CALGARY, AB, May 3, 2023 /PRNewswire/ — Parkland Corporation (“Parkland”, “we”, the “Company”, or “our”) (TSX: PKI), today announced its financial and operating results for the three months ended March 31, 2023.
Q1 2023 Highlights
- Adjusted EBITDA attributable to Parkland (“Adjusted EBITDA”1) of $395 million, consistent with the first quarter of 2022 with contributions from acquisitions and organic growth offsetting the impact of the scheduled turnaround completed at the Burnaby Refinery in the first quarter of 2023 (the “2023 Turnaround”).
- Net earnings attributable to Parkland (“net earnings”) of $77 million ($0.44 per share, basic) up 40 percent from the first quarter of 2022, and Adjusted earnings attributable to Parkland (“Adjusted earnings”2) of $114 million ($0.65 per share, basic) down 16 percent from the first quarter of 2022.
- Cash generated from operating activities of $314 million ($1.79 per share, basic3) up $362 million from the first quarter of 2022.
- Leverage ratio4 of 3.3x (3.4x in Q4 2022) and liquidity available3 of $1.5 billion.
- Continued to expand our ON the RUN convenience brand to approximately 670 locations and grew our JOURNIETM rewards loyalty program to 4.5 million members.
- Subsequent to the quarter, announced a partnership between JOURNIETM rewards loyalty program and Aeroplan and opened the first ON the RUN standalone retail location in British Columbia.
“The Company’s disciplined focus on delivering shareholder value continues to guide us and we are on track for a successful year. Our performance this quarter demonstrates our ability to execute on our strategy, capture synergies and deliver organic growth throughout our retail and commercial businesses,” said Bob Espey, President and Chief Executive Officer. “I am confident Parkland will deliver its $2 billion Adjusted EBITDA ambition by 2025 without additional acquisitions, while reducing leverage and improving shareholder returns.”
Q1 2023 Segment Highlights
- Canada delivered Adjusted EBITDA of $167 million, down 13 percent from Q1 2022 ($191 million). Unseasonably warm weather lowered commercial volumes, partially offset by 2022 acquisitions and organic growth. Fuel margins declined year-over-year due to favourable retail market conditions in Q1 2022. Food and Company C-Store Same Store Sales Growth (“SSSG”) (excluding cigarettes)2 was 6.8 percent (1.7 percent in Q1 2022).
- International delivered Adjusted EBITDA of $183 million, up 123 percent, from Q1 2022 ($82 million). Performance was largely driven by the consolidation of the remaining 25% of Sol and additional volumes captured largely in the contracted commercial and retail business, organic growth initiatives and synergies.
- USA delivered Adjusted EBITDA of $21 million, down 55 percent, from Q1 2022 ($47 million). Results were negatively impacted by the compliance obligations accounted for in the current period of $17 million, commodity price fluctuations in 2022 and severe winter weather across certain markets.
- Refining delivered Adjusted EBITDA of $38 million, down 57 percent, from Q1 2022 ($89 million) reflecting the scheduled 2023 Turnaround. Composite utilization5 was 33.9 percent. These impacts were partially offset by increased sales of imported product and efficient management of pipeline capacity.
Parkland’s sustainability accomplishments are described in the Q1 2023 MD&A (as defined below). Notably, Parkland’s total recordable injury frequency rate (“TRIF”5) on a trailing-twelve-months basis was 0.97 in Q1 2023, a decrease of 18 percent compared to the Q1 2022 TRIF of 1.19.
