Parkland reports strong third quarter financial and operating results with Adjusted EBITDA of $338 million

News Americas, CALGARY, Alberta, Nov. 03, 2020: Parkland Corporation (“Parkland”, “we”, the “Company”, or “our”) (TSX:PKI) announced today its financial and operating results for the three and nine months ended September 30, 2020. Highlights from the third quarter (unless otherwise indicated) include:

Adjusted EBITDA attributable to Parkland (“Adjusted EBITDA”) of $338 million.

Net earnings attributable to Parkland of $76 million, or $0.51 per share, basic.

Adjusted distributable cash flow of $342 million (nine months ended September 30, 2020) fully funded growth capital expenditures, acquisitions and net dividend payments.

Fuel and petroleum product volume continued to recover from the impact of COVID-19; total company volumes were within 5 percent of Q3 2019 volumes.

Pro-active cost reductions and strong per unit fuel margins continued to offset the impact of volume declines. Operating and marketing, general and administrative (“MG&A”) costs were $47 million lower relative to Q3 2019.

Marketing segments (Canada, International and USA) generated a 24 percent increase in Adjusted EBITDA over Q3 2019.

Strong refinery utilization of 90 percent, which highlights the quality of our Burnaby refinery. This utilization rate reflected robust local demand and our best-in-class ability to successfully market distillate through the challenges of COVID-19.

Maintained liquidity of $1.6 billion and lowered our Total Funded Debt to Credit Facility EBITDA ratio to 2.6 times as of September 30, 2020.

Published our inaugural Sustainability Report outlining our established environmental, social and governance practices and setting the stage for development of our enterprise-wide sustainability strategy.

“I would like to congratulate the Parkland team for exceptional financial and operating performance,” said Bob Espey, President and Chief Executive Officer. “We continue to prove the resilience of our business model and first-rate execution capabilities. These strengths have underpinned our success year-to-date and give us confidence in our ability to manage through challenging market environments, grow the business and add shareholder value.”

“I am especially proud of the way our team has maintained a focus on safety, managed costs, won new business, published our inaugural Sustainability Report and continued to serve our customers and support our communities over the last nine months,” added Espey. “In addition, we have maintained strict financial discipline and positioned ourselves to grow our existing business organically and through acquisitions in the current environment.”

Q3 2020 Segment Highlights

Canada: Recovering volumes, strong margins and c-store sales

Steady volume recovery, strong fuel margins and convenience store sales drove a 23 percent increase in Adjusted EBITDA relative to Q3 2019. We delivered our 19th consecutive quarter of Company C-Store same-store sales growth (“SSSG’), surpassed one million JOURNIE Rewards members and continued to win new business. Third quarter highlights include:

Adjusted EBITDA of $128 million, up $24 million relative to 2019. The increase was primarily driven by strong per unit fuel margins, higher convenience store baskets and lower operating and MG&A costs.

Fuel and petroleum product volume of 2.3 billion litres, a decrease of 7 percent relative to 2019 due to the impact of COVID-19. Retail fuel volumes were 8 percent lower than prior year while commercial and other volumes were 6 percent lower.

Company C-Store SSSG of 10.7 percent, reflecting the attractiveness of the convenience store channel, the quality of our customer value proposition, strong execution and domestic tourism impacts. We saw particular strength in our new-to-industry and rebranded On the Run sites, with sales increases across most major categories, offset by lower car wash.

Operating Costs decreased $10 million and MG&A costs decreased $8 million relative to 2019, reflecting proactive cost control measures and natural variability in our cost structure.

JOURNIE Rewards membership continued to grow and now exceeds one million active members. We have witnessed high engagement from our initial promotional campaigns, increases in backcourt conversion and growing CIBC cardholder penetration.

International: Strong supply performance, shipping optimization and cost efficiencies

The International segment delivered a 22 percent increase in Adjusted EBITDA relative to Q3 2019, driven by strong supply performance, shipping optimization and cost reduction initiatives. Rolling COVID-19 lockdowns resulted in lower volumes; however, we continued to benefit from geographic and product diversity within our portfolio. The International team continued to drive new growth, in particular, securing new natural resource sector business in Suriname and new diesel supply contracts in the Spanish Caribbean. Third quarter highlights include:

Adjusted EBITDA of $77 million, up $14 million relative to 2019. The increase was primarily driven by profitable supply sourcing initiatives, including a one-off supply gain of approximately $10 million, and lower costs, offset by reduced aviation and retail activity.

