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Cst Brands, Inc. Reports Third Quarter 2015 Results

The following excerpt is from the company's SEC filing.

- Third Quarter 2015 Net Income of $85 million or $1.12 per diluted share, a 35% increase over Third Quarter 2014

- EBITDA of $174 million, an increase of 25% over Third Quarter 2014

- Adjusted EBITDA of $294 million and Adjusted Earnings Per Share of $2.12

- Same Store Merchandise Sales Increases of 4% in both the U.S. and Canada

San Antonio, Texas, November 4, 2015 – CST Brands, Inc. (NYSE: CST), one of the largest independent retailers of motor fuels and convenience merchandise in North America, today reported financial results for the

quarter ended

September 30, 20 15

Three Months Results

“While our third quarter 2015 results reflect strong fuel margins across our system, I’m even more pleased with our 4% increase in same store merchandise sales in Canada and the U.S., and the terrific 13% improvement in U.S. merchandise gross profit dollars over third quarter 2014,” said Kim Lubel, Chairman and CEO of CST Brands, Inc. “The strength of the third quarter reflects the continued success of our strategic growth planks in both organic, New-to-Industry store growth and acquisitions, including the Nice N Easy and Landmark stores purchased in the last twelve months.”

For the

three month period ended

, the Company reported net income of

per diluted share, driven by an increase in fuel and merchandise gross profit during the quarter. Net income was

$63 million

per diluted share, for the comparable period in

. Certain asset impairment charges, acquisition, legal and professional related expenses of $5 million, net of tax, were included in the three month period ended September 30, 2014. Excluding these items, third quarter 2014 net income would have been $68 million, or $0.90 per diluted share. There were no such items in the current period.

Motor fuel gross profit (per gallon) in the U.S. for the

quarter of

, after deducting credit card fees and amounts distributed to CrossAmerica, was

compared to

, which was primarily caused by a declining crude oil and wholesale gasoline pricing environment in the

. U.S. merchandise gross profit increased

when compared to the

, primarily driven by an overall increase in merchandise sales as well as by the Company’s acquisitions of Nice N Easy and Landmark stores and an increase in the number of New-to-Industry (“NTI”) stores.

In Canada, the motor fuel gross profit (per gallon) in U.S. dollars for the

, after deducting credit card fees, was

. Excluding the effects of foreign exchange, the Company’s motor fuel gross profit in Canada increased

$18 million

for the quarter.

Operating income was

$137 million

, a 32% improvement over the

$104 million

achieved in the

. EBITDA (non-GAAP measures, including EBITDA, as described are reconciled to the corresponding GAAP measures in the Supplemental Disclosure section of this release) was

$139 million

for the same period in

. The increase in operating income and EBITDA was due primarily to an

in U.S. motor fuel gross profit of

$33 million

and a $14 million increase in U.S. merchandise gross profit, partially offset by an overall increase in operating expenses of $4 million, when compared to the same period in

. The increase in operating expenses was due to the acquisitions of Nice N Easy and Landmark stores in the U.S, along with the addition of

NTI stores when compared to the

quarter of 2014.

Operating revenues totaled

$2.5 billion

$3.2 billion

for the same period of

. The Company’s U.S. merchandise revenues increased $35 million during the third quarter of 2015 when compared to the third quarter of 2014, primarily as a result of an overall increase in the Company’s merchandise sales as well as the acquisition of Nice N Easy and the Landmark convenience stores. This was offset by lower per gallon selling prices for both the U.S. Retail and Canadian Retail segments. The average daily spot price of gasoline for the Company’s U.S. segment during the

was $1.05

per gallon lower when compared to the price for the same period last year, or a decline of 40%. Additionally, a decline of

$145 million

due to the weakness of the Canadian dollar relative to the U.S. dollar contributed to the decrease in operating revenues.

Nine Months Results

nine month period

, the Company reported EBITDA of

$320 million

. Adjusted EBITDA, which includes the sale of the interest of CST Fuel Supply that occurred in January and July 2015 along with the sale of real property associated with 29 New-to-Industry stores, was

$500 million

. For the

September 30, 2014

, the Company reported EBITDA and Adjusted EBITDA of $284 million. Adjusted net income, after considering the sales, net of tax, for the

$238 million

and diluted earnings per common share was

. For the

, adjusted net income was

$106 million

. This represents an improvement of more than 120% compared to the same period last year. (Non-GAAP measures, including EBITDA, are described and are reconciled to the corresponding GAAP measures in the Supplemental Disclosure section of this release).

Liquidity and Capital Resources

nine months ended

, cash flow provided by operating activities totaled

$291 million

. Cash flow used in investing activities was

$58 million

, primarily related to capital expenditures and acquisitions. Cash flow used in financing activities was

$114 million

, including payments of long-term debt of

$34 million

, dividends of

$15 million

and the buyback of common stock of

$65 million

. The effect of foreign currency exchange rates was a reduction in cash of

$30 million

. Overall, cash increased by

$89 million

. Cash, as of

$442 million

Total capital expenditures, excluding acquisitions, for the

$203 million

$192 million

, respectively.

CST maintains a revolving credit facility that provides for aggregate outstanding borrowings of up to

$300 million

. As of

, after taking into account letters of credit and the maximum lease adjusted leverage ratio constraints on borrowing availability, approximately

$296 million

was available for future borrowings.

Fourth Quarter 2015 Guidance

The Company is providing the following guidance for its core store operations for the fourth quarter of 2015:

Ranges

Fourth Quarter 2014 Results

U.S. Retail Segment:

Gallons Per Store Per Day

4,950 to 5,050

Merchandise Sales Per Store Per Day

$3,750 to $3,850

$3,490

Merchandise Gross Margin (%)

30.5% to 31.5%

Canadian Retail Segment:

3,150 to 3,250

$2,050 to $2,150

$2,336

25.5% to 26.5%

Review of Strategic Options for California Network

CST’s management team is announcing today that it is exploring strategic options for the Company’s California network, comprised of 76 stores, to enhance shareholder value, including, among others, a potential tax-efficient like-kind exchange for properties proposed to be acquired in Georgia and Florida as part of the planned Flash Foods acquisition announced today. There can be no assurance that the Company’s review of strategic options for its California network will result in any transaction being entered into or consummated. CST does not intend to disclose further developments regarding the exploration of strategic options until the Board has approved a definitive course of action.

Basis of Presentation

The results provided represent the business operations of CST and its respective legal subsidiaries before the consolidation of...


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