Parkland Corporation

Thank you. With me today on the call are Bob Espey, President and CEO; Darren Smart, Senior Vice President, Corporate Development and Interim CFO; and Dirk Lever, VP, Capital Markets.

This call is webcast and I encourage listeners to follow along with the supporting slides. We will go through our prepared remarks and then open it up for questions from the investment community.

[Operator Instructions] During our call today, we may make forward-looking statements related to expected future performance. These statements are based on current views and assumptions and are subject to uncertainties which are difficult to predict.

These uncertainties include, but are not limited to, expected operating results and industry conditions, among other factors. Risk factors applicable to our business are set out in our annual information form and management’s discussion and analysis.

We will also be discussing non-GAAP measures, which do not have any standardized meanings prescribed by GAAP. These measures are identified and defined in Parkland’s continuous disclosure documents, which are available on our website or SEDAR.

Please refer to those documents as they identify factors which may cause actual results to differ materially from any forward-looking statements. Dollar amounts discussed in today’s call are expressed in Canadian dollars unless otherwise noted.

I will now turn the call over to Bob.

Thank you, Brad and good morning. I hope everyone is staying safe and healthy and we appreciate you taking the time to join us today.

We announced exceptional results with record third quarter adjusted EBITDA of $338 million. Over the past nine months we have had the opportunity to put our business model to the test and we are very proud of our team's performance.

The resilience and flexibility of the business coupled with our customer-focused cultures have enabled our team to continue to deliver through a volatile period. Our convenience business performed exceptionally well highlighting the quality of our customer offer and the strength of our regional brands.

Additionally, our commercial operations across all regions have continued to win their business. This forms part of a larger trend across our enterprise of strong sales growth and further demonstrates our ability to grow organically to a challenging economy.

When we spoke last in August, we were seeing encouraging volume recovery across our operations. This trend continued through the quarter and while we still saw the impacts from COVID our geographic and product diversity and strong local brands returned our overall growth to apply to within 5% of the prior year.

Combination of robust fuel and non-fuel margins coupled with our deliberate and sustained cost reduction measures more than offset lower volumes and helped deliver a record third quarter. Cash from operations once again fully funded our growth and maintenance capital expenditures, cash dividends, and acquisitions and lowered our debt.

Our strong cash flow gives us tremendous financial flexibility as we advance our growth strategy organically and through potential acquisitions. The strength of our convenience store model was on display again in Q3, as we delivered our 19th consecutive quarter of C-store same-store sales growth in Canada.

Our team has quickly identified changing consumer preferences, optimized our product offering and executed consistently. Journey rewards our Canadian loyalty program continues to build momentum exceeding one million members in the third quarter.

Early promotional activity has driven strong member engagement reinforcing the value of the program. Our supply segment demonstrated strong recovery in the quarter as we experienced our first full quarter in 2020 of operations at the Burnaby refinery with utilization of 90%.

The refinery operated reliably in Q3 with no unplanned maintenance, robust local demand and strong distillate sales; all of which set us apart from others with refining exposure. Lastly, I am proud of our inaugural sustainability report which marks an exciting milestone for our organization.

While sustainability practices are already deeply embedded throughout our business, this report is a natural step in our sustainability journey. Our board and management team are fully engaged in this activity and we are focused on further embedding sustainability practices into our strategic decision making and capturing opportunities to grow our participation in the low-carbon economy.

We have highlighted some of the key initiatives from our report on slide 4 including the co-processing of renewable feedstocks at our Burnaby refinery. We hit an impressive milestone in September co-processing over 40,000 barrels of renewable feedstocks; our highest month on record.

We also improved our bio feedstock supply chain capability through increased rail and work optionality. We can leverage our infrastructure optionality at Burnaby to optimize the type and economics of the bio feedstock we bring in.

Our work on sustainability does not stop with the release of our inaugural report. Team is focused on establishing our baseline emissions data which will provide a meaningful basis for future targets.

I'll now pass over to Darren to go through the corporate financial results. Over to you Darren.

Great. Thanks Bob and good morning everyone.

Turning to slide 5, we delivered adjusted EBITDA of $338 million for the quarter compared to $302 million last year. Our combined marketing segments in Canada, USA and international increased adjusted EBITDA by 24% as strong fuel and non-fuel margins more than offset slightly lower year-over-year volumes.

In addition we benefited from sustained cost savings through initiatives taken early in the pandemic and remain confident we can retain annual run rate savings of between $50 million and $70 million. Our supply segment was marginally lower than the prior year.

