PKI Parkland Corporation

Second quarter Adjusted EBITDA of $470 million
Publishes 2022 Sustainability Report

CALGARY, AB, Aug. 3, 2023 /PRNewswire/ - Parkland Corporation ("Parkland", "we", the "Company", or "our") (TSX: PKI), today announced its financial and operating results for the three and six months ended June 30, 2023.

Q2 2023 Highlights

• Adjusted EBITDA attributable to Parkland ("Adjusted EBITDA"¹) of $470 million, up 4 percent from the second quarter of 2022.
• Net earnings attributable to Parkland ("net earnings") of $78 million ($0.44 per share, basic) down 4 percent from the second quarter of 2022, and Adjusted earnings attributable to Parkland ("Adjusted earnings"²) of $130 million ($0.74 per share, basic) down 22 percent from the second quarter of 2022.
• Cash generated from (used in) operating activities of $521 million ($2.97 per share, basic³) up 53 percent from the second quarter of 2022.
• Leverage ratio⁴ of 3.3x and liquidity available³ of $1.6 billion.
• In July, launched proprietary food offering, Bites ON the RUN by M&M Food Market, within a standalone ON the RUN convenience store in Montreal.
• As of July 31, 2023, completed or reached agreements to sell non-core assets totaling approximately $100 million.

"I would like to thank the Parkland team for safe, consistent execution this quarter. We are building tremendous momentum across Parkland, positioning us to deliver a strong year at the higher end of our 2023 Adjusted EBITDA guidance," said Bob Espey, President and Chief Executive Officer. "We are advancing every part of our strategy, driving organic growth through customer-focused marketing programs, capturing synergies and cost efficiencies, and advancing our portfolio optimization efforts. I am confident we will deliver our $2 billion Adjusted EBITDA ambition by 2025 without further acquisitions, while reducing leverage, and improving shareholder returns."

Q2 2023 Segment Highlights

• Canada delivered Adjusted EBITDA of $150 million, down 14 percent from Q2 2022 ($174 million). Fuel unit margins were lower than the comparable historical highs in the second quarter of 2022. Fuel volume increased from the prior year due to Company Volume Same Store Sales Growth ("SSSG"²) of 9.3 percent and the incremental benefit of 2022 acquisitions. Food and Company C-Store SSSG (excluding cigarettes)² increased to 3.1 percent, up from (0.6) percent in Q2 2022.
• International delivered Adjusted EBITDA of $168 million, up 93 percent, from Q2 2022 ($87 million). Performance was driven by the consolidation of Sol, higher volumes in our retail and contracted commercial businesses, organic growth in our aviation business, and contributions from our Jamaica acquisition.
• USA delivered Adjusted EBITDA of $74 million, up 45 percent from Q2 2022 ($51 million). Strong performance reflects the capabilities of our USA team and was underpinned by strong fuel unit margins. Favourable market conditions and strong market positions enabled us to capture margin opportunities.
• Refining delivered Adjusted EBITDA of $109 million, down 34 percent, from Q2 2022 ($164 million) primarily reflecting lower crack spreads. The scheduled maintenance turnaround was completed in early April and composite utilization⁵ was 91.0 percent.
• The Company realized non-recurring foreign exchange gains of $25 million on the settlement of financing balances during the quarter.
• Parkland's total recordable injury frequency rate⁵ on a trailing-twelve-months basis was 0.87, a decrease of 18 percent compared to 1.06 in the second quarter of 2022.

2022 Sustainability Report

Today, we published our fourth Sustainability Report. Titled 'Drive to Zero', it outlines our strategy and the actions we are taking to drive sustainable growth and shareholder returns. The report highlights the many successful initiatives underway. Among them are: industry-leading efforts on co-processing low-carbon, renewable fuels; safer, more diverse, and inclusive work environments; and the incorporation of sustainability metrics into executive compensation. 

Parkland's Sustainability Report can be viewed here:
https://www.parkland.ca/sustainability/sustainability-report 

Consolidated Financial Overview

Q2 2023 Conference Call and Webcast Details

Parkland will host a webcast and conference call on Friday, August 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/XDpG4K6kMy5

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: 77390959). International participants may call 1-800-389-0704 (toll-free) (Conference ID: 77390959).

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 and six months ended June 30, 2023 (the "Q2 2023 MD&A") and consolidated financial statements for the three and six months ended June 30, 2023 (the "Q2 2023 Consolidated Financial Statements") provide a detailed explanation of Parkland's operating results for the three and six months ended June 30, 2023. 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.sedarplus.ca. The French versions of the Q2 2023 MD&A and the Q2 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 what moves people, 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 and Parkland's expectation of delivering at the higher end of its 2023 Adjusted EBITDA guidance.

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. In addition, the key material assumptions underlying the 2023 Adjusted EBITDA Guidance Range include: an increase in the retail fuel and petroleum product volumes by approximately 10% as compared to the year ended December 31, 2022, reflecting the full year contribution of 2022 acquisitions, integration and synergy capture, and organic growth initiatives; Food, convenience and other gross margin of approximately 30% of total retail gross margin and approximately 20% of total commercial gross margin; Refining adjusted gross margin of approximately $40 per barrel and average Burnaby Refinery utilization of between 75% and 85% based on the Burnaby Refinery's crude processing capacity of 55,000 barrels per day; and an approximate $100 million Adjusted EBITDA impact as a result of 2023 refinery turnaround and maintenance capital expenditure of approximately $100 million relating thereto. The key material assumptions underlying the 2025 Adjusted EBITDA Ambition include an estimated $150 million of synergies and cost efficiencies and $180 million of organic growth compared to 2022 actuals. 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 Q2 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 Q2 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 Q2 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) is a non-GAAP financial measure and Adjusted earnings (loss) per share is a non-GAAP financial ratio, each 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 the current period and (c) derivatives, (vi) adjustments to 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, environmental liabilities and asset retirement obligations, (ix) loss on inventory write-downs for which there are offsetting associated risk management derivatives with unrealized gains, * 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.

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.

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 Q2 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 Q2 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 Q2 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 Q2 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 Q2 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 June 30, 2023 and June 30, 2022.

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 a detailed calculation of Adjusted gross margin for the three months ended June 30, 2023 and June 30, 2022

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SOURCE Parkland Corporation