Press release from CNW Group
Parkland Reports First Quarter 2011 Results
Thursday, May 26, 2011
Parkland Reports First Quarter 2011 Results20:58 EDT Thursday, May 26, 2011The highlights for the first quarter of 2011 are as follows:Q1 fuel sales volumes increased 25% to 1,024 million litres compared with 816 million litres in Q1 2010;EBITDA increased 143% to $46.6 million compared with $19.1 million in Q1 2010;Net earnings increased to $16.3 million compared with $3.7 million in Q1 2010;Parkland Fuel Corporation appointed Bob Espey as President and CEO, effective May 1, 2011;Parkland agreed to acquire the business of Cango Inc. ("Cango"), subject to closing conditions, which supplies more than 400 million litres of petroleum products annually to a network of 155 independent dealers and company operated locations in Ontario;Parkland agreed to acquire, subject to closing conditions, seven Save on Foods Gas Bars representing 25 million litres annually; and$86.3 million bought deal equity financing is expected to close on or about June 2, 2011, to fund acquisitions and to optimize the balance sheet in preparation for future growth.RED DEER, AB, May 26, 2011 /CNW/ - Parkland Fuel Corporation ("Parkland" or the "Corporation") (TSX: PKI), Canada's largest independent fuel distributor and marketer, today announced the financial and operating results for the three months ended March 31, 2011. All dollar amounts are stated in Canadian dollars."A number of factors came together to provide us with an exceptionally strong quarter," said Bob Espey, President and Chief Executive Officer of Parkland. "Beyond our typical base business, Parkland benefited from very strong refiners' margins as well as a cold winter across our heating fuel markets. These profits, along with the $86 million bought deal equity financing that we expect to close on or about June 2, 2011, will be used for further growth opportunities and to strengthen the balance sheet."Distributable Cash FlowDistributable cash flow exceeded dividends, net of dividend reinvestment plan in the first quarter by $24.0 million compared to distributions exceeding distributable cash flow by $0.9 million in the first quarter of 2010. The dividend/distribution payout ratio net of proceeds from the dividend reinvestment plan for the first quarter of 2011 was 25% compared with 107% in the first quarter of 2010. The reduction in the ratio from the first quarter of 2010 to the first quarter of 2011 was the result of $6.1 million in lower dividends/distributions net of the dividend reinvestment plan, as well as increased distributable cash flow arising from increased net earnings excluding depreciation and amortization costs. The increase in net earnings excluding depreciation and amortization costs was principally the result of strong commercial volumes associated with colder weather in 2011 versus 2010, the inclusion of 90.7 million litres from Bluewave's January operations which were not included in last year's first quarter results and the acquisition of Island Petroleum effective December 30, 2010, as well as improved refiners' margins. Movements in non-cash working capital are excluded from distributable cash flow.CONSOLIDATED HIGHLIGHTS (in millions of Canadian dollars except volume and per Share/Unit amounts)For the three months ended March 31, 20112010% Change Fuel volume (millions of litres)1,024.0816.025Sales and operating revenues955.1675.241Gross profit113.670.461Operating costs47.631.452Marketing, general and administrative20.020.3(1)Depreciation and amortization expense17.413.925 28.64.8496 Customer finance income(0.6)(0.5)20Finance costs8.91.9368(Gain) loss on disposal of property, plant and equipment(0.9)0.4(325)Earnings before income taxes21.23.1584Income tax expense (recovery)4.9(0.7)(800)Net earnings16.33.7341EBITDA(1)46.619.1144 Distributable cash flow(1)(2)31.913.0145Dividends/distributions13.714.6(6)Dividends/distributions, net of dividend reinvestment plan7.913.9(43)Dividend/distribution to distributable cash flow payout ratio43%112% Dividend/distribution (net of dividend reinvestment plan) to25%107% distributable cash flow payout ratio Cents per Litre Sales and operating revenues93.2782.7513Gross margin11.098.6329Operating costs4.653.8521Marketing, general and administrative1.952.49(21)Depreciation and amortization expense1.701.70(0) Earnings before income taxes2.070.38445Income tax (recovery) expense0.48(0.09) Net earnings1.590.45251EBITDA(1)4.552.3494(1) Please refer to the Non-GAAP Measures section in the MD&A for a definition of EBITDA.(2) Please see Distributable Cash Flow reconciliation table in the MD&A.EBITDA InformationEBITDA, as referenced herein, refers to earnings before finance costs (accretion on refinery remediation, accretion on asset retirement obligation, interest on long-term debt, interest and accretion on convertible debentures), income tax expense (recovery), depreciation and amortization, and (gain) loss on disposal of property, plant and equipment.EBITDA is a non-GAAP measure and Parkland's definition of EBITDA may not be consistent with other providers of financial information and therefore may not be comparable. Parkland believes, however, that EBITDA is a relevant measure to users of its financial information as it provides an indication of pre-tax earnings available to distribute to Parkland's debt and equity holders. The reconciliation of EBITDA to net earnings is set out in Management's Discussion and Analysis for the first quarter of 2011.First Quarter 2011 ReviewFuel Marketing SegmentParkland's fuel marketing segment, which accounted for approximately 94% (March 31, 2010 - 94%) of sales and operating revenue and approximately 76% (March 31, 2010 - 70%) of gross profit for the three months ended March 31, 2011, is