Press release from CNW Group
Parkland Fuel Corporation Reports Solid Fourth Quarter and Full Year 2011 Results
Wednesday, March 07, 2012
Parkland Fuel Corporation Reports Solid Fourth Quarter and Full Year 2011 Results08:00 EST Wednesday, March 07, 2012- Organic Growth of 6.4%, Coupled with Acquisitions, Drive 19% Growth in Annual Fuel Volumes - RED DEER, AB, March 7, 2012 /CNW/ - Financial Highlights: For the threemonths endedDecember 31, Year endedDecember 31, 20112010 % Change 20112010 % Change (in millions of litres) Total fuel volume 1,096981 12 4,1613,500 19Retail fuel volume 464376 23 1,6871,470 15Commercial fuel volume 476449 6 1,7851,458 22 (in millions of Canadian dollars) Net earnings 7.411.7 (37) 43.926.8 64 EBITDA (1) 36.034.9 3 150.8100.6 50 Distributable cash flow (1)(2) 26.526.4 - 126.567.0 89Dividend/distribution to distributable cash flow payout ratio 61%57% 48%89% Operational Highlights:GrowIsland Petroleum, Cango, Save on Foods and Bluewave contribute approximately 0.4 billion litres in 2011;Fuel marketing divisions deliver 6.4% organic growth in fuel volumes for 2011; andBalance sheet primed for growth with $86.3 million equity financing in June 2011 and 70% participation in Premium Dividend™ and Dividend Reinvestment Plan.Supply Refiners' margins were strong in 2011; andSupply management initiative is on plan generating profits independent of Suncor contract.Operate$450 million revolving credit facility, expected to save $6 million in interest expenses, signed June 30, 2011;11% Reduction in Days Sales Outstanding in fourth quarter 2011, compared to the same period in 2010; andFocus on core business leads to sale of long-haul trucking division for $23.5 million on August 13, 2011. Parkland Fuel Corporation ("Parkland" or the "Corporation") (TSX: PKI), Canada's largest independent distributor and marketer of fuels and lubricants, today announced the financial and operating results for the three months and year ended December 31, 2011. All financial figures are stated in Canadian dollars."In 2011 we delivered strong earnings and fuel volume growth," said Bob Espey, President and Chief Executive Officer of Parkland. "Our focus on driving improved margins, reducing costs, and pursuing a comprehensive and highly disciplined growth strategy will continue to drive increased earnings and keep us well positioned to sustain our dividend.""In the fourth quarter, our operating divisions effectively managed through a series of unexpected and acute disruptions in diesel supply in western Canada, unseasonably warm weather in eastern and central Canada, and softening refiners' margins. Despite this adversity, we were able to achieve organic volume growth during the period, an accomplishment that is a testament to the skill, experience, and dedication of our people." added Mr. Espey. CONSOLIDATED HIGHLIGHTS (in millions of Canadian dollars,except volume and per Share/Unit amounts) For the threemonths endedDecember31, Year endedDecember31, 20112010 % Change 20112010 % ChangeIncome Statement Summary: Sales and operating revenues 1,014.3824.6 23 3,980.52,891.2 38Gross profit 103.195.3 8 408.4316.2 29Operating costs 44.541.0 9 172.7138.8 24Marketing, general and administrative 22.420.0 12 86.978.2 11Depreciation and amortization expense 16.716.8 (1) 68.462.9 9 19.517.5 11 80.536.2 122 Customer finance income (0.7)(0.6) 17 (2.8)(1.5) 87Finance costs 10.58.8 19 36.727.4 34Gain on disposal of property, plant and equipment (1.1)(0.5) 120 (15.9)(3.1) 413Unrealized risk management loss 0.9- 0.9- Earnings before income taxes 9.89.8 - 61.613.5 356Income tax expense (recovery) 2.4(1.9) N/A 17.7(13.4) N/ANet earnings 7.411.7 (37) 43.926.8 64 Net earnings per share/unit (Note 6 in financial statements) - Basic 0.120.22 (45) 0.740.52 43- Diluted (3) 0.120.21 (43) 0.730.44 65 Non-GAAP Financial Measures: EBITDA (1) 36.034.9 3 150.8100.6 50Distributable cash flow (1)(2) 26.526.4 0 126.567.0 89Distributable cash flow per share (1)(2) 0.410.50 (17) 1.971.26 56Dividends/distributions 16.315.2 7 60.559.8 1Dividend/distribution to distributable cash flow payout ratio 61%57% 48%89% Key Metrics: Fuel volume (millions of litres) 1,096.0981.0 12 4,161.03,500.0 19Return on capital employed (ROCE) 13.0%7.6% Net unit operating cost (NUOC)(1) 3.523.21 10 3.823.41 12Employees 1,2671,561 (19) 1,2671,561 (19) Fuel Key Metrics - Cents per litre: Average Retail fuel gross profit 5.044.92 2 5.085.27 (4)Average Commercial fuel gross profit 8.618.51 1 8.518.38 2Operating costs 4.064.18 (3) 4.153.97 5Marketing, general and administrative 2.042.04 0 2.092.23 (7)Depreciation and amortization expense 1.521.71 (11) 1.641.80 (9) Liquidity and bank ratios: Net Debt:EBITDA (1) 2.264.37 Senior Debt:EBITDA (1) 1.322.96 Interest coverage (1) 3.341.22 (1)Please refer to the Non-GAAP Measures section in the MD&A for definitions.(2)Please see Distributable Cash Flow reconciliation table in the MD&A.