Superior Plus Corp. Announces 2014 First Quarter Results
CALGARY, ALBERTA--(Marketwired - May 7, 2014) - Superior Plus
Corp. ("Superior") (TSX:SPB) -
Highlights
- For the quarter ended March 31, 2014, Superior generated
adjusted operating cash flow (AOCF) before restructuring costs per
share of $0.70 which includes the impact of dilution relative to
the prior year quarter of $0.06 per share. Excluding the impact of
dilution, the first quarter of 2014 was $0.04 per share higher than
the prior year quarter of $0.72 per share or $0.02 per share lower
than the prior year including the impact of dilution. After
restructuring costs, Superior generated AOCF per share of $0.68
compared to $0.72 per share in the prior year quarter. Results in
the first quarter of 2014 were impacted by:
- Colder than average temperatures which resulted in a net
positive impact to Superior's Energy Services businesses but
negatively impacted Superior's Construction Products Distribution
business;
- Lower interest costs due to lower average effective interest
rates; and
- A larger number of average shares outstanding due to the equity
issuance in March 2013 which resulted in dilution of approximately
$0.06 cents per share, net of assumed interest savings, compared to
the prior year.
- As previously announced in Superior's fourth quarter of 2013
earnings release, Superior has been assessing strategic
alternatives for its Construction Products Business and has
retained BMO Capital Markets as a financial advisor. As a result of
the review, Superior's Board of Directors has authorized the
commencement of a formal process to solicit and assess offers for
the potential divestiture of Superior's Construction Products
Business.
- Superior's 2014 financial outlook of AOCF per share has been
confirmed at $1.65 to $1.95 before restructuring costs and before
the potential impact of the sale of Superior's Construction
Products Distribution business. See "2014 Financial Outlook" for
additional details.
- The initiatives that underpin Superior's Destination
2015 continue to track to plan. For further details on the
progress of key Destination 2015 initiatives, see the
presentation "Investor Update - March 31, 2014" which is available
on Superior's website at www.superiorplus.com.
- Energy Services results for the first quarter were higher than
the prior year quarter as a result of improved gross profits,
particularly within the U.S. refined fuels business and Canadian
propane business due to higher average sales margins and higher
sales volumes. Sales volumes benefitted from colder than average
temperatures during the first quarter and ongoing customer sales
and retention efforts. Higher gross profits as noted above were
offset by higher operating costs and a reduction in gross profit
from the fixed-price energy services business. Business improvement
initiatives throughout the Energy Services business continue to
track consistent with management's expectations.
- Specialty Chemicals results for the first quarter were modestly
lower than the prior year but consistent with management's
expectations. Sodium chlorate gross profits were modestly higher
than the prior year as higher sales volumes resulting from the
Tronox LLC (Tronox) agreement more than offset the impact of higher
average electricity costs. Chloralkali gross profits were lower
than the prior year due to reduced average selling prices.
- The expansion of the hydrochloric acid production capacity at
the Port Edwards, Wisconsin and Saskatoon, Saskatchewan chloralkali
facilities remain scheduled to be in commercial production in the
fourth quarter of 2014. Both projects remain on budget.
- The Construction Products Distribution business results for the
first quarter were impacted by extreme winter conditions which
resulted in a number of lost delivery days and higher operating
costs. The impact of lost delivery days was partially offset by
improved average sales margins due to ongoing procurement and
pricing initiatives which continued to gain traction throughout the
quarter.
- Superior's forecasted December 31, 2014, total debt to EBITDA
ratio before restructuring costs of 3.6X to 4.0X is unchanged from
the update provided in the 2013 fourth quarter. Superior remains
committed to reducing its total debt to EBITDA to a range of 3.0X
to 3.5X over the medium term. See "Debt Management Update" for
additional details.
- On May 1, 2014, Superior completed the sale of the U.S. portion
of its fixed-price energy business for proceeds of $3.1 million,
with deferred consideration of approximately $1.9 million due over
the next nine months if certain conditions are met.
First Quarter Financial Summary
|
Three months ended March 31, |
(millions of dollars except per share amounts) |
2014 |
2013 |
Revenue |
1,282.4 |
1,049.9 |
Gross profit |
276.6 |
253.1 |
EBITDA from operations (1) |
106.3 |
105.7 |
Interest |
(12.9) |
(17.0) |
Cash income tax expense |
(0.4) |
(0.4) |
Corporate costs |
(4.8) |
(6.1) |
Adjusted operating cash flow before restructuring costs (1) |
88.2 |
82.2 |
Restructuring costs (2) |
(1.8) |
(0.2) |
Adjusted operating cash flow after restructuring costs |
86.4 |
82.0 |
|
|
|
Adjusted operating cash flow per share before restructuring costs,
basic (1)(2)(3) |
$0.70 |
$0.72 |
Adjusted operating cash flow per share before restructuring costs,
diluted (1)(2)(3)(4) |
$0.68 |
$0.69 |
Adjusted operating cash flow per share, basic (1)(2)(3) |
$0.68 |
$0.72 |
Adjusted operating cash flow per share, diluted (1)(2)(3)(4) |
$0.66 |
$0.69 |
Dividends paid per share |
$0.15 |
$0.15 |
(1) |
EBITDA from operations and adjusted operating cash flow are key
performance measures used by management to evaluate the performance
of Superior. These measures are defined under "Non-IFRS Financial
Measures" in Superior's 2014 First Quarter Management's Discussion
and Analysis (MD&A). |
(2) |
Superior has restated its 2013 financial results to present them on
a before and after restructuring cost basis due to the one-time
nature of these costs. See "Restructuring Costs" in Superior's 2014
First Quarter MD&A for additional details. |
(3) |
The
weighted average number of shares outstanding for the three months
ended March 31, 2014 is 126.2 million (2013 - 113.7 million). |
(4) |
See
"Supplemental Financial Information" for additional details on
diluted per share amounts. |
Segmented Information
|
Three months ended March 31, |
(millions of dollars) |
2014 |
2013 |
EBITDA from operations: |
|
|
|
Energy Services |
72.2 |
67.8 |
|
Specialty Chemicals |
29.6 |
32.9 |
|
Construction Products Distribution |
4.5 |
5.0 |
|
106.3 |
105.7 |
Energy Services
- EBITDA from operations for the first quarter was $72.2 million
compared to $67.8 million in the prior year quarter. Results were
impacted by higher gross profits from the U.S. refined fuels and
Canadian propane business, offset in part, by a reduction in the
fixed-price energy services business.
- The Canadian propane business generated gross profit of $90.3
million in the first quarter compared to $77.1 million in the prior
year quarter due to improved sales volumes and higher average sales
margins.
- Canadian propane average sales margins were 19.9 cents per
litre in the first quarter compared to 18.0 cents per litre in the
prior year quarter. The increase in average sales margin was due in
part to an improved sales mix as a result of a higher proportion of
residential sales volumes combined with the impact of improved
pricing management. Pricing management during the first quarter of
2014 was critical due to the volatility in the wholesale cost of
propane throughout the quarter.
- Canadian propane distribution sales volumes were 25 million
litres or 6% higher than the prior year quarter due to improved
volumes in all lines of business. Residential and commercial sales
volumes benefited from colder than average temperatures across
Canada and improved customer sales and retention efforts.
Industrial sales volumes were impacted by colder than average
temperatures compared to the prior year quarter, offset in part, by
the impact of reduced oilfield demand.
- Average weather across Canada, as measured by degree days, for
the first quarter was 12% colder than the prior year and 11% colder
than the 5-year average. The colder than average weather and
numerous winter storms positively impacted sales volumes but
resulted in challenging operating and supply conditions which
resulted in higher operating costs, partially mitigating the
benefit of improved sales volumes.
- The U.S. refined fuels business generated gross profits of
$68.8 million in the first quarter compared to $52.9 million in the
prior year quarter. Gross profits benefited from improved sales
mix, margin management initiatives and colder than average
temperatures.
- U.S. refined fuels average sales margins of 14.0 cents per
litre in the quarter were higher than the prior year quarter of
10.3 cents per litre. Average sales margins benefitted from an
increased proportion of higher margin residential sales volumes and
improved margins in the wholesale business. Residential margins
benefitted from ongoing margin management initiatives and strategic
supply initiatives. Wholesale margins benefited from improved
supply terms with key suppliers noted in the fourth quarter of 2013
and strategic procurement initiatives. As noted in the fourth
quarter of 2013, the wholesale market is anticipated to remain
challenging throughout 2014, although Superior has begun to realize
the benefit of improved supply terms which will help mitigate the
reduction in sales volumes.
- Sales volumes within the U.S. refined fuels business were 20
million litres or 4% lower than the prior year. Sales volumes were
impacted by reduced wholesale volumes as noted above, offset by
improved residential sales margins and volumes due to colder than
average weather experienced during the first quarter.
- Average weather for the U.S. refined fuel business, as measured
by degree days, for the first quarter was 18% colder than the prior
year and 21% colder than the 5-year average. The impact of weather
on the day-to-day operations was not as significant as compared to
the impact on the Canadian propane business.
- The fixed-price energy services business generated gross
profits of $(4.3) million compared to $4.7 million in the prior
year quarter. Results in the fixed-price energy business were
significantly impacted by volatility in the wholesale cost of
natural gas and electricity due to the extreme weather conditions
experienced throughout the Northeast U.S. and Eastern Canada.
Losses in this business were due to a combination of load balancing
and fulfilling customer contracts at higher than anticipated volume
at high spot prices. Higher than anticipated volumes and volatile
commodity prices were directly attributable to the cold
temperatures.
- On May 1, 2014, Superior completed the sale of the U.S. portion
of its fixed-price energy business for proceeds of $3.1 million,
with additional deferred consideration of approximately $1.9
million due over the next nine months if certain conditions are
met. The sale simplifies Superior's fixed-price energy business,
leaving only the Canadian commercial and industrial natural gas and
electricity markets in Ontario, Quebec and Alberta which have a
much broader scope and scale than Superior's U.S. business. In
light of the sale of the U.S. business, Superior is currently
reviewing the strategic fit of the Canadian fixed-price business to
the Energy Services business.
- The supply portfolio management business generated gross
profits of $11.2 million in the first quarter compared to $7.9
million in the prior year quarter. Market conditions were
favourable during the first quarter, but were mitigated in part, by
a difficult environment for transporting wholesale liquids.
Transportation of wholesale liquids during the quarter were
significantly constrained due to difficult weather conditions
throughout much of Eastern Canada and the Northeast U.S. as a
result of numerous winter storms which resulted in reduced
availability of truck and rail. Given the scope and scale of
Superior's supply portfolio management business, Superior's
Canadian propane and U.S. refined fuels businesses were able to
continue to supply their customers with product during this very
challenging environment. The difficult conditions did result in
higher transportation costs throughout the first quarter of
2014.
- Operating expenses were $102.9 million in the first quarter
compared to $85.7 million in the prior year quarter. Operating
expenses were impacted by higher sales volumes in the Canadian
propane business and U.S. refined fuels business combined with
difficult operating conditions throughout the quarter due to
weather as previously mentioned. Additionally, operating expenses
were impacted by higher employee costs and professional costs
associated with the implementation of the ADD IT system, offset in
part, by cost reduction initiatives. The ADD IT system was
successfully implemented in the prairie region during April 2014;
the remaining regions: Ontario and Quebec are scheduled for
implementation during the second quarter of 2014.
- EBITDA from operations for 2014 is anticipated to be higher
than in 2013 due to improved results at the Canadian propane and
U.S. refined fuels businesses. Improvement in EBITDA is anticipated
as a result of modestly higher sales volumes and improved average
sales margins due to the ongoing implementation of business
initiatives. EBITDA from the wholesale supply business is
anticipated to be higher than in 2013 due to year-to-date results,
whereas EBITDA from the fixed-price business is anticipated to be
lower than 2013 due to 2014 year-to-date results. Operating costs
as a percentage of gross profits are anticipated to be modestly
lower than the prior year due to improvements from business
initiatives offset in part by costs associated with difficult
operating conditions throughout the first quarter of 2014. Average
weather, as measured by degree days, for the remaining three
quarter of 2014 is anticipated to be consistent with the 5-year
average period. Operating conditions for the remainder 2014 are
anticipated to be similar to 2013.
Specialty Chemicals
- EBITDA from operations for the first quarter was $29.6 million
compared to $32.9 million in the prior year quarter.
- Sodium chlorate gross profits were higher than the prior year
quarter as improved sales volumes resulting from the Tronox
agreement announced in the fourth quarter of 2013 more than offset
reduced average gross margins. Gross margin per tonne was modestly
lower than the prior year due to higher electricity costs and
increased truck transportation costs associated with extreme winter
conditions. Gross margin per tonne was also impacted by sales mix
due to a higher proportion of international and Tronox related
sales volumes.
- Sodium chlorate sales volumes were 15% higher than the prior
year quarter due to sales volumes associated with the Tronox
agreement. The Tronox agreement, announced on October 31, 2013,
provides that Superior can purchase and market up to 130,000 metric
tonnes of sodium chlorate on an annual basis.
- Chloralkali gross profits were modestly lower than the prior
year quarter as lower realized pricing on caustic soda and
hydrochloric acid, more than offset improved potassium caustic
selling prices and sales volumes.
- Operating expenses of $38.4 million were $5.6 million higher
than the prior year due to the impact of a weaker Canadian dollar
on the foreign currency translation of U.S. dollar denominated
expenses, higher maintenance costs, and general inflationary
increases, offset in part, by a foreign currency translation gain
on the revaluation of U.S. dollar denominated working capital.