However, we are extremely pleased with the results given global refining dynamics. In Q3 the team delivered a 90% utilization rate at the Burnaby refinery which we believe is one of the highest utilization rates in North America and allowed us to run efficiently.

Turning to page 6 maintaining balance sheets strength and financial flexibility are paramount to our strategy. This focus on the balance sheet has continued through the pandemic and we are well-positioned to manage through any further uncertainty, grow our base business and capture the right acquisition opportunities.

As always, we will exercise strict financial discipline in evaluating potential opportunities and must see a clear path to value creation. Total net funded debt decreased by $85 million from Q2 to Q3, 2020 and cash generated by the business in 2020 has funded growth and maintenance CapEx, acquisitions and cash dividends.

Our total funded debt to credit facility EBITDA ratio was 2.6 times which is around the middle of our target range for normal operations and down slightly from Q2. When coupled with our $1.6 billion of liquidity we have ample flexibility to execute our discipline growth strategy.

I'll now turn it back to Bob to discuss the segment performance.

Thanks Darren. I'll start with Canada on slide 7.

The team did a great job and deliberate adjusting to have $128 million which is up by 23% compared to last year while volumes were still 8% behind prior year due to COVID-19, they continued to recover through the quarter driven by increased traffic and economic activity, personal vehicle use and domestic tourism. We've also grown market share in retail which is a testament to our fuel and convenience strand propositions and the quality of our sites.

Importantly-- and demonstrating the resilience of our business the combination of strong unit margins and our proactive cost control measures more than offset the impact of lower volumes. Our ability to flex our cost structure plus our dynamic pricing capabilities helps insulated us from localized demand fluctuations as we manage through COVID-19.

Our convenience store channels delivered its 19th consecutive quarter of C-store same-store sales growth of 10.7% with most major categories contributing to this growth. This is a remarkable accomplishment which highlights the execution capabilities of our team, our compelling customer value propositions and our ability to quickly adapt to and anticipate changing customer needs.

More broadly safety measures have increased in priority for customers who are deciding where to stop and we believe the convenience model and our C-store proposition is well positioned for that. Consistent with our focus on driving customer loyalty and only three months after we completed our national rollout we passed a major milestone with our journey loyalty program as we exceeded one million members in the third quarter.

Early promotional activity has driven strong member engagement and our partnership with CIBC is delivering increased card holder penetration. Journey provides a powerful platform for us to deliver highly targeted customer offers, increased engagement and satisfaction.

We are very pleased with early performance and in the intermediate term remain focused on member acquisition and program refinement. For our international operations on slide 8, we delivered adjusted EBITDA of $77 million an increase of $14 million compared to last year.

At a high level this was driven by exceptional supply performance which included shipping fleet optimization and routing efficiencies and a robust base business. Supported by continued cost control initiatives our combined operating costs in MD&A were 20% lower than Q3, 2019.

Going forward, these assistance efficiencies will help insulate us from potential COVID-19 restrictions. We continue to see the benefit of our geographic and product diversity in the quarter.

For example, more diversified economies like Puerto Rico continued to perform well and marine bunkering and power supply volumes helped offset declines in aviation. We remain cautious on the outlook for tourism heading into late Q4 and anticipate the recovery will be tempered until COVID-19 restrictions are listed.

Our base business is performing ahead of expectations and our teams continue to demonstrate their ability to win new business and add volume through the pandemic. We continue to see LPG as a growth opportunity in the region having benefited from supply and wholesale wins in Q3.

You will see on the slide we upgraded our dedicated LPG vessel to a more modern ship which has resulted in shipping efficiencies and charter cost savings. The underlying growth from these initiatives helped offset continued COVID-19 impacts.

Turning to slide 9, like our other segments the geographic and product diversity in our U.S. business shown through our U.S.

segment delivered third quarter adjusted EBITDA $23 million reflecting organic growth, the impact of acquisition and strong per-unit fuel and non-fuel margins despite COVID-19 volume impacts. We continue to capture the benefits of our local scale which resulted in additional buying power on the supply side and strengthened our ability to successfully bid on and win new national account business.

As mentioned last quarter a steady stream of new customers is the lifeblood of any healthy business and I'm delighted to share as our team added over 60 million liters of annualized fuel volume amongst our regional operating centers. This is a fantastic result which highlights the new business focus and capabilities of our teams setting the stage for a broader retail growth strategy in the U.S.

and the creation of a unified North American back court brand we acquired the perpetual license for on the run across the U.S. This is an exciting springboard for continued organic retail growth as our existing U.S.

retail business was getting to the size where having a unified offer was a logical next step. The license acquisition will help us capture efficiencies and leverage an already existing established brand.