(3)Diluted earnings (loss) per share/unit can be impacted by an anti-dilutive impact of conversion of the debentures. Quarterly diluted earnings (loss) per share/unit may therefore not accumulate to the same per share/unit value as the year-to-date calculation.89% Increase in 2011's Distributable Cash Flow Improves Dividend Payout Ratio Q4 2011 vs. Q4 2010The dividend/distribution payout ratio for the fourth quarter of 2011 was 61% compared with 57% in the same period of 2010. While distributable cash flow was nearly the same between both periods, the amount of cash distributed through dividends for the three months ended December 31, 2011 increased $1.1 million to $16.3 million due to an increase in the total shares issued.Total Year 2011 vs. 2010 Parkland's dividend is on track with a dividend/distribution payout ratio of 48% for 2011 compared with 89% in 2010. The lower payout ratio in 2011 is due to an 89% increase in distributable cash flow to $126.5 million compared with $67.0 million in 2010.Commercial Team Maintains Growth Despite Diesel Shortage and Warm WeatherQ4 2011 vs. Q4 2010For the three months ended December 31, 2011, Parkland Commercial Fuels' volumes increased 6% to 476 million litres compared with 449 million litres for the same period in 2010 despite several regional challenges, demonstrating the advantage of diverse geographic and product portfolios.Commercial fuel volume growth was hindered temporarily in western Canada during the fourth quarter by a disruption in western Canada's diesel supply. Due to Parkland's strong supply capability the commercial division was able to maintain and protect commitments to its current customer base.Weather had a significant impact on fuel volumes in the fourth quarter, with warmer than normal weather in Eastern and Central Canada leading to a $2.5 million reduction in Earnings Before Interest, Tax, Depreciation and Amortization ("EBITDA") for the quarter.Fuel gross profits from Parkland Commercial Fuels for the three months ended December 31, 2011 increased 0.5% to $41.0 million compared with $40.8 million for the same period in 2010 primarily due to volume increases offset by a decrease in fuel margins. Average net fuel gross profit on a cents per litre ("cpl") basis for the fourth quarter of 2011 was 8.61 cpl, a decrease of 5% compared with 9.09 cpl in the fourth quarter of 2010 due to the addition of higher-volume, lower-margin accounts.The lubricants business continues to outperform initial expectations.Total Year 2011 vs. 2010 In 2011 Parkland Commercial Fuels' volumes increased 22% to 1.8 billion litres compared with 1.5 billion litres for the same period in 2010 due to the addition of Bluewave's January volumes in 2011 (91 million litres), stronger heating oil sales through the first quarter due to a cold winter, the addition of fuel sales from Island Petroleum throughout the year, offset by weaker heating oil sales in the fourth quarter due to warm temperatures in Eastern and Central Canada.Total year fuel gross profits from Parkland Commercial Fuels in 2011 increased 24% to $151.9 million compared with $122.2 million in 2010 primarily due to volume increases and a 2% increase in average net fuel gross profit on a cents per litre basis in 2011 to 8.51 cpl compared with 8.38 cpl in 2010.During the year, warmer than normal weather led to a $3.0 million reduction in EBITDA, with most of this concentrated in the fourth quarter.Divisional OutlookOilfield activity in Northern Alberta and Northeast British Columbia continues to be robust despite lower natural gas prices. In January the Canadian Association of Oilwell Drilling Contractors ("CAODC") reported an average rig utilization rate of 70% compared with 66% for the same period in 2011.A review of CAODC oil and gas well completion data demonstrates that Canadian drilling activity is now dominated by oil wells which make up more than 62% of total completions compared with gas wells at 28%. This makes the oil well drilling industry less vulnerable to swings in natural gas prices. Management believes that oilfield activity will remain strong as long as oil prices remain robust.The diesel supply in western Canada has returned to normal due to refiners returning to normal production levels and lower demand due to warmer weather.In the areas where we sell propane, our regional presence has allowed us to maintain stability. The recent exit of a major competitor in certain regions should provide us with an opportunity to increase sales in these areas.Retail Team Ahead of Plan on Cango IntegrationQ4 2011 vs. Q4 2010For the three months ended December 31, 2011, Parkland Retail Fuels' volumes increased 23% to 464 million litres compared with 376 million litres for the same period in 2010. The increase was the result of additional fuel volumes attributable to the Cango Inc. ("Cango") acquisition, network growth in our company owned and dealer network, offset by the following factors:Diesel shortages across western Canada which led to diesel run-outs at approximately 100 retail