVIEW


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Growth & Guidance

• Growth trends 2008 to 2014:~ 9% Revenue

~ 12% EBITDA*

• 2015 Annual Guidance:

– Sales expected to reach $11.0-$11.2 billion

– Adjusted EBITDA of $133 to $136 million

– EPS of $2.08 to $2.15

– EPS (excluding LIFO) of $2.40 to $2.47

– Free Cash Flow of $2.75 to $2.95 per share

– CapX - $35 million

* Adjusted EBITDA excludes LIFO expense and other items; see appendix for reconciliation

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Growth Story Intact

2015 Net Sales Expected to exceed $11 BillionCAGR over 9% thru 2014

• 6% Organic• 3% M&A

$4,571$5,016

$5,510$6,164

$6,908

$7,717$8,170$1,474

$1,516

$1,757

$1,951

$1,984

$2,051

$2,110

$2,500

$3,500

$4,500

$5,500

$6,500

$7,500

$8,500

$9,500

$10,500

$11,500

2008 2009 2010 2011 2012 2013 2014

$ M i l l i o n s

Net Sales Less Excise Taxes Excise Tax

$6,045

$6,532

$$7,267

$8,115

$8,892

$9,768

$10,280

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Revenue & Profit Mix

30.3%

20.5%

49.2%

2014 Sales Contribution

72.9%

27.1%

2014 Gross Profit Contribution

Other Product

Total = $9,768 Million Total = $537 Million

While cigarettes are a significant revenue driver, Core-Mark’s

non-cigarette products continue to drive gross profit

CigarettesOther Product

Cigarettes

Excise Tax

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Remaining Gross Profit*in millions of $

Food / Non-Food profit contribution - 2.4x cigarettes

72.3%

27.7%

* Remaining gross prof it is a non-GAAP measurements and i s d isc losed in our 10-K & 10-Qs

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Cigarette Business Facts

• Convenience channel has > 85% market share of cigarette sales*• Cigarettes & Other Tobacco Products are 36% of in-store sales*

• Category has a higher sales price point than other products

• Volume provides platform for leveraging everything else

• Limited net invested capital / turns quickly / tax float

• E-cigarettes & Vapor Products newer category in the C-store

channel with potential

*NACS Daily Report & 2015 SOI Report using 2014 data

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Core-Mark growth has outpaced Industry volumes

• Chart represents total domestic retail volume• MST is Moist Smokeless Tobacco

• Top Directs are major customers that are shipped directly

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Tobacco & Nicotine Categories

Core-Mark vs Total US Retail Outlets – 2014 vs. YAGO


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Operating Leverage

Warehouse & Delivery

• Increase in mileage & cubicfeet driving leverage

SG&A

• Iron Bar in place & flexingfor Administrative costs

1.60%

1.70%

1.80%

1.90%

2.00%

27.0%

30.0%

33.0%

36.0%

2010 2011 2012 2013 2014 TTM

SG&A Expenses

SG&A % to Gross Profit *

SG&A % of Sales

1.60%

1.70%

1.80%

1.90%

2.00%

27.0%

30.0%

33.0%

36.0%

2010 2011 2012 2013 2014

SG&A Expenses

SG&A % to Gross Profit * SG&A % of Sales* Excludes LIFO Expense

0

15

30

45

60

75

90

00.15

0.30.45

0.60.75

0.91.05

1.21.35

1.51.65

1.81.95

2.12.25

2.42.55

2.72.85

33.15

3.33.45

2011 2012 2013 2014 TTM

W&D Expense / Cubes / Miles

miles cubic feet

Millions$ / Cube

0

15

30

45

60

75

90

$3.30

$3.45

$3.60

$3.75

$3.90

$4.05

2010 2011 2012 2013 2014

W&D Expense / Cubes / Miles

Cost per Cube miles

cubic feet Linear (Cost per Cube)

% GP % Sales(Excludes Carolina Division)

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Adjusted EBITDA*

* Please see appendix for reconciliation from Net Income to Adjusted EBITDA

While not in our direct control, inventory holding gains contribute to earnings every year.

Cigarette Holding Gains every year versus Candy Holding Gains every three years.

CAGR ~12%

2008 to 2014$62.4

$95.5

$70.0

$91.9

$100.8

$109.5

$122.7

$0.0

$25.0

$50.0

$75.0

$100.0

$125.0

2008 2009 2010 2011 2012 2013 2014

$ M

i l l i o n s

Adjusted EBITDA ex holding gains Cigarette holding gains Non-cig

Adjusted EBITDA is a non-GAAP measurements and is disclosed in our press releases10-K & 10-Qs

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Low Risk Balance Sheet


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Low Risk Balance Sheet

& Return Focus

Key Balance Sheet Facts:

Net Inventory turns average 70-80x per year*

Collect Receivables in ~ 9 to 10 days

Very Modest debt- 2014 average=$14.8 million

Access to $300 million credit facility**

Current ratio 2:1

Company Standard:

20% RONA Target on (FIFO) Pre-Tax Net income

Over 19% RONA in 2014

*Net Inventory= inventory less accounts payable and tobacco taxes payable** Includes $100 million expansion feature & expires May 2020

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Cash & Capital Allocation

2015 Projections

~$65-$70 million Free Cash Flow*

Assumes $35m CAPX

Uses of CashAcquisitions / Expansion

Dividends

Inventory Investments

Share Repurchase

* Excludes any year end temporary spikes in inventory

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$50 $52

$18

$65

$78$71 $72

$-

$20

$40

$60

$80

$100

$120

2012 2013 2014 2015F

M i l l i o n s

Free Cash Flow Before CapX

Free Cash Flows Maintainance CAPX Growth CAPX

$100


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Total Return of Value to Shareholders

*In lieu of the first quarter 2013 dividend, the Board of Directors declared an accelerated cash dividend of $2.2 million, or

$0.19 per common share in the fourth quarter of 2012. For comparison purposes, the accelerated dividend is included in2013 in the above chart.

