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, 2012.
Highlights included record annual sales of $8.9 billion; record adjusted EBITDA in 2012 and a 30% increase in diluted EPS for the year; record fourth quarter diluted EPS of 83 cents; and expect sales of $9.8-$10 billion and adjusted EBITDA of $112-$115 Million in 2013.
“We posted record sales and profits in 2012, ending the year on a high note with the acquisition of J.T. Davenport and Sons. Mark Davenport and his excellent company are a great addition to the Core-Mark family and strengthen our presence in the Southeast,” said Thomas Perkins, president and CEO. “I am excited to have the responsibility to lead this great company in our 125th year of existence. Our core strategies are intact and will continue to fuel growth in the coming years.”
Net sales increased 2.9% to $2.2 billion for the fourth quarter of 2012 compared to $2.1 billion for the same period in 2011. Non-cigarettes sales grew 6.2% driven by increases in same store sales and execution of the company’s key marketing strategies. Sales growth overall was impacted by one less selling day this quarter and by lower cigarette carton sales in Canada.
Gross profit for the fourth quarter of 2012 was $121.9 million compared to $109.8 million in the fourth quarter of 2011. Remaining gross profit increased 6.4% to $119.9 million. Non-cigarette remaining gross profit grew $6.3 million or 24 basis points compared to the same quarter last year. Cigarette remaining gross profit per carton increased 3.1%.
The company’s operating expenses for the fourth quarter of 2012 were $105.6 million compared to $101.1 million in the same quarter of 2011. Operating expenses as a percentage of sales increased seven basis points driven by an increase in health and welfare costs.
Net income for the fourth quarter of 2012 was $9.7 million compared to $5.2 million for the same period in 2011. Adjusted EBITDA increased from $22.2 million in the fourth quarter of 2011 to $25.6 million in the fourth quarter of 2012.
Diluted earnings per share were 83 cents for the fourth quarter this year compared to 45 cents in the fourth quarter of last year. Excluding LIFO expenses, diluted earnings per share were 90 cents per diluted share in this quarter compared to 75 cents for the fourth quarter in 2011—a 20.0% increase.
2012 Results
Net sales were $8.9 billion for 2012 compared to $8.1 billion for 2011, a 9.6% increase. Cigarette Sales increased 7.5% and non-cigarette sales increased 14.5% over prior year. The increase in net sales was driven primarily by the expansion in the Southeastern U.S. and the acquisition of Forrest City Grocery Company in May 2011. Excluding these two events, non-cigarette sales grew an additional 6.4% driven by the company’s sales and marketing initiatives.
Gross profit for 2012 was $476.8 million compared to $434.1 million for last year. Remaining gross profit was $481.3 million in 2012 compared to $437.5 million in 2011, a 10.0% increase. Non-cigarette remaining gross profit grew 10.8% despite a $3.6 million decline in inventory holding gains.
The company’s operating expenses for 2012 increased to $419.4 million compared to $388.4 million for 2011. Operating expenses as a percentage to sales were essentially flat excluding start-up costs in both years and the reduction in legacy insurance costs this year.
Net income in 2012 was $33.9 million compared to $26.2 million for the same period in 2011, a 29% increase. Strong revenue growth and improved sales mix to higher margin categories were the primary drivers to the improvement in net income. In addition, adjusted EBITDA increased 9.7% from $91.9 million in 2011 to $100.8 million this year. Excluding the start-up costs associated with the J. T. Davenport acquisition, Adjusted EBITDA was $102.1 million in 2012.
Diluted earnings per share were $2.91 for 2012 compared to $2.23 last year, an increase of 30.5%. Excluding LIFO expenses, diluted earnings per share were $3.55 in 2012 compared to $3.17 in 2011—a 12% increase.
Guidance for 2013
The company expects annual net sales in 2013 to be between $9.8 billion and $10.0 billion, a 10-12% increase. This expected growth over 2012 is driven by incremental sales from our recent acquisition of J.T. Davenport, market share gains and additional penetration into existing stores, leveraging vendor consolidation and focused marketing initiatives.
Adjusted EBITDA for 2013 is expected to be between $112 million and $115 million, an 11-14% increase, which includes some start-up and conversion costs associated with the recent acquisition. Diluted earnings per share for the full year are expected to be between $3.10 and $3.25, which includes a $3.7 million increase in LIFO expense to $16 million which decreases EPS by $0.19. In addition, EPS assumes a 40% tax rate and 11.8 million fully diluted shares outstanding, compared to 11.6 million in 2012.
“We will approach $10 billion in annual net sales in 2013 as we continue to gain traction with our key strategic initiatives,” said Perkins. “We do not expect robust sales growth in the first quarter of 2013 because we are seeing softer sales as consumers react to increasing payroll taxes and fuel costs, but we expect purchasing patterns to return to normal levels as the summer approaches. I am excited about our opportunities to drive non-cigarette sales growth in 2013 and achieve the goals we have set for ourselves.”
Capital expenditures for 2013 are expected to approach $30 million, which will be utilized for expansion projects and maintenance investments.
