Core-Mark Announces Q3 Financial Results

core-marks-ceo-to-retire01Third quarter sales increased 13.2%, driven by non-cigarette sales growth of 16.5%.

Core-Mark Holding Co. Inc. announced financial results for the third quarter ended Sept. 30, 2013.

“We continued to build momentum by delivering strong sales growth in the third quarter, particularly in our higher margin non-cigarette categories.  We firmly believe we have the right strategies and the vision to continue to make our company the supplier of choice for the convenience store industry,” said Thomas Perkins, president and CEO, Core-Mark.  “We expect to deliver record sales and Adjusted EBITDA for 2013 and be well positioned for future growth.”

Third Quarter
Net sales increased 13.2% to $2.62 billion for the third quarter of 2013 compared to $2.31 billion for the same period in 2012.  Excluding excise taxes, net sales increased 15%.  Non-cigarette sales increased 16.5%, while cigarette sales grew 11.7%.  The increase in sales was driven primarily by sales from our new Carolina division, which was acquired in December 2012 and by an increase in same-store non-cigarette sales, which reflects the success of the company’s marketing strategies. The third quarter of 2013 included one additional selling day when compared to the same quarter in 2012.

Gross profit for the third quarter of 2013 was $140.8 million compared to $122.2 million in the third quarter of 2012.  Remaining gross profit increased 13.5% to $142.8 million.  Non-cigarette remaining gross profit grew $14.7 million or 17.1% compared to the same quarter last year, whereas cigarette remaining gross profit grew $2.3 million or 5.9% compared to the third quarter of 2012.

The company’s operating expenses for the third quarter of 2013 were $121.3 million compared to $105 million in the same quarter of 2012.  The third quarter of 2013 includes $0.7 million of costs associated with the Carolina division’s system integration as well as expansion activities in the East, while the same period in 2012 includes $1.4 million cost recovery related to legacy insurance claims.  Adjusting for these items, operating expense as a percentage of net sales was flat.

Net income for the third quarter of 2013 was $12.3 million compared to $10.5 million for the same period in 2012. The increase in net income was driven primarily by growth in the non-cigarette business, including the contributions from the new Carolina division.  Adjusted EBITDA increased from $28.7 million in the third quarter of 2012 to $29.8 million in the third quarter of 2013.

Adjusted EBITDA included the aforementioned integration and business expansion related costs in 2013 and the recovery of legacy insurance claims in 2012.  Excluding these items, Adjusted EBITDA increased 11.7%.

Diluted earnings per share were $1.06 for the third quarter this year compared to $0.90 in the third quarter of last year. Excluding LIFO expense, diluted earnings per share were $1.17 compared to $1.09 for the third quarter of 2012.

First Nine Months of 2013
Net sales were $7.28 billion for the first nine months of 2013 compared to $6.70 billion for the same period in 2012, an 8.6% increase.  Excluding excise taxes, net sales increased 10.7%.  The growth in sales was due largely to the addition of the new Carolina division and incremental non-cigarettes sales from Core-Mark’s Vendor Consolidation Initiative and Fresh programs.

Gross profit for the first nine months of 2013 was $393.8 million compared to $354.9 million for the same period last year.  Remaining gross profit increased $36.3 million or 10.0%.  Non-cigarette remaining gross profit grew 13.2% to $280.0 million, whereas cigarette remaining gross profit grew 3.3% to $117.7 million.

The company’s operating expenses for the first nine months of 2013 were $348.6 million compared to $313.8 million in the same period in 2012.  The first nine months of 2013 includes $1.6 million of costs associated with the Carolina division’s system integration and expansion activities in the East, while the same period in 2012 includes $1.8 million cost recovery related to legacy insurance claims.  Adjusting for these items, operating expense as a percentage of net sales increased six basis points.

Net income for the first nine months of 2013 was $26.6 million compared to $24.2 million for the same period in 2012. Strong revenue growth and an improvement in non-cigarette gross profit margins were the primary drivers to the improvement in net income.   Adjusted EBITDA increased from $75.2 million in the first nine months of 2012 to $78.2 million for the same period this year.

Adjusted EBITDA increased 8.7% after excluding the aforementioned integration and business expansion related costs in 2013 and the recovery of legacy insurance claims in 2012.

Diluted earnings per share were $2.29 for the first nine months of this year compared to $2.08 for the same period last year, an increase of over 10%.   Excluding LIFO expense, diluted earnings per share increased from $2.65 last year to $2.75 this year.

Guidance Update for 2013
The company has tightened its 2013 annual net sales guidance to between $9.8 and $9.9 billion compared to a range of $9.8 to $10 billion in previous guidance.  Correspondingly, Adjusted EBITDA is expected to be between $112 and $113 million vs. the prior range of $112-$115 million.  The company is increasing its diluted per share EPS guidance to a range of $3.35-$3.45 from $3.10-$3.25, driven primarily by a refined LIFO expense estimate. Its diluted per share estimates, excluding LIFO expenses, increased to a range between $4.00 and $4.10 compared to $3.90-$4.05 previously expected.   For the full year, Core-Mark is now expecting approximately $12 million in LIFO expense, a 39% tax rate and 11.6 million fully diluted shares outstanding.  Guidance estimates assume an anticipated cigarette price increase during the fourth quarter.  Capital expenditures for 2013 are expected not to exceed $25 million compared to our previous guidance of $30 million.

Core-Mark hosted an earnings call on Nov. 12, 2013. An audio replay will be available for two weeks following the call by dialing 1-888-843-7419 using the code 35967622.  The replay will also be available via Webcast at www.core-mark.com for approximately 90 days following the call.

 

 

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