Parkland Reports Third Quarter 2010 Financial Results

Performance Highlights for the Three and Nine Months Ended September 30, 2010:

• Fuel sales volumes for the quarter increased 27% to 901 million litres compared with 712 million litres in Q3 2009, and year-to-date increased 25% to 2.52 billion litres compared with 2.02 billion litres in 2009;
• Fuel marketing segment gross profit increased 24% to $57.3 million compared with $46.2 million in Q3 2009, and year-to-date increased 16% to $170.2 million compared with $146.6 million in 2009;
• Supply and Wholesale gross profit, which includes Parkland's share of refiners' margins, decreased by $1.2 million for the quarter, and by $18.1 million for the nine months ended September 30, 2010 compared to the same periods in 2009;
• EBITDA for the quarter decreased 15% to $18.1 million compared with $21.4 million in Q3 2009, and year-to-date decreased 12% to $67.9 million compared with $77.1 million in 2009;
• Bluewave Energy integration with Parkland's Commercial Business Group remains on target with synergies to exceed 2010 plan of $2 million; and
• Effective September 30, 2010, Parkland entered into an agreement with Shell to be a primary distributer of Shell, Pennzoil, and Quaker State lubricants under Shell's Alliance Distributorship model that is immediately accretive and increases Parkland's annual direct sales of lubricants by 92%.

RED DEER, AB, Nov. 12 /CNW/ - Parkland Income Fund ("Parkland" or "the Fund") (TSX: PKI.UN), Canada's largest independent fuel distributer and marketer, today announced the financial and operating results for the three and nine months ended September 30, 2010. All dollar amounts are stated in Canadian dollars.

"While lower refiners' margins certainly impacted our earnings this quarter, our earnings also reflect a change to the seasonality of our business following the Bluewave acquisition," said Mike Chorlton, President and CEO of Parkland Income Fund. "Our earnings are now more balanced throughout the year. Earnings this quarter and on a cumulative basis reflect low refiners' margins, the impact of carrying the increased marketing, general and administration expenses and finance costs associated with Bluewave, without the benefit of Bluewave's strongest earnings cycle being included.  While the drag on earnings led to a high payout ratio for the quarter, we believe the payout ratio for the year ended December 31, 2010 should improve after considering the full seasonality of our business."

"Key wins for the quarter include a 27% year-over-year increase in fuel volume, movement of the enterprise resource planning (ERP) system into the sustainment phase, substantial progress on collecting trade accounts receivable impacted by the ERP disruption in the first quarter, and the Shell Alliance deal.  The alliance with Shell is another example of how oil and gas refiners are looking for a trusted partner to simplify and manage portions of their downstream marketing business.  This accretive addition to our business, which was part of Bluewave Energy's business acquisition pipeline, fits with our strategy to continue to expand our market share in Canada's petroleum marketing and distribution sector.  Despite low earnings this quarter, we have built a solid platform for growth, have a robust portfolio of growth opportunities, and we're looking forward to improved returns from the Bluewave acquisition in the last quarter of 2010."

Distributable Cash Flow
Distributions exceeded distributable cash flow in the third quarter by 50% and by 4% for the first nine months of 2010.  The distribution payout ratio for the third quarter of 2010 was 150% compared with 86% in 2009. For the nine month period ended September 30, 2010 the distribution payout ratio was 104% compared with 71% in the prior year.  Earnings for the third quarter were negatively impacted by low refiners' margins, increased interest costs as a result of the Bluewave acquisition, margin compression in the fuel marketing segment, and an increase in marketing, general and administration expenses without the benefit of Bluewave's strongest earnings cycle being included.

Parkland's current distribution policy as a publically traded income trust is based on distributable cash flow on an annualized basis.  Accordingly, the seasonality of Parkland's individual quarterly results must be assessed in the context of annualized distributable cash flow.  With the acquisition of Bluewave and Columbia, the seasonality of Parkland's results is expected to change, with peak earnings to be realized in the fourth and first quarters on a go forward basis.  For more information please refer to the 'Distributable Cash Flow' section of this quarters Management's Discussion & Analysis.

