Cigarette sales increase, along with increases in volume and sales margin increases, have led Core-Mark to experience significant growth.
Core-Mark Holding Co. Inc. has announced financial results for second quarter 2015, which ended June 30. The results in the report reveal exceptional growth in a number of areas. This growth has led the company to adjust its expectations for the coming months.
“Core-Mark’s strong results in the first half of 2015 have put us on pace to beat our original guidance. We are increasing our sales and earnings expectations due to recent market share gains primarily in the cigarette and tobacco categories, the continued growth in our non-cigarette categories, and executing on various income opportunities,” said Thomas Perkins, president and CEO.
Second Quarter Results Net sales increased 7.1% to $2.8 billion for the second quarter of 2015 compared to $2.6 billion for the same period in 2014. Excluding the impact of foreign currency fluctuations, net sales increased 8.7%. Non-cigarette sales increased 6.9% lead by food sales, which increased 9.6%, due primarily to sales to existing customers, while cigarette sales increased 7.2%. This growth in cigarette sales was driven primarily by an increase in cigarette carton sales, an increase in cigarette prices and additional volume generated from the Karrys Bros. acquisition earlier this year.
Gross profit increased 10.9% to $158.9 million for the second quarter of 2015 compared to $143.3 million for the same period in 2014 driven primarily by increases in sales volume and higher margins in non-cigarette categories. Remaining gross profit increased 9.3% to $157.7 million. Non-cigarette remaining gross profit increased 10.2% compared to the same quarter last year while cigarette remaining gross profit increased 6.7%.
The Company’s operating expenses for the second quarter of 2015 were $136.7 million compared to $122.8 million for the same period in 2014. Operating expenses as a percentage of net sales were 4.9% for the second quarter of 2015 compared to 4.7% for the second quarter of 2014. Operating expenses for the second quarter of 2015 include approximately $6 million in incremental expenses from the company’s new Ohio division and expenses from the recent Karrys Bros. acquisition. In addition, increases in the amount of cubic feet of product handled and number of customer deliveries contributed to higher operating costs.
Net income for the second quarter of 2015 was $13.2 million compared to $12.0 million for the same period in 2014. Adjusted EBITDA increased 9.6% to $37.5 million in the second quarter of 2015 compared to $34.2 million in the second quarter of 2014. The increases in net income and Adjusted EBITDA for the second quarter of 2015 were driven primarily by an increase in gross profit.
Diluted earnings per-share were $0.57 for the second quarter of 2015 compared to $0.52 for the second quarter of 2014. Excluding LIFO expenses, diluted earnings per-share were $0.66 for the second quarter of 2015 compared to $0.63 for the second quarter of 2014. Several other items impacted the results as well.
First Six Months of 2015 Net sales increased 6.9% to $5.3 billion for the first six months of 2015 compared to $4.9 billion for the same period in 2014. Excluding the impact of foreign currency fluctuations, net sales increased 8.4%. This growth was driven primarily by an increase in cigarette carton sales, an increase in cigarette prices and an increase in non-cigarette sales to existing customers. Non-cigarette sales grew 7.1% while cigarette sales increased 6.8%.
Gross profit increased 10.6% to $296.2 million for the first six months of 2015 compared to $267.7 million for the same period in 2014. Remaining gross profit increased 9.0% to $295.5 million. Non-cigarette remaining gross profit increased 10.3% compared to the same period last year while cigarette remaining gross profit increased 5.7%.
The Company’s operating expenses for the first half of 2015 were $264.1 million compared to $242.6 million for the same period of 2014. Operating expenses as a percentage of net sales were 5.0% for the first half of 2015 and 4.9% for the first half of 2014. Operating expenses for the first half of 2015 include approximately $9.1 million in incremental expenses from the new Ohio division and costs related to the recent Karrys Bros. acquisition. Also, increases in the amount of cubic feet of product handled and incremental customer deliveries contributed to higher operating costs.
Net income for the first six months of 2015 was $18.7 million compared to $14.4 million for the same period in 2014. Adjusted EBITDA increased 20.6% to $60.4 million in the first six months of 2015 compared to $50.1 million in the first six months of 2014. The increase in net income for the first half of 2015 was driven primarily by an increase in non-cigarette gross profit, which grew at a higher rate than operating expenses.
Diluted earnings per-share were $0.81 for the first six months of 2015 compared to $0.62 for the same period in 2014. Excluding LIFO expenses, diluted earnings per-share were $0.97 for the first six months of 2015 compared to $0.80 for the first six months of 2014, a 21% increase. In addition, per-share results were impacted by several other items.
Dividend Core-Mark has also announced its Board of Directors has approved a $0.13 cash dividend per common share. The dividend is payable on September 14, 2015 to stockholders of record as of the close of business on August 21, 2015.
Raising Guidance for 2015 The Company has raised its net sales guidance for the full year of 2015. Annual net sales guidance is now expected to be between $11.0 billion and $11.2 billion, up from $10.8 billion. The primary driver to the increase in net sales is market share gains in the tobacco categories.
Adjusted EBITDA for 2015 is now expected to be between $133.0 million and $136.0 million, up from $126.5 million and $129.0 million. Diluted earnings per-share for the full year are expected to be between $2.03 and $2.10, up from between $1.87 and $1.91. Diluted per-share estimates, excluding LIFO expense, are expected to be between $2.45 and $2.52, up from between $2.29 and $2.33. The primary drivers to the increase in EBITDA and EPS are stronger sales and net gains on excise tax increases.
The Company reaffirmed capital expenditure estimates for 2015 of approximately $35 million, which will be utilized for expansion projects and maintenance investments.