Fuel and petroleum product volume of 1.1 billion litres, a decrease of 8 percent relative to 2019 due to the impact of COVID-19. Retail fuel volumes were 15 percent lower while commercial and other volumes were 3 percent lower. Although International is experiencing continuing progress in demand recovery with the easing of COVID-19 restrictions, we anticipate the recovery will be tempered until COVID-19 restrictions are lifted and tourism activity returns to normal.

Reduced operating costs by $7 million and MG&A costs by $6 million relative to 2019, reflecting the sustained benefit of proactive cost control measures, natural variability in our cost structure and integration.

USA: National accounts growth and strong margins

The USA segment delivered a 35 percent increase in Adjusted EBITDA relative to Q3 2019, driven by recent acquisitions, organic growth and strong fuel and non-fuel unit margins. This performance was partially offset by COVID-19 volume impacts and lower commercial activity in our Northern Regional Operations Center (“ROC”). The USA team is realizing the benefits of local scale, winning new business and growing volume in the Rockies and Southeast ROCs and improving fuel and lubricant supply economics. We continue to evaluate acquisition opportunities to increase our marketing presence and optimize our growing supply advantage. Third quarter highlights include:

Adjusted EBITDA of $23 million, up $6 million relative to 2019. The increase was primarily due to acquisitions, strong unit margins and coordinated marketing efforts to grow national accounts.

Fuel and petroleum product volume of 653 million litres, an increase of 44 percent relative to 2019 due to the impact of acquisitions and organic growth, offset by the impact of COVID-19. Retail fuel volume increased 4 percent while wholesale and commercial volume increased 51 percent.

Operating Costs increased $8 million and MG&A costs increased $4 million relative to 2019, due to the impact of acquisitions.

Consistent with our strategy to grow our non-fuel business, we acquired the license for the exclusive use of the On the Run trademark in the majority of U.S. states. This positions us to create a unified, North American convenience store brand and our first pilot rebranding is planned for the first half of 2021.

Supply: Burnaby refinery operated at 90 percent utilization

Adjusted EBITDA in the Supply segment decreased 16% relative to Q3 2019, driven by the impacts of COVID-19 but mitigated by strong refining utilization and steady performance from our integrated logistics business. Our ability to market diesel and jet fuel allowed our refinery to run more efficiently, resulting in utilization rates meaningfully above the North American average. Third quarter highlights include:

Adjusted EBITDA of $122 million, down $24 million relative to 2019 due to COVID-19 related volume and pricing impacts which drove lower refinery utilization and margins compared to 2019, but strong considering external market factors.

Refinery utilization was 90 percent, underpinned by our integrated marketing channels in British Columbia and ability to place both diesel and jet fuel at prevailing market prices.

Reduced operating costs by $15 million and MG&A costs by $6 million relative to 2019, reflecting the variable components of production costs and proactive cost control measures.

We continue to pursue high-quality growth projects that extend our supply advantage, such as diesel import and export opportunities and development of our renewable fuel strategy.

Corporate – organizational efficiency delivering sustainable MG&A savings

The Corporate segment includes centralized administrative services and expenses incurred to support operations. Third quarter highlights include:

MG&A costs of $22 million, down $7 million relative to 2019, reflecting the sustained benefit of proactive cost control measures and natural variability in our cost structure.

As a percentage of total adjusted gross profit, MG&A costs decreased to 3.3 percent (from 4.3 percent in 2019).

Adjusted EBITDA expense of $12 million, which includes MG&A costs and foreign exchange gains on US dollar debt repayments during the quarter.