Furthermore, we are excited about what it can do for the organic world's particular operations and as a scalable convenience retail foundation for future acquisitions. Finally, turning to supply on slide 10, we delivered $122 million of adjusted EBITDA in Q3.

While we recognize the challenges facing refineries across North America the strategic benefits to cash flow generation generating ability of our Burnaby asset remains strong. We are particularly proud of our team's ability to operate reliably through the third quarter and successfully market distally which underpinned a 90% utilization for Q3.

We believe this was among the highest utilization rates in North America. The global reduction in additional demand primarily projects fuel has resulted in an oversupply fiscally and a resulting decrease in most refining run rates in North America.

Our team's ability to successfully market these ones yet has allowed our refinery to run more efficiently and capture additional refining margins. On to slide 11, our capital expenditures remain on track relative to guidance with initiatives focused on high return Canadian retail investments and advancing our supply capability across all areas of operation.

I'll touch on some of this in the following slide. There is no change to our capital 2020 expenditures forecast.

On slide 12, to conclude we are delighted with our performance year-to-date and are highly confident that whatever lies ahead we are well-positioned to thrive. We will continue to exercise strict financial discipline to maintain a strong balance sheet, advance our organic growth strategy and carefully select acquisition.

In all scenarios our goal is to deliver shareholder values. The acquisition market has heated up since we last spoke and our team is actively assessing opportunities which we believe we can add value to.

As always we remain highly selective. We also have a lot of exciting organic growth options not only have we revived our retail investments and new sites [Indiscernible] but also we continue to pursue high quality infrastructure projects to increase supply optionality, increase margins and the best of our wholesale operations.

Our collaboration with Amazon Web Services continues to progress leveraging cutting edge technology to drive efficiency enhancing our pricing capabilities and generating C-store and customer loyalty insights. In the coming months we will accelerate these efforts and advance our store of the future concepts all with the goal of improving our customer value proposition through innovation.

I referenced our U.S. on the run expansion earlier.

We will pilot the U.S. concept in early 2021 leveraging our existing expertise with the brand just tailored to the difference in the U.S.

retail market. As I said on our last two calls the resilience and flexibility of our business has driven tremendous performance through these challenging times.

I believe we are well positioned for a strong end of the year and to excel in 2021. We remain focused on growth and the team continues to execute remarkably well.

Thanks to the entire Parkland team for an amazing quarter and a continuing focus on safe and reliable operations while continuing to provide the support to our customers and communities. Once again thank you and we will now open the line for questions.

Thank you and good morning and congrats on the great quarter. Just a couple questions if I may.

Your operating and MD&A expenses went down $47 million year-over-year in Q3. Can you just run through your cost cutting efforts that you've outlined since COVID and kind of where are you and have you uncovered any new cost-cutting opportunities?

Yes. Hi Ben, it's Bob Espey and thanks for the question.

Our costs when we look at our cost the certainly on our MD&A we were able to reduce a lot of the discretionary costs that we had in our budget and also we did make some structural changes in the business that allow us to capture a portion of that going forward. On the operating side we are fortunate that we have a highly variable cost space and we continue to see the positive impact of that in the quarter as we progress through and volumes has been somewhat under where they were last year.

Thank you for that and then my second and follow-up question is a two-parter in the U.S. First can you talk about different outcomes in the U.S.

election? Could there be any different impacts for your U.S.

business and then as part of the U.S. also you talked about M&A opportunities are heating up.

Are you seeing since COVID multiple changes size of opportunities, regional opportunities are shifting somewhere else? Can you just kind of add some more color in terms of what you're seeing in the M&A market?

Thank you.

Yes. On your first question I think independent of the outcome of the election we still see the U.S.

market as highly attractive, highly fragmented and our business pieces there remains intact. We like the markets that we're in and we've seen some good growth in those markets and most importantly we have a great team that really focuses on servicing customers and supporting their local communities and we want to continue to grow and invest in that business independent of the outcome of the election.

In terms of the M&A opportunity again our growth piece is there remains intact. The market is still highly fragmented and we are seeing opportunities to buy some great businesses that we can fold into our platform.

As always we remain disciplined in the M&A process and look for good quality assets with great deeds.

That's great colors. Thank you.

Hi, good morning guys. Thanks for taking my question.

