Parkland Fuel Corporation ("Parkland" or the "Corporation") (TSX:PKI), North
America's fastest growing distributor and marketer of fuels and lubricants,
today announced the financial and operating results for the three months ended
March 31, 2014. All financial figures are expressed in Canadian dollars.
Q1 2014 Operational Highlights:
----------------------------------
For the three months ended
March 31,
2014 2013 % Change
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(in millions of litres)
Total fuel volume 2,272 1,400 62
Retail fuel volume 417 400 4
Commercial fuel volume 517 433 19
(in millions of Canadian dollars)
Adjusted EBITDA (1) 61.2 61.0 0
Net earnings 22.3 30.5 (27)
Distributable cash flow (2) 44.6 44.9 (1)
Dividend to distributable cash flow payout
ratio 43% 39%
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(1) Please see Adjusted EBITDA in the Non-GAAP Measures section in the MD&A.
(2) Please see Distributable Cash Flow reconciliation table and definition
in Non-GAAP Measures, both of which can be found in the MD&A.
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Grow
-- First quarter results from SPF Energy Inc. were stronger than expected,
delivering $5.2 million in Adjusted EBITDA;
-- Retail same store fuel sales increased by 3.0% that, in combination with
strong in-store promotions, drove a 9.4% increase in same store
convenience store merchandise sales;
-- Cold weather drove 5.5% growth in commercial base business; and
-- Twelve Chevron-branded service stations were purchased in northern
British Columbia subsequent to March 31, 2014.
Supply
-- Elbow River Marketing delivered an incremental increase of $10.7 million
in Adjusted EBITDA compared with the first quarter of 2013 due to a full
quarter of earnings (Parkland acquired Elbow River February 15, 2013)
and due to unique market conditions brought on by cold weather;
-- The import capability and rail logistics of Elbow River Marketing
ensured that Sparlings Propane had access to propane during the first
quarter of 2014 while most of the industry struggled to source supply;
-- Elbow River Marketing shipped 200 rail cars of diesel to SPF Energy Inc.
in the first quarter to support volume growth; and
-- New supply arrangements began to stream in the first quarter of 2014
which helped offset the loss of refiner's margins.
Operate
-- Operating and direct costs on a cents per litre ("cpl") basis improved
by 0.1 cpl (to 2.9 cpl from 3.0 cpl) but increased by 53% to $65.2
million in the first quarter of 2014, compared with $42.5 million for
the same period in 2013 due to the acquisitions of Elbow River
Marketing, the assets of TransMontaigne Marketing Canada Inc. ("TMCI"),
Sparlings Propane, and SPF Energy Inc.;
-- MG&A expenses on a cpl basis improved by 0.2 cpl (to 1.6 cpl from 1.8
cpl) but increased 46% to $36.4 million in the first quarter of 2014,
compared with $24.9 million during the same period in 2013 for the same
reasons described above.
"The fact that we were able to establish a new Adjusted EBITDA record this
quarter is a testament to the health of our business, and demonstrates our
team's ability to execute against our five year plan to double 2011 EBITDA by
2016," said Bob Espey, President and Chief Executive Officer of Parkland. "Our
team has been successful in offsetting the loss of refiner's margins which, if
you recall from the first quarter of 2013, were unusually strong."
2014-2016 Adjusted EBITDA Guidance:
The expected seasonal contribution of Adjusted EBITDA is shown in the schedule
below:
Q1 Q2 Q3 Q4 Total
Adjusted EBITDA 29% 20% 22% 29% 100%
While this schedule is based on historical averages, the first quarter of 2014
was unusually strong compared to previous years. Parkland is not changing its
previous annual guidance, despite the strong First Quarter results due to our
expectations of the business environment for the balance of 2014.