| __________________________ |
| 1 Total of segments measure. See “Total of Segments Measures” section of this news release. |
| 2 Non-GAAP financial measure or non-GAAP financial ratio. See “Non-GAAP Financial Measures and Ratios” section of this news release. |
| 3 Supplementary financial measure. See “Supplementary Financial Measures” section of this news release. |
| 4 Capital management measure. See “Capital Management Measures” section of this news release. |
| 5 Non-financial measure. See “Non-Financial Measures” section of this news release. |
Consolidated Financial Overview
| ($ millions, unless otherwise noted) | Three months ended March 31, | |
| Financial Summary | 2023 | 2022 |
| Sales and operating revenue | 8,156 | 7,606 |
| Adjusted EBITDA attributable to Parkland (“Adjusted EBITDA”)(1) | 395 | 387 |
| Canada | 167 | 191 |
| International | 183 | 82 |
| USA | 21 | 47 |
| Refining | 38 | 89 |
| Corporate | (14) | (22) |
| Net earnings (loss) attributable to Parkland | 77 | 55 |
| Net earnings (loss) per share – basic ($ per share) | 0.44 | 0.36 |
| Net earnings (loss) per share – diluted ($ per share) | 0.43 | 0.35 |
| Trailing-twelve-month (“TTM”) Cash generated from (used in) operating activities(2) | 1,688 | 592 |
| Cash generated from (used in) operating activities | 314 | (48) |
| TTM Cash generated from (used in) operating activities per share(2) | 10.23 | 3.88 |
| (1) Total of segments measure. See “Total of Segments Measures” section of this news release. |
| (2) Supplementary financial measure. See “Supplementary Financial Measures” section of this news release. |
Q1 2023 Conference Call and Webcast Details
Parkland will host a webcast and conference call on Thursday, May 4, 2023 at 6:30 am MDT (8:30 am EDT) to discuss the results. To listen to the live webcast and watch the presentation, please use the following link: https://app.webinar.net/nog8aEnNBqP
Analysts and investors interested in participating in the question-and-answer session of the conference call may do so by calling 1-888-390-0546 (toll-free) (Conference ID: 79037941). International participants may call 1-800-389-0704 (toll-free) (Conference ID: 79037941).
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 at the link above. It will remain available for one year and will also be posted to www.parkland.ca.
MD&A and Consolidated Financial Statements
The management’s discussion and analysis for the three months ended March 31, 2023 (the “Q1 2023 MD&A”) and consolidated financial statements for the three months ended March 31, 2023 (the “Q1 2023 Consolidated Financial Statements”) provide a detailed explanation of Parkland’s operating results. An English version of these documents will be available online at www.parkland.ca and SEDAR after the results are released by newswire under Parkland’s profile at www.sedar.com. The French versions of the Q1 2023 MD&A and the Q1 2023 Consolidated Financial Statements will be posted to www.parkland.ca and SEDAR as soon as they become available.
About Parkland Corporation
Parkland is an international fuel distributor and retailer with operations in twenty-five countries. Our purpose is to Power Journeys and Energize Communities, and every day, we provide over one million customers with the essential fuels, convenience items and quality foods on which they depend.
With approximately 4,000 retail and commercial locations across Canada, the United States, and the Caribbean region, we have developed supply, distribution, and trading capabilities to accelerate growth and business performance. In addition to meeting our customers’ needs for essential fuels, we provide a range of choices to help them lower their environmental impact. These include carbon and renewables trading, solar power, renewables manufacturing and ultrafast Electric Vehicle charging.
Our proven business model is centered around organic growth, our supply advantage, driven by scale and our integrated refinery and supply infrastructure, acquiring prudently, and integrating successfully. Our strategy is focused on developing our existing business in resilient markets, growing our food, convenience, and renewable energy businesses, and helping customers to decarbonize. Our business is underpinned by our people, and our values; safety, integrity, community, and respect, which are deeply embedded across our organization.
Forward-Looking Statements
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: Parkland’s business model, objectives and strategies, including its ambition to reach $2 billion of Adjusted EBITDA by 2025 without further acquisitions, reduce leverage and improve shareholder returns.