We've been getting a fair amount of questions on the international segment just as we headed to what would normally be a peak travel season as well as kind of a resurgence in COVID cases globally. I know you've provided a rough split on retail commercial and supply in the past.

Can you refresh that breakdown and then provide a bit of detail on what you've been seeing in terms of base demand, local tourism and commercial activity in the area?

Yes. Hi Luke, it's Bob Espey.

And thanks for the question. I think we provided a breakdown when we initially bought the business.

We haven't disclosed or broken it down further since. What we would say consistent to what we've communicated in the past we've seen some segments of the business perform exceptionally strong and others where we have had an offset due to reduced tourism.

I would say it's like all of our businesses the international business has diversified and has many product lines and we continue to see the benefit of that not only an international but across our business because we're not beholden to anyone on sector or segment. The other thing is geographic.

The geographical diversification has really helped. Some of the highlights from that area are we continue to win in markets that are more driven or levered towards natural resources such as Guyana and Surinam where we've picked up major accounts.

We continue to gain market share in the power generation market where our team has continued to win large commercial contracts in that space. On our diesel and propane business we've had a lot of good local wins within markets and that has that and an intense focus on costs has helped offset some of the pending shortfall or some of the shortfall in tourism that that we've seen in the market.

So again not one item but many. The other item is our supply business there now the team has made some really good adjustments on the distribution side and optimizing our fleet of ships and then also continues to look for opportunities in the market to buy well when we continue to see that flow through the results.

So again many-many great activities there that have helped shore up part of the reduction in tourism.

Thanks. That's really helpful.

Just a quick follow up with if I may margins were also very strong. Can you remind me roughly how much of the international segment is regulated from a margin perspective and maybe just kind of outline the key drivers for that performance during Q3?

Yes. Roughly half the markets that we're marketing into on the retail side are regulated.

Again we've got many different product lines that are in those markets and again a lot of the margin improvement has happened on the supply side of the business where we've been able to leverage our distribution and supply capabilities to buy well in the marketplace.

That's great. Thanks very much Bob.

Hi, good morning guys. Thanks for taking my question.

On Burnaby can you talk through a little bit the 90% utilization rates this is as you guys mentioned a good deal higher than the industry in North America and I know you gave some color and called out diesel and jet but just hoping you can dig in a little on the refinery and how it's been so unique in this environment.

Hi John and good question. Again I do commend the team there on being able to move particularly jet and diesel because that is really the key item that others have had constraints with and we've been fortunate that our team has been able to place that into the local market or adjacent markets and sell it.

So some good work there by our optimization team and our sales team to place that product in the market and allow the team and the refinery to operate safely and reliably. The other thing is we have seen gasoline demands particularly in western Canada has been quite it's probably been the strongest in Canada where we've been the least impacted by COVID and the slowdowns that happen in the marketplace.

So those things combined helped us maintain a high utilization rate through the quarter.

Great. Thank you and then on the Canada retail side you're inside the store comps were up double digits the second quarter in a row but you were also up about 500 basis points on the non-fuel gross margin percentage.

So can you talk about the mixed effects in that category? I know, strength drove that margin down a little bit in 2Q it seems like that's come back somewhat?

Yes. So that non-fuel component has our convenience and also our commercial non-fuel.

So it's not just purely convenience that margin that you see. I would highlight that we do continue to see good growth in the segment and like that's a number of different factors.

One is we continue to see the benefits of the rebranding of on the run in key locations. We continue to see the benefits of some of the capital we put in 2019 as both sites gain traction and starts growth in the market and we continue to see the benefits of our efforts of our category management team which is optimizing the offer to suit some of the changes that we've seen that are COVID driven where people are using the convenience segments as a way to supplement their weekly or online buying with items that they have run short on.

Great. Thank you very much.

Yes. Morning guys.

I guess a question on the journey program. You've surpassed the 1 million member mark that's an obvious and a notable milestone here.

Just curious if you'll be willing to share a target for your membership over the next one to two years given the strong take-up you've seen thus far and maybe just an additional metrics if you've got any around again the wallet size benefits you've been seeing and/or any additional sort of obvious milestones you're seeing that you're tracking on a KPI perspective?

Yes. Thanks Steve and appreciate your continued usage of the journey program.

I love the report that you wrote on that. It was quite insightful.

I would say first of all look we're delighted with the growth and again particularly in an environment where we put the brakes on for a few months and we really did only ramp our promotional activity here towards the back end of the quarter. So very delighted with the uptake and again speaking to the strength of the program and our operations team and engaging customers to participate.