Acquisition
assumptions:
Adjusted EBITDA Forecast (Adjusted EBITDA
($ millions) 2014 2015 2016 acquired per year)
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Expected Case 200 226 252 12
Low Case 185 210 228 7
High Case 209 239 269 15
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Consolidated Highlights:
Three months ended March 31,
----------------------------------------------------------------------------
(in millions of Canadian dollars, except
volume and per Share
amounts) 2014 2013 % Change
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Income Statement Summary:
Sales and operating revenues 2,024.3 1,212.8 67
Gross profit 165.0 127.6 29
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Operating costs 65.2 42.5 (53)
Marketing, general and administrative 36.4 24.9 (46)
Depreciation and amortization expense 18.9 13.2 (43)
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44.5 47.0 (5)
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Customer finance income (0.6) (0.5) (20)
Finance costs 5.4 5.3 (2)
Foreign exchange gain (loss) (2.9) (0.3) (867)
Loss on disposal of property, plant and
equipment 1.1 0.3 (267)
Loss on risk management activities 9.4 2.7 (248)
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Earnings before income taxes 32.1 39.5 (19)
Income tax expense 9.7 9.0 (8)
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Net earnings 22.4 30.5 (27)
Net earnings per share
- Basic 0.30 0.44 (32)
- Diluted (1) 0.30 0.42 (28)
Non-GAAP Financial Measures:
Adjusted EBITDA (2)(3) 61.2 61.0 0
Distributable cash flow (2)(4) 44.6 44.9 (1)
Distributable cash flow per share (2)(4) 0.61 0.65 16
Dividends 19.2 17.7 9
Dividend to distributable cash flow
payout ratio (2)(4) 43% 39%
Key Metrics:
Fuel volume (millions of litres) 2,272 1,400 62
Return on capital employed (ROCE)(2)(5) 18.7% 26.9%
Employees 1,713 1,167 47
Fuel Key Metrics - Cents per litre:
Average Retail fuel adjusted gross
profit (6) 4.59 4.53 1
Average Commercial fuel adjusted gross
profit (6) 11.33 11.70 (3)
Operating costs 2.87 3.04 6
Marketing, general and administrative 1.60 1.78 10
Depreciation and amortization expense 0.83 0.94 12
Liquidity and bank ratios:
Net debt:adjusted EBITDA (2)(7) 2.21 1.41
Senior debt:adjusted EBITDA (2)(7) 1.59 0.83
Interest coverage (2)(6) 7.96 8.84
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(1) Diluted earnings (loss) per share can be impacted by an anti-dilutive
impact of conversion of the debentures. Quarterly diluted earnings
(loss) per share may therefore not accumulate to the same per share
value as the year-to-date calculation.
(2) Please refer to the Non-GAAP Measures section in the MD&A for
definitions.
(3) Please see Adjusted EBITDA discussion in the MD&A.
(4) Please see Distributable Cash Flow reconciliation table in the MD&A.
(5) Please see ROCE discussion in the MD&A.
(6) Please see Segmented Results discussion in the MD&A.
(7) Please refer to the Non-GAAP Measures section in the MD&A for
reconciliations.
Parkland Penny Plan Scorecard
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Area Commitment Analysis 2016 Q1 2014 2013
Target
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Organic growth Upturn in Organic
Growth
Driven by a 5.5% 100 30.5 11.2
increase in base million million million
commercial volumes litres litres litres
due to cold per year YTD YTD
weather; 3.0% same
store fuel sales
growth in
Parkland's
retailer gas
station network;
stronger wholesale
volumes; partially
offset by planned
retail site
closures.
Grow
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Major SPF Energy Inc.
acquisitions Delivers
Additional Volumes
The acquisition 4.6 1.2 2.7
SPF Energy Inc. billion billion billion
drove increased litres litres litres
volumes this by 2016 (annual (annual
quarter and is volume) volume)
performing ahead
of plan. The
mergers and
acquisitions
environment
remains very
active.
============================================================================
Supply Supply Margins Progress Revealed
this Quarter
The Q1 2014 100% On Track On Track
results did not Normalized
benefit from profit
refiner's margins plus 1/3
and demonstrate cent
the health of
Parkland's supply
operation in the
absence of the
refiner's margin
contract which
ended December
2013.