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, assumptions and uncertainties including, but not limited to: general economic, market and business conditions, including the duration and impact of the COVID-19 pandemic and the Russia-Ukraine conflict; micro and macroeconomic trends and conditions, including increases in interest rates, inflation and commodity prices; Parkland’s ability to execute its business objectives, projects and strategies, including the completion, financing and timing thereof, realizing the benefits therefrom and meeting our targets and commitments relating thereto; Parkland’s management systems and programs and risk management strategy; the competitive environment of our industry; retail pricing, margins and refining crack spreads; availability and pricing of petroleum product supply; volatility of crude oil and refined product prices; 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; environmental impact; changes in environmental and regulatory laws, including the ability to obtain or maintain required permits; and other factors, many of which are beyond the control of Parkland. Assumptions related to Parkland’s ambition to reach $2 billion of Adjusted EBITDA by 2025 include an estimated $150 million of synergies from completed acquisitions and cost efficiencies and $180 million of organic growth compared to the 2022 financial results. See also the risks and uncertainties described in “Cautionary Statement Regarding Forward-Looking Information” and “Risk Factors” included in Parkland’s most recent Annual Information Form, and in “Forward-Looking Information” and “Risk Factors” included in the Q1 2023 MD&A, each filed on SEDAR and available on the Parkland website at www.parkland.ca. The forward-looking statements contained in this news release are expressly qualified by this cautionary statement.
Non-Financial Measures
Parkland uses a number of non-financial measures, including composite utilization and total recordable injury frequency rate, in measuring the success of our strategic objectives and to set variable compensation targets for employees. These non-financial measures are not accounting measures, do not have comparable International Financial Reporting Standards (“IFRS”) measures, and may not be comparable to similar measures presented by other issuers, as other issuers may calculate these metrics differently. See Section 16 of the Q1 2023 MD&A, which is incorporated by reference into this news release, for further details on the non-financial measures used by Parkland.
Specified Financial Measures
This news release contains total of segments measures, non-GAAP financial measures and non-GAAP financial ratios, supplementary financial measures and capital management measures (collectively, “specified financial measures”). Parkland’s management uses certain specified financial measures to analyze the operating and financial performance, leverage and liquidity of the business. These specified financial measures do not have any standardized meaning under IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. The specified financial measures should not be considered in isolation or used in substitute for measures of performance prepared in accordance with IFRS. See Section 16 of the Q1 2023 MD&A, which is incorporated by reference into this news release, for further details regarding specified financial measures used by Parkland.
Non-GAAP Financial Measures and Ratios
Adjusted earnings (loss) and Adjusted earnings (loss) per share are a non-GAAP financial measure and a non-GAAP financial ratio, respectively, representing the underlying core operating performance of business activities of Parkland at a consolidated level.
Adjusted earnings (loss) and Adjusted earnings (loss) per share represent how well Parkland’s operational business is performing, while considering depreciation and amortization, interest on leases and long-term debt, accretion and other finance costs, and income taxes. The Company uses these measures because it believes that Adjusted earnings (loss) and Adjusted earnings (loss) per share are useful for management and investors in assessing the Company’s overall performance as they exclude certain significant items that are not reflective of the Company’s underlying business operations.
Adjusted earnings (loss) excludes costs that are not considered representative of Parkland’s underlying core operating performance including: (i) costs related to potential and completed acquisitions, (ii) non-core acquisition and integration employee costs, (iii) business integration and restructuring costs, (iv) changes in the fair value of share-based compensation liabilities, (v) unrealized gains and losses on (a) foreign exchange, (b) risk management assets and liabilities unless they relate to underlying physical sales activity in current period and (c) derivatives, (vi) realized foreign exchange gains and losses as a result of cash pooling arrangements and refinancing activities, (vii) realized foreign exchange gains and losses on accrued financing costs in foreign currency and the offsetting realized risk management gains and losses on the related foreign exchange risk management instruments, (viii) changes in values of the Sol put option, redemption options under Parkland’s senior unsecured notes, environmental liabilities and asset retirement obligations, (ix) loss on inventory write-downs for which there are offsetting associated risk management derivatives with unrealized gains, (x) impairments of non-current assets, (xi) loss on modification of long-term debt, (xii) earnings impact from hyperinflation accounting, (xiii) certain realized gains and losses on risk management assets and liabilities that are related to underlying physical sales activity in another period, (xiv) gains and losses on asset disposals, (xv) adjustment for the effect of market-based performance conditions for equity settled share-based award settlements, and (xvi) other adjusting items. Parkland’s Adjusted earnings (loss) and Adjusted earnings (loss) per share are also adjusted to include Parkland’s proportionate share of its joint-venture investees’ Adjusted earnings (loss). Concurrently with Parkland entering into the Share Exchange Agreement, effective August 4, 2022, Parkland does not allocate a portion of Adjusted earnings (loss) to NCI and includes 100 percent of International results as Adjusted earnings (loss).
