Parkland Fuel Corporation Reports Q2 Results and Increases Its 2017 Guidance

August 2, 2017

CALGARY, Alberta--(BUSINESS WIRE)-- Parkland Fuel Corporation (“Parkland”) (TSX:PKI), Canada’s largest and one of North America's fastest growing independent marketers of fuel and petroleum products, announced today the financial and operating results for the three months ended June 30, 2017. All financial figures are expressed in Canadian dollars.

“Parkland consistently continues to deliver against its strategic plan. Our second quarter results show organic volume growth across our entire business with year over year adjusted EBITDA improvements in the Parkland USA business and in our Retail Fuels business. Our Company convenience-store channel experienced strong same-store sales growth of 6.0%, as a result of our ongoing marketing programs to improve our offer. While volumes have been robust throughout the business we did see margins soften in the wholesale business in our LPG and crude product lines,” said Bob Espey, President and Chief Executive Officer at Parkland. “On the acquisition front, we closed one of our most significant acquisitions to date, the majority of the Canadian business and assets of CST Brands, Inc., providing a large scale expansion into Quebec and Atlantic Canada under the Ultramar brand, the most recognized retail fuel brand in this region.”

As a result of the closing of the acquisition of the majority of the Canadian business and assets (the “CST Brands Canada Acquisition”) of CST Brands, Inc. ("CST Brands Canada") from Alimentation Couche-Tard Inc. ("Couche-Tard") in the second quarter, Parkland has increased its 2017 Adjusted EBITDA guidance to $310 million to $340 million (“Revised 2017 Guidance Range”), see Additional Revised Guidance Considerations section below.

KEY COMPONENTS OF PARKLAND’S STRATEGY – Q2 HIGHLIGHTS

GROW

  • We achieved a 2.1% growth in volume, delivering approximately 2.6 billion litres of fuel and petroleum products in the second quarter of 2017, compared to 2.5 billion litres in the second quarter of 2016. The volume increase was driven by growth in gas, diesel and propane volumes in Commercial Fuels, and growth in gas and diesel volumes in Retail Fuels and Parkland USA.
  • Retail Fuels achieved an outstanding Company C-Store same-store sales growth of 6.0% during the second quarter of 2017 as compared to the second quarter of 2016, as a result of continued marketing efforts in Parkland's convenience store offerings. The growth was observed across both Western Canada and Eastern Canada.
  • Commercial Fuels delivered 26% more propane than in the second quarter of 2016 primarily due to strong organic growth efforts, the impact of recent customer wins, and contributions from strategic business acquisitions completed in 2016.

ACQUIRE

  • On June 28, 2017, we completed the acquisition of the majority of the Canadian business and assets of CST Brands Canada from Couche-Tard. These businesses operate under a number of highly recognizable brands including Ultramar, Dépanneur du Coin / Corner Store, Dépan Express / ExpressMart and Pipeline Commercial.
  • On April 18, 2017, Parkland announced it had entered into an agreement with Chevron Canada Limited to acquire all of the outstanding shares of Chevron Canada R & M ULC for US$1.1 billion plus working capital (the "Chevron Canada Acquisition").

SUPPLY

  • Supply and Wholesale Adjusted EBITDA was $17.8 million compared to $23.1 million in the second quarter of 2016 primarily driven by narrower margins, particularly in the crude and propane business.
  • The Supply and Wholesale segment continued to drive higher propane sales this quarter. Supply and Wholesale sold an additional 24 million litres of propane in the second quarter of 2017 as compared to the second quarter of 2016.
  • Diesel and biodiesel volumes in the Supply and Wholesale segment increased by approximately 22% compared to the same quarter of 2016 as a result of strong market share gains and strategic initiatives to drive volume growth.