============================================================================
Operating Opex Costs Down
costs Per Litre
Increased Activity 2.48 cpl 2.87 cpl 3.04 cpl
in Elbow River TTM TTM
Marketing offset
by overall
increase in Volume
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Marketing, MG&A Increases
General and Less than Volume
Administration
("MG&A") costs
Operate MG&A costs 1.52 cpl 1.60 cpl 1.78 cpl
decrease on a per TTM TTM
litre basis as
volumes increase.
-------------------------------------------------------------------
Total TRIF Improves
Recordable Despite Cold
Injury Winter
Frequency
Total Recordable Less than 2.98 TTM 3.95 TTM
Injury Frequency 2.00
improved from 3.95
(TTM) in Q4 2013
to 2.98 (TTM) this
quarter.
Commercial
launched its
safety leadership
training program
for 200 managers
to further
improve.
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Note: 2016 cost targets will be updated in the event of a significant change
to Parkland's business mix.
Abbreviations: CPL = Cents per litre
YTD = Year-to-date
TTM = Trailing twelve months
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Distributable Cash Flow Remains Strong
Q1 2014 vs. Q1 2013
Distributable cash flow exceeded dividends in the first quarter by $25.4 million
compared with $27.2 million in the first quarter of 2013. The dividend payout
ratio for the first quarter of 2014 was 43% compared with 39% in the first
quarter of 2013. Distributable cash flow decreased by $0.3 million to $44.6
million in the first quarter of 2014 compared with $44.9 million in the first
quarter of 2013. The decrease in distributable cash flow is primarily due to the
$2.2 million increase in current income tax expense partially offset by $1.8
million in lower maintenance capital expenditures and a $0.2 million increase in
Adjusted EBITDA. The increase in the dividend payout ratio is also impacted by
an increase of 4.3 million common shares outstanding.
Commercial Base Volumes Increase 5% Due to Cold Weather and Increased Sales
Q1 2014 vs. Q1 2013
Volumes
For the three months ended March 31, 2014, Parkland Commercial Fuels' volumes
increased 19.5% to 517 million litres compared with 433 million litres in 2013.
The 84 million litre increase included 60 million litres in incremental propane
sales from Sparlings Propane and 5.5% volume growth in the base business (SPF
Energy Inc. currently only contributes lubricant volumes to Commercial Fuel
results).
Despite significant weather related operational challenges, fuel volumes in
Eastern Canada increased due to colder weather and new accounts. While road
closures and an increase in unplanned deliveries disrupted truck routing, the
Eastern Canadian operations were successful in delivering propane and heating
oil to both residential and commercial customers. Elbow River Marketing played a
key role in ensuring the Sparlings operations in Ontario had access to propane
while most of the industry struggled to source supply. In general, the Sparlings
business is performing ahead of plan from a volume perspective.
Parkland Commercial Fuel sales in western Canada were down year over year
primarily due to the discontinuation of a low margin marketer agreement in
northern Alberta. However, when this agreement is factored out, Western
commercial fuel volumes are up year over year as the result of increased propane
sales and new account signings.
The Canadian Association of Oilwell Drilling Contractors "CAODC" reported that
the average monthly count of active drilling rigs during the three months ended
March 31, 2014 was 521, a five percent increase compared with 496 during the
same period in 2013. Despite slightly higher activity levels across the entire
oil and gas sector, much of the activity remains focussed on areas rich in
crude, whereas a significant softening in natural gas drilling was observed in
northern Alberta, an area of significant concentration for Parkland's Western
commercial operation. Poor weather also reduced the volume delivered in this
region during the quarter.
Adjusted Gross Profit
For the three months ended March 31, 2014, fuel gross profit increased 16% to
$58.5 million compared with $50.6 million in 2013 due to higher volumes offset
by lower margins on a cent per litre (cpl) basis. Sparlings Propane added $8.2
million in fuel adjusted gross profit in the first quarter of 2014.
