Sees a 31.2% bump in sales, driven primarily by sales to Murphy U.S.A., which the company began servicing in the first quarter of 2016.
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 second quarter ended June 30, 2016.
“We have grown at a remarkable pace in the first six months of 2016, and I am very proud of the accomplishments of this organization. We are well positioned to post record financial results this year. We remain focused on the absorption of the business added thus far and the business we will be adding later this year,” said Thomas Perkins, president and CEO.
Second Quarter Results
Net sales increased 31.2% to $3.7 billion for the second quarter of 2016 compared to $2.8 billion for the same period in 2015 driven primarily by sales to Murphy U.S.A., which the company began servicing in the first quarter of 2016, other market share wins and the acquisition of Pine State Convenience (Pine State). Excluding the effects of foreign currency fluctuations, net sales increased by approximately 31.9%. Cigarette sales increased 38.5%, driven by an increase in cigarette carton sales attributable primarily to market share gains. Non-cigarette sales increased 15.9% through market share gains and the success of our core strategies with new and existing customers. Cigarettes as a percentage of total sales were 71.4% for the second quarter this year compared to 67.6% for the same period last year; the increase was driven largely by our sales to Murphy U.S.A.
Gross profit increased 18.3% to $187.9 million for the second quarter of 2016 compared to $158.9 million for the same period in 2015. Remaining gross profit, a non-GAAP measure, increased 16.6% to $183.8 million from $157.7 million for the same period in 2015.
Remaining gross profit margin for the second quarter of 2016 declined approximately 60 basis points to 5.0% from 5.6% for the same period last year. The margin compression was due primarily to the growth in our cigarette and other tobacco products (OTP) from the addition of Murphy U.S.A. and other market share gains.
The company’s operating expenses for the second quarter of 2016 were $160.2 million compared to $136.7 million for the same period in 2015. Increased volumes of product handled, incremental customer deliveries and the addition of Pine State, contributed to higher operating expenses in the second quarter of 2016. Operating expenses as a percentage of net sales were 4.3% for the second quarter of 2016 compared to 4.9% for the second quarter of 2015. The shift in sales mix towards cigarettes in the second quarter this year reduced operating expenses as a percentage of total net sales by approximately 60 basis points.
Net income increased 23.5% to $16.3 million for the second quarter of 2016 compared to $13.2 million for the same period in 2015. Adjusted EBITDA, a non-GAAP measure, increased 13.3% to $42.5 million for the second quarter of 2016 compared to $37.5 million for the second quarter of 2015.
First Six Months of 2016
Net sales increased 27.3% to $6.7 billion for the first six months of 2016 compared to $5.3 billion for the same period in 2015 driven primarily by sales to Murphy U.S.A., other recent market share wins and the acquisition of Pine State.
Fluctuations in foreign currency rates reduced net sales by approximately 0.9%, offset by one additional selling day in 2016. Cigarette sales increased 33.9%, driven by an increase in cigarette cartons sales attributable primarily to market share gains. Non-cigarette sales increased 13.7% through market share gains and the success of our core strategies with new and existing customers. Cigarettes as a percentage of total sales were approximately 71% for 2016 compared to approximately 67% for the same period last year, the increase was driven largely by sales to Murphy U.S.A.
Gross profit increased 14.4% to $339.0 million for the first six months of 2016 compared to $296.2 million for the same period in 2015. Remaining gross profit increased 14.1% to $337.3 million from $295.5 million for the same period in 2015.
Remaining gross profit margin for the second quarter of 2016 declined approximately 60 basis points to 5.0% from 5.6% for the same period last year. The decline was due primarily to the addition of Murphy U.S.A. and other market share gains, which have a higher sales mix of cigarettes and OTP compared to most of its other customers.
The Company’s operating expenses for the first half of 2016 were $302.1 million compared to $264.1 million for the same period in 2015. Increased volumes of product handled, incremental customer deliveries and the addition of Pine State, contributed to higher operating expenses in the first half of 2016. Operating expenses as a percentage of net sales were 4.5% for the first half of 2016 compared to 5.0% for the same period in 2015. The shift in sales mix towards cigarettes reduced operating expenses as a percentage of total net sales by approximately 50 basis points.
Net income increased 17.6% to $22.0 million for the first six months of 2016 compared to $18.7 million for the same period in 2015. Adjusted EBITDA increased 10.3% to $66.6 million for the first six months of 2016 compared to $60.4 million for the same period in 2015.
Dividend
Core-Mark also announced today that its Board of Directors has approved a $0.08 cash dividend per common share. The dividend is payable on Sept. 15, 2016 to stockholders of record as of the close of business on Aug. 24, 2016.
Guidance for 2016
The Company reaffirms its guidance for 2016. Annual net sales for 2016 are expected to be between $14 billion and $14.5 billion. Diluted EPS for the full year are expected to be between $1.16 to $1.23. Diluted per-share estimates, excluding LIFO expense, are expected to be between $1.33 and $1.40. Adjusted EBITDA for 2016 is expected to be between $157 million and $164 million. For 2016, we are expecting LIFO expense of $13 million, a 38.5% tax rate and 46.8 million fully diluted shares outstanding reflecting the recent two for one stock split.
Capital expenditure estimates for 2016 are expected to be approximately $50 million, which will be utilized for expansion projects, including a new warehouse in Las Vegas, and maintenance investments.