- The previously announced hydrochloric acid expansion projects
at Port Edwards, Wisconsin and Saskatoon, Saskatchewan remain
on-time and on-budget. Upon completion of both projects, Superior
will have doubled its total hydrochloric acid production capacity
to 360,000 wet metric tonnes. The expansion of the production
capacity will allow Superior to optimize overall returns at both
facilities by converting a larger portion of its chlorine into
higher value hydrochloric acid, thus reducing Superior's exposure
to chlorine. The Port Edwards project is anticipated to cost $18
million with commercial production expected early in the fourth
quarter of 2014. The Saskatoon project is anticipated to cost $25
million with commercial production expected in the fourth quarter
of 2014. To date, cumulative costs of $24 million have been
incurred with respect to both projects.
- Superior expects EBITDA from operations for 2014 to be lower
than in 2013 due to a reduced contribution from sodium chlorate due
to higher electricity prices and plant operating costs, offset in
part, by the contribution from the Tronox agreement. Contribution
from the chloralkali segment is anticipated to be higher than 2013
due to the completion of the hydrochloric acid facility expansions
in the fourth quarter of 2014. Sales volumes of caustic, chlorine
and hydrochloric acid are anticipated to be modestly higher than
2013, offset by lower average selling prices. Supply and demand
fundamentals in the chloralkali markets in which Superior operates
are anticipated to remain similar with the prior year.
Construction Products Distribution
- EBITDA from operations for the first quarter was $4.5 million
compared to $5.0 million in the prior year quarter. Results in the
current year quarter were negatively impacted by adverse weather
conditions and $1.5 million in costs associated with deferring the
IT system integration project, the impacts of which more than
offset benefits from higher average selling prices and improved
average sales margins.
- Gross profit was higher than the prior year quarter due to
improved average selling prices and higher average sales margins.
Gypsum revenues were higher than the prior year quarter due to
improved U.S. sales volumes as a result of ongoing improvements in
the U.S. residential construction sector, higher average selling
prices and the impact of foreign currency translation on U.S.
denominated revenues. These improvements more than offset lower
revenues in Canada due to adverse weather conditions and a slowdown
in Canadian new housing starts and general construction related
activity. Gypsum sales margins benefited from improved board
pricing and the success of intelligent pricing initiatives.
- Commercial and industrial insulation (C&I) revenues
increased over the prior year quarter due to modest improvements in
end-use markets, an increase in market share due to investments in
sales and marketing, the opening of a new branch in Baton Rouge,
Louisiana and a stronger U.S. dollar. C&I gross margins were
modestly higher than the prior year due to marginally improved
market conditions and the implementation of intelligent pricing
initiatives.
- Operating expenses for the first quarter were $43.0 million
compared to $40.1 million in the prior year quarter. Operating
costs were impacted by costs associated with deferring the IT
system integration project, higher sales volumes in the U.S., the
impact of foreign currency translation on U.S. denominated
expenses, difficult operating conditions due to adverse weather
during the first quarter, investments in sales and marketing in the
C&I segment and general inflationary increases of wages and
benefits. Operating expenses as a percentage of sales were modestly
higher than the prior year quarter due to the impact of weather as
noted above and lower Canadian revenues.
- As previously noted, Superior's Board of Directors has approved
the commencement of a formal process to solicit and assess offers
for the potential divestiture of the CPD business.
- Before consideration of the timing of the sales process noted
above, Superior anticipates that EBITDA from operations in 2014
will be higher than in 2013 due to continued improvements in U.S.
residential construction markets, benefits resulting from ongoing
business initiatives and improvements in the commercial and
industrial markets. Superior anticipates that the U.S. commercial
market will be modestly improved in 2014 compared to 2013 and that
the Canadian residential market will continue to be
challenging.
Corporate Related
- Interest expense for the first quarter was $12.9 million
compared to $17.0 million in the prior year quarter. Interest
expense was lower than the prior year quarter as a result of lower
average effective interest rates.
- Corporate costs were $4.8 million in the first quarter which
was $1.3 million lower than the prior year quarter. The decrease in
corporate costs is due to lower long-term incentive plan costs due
to changes in Superior's share price compared to December 31,
2013.
- Superior's total debt (including convertible debentures) to
Compliance EBITDA before restructuring costs was 3.9X as at March
31, 2014 (4.1X after restructuring costs), consistent with 3.9X as
at December 31, 2013. See "Debt Management Update" for additional
details.
- On April 25, 2014, Superior completed the repayment of the
$125.0 million short-term loan facility which was entered into on
February 14, 2014 to ensure Superior maintained sufficient
liquidity to manage short-term fluctuations in working capital
requirements throughout the first quarter of 2014 due to volatility
in the wholesale cost of propane. The wholesale cost of propane
normalized by the end of the first quarter, alleviating working
capital requirements and allowing Superior to redeem the short-term
facility before its maturity date.
CRA Income Tax Update
As previously disclosed, on April 2, 2013 Superior received from
the CRA Notices of Reassessment for Superior's 2009 and 2010
taxation years reflecting the CRA's intent to challenge the tax
consequences of Superior's corporate conversion transaction
(Conversion) which occurred on December 31, 2008. The CRA's
position is based on the acquisition of control rules, in addition
to the general anti-avoidance rules in the Income Tax Act
(Canada).
The table below summarizes Superior's estimated tax liabilities
and payment requirements associated with the received and
anticipated Notices of Reassessment. Upon receipt of the Notices of
Reassessment, 50% of the taxes payable pursuant to such Notices of
Reassessment, must be remitted to the CRA.
Taxation Year |
|
Taxes Payable (1)(2) |
|
50% of the Taxes Payable (1)(2) |
|
Payment Dates |
2009/2010 |
|
$13.0 |
|
$6.5 |
|
April 2013 |
2011 |
|
$10.0 |
(3) |
$5.0 |
|
2015 |
2012 |
|
$10.0 |
(3) |
$5.0 |
|
2015 |
2013 |
|
$10.0 |
(3) |
$5.0 |
|
2015 |
2014 |
|
$20.0 |
(3) |
$10.0 |
|
2015 |
Total |
|
$63.0 |
|
$31.5 |
|
|
(1) |
In
millions of dollars. |
(2) |
Includes estimated interest and penalties. |
(3) |
Estimated based on Superior's previously filed tax returns, actual
2013 financial results and the midpoint of Superior's 2014
financial outlook. |
During 2013, Superior filed a Notice of Objection and a Notice
of Appeal with respect to the Notice of Reassessments received on
May 8, 2013. Superior anticipates that if the case proceeds in the
Tax Court of Canada, the case could be heard in the first quarter
of 2015, with a decision rendered by the end of fiscal 2015. If a
decision of the Tax Court of Canada were to be appealed, the appeal
process could reasonably be expected to take an additional 2 years.
If Superior receives a positive decision then any taxes, interest
and penalties paid to the CRA will be refunded plus interest and if
Superior is unsuccessful then any remaining taxes payable plus
interest and penalties will have to be remitted.
Superior remains confident in the appropriateness of its tax
filing position and the expected tax consequences of the Conversion
and intends to vigorously defend such position and intends to file
its future tax returns on a basis consistent with its view of the
outcome of the Conversion.
Interim tax payments made by Superior will be recorded to the
balance sheet and will not materially impact either adjusted
operating cash flow or net earnings.
Based on the midpoint of Superior's current 2014 financial
outlook of AOCF per share of $1.80, if the tax pools from the
Conversion were not available to Superior, the impact would be an
increase to cash income taxes of approximately $0.15 per share for
2014. As previously stated, Superior intends to file its future
income tax returns on a basis consistent with its view of the
outcome of the Conversion.
2014 Financial Outlook
Superior expects 2014 AOCF per share of $1.65 to $1.95,
consistent with the financial outlook provided at the end of the
fourth quarter of 2013. Superior's 2014 financial outlook is stated
before the impact of one-time restructuring costs anticipated to be
incurred in 2014 and the potential sale of the Construction
Products Distribution business.
For additional details on the assumptions underlying the 2014
financial outlook, see Superior's 2014 First Quarter MD&A.
Restructuring Cost Summary
|
Three months ended March 31, |
Cumulative |
(millions of dollars) |
2014 |
2013 |
2014 and 2013 |
Severance |
0.4 |
0.2 |
6.1 |
Branch closure and lease termination |
- |
- |
4.7 |
Consulting |
1.4 |
- |
2.7 |
Inventory write-down |
- |
- |
3.6 |
Total Restructuring Costs |
1.8 |
0.2 |
17.1 |
As previously disclosed in Superior's 2013 third quarter
MD&A, Superior is undertaking restructuring activities in its
Energy Services and Construction Products Distribution businesses
to accelerate ongoing operational improvements. As a result of
these activities, Superior incurred $1.8 million in costs in the
first quarter of 2014. Superior anticipates that an additional $5
to $7 million in restructuring costs will be expensed during the
second quarter of 2014. Superior's forecasted total restructuring
costs of $22 to $25 million are consistent with the estimate
provided in the fourth quarter of 2013.
Debt Management Update
Superior's anticipated debt repayment for 2014 and total debt to
EBITDA leverage ratio as at December 31, 2014, based on Superior's
2014 financial outlook is detailed in the chart below. Superior's
December 31, 2014 forecasted total debt to EBITDA leverage ratio is
stated before restructuring costs and before the potential impact
of the sale of CPD.
|
Dollar Per Share |
Millions of Dollars |
2014 financial outlook AOCF per share - mid-point (1) |
1.80 |
227.1 |
Maintenance capital expenditures, net |
(0.28) |
(35.0) |
Capital lease obligation repayments |
(0.16) |
(20.0) |
Restructuring costs |
(0.16) |
(20.0) |
Cash flow available for dividends and debt repayment before growth
capital |
1.20 |
152.1 |
Expansion of Port Edward's and Saskatoon facilities |
(0.17) |
(22.0) |
Other growth capital expenditures |
(0.12) |
(15.0) |
Proceeds on disposition of turbo generator in Chile |
0.12 |
15.0 |
Estimated 2014 free cash flow available for dividend and debt
repayment |
1.03 |
130.1 |
Dividends |
(0.60) |
(75.7) |
Total estimated debt repayment |
0.43 |
54.4 |
Estimated total debt to EBTIDA as at December 31, 2014 |
3.6X - 4.0X |
3.6X - 4.0X |
|
|
|
Dividends |
0.60 |
75.7 |
Calculated payout ratio after all capital |
58% |
58% |
(1) |
See
"Financial Outlook" in Superior's 2014 First Quarter MD&A for
additional details including assumptions, definitions and risk
factors. |
Superior's total debt (including convertible debentures) to
Compliance EBITDA before restructuring costs was 3.9X as at March
31, 2014 (4.1X after restructuring costs), consistent with the 3.9X
as at December 31, 2013. Debt levels and total leverage as at March
31, 2014 were consistent with December 31, 2013 levels as working
capital levels in the Energy Services business were high due to
strong sales volumes. Superior anticipates that working capital
levels will reduce throughout the second quarter of 2014 due to the
seasonal nature of Superior's Energy Service business. Superior
continues to focus on reducing its total leverage through ongoing
debt reduction, including reducing working capital requirements and
improving business operations.
Superior remains focused on managing both its total debt and its
total debt to EBITDA. Superior's forecasted total debt to EBITDA at
December 31, 2014 is 3.6X to 4.0X, consistent with the forecast
provide by Superior in the fourth quarter of 2103. Superior
anticipates being at the lower end of the total debt to EBITDA
range.
2014 Detailed First Quarter Results
Superior's 2014 First Quarter Management's Discussion and
Analysis is attached and is also available on Superior's website at
www.superiorplus.com under the Investor Relations section.
2014 First Quarter Conference Call
Superior will be conducting a conference call and webcast for
investors, analysts, brokers and media representatives to discuss
the 2014 First Quarter Results at 8:30 a.m. MST on Thursday, May 8,
2014. To participate in the call, dial:1-877-577-0837. An archived
recording of the call will be available for replay until midnight,
July 6, 2014. To access the recording, dial: 1-800-408-3053 and
enter pass code 4639812 followed by the # key. Internet users can
listen to the call live, or as an archived call, on Superior's
website at www.superiorplus.com.
Supplemental Financial Information
Diluted AOCF Per Share
For the three months ended March 31, 2014, the dilutive impact
of the 7.50%, October 31, 2016 convertible debentures was 6.6
million shares (132.8 million total shares on a dilutive basis)
with a resulting impact on AOCF before restructuring costs of $1.4
million ($89.6 million total on a dilutive basis) and on AOCF of
$1.4 million ($87.8 million total on a dilutive basis). For the
three months ended March 31, 2013, the dilutive impact of the
7.50%, October 31, 2016 convertible debentures was 6.6 million
shares (120.3 million total shares on a dilutive basis) with a
resulting impact on AOCF of $1.4 million ($83.6 million total on a
dilutive basis) and on AOCF of $1.4 million ($83.4 million total on
a dilutive basis).
Forward Looking Information
Certain information included herein is forward-looking
information within the meaning of applicable Canadian securities
laws. Forward-looking information may include statements regarding
the objectives, business strategies to achieve those objectives,
expected financial results (including those in the area of risk
management), economic or market conditions, and the outlook of or
involving Superior, Superior LP and its businesses. Such
information is typically identified by words such as "anticipate",
"believe", "continue", "could", "estimate", "expect", "plan",
"intend", "forecast", "future", "guidance", "may", "predict",
"project", "should", "strategy", "target", "will" or similar
expressions suggesting future outcomes.