Average adjusted fuel gross profit on a cents per litre basis for the first
quarter of 2014 was 11.32 cpl, a decrease of 3% compared with 11.70 cpl in the
first quarter of 2013 due in large part to an increase in low margin heavy fuel
oil sales and several new large contracts that added significant volumes at
lower margins across Canada.
Non-fuel gross profit increased 12% in the first quarter of 2014 to $18.1
million compared with $16.2 million in the first quarter of 2013 as a result of
$2.5 million in additional lubricant profits from SPF Energy Inc., slightly
better Canadian lubricant margins, offset by lower lubricant volumes in Canada.
Sparlings Propane added $0.7 million in non-fuel adjusted gross profit in the
first quarter of 2014.
Operating Costs
Parkland Commercial Fuels' operating costs for the first quarter of 2014
increased 20% to $40.8 million (7.9 cpl) compared with $34.1 million (7.9 cpl)
during the same period in 2013 due to the addition of Sparlings Propane, a $1.6
million increase from SPF Energy Inc. and increased fleet costs due to severe
weather, offset by cost savings in the base business.
Marketing General and Administration
Marketing, General and Administration expenses for the first quarter of 2014
increased 9% to $7.1 million (1.4 cpl) compared with $6.5 million (1.5 cpl)
during the same period in 2013 due to the addition of Sparlings Propane,
partially offset by cost savings in the base business that drove lower costs on
a cpl basis.
Adjusted EBITDA
For the three months ended March 31, 2014, Parkland Commercial Fuels' EBITDA
increased 12% to $29.8 million (5.8 cpl) compared with $26.6 million (6.1 cpl)
in 2013.
Retail Corporate Locations See 3% Increase in Same Store Fuel Sales
Q1 2014 vs. Q1 2013
Volumes
For the three months ended March 31, 2014, Parkland Retail Fuel volumes
increased 4% to 417 million litres compared with 400 million litres in 2013. The
17 million litre increase was the result of the addition of 21.5 million litres
from SPF Energy Inc.'s retail operations and 3% same store fuel sales growth in
company owned sites across Canada, offset by planned site closures.
Alberta, at 6.9%, led company owned same store fuel sales growth across the
country as the result of a planned increase in advertising. This increased
traffic also drove non-fuel margins through convenience store sales.
Adjusted Gross Profit
For the three months ended March 31, 2014, fuel and petroleum product adjusted
gross profit increased 6% to $19.1 million compared with $18.1 million in 2013
due to the addition of $1.9 million from SPF Energy Inc., slightly offset by
lower volumes and lower margins on a cent per litre (cpl) basis in Canada.
Average adjusted fuel gross profit on a cpl basis for the first quarter of 2014
was 4.6 cpl, an increase of 1% compared with 4.5 cpl in the first quarter of
2013.
Non-fuel gross profit increased 80% in the first quarter to $7.1 million
compared with $3.9 million in 2013 due to the addition of $2.6 million from SPF
Energy Inc. and a 9.4% increase in same store convenience store sales year over
year in the company's Canadian owned network which was driven by increased
traffic coupled with stronger in-store programs.
Operating Costs
Retail operating costs for the first quarter of 2014 increased 47% to $9.0
million (2.2 cpl) compared with $6.2 million (1.5 cpl) during the same period in
2013 due to the addition of $3.0 million from SPF Energy Inc. partially offset
by $0.1 million in savings within the base business as a result of greater
discipline on commissions in renewals with retailers.
Marketing General and Administration
Marketing, General and Administration expenses for the three months ended March
31, 2014 increased 5% to $3.6 million (0.9 cpl) compared with $3.4 million (0.9
cpl) during the same period in 2013 due to the addition of $0.4 million from SPF
Energy Inc. and a planned increase in advertising that successfully drove up
sales volumes at company operated sites, offset by $0.3 million in savings
within the base business through cost controls.
Adjusted EBITDA
For the three months ended March 31, 2014, Parkland Retail Fuels' EBITDA
increased 9% to $13.6 million (3.3 cpl) compared with $12.4 million (3.1 cpl) in
2013.
