SOUTH SAN FRANCISCO, Calif. -- 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, 2013.
"We had a very good year in 2013. Our core strategies are resonating in the market place, and we have been able to accelerate our sales growth as a result," said Thomas B. Perkins, president and chief executive officer. "I am especially pleased by the growth in our non-cigarette sales and by the improvement in our non-cigarette margins this year. We intend to build on that momentum in 2014."
Fourth Quarter
Net sales increased 13.8% to $2.5 billion for the fourth quarter of 2013 compared to $2.2 billion for the same period in 2012. Excluding excise taxes, net sales increased by 15.1%. Non-cigarettes sales grew 18.2%, while cigarette sales increased 11.8%. The increase in cigarette sales was due mostly to a new Carolina division that was acquired in December 2012. Non-cigarette sales were driven primarily by the success of our core marketing strategies and market share gains, enhanced further by the acquired division.
Gross profit for the fourth quarter of 2013 was $143.3 million compared to $121.9 million for the fourth quarter of 2012. Remaining gross profit increased 16.0% to $139.1 million. Non-cigarette remaining gross profit grew $17.2 million or 27 basis points as a percent to sales compared to the same quarter last year while cigarette remaining gross profit grew $1.9 million or 5.1%.
The Company's operating expenses for the fourth quarter of 2013 were $119.5 million compared to $105.6 million for the same quarter of 2012. As a percentage of sales, operating expenses decreased slightly despite a shift in sales mix to non-cigarette categories that have lower selling price points, which drives operating costs as a percentage to sales higher.
Net income for the fourth quarter of 2013 was $15.0 million compared to $9.7 million for the same period in 2012. Adjusted EBITDA increased 22% from $25.6 million in the fourth quarter of 2012 to $31.3 million in the fourth quarter of 2013.
2013 Results
Net sales were $9.8 billion for 2013 compared to $8.9 billion for 2012, a 9.8% increase. Excluding excise taxes, net sales increased 11.7%. The increase in net sales was driven primarily by the Carolina acquisition and by increases in non-cigarette sales in the remaining business. Cigarette sales increased 8.2% and non-cigarette sales increased 13.5% over the prior year. Sales generated from the Focused Marketing Initiative, and the Fresh and Vendor Consolidation initiatives contributed significantly to the growth in the non-cigarette categories.
Gross profit for 2013 was $537.1 million compared to $476.8 million for last year. Remaining gross profit was $536.8 million in 2013 compared to $481.3 million in 2012, an 11.5% increase. Non-cigarette remaining gross profit grew 15.1%, or 16 basis points as a percentage of sales, driven by sales of higher margin categories.
The company's operating expenses for 2013 increased to $468.1 million compared to $419.4 million for 2012. Operating expenses included $2.8 million of integration and expansion costs in 2013 compared to $1.3 million the previous year. In addition, 2012 benefited from a $1.8 million favorable resolution of legacy workers compensation and insurance claims. Excluding these items, operating expenses as a percentage of sales increased four basis points.
Net income in 2013 was $41.6 million compared to $33.9 million for the same period in 2012, a 22.7% increase. Strong revenue growth, a reduction in LIFO expense and improved sales mix to higher margin categories were the primary drivers to the improvement in net income. In addition, adjusted EBITDA increased 8.6% from $100.8 million in 2012 to $109.5 million this year.
Guidance for 2014
The company expects annual net sales in 2014 to be between $10.4 billion and $10.7 billion. This expected growth in sales is driven largely by continued market share gains as it assumes no new acquisitions or large customer wins.
South San Francisco-based Core-Mark is one of the largest marketers of fresh and broad-line supply solutions to the convenience retail industry in North America.
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