In terms of our targets the growth rate is certainly, we're delighted with it. I would say our target is as big as we can get.

We service millions of Canadians and expect to see that continue to grow quite dramatically provided that the growth rate continues here. There certainly is a scenario where I believe over time we should be able to get into the 2 million to 4 million Canadians participating in this program.

Some of that we are seeing very positive results and again these are all early days in terms of the program as we gather data, but we're certainly seeing sort of basket size trip frequency starting to increase and also average bill size go up quite dramatically as consumers get used to the program and get used to using it. And then, also I would like to highlight our partnership with CIBC they've been a great partner here where we've been able to connect our journey program to folks that have a CIBC credit card, myself being one of them and the team has done a lot of work in the last quarter to really simplify that linkage process and as a result we're continuing to see the number of linked cards climb quite quickly.

And we do see a material increase in the share of fuel spend with the linked cards. So again very delighted with the progress and the outcome and certainly if we project forward this will have a very positive impact on our sales.

I appreciate the color. Thanks.

Thanks. I think you've covered some of it but on the fuel margins they've obviously been very strong particularly in Canada and international but can you, to the best of your ability, try to separate how much of this you think is temporary because the market is adjusting to lower volumes and how much of this you think is business mix related and supply procurement efforts made by Parkland and a sustainable longer term?

Yes. First of all on the pricing side very difficult to predict.

Again we need to price competitively in the marketplace to make sure we deliver the best values for consumers and we're committed to do that. On the supply side it is captured in various areas of our business.

On the U.S. and international side, we do have an integrated margin there and in Canada we isolate that into our supply group.

Again we continue, our supply team continues to improve our supply economics through partnering with our refining partners to optimize value arbitrage within the marketplace of leveraging our distribution and storage assets in local markets to move product around and take advantage of location arbitrage. And then, the third thing is making sure that we always have product for our customers which we see as an ongoing advantage of the Parkland system.

The other item that we've done Michael is, as we've said we've made some investments in our digital capability and analytics and that's really helped us across both our customer or consumer facing side of the business but also on the supply side. We continue to get better at taking the data and analyzing it and making sure we're optimizing locally but across the system when we connected in with our demand management and our supply making sure that those are connected to optimize across the entire value chain and again those I think we're all at Parkland delighted with the outcome of that investment and some very quick payback to those initiatives.

That's helpful. Thank you.

And just to follow up on the journey program. I can only imagine it's helping on your same-store sales, but how clear is that relationship between the rising journey membership count numbers and the acceleration in the same-store sales that you had first from first half to into Q3?

Is that something that you could monitor through the data and see that the membership is driving the higher pace of same-store sales?

Yes, I mean, it's certainly something that we can see and we started to quantify the incremental basket size which we can correlate the frequency of visits and ultimately how that drives same-store we are seeing a positive impact. I think we'd like to see the program mature a little further but that's something that at some point will provide some more clarity on again as the program matures and we get a couple more cycles here seeing the benefits and are confident that trend persists.

Thank you. And just finally, on the refinery on the Q2 call you guys said that the refinery was running around 80% to 85% utilization and you finished just over 90.

So I'm assuming that you exited Q3 and entered Q4 at a rate that was north of 90% and it sounds like you're, yes would it be fair to say that you're comfortable that you'll be able to hit that 90 at least the 91.5% that you utilization that you did last year in Q4?

I would say if the current demands persist that should certainly be achievable number here as we go into this quarter and we are continuing to see that sort of utilization of the asset. Yes, I'd also highlight that this quarter is sort of the first quarter in 2020 where you do see the full impact of the refinery and because the prior two quarters we were in turn around and so I would say we're delighted with the ability of the team to keep a high utilization rate and capture the economics that they have.

Great, thanks Bob.

Hi, good morning and thanks for taking my question. If I could just turn to maybe my first question, if I could just turn to the international segment if I just look at your Q3 results versus your Q2 results volumes are down a little bit but EBITDA was obviously much higher sequentially even if I back up the one time supply gain.

I'm trying to get a sense of pre-pandemic there is a lot of synergy capture opportunities within international and I guess things have gotten noisy here given some of the end market volatility but how is that synergy capture coming along here? Are you still on target to I think hit over 40 million kind of within the next year or so or are those, have those plans been accelerated given some of the cost cutting you've done and some of the efficiencies you found during this pandemic?

Just be interested in knowing kind of some of the drivers here within the international earnings growth.

