Food sales increased 7.2% for the fourth quarter, while total non-cigarette sales increased 5.6%, Core-Mark reports.
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 ending Dec. 31, 2014.
“Core-Mark had another good year in 2014. We have been able to accelerate our earnings by executing on the fundamentals and by leveraging some significant opportunities in the market place. Our non-cigarette comparable same store sales increased in the fourth quarter by 5.5%, which was a very encouraging metric to end the year,” said Thomas Perkins, president and CEO. “We have seen healthy organic growth driven by the success of our core strategies and are looking forward to 2015.”
Fourth Quarter Results
Net sales increased 4.7% to $2.6 billion for the fourth quarter of 2014 compared to $2.5 billion for the same period in 2013. Excluding the impact of foreign currency fluctuations, net sales increased 5.8%. Non-cigarette sales grew 5.6% while cigarette sales increased 4.3%. Non-cigarette sales were driven primarily by increases in sales to our existing customers through the successful implementation of our core marketing strategies. The increase in cigarette sales was due mostly to manufacturer’s price increases and a modest increase in cartons sold.
Gross profit increased 7.9% to $154.6 million during the fourth quarter 2014 compared to $143.3 million for the same period in 2013. Remaining gross profit increased 5.0% to $146.1 million. Non-cigarette remaining gross profit increased 6.5% compared to the same quarter last year while cigarette remaining gross profit increased 1.5%.
The company’s operating expenses for the fourth quarter of 2014 were $131.6 million compared to $119.5 million for the same quarter of 2013. As a percentage of sales, operating expenses increased about 20 basis points. This increase was due in part to a shift in sales to non-cigarette categories, which have lower selling price points than cigarettes. Further, the addition of the new Ohio Division, a $1.7 million increase in employee incentive expense, $1.2 million of settlement and related legal costs, as well as increases in healthcare and professional fees associated with the OTP items, impacted fourth quarter operating expenses.
Net income for the fourth quarter of 2014 was $14.6 million compared to $15.0 million for the same period in 2013. LIFO expense, before tax effect, was $2.8 million higher in Q4 this year versus 2013 driving net income lower. Excluding LIFO expense, net income increased 9.4%. Adjusted EBITDA increased 15.3% to $36.1 million in the fourth quarter compared to $31.3 million in the fourth quarter of 2013.
Diluted earnings per-share were $0.62 for the fourth quarter of 2014 compared to $0.65 for the fourth quarter of 2013. Excluding LIFO expenses, diluted earnings per-share were $0.69 in this quarter compared to $0.65 for the fourth quarter of 2013, a 6.2% increase.
2014 Full Year Results
Net sales were $10.3 billion for 2014 compared to $9.8 billion for 2013, a 5.2% increase. Excluding the impact of foreign currency fluctuations, net sales increased 6.2%. Non-cigarette sales increased 6.8% over the prior year benefiting from market share gains and the execution of our core strategies. Cigarette sales increased 4.5% driven by cigarette price increases and market share gains.
Gross profit increased 6.8% to $573.7 million in 2014 compared to $537.1 million the previous year. Gross profit includes a large candy holding gain and a significant OTP tax refund. Remaining gross profit was $567.3 million in 2014 compared to $536.8 million in 2013, a 5.7% increase. Non-cigarette remaining gross profit grew 8.0% or 13 basis points as a percentage of sales, driven by sales growth in our Food category and the shift towards higher margin categories. Excluding the compressing effect of two large customers won in the second half of 2013, non-cigarette remaining gross profit increased 20 basis points.
The company’s operating expenses for 2014 increased 8.0% to $505.4 million compared to $468.1 million for 2013. Operating expenses as a percentage of sales increased 13 basis points, of which approximately 14 basis points were related to a shift in sales to non-cigarette categories, which have lower selling price points than cigarettes. In addition, higher employee incentives and healthcare costs increased operating costs as a percent of sales by seven basis points.
Net income in 2014 was $42.7 million compared to $41.6 million for the same period in 2013. LIFO expense, before tax effect, was $7.6 million higher in 2014 compared to last year, driving net income lower. Excluding LIFO expense, net income increased over 11%. Adjusted EBITDA increased 12.1% from $109.5 million in 2013 to $122.7 million this year.
Diluted earnings per-share were $1.83 for 2014 compared to $1.79 last year, an increase of 2.2%. Excluding LIFO expense, diluted earnings per-share were $2.26 in 2014 compared to $2.02 in 2013, an 11.9% increase. These per-share results were impacted by several other items.
Dividend
Core Mark also announced today its Board of Directors has approved a $0.13 cash dividend per common share. The dividend is payable on March 26, 2015 to stockholders of record as of the close of business on March 12, 2015.
Conference Call and Webcast Information
Core-Mark will host an earnings call on Thursday, March 2, 2015 at 9:00 a.m. Pacific time during which management will review the results of the fourth quarter and full year. The call may be accessed by dialing 1-800-588-4973 using the code 38895909. The call may also be listened to on the Company’s website www.core-mark.com.
An audio replay will be available for approximately one month following the call by dialing 888-843-7419 using the same code provided above. The replay will also be available via webcast at www.core-mark.com for approximately 90 days following the call.