Forward-looking information in this document includes: future
financial position, consolidated and business segment outlooks,
expected EBITDA from operations, expected adjusted operating cash
flow (AOCF) and adjusted operating cash flow per share, expected
leverage ratios and debt repayment, debt management summary,
expectations in terms of the cost of operations, capital spend and
maintenance and the variability of these costs, timing, costs and
benefits of restructuring activities, outcome and timing of the
sale of the Construction Products Distribution business, business
strategy and objectives, development plans and programs, business
expansion and improvement projects, expected timing of commercial
production and the costs and benefits associated therewith, market
conditions in Canada and the U.S., expected tax consequences of the
Conversion, the challenge by the CRA of the tax consequences of the
Conversion (and the expected timing and impact of such process
including any payment of taxes and the quantum of such payments),
future income taxes, the impact of proposed changes to Canadian tax
legislation or U.S. tax legislation, future economic conditions,
future exchange rates and exposure to such rates, dividend
strategy, payout ratio, expected weather, expectations in respect
to the global economic environment, our trading strategy and the
risk involved in these strategies, the impact of certain hedges on
future reported earnings and cash flows, commodity prices and
costs, the impact of contracts for commodities, demand for propane,
heating oil and similar products, demand for chemicals including
sodium chlorate and chloralkali, effect of operational and
technological improvements, anticipated costs and benefits of
restructuring activities, business enterprise system upgrade plans,
future working capital levels, expected governmental regulatory
regimes and legislation and their expected impact on regulatory and
legislative compliance costs, expectations for the outcome of
existing or potential legal and contractual claims, our ability to
obtain financing on acceptable terms, expected life of facilities
and statements regarding net working capital and capital
expenditure requirements of Superior or Superior Plus LP.
Forward-looking information is provided for the purpose of
providing information about management's expectations and plans
about the future and may not be appropriate for other purposes.
Forward-looking information herein is based on various assumptions
and expectations that Superior believes are reasonable in the
circumstances. No assurance can be given that these assumptions and
expectations will prove to be correct. Those assumptions and
expectations are based on information currently available to
Superior, including information obtained from third party industry
analysts and other third party sources, and the historic
performance of Superior's businesses. Such assumptions include
anticipated financial performance, current business and economic
trends, the amount of future dividends paid by Superior, business
prospects, availability and utilization of tax basis, regulatory
developments, currency, exchange and interest rates, trading data,
cost estimates, our ability to obtain financing on acceptable
terms, the assumptions set forth under the "Financial Outlook"
sections of our first quarter management's discussion and analysis
("MD&A") and are subject to the risks and uncertainties set
forth below.
By its very nature, forward-looking information involves
numerous assumptions, risks and uncertainties, both general and
specific. Should one or more of these risks and uncertainties
materialize or should underlying assumptions prove incorrect, as
many important factors are beyond our control, Superior's or
Superior LP's actual performance and financial results may vary
materially from those estimates and intentions contemplated,
expressed or implied in the forward-looking information. These
risks and uncertainties include incorrect assessments of value when
making acquisitions, increases in debt service charges, the loss of
key personnel, fluctuations in foreign currency and exchange rates,
inadequate insurance coverage, liability for cash taxes,
counterparty risk, compliance with environmental laws and
regulations, operational risks involving our facilities, force
majeure, labour relations matters, our ability to access external
sources of debt and equity capital, and the risks identified in (i)
our MD&A under the heading "Risk Factors" and (ii) Superior's
most recent Annual Information Form. The preceding list of
assumptions, risks and uncertainties is not exhaustive.
When relying on our forward-looking information to make
decisions with respect to Superior, investors and others should
carefully consider the preceding factors, other uncertainties and
potential events. Any forward-looking information is provided as of
the date of this document and, except as required by law, neither
Superior nor Superior LP undertakes to update or revise such
information to reflect new information, subsequent or otherwise.
For the reasons set forth above, investors should not place undue
reliance on forward-looking information.
For more information about Superior, visit our website at
www.superiorplus.com.
Management's Discussion and Analysis of 2014 First Quarter
Results
May 7, 2014
The following Management Discussion & Analysis (MD&A) is
a review of the financial performance and position of Superior Plus
Corp. (Superior) as at and for the three months ended March 31,
2014 and 2013. The information in this MD&A is current to May
7, 2014. This MD&A should be read in conjunction with
Superior's audited consolidated financial statements and notes to
those statements as at and for the twelve months ended December 31,
2013 and its December 31, 2013 MD&A. Additional information
regarding Superior, including the Annual Information Form, is
available on SEDAR at www.sedar.com, and on Superior's website,
www.superiorplus.com.
The accompanying unaudited condensed consolidated financial
statements of Superior were prepared by and are the responsibility
of Superior's management. Superior's unaudited condensed
consolidated financial statements were prepared in accordance with
International Accounting Standard 34 Interim Financial
Reporting as issued by the International Accounting Standards
Board (IASB). Dollar amounts in this MD&A are expressed in
Canadian dollars and millions except where otherwise noted.
Overview of Superior
Superior is a diversified business corporation. Superior holds
99.9% of Superior Plus LP (Superior LP), a limited partnership
formed between Superior General Partner Inc. (Superior GP) as
general partner and Superior as limited partner. Superior owns 100%
of the shares of Superior GP and Superior GP holds 0.1% of Superior
LP. The cash flow of Superior is solely dependent on the results of
Superior LP and is derived from the allocation of Superior LP's
income to Superior by means of partnership allocations. Superior,
through its ownership of Superior LP and Superior GP, has three
operating segments: the Energy Services segment, which includes a
Canadian propane distribution business, a U.S. refined fuels
distribution business, a fixed-price energy services business and a
supply portfolio management business; the Specialty Chemicals
segment; and the Construction Products Distribution segment.
First Quarter
Results
Summary of Adjusted Operating Cash Flow
|
Three months ended March 31, |
(millions of dollars except per share
amounts) |
2014(4) |
2013(4) |
EBITDA from operations: (1) |
|
|
|
Energy Services |
72.2 |
67.8 |
|
Specialty Chemicals |
29.6 |
32.9 |
|
Construction Products Distribution |
4.5 |
5.0 |
|
106.3 |
105.7 |
Interest expense |
(12.9) |
(17.0) |
Corporate costs |
(4.8) |
(6.1) |
Cash income tax expense |
(0.4) |
(0.4) |
Adjusted operating cash (1) flow before restructuring
costs |
88.2 |
82.2 |
Restructuring costs |
(1.8) |
(0.2) |
Adjusted operating cash flow(1) |
86.4 |
82.0 |
|
|
|
Adjusted operating cash flow per share before
restructuring costs, basic(2) |
$0.70 |
$0.72 |
Adjusted operating cash flow per share before
restructuring costs, diluted(3) |
$0.68 |
$0.69 |
Adjusted operating cash flow per share, basic(2) |
$0.68 |
$0.72 |
Adjusted operating cash flow per share, diluted(3) |
$0.66 |
$0.69 |
(1) |
Earnings before interest, taxes, depreciation and amortization
(EBITDA) and adjusted operating cash flow are not IFRS measures.
See "Non-IFRS Financial Measures". |
(2) |
The
weighted average number of shares outstanding for the three months
ended March 31, 2014, is 126.2 million (March 31, 2013 - 113.7
million). |
(3) |
For
the three months ended March 31, 2014, the dilutive impact of the
7.50%, October 31, 2016 convertible debentures was 6.6 million
shares (132.8 million total shares on a dilutive basis) with a
resulting impact on AOCF before restructuring costs of $1.4 million
($89.6 million total on a dilutive basis) and on AOCF of $1.4
million ($87.8 million total on a dilutive basis). For the three
months ended March 31, 2013, the dilutive impact of the 7.50%,
October 31, 2016 convertible debentures was 6.6 million shares
(120.3 million total shares on a dilutive basis) with a resulting
impact on AOCF of $1.4 million ($83.6 million total on a dilutive
basis) and on AOCF of $1.4 million ($83.4 million total on a
dilutive basis). Superior's diluted per share amounts exclude all
debentures which have an exercise price above Superior's share
price as at March 31, 2014 since it is unlikely any material
conversions would occur. |
(4) |
Superior has restated its 2013 financial results and presented its
2014 financial results on a before and after restructuring cost
basis due to the one-time nature of these items. See Restructuring
Costs for further details. |
Adjusted Operating Cash Flow Reconciled to Net Cash Flow from
Operating Activities (1)
|
Three months ended March 31, |
(millions of dollars) |
2014 |
|
2013 |
|
Net cash flow from operating activities |
51.1 |
|
95.3 |
|
Add: |
|
|
|
|
|
Non -cash interest expense |
1.5 |
|
1.7 |
|
|
Increase in non-cash working capital |
48.6 |
|
4.1 |
|
Less: |
|
|
|
|
|
Gain on debenture redemptions |
- |
|
(0.2 |
) |
|
Income tax expense |
(0.4 |
) |
(0.4 |
) |
|
Finance expense recognized in net earnings |
(14.4 |
) |
(18.5 |
) |
Adjusted operating cash flow |
86.4 |
|
82.0 |
|
(1) |
See
the unaudited condensed consolidated financial statements for net
cash flow from operating activities and changes in non-cash working
capital. |
First quarter adjusted operating cash flow (before restructuring
costs of $1.8 million) was $88.2 million, an increase of $6.0
million or 7% from the prior year quarter. The increase in adjusted
operating cash flow was primarily due to higher operating results
at Energy Services and lower interest costs. Adjusted operating
cash flow (before restructuring costs) of $0.70 per share,
decreased by $0.02 per share from the prior year quarter due to a
11% increase in the weighted average number of shares outstanding
offset in part by the increase in adjusted operating cash flow as
noted above. The weighted average number of shares outstanding
increased as a result of shares issued from Superior's Dividend
Reinvestment Program and Optional Share Purchase Plan (DRIP) and
the completion of an equity offering on March 27, 2013 for gross
proceeds of $143.9 million and 13.0 million shares.
The net earnings for the first quarter were $40.6 million,
compared to net earnings of $31.4 million in the prior year
quarter. Net earnings were higher due to increased sales volumes
and gross margins as a result of colder weather as compared to
historical norms offset in part by higher operating costs. Interest
costs were lower due to reduced debt levels and unrealized
derivative financial instrument losses were lower due to foreign
currency losses on Superior's foreign currency financial
derivatives compared to the prior year quarter as a result of the
appreciation of the U.S. dollars offset in part by gains on natural
gas forward contracts due to an increase in natural gas prices.
Revenue of $1,282.4 million was $232.5 million higher than in the
prior year's quarter due to increased Energy Services revenue as a
result of higher propane commodity prices and sales volumes and
increased Specialty Chemicals revenue due to higher sales volumes
and favourable foreign exchange impact. Gross profit of $276.6
million was $23.5 million higher than in the prior year quarter
primarily due to increased Energy Services gross profits as a
result of higher sales volumes and gross margins and higher
Construction Products Distribution gross profits due to increased
gross margins offset in part by losses from the fixed price energy
business. Operating expenses of $200.7 million in the first quarter
were $21.6 million higher than in the prior year quarter primarily
due to increased operating expenses associated with higher sales
volumes at Energy Services and the negative impact of weaker
Canadian dollar on the translation of U.S. denominated operating
expenses. Total income tax expense for the first quarter was $16.8
million compared to income tax expense of $15.8 million in the
prior year quarter. The slight increase in income tax expense was
due to higher net earnings in the first quarter of 2014.
Energy Services
Energy Services' condensed operating results for 2014 and
2013:
|
Three months ended March 31, |
(millions of dollars) |
2014 |
|
2013 |
Revenue(1) |
939.6 |
|
719.7 |
|
Cost of sales(1) |
(764.5 |
) |
(566.2 |
) |
Gross profit |
175.1 |
|
153.5 |
|
Less: Cash operating and administrative costs(1) |
(102.9 |
) |
(85.7 |
) |
EBITDA from operations |
72.2 |
|
67.8 |
|
(1) |
In
order to better reflect the results of its operations, Superior has
reclassified certain amounts for purposes of this MD&A to
present its results as if it had accounted for various transactions
as accounting hedges. See "Reconciliation of Divisional Segmented
Revenue, Cost of Sales and Cash Operating and Administrative Costs
Included in this MD&A" for detailed amounts. |
(2) |
Energy Services EBITDA from operations has been restated and
restructuring cost have been excluded from EBITDA from operations.
The above results exclude restructuring costs for the three months
ended March 31, 2014 and 2013 of $1.8 million and $0.2 million,
respectively. See Restructuring Costs for further details. |
Revenues for the first quarter of 2014 were $939.6 million, an
increase of $219.9 million from revenues of $719.7 million in 2013.
The increase in revenues was primarily due to higher commodity
prices and sales volumes due to colder weather during the first
quarter as compared to the prior year quarter. Total gross profit
for the first quarter of 2014 was $175.1 million, an increase of
$21.6 million or 14% as compared to the prior year quarter. The
increase in gross profit was primarily due to higher sales volumes
and gross margins at Canadian propane distribution and U.S. refined
fuels along with strong contribution from supply portfolio
management offset in part by lower fixed-price energy services
gross profits. A summary and detailed review of gross profit is
provided below.
Gross Profit Detail
|
Three months ended March 31, |
(millions of dollars) |
2014 |
2013 |
Canadian propane distribution |
90.3 |
77.1 |
U.S. refined fuels distribution |
68.8 |
52.9 |
Other services |
9.1 |
10.9 |
Supply portfolio management |
11.2 |
7.9 |
Fixed-price energy services |
(4.3) |
4.7 |
Total gross profit |
175.1 |
153.5 |
Canadian Propane Distribution
Canadian propane distribution gross profit for the first quarter
was $90.3 million, an increase of $13.2 million or 17% from 2013,
due to higher sales volumes and gross margins. Residential and
commercial sales volumes increased by 19 million litres or 12% from
the prior year quarter due to significantly colder weather, new
residential sales and improved customer retention. Average weather
across Canada for the first quarter, as measured by degree days,
was 12% colder than the prior year and 11% colder than the
five-year average. Industrial volumes increased by 5 million litres
or 2% due to increased demand from large commercial and mining
customers as a result of colder weather. Automotive propane sales
volumes were consistent with the prior year quarter as increased
propane prices narrowed the price spread between propane and
gasoline which reduced demand.