Consolidated Highlights

(in millions of Canadian dollars except volume and per Unit amounts)	Three months ended Sept 30, 2010	Three months ended Sept 30, 2009	% Change
Fuel volume (millions of litres)	901	712	27
Net sales and operating revenues	796.5	543.1	47
Gross profit	78.3	60.6	29
Gross margin	10%	11%
Operating and direct costs	39.2	25.8	52
Marketing, general and administrative	20.9	13.4	56
(Loss) earnings before income taxes	(4.3)	8.6	(150)
Income tax (recovery) expense	(4.7)	(1.5)
Net earnings	0.4	10.1	(96)
EBITDA ^(1)	18.1	21.4	(15)
Earnings per Unit - basic	$0.01	$0.20
Earnings per Unit - diluted	$0.01	$0.20
Distributable cash flow ^(2)	10.9	18.5	(41)
Distributions	16.3	15.8	3
Distribution payout ratio	150%	86%
(in millions of Canadian dollars except volume and per Unit amounts)	Nine months ended Sept 30, 2010	Nine months ended Sept 30, 2009	% Change
Fuel volume (millions of litres)	2,520	2,015	25
Net sales and operating revenues	2,082.6	1,477.6	41
Gross profit	236.9	192.6	23
Gross margin	11.4%	13.0%
Operating and direct costs	112.8	78.0	45
Marketing, general and administrative	56.1	37.5	50
Earnings before income taxes	5.0	45.3	(89)
Income tax (recovery) expense	(14.4)	1.2
Net earnings	19.4	44.1	(56)
EBITDA ^(1)	67.9	77.1	(12)
Earnings per Unit - basic	$0.37	$0.88
Earnings per Unit - diluted	$0.37	$0.88
Distributable cash flow ^(2)	47.1	66.9	(30)
Distributions	48.9	47.2	4
Distribution payout ratio	104%	71%
^(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.

Third Quarter 2010 Review

Fuel Marketing Segment
Fuel sales volumes increased 27% to 901 million litres for the three months ended September 30, 2010, compared with 712 million litres for the same period in 2009 due to increased fuel sales volumes from the acquisition of Bluewave Energy.  For the nine months ended September 30, 2010, fuel sales volumes increased 25% to 2.52 billion litres compared with 2.02 billion litres for the same period the previous year.  Parkland is actively growing the fuel marketing and distribution business downstream from the refiners.

Net sales in the fuel marketing segment increased by 48% to $748.2 million (83.0 cents per litre "cpl") for the three months ended September 30, 2010, compared with $506.7 million (71.2 cpl) for the same period in 2009.  For the nine months ended September 30, 2010, net sales in the fuel marketing segment increased by 43% to $1.93 billion (76.5 cpl) compared with $1.35 billion (67.1 cpl) for the same period the previous year. 

Gross profit in the fuel marketing segment increased 24% to $57.3 million (6.4 cpl) for the three months ended September 30, compared with $46.2 million (6.5 cpl) for the same period in 2009 as fuel sales volumes increased.  For the nine months ended September 30, 2010, increased volumes offset by slightly lower cpl gross margins led to a 16% increase in gross profit in the fuel marketing segment to $170.2 million (6.8 cpl) compared with $146.6 million (7.3 cpl) for the same period the previous year.

Parkland's retail fuel marketing segment continued to deliver a strong performance in a relatively flat market, with increase fuel volumes from new retail sites offset by reductions in cpl gross margins due to increased competition in certain markets.

The outlook for commercial fuel sales volumes continues to improve as activity in the forestry, trucking and oil & gas drilling industries increases.  For the three months ended September 30, 2010, the Canadian Association of Oilwell Drilling Contractors (CAODC) reported an average rig utilization rate of 40.3% compared with 20.7% for the same period in 2009.  For the first three quarters of 2010, the CAODC reported an average rig utilization rate of 37.9% compared with 22.8% in the first three quarters of 2009.  Parkland continues to observe increased competition for truck drivers, which management believes is a signal that economic activity on the commercial front is improving.

Convenience Store Merchandise Segment
Net sales in the convenience store merchandise segment decreased by 46% to $6.9 million for the three months ended September 30, 2010, compared with $12.8 million for the same period in 2009 as corporate operated sites were converted to commission based sites which are dealer operated.  For the nine months ended September 30, 2010, net sales in the convenience store merchandise segment decreased by 52% to $19.1 million compared with $40.1 million for the same period the previous year.  As more stations are converted to a commissioned operator model, retail commissions will increase 'Other Segment' revenues.