CONSOLIDATED FINANCIAL OVERVIEW

($ millions, unless otherwise noted) Three months ended June 30, Six months ended June 30,
2017 2016 2015 2017 2016 2015
Financial Summary
Sales and operating revenue 1,806.2 1,569.8 1,389.9 3,590.7 2,887.9 2,781.5
Adjusted gross profit(1) 167.6 166.6 123.0 358.6 339.4 278.2
Adjusted EBITDA(1) 53.6 56.4 34.1 123.6 116.1 91.2
Net earnings (loss) (1.4 ) 4.6 (10.5 ) 20.6 29.5 9.3
Per share – basic (0.01 ) 0.05 (0.13 ) 0.20 0.31 0.11
Per share – diluted (0.01 ) 0.05 (0.13 ) 0.20 0.31 0.11
Distributable cash flow(2) 22.2 28.3 9.1 61.0 63.2 45.4
Per share(2)(3) 0.20 0.30 0.11 0.59 0.67 0.55
Adjusted distributable cash flow(2) 38.5 36.7 22.0 84.9 76.2 61.0
Per share(2)(3) 0.35 0.39 0.26 0.82 0.80 0.73
Dividends 32.5 27.2 23.3 60.5 53.9 46.8
Per share outstanding 0.25 0.29 0.26 0.46 0.56 0.52
Dividend payout ratio(2) 146 % 96 % 257 % 99 % 85 % 103 %
Adjusted dividend payout ratio(2) 84 % 74 % 106 % 71 % 71 % 77 %
Total assets 4,365.6 1,834.1 1,819.6 4,365.6 1,834.1 1,819.6
Total long-term liabilities 2,075.4 582.6 590.7 2,075.4 582.6 590.7
Shares outstanding (millions) 130.4 95.4 89.9 130.4 95.4 89.9

Weighted average number of
common shares (millions)

110.8 95.1 83.9 103.6 94.7 83.2
Operating Summary

Fuel and petroleum product volume
(million litres)

2,588.7 2,536.1 2,031.0 5,344.3 4,973.2 4,269.0

Fuel and petroleum product adjusted
gross profit(1) (cpl):

Retail Fuels 5.78 5.64 5.09 5.53 5.41 4.99
Commercial Fuels 9.36 10.47 10.46 11.59 11.98 12.34
Parkland USA 3.31 3.17 3.33 3.43 3.49 3.37
Operating costs (cpl) 3.02 2.94 2.97 3.08 3.09 2.97
Marketing, general and administrative (cpl) 1.41 1.42 1.44 1.34 1.42 1.44
(1) Measure of segment profit. See Section 12 of the MD&A.
(2) Non-GAAP financial measure. See Section 12 of the MD&A.
(3) Calculated by using the weighted average number of common shares.
MD&A AND FINANCIAL STATEMENTS

The Q2 2017 Management’s Discussion and Analysis (“Q2 2017 MD&A”) and Parkland Fuel Corporation’s unaudited interim condensed consolidated financial statements for the three and six months ended June 30, 2017 (the “Interim Consolidated Financial Statements”) provide a detailed explanation of Parkland’s operating results for the three and six months ended June 30, 2017. These documents are available online at www.parkland.ca and SEDAR immediately after the results are released by newswire under Parkland’s profile at www.sedar.com.

CONFERENCE CALL AND WEBCAST INFORMATION

Parkland will host a webcast and conference call at 6:30 a.m. MST (8:30 a.m. EST) on Thursday, August 3, 2017 to discuss the results for the three and six months ended June 30, 2017.

To access the conference call by telephone, dial toll-free 1-844-889-7784 [Conference ID: 59274851]. The webcast slide presentation can be accessed at http://edge.media-server.com/m/p/kd6nd76b. Please connect and log in approximately 10 minutes before the beginning of the call.

The webcast will be available for replay two hours after the conference call ends. It will remain available at the link above for one year and will also be posted to www.parkland.ca.

FORWARD-LOOKING STATEMENTS AND NON-GAAP FINANCIAL MEASURES

Certain statements contained in this news release constitute forward-looking information and statements (collectively, “forward-looking statements”). When used in this news release, the words “expect’’, ‘‘will’’, ‘‘could’’, ‘‘would’’, “well positioned,” ‘‘pursue’’ and similar expressions are intended to identify forward-looking statements. In particular, this news release contains forward-looking statements with respect to, among other things, Revised 2017 Guidance Range, the closing of the Chevron Canada Acquisition and the timing thereof, the factors and assumptions that contribute to Parkland’s 2017 Revised Guidance Range, business objectives and growth strategies, the strength of Parkland’s balance sheet and financial condition, sources of growth, future acquisitions, capital expenditures, the anticipated benefits and accretive effects of closed, announced and/or future acquisitions, contribution of Distributable Cash Flow per Share from acquisitions, and plans and objectives of or involving Parkland.