Average propane sales margins for the first quarter increased to
19.9 cents per litre from 18.0 cents per litre in the prior year
quarter. The increase is principally due to favourable movement in
the sales mix as the current quarter included a higher proportion
of higher-margin heating related sales volumes, the benefit of
improved pricing management and the impact of declining supply
costs during the end of February and into March.
Canadian Propane Distribution Sales Volumes
Volumes by End-Use Application |
|
Volumes by Region (1) |
Three months ended March 31, |
|
Three months ended March 31, |
(millions of litres) |
2014 |
2013 |
|
(millions of litres) |
2014 |
2013 |
Residential |
60 |
52 |
|
Western Canada |
260 |
255 |
Commercial |
118 |
107 |
|
Eastern Canada |
159 |
144 |
Agricultural |
18 |
17 |
|
Atlantic Canada |
35 |
30 |
Industrial |
243 |
238 |
|
|
|
|
Automotive |
15 |
15 |
|
|
|
|
|
454 |
429 |
|
|
454 |
429 |
(1) |
Regions: Western Canada region consists of British Columbia,
Alberta, Saskatchewan, Manitoba, Northwest Ontario, Yukon and
Northwest Territories; Eastern Canada region consists of Ontario
(except for Northwest Ontario) and Quebec; and Atlantic Canada
region consists of New Brunswick, Newfoundland & Labrador, Nova
Scotia and Prince Edward Island. |
U.S. Refined Fuels Distribution
U.S. refined fuels distribution gross profit for the first
quarter was $68.8 million, an increase of $15.9 million or 30% from
the prior year quarter. The increase in gross profit was due to
higher gross margins offset in part by lower sales volumes. Sales
volumes of 492 million litres, decreased by 20 million litres or 4%
from the prior year quarter. The decrease was primarily due
continuing challenges in the wholesale market and supply
constraints offset in part by higher heating related demand for
heating oil, propane and commercial fuels as a result of the
extremely cold weather experienced in Northeastern U.S. Average
weather as measured by heating degree days for the first quarter
was 18% higher than the prior year quarter and 21% higher than the
5-year average. Average U.S. refined fuels sales margins of 14.0
cents per litre increased from 10.3 cents per litre in the prior
year quarter. Sales margins were positively impacted by a
favourable sales mix due to a higher proportion of higher-margin
heating related sales volumes, effective price and supply
management in an escalating cost environment and favourable foreign
exchange translation contribution.
U.S. Refined Fuels Distribution Sales Volumes
Volumes by End-Use Application (1) |
|
Volumes by Region(2) |
Three months ended March 31, |
|
Three months ended March 31, |
(millions of litres) |
2014 |
2013 |
|
(millions of litres) |
2014 |
2013 |
Residential |
164 |
143 |
|
Northeast United States |
492 |
512 |
Commercial |
211 |
226 |
|
|
|
|
Automotive |
117 |
143 |
|
|
|
|
|
492 |
512 |
|
|
492 |
512 |
(1) |
Volume: Volume of heating oil, propane, diesel and gasoline sold
(millions of litres). |
(2) |
Regions: Northeast United States region consists of Pennsylvania,
Connecticut, New York, and Rhode Island. |
Other Services
Other services gross profit was $9.1 million in the first
quarter, a decrease of $1.8 million from the prior year quarter due
to lower profitability on appliance and parts revenues.
Supply Portfolio Management
Supply portfolio management gross profits were $11.2 million in
the first quarter, an increase of $3.3 million from the prior year
quarter due to favourable market conditions, optimization of
arbitrage opportunities through logistics management and increased
sales volumes associate with colder weather offset in part by a
difficult environment for transporting supply which increased
transportation costs.
Fixed-Price Energy Services
Fixed-Price Energy Services Gross Profit
(millions of dollars except volume and per unit
amounts) |
Three months ended March 31, 2014 |
Three months ended March 31, 2013 |
Gross Profit |
Volume |
Per Unit |
Gross Profit |
Volume |
Per Unit |
Natural gas(1) |
(2.6) |
4.6 GJ |
(56.5¢)/GJ |
3.0 |
4.5 GJ |
66.7¢/GJ |
Electricity(2) |
(1.7) |
244.4 KWh |
(0.70¢)/KWh |
1.7 |
205.2KWh |
0.83¢/KWh |
Total |
(4.3) |
|
|
4.7 |
|
|
(1) |
Natural gas volumes are expressed in thousands of gigajoules
(GJ). |
(2) |
Electricity volumes are expressed in thousands of kilowatt hours
(KWh). |
Fixed-price energy services gross profit was a loss of $4.3
million in the first quarter, a decrease of $9.0 million or 191%
from $4.7 million in the prior year quarter. Natural gas gross
profit was a loss of $2.6 million, a decrease of $5.6 million from
the prior year quarter due to negative gross margins. Natural gas
gross profit per unit was a loss of 56.5 cents per gigajoule (GJ),
a decrease of 123.2 cents per GJ or 185% from the prior year
quarter due to a significant increase in the spot price of natural
gas associated with extremely cold weather which negatively
impacted margins as natural gas was purchased at high prices to
cover balancing and supply requirements. Sales volumes of natural
gas were 4.6 million GJ, an increase of 0.1 million GJ or 2% higher
than the prior year quarter due to colder weather. Electricity
gross profit in the first quarter of 2014 was a loss $1.7 million,
a decrease of $3.4 million or 200% from the prior year quarter due
to significantly increase in customer demand associated with
extremely cold weather which required the purchase of supply at
record high market prices.
Operating Costs
Cash operating and administrative costs were $102.9 million in
the first quarter of 2014, an increase of $17.2 million or 20% from
the prior year quarter. The increase in expenses was primarily due
to higher delivery costs associated with increased sales volumes
and difficult weather conditions, system conversion costs, higher
vehicle expenses and the impact of a weaker Canadian dollar on the
translation of U.S. denominated operating expenses offset in part
by cost reduction initiatives implemented during 2012/2013.
Fixed-Price Energy Asset Sale
On May 1, 2014, Superior closed the sale of its U.S. based
residential and commercial electricity customer base to Crius
Energy. Superior has decided to exit both the residential and
commercial Northeast U.S. based electricity markets in order to
focus on the Canadian market and reduce the risk of future losses
associated with volatility in electricity prices. Superior received
proceeds of $3.1 million from the sale on May 1, 2014 and expects
to receive deferred consideration of approximately $1.9 million
during the next 9 months if certain conditions are met.
Financial Outlook
EBITDA from operations for 2014 is anticipated to be higher than
in 2013 due to improved results at the Canadian propane and U.S.
refined fuels businesses. Improvement in EBITDA is anticipated as a
result of higher sales volumes and improved average sales margins
due to the ongoing business operational improvements and
contribution from colder weather experienced during the first
quarter. EBITDA from the wholesale supply business is anticipated
to higher than 2013 due to year-to-date results, whereas EBITDA
from fixed-price energy services is anticipated to be lower than
2013 due to 2014 year-to-date results. Operating costs as a
percentage of gross profits are anticipated to be modestly lower
than the prior year due to improvements from business initiatives
offset in part by costs associated with difficult operating
conditions throughout the first quarter of 2014. Average weather,
as measured by degree days, is anticipated to be consistent with
the five-year average for the remainder of 2014. Operating
conditions for the remainder of 2014 are expected to be similar to
2013. The difficult wholesale propane supply conditions experienced
at the beginning of 2014 due in part to lower than average propane
storage levels and colder than average temperatures moderated
towards the end of the first quarter and are expected to return to
historical levels during the second quarter.
Initiatives to improve results in the Energy Services business
continued during the first quarter of 2014 in conjunction with
Superior's Destination 2015 initiative and Superior's goal
for each of its businesses to become best-in-class. Business
improvement projects for 2014 include: a) improving customer
service, b) improving overall logistics and procurement functions,
c) enhancing the management of margins, d) working capital
management e) improving existing and implementing new technologies
to facilitate improvements to the business, f) headcount reductions
and g) execution of the detailed restructuring plan.
The restructuring plan for the Canadian Propane distribution and
U.S. refined fuels businesses are expected to accelerate
realization of operating efficiencies by implementing a more
disciplined and consistent management operating system across the
segment designed to leverage the new processes and information
system investments and by sizing the organization to efficiently
meet its operational business needs. The restructuring plan is
expected to be completed by mid-2014.
System Conversion
In 2013, Canadian propane distribution commenced the
implementation of an order-to-cash, billing and logistics IT system
to replace the distribution and invoicing functions of the present
enterprise system. The total estimated cost of the implementation
is $21.7 million. Approximately $19.0 million has been incurred to
date and the estimated completion is the summer of 2014. During the
third and fourth quarters of 2013, the new system was successfully
implemented in the Atlantic and British Columbia regions and during
April of 2014, it was successfully implemented in the Prairies. The
remaining three regions will be converted during the remainder of
the second quarter of 2014. The implementation has been phased in
order to minimize the impact on the business during the heating
season.
During 2014, Canadian propane distribution will migrate its
current data center located in Calgary, Alberta to a new location
in New Jersey, U.S. along with approximately 175 services and more
than 200 applications. Superior does not anticipated any business
interruptions associated with the migration.
In addition to the significant assumptions detailed above, refer
to "Risk Factors to Superior" for a detailed review of significant
business risks affecting the Energy Services' businesses.
Specialty Chemicals
Specialty Chemicals' condensed operating results for 2014 and
2013;
(millions of dollars except per metric tonne (MT)
amounts) |
Three months ended March 31, |
2014 |
|
2013 |
|
$ per MT |
$ per MT |
Chemical revenue(1) |
159.1 |
|
716 |
|
144.6 |
|
711 |
|
Chemical cost of sales (1) |
(91.1 |
) |
(410 |
) |
(78.9 |
) |
(388 |
) |
Chemical gross profit |
68.0 |
|
306 |
|
65.7 |
|
323 |
|
Less: Cash operating and administrative costs(1) |
(38.4 |
) |
(173 |
) |
(32.8 |
) |
(161 |
) |
EBITDA from operations |
29.6 |
|
133 |
|
32.9 |
|
162 |
|
Chemical volumes sold (thousands of MTs) |
222 |
|
203 |
|
(1) |
In
order to better reflect the results of its operations, Superior has
reclassified certain amounts for purposes of this MD&A related
to derivative financial instruments, non-cash amortization and
foreign currency translation losses or gains related to
U.S.-denominated working capital. See "Reconciliation of Divisional
Segmented Revenue, Cost of Sales and Cash Operating and
Administrative Costs Included in this MD&A" for detailed
amounts. |
Chemical revenue for the first quarter of $159.1 million was
$14.5 million or 10% higher than in the prior year quarter
primarily due to higher sodium chlorate sales volumes offset in
part by lower chloralkali/potassium pricing. First quarter gross
profit of $68.0 million was $2.3 million higher than in the prior
year quarter due to higher sodium chlorate gross profits. Sodium
chlorate gross profits increased due to higher sales volumes offset
in part by lower gross margins. Sodium chlorate gross margins were
lower due to higher average electricity costs, increased
transportation costs associated with extreme winter conditions and
sales mix due to a higher proportion of international and Tronox
related sales volumes. Sodium chlorate sales volumes increased by
approximately 18,000 tonnes or 15% compared to the prior year
quarter due to incremental contribution from the Tronox agreement
announced in the fourth quarter of 2013 and provides Superior with
access to up to 130,000 tonnes of supply on an annual basis.
Chloralkali/potassium products gross profits were lower than the
prior year quarter due to slightly lower gross margins offset by
higher sale volumes. Sales volumes were higher due to increased
demand for potassium caustic offset in part by lower chlorine sales
volumes. Gross margins were lower due to a reduction in average
selling prices for caustic and hydrochloric acid.
Cash operating and administrative costs of $38.4 million were
$5.6 million or 17% higher than in the prior year quarter due to
impact of a weaker Canadian dollar on the translation of U.S.
dollar denominated expenses, timing of plant maintenance and
general inflationary increases offset in part by gains on the
translation of U.S. dollar denominated net working capital.
Major Capital Projects
As announced in the first quarter of 2012, Superior approved an
$18.0 million expansion of hydrochloric acid production capacity at
the Port Edwards, Wisconsin chloralkali facility. The plant's
capacity of 110,000 wet metric tonnes (WMT), or 36,000 dry metric
tonnes, is being increased to approximately 220,000 WMT. The
expansion project commenced in 2012, with commercial production
expected early in the fourth quarter of 2014.
As announced in the third quarter of 2012, Superior has approved
a $25.0 million expansion of hydrochloric acid production capacity
at the Saskatoon, Saskatchewan chloralkali facility. The plant's
capacity of 70,000 WMT, or 22,000 dry metric tonnes, will be
increased to approximately 140,000 WMT. The expansion project
commenced in 2012, with commercial production expected in the
fourth quarter of 2014.
As at March 31, 2014, a total of $24.0 million had been spent on
the two projects. Upon completion of both projects, Superior will
have total hydrochloric acid production capacity of approximately
360,000 WMT. The two expansions will allow Superior to optimize
overall returns at both facilities by converting a larger portion
of its chlorine into higher-value hydrochloric acid.
Financial Outlook
EBITDA from operations for 2014 is expected to be lower than in
2013 due to reduced sodium chlorate contribution from higher
average electricity prices and plant operating costs, offset in
part by the contribution from the Tronox agreement. Contribution
from the chloralkali segment is anticipated to be higher than in
2013 due to the completion of the hydrochloric acid facility
expansions during 2014. Selling prices and sales volumes of
caustic, chlorine and hydrochloric acid are anticipated to be
modestly higher than 2013, offset by lower average selling prices.
Supply and demand fundamentals in the chloralkali markets in which
Superior operates are anticipated to remain consistent with the
prior year.
In addition to the significant assumptions detailed above, refer
to "Risk Factors to Superior" for a detailed review of the
significant business risks affecting Superior's Specialty
Chemicals' segment.
