Parkland Fuel Corporation Reports Record Q3 Adjusted EBITDA of $200 million and Payout Ratio of 28%
November 1, 2018
Parkland Tracking Well Toward 2018 Adjusted EBITDA Guidance of $775 Million ± 5%
CALGARY, Alberta, Nov. 01, 2018 (GLOBE NEWSWIRE) -- Parkland Fuel Corporation, ("Parkland", "We", or "Our") (TSX:PKI) Canada's largest and one of North America's fastest growing independent marketers of fuel and petroleum products and a leading convenience store operator, announced today the financial and operating results for the three and nine months ended September 30, 2018. All financial figures are expressed in Canadian dollars.
"The strength of our acquisitions, realized synergies, and business performance continue to drive Parkland's track record of earnings growth and value creation for shareholders," said Bob Espey, President and Chief Executive Officer. "Our supply division delivered another strong quarter driven by improved supply economics and strong refining margins. These strong quarter and year-to-date results have us tracking well toward our 2018 FY guidance of $775 million ± 5%."
KEY COMPONENTS OF PARKLAND'S STRATEGY - Q3 2018 HIGHLIGHTS
- Increased sales and operating revenue by 48% to $3.8 billion.
- Delivered 4.2 billion litres of fuel and petroleum product representing 18% growth compared to the same period in 2017.
- Achieved Adjusted EBITDA of $200 million, an increase of $104 million or 108% compared with $96 million for the same period in 2017. This was driven in large part by:
• Retail Adjusted EBITDA growth of 18% due to acquisitions(1) and 6.7% same-store-sales growth ("SSSG") in Company C-Stores, marking the 11th consecutive quarter of positive Company C-Store SSSG at Parkland.
• Commercial Adjusted EBITDA growth, largely due to acquisitions.
• Supply Adjusted EBITDA growth of 384% due to acquisitions, strong refining margins and continued efforts in executing Parkland's supply strategy.
• Parkland USA Adjusted EBITDA increased $4 million for the third quarter of 2018 due to the Rhinehart Acquisition (as defined herein) and Parkland's continued focus on its strategy to drive new business and maintain organic growth.
- Retrofitted 45 existing On the Run / Marché Express locations and constructed nine Flagship locations to date, as part of the successful rollout of the national refreshed On the Run / Marché Express store concept.
- Distributable cash flow(3) increased by 149% to $112 million, resulting in a dividend payout ratio(3) of 35%. Adjusted distributable cash flow(3) increased by 116% to $138 million, resulting in a record adjusted dividend payout ratio(3) of 28%, well within our target ratio of less than 50%.
- Attained a leverage ratio of 2.6 times at the end of the third quarter, measured as Total Funded Debt to Credit Facility EBITDA(3).
- Grew Supply's Adjusted EBITDA to $121 million and $362 million for the three and nine months ended September 30, 2018, compared to $25 million and $66 million in the respective periods of 2017. This exceptional growth was attributable to contributions from the Chevron Acquisition(1), strong refining margins, profitable supply sourcing initiatives, improved supply economics and optimization in the base business.
- Strong crack spreads in the third quarter were partially offset by increased transportation costs.
- The Burnaby Refinery achieved refinery utilization of 97.7% in the third quarter of 2018, marking the first successful full quarter of operations since the completion of the Burnaby Refinery's major maintenance event in the first week of April 2018.
- Increased supply and wholesale volumes by 32%, mainly attributable to the aviation fuel business acquired as part of the Chevron Acquisition, as well as increases in refined product sales.
- Our recent acquisitions continue to perform well, contributing to the ongoing strength of our financial results for the third quarter of 2018.
- Parkland's ongoing success with the integration of our acquisitions continues to drive synergies that are pacing significantly above internal targets.
• As at September 30, 2018, we have completed initiatives that are expected to result in Annual Synergies on the Ultramar and Chevron acquisitions of approximately $65 million for fiscal year 2018, an increase of $10 million since the end of the second quarter.
• We continue to expect run-rate Annual Synergies on the acquisitions to reach approximately $180 million by the end of 2020. This represents an increase of $112 million over our original expectation of $68 million at the time of our acquisitions.