These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These forward-looking statements speak only as of the date of this news release. Parkland does not undertake any obligations to publicly update or revise any forward-looking statements except as required by securities laws. Actual results could differ materially from those anticipated in these forward-looking statements as a result of numerous risks and uncertainties including, but not limited to: failure to achieve the results in the Revised 2017 Guidance Range, failure to close the Chevron Canada Acquisition on the terms negotiated or at all, failure to achieve the anticipated benefits of acquisitions (including but not limited to the CST Brands Canada Acquisition and Chevron Canada Acquisition), failure to obtain necessary regulatory or other third-party consents and approvals required to complete announced acquisitions (including the Chevron Canada Acquisition), failure to complete announced acquisitions (including the Chevron Canada Acquisition), general economic, market and business conditions, industry capacity, competitive action by other companies, refining and marketing margins, the ability of suppliers to meet commitments, actions by governmental authorities and other regulators including increases in taxes, changes and developments in environmental and other regulations, and other factors, many of which are beyond the control of Parkland. See also the risks and uncertainties described in the “Cautionary Statement Regarding Forward-Looking Information” and “Risk Factors” included in Parkland’s Annual Information Form dated March 31, 2017, as filed on SEDAR and available on Parkland’s website at www.parkland.ca.

Revised 2017 Adjusted EBITDA guidance considerations

The Revised 2017 Adjusted EBITDA guidance of $310 million to $340 million includes growth scenarios that build off the 2016 Adjusted EBITDA of $253.5 million and adds Adjusted EBITDA based on Parkland management's estimate of how the business acquired in the CST Brands Canada Acquisition will perform, whereby such estimate is based on prior performance of the CST Brands Canada business. The Revised 2017 Adjusted EBITDA guidance is also based on the assumption that general market conditions, including but not limited to fuel margins and weather, will remain the same for the remainder of 2017. Additionally, the lower end of range accounts for potential adverse market conditions in Western Canada and the Northern U.S. and the higher range accounts for contributions from synergies relating to prior acquisitions and Parkland achieving its previously disclosed average annual organic growth goal of 3-5%. The guidance does not include the Adjusted EBITDA impact of the Chevron Canada Acquisition. Refer to this press release and Parkland’s press release issued on March 2, 2017 on SEDAR at www.sedar.com for more information.

Financial Measures

This news release refers to certain non-GAAP financial measures that are not determined in accordance with International Financial Reporting Standards (“IFRS”). Distributable Cash Flow, Distributable Cash Flow per Share, Adjusted Distributable Cash Flow, Adjusted Distributable Cash Flow per Share, Dividend Payout Ratio, Adjusted Dividend Payout Ratio, and Fuel and Petroleum Product Adjusted Gross Profit are not measures recognized under IFRS and do not have standardized meanings prescribed by IFRS. Management considers these measures to be important supplemental measures of Parkland’s performance and believes these measures are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in its industries. See Section 6 of the Q2 2017 MD&A for a reconciliation of distributable cash flow to cash flow from operating activities, the IFRS measure most directly comparable to distributable cash flow. See Section 12 of the Q2 2017 MD&A for a discussion of non-GAAP measures and their reconciliations.

Adjusted EBITDA and Adjusted Gross Profit are measures of segment profit. See Section 12 of the Q2 2017 MD&A and Note 14 of the Interim Consolidated Financial Statements for a reconciliation of these measures of segment profit. Investors are encouraged to evaluate each adjustment and the reasons Parkland considers it appropriate for supplemental analysis.

Investors are cautioned, however, that these measures should not be construed as an alternative to net earnings determined in accordance with IFRS as an indication of Parkland’s performance. The forward-looking statements contained in this news release are expressly qualified by this cautionary statement.

ABOUT PARKLAND FUEL CORPORATION

Parkland Fuel Corporation delivers gasoline, diesel, propane, lubricants, heating oil and other high-quality petroleum products to motorists, businesses, households and wholesale customers in Canada and the United States. Our mission is to be the partner of choice for our customers and suppliers, and we do this by building lasting relationships through outstanding service, reliability, safety and professionalism.

We are unique in our ability to provide customers with dependable access to fuel and petroleum products, utilizing a portfolio of supply relationships, storage infrastructure, and third-party rail and highway carriers to rapidly respond to supply disruptions in order to protect our customers.

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