Yes. Hi, Kevin and good question.

Appreciate it. I would say first of all the pandemic did force us to review our cost base across the business and again we've benefited from moving decisively and quickly here across the business including our international business and also similar to our North American business, our international business does benefit from a variable cost base on the operating side.

So, we can see the benefit of that. In terms of has this accelerated our synergy capture, I would say our synergy capture is on track.

The pandemic did force us to offer to push a little quicker on the cost side but we continue to make very good progress. It's gone against the base assumptions we put in.

Again unfortunately, because of the slowdown in COVID some of that has been absorbed by the slowdown in the business tough to say how that will manifest itself in next year. I mean again, we do continue to see the business perform well.

We continue to see the team there, look for alternative sources of gross profit which they've done admirably and we continue to make great progress on particularly the supply and distribution side and continually optimizing that and improving the opportunities in that side of the business. So again, delighted with the progress.

Certainly, a large part of that is what we did plan. We're seeing some of that a bit earlier, but again the headwind there is the economic slowdown.

That's very helpful color. And just my second question, I mean obviously Q3 was strong as you mentioned in your prepared remarks you kept your capital envelope unchanged from what you had guided to in Q2.

And just wondering just given the resiliency and earnings the fact that you're holding CapEx unchanged just wondering that if that reflects maybe a medium term change in how you think about your capital allocation whether you're prioritizing de-leveraging more or does the M&A pipeline look a little bit more robust here. You have put call option with the minority stake you don't own, are you creating some balance sheet room for that?

Just any color in terms of how you think about that capital allocation over the next 12 to 18 months?

Yes. Certainly Kevin and we'll split that into two questions.

So I'll take the first part talking about our capital and spend and then Darren can comment on the balance sheet. In terms of our capital, going forward certainly we are ramping up again and looking both organically on the M&A side and we do see some good prospects in both those areas.

There is a lead time and certainly with some of our more northern growth CapEx you get into winter and it's hard to deploy that. So it pushes a lot of the stuff in the next year.

So we will start to see and have started to see some opportunities that we're executing the gain. On the maintenance CapEx we did cut back this year we next year we will have to do some catch-up to make sure that we don't run our assets to a point where we can't service our customers but our intent is to get that fully back on track next year across the business.

So you will see capital come up. We have -- that has been a benefit to the balance sheet and I'll let Darren talk about the balance sheet.

Yes, great, thanks Bob. And on the balance sheet guys we're really pleased with how leverage has come, remain very steady here this quarter down slightly in a quarter where we didn't have significant M&A.

We did repay about $85 million of net debt which is a great thing to be able to do but we were very comfortable with where we are on our overall leverage and we have lots of flexibility and lots of liquidity to be able to fund our growth both M&A and organic and continue to be very disciplined in looking at those opportunities and ensuring that we're getting the value from those investments. But we're in a really great shape on the balance sheet.

That makes sense. Thanks for taking my questions.

Congrats on a good quarter there.

Good morning gents, a remarkable quarter. Just a couple of questions first of all digging a little bit deeper into the U.S., which has really stood out for the last couple of quarters here it does seem like you're really leveraging your supply advantage down into the U.S.

and really starting to get some good traction there and negotiating better rack prices overall and scaling the U.S. operation.

So I guess my question is how much leverage are you seeing, how much is the scale helping you out and negotiating better procurement deals and obviously that's a good setup for future M&A as well.

Hi, David and thank you. Yes, look our U.S.

business look we're delighted with the performance down there and what we've seen is that we set up these regional operating centers and again the teams there can focus on the local markets which are fairly large and these are large markets and we've been able to start to build scale in those markets so that we can work the supply and the supplies a number of different weavers that the team there pulls again first and foremost is partnering with the right refiner and finding value that works for both of us and we've been able to, the team there has been able to develop some strong relationships with some key refiners in the market. The second thing again is, leveraging our distribution fleet which gets bigger with every acquisition and in that market it's mainly a truck-based fleet and again the team's ability to shift between various suppliers in the market quickly is part of the success.

And then, the third element is we do continue to supply that market with planks out of Canada. It's both on the diesel and gasoline side.

We do have terminals rail, offloads rails, truck terminals and key markets that we continue to leverage and that also helps us make sure that we have the best supply in those markets. So again, scale and then the more scale we put on top of that the better benefit we get and we continue to see that with the acquisitions.

As we continue to grow we did announce some acquisitions earlier this year and continue to see a similar trend in that market where it's continuing to consolidate and we're certainly seeing some good opportunities.