Please see below for the reconciliation of Adjusted earnings (loss) to net earnings (loss) and calculation of Adjusted earnings (loss) per share.
| Three months ended March 31, | ||
| ($ millions, unless otherwise stated) | 2023 | 2022 |
| Net earnings (loss) attributable to Parkland | 77 | 55 |
| Add: Net earnings (loss) attributable to NCI | — | 13 |
| Net earnings (loss) | 77 | 68 |
| Add: | ||
| Acquisition, integration and other costs | 27 | 13 |
| (Gain) loss on foreign exchange – unrealized | 7 | 6 |
| (Gain) loss on risk management and other – unrealized | (32) | 11 |
| Other (gains) and losses | 21 | 72 |
| Other adjusting items(1) | 21 | 6 |
| Tax normalization(2) | (7) | (26) |
| Adjusted earnings (loss) including NCI | 114 | 150 |
| Less: Adjusted earnings (loss) attributable to NCI | — | 14 |
| Adjusted earnings (loss) | 114 | 136 |
| Weighted average number of common shares (million shares)(3) | 175 | 155 |
| Weighted average number of common shares adjusted for the effects of dilution (million shares)(3) | 177 | 156 |
| Adjusted earnings (loss) per share ($ per share) | ||
| Basic | 0.65 | 0.88 |
| Diluted | 0.64 | 0.87 |
| (1) | Other Adjusting Items for the three months ended March 31, 2023 include: (i) the effect of market-based performance conditions for equity-settled share-based award settlements of $13 million (2022 – nil), and (ii) the share of depreciation and income taxes for Isla joint venture of $3 million (2022 – $4 million). |
| (2) | The tax normalization adjustment was applied to net earnings (loss) adjusting items that were considered temporary differences, such as acquisition, integration and other costs, unrealized foreign exchange gains and losses, unrealized gains and losses on risk management and other, gains and losses on asset disposals, changes in fair value of redemption options, changes in estimates of environmental provisions, loss on inventory write-downs for which there are offsetting associated risk management derivatives with unrealized gains, impairments of non-current assets and debt modifications. The tax impact was estimated using the effective tax rates applicable to jurisdictions where the related items occur. |
| (3) | Weighted average number of common shares are calculated in accordance with Parkland’s accounting policy contained in Note 2 of the Annual Consolidated Financial Statements. |
Food and Company C-Store SSSG refers to the period-over-period sales growth generated by retail food and convenience stores at the same company sites. The effects of opening and closing stores, temporary closures (including closures for ON the RUN / Marché Express conversions), expansions of stores, renovations of stores, and stores with changes in food service models in the period are excluded to derive a comparable same-store metric. Same-store sales growth is a metric commonly used in the retail industry that provides meaningful information to investors in assessing the health and strength of Parkland’s brands and retail network, which ultimately impacts financial performance. Food and Company C-Store SSSG does not have any standardized meaning prescribed under IFRS and is therefore unlikely to be comparable to similar measures presented by other companies. Please see below for a reconciliation of convenience store revenue (Food and C-Store revenue) of the Canada segment with the Food and Company C-Store same store sales (“SSS”) and calculation of the Food and Company C-Store SSSG.