- On August 27, 2018, Parkland completed the acquisition of Rhinehart Oil Co., Inc. and its affiliates (collectively, "Rhinehart"). Rhinehart markets and distributes fuels, lubricants and specialty products in Utah, Colorado, Wyoming and New Mexico
For the remainder of 2018, Parkland will remain focused on continuing to achieve synergies from the acquisitions and preparing to close the Sol Transaction announced October 10, 2018, which is targeted for the fourth quarter of 2018.
2018 Guidance Range
Our 2018 Adjusted EBITDA guidance is tracking well toward approximately $775 million ± 5% (the "2018 Guidance Range"). The 2018 Guidance Range is based on certain assumptions, including, among other assumptions, estimates of future performance of recently acquired businesses (excluding Sol, which is not included in 2018 guidance), with such estimates being based on recent performance, integration synergies being realized ahead of expectations, sustained supply initiatives, and the continuation of robust refining margins.
The 2018 Guidance Range includes initiatives that build off the 2017 Adjusted EBITDA of $418 million and the assumption that the performance of recently acquired businesses (excluding Sol), general market conditions, including but not limited to fuel margins, refining margins and weather, will remain substantially consistent in 2018. Additionally, the negative 5% variance accounts for potential adverse market conditions in western Canada and the northern U.S. as well as the possibility of materially lower refining margins, while the positive 5% variance accounts for contributions from synergies relating to our recent acquisitions, higher refining margins and Parkland achieving its previously disclosed average annual organic growth goal of 3-5%.
In addition, the factors and assumptions which contribute to Parkland's assessment of the 2018 Guidance Range are consistent with existing Parkland disclosure and such guidance range is subject to risks and uncertainties inherent in Parkland's business. Readers are directed to the "Risk Factors" section in the Annual MD&A(4) and the Annual Information Form(5) for a description of such factors, assumptions, risks and uncertainties.
(1) On June 28, 2017, Parkland acquired the majority of the Canadian business and assets of CST Brands, Inc. (the "Ultramar Acquisition"); on October 1, 2017, Parkland acquired all outstanding shares of Chevron Canada R & M ULC (the "Chevron Acquisition"); on August 27, 2018, Parkland acquired all of the issued and outstanding equity interests of Rhinehart Oil Co., Inc. and its affiliates (collectively, “Rhinehart”) (the “Rhinehart Acquisition”); and on October 9, 2018 Parkland entered into an agreement to acquire 75% of the issued and outstanding shares in the capital of Sol Investments Limited and its subsidiaries (collectively, “Sol”) (the “Sol Transaction”).
(2) Annual Synergies is an annualized measure and is considered to be forward-looking information. See Section 12 and Section 14 of the Management's Discussion and Analysis for the three and nine months ended September 30, 2018 ("Q3 2018 MD&A").
(3) Non-GAAP financial measure. See Section 12 of the Q3 2018 MD&A.
(4) Please refer to our Management's Discussion and Analysis for the fiscal year ended December 31, 2017.
(5) Please refer to our Annual Information Form for the fiscal year ended December 31, 2017 dated March 9, 2018.
Consolidated Financial Overview
|($ millions, unless otherwise noted)||Three months ended September 30,||Nine months ended September 30,|
|Sales and operating revenue||3,849||2,600||1,638||10,974||6,191||4,526|
|Adjusted gross profit(1)||465||266||171||1,408||625||511|
|Per share – basic||0.37||0.10||0.15||0.98||0.30||0.47|
|Per share – diluted||0.36||0.10||0.15||0.95||0.29||0.46|
|Distributable cash flow(2)||112||45||28||259||106||91|
|Adjusted distributable cash flow(2)||138||64||33||387||149||109|
|Dividends declared per share outstanding||0.2934||0.2886||0.2835||0.8770||0.8624||0.8415|
|Dividend payout ratio(2)||35||%||83||%||99||%||46||%||92||%||90||%|
|Adjusted dividend payout ratio(2)||28||%||59||%||83||%||30||%||66||%||75||%|
|Total long-term liabilities||2,544||2,325||634||2,544||2,325||634|
|Shares outstanding (millions)||133||131||96||133||131||96|
|Weighted average number of common shares (millions)||133||131||96||132||113||95|
|Fuel and petroleum product volume (million litres)(4)||4,211||3,557||2,659||12,624||8,901||7,632|
|Fuel and petroleum product adjusted gross profit(1) (cpl)(5):|
|Operating costs(6) (cpl)||4.65||3.40||2.79||4.73||3.20||2.97|
|Marketing, general and administrative (cpl)||1.64||1.37||1.38||1.66||1.35||1.40|
(1) Measure of segment profit. See Section 12 of the Q3 2018 MD&A.