Consolidated Financial Overview

($ millions, unless otherwise noted) | Three months ended September 30, | Nine months ended September 30,
Financial Summary | 2020(4) | 2019(4) | 2018(4) | 2020(4) | 2019(4) | 2018(4)
Sales and operating revenue | 3,505 | | 4,605 | | 3,811 | | 10,537 | | 13,674 | | 10,936 |
Fuel and petroleum product volume (million litres) | 5,324 | | 5,622 | | 4,211 | | 16,008 | | 16,483 | | 12,624 |
Adjusted gross profit(1) | 674 | | 679 | | 465 | | 1,754 | | 2,104 | | 1,408 |
Adjusted EBITDA including non-controlling interest (“NCI”) | 364 | | 322 | | 200 | | 786 | | 1,031 | | 602 |
Adjusted EBITDA attributable to Parkland (“Adjusted EBITDA”)(1) | 338 | | 302 | | 200 | | 720 | | 963 | | 602 |
Canada(2) | 128 | | 104 | | 97 | | 323 | | 292 | | 304 |
International | 77 | | 63 | | — | | 198 | | 208 | | — |
USA | 23 | | 17 | | 8 | | 63 | | 41 | | 17 |
Supply | 122 | | 146 | | 121 | | 202 | | 507 | | 362 |
Corporate | (12 | ) | (28 | ) | (26 | ) | (66 | ) | (85 | ) | (81 | )
Net earnings (loss) | 91 | | 26 | | 49 | | 48 | | 228 | | 129 |
Net earnings (loss) attributable to Parkland | 76 | | 24 | | 49 | | 29 | | 206 | | 129 |
Net earnings (loss) per share – basic ($ per share) | 0.51 | | 0.16 | | 0.37 | | 0.19 | | 1.41 | | 0.98 |
Dividends | 47 | | 45 | | 39 | | 137 | | 133 | | 118 |
Per share | 0.3036 | | 0.2985 | | 0.2934 | | 0.9074 | | 0.8921 | | 0.8770 |
Weighted average number of common shares (million shares) | 149 | | 148 | | 133 | | 149 | | 147 | | 132 |
TTM distributable cash flow(1)(5) | 479 | | 566 | | 310 | | 479 | | 566 | | 310 |
Per share(1)(3)(5) | 3.24 | | 3.96 | | 2.35 | | 3.24 | | 3.96 | | 2.35 |
TTM adjusted distributable cash flow(1)(5) | 484 | | 594 | | 495 | | 484 | | 594 | | 495 |
Per share(1)(3)(5) | 3.27 | | 4.15 | | 3.75 | | 3.27 | | 4.15 | | 3.75 |
TTM dividends(5) | 181 | | 174 | | 157 | | 181 | | 174 | | 157 |
TTM dividend payout ratio(1)(5) | 38 | % | 31 | % | 51 | % | 38 | % | 31 | % | 51 | %
TTM adjusted dividend payout ratio(1)(5) | 37 | % | 29 | % | 32 | % | 37 | % | 29 | % | 32 | %

TTM weighted average number of common shares
(million shares)(5)

148

143

132

148

143

132

Total assets | 8,978 | | 9,157 | | 5,736 | | 8,978 | | 9,157 | | 5,736 |
Total Funded Debt to Credit Facility EBITDA ratio(1)(6) | 2.56 | | 2.58 | | 2.62 | | 2.56 | | 2.58 | | 2.62 |
Interest coverage ratio(1) | 5.52 | | 5.97 | | 5.91 | | 5.52 | | 5.97 | | 5.91 |
Growth capital expenditures attributable to Parkland(1) | 15 | | 71 | | 29 | | 65 | | 152 | | 52 |
Maintenance capital expenditures attributable to Parkland(1) | 18 | | 46 | | 28 | | 186 | | 141 | | 135 |

(1)  Measure of segment profit and Non-GAAP financial measures. See Section 12 of this MD&A.
(2)  For comparative purposes, information for the three and nine months ended September 30, 2019 was restated due to a change in segment presentation. Canada Retail and Canada Commercial, formerly presented separately as individual segments, and the Canadian distribution business, formerly presented in Supply, are now included in Canada, reflecting a change in organizational structure in the first six months of 2020.
(3)  Calculated using the weighted average number of common shares.
(4)  2020 and 2019 results reflect the adoption of IFRS 16 as of January 1, 2019. 2018 comparative figures reflect the accounting standards in effect for that year and are not restated to reflect the impact of IFRS 16, as is allowed under the modified retrospective approach for IFRS 16 adoption.
(5)  Amounts presented on a trailing-twelve-month (“TTM”) basis.
(6)  Beginning in Q1 2020, Credit Facility EBITDA includes Adjusted EBITDA attributable to NCI and excludes IFRS 16 impact attributable to NCI, and Total Funded Debt includes long term-debt attributable to NCI, letters of credit attributable to NCI and cash and cash equivalents attributable to NCI. The amounts presented for 2019 and 2018 have not been restated.