the Corporation's most important segment and the focus of its operations. This segment consists of fuel sales and deliveries through the Corporation's commercial, retail, and wholesale operations.Fuel marketing sales have increased 41% to $893.9 million in the quarter ended March 31, 2011 from $633.5 million in the first quarter of 2010. The increase in fuel marketing sales was primarily driven by the inclusion of Bluewave Energy's January 2011 activity, first quarter volumes from Island Petroleum, increased crude pricing, cooler weather and stronger economic activity. Bluewave Energy and Island Petroleum contributed $262.1 million in fuel sales in the first quarter of 2011 compared to $94.3 million in the first quarter of 2010. Parkland's operating revenues and cost of sales fluctuate with the price paid for refined product, which in turn fluctuates with the cost of crude oil. Profit margins on a cents per litre (cpl) basis are a more relevant indicator of the Corporation's ability to generate value.For the three month period ended March 31, 2011, fuel profit margins in the Retail Fuels Division of $17.9 million were up $0.4 million compared to $17.5 million in the first quarter of 2010. On a cents per litre basis, the Retail Fuels Division fuel gross profit was 5.3 cpl compared to 5.4 cpl in the first quarter of 2010. Fuel profit margins in the Commercial Fuels Division increased 54% to $51.2 million in the first quarter of 2011 compared with $33.3 million in the first quarter of last year. On a cents per litre basis the Commercial Fuels Division fuel profit margin increased to 9.7 cpl in the first quarter of 2011 compared with 9.4 cpl for the same period in 2010 due to an increase in the proportion of higher margin delivered fuel and heating oil products.Parkland Supply & Wholesale and Refiners' MarginsParkland Supply & Wholesale, a part of the Fuel Marketing Segment, includes profits from Parkland's participation in refiners' profit margins and modest profits from wholesale fuel sales. Parkland participates in refiners' margins for a portion of its supply volumes. Refiners' margins are driven by supply and demand, over which the Corporation has no control. Parkland continues to execute its strategy to build fuel marketing profits to offset fluctuations in refinery margins that are expected to continue until the termination of the Suncor contract on December 31, 2013.Gross profit in the Parkland Supply & Wholesale Division increased $19.2 million to $16.3 million for the three months ended March 31, 2011, compared with ($2.9 million) for the same period in 2010 due to strong refiners' margins. Refiners' margins in the first quarter of 2011 compared to the same period in 2010 increased $17.3 million year over year.Non-Fuel Commercial SegmentParkland's Non-Fuel Commercial Segment consists of agricultural inputs, lubricants, and other products that do not fall into the fuel category. This segment accounted for approximately 5% (March 31, 2010 - 4%) of revenues and 16% (March 31, 2010 - 17%) of gross profits for the three months ended March 31, 2011.Non-Fuel Commercial revenue increased to $49.4 million in the first quarter of 2011 from $27.5 million in the first quarter of 2010 due to the inclusion of Bluewave Energy's January 2011 activity and from strong lubricant sales.Other Non-Fuel Segment Parkland's Other Non-Fuel Segment consists of convenience store revenue, lottery revenue, externally charged freight revenue, retail variable rents, and vendor rebates. While this segment accounted for approximately 1% (March 31, 2010 - 2%) of sales and operating revenue, it was responsible for approximately 8% (March 31, 2010 - 13%) of Parkland's gross profits for the three months ended March 31, 2011. This segment reflects the changes as a result of Parkland's ongoing program to switch from company operated to commission operated retail sites. Consolidated ResultsSales and operating revenue for the three month period ended March 31, 2011 was $955.1 million, up 41% from $675.2 million during the first quarter of last year. Fuel marketing revenue increased 41% with commercial fuel sales reporting an increase of 81% compared with the same three month period in 2010. The increase in fuel marketing and commercial revenues was primarily due to the inclusion of Bluewave Energy's January 2011 activity, first quarter volumes from Island Petroleum, increased crude pricing, cooler weather and stronger economic activity. In the first quarter of 2011 fuel marketing revenue per litre increased 12%.Gross profit for the three months ended March 31, 2011 increased 61% or $43.2 million to $113.6 million compared with $70.4 million for the same period in 2010. This increase was due to a 25% increase in fuel volumes and a 41% increase, or 2.5 cents, in fuel gross profit per litre compared with the same period in 2010 due to strong Commercial Fuel Division results and improved refiners' margins.Operating and direct costs increased by 51% to $47.6 million (4.7 cpl) for the three months ended March 31, 2011, compared with $31.4 million (3.9 cpl) for the same quarter in 2010. Of the $16.2 million increase in Parkland's operating and direct costs for the three month period, the Commercial Fuels division accounts for $13.3 million of the increase. This is the result of the growth of the division, relating to the acquisition of Island Petroleum and the inclusion of Bluewave Energy's January business in the first quarter of 2011. As a result of the acquisitions, and the return of seasonal winter weather, the Commercial Fuels Division increased fuel volume quarter over quarter by 49% from 355 million litres to 529 million litres, resulting in increased operating and direct expenses. The increase in operating costs on a cpl basis