“I couldn’t be prouder of our team coming together to help grow our company and bring value to our shareholders, says CEO of CST Brands.
CST Brands Inc. reported financial results for the third quarter ended Sept. 30, 2013.
“Our company delivered strong year-over-year earnings growth,” said Kim Bowers, chairman and CEO of CST Brands. “We continue to make great strides as a separate, publicly-traded company, working on key initiatives such as establishing our culture, further developing our brand, and reducing and eliminating the transition services being provided by our former parent company. I am very proud of our hardworking team members across the company that helped produce a very solid quarter.”
Three Months Results
For the three-month period ending Sept. 30, 2013, the Company reported net income of $41 million, or $0.55 per diluted share. Included in net income are asset impairment charges of $2 million, net of tax. Excluding these asset impairments, net income would have been $43 million, or $0.57 per diluted share. Net income was $24 million, or $0.31 per diluted share, for the comparable period in 2012.
Revenues totaled $3.3 billion for the third quarter of 2013 compared to $3.4 billion for the same period of 2012. Motor fuel revenues in the U.S. segment declined $47 million, driven by a 1% decline in both of the Company’s per gallon average motor fuel selling price and in motor fuel gallons sold. Motor fuel revenues declined $28 million in our Canada retail segment, primarily from a 2% decline in the Company’s motor fuel gallons sold primarily as a result of fewer average retail sites that sell motor fuel. Also contributing to the overall revenue decline in the Canadian segment was a $55 million impact from foreign currency effects of the Canadian dollar relative to the U.S. dollar.
In the U.S., motor fuel gross margin (cents per gallon), after deducting credit card fees, was $0.16 compared to $0.09 in the third quarter of 2012. The Company experienced historically low motor fuel gross margins in the third quarter of 2012, due primarily to the volatility of crude oil during that period. U.S. merchandise gross margin, net of credit card fees, increased slightly when compared to the third quarter of 2012.
In Canada, the motor fuel gross margin (cents per gallon), after deducting credit card fees, was $0.24 compared to $0.21 in the third quarter of 2012. The margin increase was due primarily to the volatility of crude oil in the prior year period, which resulted in lower motor fuel gross margins in the third quarter of 2012. Canada merchandise gross margin, net of credit card fees, decreased slightly when compared to the third quarter of 2012.
Operating income was $68 million for the third quarter of 2013 compared to $35 million for the third quarter of 2012. Adjusted EBITDA (the non-GAAP measures, including adjusted EBITDA, are described and are reconciled to the corresponding GAAP measures in the Supplemental Disclosure section of this release) was $101 million for the three-month period ending Sept.30, 2013 compared to $63 million for the same period in 2012. The increase in operating income and adjusted EBITDA was due primarily to higher motor fuel gross margin, which is discussed above.
Nine Months Results
Net income for the nine months ending Sept. 30, 2013 was $105 million, or $1.39 per diluted share. For the same period in 2012, net income was $146 million, or $1.93 per diluted share.
For the nine-month period ending Sept. 30, 2013, revenues were approximately $9.7 billion compared to $9.9 billion for the nine-month period ending Sept. 30, 2012. Motor fuel revenues in the U.S. segment declined $76 million, driven by a 2% decline in the Company’s per gallon average motor fuel selling price. Motor fuel revenues declined $147 million in our Canada retail segment for reasons similar to those discussed above. Also contributing to the overall revenue decline in the Canadian segment was an $84 million impact from foreign currency effects of the Canadian dollar relative to the U.S. dollar.
Operating income was $178 million for the nine months ending Sept. 30, 2013 compared to $218 million for the nine months ending Sept. 30, 2012. Adjusted EBITDA was $273 million for the nine-month period ending Sept. 30, 2013 compared to $302 million for the same period in 2012. The reasons for the decline were a decline in motor fuel gross margin in both our U.S. and Canada retail segments, as well as an additional $12 million of general and administrative expenses primarily associated with being a new public company.
New Store Openings
CST opened 15 new stores in the first nine months of the year. The third quarter of 2013 was particularly busy with new store openings, with eight opened in the U.S. and two opened in Canada during the period. “Each new store opening takes energy and support from CST team members across the company,” said Bowers. “I couldn’t be prouder of our team coming together to help grow our company and bring value to our shareholders.”
Liquidity and Capital Resources
For the nine-month period ending Sept. 30, 2013, cash flow provided by operating activities totaled $410 million. The increase in cash provided by operating activities was due primarily to the change related to the Company’s payment terms on motor fuel purchased from Valero, which were increased to “net 10” days after taking title to the motor fuel. Cash flow used in investing activities was $142 million, primarily related to capital expenditures. Cash flow provided by financing activities was $96 million, due to our net activity with Valero prior to the spin. The effect of foreign currency exchange rate changes was a reduction in cash of $1 million. Overall, cash increased by $363 million.
Total capital expenditures for the three and nine months ended September 30, 2013 were $47 million and $137 million, respectively.