Elbow River Marketing Continues to Surpass Expectations (Again)
Q1 2014 vs. Q1 2013
Volumes
For the three months ended March 31, 2014 Parkland Wholesale, Supply and
Distribution fuel volumes (factoring out intersegment sales) increased 136% to
1.3 billion litres compared with 567 million litres for the same period in 2013
primarily due to the addition of 355 million litres from Elbow River Marketing,
177 million litres from the purchased assets of TMCI, and the addition of 255
million litres from SPF Energy Inc.
The supply group made full use of Parkland's strategic infrastructure to supply
Eastern Canada with propane during a period of critical supply constraints.
Parkland's rail capacity, storage infrastructure, import capability and multiple
supply relationships helped to ensure that the customers of Parkland's delivered
fuel brands had access to propane.
Adjusted Gross Profit
For the three months ended March 31, 2014, fuel adjusted gross profit increased
34% to $49.6 million compared with $36.9 million in 2013 due to higher volumes
from the acquisition of the assets of TMCI, SPF Energy Inc. and Elbow River
Marketing, offset by lower margins on a cent per litre basis.
Average fuel and petroleum product adjusted gross profit on a cents per litre
basis for the first quarter of 2014 was 3.7 cpl, a decrease of 43% compared with
6.5 cpl in the first quarter of 2013 due to the absence of refiner's margins
compared to the first quarter of 2013 where unusually strong refiner's margins
inflated the margin on a cpl basis for that period. This was partially offset in
the first quarter of 2014 by the strong performance from Elbow River Marketing
and the success of Parkland's supply initiatives.
Non-fuel gross profit increased 783% in the first quarter of 2014 to $7.5
million compared with $0.9 million in the first quarter of 2013 as a result of
additional non-fuel product gross profits from Elbow River Marketing and SPF
Energy Inc.
Operating Costs
Operating costs in the first quarter of 2014 increased to $15.6 million (1.2
cpl) compared with $2.2 million (0.4 cpl) during the same period in 2013 due to
the addition of Elbow River Marketing and SPF Energy Inc. and the assets of
TMCI.
Marketing General and Administration
Marketing, General and Administration expenses for the first quarter of 2014
increased to $14.0 million (1. 1 cpl) compared with $5.1 million (0.9 cpl)
during the same period in 2013 for the same reasons described above.
Adjusted EBITDA
For the three months ended March 31, 2014, Parkland Wholesale, Supply and
Distribution's EBITDA decreased 10% to $27.5 million (2.1 cpl) compared with
$30.4 million (5.4 cpl) in 2013. Acquisition related earnings reflected in
Wholesale, Supply and Distribution's EBITDA partially offset the elimination of
refiner's margins with the end of the contract with Suncor in December, 2013.
Elbow River Marketing experienced higher than normal sales of liquid petroleum
gases and contributed $15.6 million of Adjusted EBITDA in the first quarter of
2014, compared with $4.9 million reported in the first quarter of 2013,
commencing from the acquisition date of February 15, 2013.
Consolidated EBITDA Established Another Record
Q1 2014 vs. Q1 2013
Adjusted EBITDA for the first quarter of 2014 increased $0.2 million to $61.2
million compared with $61.0 million in the first quarter of 2013 as acquisition
related earnings offset the elimination of refiner's margins with the end of the
contract with Suncor in December, 2013.
Net Earnings Lower on Depreciation and Amortization
Q1 2014 vs. Q1 2013
Parkland's net earnings in the first quarter of 2014 decreased 27% to $22.3
million compared with net earnings of $30.5 million in the first quarter of
2013. The decrease in net earnings in the first quarter of 2014 compared with
the prior year was primarily due to a $5.7 million increase in amortization and
depreciation and the $1.0 million increase in unrealized loss from the change in
fair value of forward contracts, future contracts and US dollar forward exchange
contracts.
MD&A and Financial Statements
Management's Discussion and Analysis, the audited Consolidated Financial
Statements, and the Notes to the Consolidated Financial Statements for the three
months ended March 31, 2014 will be posted to www.parkland.ca and SEDAR
immediately after the results are released by newswire.