Gross profit in the convenience store merchandise segment decreased by 47% to $1.8 million for the three months ended September 30, 2010, compared with $3.4 million for the same period in 2009, once again due to stations converting to a commissioned operator model.  For the nine months ended September 30, 2010, gross profit in the convenience store merchandise segment decreased by 53% to $4.9 million compared with $10.4 million for the same period the previous year. 

Commercial Segment (Non-Fuel)
Parkland's Commercial Segment consists of agricultural, lubricant, and other products that do not fall into the fuel category.  Net sales in the commercial segment increased by 77% to $32.0 million for the three months ended September 30, 2010, compared with $18.1 million for the same period in 2009 due to the Bluewave acquisition.  For the nine months ended September 30, 2010, net sales in the commercial segment increased by 47% to $104.7 million compared with $71.1 million for the same period the previous year due to the Columbia Fuels and Bluewave Energy acquisitions

From increased net sales, gross profit in the commercial segment increased by 78% to $9.8 million for the three months ended September 30, 2010, compared with $5.5 million for the same period in 2009.  For the nine months ended September 30, 2010, gross profit in the commercial segment increased by 55% to $31.7 million compared with $20.4 million for the same period the previous year.

Other Segment
Parkland's Other Segment consists of lottery revenue, externally charged freight revenue, retail commissions and vendor rebates for which no cost of sales is recognized.  Gross profit in the Other Segment increased by 71% to $9.4 million for the three months ended September 30, 2010, compared with $5.5 million for the same period in 2009 as more stations became commissioned operator based.  For the nine months ended September 30, 2010, gross profit in the Other Segment increased by 98% to $30.1 million compared with $15.2 million for the same period the previous year.

Supply and Wholesale - Refiners' Margins
Supply and Wholesale, a part of the Fuel Marketing Segment, includes profits from Parkland's participation in refiners' profit margins.  Parkland participates in refiners' margins for a significant portion of its supply volumes.  Refiners' margins are driven by supply and demand, over which the Fund has little control. 

Refiners' margins for the three months ended September 30, 2010, remained at historic lows. 

Wholesale fuel sales for the three months ended September 30, 2010 decreased by 18% to 160 million litres compared with 195 million litres for the same period in 2009 due to low refiners' margins and periodic supply disruptions. For the nine months ended September 30, 2010, wholesale fuel sales decreased 11% to 517 million litres compared with 583 million litres for the same period in 2009 for the same reasons mentioned above.

Gross profit in Supply and Wholesale decreased 14% to $7.1 million for the three months ended September 30, compared with $8.3 million for the same period in 2009.  For the nine months ended September 30, 2010, Supply and Wholesale gross profit decreased 58% to $12.9 million compared with $31.0 million for the same period the previous year.

Refiners' margins have remained low throughout 2010. While refiners' margins in October were showing early signs of recovery compared to the third quarter, they have grown weaker entering into November. 

Consolidated Results
Net sales and operating revenue increased by 47% to $796.5 million for the three months ended September 30, 2010, compared with $543.1 million for the same period in 2009.  For the nine months ended September 30, 2010, net sales and operating revenue increased by 41% to $2.08 billion compared with $1.48 billion for the same period the previous year. 

Gross profit increased by 29% to $78.3 million for the three months ended September 30, 2010, compared with $60.6 million for the same period in 2009. For the nine months ended September 30, 2010, gross profit increased by 23% to $236.9 million compared with $192.6 million for the same period the previous year.

Operating and direct costs increased by 52% to $39.2 million (4.4 cpl) for the three months ended September 30, 2010, compared with $25.8 million (3.6 cpl) for the same quarter in 2009. The $13.4 million increase in operating and direct costs for the three month period resulted from $9.4 million in additional operating costs directly related to Bluewave Energy. The increase in operating costs on a cpl basis also reflects the change in business mix following the Bluewave acquisition that increased Parkland's proportion of delivered fuel products which involves higher operating costs (due to delivery) offset by higher fuel margins for delivered fuel and heating oil.

