RED DEER, ALBERTA — (Marketwired) — 05/07/13 — Parkland Fuel Corporation (“Parkland” or the “Corporation”) (TSX: PKI), Canada–s largest independent supplier and reseller of and petroleum products, today announced the financial and operating results for the three months ended March 31, 2013.
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“Refiners margins were strong year over year and Elbow River Marketing–s earnings surpassed our expectations in the first quarter with a stronger than expected Adjusted EBITDA of $5.2 million,” said Bob Espey, President and Chief Executive Officer of Parkland. “Lower costs throughout our business also helped to offset continued weakness in Parkland Commercial Fuels– business environment during the first quarter, which was especially pronounced in the West as drilling completions for natural gas were down 50% compared to a year ago. We have responded appropriately to these conditions, and continue to position ourselves to consolidate our share of the commercial marketplace through concerted sales efforts and business diversification to offset diminished consumption in the oil and gas sector.”
Parkland Penny Plan Update
The Parkland Penny Plan, announced on May 15, 2012, is targeting:
Penny Plan Scorecard Summary:
This five year strategic plan aims to double 2011 normalized EBITDA of $125 million by the end of 2016. (Normalized EBITDA ignores one-time costs and irregular profits). $70 million is expected to be derived through a one cent increase in EBITDA margin, $55 million is expected to be derived through acquisitions.
A more detailed explanation of the Parkland Penny Plan and the full scorecard can be found in this quarter–s Management–s Discussion and Analysis.
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA)
Due to the acquisition of Elbow River Marketing and ongoing mergers and acquisition activities Parkland will utilize “Adjusted EBITDA”. Adjusted EBITDA represents earnings before finance costs (accretion on refinery remediation, accretion on asset retirement obligation, interest on long-term debt, interest and accretion on convertible debentures and loss on interest rate swaps), income tax expense (recovery), depreciation and amortization, unrealized loss (gain) on commodities forward contracts and US dollar forward exchange contracts, acquisition related costs and gain on disposal of property, plant and equipment. Adjusted EBITDA differs from the previously disclosed EBITDA due to the exclusion of acquisition related costs in the calculation. See the Adjusted EBITDA discussion of the MD&A for a reconciliation of Adjusted EBITDA.
Pay Out Ratio Driven Down to 39% As Result of an $18 million Increase in Adjusted EBITDA
Q1 2013 vs. Q1 2012
The dividend payout ratio for the first quarter of 2013 was 39% compared with 64% in the first quarter of 2012.
Distributable cash flow increased $18.9 million or 73% to $44.9 million in the first quarter of 2013 compared with $26.0 million in the first quarter of 2012.
The increase in distributable cash flow and decrease in the dividend payout ratio are primarily due to the $18.2 million increase in Adjusted EBITDA and a $2.6 million decrease in maintenance capital partially offset by a $3.0 million decrease in proceeds on disposal of property, plant and equipment and a $1.5 million increase in acquisition related costs.
Parkland Responds to Headwinds in Commercial Fuels
Q1 2013 vs. Q1 2012
For the three months ended March 31, 2013, Parkland Commercial Fuels– volumes decreased 6% to 433 million litres compared with 462 million litres in 2012 principally as a result of lower year over year industrial activity in key sectors including oil and gas and the discontinuation of low margin marketer agreements in Northern Alberta.
Strong sales activities with a focus on diversifying Parkland–s customer mix helped to offset the impact of the foregoing challenges in the quarter.
For the three months ended March 31, 2013, the Canadian Association of Oilwell Drilling Contractors (CAODC) reported an average monthly drilling rig count of 496 per month, an 8 percent decrease compared with 540 per month for the same period in 2012. This drop continues to be attributed to the impact of decreased commodity pricing in the Western Canadian Sedimentary Basin.
Average net fuel adjusted gross profit on a cents per litre basis for the first quarter of 2013 was 11.69 cpl, an increase of 4% or 0.46 cpl compared with 11.23 cpl in the first quarter of 2012 due to the discontinuation of low margin marketer agreements in Northern Alberta.