sites;Planned rationalization of underperforming stations in both Parkland's and Cango's network;Temporary closures for the purpose of upgrades; andWarm weather impacting demand for Fas Gas Plus' full serve offering.Fuel gross profits from Parkland Retail Fuels for the three months ended December 31, 2011 increased 26% to $23.4 million compared with $18.5 million for the same period in 2010 primarily due to volume increases and improved margins.On a cents per litre basis, Parkland Retail Fuels' gross profit in the fourth quarter of 2011 increased by 2% to 5.04 cpl compared with 4.92 cpl in the fourth quarter of 2010 reflecting the net effect of higher-volume, lower-margin stations in the Cango network offset by favourable shifts in the competitive environment.Total Year 2011 vs. 2010 In 2011, Parkland Retail Fuels' volumes increased 15% to 1.7 billion litres compared with 1.5 billion litres in 2010. The increase was the result of additional fuel volumes attributable to the acquisitions of Cango and general network growth through the acquisition of new sites and continued expansion of our dealer business.Total year fuel gross profits from Parkland Retail Fuels increased 11% in 2011 to $85.7 million compared with $77.4 million in 2010 primarily due to volume increases offset by a 4% decrease in fuel margins in 2011 to 5.08 cpl compared with 5.27 cpl in 2010. This decrease was the result of increased competition that was particularly evident in the first and third quarters.Divisional OutlookCango, and the seven retail fuel outlets acquired from Overwaitea Food Group ("Save On Foods") that have been re-branded to Fas Gas are expected to contribute to increased volumes through the first and second quarters of 2012 compared with the same periods in 2011.Supply Management Initiative is On Plan and Achieving ProfitParkland Wholesale, Supply and Distribution ("WS&D") 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. This division includes profits from Parkland's participation in refiners' margins, profits derived through superior supply management, and profits from wholesale fuel sales.Q4 2011 vs. Q4 2010Fuel gross profits from Supply and Wholesale for the three months ended December 31, 2011 increased 109% to $11.5 million compared with $5.5 million for the same period in 2010 primarily due to refiners' margins.Compared with the rest of 2011, refiners' margins softened in the fourth quarter. Refiners' margins in 2011 were strong due primarily to weak mid-continent and Canadian crude prices relative to Brent Crude prices. As mid-continent crude spreads narrowed, and Edmonton gasoline rack prices weakened in November and December, refiners' margins declined.The diesel shortage in western Canada between October and December 2011 was managed by WS&D. By finding diesel supply options for the Corporation's commercial and retail business units during this diesel shortage, Parkland's WS&D department played a large role in mitigating the impact of the shortage on Parkland's operations. Spot wholesale diesel sales were trimmed in the fourth quarter to ensure the fuel requirements of contracted customers across the division were met.Total Year 2011 vs. 2010 Fuel gross profits from Supply and Wholesale for 2011 increased 323% to $71.0 million compared with $16.8 million in 2010 primarily due to strong refiners' margins in 2011.Divisional OutlookRefiners' margins have strengthened since December 2011.Parkland plans to continue to optimize a number of key supply agreements in 2012 that will improve Parkland's supply economics, diversify the supply portfolio, and provide further supply security and flexibility for customers. Parkland will not announce new contracts due to the confidential and sensitive nature of the volume and pricing information of these supply agreements.The Bowden terminal conversion project continues. The terminal is scheduled to open in the fourth quarter of 2012. Bowden will enhance Parkland's storage and supply capability for western Canada, and will also be available for third parties to lease tankage for the storage of petroleum products.Operating Costs Decrease by 0.12 Cents per Litre in the Fourth QuarterQ4 2011 vs. Q4 2010Operating and direct costs increased by 9% to $44.5 million (4.06 cpl) for the three months ended December 31, 2011, compared with $41.0 million (4.18 cpl) for the three months ended December 31, 2010. Operating and direct costs were lower on a cpl basis in the fourth quarter of 2011 compared to the prior year, reflecting higher volumes, the positive impact of Parkland's cost initiatives, partially offset by one-time costs.Total Year 2011 vs. 2010 Operating and direct costs increased 24% to $172.7 million (4.15 cpl) for the year ended December 31, 2011, compared with $138.8 million (3.97 cpl) for the same period in 2010. A change in business mix towards commercial fuels (which have intrinsically higher operating costs) due to organic growth and recent commercial acquisitions, increased