And then, second question is, just on the M&A side further to Kevin's question on capital allocation. You've got obviously a looming buying the remainder of [Indiscernible] I think you as early 2022 that you can do that.

To the extent that you're investing in growth capital and looking at M&A, etcetera, and you've got a great balance sheet obviously at this juncture. Do you hold some back on M&A in the U.S.

a little bit and kind of densify the mark rocks that you're in today and keep your powder dry for the stub of salt that you don't own? So in other words keep your, keep you a little bit in check on M&A for next year?

Hi, it's Darren Smart here and thanks for the question. One of the dynamics that does play out as we acquire in the U.S.

is, we're able to acquire EBITDA at the same time and so we don't materially increase our leverage as we buy lots of these small to medium-sized businesses. So as we look out, we think we've got lots of balance sheet capacity to be able to continue to pursue the U.S.

opportunities and as well to be prepared for the purchase of the remaining [Indiscernible] stake.

And any change in valuation metrics in the U.S.? Have guys become a little bit more desperate amid COVID to potentially sell it at really reasonable multiples?

I think valuation in the U.S. has remained pretty consistent with before the pandemic.

The sector has been quite resilient and we're seeing very similar valuations out there and some businesses that have really held up well.

Excellent. Thanks guys.

Appreciate it. Great quarter.

Thank you.

I'm trying to better understand the relationship between your fixed and variable cost structure. So, the $47 million of costs that you took out which I believe were largely marketing and general administrative costs, like if you had done nothing in terms of attacking your cost structure how much of that $47 million do you think you would have captured just from lower volume?

So what I'm really trying to drive at is how much of that 47 million is purely variable and related to leaders? Do you have a feel for that at all?

Hi Peter. It's Bob.

I don't have a feel for that in terms of an exact number. Now let's get back to normal.

On the international division could you explain what that one-time gain was the 10 million?

Yes. For sure.

Let me just go back to your previous question. So I think on a sustainable basis, we telegraph that we believe there is $50 million to $70 million of cost savings annually that we've been able to work into the business through.

Okay.

Does that make sense?

Yes.

And that's a mix of office and G&A.

Okay. And then, on the international division the 10 million gains could you explain what that is?

Yes. I mean look that's just the team there was able to buy some product in previous quarters when prices were very low and as demand picked up we're able to push that into the marketplace and we're able to get a benefit on the difference in the price.

Okay. And also on the international division you talked about like you won some contracts in power generation.

So when you're bidding on contracts like that is it purely on price and why are you able to bid stronger than others on price or are there other factors that power generators look at strictly aside from price?

It does tend to be very price driven although I would say one of the things that's helped us particularly having our own fleets in the Caribbean is being able to optimize around the delivery and our logistics advantage has been able to, has enabled us to have a price advantage but we can still get some good gross profit out of these contracts.

Okay. And then lastly, just in the U.S.

M&A landscape with the speedway transaction put to bed two questions like do you feel that that's changed like has that changed the dynamics in the U.S. M&A landscape?

Has that freed things up? And then the other thing what are you hearing about the assets that will have to be sold as they put the two organizations together from an anti-trust perspective like are those, are you seeing those assets yet or if you can just give us an update on what you're seeing from your perspective?

Yes. So in terms of the dynamics of the market again the market is very fragmented and we are still seeing good opportunities and good value in the markets that we operate in.

I would say with regard to potential the acquirer 711 having to spin off potential sites. We do believe they're in the market.

We don't comment on specific processes but don't certainly expect to see those transactions as well.

Okay. That's all I have.

Thank you.

Hi. Thanks for taking my questions.

In the Canada section in the disclosure material management notes that economic activity improved through the quarter which I presume implies that the business trends improve through the quarter. It also indicated that it seemed positive trends at the end of September.

So that roughly coincides with a little bit of an increase in the COVID cases. So I'm just wondering last quarter you did give us some indications, more discrete indications on how the businesses are performing and with COVID ramping back up in this commentary in the disclosure.

Wondering if you can give us a taste of how the second wave impacted particularly the Canada segment.

Yes. I would say look volumes are slightly down on a year-over-year basis.

I would say that the impact of the second wave at this point is fairly minimal in the business. We continue to see the same dynamics where any decline is offset through margin and cost at this point.

So not being a massive slowdown like we saw in March and April what we're seeing is on a very localized micro market basis there are specific impacts but overall we don't see any material impact of the business and there is this natural offset between margin and cost.