For the nine months ended September 30, 2010, operating and direct costs increased by 45% to $112.8 million (4.5 cpl) compared with $78.0 million (3.9 cpl) for the same period in 2009. The $34.8 million increase in operating and direct costs for the six month period resulted from $32.4 million in additional operating costs directly related to the acquired businesses of Bluewave Energy and Columbia Fuels, and a change in the proportion of delivered products as mentioned above.

Marketing, general and administrative (MG&A) expenses increased by 56% to $20.9 million (2.3 cpl) for the three months ended September 30, 2010, compared with $13.4 million (1.9 cpl) for the same quarter in 2009.  Of the $7.5 million increase in marketing, general and administrative expenses during the three month period, $3.5 million was related to Bluewave Energy and $1.9 million was due to information technology expenses related to ERP implementation and sustainment. The remaining increase was the result of year-over-year cost increases.

For the nine months ended September 30, 2010, marketing, general and administrative expenses increased by 50% to $56.1 million (2.2 cpl) compared with $37.5 million (1.9 cpl) for the same period in 2009.  Of the $18.6 million increase during the nine month period, $9.6 million was related to the acquired businesses of Bluewave Energy and Columbia Fuels, $0.6 million was related to onetime costs for converting from a trust to corporation and $1.7 million was due to information technology expenses related to ERP implementation and sustainment. The remaining increase was the result of year-over-year cost increases.

Parkland's inventory of fuel volumes are subject to revaluation as underlying crude oil prices rise and fall. In the third quarter of 2010 this resulted in a decrease in gross profit of $1.2 million compared with a decrease of $0.3 million for the same period in 2009. 

EBITDA decreased 15% to $18.1 million (2.0 cpl) for the three months ended September 30, 2010, compared with $21.4 million (3.0 cpl) for the same quarter in 2009.  The decrease in EBITDA from 2009 is attributed to EBITDA increases from the Bluewave acquisition which were offset by a $7.6 million increase in marketing, general and administrative costs.

For the nine months ended September 30, 2010, EBITDA decreased 12% to $67.9 million (2.7 cpl) compared with $77.1 million (3.8 cpl) for the same period in 2009.  EBITDA increases from the Bluewave and Columbia Fuels acquisitions were offset by a decrease in Parkland's share of refiners' margins and an $18.6 million increase in marketing, general and administrative expenses.

Net earnings decreased by 96% to $0.4 million (0.0 cpl) for the three months ended September 30, 2010, compared with $10.1 million (1.4 cpl) for the same period in 2009. On a per unit basis, net earnings for this quarter were $0.01 per unit basic and diluted, compared with $0.20 per unit basic and diluted for the same quarter in 2009.  For the nine months ended September 30, 2010, net earnings decreased 56% to $19.4 million (0.8 cpl) compared with $44.1 million (2.2 cpl) for the same period in 2009.  On a per unit basis, net earnings for the nine months ended September 30, 2010, were $0.37 per unit basic and diluted compared with $0.88 per unit basic and diluted for the same period in 2009.

Enterprise Resource Planning (ERP) System
To enhance Parkland's long-term efficiency and ability to integrate future acquisitions, the Fund began implementation of an ERP system upgrade and expansion on March 1, 2010.  At this time, the majority of Parkland's operating divisions, excluding Columbia Fuels and Bluewave, migrated their supply-chain and accounting transaction streams onto the ERP platform, thereby unifying the essential operational data of these business units with Parkland's core business functions.

The March 2010 implementation experienced complications with processing certain sales transactions which resulted in invoicing delays, delayed customer collections and increased working capital requirements.  Through the third quarter of 2010, Parkland substantially completed the stabilization of the primary ERP transaction streams and customer-facing processes.  Parkland also continued efforts from the second quarter of 2010 on reconciling and settling customer accounts that were disrupted by the implementation.  During the third quarter, Parkland reduced the trade receivables resulting from the ERP disruption by approximately $40 million, which was offset by increases in commercial accounts due to increased volume and increases in other non-trade receivables.  In the third quarter of 2010, Parkland moved into the sustainment phase of the project.

Starting in the third quarter and continuing through the fourth quarter of 2010, Parkland is analyzing and preparing for the controlled migration of Columbia Fuels and Bluewave onto the ERP system in 2011, and the implementation of additional modules to expand the functionality of the system.