fuel prices and delivery charges, a $5.0 million charge in the third quarter of 2011 that included aging receivables and other provisions, partially offset by Parkland's cost initiatives resulted in an increase of 0.18 cpl in 2011 compared with 2010.MGA Up on Variable Compensation in Fourth Quarter Q4 2011 vs. Q4 2010Marketing, general and administrative expenses increased 12% to $22.4 million (2.04 cpl) for the fourth quarter of 2011 compared with $20.0 million (2.04 cpl) in the fourth quarter of 2010. The increase includes $2.8 million in variable compensation costs that stem from Parkland's strong 2011 annual results and $0.7 million in costs related to ongoing acquisition activities, offset by savings in other areas of the business. Investors should expect approximately $0.5 million per quarter in ongoing costs related to Parkland's increased acquisition activities in 2012.Total Year 2011 vs. 2010 Marketing, general and administrative expenses increased 11% in 2011 to $86.9 million (2.09 cpl) compared with $78.2 million (2.23 cpl) in 2010. While part of this increase was activity related, $3.3 million was expensed in the second quarter of 2011 as the result of one-time expenses relating to management changes and Cango acquisition costs. Strong total shareholder return in 2011 led to an increase in variable employee incentive compensation expenses of $3.0 million year over year.EBITDA Increases by 50% in 2011 on Volume Growth and Cost SavingsQ4 2011 vs. Q4 2010EBITDA for the fourth quarter of 2011 increased by 3% to $36.0 million compared with $34.9 million in the fourth quarter of 2010. The $1.1 million increase in EBITDA is the result of increased volumes in Retail and Commercial offset by lower heating fuel sales (a reduction of $2.5 million) weaker refiners' margins in the fourth quarter and an increase in variable compensation.Total Year 2011 vs. 2010 2011 total year EBITDA was $150.8 million, an increase of 50% compared with $100.6 million in 2010, due to stronger Retail and Commercial Fuels results and improved refiners' margins compared to the prior year.64% increase in net earnings in 2011 despite being fully taxableQ4 2011 vs. Q4 2010Parkland's net earnings in the fourth quarter of 2011 were $7.4 million, compared with net earnings of $11.7 million for the same period in 2010. The decrease in net earnings in the fourth quarter of 2011 compared to the prior year was primarily the result of $1.1 million in higher EBITDA offset by $4.3 million in higher income tax expenses compared to the same quarter in 2010.Total Year 2011 vs. 2010 2011 total year net earnings increased 64% to $43.9 million compared with $26.8 million for 2010. The increase in net earnings was primarily from $50.2 million in increased EBITDA, a $12.8 million gain on the sale of Parkland's long-haul transportation division, partially offset by $31.1 million in increased income tax expense.MD&A and Financial StatementsThe MD&A as well as the audited Consolidated Financial Statements and Notes to the Consolidated Financial Statements for the three and twelve months ended December 31, 2011 are available online at www.parkland.ca.Conference Call InformationPresident and CEO Bob Espey and Senior Vice President and CFO Mike Lambert will host a webcast and conference call at 6:30 a.m. Mountain Standard Time ("MST") (8:30 a.m. Eastern Standard Time) to discuss the fourth quarter results and then take questions from securities analysts, brokers and investors.Please log into the slide presentation 10 minutes before the webcast start time at:http://www.meetview.com/parkland20120306/To access the conference call by telephone from within Canada dial toll free 1-888-886-7786. International callers or callers from the Toronto area should use 416-764-8658. Please connect approximately 10 minutes prior to the beginning of the call and quote the conference ID: 4685 3637.The webcast will be available for replay two hours after the conference call ends. It will remain available at the link above for 90 days.Annual General MeetingThe annual and special meeting of the common shareholders of Parkland Fuel Corporation will take place on May 8th, 2012 at 9:00 AM Mountain Time at the Black Knight Inn located at 2929 - 50 Avenue, Red Deer, AB T4R 1H1.CUSIP / ISIN: 70137T105 / CA70137T1057Meeting Date: May 8, 2012Record Date: April 2, 2011Forward 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. 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 is Canada's largest independent marketer and distributor of fuels and lubricants, managing a nationwide network of sales channels. We are Canada's local fuel company, delivering gasoline, diesel fuel, lubricants, heating oil and other products to businesses, consumers and wholesale customers by community based operators who care. For further information: For investor and media inquiries please contact Tom McMillan, Director of Corporate Communications at firstname.lastname@example.org or 1-800-662-7177 extension 2533.