| Three months ended March 31, | |||
| ($ millions) | 2023 | 2022 | %(1) |
| Food and Company C-Store revenue | 70 | 100 | |
| Add: | |||
| Point-of-sale (“POS”) value of goods and services sold at Food and Company C-Store operated by retailers and franchisees(2) | 278 | 165 | |
| Less: | |||
| Rental and royalty income from retailers, franchisees and others(3) | (55) | (34) | |
| Same Store revenue adjustments(4) (excluding cigarettes) | (80) | (21) | |
| Food and Company C-Store same-store sales | 213 | 210 | 1.6 % |
| Less: | |||
| Same Store revenue adjustments(4) (cigarettes) | (87) | (92) | |
| Food and Company C-Store same-store sales (excluding cigarettes) | 126 | 118 | 6.8 % |
| Three months ended March 31, | |||
| ($ millions) | 2022 | 2021 | %(1) |
| Food and Company C-Store revenue | 100 | 92 | |
| Add: | |||
| Point-of-sale (“POS”) value of goods and services sold at Food and Company C-Store operated by retailers(2) | 165 | 129 | |
| Less: | |||
| Rental income from retailers and others(3) | (25) | (24) | |
| Same Store revenue adjustments(4)(5) (excluding cigarettes) | (60) | (7) | |
| Food and Company C-Store same-store sales | 180 | 190 | (5.5) % |
| Less: | |||
| Same Store revenue adjustments(4)(5) (cigarettes) | (91) | (103) | |
| Food and Company C-Store same-store sales (excluding cigarettes) | 89 | 87 | 1.7 % |
| (1) | Percentages are calculated based on actual amounts and are impacted by rounding. |
| (2) | POS values used to calculate Food and Company C-Store SSSG are not a Parkland financial measure and do not form part of Parkland’s consolidated financial statements. |
| (3) | Includes rental income from retailers in the form of a percentage rent on Food and Company C-Store sales, royalty, franchisee fees and excludes revenues from automated teller machines, POS system licensing fees, and others. |
| (4) | This adjustment excludes the effects of acquisitions, opening and closing stores, temporary closures (including closures for ON the RUN / Marché Express conversions), expansions of stores, renovations of stores, and stores with changes in food service models, to derive a comparable same-store metric. |
| (5) | Excludes sales from acquisitions completed within the year as these will not impact the metric until after the completion of one year of the acquisitions when the sales or volume generated establish the baseline for these metrics. |
The non-GAAP financial measures and ratios should not be considered in isolation or used in substitute for measures of performance prepared in accordance with IFRS. Except as otherwise indicated, these non-GAAP measures and ratios are calculated and disclosed on a consistent basis from period to period. See section 16 of the Q1 2023 MD&A, which is incorporated by reference into this news release, for further details regarding Parkland’s non-GAAP financial measures and ratios.
Supplementary Financial Measures
Parkland uses a number of supplementary financial measures, including cash generated from (used in) operating activities per share and liquidity available to evaluate the success of our strategic objectives and to set variable compensation targets for employees. These measures may not be comparable to similar measures presented by other issuers, as other issuers may calculate these metrics differently. See Section 16 of the Q1 2023 MD&A, which is incorporated by reference into this news release, for further details regarding supplementary financial measures used by Parkland.
Capital Management Measures
Parkland’s primary capital management measure is the Leverage Ratio, which is used internally by key management personnel to monitor Parkland’s overall financial strength, capital structure flexibility, and ability to service debt and meet current and future commitments. The Leverage Ratio is calculated as a ratio of Leverage Debt to Leverage EBITDA (each as defined in the Q1 2023 Consolidated Financial Statements) and does not have any standardized meaning prescribed under IFRS. It is therefore unlikely to be comparable to similar measures presented by other companies. See Section 16 of the Q1 2023 MD&A, which is incorporated by reference into this news release, for further details regarding capital management measures used by Parkland.