Oct 19Oct 19

May-Dec

2011

$0.0

$5.0

$10.0

$15.0

$20.0

$25.0

2011 2012* 2013* 2014

Nearly $70 million returned to Shareholders

Inception through 2014

Dividend Payout Share Repurchases

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F d Sh h ld V l


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Focused on Shareholder Value

Key Financial Considerations:

• Focus on reinvestment into

Business and CapX• Rigorous, DCF based review of

Acquisitions and major projects

• Access to capital and cost ofcapital more than adequate

• Executive Compensation alignedwith delivery of results

• Mix of dividends / buybacks

Value Returned to Shareholders:

• Quarterly dividend of $0.16

• ~$48m of $60m buybackprograms spent to date

– ~$12m remaining

• Combined ~$69 million

returned to Shareholdersthrough 12/31 since 2011

inception =

~54% of cumulative FCF35


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KEY INVESTMENT CONSIDERATIONS

d


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20

25

30

35

40

45

50

55

60

Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14

Investments Considerations

Market Leader in Highly Fragmented Industry

Only 5% of Market Share with Large Opportunity to Grow

Significant Cash Flow Generation from Cigarette Volume

Cash Invested in Growth Initiatives with Higher Margin Products

Strong Balance Sheet, Supporting Growth & Return of Capital

Adjusted EBITDA* CAGR 12% from 2008 to 2014

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Thank You For Your Interest

MS. MILTON DRAPER

DIRECTOR OF INVESTOR RELATIONS

(650) 589.9445

[email protected]

mailto:[email protected]:[email protected]


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Appendix

• Reconciliation Chart for Non-GAAP Financial Metrics

– Adjusted EBITDA – Historical EPS excluding LIFO & Free Cash Flow perdiluted share

• Other Key MetricsNote: Reconciliations for certain metrics are provided in our 10K’s 10Q’s and our press releases and areincorporated by reference.

• Remaining Gross Profits calculation is included in our 10-Qs & 10-Ks• EPS Reconciliation table is included in our Quarterly Press Releases

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Core-Mark Adjusted EBITDA

Core-Mark Holding Company, Inc.

Historical

Millions

2008 2009 2010 2011 2012 2013 2014

Net Income 17.9$ 47.3$ 17.7$ 26.2$ 33.9$ 41.6$ 42.7$

Interest (net) 1.2 1.4 2.2 2.0 1.8 2.2 1.8Taxes 4.7 18.5 9.5 17.0 21.5 24.4 23.7

Depreciation & amortization 17.4 18.7 19.7 22.4 25.3 27.2 32

Amortization of stock compensation 3.9 5.1 4.8 5.5 5.8 4.6 6.1

Foreign currency transaction losses (gains) 6.3 (2.2) (0.5) 0.5 0.2 0.8 0.1

LIFO expense 11.0 6.7 16.6 18.3 12.3 8.7 16.3

Adjusted EBITDA (FIFO) 62.4$ 95.5$ 70.0$ 91.9$ 100.8$ 109.5$ 122.7

Unusual or special i temsLegacy insurance items 1.6 (1.8) 0.7

OTP tax settlements (1.4) (0.6) (0.6) (0.7) (7.5)

Other one-time (benefits) costs disclosed (net) 1.3 0.9 3.9 4.5 1.3 2.8 1.4

Normalized EBITDA 62.3$ 95.8$ 74.9$ 95.7$ 100.3$ 112.3$ 118.8

Reconciliation of Net Income to Adjusted EBITDA

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EPS and Free Cash Flow

Reconciliation of EPS & FCF/shareexcluding LIFO expense

* All per share metrics presented in this presentation reflect the June 2014 stock split

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Earnings per Share 2012 2013 2014

EPS GAAP 1.46$ 1.79$ 1.83$plus LIFO expense 0.32$ 0.23$ 0.43$

EPS excluding LIFO expense 1.78$ 2.02$ 2.26$

Free Cash Flow per share

Adjusted EBITDA 100.8$ 109.5$ 122.7$

less working capital changes (9.4)$ (17.8)$ (22.2)$

capital expenditure and investing software (28.6)$ (18.4)$ (59.2)$less taxes paid in cash (11.7)$ (19.5)$ (22.0)$less interest paid in cash (1.6)$ (1.5)$ (1.1)$

Free Cash Flow 49.5$ 52.3$ 18.2$Diluted shares 23.2 23.2 23.3

Free Cash Flow per share 2.13$ 2.25$ 0.78$

C M k K M i


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Core-Mark Key Metrics

• Return on Net Assets (RONA):

– Company Standard is 20% – RONA = PTNP / Net Assets• Net Assets = (Inventory + Accounts Receivables + Fixed Assets)

less (Accounts Payable + Tobacco Taxes Payable + Accrued Liabilities)

– Applies to all investments of capital

• Working Capital Metrics: – Average DSO ~ 9-10 days – Average DCOS ~ 14-16 days – Average DPO ~ 10-11 days

• Pre-Pay US cigarette manufacturers ~0-3 days• Tax jurisdictions paid on average ~30 days after purchase• Other vendors get paid on average ~12-14 days

• Free Cash Flow (FCF): – FCF = Adjusted EBITDA less (cash interest + cash taxes + CapX±

changes in working capital)

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CORE Coremark Jan 2016 Investor Presentation

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