Core-Mark Announces Q1 2013 Financial Results

Non-cigarette margins improved by more than 30 basis points, results show.

Core-Mark Holding Co. Inc., a marketer of fresh and broad-line supply solutions to the convenience retail industry in North America, announced financial results for the first quarter ended March 31, 2013.

“I am encouraged to see healthy growth in our non-cigarette sales and robust improvements in the margins, despite soft consumer demand in the quarter.  This not only indicates that our key strategies continue to resonate with customers, but strengthens my confidence that we will post record earnings in 2013,” said Thomas Perkins, president and CEO.  “I am very excited about our new Carolina division and the positive impact they have made to the company and the new Turkey Hill contract announced this morning.”

First Quarter

Net sales increased 2.1% to $2.15 billion for the first quarter of 2013 compared to $2.10 billion for the same period in 2012 driven by the company’s recent acquisition. Sales growth overall was impacted by the timing of certain customer gains and losses, declines in carton sales and one less selling day this quarter.   Non-cigarette sales grew 5.2% driven by sales from our newest division and by execution of the company’s key marketing strategies. 

Gross profit for the first quarter of 2013 was $116.0 million compared to $110.1 million in the first quarter of 2012.  Remaining gross profit increased 5.5% to $118.1 million.  Non-cigarette remaining gross profit grew $6.1 million or 31 basis points compared to the same quarter last year.  Cigarette remaining gross profit per carton was flat.  The following table reconciles the components of remaining gross profit.

The company’s operating expenses for the first quarter of 2013 were $110.9 million compared to $104.0 million in the same quarter of 2012. Operating expenses as a percentage of sales increased 22 basis points driven largely by a lack of leverage on soft sales.

Net income for the first quarter of 2013 was $2.6 million compared to $3.6 million for the same period in 2012. Adjusted EBITDA was $15.9 million in the first quarter of 2013 compared to $16.7 million in the first quarter of 2012.

Diluted earnings per share were $0.22 for the first quarter this year compared to $0.31 in the first quarter of last year.  Excluding LIFO expenses, diluted earnings per share were $0.37 per diluted share in this quarter compared to $0.46 for the first quarter in 2012.

Guidance for 2013

Core-Mark expects annual net sales in 2013 to be between $9.8 billion and $10.0 billion, a 10% to 12% increase compared to 2012.  This expected growth is driven by incremental sales from our recent acquisition of J.T. Davenport, market share gains including our recently announced contract with Turkey Hill and additional penetration into existing stores, leveraging our vendor consolidation and focused marketing initiatives. 

Adjusted EBITDA for 2013 is expected to be between $112 million and $115 million, an 11% to 14% increase over 2012 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 or between $3.90 and $4.05 excluding the impact of LIFO expense. The company is expecting approximately $16 million in LIFO expense, a 40% tax rate and 11.8 million fully diluted shares outstanding. 

Capital expenditures for 2013 are expected to approach $30 million, which will be utilized for expansion projects and maintenance investments.

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