Total of Segments Measures
Adjusted EBITDA is a total of segments measure used by the chief operating decision maker to make decisions about resource allocation to the segment and to assess its performance. In accordance with IFRS, adjustments and eliminations made in preparing an entity’s financial statements and allocations of revenue, expenses, and gains or losses shall be included in determining reported segment profit or loss only if they are included in the measure of the segment’s profit or loss that is used by the chief operating decision maker. As such, Parkland’s Adjusted EBITDA is unlikely to be comparable to similarly named measures presented by other issuers, who may calculate these measures differently. Parkland views Adjusted EBITDA as the key measure for the underlying core operating performance of business segment activities at an operational level. Adjusted EBITDA is used by management to set targets for Parkland (including annual guidance and variable compensation targets) and is used to determine Parkland’s ability to service debt, finance capital expenditures and provide for dividend payments to shareholders. See Section 16 of the Q1 2023 MD&A, which is incorporated by reference into this news release, for further details regarding total of segments measures used by Parkland. Refer to the table below for the reconciliation of Adjusted EBITDA to net earnings (loss) for the three months ended March 31, 2023 and March 31, 2022.
| Three months ended March 31, | ||
| ($ millions) | 2023 | 2022 |
| Adjusted EBITDA attributable to Parkland (“Adjusted EBITDA”) | 395 | 387 |
| Add: Attributable to NCI | — | 27 |
| Adjusted EBITDA including NCI | 395 | 414 |
| Less: | ||
| Acquisition, integration and other costs | 27 | 13 |
| Depreciation and amortization | 190 | 155 |
| Finance costs | 104 | 70 |
| (Gain) loss on foreign exchange – unrealized | 7 | 6 |
| (Gain) loss on risk management and other – unrealized | (32) | 11 |
| Other (gains) and losses(1) | 21 | 72 |
| Other adjusting items(2) | 21 | 6 |
| Income tax expense (recovery) | (20) | 13 |
| Net earnings (loss) | 77 | 68 |
| Net earnings (loss) attributable to Parkland | 77 | 55 |
| Net earnings (loss) attributable to NCI | — | 13 |
| (1) | Other (gains) and losses for the three months ended March 31, 2023 include the following: (i) nil non-cash valuation gain (2022 – $4 million loss) due to the change in redemption value of Sol Put Option; (ii) $9 million non-cash valuation gain (2022 – $86 million loss) due to the change in fair value of redemption options; and (iii) $30 million loss (2022 – $18 million gain) in Other items including $23 million (2022 – nil) in write-off of certain assets related to renewable diesel complex. Refer to Note 12 of the Interim Condensed Consolidated Financial Statements. |
| (2) | Other Adjusting Items for the three months ended March 31, 2023 mainly include: (i) the effect of market-based performance conditions for equity-settled share-based award settlements of $13 million (2022 – nil), and (ii) the share of depreciation and income taxes for Isla joint venture of $3 million (2022 – $4 million). |
Parkland uses Adjusted gross margin as a measure of segment profit (loss) to analyze the performance of sale and purchase transactions and performance on margin. Adjusted gross margin excludes the effects of significant items of income and expenditure that are not considered representative of Parkland’s underlying core margin performance and may have an impact on the quality of margins, such as (i) unrealized gains and losses on (a) foreign exchange, (b) risk management and other unless underlying physical sales activity has occurred, (ii) loss on inventory write-downs for which there are offsetting associated risk management and other with unrealized gains, (iii) certain realized gains and losses on risk management assets and liabilities that are related to underlying physical sales activity in another period, and (iv) other adjusting items. Refer to the table below for the reconciliation of Adjusted gross margn.
| Three months ended March 31, | ||
| ($ millions) | 2023 | 2022 |
| Sales and operating revenue | 8,156 | 7,606 |
| Cost of purchases | (7,265) | (6,563) |
| Gain (loss) on risk management and other – realized | 39 | (183) |
| Gain (loss) on foreign exchange – realized | 6 | 8 |
| Other adjusting items to Adjusted gross margin | 2 | — |
| Adjusted gross margin | 938 | 868 |
| Fuel and petroleum product adjusted gross margin | 766 | 734 |
| Convenience and other non-fuel adjusted gross margin | 172 | 134 |
| Adjusted gross margin | 938 | 868 |