Construction Products Distribution
Construction Products Distribution's condensed operating results
for 2014 and 2013:
|
Three months ended |
|
|
March 31, |
|
(millions of dollars) |
2014 |
|
2013 |
|
Revenue (2) |
185.8 |
|
186.5 |
|
Cost of sales (2) |
(138.3 |
) |
(141.4 |
) |
Gross profit |
47.5 |
|
45.1 |
|
Less: Cash operating and administrative costs |
(43.0 |
) |
(40.1 |
) |
EBITDA from operations |
4.5 |
|
5.0 |
|
(1) |
In
order to better reflect the results of its operations, Superior has
reclassified certain amounts for purposes of this MD&A to
present its results as if it had accounted for various transactions
as accounting hedges. See "Reconciliation of Divisional Segmented
Revenue, Cost of Sales and Cash Operating and Administrative Costs
Included in this MD&A" for detailed amounts. |
(2) |
The
prior year revenue and cost of sales classifications between GSD
and C&I have been adjusted to align with the ongoing
restructuring efforts. |
Revenues of $185.8 million for the first quarter of 2014 were
$0.7 million or nil% lower than in the prior year quarter. Revenue
decreased slightly due to a slowdown in Canadian new housing starts
and severe winter weather in both Canada and U.S. which reduced
construction activity and delivery days. This was offset in part by
higher contribution from some U.S. regions due to ongoing
improvement in the construction market, pricing initiatives and the
impact of a weaker Canadian dollar on the translation of U.S.
dollar revenue.
Gross profits of $47.5 million in the first quarter were $2.4
million or 5% higher than in the prior year quarter primarily due
to increased gross margins. The increase in gross margins was due
to improved average selling prices, successful procurement
initiatives including volume rebate achievements, sales mix, impact
of exiting less profitable markets and the benefit of a weaker
Canadian dollar on the translation of U.S. denominated revenue.
Cash operating and administrative costs were $43.0 million in
the first quarter, an increase of $2.9 million or 7% from the prior
year quarter. The increase was primarily due the impact of a weaker
Canadian dollar on the translation of U.S. denominated operating
costs, higher delivery costs due to adverse winter weather and
costs associated with suspending the system conversion project.
Construction Products Distribution Strategic Alternatives
As previously announced in Superior's fourth quarter financial
discussion, Superior has been assessing strategic alternatives for
its Construction Products Distribution segment and has retained BMO
Capital Markets as a financial advisor. As a result of the review,
Superior's Board of Directors has authorized the commencement of a
formal process to solicit and assess offers for the potential
divestiture of the Construction Products Distribution segment.
Financial Outlook
Before consideration of the timing of the sale process noted
above, Superior anticipates that EBITDA from operations in 2014
will be higher than in 2013 due to continued improvements in U.S.
residential construction markets, benefits resulting from ongoing
business initiatives and improvements in the commercial and
industrial insulation markets. Superior anticipates that the U.S.
commercial market will improve in 2014 over 2013 and that the
Canadian residential markets will continue to be challenging.
Initiatives to improve results in the Construction Products
Distribution business continued during the first quarter of 2014.
Ongoing business improvement projects include: a) assessment of
overall logistics and existing branch network, b) review of supply
chain management including procurement and transportation, c)
review of product pricing, d) working capital management, e) sales
growth in select focus products/markets, and f) execution of the
detailed restructuring plan.
In late 2013, Construction Products Distribution initiated a
business transformation project to fully integrate its C&I and
GSD operations. The project consists of realigning the management
structure along geographic lines, adopting best practice common
business processes, and integrating all operations onto a single
ERP (computer) system. The project was expected to take
approximately two years and conclude at the end of 2015. The ERP
system conversion has been placed on hold due to the proposed sale
of the Construction Products Distribution segment.
As part of the business transformation project, the decision was
made, in the fourth quarter of 2013, to relocate the Calgary,
Alberta corporate office to Dallas, Texas. The relocation has been
suspended pending the conclusion of the sale process.
In addition to the Construction Products Distribution segment's
significant assumptions detailed above, refer to "Risk Factors to
Superior" for a detailed review of the significant business risks
affecting Superior's Construction Products Distribution
segment.
Consolidated Capital Expenditure Summary
|
Three months ended |
|
March 31, |
(millions of dollars) |
2014 |
|
2013 |
|
Efficiency, process improvement and growth-related |
10.5 |
|
8.5 |
|
Other capital |
6.3 |
|
3.2 |
|
|
16.8 |
|
11.7 |
|
Proceeds on disposition of capital |
(0.4 |
) |
(0.5 |
) |
Total net capital expenditures |
16.4 |
|
11.2 |
|
Investment in finance leases |
0.9 |
|
1.0 |
|
Total expenditures including finance leases |
17.3 |
|
12.2 |
|
Efficiency, process improvement and growth related expenditures
were $10.5 million in the first quarter compared to $8.5 million in
the prior year quarter. These are primarily related to the
expansion projects at Specialty Chemicals and Energy Services'
purchases of rental assets and truck related expenditures although
additional expenditures were made during the quarter on the
Canadian Propane distribution system conversion. Other capital
expenditures were $6.3 million in the first quarter compared to
$3.2 million in the prior year quarter, consisting primarily of
required maintenance and general capital across all of Superior's
segments although additional expenditures were made at Specialty
Chemicals. Proceeds on the disposal of capital were $0.4 million in
the first quarter and consisted of Superior's disposition of
surplus tanks, cylinders and property. During the first quarter
Superior entered into new leases with a capital equivalent value of
$0.9 million primarily related to delivery vehicles for the Energy
Services and Construction Products Distribution segments.
Corporate and Interest Costs
Corporate costs for the first quarter were $4.8 million,
compared to $6.1 million in the prior year quarter. The decrease
was primarily due to lower long term incentive costs as Superior's
share price did not increase as significantly as the prior year
quarter offset in part by higher consulting and legal costs.
Interest expense on borrowing and finance lease obligations for
the first quarter was $5.4 million, compared to $9.1 million in the
prior year quarter. The decrease was due to lower average debt as a
result of Superior's $143.9 million equity offering ($137.8 million
net of issuance costs) which closed on March 27, 2013, higher cash
flows and the benefit of debt repayment efforts during the past 12
months. See "Liquidity and Capital Resources" discussion for
further details on the change in average debt levels.
Interest on Superior's convertible unsecured subordinated
debentures ("Debentures" which include all series of convertible
unsecured subordinated debentures) for the first quarter was $7.5
million compared to $7.9 million in the prior year quarter. The
decrease was due to the redemption of $49.9 million of Superior's
$25.0 million of Superior's 5.85% convertible subordinated
debentures due October 31, 2015 on April 9, 2013 and $68.9 million
of Superior's 7.50% convertible subordinated debentures due
December 31, 2014 on September 3, 2013 offset in part by the
issuance of $97.0 million of 6.00% convertible subordinated
debentures on July 22, 2013 which mature on June 30, 2019.
Restructuring Costs
Superior's restructuring costs have been categorized together
and excluded from segmented results. Below is a table summarizing
these costs:
|
|
Three months ended March 31, |
|
Cumulative costs for |
(millions of dollars) |
|
2014 |
|
2013 |
|
2013 and 2014 |
Severance costs |
|
0.4 |
|
0.2 |
|
6.1 |
Branch closure and lease termination costs |
|
- |
|
- |
|
4.7 |
Consulting costs |
|
1.4 |
|
- |
|
2.7 |
Inventory write-downs |
|
- |
|
- |
|
3.6 |
Total restructuring costs |
|
1.8 |
|
0.2 |
|
17.1 |
Superior recognized $1.8 million of restructuring costs during
the first quarter 2014 as compared to $0.2 million in the prior
year quarter. The $1.8 million of restructuring costs recognized
during the first quarter were related to employee severance costs
and consulting costs at Energy Services. Superior expects to incur
between $5 million and $7 million in restructuring costs during the
second quarter and a total of between $7 million and $10 million of
restructuring costs during 2014. Total restructuring costs are
anticipated to be between $22 million and $25 million during 2013
and 2014 which is consistent with the range provided in Superior's
fourth quarter 2013 Financial Discussion.
Income Taxes
Total income tax expense for the first quarter was $16.8 million
and consists of $0.4 million in cash income tax recovery and $16.4
million in deferred income tax expense, compared to a total income
tax expense of $15.8 million in the prior year quarter, which
consisted of $0.4 million in cash income tax expense and a $15.4
million deferred income tax expense.
Cash income tax expense for the first quarter was $0.4 million
and consisted of income tax expense in the U.S. of $0.4 million
(2013 Q1 - $0.4 million of U.S. cash tax expense). Deferred income
tax expense for the first quarter was $16.4 million (2013 Q1 -
$15.4 million deferred income tax expense), resulting in a
corresponding net deferred income tax asset of $272.4 million as at
March 31, 2014. The increase in deferred income tax expense was due
to higher taxable earnings compared to the prior year quarter.
Canada Revenue Agency (CRA) Income Tax Update
As previously disclosed, on April 2, 2013 Superior received from
the CRA Notices of Reassessment for Superior's 2009 and 2010
taxation years reflecting the CRA's intent to challenge the tax
consequences of Superior's corporate conversion transaction
(Conversion) which occurred on December 31, 2008. The CRA's
position is based on the acquisition of control rules, in addition
to the general anti-avoidance rules in the Income Tax Act
(Canada).
The table below summarizes Superior's estimated tax liabilities
and payment requirements associated with the received and
anticipated Notices of Reassessment. Upon receipt of the Notices of
Reassessment, 50% of the taxes payable pursuant to such Notices of
Reassessment, must be remitted to the CRA.
Taxation Year |
Taxes Payable (1)(2) |
50% of the Taxes Payable(1)(2) |
Payment Dates |
2009/2010 |
$13.0 |
|
$6.5 |
Paid in April 2013 |
2011 |
$10.0 |
(3) |
$5.0 |
2015 |
2012 |
$10.0 |
(3) |
$5.0 |
2015 |
2013 |
$10.0 |
(3) |
$5.0 |
2015 |
2014 |
$20.0 |
(3) |
$10.0 |
2015 |
Total |
$63.0 |
|
$31.5 |
|
(1) |
In
millions of dollars. |
(2) |
Includes estimated interest and penalties. |
(3) |
Estimated based on Superior's previously filed tax returns and the
midpoint of Superior's 2014 outlook. |
During 2013, Superior filed a Notice of Objection and a Notice
of Appeal with respect to the Notice of Reassessments received on
May 8, 2013. Superior anticipates the case could be heart in the
Tax Court of Canada, in the first quarter of 2015, with a decision
rendered by the end of fiscal 2015. If a decision of the Tax Court
of Canada were to be appealed, the appeal process could reasonably
be expected to take an additional 2 years. If Superior receives a
positive decision then any taxes, interest and penalties paid to
the CRA will be refunded plus interest and if Superior is
unsuccessful then any remaining taxes payable plus interest and
penalties will have to be remitted.
Superior remains confident in the appropriateness of its tax
filing position and the expected tax consequences of the Conversion
and intends to vigorously defend such position and intends to file
its future tax returns on a basis consistent with its view of the
outcome of the Conversion.
Interim tax payments made by Superior will be recorded to the
balance sheet and will not materially impact either adjusted
operating cash flow or net earnings.
Based on the midpoint of Superior's current 2014 financial
outlook of AOCF per share of $1.80, if the tax pools from the
Conversion were not available to Superior, the impact would be an
increase to cash income taxes of approximately $0.15 per share for
2014. As previously stated, Superior intends to file its future
income tax returns on a basis consistent with its view of the
outcome of the Conversion.
Financial Outlook
Superior's outlook is for adjusted operating cash flow for 2014
to be between $1.65 per share and $1.95 per share, before
restructuring costs and any impact of a potential sale of
Construction Products Distribution, consistent with the outlook
included in Superior's 2013 fourth-quarter Financial Discussion.
Achieving Superior's adjusted operating cash flow depends on the
operating results of its three operating segments.
In addition to the operating results of Superior's three
operating segments, significant assumptions underlying Superior's
2014 outlook are:
- Economic growth in Canada and the U.S. is expected to be
similar to or modestly higher than in 2013;
- Superior is expected to continue to attract capital and obtain
financing on acceptable terms;
- Superior's estimated total debt to EBITDA ratio is based on
maintenance and growth related expenditures of $72.0 million in
2014 and working capital funding requirements which do not
contemplate any significant commodity price changes;
- The foreign currency exchange rate between the Canadian dollar
and US dollar is expected to average 1.10 in 2014 on all unhedged
foreign currency transactions;
- Financial and physical counterparties are expected to continue
fulfilling their obligations to Superior;
- Regulatory authorities are not expected to impose any new
regulations impacting Superior;
- Superior's average interest rate on floating-rate debt is
expected to remain consistent with 2013 levels; and
- Canadian and U.S. based cash taxes are expected to be minimal
for 2014 based on existing statutory income tax rates and the
ability to use available tax basis.
Energy Services
- Average temperatures across Canada and the Northeast U.S. in
2014 are expected to be consistent with the recent five-year
average for the remainder of the year;
- Total propane and U.S. refined fuels-related sales volumes are
expected to increase in 2014 due to the impact from customer
win-back and retention programs;
- Wholesale propane and U.S. refined fuels-related prices are not
anticipated to significantly affect demand for propane, refined
fuels and related services;
- Supply portfolio management market results for 2014 are
expected to increase modestly from 2013 due to growth in sales
volumes and margins;
- Fixed-price energy services results for 2014 are expected to
decrease from 2013 due to market challenges experienced during the
first quarter, the sale of the U.S. based residential and
commercial customer base and continued challenges in the natural
gas market; and
- Operating costs are expected to decrease in 2014 from 2013 due
to improvements in operational efficiencies from business
initiatives.
