Parkland Fuel Corporation Announces Record Second Quarter Adjusted EBITDA of $249 million and Increases 2018 Adjusted EBITDA Guidance to $775 million ± 5%

CALGARY, Alberta, Aug. 02, 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 six months ended June 30, 2018. All financial figures are expressed in Canadian dollars.

“Our record results in the second quarter continue to highlight the contribution of the Chevron and Ultramar Acquisitions, the significance of the Annual Synergies(2) we are realizing, and the underlying strength of Parkland’s pre-acquisition operations.  Through these acquisitions, we have established a significant Canada-wide scale that enables strong opportunity for continued organic growth.” said Bob Espey, President and Chief Executive Officer. “I would also like to thank the Parkland Team for their continued focus on operating safely, effectively integrating the Acquisitions, and continuing to drive organic growth to deliver strong shareholder value.”

KEY COMPONENTS OF PARKLAND’S STRATEGY – Q2 2018 HIGHLIGHTS

GROW

  • Increased sales and operating revenue by 109% to .8 billion.
  • Delivered 4.2 billion litres of fuel and petroleum product representing 62% growth compared to the same period in 2017.
  • Achieved record Adjusted EBITDA of 9 million, more than quadruple the million achieved for the same period in 2017.
    • Retail grew by 116% due to the Acquisitions(1) and strong Company C-Store same-store-sales growth (“SSSG”) of 8.1%, marking the 10th consecutive quarter of positive Company C-Store SSSG at Parkland;
    • Commercial grew by 260% due to the Acquisitions, higher propane, gasoline and diesel volumes and higher fuel margins; and
    • Supply grew 844% due to the Acquisitions, strong refining margins and continued efforts in executing Parkland’s supply strategy.
  • Realized net earnings of million compared to a net loss of million for the same period in 2017.
  • Successfully launched new private label product categories under Parkland’s proprietary 59th Street Food Co. brand as we look to grow our convenience store offering.
  • Retrofitted 41 existing On the Run / Marché Express locations and constructed five Flagship locations to date, as part of the successful rollout of the national refreshed On the Run / Marché Express store concept.
  • Entered into pilot programs with Tesla and Hydro Quebec to enable electric vehicle charging at select Parkland locations.
  • Grew distributable cash flow(3) by 413% to 8 million, resulting in a dividend payout ratio(3) of 35%. Adjusted distributable cash flow(3) increased by 256% to 9 million, resulting in an adjusted dividend payout ratio(3) of 29%, well within our target ratio of less than 50%.
  • Attained a leverage ratio of 2.4 times at the end of the second quarter, measured as Total Funded Debt to Credit Facility EBITDA(3).

SUPPLY

  • Successfully and safely completed a major maintenance event (the “2018 Turnaround”) at the Burnaby Refinery.
  • Grew Supply’s Adjusted EBITDA to 0 million and 1 million for the three and six months ended June 30, 2018 compared to million and million in the respective periods in 2017. This exceptional growth was attributable to contributions from the Chevron Acquisition(1), robust refining margins, profitable supply sourcing initiatives, improved supply economics and optimization in the Base Business.
  • Increased wholesale sales volumes by 41%, mainly attributable to the aviation fuel business acquired as part of the Chevron Acquisition, as well as increases in our Base Business refined product sales.

ACQUIRE

  • The Acquisitions have performed very well since their respective closing dates. The quality of the assets and the teams acquired is reflected in the strength of the results for the second quarter of 2018 and by the successful 2018 Turnaround.
  • Acquisition synergy targets continue to pace significantly above internal plan, reinforcing Parkland’s ability and commitment to acquire prudently and integrate successfully.
    • As at June 30, 2018, we have completed initiatives that are expected to result in Annual Synergies on the Acquisitions of approximately million for fiscal year 2018, an increase of million since the end of the first quarter.
    • We currently expect run-rate Annual Synergies on the Acquisitions will reach approximately 0 million by the end of 2020. This represents an increase of 2 million over our original expectation of million at the time of the Acquisitions.
  • In April 2018, we completed the conversion of Ultramar’s enterprise resource planning (“ERP”) system to Parkland’s ERP system allowing us to exit the Ultramar Acquisition(1) transitional services agreement (“TSA”). As at August 2, 2018, we have completed a similar conversion of the ERP system used in the Retail and Commercial segments of the Chevron Acquisition to our ERP system with the ERP for the Supply segment being the final element to be converted.  We remain on track to exit the Chevron Acquisition TSA in Q4 2018.

BUILDING ONE PARKLAND TEAM

A core element of our strategy is enabling our people to succeed.  This year, our focus has been to bring our people together into a strong integrated network of teams that we’ve termed One Parkland Team.  The team has worked extremely hard over the past year to enable the exit of our transition service arrangements, to find new ways to work together, and to identify and execute on numerous synergies only available to us as a combined entity.

OUTLOOK

For the remainder of 2018, Parkland will remain focused on integrating the Acquisitions and driving synergies to create shareholder value. As at June 30, 2018, Parkland has completed initiatives that are expected to result in Annual Synergies on the Acquisitions of approximately million for fiscal year 2018. Parkland expects that Annual Synergies on the Acquisitions will reach approximately 0 million by the end of 2020.