(2) Non-GAAP financial measure. See Section 12 of the Q3 2018 MD&A.
(3) Calculated using the weighted average number of common shares.
(4) Fuel and petroleum product volume represents external volumes only. Intersegment volumes, including volumes produced by the Burnaby Refinery and transferred to the Retail and Commercial segments, are excluded from this reported volume.
(5) "cpl" stands for cents-per-litre and is a key performance indicator. See Section 12 of the Q3 2018 MD&A.
(6) Operating costs (cpl) were restated to conform to current year's presentation in the consolidated statements of income. Specifically, customer finance income, which was formerly presented separately, is now included in operating costs.
MD&A AND FINANCIAL STATEMENTS
The Q3 2018 Management's Discussion and Analysis ("MD&A") and the interim condensed consolidated financial statements provide a detailed explanation of Parkland's operating results for the three and nine months ended September 30, 2018. An English version of these documents will be available online at www.parkland.ca and SEDAR immediately after the results are released by newswire under Parkland's profile at www.sedar.com. French Financial Statements and MD&A will be posted to www.parkland.ca and SEDAR as soon as they become available.
CONFERENCE CALL AND WEBCAST INFORMATION
Parkland will host a webcast and conference call on Friday, November 2, 2018, at 6:30am MST (8:30am EST) to discuss the results.
To access the conference call by telephone, dial toll-free 1-844-889-7784 [Conference ID: 7258739]. The webcast slide presentation can be accessed at https://edge.media-server.com/m6/p/3kj2x22a. 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", "believe", "continue", "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, signs of growth, business objectives and growth strategies; the strength of Parkland's operations and financial condition; sources of growth; anticipated synergies; Parkland's ability to drive synergies above internal targets; matters related to transition services agreements; the targeted closing of the Sol Transaction; annual organic growth objectives; forecast crack spreads or refining margins; supply improvement and optimization and plans and objectives of or involving Parkland.
These 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 law. 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, 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 but not limited to increases in taxes or restricted access to markets; 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 "Forward-Looking Information" and "Risk Factors" included in Parkland's Annual Information Form dated March 9, 2018 and in "Forward-Looking Information" and "Risk Factors" in the Q3 2018 MD&A, each as filed on SEDAR and available on the Parkland website at www.parkland.ca.
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 and adjusted dividend payout ratio are not measures recognized under IFRS and do not have standardized meanings prescribed by IFRS. Management considers these 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 12 of the Q3 2018 MD&A for a discussion of non-GAAP measures and their reconciliations to the nearest applicable IFRS measure.
Adjusted EBITDA and adjusted gross profit are measures of segment profit. See Section 12 of the Q3 2018 MD&A and Note 14 of the Interim Condensed Consolidated Financial Statements for a reconciliation of these measures of segment profit. Annual Synergies is an annualized measure and is considered to be forward-looking information. See Section 12 of the Q3 2018 MD&A. Investors are encouraged to evaluate each measure 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 ("Parkland") is Canada's largest and one of North America's fastest growing independent suppliers and marketers of fuel and petroleum products and a leading convenience store operator. Parkland serves customers through three channels: Retail, Commercial and Wholesale. Parkland optimizes its fuel supply across these three channels by operating the Burnaby Refinery and leveraging a growing portfolio of supply relationships and storage infrastructure. Parkland provides trusted and locally relevant fuel brands and convenience store offerings, including under the On the Run / Marché Express banners, in the communities it serves.
Parkland creates value for shareholders by focusing on its proven strategy of growing organically, realizing a strong supply advantage, acquiring prudently and integrating successfully. At the core of our strategy are our people as well as our values of safety, integrity, community and respect, which are embraced across our organization.
Parkland is listed on the Toronto Stock Exchange and trades under the symbol PKI. We operate through four operating segments: Retail, Commercial, Supply, and Parkland USA.
FOR FURTHER INFORMATION
Vice President, Treasury and Risk Management
Senior Specialist, Corporate Communications
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