Divisional Outlook
Given lower activity within the oil and gas sector, Parkland has made appropriate adjustments to its variable cost structure to reflect current economic conditions. Initial evidence indicates that Parkland Commercial Fuels– on going sales efforts and strategy to diversify into other markets has helped to offset diminished consumption and has consolidated market share in the commercial fuels marketplace.
Oil and gas activity will be contingent on the approval of pipelines to increase access to international markets.
Management expects that the operational changes made in the Commercial Division in 2012 to simplify and standardize the business will drive savings, better customer service, and better performance going forward. These changes include the consolidation of branches, changes in branded distribution agreements, the roll out of Parkland–s multi-product commercial offering at additional branches and the simplification and standardization of procedures and process.
Retail Gross Profit Decreases by 2% on Lower Volumes Due to Cango Site Rationalizations
Q1 2013 vs. Q1 2012
For the three months ended March 31, 2013, Parkland Retail Fuels– volumes decreased 4% to 400 million litres compared with 415 million litres for the same period in 2012. The decrease was primarily the result of a 9 million litre reduction in volume contribution from the Cango network due to site rationalization, temporary closures for the purpose of upgrades, competitive pressures in certain markets partially offset by network growth in Parkland–s company owned and dealer network.
The first quarter of 2013 financial results for Parkland Retail Fuels continued to benefit from lower costs that helped offset the contraction in volumes described above. Disciplined management of repair, maintenance, travel, advertising and other costs, reductions in staffing, and a refined approach to commission and dealer agreements continued to drive significant savings in operating and marketing, general and administrative costs in the quarter.
Average adjusted gross profit on a cents per litre basis increased by 2% to 4.53 cpl in the first quarter of 2013 compared with 4.46 cpl in the first quarter of 2012 due to strong company store margins partially offset by an increase in the proportion of dealer operated sites versus company owned.
Divisional Outlook
Management expects the 2013 retail fuel market to be comparable to 2012, subject to unforeseen movements in retail margins and will continue to focus on managing prudently to maintain operating efficiencies, growing same store sales, site acquisitions and signing additional dealer business.
Refiners– Margins and Elbow River Marketing Drive Strong First Quarter
Parkland Wholesale, Supply and Distribution is responsible for managing Parkland–s fuel supply contracts, purchasing fuel from refiners, distribution through third party long-haul carriers, and serving wholesale and reseller customers.
Q1 2013 vs. Q1 2012
For the three months ended March 31, 2013 Parkland Wholesale, Supply and Distribution fuel volumes (factoring out intersegment sales) increased 173% to 567 million litres compared with 208 million litres for the same period in 2012 primarily due to 327 million litres added from the acquisition of Elbow River Marketing and strong sales in both Western and Eastern Canada.
Fuel adjusted gross profits for the three months ended March 31, 2013 increased 81% to $37.8 million compared with $20.9 million for the same period in 2012 primarily due to $10.0 million in adjusted gross profits from the acquisition of Elbow River Marketing and increased refiners– margins.
Parkland recorded a $0.5 million expense related to put option contracts in place to hedge and secure a portion of the future economic benefit that Parkland receives on its refiners– margins based contract.
Divisional Outlook
Planned shut downs are coming this year to a number of refinery operators in Canada. While it is expected that these refiners have the ability to cover product demand during their shut down, Parkland has contingencies in place to provide supply options during these periods. In addition, Parkland is working closely with refinery operators to ensure that they have access to additional terminal and distribution options such as the Bowden terminal. Fuel supplies are therefore expected to be sufficient in all Canadian markets for 2013.
Weak Canadian crude prices relative to Brent crude prices drove record high refiners– margins in 2012. Refiners– margins for gasoline contracted significantly in January and remained at the low end of the five year range until March, when they returned to the high end of the five year range. In the first quarter of 2013, refiners– margins for gasoline were consistently lower than the levels seen during the same period in 2012. Diesel margins remained at the high end of the five year range during the first quarter of 2013 and exceeded diesel margins compared to January and February of 2012 before decreasing year over year in the month of March.
As at April 16, 2013, Refiners– margins for gasoline and diesel were above the median of the five year range for the month of April, but trending below 2012 levels.
