Core-Mark Holding Co. Inc., one of the largest marketers of fresh and broad-line supply solutions to the convenience retail industry in North America, announced financial results for the fourth quarter and year ended Dec. 31, 2013.
“We had a very good year in 2013. Our core strategies are resonating in the market place, and we have been able to accelerate our sales growth as a result,” said Thomas Perkins, president and CEO. “I am especially pleased by the growth in our non-cigarette sales and by the improvement in our non-cigarette margins this year. We intend to build on that momentum in 2014.”
Net sales increased 13.8% to $2.5 billion for the fourth quarter of 2013 compared to $2.2 billion for the same period in 2012. Excluding excise taxes, net sales increased by 15.1%. Non-cigarettes sales grew 18.2% while cigarette sales increased 11.8%. The increase in cigarette sales was due mostly to the company’s new Carolina division, which was acquired in December of 2012. Non-cigarette sales were driven primarily by the success of our core marketing strategies and market share gains, enhanced further by the acquired division.
Gross profit for the fourth quarter of 2013 was $143.3 million compared to $121.9 million for the fourth quarter of 2012. Remaining gross profit increased 16.0% to $139.1 million. Non-cigarette remaining gross profit grew $17.2 million or 27 basis points as a percent to sales compared to the same quarter last year while cigarette remaining gross profit grew $1.9 million or 5.1%.
Diluted earnings per-share were $1.29 for the fourth quarter of 2013 compared to $0.83 for the fourth quarter of 2012. Excluding LIFO expenses, diluted earnings per-share were $1.28 per diluted share in this quarter compared to $0.90 for the fourth quarter of 2012, a 42% increase. In addition, per-share results were impacted by several other items, which are reconciled in the attached diluted EPS table following the financial schedules.
Net sales were $9.8 billion for 2013 compared to $8.9 billion for 2012, a 9.8% increase.
Excluding excise taxes, net sales increased 11.7%. The increase in net sales was driven primarily by the Carolina acquisition and by increases in non-cigarette sales in the remaining business. Cigarette sales increased 8.2% and non-cigarette sales increased 13.5% over the prior year. Sales generated from the Focused Marketing Initiative, and the Fresh and Vendor Consolidation Initiatives contributed significantly to the growth in the non-cigarette categories.
Gross profit for 2013 was $537.1 million compared to $476.8 million for last year. Remaining gross profit was $536.8 million in 2013 compared to $481.3 million in 2012, an 11.5% increase. Non-cigarette remaining gross profit grew 15.1%, or 16 basis points as a percentage of sales, driven by sales of higher margin categories.
The company’s operating expenses for 2013 increased to $468.1 million compared to $419.4 million for 2012. Operating expenses included $2.8 million of integration and expansion costs in 2013 compared to $1.3 million the previous year. In addition, 2012 benefited from a $1.8 million favorable resolution of legacy workers compensation and insurance claims. Excluding these items, operating expenses as a percentage of sales increased four basis points.
Net income in 2013 was $41.6 million compared to $33.9 million for the same period in 2012, a 22.7% increase. Strong revenue growth, a reduction in LIFO expense and improved sales mix to higher margin categories were the primary drivers to the improvement in net income. In addition, adjusted EBITDA increased 8.6% from $100.8 million in 2012 to $109.5 million this year.
Diluted earnings per-share were $3.58 for 2013 compared to $2.91 last year, an increase of 23.0%. Excluding LIFO expense, diluted earnings per-share were $4.04 in 2013 compared to $3.55 in 2012, a 13.8% increase.
Guidance for 2014
The company expects annual net sales in 2014 to be between $10.4 billion and $10.7 billion. This expected growth in sales is driven largely by continued market share gains as it assumes no new acquisitions or large customer wins.
Adjusted EBITDA for 2014 is expected to be between $116 million and $120 million. Diluted earnings per-share for the full year are expected to be between $3.50 and $3.65, which includes an estimate of $13 million for LIFO expense. Our diluted per-share estimates, excluding LIFO expense, are between $4.15 and $4.30. EPS assumes a 39% tax rate and 11.7 million fully diluted shares outstanding.
Capital expenditures for 2014 are expected to be approximately $30 million, which will be utilized for expansion projects and maintenance investments.