Furthermore, in line with our disciplined strategy of acquiring prudently, Parkland will continue to review its acquisition pipeline for potential targets and initiate acquisitions as strategic opportunities arise.

Revised 2018 Guidance

As a result of the exceptional performance experienced in 2018, we have raised our 2018 Adjusted EBITDA guidance to 5 million ± 5% (the “Revised 2018 Guidance Range”). This represents an increase of 5 million from the previous guidance of 0 million ± 5%. The Revised 2018 Guidance Range is based on certain assumptions, including, but not limited to, estimates of future performance of the businesses acquired in the Acquisitions, with such estimates being based on recent performance, integration synergies being realized ahead of expectations, sustainment of supply initiatives, and the continuation of robust refining margins.

The Revised 2018 Guidance Range includes initiatives that build off the 2017 Adjusted EBITDA of 8 million and the assumption that the performance of the businesses purchased through the Acquisitions, 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 the 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. Please refer to Parkland’s press release issued on May 2, 2018 on SEDAR at www.sedar.com for more information.

(1)        On June 28, 2017, Parkland acquired the majority of the Canadian business and assets of CST Brands, Inc. (the “Ultramar Acquisition”) and on October 1, 2017, Parkland acquired all outstanding shares of Chevron Canada R & M ULC (the “Chevron Acquisition”), (collectively, “the Acquisitions”).

(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 six months ending June 30, 2018 (“Q2 2018 MD&A”).

(3)        Non-GAAP financial measure. See Section 12 of the Q2 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 June 30, Six months ended June 30,
2018   2017   2016   2018   2017   2016  
Financial Summary                        
Sales and operating revenue 3,783   1,806   1,570   7,125   3,591   2,888  
Adjusted gross profit(1) 513   168   167   943   359   340  
Adjusted EBITDA(1) 249   54   56   402   124   116  
Net earnings 60   (1 ) 5   80   21   30  
Per share – basic 0.45   (0.01 ) 0.05   0.61   0.20   0.31  
Per share – diluted 0.45   (0.01 ) 0.05   0.60   0.20   0.31  
Distributable cash flow(2) 118   23   28   147   61   63  
Per share(2)(3) 0.89   0.20   0.30   1.12   0.59   0.67  
Adjusted distributable cash flow(2) 139   39   36   249   85   76  
Per share(2)(3) 1.05   0.35   0.39   1.89   0.82   0.80  
Dividends 41   33   27   79   61   54  
Dividends declared per share outstanding 0.2934   0.2886   0.2835   0.5836   0.5738   0.5580  
Dividend payout ratio(2) 35 % 146 % 96 % 54 % 99 % 85 %
Adjusted dividend payout ratio(2) 29 % 84 % 74 % 32 % 71 % 71 %
Total assets 5,592   4,281   1,834   5,592   4,281   1,834  
Total long-term liabilities 2,533   2,075   583   2,533   2,075   583  
Shares outstanding (millions) 132   130   95   132   130   95  
Weighted average number of common shares (millions) 132   111   95   132   104   95  
             
Operating Summary            
Fuel and petroleum product volume (million litres)(4) 4,202   2,588   2,536   8,413   5,344   4,973  
Fuel and petroleum product adjusted gross profit(1) (cpl)(5):            
Retail 8.00   5.78   5.64   7.94   5.53   5.41  
Commercial 7.99   9.36   10.47   8.85   11.59   11.98  
Parkland USA 3.66   3.31   3.17   3.66   3.43   3.49  
Operating costs(6) (cpl) 4.62   3.00   2.93   4.77   3.06   3.07  
Marketing, general and administrative (cpl) 1.67   1.41   1.42   1.66   1.34   1.42  
                         

(1) Measure of segment profit. See Section 12 of the Q2 2018 MD&A.
(2) Non-GAAP financial measure. See Section 12 of the Q2 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 Q2 2018 MD&A.
(6) Operating costs (cpl) were restated to conform to current year’s presentation in the consolidated statements of income (loss). Specifically, customer
   finance income, which was formerly presented separately, is now included in operating costs.


MD&A AND FINANCIAL STATEMENTS

The Q2 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 six months ended June 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, August 3, 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: 2259247]. The webcast slide presentation can be accessed at https://edge.media-server.com/m6/p/z8pymf2c. 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; matters related to TSAs; forecast crack spreads or refining margins; supply improvements, initiatives and/or 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; Parkland’s ability to achieve expected synergies; Parkland’s ability  to exit TSA’s on expected timelines; 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 Q2 2018 MD&A, each as filed on SEDAR and available on the Parkland website at www.parkland.ca.

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, 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 Q2 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 Q2 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 Q2 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 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 Parkland 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 its 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 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.

FOR FURTHER INFORMATION

Investor Inquiries

Ben Brooks
Vice President, Treasury and Risk Management
403-567-2534
Ben.Brooks@parkland.ca

Media Inquiries

Annie Cuerrier
Director, Corporate Communications
403-567-2579
Annie.Cuerier@parkland.ca

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