Once fully implemented, the ERP system will provide Parkland with a comprehensive fuel management system that will help support and optimize the management of Parkland's fuel supply chain.

Corporate Conversion Plan
At the May 3, 2010 Parkland Annual and Special Meeting, Parkland received approval from unitholders to complete the conversion of Parkland Income Fund into a new public corporation (Parkland Fuel Corporation) by way of a trust unit for corporate share tax-deferred exchange effective no later than January 2011. Parkland will schedule a second Special Meeting of unitholders to re-approve the conversion plan if there is a material change in business conditions before conversion or if Parkland proposes conversion before 2011 because of acquisition opportunities or other factors. 

On May 17, 2010 Parkland announced that after conversion, provided there are no material adverse changes in Parkland's outlook for business conditions, Parkland will continue as a balanced yield and growth company with an expected dividend presently anticipated between 75% and 110% of the current level of Parkland's annual distribution ($1.26 per unit). The amount of any dividends payable by Parkland Fuel Corporation will be at the discretion of the Board of Directors from time to time and may vary depending on a number of factors.

Post conversion, it is expected that Parkland's 2011 dividends will qualify as "eligible dividends" for Canadian income tax purposes and thus qualify for the enhanced gross-up and tax credit regime for certain individual Shareholders that receive the dividends outside of a registered account.

Parkland will announce its 2011 dividend plan by November 30, 2010.

MD&A and Financial Statements
The MD&A as well as the unaudited Consolidated Financial Statements and Notes to Consolidated Financial Statements for the three and nine months ended September 30, 2010, are available online at http://files.newswire.ca/714/2010_Q3_MDAFS.pdf.

Conference Call
Parkland will host its third quarter results conference call on Monday, November 15, 2010, at 9:00 a.m. Mountain Time (MT) (11:00 a.m. ET).

The conference call will be hosted by President and CEO Mike Chorlton and Senior Vice President and CFO Ken Grondin who will discuss Parkland's financial results for the quarter and then take questions from analysts, brokers and investors.

To access the conference call by telephone, dial [phone] or 888-231-8191. 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. MT (11:59 p.m. ET), Monday, November 29, 2010. To access the archived conference call, dial [phone] or 800-642-1687 and enter the passcode: 2236 1772 followed by the pound sign.

To access the live audio webcast of the conference call, please navigate your internet browser to:  http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3296260. 

Please connect to the webcast at least 10 minutes prior to the beginning of the 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 Information
Certain 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, conversion of Parkland to a corporate structure, anticipated dividends and the amount thereof, if any, to be declared by Parkland Fuel Corporation, expectations regarding the implementation of Parkland's new ERP system 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 Fund'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 Fund'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 Fund 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 Income Fund
Parkland Income Fund is Canada's largest independent fuel distribution and marketing company, delivering fuel products from regional refineries to retail, commercial and reseller customers coast-to-coast.  Through its network of 620 retail locations, 77 commercial branches, 71 cardlock locations and through wholesale agreements, the Fund distributes 3.4 billion litres of fuel annually, representing 4.7% of the total Canadian fuel market (market share in some regions of operation is higher). 

Parkland currently distributes fuel to retail customers under its Fas Gas Plus, Fas Gas and Race Trac brands as well as through distribution agreements with 293 Esso locations.  Parkland also supplies propane, bulk fuel, heating oil, lubricants, industrial fluids and associated services to commercial and industrial customers across Canada under the Neufeld, United Petroleum, Columbia Fuels, Bluewave Energy and Great Northern Oil brands. 

Parkland offers investors a balance of yield and growth.  The Company is delivering value to unitholders by growing fuel volumes through carefully selected acquisitions, working closely with suppliers to achieve a material cost advantage and achieving greater efficiency through operational excellence. 

Parkland units and convertible debentures trade on the Toronto Stock Exchange (TSX) under the symbols PKI.UN and PKI.DB.  For more information visit www.parkland.ca.

For further information:

For investor and media inquiries, or to be added to the email news alert service, please contact Mike W. Chorlton, President and CEO; Ken J. Grondin, Senior Vice President and CFO; or Tom McMillan, Investor Relations Manager at 403-357-6400 or [email protected]