Simplification and Standardization Continues to Drive Down Costs
Q1 2013 vs. Q1 2012
Operating and direct costs decreased by 5% to $42.2 million (3.0 cpl) for the three months ended March 31, 2013, compared with $44.4 million (4.1 cpl) in the three months ended March 31, 2012, primarily due to business simplification and standardization in Parkland–s Retail Fuels Division, reduced volumes and cost initiatives within the Commercial Fuels Division, partially offset by the acquisition of Elbow River Marketing.
Marketing, General and Administrative Costs Higher on Elbow River Marketing and Ongoing Mergers and Acquisition Activities
Q1 2013 vs. Q1 2012
Marketing, general and administrative expenses (“MGA”) increased 26% to $24.9 million (1.8 cpl) in the first quarter of 2013 compared with $19.8 million (1.8 cpl) in the first quarter of 2012. Marketing, general and administrative costs increased primarily due to the acquisition of Elbow River Marketing effective February 15, 2013, which increased marketing, general and administrative expenses by $3.6 million. There were $1.5 million in acquisition related costs in the first quarter of 2013 and none in the prior year.
EBITDA Grows by 42 Percent
Q1 2013 vs. Q1 2012
Adjusted EBITDA for the first quarter of 2013 increased by 42% to $61.3 million compared with $43.1 million in the first quarter of 2012. The increase in Adjusted EBITDA is the result of the acquisition of Elbow River Marketing with Adjusted EBITDA of $5.2 million, higher refiner–s margins and operating cost reductions in the first quarter of 2013, partially offset by lower adjusted gross profit in Commercial and Retail.
Net Earnings Increase 74%
Q1 2013 vs. Q1 2012
Parkland–s net earnings in the first quarter of 2013 were $30.5 million, an increase of $13.0 million compared with net earnings of $17.5 million in the first quarter of 2012. The increase in net earnings in the first quarter of 2013 compared with the prior year was due to a $18.2 million increase in Adjusted EBITDA, a $0.3 million decrease in depreciation and amortization expense and a $0.2 million decrease in finance costs, partially offset by a $2.9 million increase in income taxes, $1.5M increase in acquisition related costs and an increase of $1.5 million in unrealized loss from the change in fair value of commodity forward 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, 2013 are available online at .
Conference Call Information
On Wednesday, May 8, 2013 Parkland Fuel Corporation will host a webcast and conference call at 7:30 a.m. Mountain Time (9:30 a.m. Eastern Time) to discuss the results for the three months ended March 31, 2012.
President and CEO Bob Espey and Senior Vice President and CFO Mike Lambert will discuss Parkland–s financial results for the quarter and then take questions from securities analysts, brokers and investors.
Please log into the webcast slide presentation 10 minutes before the start time at:
To access the conference call by telephone from within Canada dial toll free 1-888-241-0394. International callers or callers from the Toronto area should use (647) 427-3413. Please connect approximately 10 minutes prior to the beginning of the call and quote the conference ID: 5573 4785.
The webcast will be available for replay within 24 hours of the end of the conference call.
Annual and Special Meeting
The holders of common shares of Parkland are invited to the Annual and Special Meeting of Shareholders taking place Wednesday, May 8, 2013 at 9:00 a.m. MT (11:00 a.m. ET) at the Calgary Marriott Downtown Hotel.
Parkland will also simultaneously video webcast the meeting and presentation at the following URL:
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 will review Parkland–s operations and strategy for investors.
To access the conference call by telephone from within Canada dial toll free 1-877-419-3674. Please connect approximately 10 minutes prior to the beginning of the call and quote the conference ID: 5724 3823.
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.
About Parkland Fuel Corporation
Parkland Fuel Corporation is Canada–s largest independent supplier and reseller of petroleum products, managing a nationwide network of sales channels. We are Canada–s local , delivering gasoline, diesel fuel, lubricants, heating oil and other products to businesses, consumers and wholesale customers through community based operators who care.
Contacts:
Parkland Fuel Corporation
Tom McMillan
Director of Corporate Communications
1-800-662-7177 ext 2533