Specialty Chemicals
- Sodium chlorate contribution in 2014 is expected to decrease
from 2013 due to lower gross margins associated with higher
electricity prices. Sales volumes in 2014 are expected to increase
as compared to 2013 due to the impact of the strategic supply
agreement;
- Chloralkali contribution in 2014 is expected to be higher than
in 2013 due to higher sales volumes associated with the completion
of the Port Edwards and Saskatoon expansions;
- Electricity costs are expected to increase in 2014 as compared
to the prior year; and
- Average plant utilization will approximate greater than 94% in
2014.
Construction Products Distribution
- Revenues in 2014 are expected to increase as compared to 2013
due to continued growth in U.S. based GSD sales as the U.S.
residential market continues to improve, and higher C&I sales
revenue due to improvement in the U.S. commercial construction
segment;
- Sales margins in 2014 are expected to increase from 2013 due to
continued focus on price management, customer profitability and
procurement; and
- Operating costs in 2014 are expected to decrease as a
percentage of revenue compared to 2013 due to anticipated savings
from restructuring efforts.
- Superior's 2014 outlook includes a full year contribution from
Construction Products Distribution.
Restructuring Charges
- Superior has incurred a total of $17.1 million of restructuring
costs to date associated with the restructuring efforts announced
during the fourth quarter of 2013 of which $1.8 million was
incurred during the first quarter of 2014. The $1.8 million was
incurred for severance and consulting costs at Energy Services.
Total restructuring costs are expected to be between $22 million to
$25 million for 2013 and 2014 and this is consistent with the range
provided in Superior's fourth-quarter Financial Discussion.
Superior expects to incur between $5 million and $7 million of
total restructuring costs during the second quarter of 2014. These
costs are excluded from Superior's 2014 financial outlook.
Debt Management Update
Superior's anticipated debt repayment for 2014 and total debt to
EBITDA leverage ratio as at December 31, 2014, based on Superior's
2014 financial outlook and year-to-date results, are detailed in
the chart below.
Debt Management Summary
|
|
|
Per Share |
|
Millions of dollars |
|
2014 financial outlook AOCF per share - mid-point (1) |
|
$ |
1.80 |
|
227.1 |
|
Maintenance capital expenditures, net |
|
|
(0.28 |
) |
(35.0 |
) |
Capital lease obligation repayments |
|
|
(0.16 |
) |
(20.0 |
) |
Restructuring costs |
|
|
(0.16 |
) |
(20.0 |
) |
Cash flow available for dividends and debt repayment before growth
capital |
|
$ |
1.20 |
|
152.1 |
|
Expansion of Port Edward's and Saskatoon facilities |
|
|
(0.17 |
) |
(22.0 |
) |
Other growth capital expenditures |
|
|
(0.12 |
) |
(15.0 |
) |
Proceeds on disposition of turbo generator in Chile |
|
|
0.12 |
|
15.0 |
|
Estimated 2014 free cash flow available for dividend and debt
repayment |
|
$ |
1.03 |
|
130.1 |
|
Dividends (annualized) |
|
|
(0.60 |
) |
(75.7 |
) |
Total estimated debt repayment |
|
$ |
0.43 |
|
54.4 |
|
Estimated total debt to EBITDA ratio as at December 31, 2014 |
|
|
3.6X - 4.0X |
|
3.6X - 4.0X |
|
Dividend per share (annualized) |
|
$ |
0.60 |
|
75.7 |
|
Calculated payout ratio after all capital |
|
|
58 |
% |
58 |
% |
(1) |
See
"Financial Outlook" for additional details including assumptions,
definitions and risk factors. |
In addition to Superior's significant assumptions detailed
above, refer to "Risk Factors to Superior" for a detailed review of
Superior's significant business risks.
Liquidity and Capital Resources
Superior's revolving syndicated bank facility (Credit Facility),
term loans and finance lease obligations (collectively Borrowing)
before deferred financing fees totalled $584.1 million as at March
31, 2014, an increase of $5.4 million from December 31, 2013. The
increase in Borrowing was primarily due to higher net working
capital requirements and capital expenditures offset in part by
cash flow from operating activities.
On June 10, 2013, Superior completed an extension of its $570.0
million Credit Facility with eight lenders. The Credit Facility
matures on June 27, 2016 and can be expanded to $750.0 million.
Financial covenant ratios were unchanged with a consolidated
secured debt to consolidated EBITDA ratio and a consolidated debt
to consolidated EBITDA ratio of 3.0x and 5.0x, respectively. See
"Summary of Cash Flow" for details on Superior's sources and uses
of cash.
As at March 31, 2014, Debentures (before deferred issuance fees
and discount values) issued by Superior totalled $494.4 million
which was $0.1 million lower than the balance as at December 31,
2013 due to the conversion of $0.1 of debentures into common
shares. See Note 12 to the unaudited condensed consolidated
financial statements for additional details on Superior's
Debentures.
As previously announced, on February 14, 2014, Superior closed a
$125 million term loan facility which matures on August 14, 2014.
The term loan facility provides additional liquidity to ensure
Superior has sufficient financial flexibility to manage short term
fluctuations in working capital requirements. Throughout the end of
2013 and the beginning of 2014, Superior's working capital
requirements increased due to a rise in the wholesale cost of
propane. The wholesale cost of propane and the related working
capital started to normalize during March which allowed Superior
repaid the facility in full on April 25, 2014. As at March 31,
2013, approximately $137.9 million was available under the Credit
Facility which Superior considers sufficient to meet its expected
net working capital, capital expenditure and refinancing
requirements during 2014 when combined with the above noted $125
million term loan facility.
Consolidated net working capital was $336.3 million as at March
31, 2014, an increase of $43.2 million from net working capital of
$293.1 million as at December 31, 2013. The increase was primarily
due to higher Energy Services net working capital requirements due
to increased commodity prices and sales volumes. Superior's net
working capital requirements are financed from its Credit
Facility.
Proceeds received from the DRIP for 2014 were $nil as compared
to $3.6 million in 2013. The decrease was due to Superior
suspending the DRIP following payment of the March dividend in
April 2013.
As at March 31, 2014, when calculated in accordance with the
Credit Facility, the consolidated secured debt to compliance EBITDA
ratio was 2.2 to 1.0 (December 31, 2013 - 2.2 to 1.0) and the
consolidated debt to compliance EBITDA ratio was 2.2 to 1.0
(December 31, 2013 - 2.2 to 1.0). For both of these covenants,
Debentures are excluded. These ratios are within the requirements
of Superior's debt covenants. In accordance with the Credit
Facility, Superior must maintain a consolidated secured debt to
compliance EBITDA ratio of not more than 3.0 to 1.0 and not more
than 3.5 to 1.0 as a result of acquisitions. In addition, Superior
must maintain a consolidated debt to compliance EBITDA ratio of not
more than 5.0 to 1.0, excluding Debentures. Superior's total debt
to compliance EBITDA ratio was 4.1 to 1.0 as at March 31, 2014 and
3.9 to 1.0 on a before restructuring cost basis. Also, Superior is
subject to several distribution tests and the most restrictive
stipulates that Distributions (including Debenture holders and
related payments) cannot exceed compliance EBITDA less cash income
taxes, plus $35.0 million on a trailing 12-month rolling basis. On
a 12-month rolling basis as at March 31, 2014, Superior's available
distribution amount was $140.0 million under the above noted
distribution test.
On December 11, 2013, Standard & Poor's raised Superior and
Superior LP's long-term corporate credit rating to BB from BB- and
the senior secured debt rating to BBB- from BB+. The outlook rating
for Superior remains stable. On July 2, 2013, Dominion Bond Rating
Service confirmed Superior LP's senior secured rating of BB (high)
and Superior LP's senior unsecured rating of BB (low). The trend
for both ratings is stable.
As at March 31, 2014, Superior had an estimated defined benefit
pension solvency deficiency of approximately $10.5 million
(December 31, 2013 - $12.8 million) and a going concern surplus of
approximately $18.1 million (December 31, 2013 - surplus - $11.5
million). Funding requirements required by applicable pension
legislation are based upon going concern and solvency actuarial
assumptions. These assumptions differ from the going concern
actuarial assumptions used in Superior's financial statements.
Superior has sufficient liquidity through its existing Credit
Facility and anticipated future operating cash flow to fund this
deficiency over the prescribed period.
In the normal course of business, Superior is subject to
lawsuits and claims. Superior believes the resolution of these
matters will not have a material adverse effect, individually or in
the aggregate, on Superior's liquidity, consolidated financial
position or results of operations. Superior records costs as they
are incurred or when they become determinable.
Shareholders' Capital
The weighted average number of common shares issued and
outstanding at the end of the first quarter was 126.2 million
shares, an increase of 12.5 million common shares from the prior
year quarter due to the issuance of 13,806,271 common shares on
March 27, 2013 and the resulting impact on weighted average number
of common shares outstanding during the past 12 months.
As at May 7, 2014, March 31, 2014 and December 31, 2013, the
following common shares and securities convertible into common
shares were issued and outstanding:
|
|
May 7, 2014 |
March 31, 2014 |
December 31, 2013 |
(millions) |
|
Convertible Securities |
Shares |
Convertible Securities |
Shares |
Convertible Securities |
Shares |
Common shares outstanding |
|
|
126.2 |
|
126.2 |
|
126.2 |
5.75% Debentures (1) |
|
$172.5 |
9.1 |
$172.5 |
9.1 |
$172.5 |
9.1 |
6.00% Debentures (2) |
|
$150.0 |
9.9 |
$150.0 |
9.9 |
$150.0 |
9.9 |
7.50% Debentures (3) |
|
$74.9 |
6.6 |
$74.9 |
6.6 |
$75.0 |
6.6 |
6.00% Debentures (4) |
|
$97.0 |
5.8 |
$97.0 |
5.8 |
$97.0 |
5.8 |
Shares outstanding and issuable upon conversion of Debentures |
|
|
157.6 |
|
157.6 |
|
157.6 |
(1) |
Convertible at $19.00 per share. |
(2) |
Convertible at $15.10 per share. |
(3) |
Convertible at $11.35 per share. |
(4) |
Convertible at $16.75 per share. |
Dividends Paid to Shareholders
Dividends paid to Superior's shareholders depend on its cash
flow from operating activities with consideration for Superior's
changes in working capital requirements, investing activities and
financing activities. See "Summary of Adjusted Operating Cash Flow"
and "Summary of Cash Flow" for additional details.
Dividends paid to shareholders for 2014 were $18.9 million
(before DRIP proceeds of $nil) or $0.60 per share compared to $16.9
million (before DRIP proceeds of $3.6 million) or $0.60 per share
in 2013. The increase of $2.0 million was due to the issuance of
shares under Superior's DRIP during 2013 and the equity offering
completed on March 27, 2013. Superior's monthly dividend is $0.05
per share or $0.60 per share on an annualized basis. See "Debt
Management Update" for further details. Dividends to shareholders
are declared at the discretion of Superior's Board of
Directors.
Superior's primary sources and uses of cash are detailed
below:
Summary of Cash Flow (1)
|
Three months ended March 31, |
|
(millions of dollars) |
2014 |
|
2013 |
|
|
|
|
|
|
Cash flow from operating activities |
46.2 |
|
90.6 |
|
Investing activities(2): |
|
|
|
|
|
Purchase of property, plant and equipment |
(16.8 |
) |
(11.7 |
) |
|
Proceeds from disposal of property, plant and equipment |
0.4 |
|
0.5 |
|
Cash flow used in investing activities |
(16.4 |
) |
(11.2 |
) |
|
|
|
|
|
Financing activities: |
|
|
|
|
|
Net repayment of revolving term bank credits and other debt |
- |
|
(123.6 |
) |
|
Repayment of finance lease obligation |
(4.7 |
) |
(3.9 |
) |
|
Redemption of 5.75% convertible debentures |
- |
|
(50.0 |
) |
|
Proceeds from issuance of common shares |
- |
|
143.9 |
|
|
Issue costs on issuance of common shares |
- |
|
(6.1 |
) |
|
Proceeds from the dividend reinvestment plan |
- |
|
3.6 |
|
|
Dividends paid to shareholders |
(18.9 |
) |
(16.9 |
) |
Cash flow used in financing activities |
(23.6 |
) |
(53.0 |
) |
|
|
|
|
|
Net increase in cash and cash equivalents |
6.2 |
|
26.4 |
|
Cash and cash equivalents, beginning of period |
8.3 |
|
7.6 |
|
Effect of translation of foreign currency-denominated
cash and cash equivalents |
0.1 |
|
(0.1 |
) |
Cash and cash equivalents, end of period |
14.6 |
|
33.9 |
|
(1) |
See
the consolidated statement of cash flow for additional
details. |
(2) |
See
"Consolidated Capital Expenditure Summary" for additional
details. |
Financial Instruments - Risk Management
Derivative and non-financial derivatives are used by Superior to
manage its exposure to fluctuations in foreign currency exchange
rates, interest rates, share-based compensation and commodity
prices. Superior assesses the inherent risks of these instruments
by grouping derivative and non-financial derivatives related to the
exposures these instruments mitigate. Superior's policy is not to
use derivative or non-financial derivative instruments for
speculative purposes. Superior does not formally designate its
derivatives as hedges and, as a result, Superior does not apply
hedge accounting and is required to designate its derivatives and
non-financial derivatives as held for trading. Refer to Superior's
2013 Annual MD&A for further details on financial instrument
risk management.
As at March 31, 2014, Superior has hedged approximately 91% of
its estimated US dollar exposure for 2014 and 68% for 2015. The
estimated sensitivity of adjusted operating cash flow for Superior,
including divisional US exposures and the impact on US-denominated
debt with respect to a $0.01 change in the Canadian to United
States exchange rate for 2014 is $0.2 million and for 2015 is $0.3
million after giving effect to United States forward contracts for
2014 and 2015, as shown in the table below. Superior's
sensitivities and guidance are based on an anticipated average
Canadian to US dollar foreign currency exchange rate for 2014 of
1.10.