Conference Call Information
On May 5, 2014 (Today) Parkland Fuel Corporation will host a webcast and
conference call at 4:00 p.m. Mountain Standard Time ("MST") (6:00 p.m.) Eastern
Standard Time ("EST") to discuss the results for the three months ended March
31, 2014.
Please log into the webcast slide presentation 10 minutes before the start time at:
http://www.gowebcasting.com/5378.
To access the conference call by telephone dial toll free 1-866-223-7781.
Callers from the Toronto area should use (416) 340-2216. Please connect
approximately 10 minutes prior to 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.
2014 Annual & Special Meeting of Shareholders
Parkland is holding its annual and special meeting of common shareholders on
Tuesday, May 6, 2014 at 9:00 a.m. MST (11:00 a.m. EST) ("the Meeting").
Shareholders of record on March 20th are eligible to vote on the matters
outlined in Parkland's information circular at the Meeting. The information
circular, annual information form, and other documents pertaining to the Meeting
can be found at bit.ly/PKI-2014AGM or at www.parkland.ca.
The formal business of the Meeting will be conducted by Jim Pantelidis, Chairman
of Parkland's Board of Directors. Following the conclusion of formal business at
the Meeting, President and CEO Bob Espey and Senior Vice President and CFO Mike
Lambert will review Parkland's operations and strategy for investors.
Meeting Location:
The Metropolitan Conference Centre
The Strand/Trivoli Room
333 4 Avenue SW
Calgary, Alberta
Parkland will also simultaneously webcast the Meeting at the following URL:
http://www.gowebcasting.com/5379
About Parkland Fuel Corporation
Parkland Fuel Corporation is North America's fastest growing independent
marketer of fuel and petroleum products. We deliver gasoline, diesel, propane,
lubricants, heating oil and other high quality petroleum products to motorists,
businesses, consumers 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 supply, 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' operations.
To sign up for Parkland's investor information services, please go to
http://bit.ly/PKI- Info or visit www.parkland.ca.
Forward Looking Information
Certain information included herein is forward-looking. Forward-looking
statements include, without limitation, statements regarding Parkland's future
financial position, business and growth strategies, including the manner in
which such strategies will be implemented, budgets, projected costs, sources of
growth, capital expenditures, financial results, taxes, future acquisitions and
the efficiencies to be derived therefrom, effectiveness of internal controls,
sources of funding for growth capital expenditures, anticipated dividends and
the amount thereof, if any, to be declared by Parkland Fuel Corporation, and
plans and objectives of or involving Parkland. Many of these statements can be
identified by looking for words such as "believe", "expects", "expected",
"will", "intends", "projects", "projected", "anticipates", "estimates",
"continues", or similar words and include, but are not limited to, statements
regarding the accretive effects of acquisitions and the anticipated benefits of
acquisitions. Parkland believes the expectations reflected in such
forward-looking statements are reasonable but no assurance can be given that
these expectations will prove to be correct and such forward-looking statements
should not be unduly relied upon. Forward-looking statements are not guarantees
of future performance and involve a number of risks and uncertainties some of
which are described in Parkland's annual information form and other continuous
disclosure documents. Such forward-looking statements necessarily involve known
and unknown risks and uncertainties and other factors, which may cause
Parkland's actual performance and financial results in future periods to differ
materially from any projections of future performance or results expressed or
implied by such forward-looking statements. Such factors include, but are 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
including increases in taxes; changes in environmental and other regulations;
and other factors, many of which are beyond the control of Parkland. Any
forward-looking statements are made as of the date hereof and Parkland does not
undertake any obligation, except as required under applicable law, to publicly
update or revise such statements to reflect new information, subsequent or
otherwise.
FOR FURTHER INFORMATION PLEASE CONTACT:
For investor and media inquiries: Parkland Fuel Corporation
Tom McMillan
Director, Corporate Communications
1-800-662-7177 ext. 2533
www.parkland.ca
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