also reflects the change in business mix following the Bluewave and Island Petroleum acquisitions that increased Parkland's proportion of delivered fuel products which involves higher operating costs (due to delivery) offset by higher fuel gross margins.Marketing, general and administrative expenses were $0.3 million lower than last year at $20.0 million (2.0 cpl) for the three months ended March 31, 2011, compared with $20.3 million (2.5 cpl) for the first quarter of 2010. The quarter ended March 31, 2010 included an IFRS related adjustment of $2.9 million in expenses related to the Bluewave Energy acquisition. Marketing, general and administrative expenses from Bluewave Energy in January, 2011 were $1.5 million.EBITDA for the first quarter of 2011 was $46.6 million, an increase of 143% from $19.1 million in 2010. The increase in EBITDA from the same period in 2010 is explained primarily by increases in commercial fuel volumes, stronger refiners' margins and EBITDA increases from the Bluewave and Island Petroleum acquisitions.Finance costs were $8.9 million in the first quarter compared with $1.9 million for the same period in 2010. This increase of $7.0 million is primarily attributable to a Q1 2010 IFRS related adjustment arising from the series 1 convertible debentures and increased interest and accretion on the series 1 and series 2 convertible debentures. As at March 31, 2011, the Corporation had convertible debentures outstanding of $134.1 million compared to $88.4 as at March 31, 2010.Interest on long-term debt for the first quarter of 2011 was $4.9 million versus $5.0 million in the first quarter of 2010. Long-term debt including the current portion has increased to $340.7 million as at March 31, 2011, up $47.3 from $293.4 million at March 31, 2010. Interest costs in the first quarter of 2010 now include $1.6 million of distributions to Class B and C LP unitholders that are now treated as interest cost under IFRS.An income tax expense of $4.9 million was incurred in the first quarter compared with a recovery of $0.7 million for the same period in 2010. This is primarily the impact of the Conversion from an income trust to a corporation, as taxable income is no longer reduced by distributions to unitholders.Net earnings in the first quarter of 2011 were $16.3 million, up significantly from $3.7 million for the same period in 2010. The increase in net earnings was directly attributable to the improvement in refiners' margins from the same quarter in 2010, as well as the growth of the Commercial Fuels Division, which experienced increased volume and gross profit quarter over quarter.MD&A and Financial StatementsThe MD&A as well as the unaudited Consolidated Financial Statements and Notes to Consolidated Financial Statements for the three months and year ended March 31, 2011, are available online at www.parkland.ca.Conference Call InformationParkland will host its first quarter 2011 results conference call at 9:00 a.m. Mountain Time (11:00 a.m. Eastern Time) on Friday, May 27, 2011.President and CEO Bob Espey and CFO Ken Grondin will discuss Parkland's financial results for the quarter and then take questions from securities analysts, brokers and investors.To access the conference call by telephone, dial 647-427-7450 or 888-231-8191 (Conference ID: 6970 9596). Please connect approximately 10 minutes prior to the beginning of the call. The conference call will be archived for replay until 9:59 p.m. Mountain Time (11:59 p.m. Eastern Time), June 10, 2011. To access the archived conference call, dial 1-800-642-1687 and enter the reservation number: 6970 9596 followed by the number sign.A live audio webcast of the conference call will be available at:http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3546180Please connect at least 10 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. The webcast will be archived at the above website for 90 days.Forward Looking InformationCertain information included herein is forward-looking. Forward-looking statements include, without limitation, statements regarding the future financial position, business strategy, budgets, projected costs, capital expenditures, financial results, taxes, effectiveness of internal controls, sources of funding of growth capital expenditures 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 the acquisition and the anticipated benefits of the acquisition. 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 the Corporation's annual report, 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 the Corporation'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 the Corporation 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 CorporationParkland Fuel Corporation ("Parkland") is Canada's largest independent marketer and distributer of fuels, managing a nationwide network of sales channels for retail, commercial, wholesale and home heating fuel customers. Parkland's mission is to be the most trusted source of convenience for fuel and related products focused on non-urban markets. Our family of brands includes: Fas Gas Plus, Race Trac Gas, Bluewave Energy, Columbia Fuels, Great Northern Oil, Neufeld Petroleum & Propane, United Petroleum Products and Island Petroleum. We are Canada's local fuel company, delivering competitive fuel products and serving Canadian communities through local operators who care. For more information please visit www.parkland.ca.Parkland shares and convertible debentures trade on the Toronto Stock Exchange (TSX) under the symbols PKI, PKI.DB and PKI.DB.A. For further information: For investor and media inquiries, or to be added to the email news alert service, please contact Tom McMillan, Investor Relations Manager at 403-356-6722, 1-800-662-7177 ext 6722 or firstname.lastname@example.org.