(US$ millions except exchange rates) |
2014 |
|
2015 |
2016 |
2017 |
2018 |
2019 and Thereafter |
Total |
|
Energy Services - US$ forward sales |
7.2 |
|
26.0 |
- |
- |
- |
- |
33.2 |
|
Construction Products Distribution - US$ forward sales |
9.0 |
|
12.0 |
12.0 |
- |
- |
- |
33.0 |
|
Specialty Chemicals - US$ forward sales |
148.3 |
|
148.0 |
101.4 |
51.0 |
- |
- |
448.7 |
|
Corporate - US$ forward purchases |
(27.0 |
) |
- |
- |
- |
- |
- |
(27.0 |
) |
Net US $ forward sales |
137.5 |
|
186.0 |
113.4 |
51.0 |
- |
- |
487.9 |
|
|
|
|
|
|
|
|
|
|
|
Energy Services - Average US$ forward sales rate |
1.00 |
|
1.01 |
- |
- |
- |
- |
1.01 |
|
Construction Products Distribution - Average US$ forward sales
rate |
1.00 |
|
1.00 |
1.03 |
- |
- |
- |
1.01 |
|
Specialty Chemicals - Average US$ forward sales rate |
1.03 |
|
1.02 |
1.04 |
1.04 |
- |
- |
1.03 |
|
Corporate - US$ forward purchases rate |
1.01 |
|
- |
- |
- |
- |
- |
1.01 |
|
Net average external US$/CDN$ exchange rate |
1.02 |
|
1.01 |
1.04 |
1.04 |
- |
- |
1.02 |
|
For additional details on Superior's financial instruments,
including the amount and classification of gains and losses
recorded in Superior's first quarter condensed consolidated
financial statements, summary of fair values, notional balances,
effective rates and terms, and significant assumptions used in the
calculation of the fair value of Superior's financial instruments,
see Note 13 to the unaudited condensed consolidated financial
statements.
Disclosure Controls and Procedures and Internal Controls Over
Financial Reporting
No changes have been made in Superior's internal control over
financial reporting that have materially affected, or are
reasonably likely to materially affect, Superior's internal control
over financial reporting in the quarter ended March 31, 2014.
The Canadian propane business system roll out (see System
Conversion) commenced during the third quarter of 2013 and is
expected to be completed by the second quarter of 2014. Management
has concluded that the change materially affected Superior's
internal controls over financial reporting. Superior's management
team has participated at all levels of planning and execution of
the IT system and has concluded that no material deficiency has
resulted from this change to internal controls over financial
reporting. The planning and execution of the system transition will
continue to be overseen by senior management with involvement by
the President and VP Finance of the business and the certifying
officers.
Critical Accounting Policies and Estimates
Superior's unaudited condensed consolidated financial statements
have been prepared in accordance with IFRS. The significant
accounting policies are described in the unaudited condensed
consolidated financial statements for the period ended March 31,
2014. Certain of these accounting policies, as well as estimates
made by management in applying such policies, are recognized as
critical because they require management to make subjective or
complex judgments about matters that are inherently uncertain. Our
critical accounting estimates relate to the allowance for doubtful
accounts, employee future benefits, future income tax assets and
liabilities, the valuation of derivatives and non-financial
derivatives and asset impairments and the assessment of potential
provision retirement obligations.
Recent Accounting Pronouncements
Certain new standards, interpretations, amendments or
improvements to existing standards were issued by the IASB or the
International Financial Reporting Interpretations Committee (IFRIC)
that are mandatory for accounting periods beginning on January 1,
2014 or later. The affected standards that apply to Superior are as
follows:
IFRS 9 - Financial Instruments: Classification and
Measurement
IFRS 9, Financial Instruments, was issued in November 2009 and
is intended to replace International Accounting Standard (IAS)
39, Financial Instruments: Recognition and Measurement.
IFRS 9 uses a single approach to determine whether a financial
asset is measured at amortized cost or fair value, replacing the
multiple rules in IAS 39. The approach in IFRS 9 is based on how an
entity manages its financial instruments in the context of its
business model and the contractual cash flow characteristics of the
financial assets. The new standard also requires a single
impairment method to be used, replacing the multiple impairment
methods in IAS 39. Requirements for financial liabilities were
added in October 2010 and they largely carried forward existing
requirements in IAS 39, except that fair value changes due to
credit risk for liabilities designated at fair value through profit
and loss would generally be recorded in other comprehensive income.
This standard is required to be applied for accounting periods
beginning on or after January 1, 2015, with earlier adoption
permitted. Superior is assessing the effect of IFRS 9 on its
financial results and financial position; changes, if any, are not
expected to be material.
Superior adopted the following on January 1, 2014:
IAS 36 - Impairment of Assets
The IASB issued Recoverable Amount Disclosures for
Non-Financial Assets (Amendments to IAS 36) on May 29, 2013.
The overall effect of the amendments is to reduce the circumstances
in which the recoverable amount of cash-generating units ("CGUs")
is required to be disclosed and to clarify the disclosures required
when an impairment loss has been recognized or reversed in the
period. The amendments are required to be adopted retrospectively
for fiscal years beginning January 1, 2014, with earlier adoption
permitted. Superior adopted the amendments on January 1, 2014, with
no impact to Superior.
IFRS 10 - Consolidated Financial Statements, IFRS 12 -
Disclosure of Interests in Other Entities and IAS 27 -
Separate Financial Statements
The amendments to IFRS 10 define an investment entity and
require a reporting entity that meets the definition of an
investment entity not to consolidate its subsidiaries but instead
to measure its subsidiaries at fair value through profit or loss in
its consolidated and separate financial statements. Consequently,
IFRS 12 and IAS 27 were amended to introduce new disclosure
requirements for investment entities. Superior adopted the
amendments on January 1, 2014, with no impact to Superior.
International Financial Reporting Interpretations Committee
(IFRIC) 21, Levies
IFRIC 21, Levies, was issued on May 20, 2013 provides
guidance on when to recognize a liability for a levy imposed by a
government, both for levies that are accounted for in accordance
with IAS 37 Provisions, Contingent Liabilities and Contingent
Assets and those where the timing and amount of the levy is
certain. The Interpretation covers the accounting for outflows
imposed on entities by governments (including government agencies
and similar bodies) in accordance with laws and/or regulations.
However, it does not include income taxes (see IAS 12 Income
Taxes), fines and other penalties, liabilities arising from
emissions trading schemes and outflows within the scope of other
Standards. It also provides the following guidance on recognition
of a liability to pay levies: The liability is recognized
progressively if the obligating event occurs over a period of time
and if an obligation is triggered on reaching a minimum threshold,
the liability is recognized when that minimum threshold is reached.
This standard must be applied for accounting periods beginning on
or after January 1, 2014, with retrospective application from
December 31, 2012. Superior adopted IFRS 21 on January 1, 2014,
with retroactive application from December 31, 2012 with no impact
to its financial results.
Quarterly Financial and Operating Information
(millions of dollars except per share amounts) |
2014 Quarter |
2013 Quarters |
2012 Quarters(2)(3) |
First |
Fourth |
Third |
Second |
First |
Fourth |
Third |
Second |
Canadian propane sales volumes (millions of litres) |
454 |
405 |
232 |
265 |
429 |
383 |
240 |
255 |
U.S. refined fuels sales volumes (millions of litres) |
492 |
411 |
326 |
383 |
512 |
428 |
335 |
363 |
Natural gas sales volumes (millions of GJs) |
5 |
5 |
5 |
5 |
5 |
5 |
5 |
5 |
Electricity sales volumes (millions of KwH) |
244 |
228 |
249 |
205 |
205 |
200 |
245 |
187 |
Chemical sales volumes (thousands of metric tonnes) |
222 |
220 |
204 |
199 |
203 |
200 |
193 |
190 |
Revenues |
1,282.4 |
1,034.7 |
813.8 |
854.4 |
1,049.9 |
934.0 |
790.1 |
843.3 |
Gross profit |
276.6 |
240.8 |
184.9 |
190.0 |
253.1 |
228.2 |
195.9 |
184.1 |
Net earnings (loss) |
40.6 |
10.9 |
35.9 |
(25.5) |
31.4 |
13.5 |
35.9 |
12.7 |
Per share, basic |
$0.32 |
$0.09 |
$0.28 |
$(0.20) |
$0.28 |
$0.12 |
$0.32 |
$0.11 |
Per share, diluted |
$0.28 |
$0.05 |
$0.12 |
$(0.20) |
$0.27 |
$0.12 |
$0.29 |
$0.11 |
Adjusted operating cash flow |
86.4 |
55.9 |
24.2 |
30.2 |
82.0 |
61.9 |
33.7 |
28.2 |
Per share, basic |
$0.70 |
$0.44 |
$0.19 |
$0.24 |
$0.72 |
$0.55 |
$0.30 |
$0.25 |
Per share, diluted |
$0.68 |
$0.43 |
$0.19 |
$0.24 |
$0.69 |
$0.53 |
$0.30 |
$0.25 |
Adjusted operating cash flow before restructuring costs |
88.2 |
70.1 |
24.4 |
30.9 |
82.2 |
65.9 |
37.3 |
29.3 |
Per share, basic |
$0.68 |
$0.56 |
$0.19 |
$0.24 |
$0.72 |
$0.59 |
$0.33 |
$0.26 |
Per share, diluted |
$0.66 |
$0.54 |
$0.19 |
$0.24 |
$0.69 |
$0.57 |
$0.33 |
$0.26 |
Net working capital (1) |
336.3 |
293.1 |
202.0 |
242.3 |
280.5 |
279.2 |
218.3 |
234.4 |
(1) |
Net
working capital reflects amounts as at the quarter-end and is
comprised of accounts receivable and inventories, less trade and
other payables and deferred revenue. |
(2) |
Superior's 2012 quarterly results have been restated for the
adoption of IAS 19 Employee Benefits, amendments. |
(3) |
December 31, 2012 has been restated for the impact of a prior
period adjustment. |
Non-IFRS Financial Measures
Adjusted Operating Cash Flow
AOCF is equal to cash flow from operating activities as defined
by IFRS, adjusted for changes in non-cash working capital, other
expenses, non-cash interest expense, current income taxes and
finance costs. Superior may deduct or include additional items in
its calculation of AOCF; these items would generally, but not
necessarily, be items of a non-recurring nature. AOCF is the main
performance measure used by management and investors to evaluate
Superior's performance. Readers are cautioned that it is not a
defined performance measure under IFRS and cannot be assured.
Superior's calculation of AOCF may differ from similar calculations
used by comparable entities. AOCF represents cash flow generated by
Superior that is available for, but not necessarily limited to,
changes in working capital requirements, investing activities and
financing activities of Superior.
The seasonality of Superior's individual quarterly results must
be assessed in the context of annualized AOCF. Adjustments recorded
by Superior as part of its calculation of AOCF include, but are not
limited to, the impact of the seasonality of Superior's businesses,
principally the Energy Services segment, by adjusting for non-cash
working capital items, thereby eliminating the impact of the timing
between the recognition and collection/payment of Superior's
revenues and expenses, which can differ significantly from quarter
to quarter. Adjustments are also made to reclassify the cash flow
related to natural gas and electricity customer contract-related
costs in a manner consistent with the income statement's
recognition of these costs. AOCF is reconciled to net cash flow
from operating activities on page 11.
EBITDA
EBITDA represents earnings before taxes, depreciation,
amortization, finance expense and certain other non-cash expenses,
and is used by Superior to assess its consolidated results and
those of its operating segments. EBITDA is not a defined
performance measure under IFRS. Superior's calculation of EBITDA
may differ from similar calculations used by comparable entities.
The EBITDA of Superior's operating segments may be referred to as
EBITDA from operations. Net earnings before income taxes are
reconciled to EBITDA from operations on page 30.
Compliance EBITDA
Compliance EBITDA represents earnings before interest, taxes,
depreciation, amortization and certain other non-cash expenses
calculated on a 12-month trailing basis, giving pro forma effect to
acquisitions and divestitures, and is used by Superior to calculate
compliance with its debt covenants and other credit information.
Compliance EBITDA is not a defined performance measure under IFRS.
Superior's calculation of compliance EBITDA may differ from similar
calculations used by comparable entities. See Note 15 to the
unaudited condensed consolidated financial statements for a
reconciliation of net earnings to compliance EBITDA.
Payout Ratio
Payout ratio represents dividends as a percentage of AOCF less
other capital expenditures, and is used by Superior to assess its
financial results and leverage. Payout ratio is not a defined
performance measure under IFRS. Superior's calculation of payout
ratio may differ from similar calculations used by comparable
entities.