Okay. Thank you for that and with respect to your efficiency and cost savings I guess a big topic in this quarter and I know you've called out that 50 to 70 earlier and I understand it's early days but wondering if you're able to quantify to what degree you were able to capture any of those savings in this current quarter?

Well, they would be within in the quarter I mean look we are going to have to add cost back into business as activity comes up and particularly as we start to reinvest in our initiatives which you can see have added tremendous value whether that's our digital initiative, our loyalty program or our organic growth which does require some cost to execute. So you will see some of those costs come back particularly on the fixed side, but we have found efficiencies on the system side where we continue to execute effectively across our business and strengthen our platform and then certainly on the operating side team there has been able to again find some efficiencies which will persist going forward but those would be within the current quarter.

Okay. And lastly, with respect to the impact of COVID on longer term decisions that management may make with respect to investment planning and CapEx and so on and so forth it does seem like there will be some lasting changes for the consumer even if COVID gets better perhaps work from home sticks perhaps there are different elements that stay around; wondering if this changes the view of any of the elements that you've talked about even on the margin or acquisitions more on the four or less so are you willing to pay more or less or is it what I'm gathering from you it seems like business as usual I know you've done a lot of work on the cost and CapEx side but with respect to the plans looking forward it seems like business as usual.

Is that a fair characterization?

Yes. What we've said is our sort of investment thesis remains intact in terms of our plans to deploy capital and our M&A thesis have to have things shifted around for sure.

I mean look there are certain and it's hard to predict ultimately how once vaccination is in place or certainly more rapid testing how the consumer responds and how their behaviors change there is certainly some impacts of COVID that we would have never predicted in terms of our convenience channel and some of our other channels and how resilient they've been through this. On the demand side, I think it's early to tell whether there will be structural impairment in various markets.

Again what we have seen is certain offsets to that continue to persist. So that's how we're proceeding going forward.

The other thing is we're always very careful in how we deploy our capital. We do have if you look at the organic growth side I mean we've got lots of opportunities that aren't focused in the core urban markets and we continue to see robust demand and activity outside of those core urban areas.

So plenty of options continue to invest and get great returns and again on the M&A side same thing. Particularly in the markets that we're in the U.S.

the Rocky Mountain, northern tier in Florida, we've seen again demand remain robust and certainly see good opportunities there to continue to buy very well-run businesses that's in our minds will persist here going forward.

Thank you.

Yes, hi, thanks. Just one quick one from me.

Just in terms of we talked a decent amount about M&A here today. I am just wondering what you are seeing in terms of opportunities and it sounds like the multiple sort of remain the same but are you seeing more opportunities?

Are you getting the regions where you are looking in the U.S. what about in Canada?

Is there anything to what we do in Canada or would you be more focused on commercial propane? Just wondering about sort of playing out.

Hi, it's Darren Smart here. Thanks for the question.

Yes U.S. is certainly a priority for us on the M&A front.

But that being said we continue to see opportunities in Canada and international as well. So there are opportunities across our business and which makes a broad M&A base if you will and they do take the nature of all of the businesses you mentioned; so retail, commercial, propane, LPG.

And have you seen sort of an increase in I don't know files coming across your desk as of late or is pretty stable from what you saw pre- COVID?

It's probably busier. Our team is quite busy looking at opportunities across the business and yes as busy as we've been.

Okay. Thank you very much.

Good morning. I just have one question.

Focusing on Burnaby and you mentioned co-processing that I think of as blending so correct me if I'm incorrect. Is it possible that we can see a step up if you're able to co-process which could be increasing output without sort of a capital expansion in the long term or maybe modify product mix a bit?

Well, so our co-processing we are actually taking bio feedstocks into the refinery and processing them. We just went through a turnaround which enabled us to increase the throughput of bio feedstocks the team is currently ramping that up and they've made some very good progress.

So in terms of going forward in order to increase that we do need to make some investments on the logistical side to enable. We do have some constraints there in terms of handling that we have planned and are executing again and we can continue to ramp that.

The next steps will require capital, additional capital. It's something that we're evaluating and certainly we'll make sure that any capital investment there is justified by the returns that we can get in that facility which again looks very favorable at this point.

So we're really proud of what the team has been able to achieve there. We have great support of the BC government as we continue to be a leader in the space and certainly puts British Columbia and Burnaby on the map as a leader in co-processing in Canada.

Great. That's it for me.

I'll leave it at that. Thank you very much.

Great. Well thank you.

Thanks everybody for joining and look forward to connecting with you next quarter.