Conference Call and Webcast Details

Parkland will host a webcast and conference call on Wednesday, November 4, at 6:30am MST (8:30am EST) to discuss the results.

To listen to the live webcast and watch the presentation, please use the following link:

https://produceredition.webcasts.com/starthere.jsp?ei=1390182&tp_key=aefbc264cf

Analysts and institutional investors interested in participating in the question and answer session of the conference call may do so by calling 1-888-390-0546 (toll-free) (Conference ID: 51942789). International participants can call 1-587-880-2171 (toll) (Conference ID: 51942789).

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 at the link above. It will remain available for one year and will also be posted to www.parkland.ca.

MD&A and Consolidated Financial Statements

The Q3 2020 MD&A and Q3 2020 Financial Statements provide a detailed explanation of Parkland’s operating results for the three and nine months ended September 30, 2020. An English version of these documents will be available online at www.parkland.ca and SEDAR after the results are released by newswire under Parkland’s profile at www.sedar.com. The Q3 2020 French MD&A and Q3 2020 French Financial Statements will be posted to www.parkland.ca and SEDAR as soon as they become available.

Forward-Looking Statements

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, business objectives and strategies, estimated 2020 capital expenditures, potential acquisition opportunities, potential projects to extend Parkland’s supply advantage, the ongoing roll out of the JOURNIE Rewards loyalty program, expected Burnaby refinery utilization rates, and Parkland’s ability to advance its growth agenda.

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, including the duration and impact of the COVID-19 pandemic; Parkland’s ability to execute its business strategies; 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 20, 2020, and “Forward-Looking Information” and “Risk Factors” included in the Q3 2020 MD&A dated November 3, 2020, each filed on SEDAR and available on the Parkland website at www.parkland.ca. The forward-looking statements contained in this news release are expressly qualified by this cautionary statement.

Non-GAAP 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, total funded debt to credit facility EBITDA ratio, dividend payout ratio, adjusted dividend payout ratio and growth and maintenance capital expenditures attributable to Parkland 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 our industry. See Section 12 of the Q3 2020 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 2020 MD&A and Note 19 of the Q3 2020 FS for a reconciliation of these measures of segment profit. Investors are encouraged to evaluate each measure and the reasons Parkland considers it appropriate for supplemental analysis.

In addition to non-GAAP financial measures, Parkland uses a number of operational KPIs, such as SSSG and refinery utilization, to measure the success of our strategic objectives and to set variable compensation targets for employees. These KPIs are not accounting measures, do not have comparable IFRS measures, and may not be comparable to similar measures presented by other issuers, as other issuers may calculate these metrics differently. See Section 12 of the Q3 2020 MD&A for further details.

Investors are cautioned 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.

Effective January 1, 2019, Parkland adopted the new accounting standard, IFRS 16 – Leases (“IFRS 16”). The adoption of IFRS 16 has a significant effect on Parkland’s reported results. Due to Parkland’s selected transition method, it has not restated its prior year comparatives. Certain financial statement measures are presented excluding the impact of IFRS 16 (“Pre-IFRS 16 measures”).

About Parkland Corporation

Parkland is an independent supplier and marketer of fuel and petroleum products and a leading convenience store operator. Parkland services customers across Canada, the United States, the Caribbean region and the Americas through three channels: Retail, Commercial and Wholesale. Parkland optimizes its fuel supply across these three channels by operating and leveraging a growing portfolio of supply relationships and storage infrastructure. Parkland provides trusted and locally relevant fuel brands and convenience store offerings in the communities it serves.

Parkland creates value for shareholders by focusing on its proven strategy of growing organically, realizing a supply advantage and 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.