Reconciliation of Net Earnings before income taxes to EBITDA
from Operations (1)(2)
For the three months ended March 31, 2014 |
Energy Services |
|
Specialty Chemicals |
|
Construction Products Distribution |
Net Earnings before income taxes |
71.3 |
|
16.9 |
|
2.7 |
Add: Depreciation included in selling, distribution and
administrative costs |
10.6 |
|
- |
|
1.6 |
|
Depreciation included in cost of sales |
- |
|
11.9 |
|
- |
|
Customer contract-related costs |
(0.4 |
) |
- |
|
- |
|
Restructuring costs |
1.8 |
|
- |
|
- |
|
Finance expense |
0.7 |
|
0.3 |
|
0.2 |
|
Unrealized (gains) losses on derivative financial instruments |
(11.8 |
) |
0.5 |
|
- |
EBITDA from operations |
72.2 |
|
29.6 |
|
4.5 |
For the three months ended March 31, 2013 |
Energy Services |
|
Specialty Chemicals |
|
Construction Products Distribution |
Net Earnings before income taxes |
71.3 |
|
22.6 |
|
3.3 |
Add: Depreciation included in selling, distribution and
administrative costs |
13.3 |
|
- |
|
1.5 |
|
Depreciation included in cost of sales |
- |
|
10.3 |
|
- |
|
Losses on disposal of assets |
0.3 |
|
- |
|
0.1 |
|
Customer contract-related costs |
(0.2 |
) |
- |
|
- |
|
Restructuring costs |
0.2 |
|
- |
|
- |
|
Finance expense |
0.8 |
|
0.1 |
|
0.1 |
|
Unrealized gains on derivative financial instruments |
(17.9 |
) |
(0.1 |
) |
- |
EBITDA from operations |
67.8 |
|
32.9 |
|
5.0 |
(1) |
See
the unaudited condensed consolidated financial statements for net
earnings before income taxes, depreciation of property, plant,
equipment, intangible assets and accretion of convertible debenture
issuance costs, depreciation included in cost of sales, customer
contract-related costs and unrealized gains or losses on derivative
financial instruments. |
(2) |
See
"Non-IFRS Financial Measures" for additional details. |
Reconciliation of Divisional Segmented Revenue, Cost of Sales
and Cash Operating and Administrative Costs Included in this
MD&A
|
For the three months ended |
|
For the three months ended |
|
March 31, 2014 |
|
March 31, 2013 |
|
Energy Services |
|
Specialty Chemicals |
|
Construction Products Distribution |
|
Energy Services |
|
Specialty Chemicals |
|
Construction Products Distribution |
Revenue per financial statements |
939.6 |
|
|
157.0 |
|
|
185.8 |
|
|
719.7 |
|
|
143.7 |
|
|
186.5 |
|
|
Foreign currency gains related to working capital |
- |
|
|
2.1 |
|
|
- |
|
|
- |
|
|
0.9 |
|
|
- |
|
Revenue per the MD&A |
939.6 |
|
|
159.1 |
|
|
185.8 |
|
|
719.7 |
|
|
144.6 |
|
|
186.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of products sold per financial statements |
(764.5 |
) |
|
(103.0 |
) |
|
(138.3 |
) |
|
(566.2 |
) |
|
(89.2 |
) |
|
(141.4 |
) |
|
Non-cash amortization |
- |
|
|
11.9 |
|
|
- |
|
|
- |
|
|
10.3 |
|
|
- |
|
Cost of products sold per the MD&A |
(764.5 |
) |
|
(91.1 |
) |
|
(138.3 |
) |
|
(566.2 |
) |
|
(78.9 |
) |
|
(141.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
175.1 |
|
|
68.0 |
|
|
47.5 |
|
|
153.5 |
|
|
65.7 |
|
|
45.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash operating and administrative costs per financial
statements |
(114.9 |
) |
|
(36.3 |
) |
|
(44.6 |
) |
|
(99.3 |
) |
|
(31.9 |
) |
|
(41.7 |
) |
|
Amortization and depreciation expenses |
10.6 |
|
|
- |
|
|
1.6 |
|
|
13.3 |
|
|
- |
|
|
1.5 |
|
|
Losses on disposal of assets |
- |
|
|
- |
|
|
- |
|
|
0.3 |
|
|
- |
|
|
0.1 |
|
|
Customer contract-related costs |
(0.4 |
) |
|
- |
|
|
- |
|
|
(0.2 |
) |
|
- |
|
|
- |
|
|
Restructuring costs |
1.8 |
|
|
- |
|
|
- |
|
|
0.2 |
|
|
- |
|
|
- |
|
|
Reclassification of foreign currency gains related to working
capital |
- |
|
|
(2.1 |
) |
|
- |
|
|
- |
|
|
(0.9) |
|
|
- |
|
Cash operating and administrative costs per the
MD&A |
(102.9 |
) |
|
(38.4 |
) |
|
(43.0 |
) |
|
(85.7 |
) |
|
(32.8 |
) |
|
(40.1 |
) |
Risk Factors to Superior
The risks factors and uncertainties detailed below are a summary
of Superior's assessment of its material risk factors as detailed
in Superior's 2013 Annual Information Form under "Risk Factors"
which is filed on the Canadian Securities Administrators' website,
www.sedar.com, and on Superior's website, www.superiorplus.com.
Risks to Superior
Superior depends entirely on the operations and assets of
Superior LP. Superior's ability to make dividend payments to its
shareholders depends on the ability of Superior LP to make
distributions on its outstanding limited partnership units, as well
as on the operations and business of Superior LP.
There is no assurance regarding the amount of cash to be
distributed by Superior LP or generated by Superior LP and,
therefore, there is no assurance regarding funds available for
dividends to shareholders. The amount distributed in respect of the
limited partnership units will depend on a variety of factors
including, without limitation, the performance of Superior LP's
operating businesses, the effect of acquisitions or dispositions on
Superior LP, and other factors that may be beyond the control of
Superior LP or Superior. In the event significant sustaining
capital expenditures are required by Superior LP or the
profitability of Superior LP declines, there would be a decrease in
the amount of cash available for dividends to shareholders and such
decrease could be material.
Superior's dividend policy and the distribution policy of
Superior LP are subject to change at the discretion of the Board of
Directors of Superior or the Board of Directors of Superior General
Partner Inc., the general partner of Superior LP, as applicable.
Superior's dividend policy and the distribution policy of Superior
LP are also limited by contractual agreements including agreements
with lenders to Superior and its affiliates and by restrictions
under corporate law.
As previously disclosed by Superior, on April 2, 2013, Superior
received from the CRA, Notices of Reassessment for Superior's 2009
and 2010 taxation years reflecting the CRA's intent to challenge
the tax consequences of the Conversion. The CRA's position is based
on the acquisition of control rules, in addition to the general
anti-avoidance rules in the Tax Act. See Canada Revenue Agency
Income Tax Update.
During 2013, Superior filed a Notice of Objection and a Notice
of Appeal with respect to the Notice of Reassessments received on
May 8, 2013. Superior anticipates the case could be heard in the
Tax Court of Canada, in the first quarter of 2015, with a decision
rendered by the end of fiscal 2015. If a decision of the Tax Court
of Canada were to be appealed, the appeal process could reasonably
be expected to take an additional 2 years. If Superior receives a
positive decision then any taxes, interest and penalties paid to
the CRA will be refunded plus interest and if Superior is
unsuccessful then any remaining taxes payable plus interest and
penalties will have to be remitted.
Superior remains confident in the appropriateness of its tax
filing position and the expected tax consequences of the Conversion
and intends to vigorously defend such position. Superior also
strongly believes that there was no acquisition of control of
Ballard and that the general anti-avoidance rule does not apply to
the Conversion and intends to file its future tax returns on a
basis consistent with its view of the outcome of the
Conversion.
Upon receipt of the Notices of Reassessment, 50% of the taxes
payable pursuant to such Notices of Reassessment, must be remitted
to the CRA. Superior would also be required to make a payment of
50% of the taxes the CRA claims are owed in any future tax year if
the CRA were to issue a similar notice of reassessment for such
years and Superior were to appeal such other years. See the CRA
Income Tax Update section for further details on the amounts paid
and estimated amounts payable. Superior has 90 days from any future
Notice of Reassessment to prepare and file a Notice of Objection,
which would be reviewed by the CRA's appeals division. If the CRA
is not in agreement with Superior's Notice of Objection, Superior
has the option to appeal to the Tax Court of Canada following the
same process described above.
The credit facilities and U.S. notes of Superior LP contain
covenants that require Superior LP to meet certain financial tests
and that restrict, among other things, the ability of Superior LP
to incur additional debt, dispose of assets or pay
dividends/distributions in certain circumstances. These
restrictions may preclude Superior LP from returning capital or
making distributions on the limited partnership units.
The payout by Superior LP of substantially all of its available
cash flow means that capital expenditures to fund growth
opportunities can only be made in the event that other sources of
financing are available. Lack of access to such additional
financing could limit the future growth of the business of Superior
LP and, over time, have a material adverse effect on the amount of
cash available for dividends to shareholders.
To the extent that external sources of capital, including public
and private markets, become limited or unavailable, Superior's and
Superior LP's ability to make the necessary capital investments to
maintain or expand the current business, and to make necessary
principal payments and debenture redemptions under its term credit
facilities may be impaired.
Superior maintains substantial floating interest rate exposure
through a combination of floating interest rate borrowing and the
use of derivative instruments. Demand levels for approximately half
of Energy Services' sales and substantially all of Specialty
Chemicals' and Construction Products Distribution's sales are
affected by general economic trends. Generally speaking, when the
economy is strong, interest rates increase, as does demand from
Superior's customers, thereby increasing Superior's sales and its
ability to pay higher interest costs, and vice-versa. In this way,
there is a common relationship among economic activity levels,
interest rates and Superior's ability to pay higher or lower rates.
Increased interest rates, however, will affect Superior's borrowing
costs, which may have an adverse effect on Superior.
A portion of Superior's net cash flow is denominated in US
dollars. Accordingly, fluctuations in the Canadian/US dollar
exchange rate can affect profitability. Superior attempts to
mitigate this risk by hedging.
The timing and amount of capital expenditures incurred by
Superior LP or by its subsidiaries will directly affect the amount
of cash available to Superior for dividends to shareholders.
Dividends may be reduced, or even eliminated, at times when
significant capital expenditures are incurred or other unusual
expenditures are made.
If the Board of Directors of Superior decides to issue
additional common shares, preferred shares or securities
convertible into common shares, existing shareholders may suffer
significant dilution.
There can be no assurance that income tax laws in the numerous
jurisdictions in which Superior operates will not be changed,
interpreted or administered in a manner which adversely affects
Superior and its shareholders. In addition, there can be no
assurance that the CRA (or a provincial tax agency), the U.S.
Internal Revenue Service (or a state or local tax agency), or the
Chilean Internal Revenue Service (collectively, the Tax Agencies)
will agree with how Superior calculates its income for tax purposes
or that the various Tax Agencies will not change their
administrative practices to the detriment of Superior or its
shareholders.
Risks to Superior's Segments
Energy Services
Canadian Propane Distribution and U.S. Refined
Fuels
Propane is sold in competition with other energy sources such as
fuel oil, electricity and natural gas, some of which are less
costly on an energy-equivalent basis. While propane is usually more
cost-effective than electricity, electricity is a major competitor
in most areas. Fuel oil is also used as a residential, commercial
and industrial source of heat and, in general, is less costly on an
equivalent-energy basis, although operating efficiencies,
environmental and air quality factors help make propane competitive
with fuel oil. Except for certain industrial and commercial
applications, propane is generally not competitive with natural gas
in areas with natural gas service. Other alternative energy sources
such as compressed natural gas, methanol and ethanol are available
or could be further developed and could have an impact on the
propane industry in general and Canadian propane distribution in
particular, in the future. The trend towards increased conservation
measures and technological advances in energy efficiency may have a
detrimental effect on propane demand and Canadian propane
distribution's sales. Demand for traditional propane end-use
applications is increasing marginally with general economic growth.
However, increases in the cost of propane encourage customers to
reduce fuel consumption and to invest in more energy efficient
equipment, reducing demand. Automotive propane demand is currently
stabilizing after several years of decline but the decline trend
could resume depending on propane pricing and the market acceptance
of propane conversion options and the availability of
infrastructure.
Competition in the U.S. refined fuels business' markets
generally occurs on a local basis between large, full-service,
multi-state marketers and smaller, independent local marketers.
Marketers primarily compete based on price and service and tend to
operate in close proximity to customers, typically within a 35-mile
marketing radius from a central depot, in order to minimize
delivery costs and provide prompt service.
Weather and general economic conditions affect distillates
market volumes. Weather influences the immediate demand for
distillates, primarily for heating, while longer-term demand
declines due to economic conditions as customers trend towards
conservation and supplement heating with alternative sources such
as wood pellets. Also, harsh weather can create conditions that
exacerbate demand for propane, impede the transportation and
delivery of propane, or restrict the ability for Superior Propane
to obtain propane from its suppliers. Such conditions may also
increase Superior Propane's operating costs and may reduce
customers' demand for propane, any of which may have an adverse
effect on Superior. Spikes in demand caused by weather or other
factors can stress the supply chain and hamper Superior's ability
to obtain additional quantities of propane. Transportation
providers (rail and truck) have limited ability to provide
resources in terms of extreme peak demand.
The trend towards increased conservation measures and
technological advances in energy efficiency may have a detrimental
effect on propane and heating oil demand and Superior's sales.
Further, increases in the cost of propane encourage customers to
conserve fuel and to invest in more energy-efficient equipment,
reducing demand. Changes in propane supply costs are normally
passed through to customers, but timing lags (between when Superior
purchases the propane and when the customer purchases the propane)
may result in positive or negative gross margin fluctuations.
Superior offers its customers various fixed-price propane and
heating oil programs. In order to mitigate the price risk from
offering these services, Superior uses its physical inventory
position, supplemented by forward commodity transactions with
various third parties having terms and volumes substantially the
same as its customers' contracts. In periods of high propane price
volatility the fixed-price programs create exposure to over or
under-supply positions as the demand from customers may
significantly exceed or fall short of supply procured. In addition,
if propane prices decline significantly subsequent to customers
signing up for a fixed-price program, there is a risk that
customers will default on their commitments.
Superior's operations are subject to the risks associated with
handling, storing and transporting propane in bulk. Slight
quantities of propane may also be released during transfer
operations. To mitigate risks, Superior has established a
comprehensive environmental, health and safety protection program.
It consists of an environmental policy, codes of practice, periodic
self-audits, employee training, quarterly and annual reporting and
emergency prevention and response.
The U.S. refined fuels business, through a centralized safety
and environment management system, ensures that safety practices
and regulatory compliance are an important part of its business.
The storage and delivery of refined fuels pose the risk of spills
which could adversely affect the soil and water of storage
facilities and customer properties.
Superior's fuel distribution businesses are based and operate in
Canada and the United States and, as a result, such operations
could be affected by changes to laws, rules or policies which could
either be more favourable to competing energy sources or increase
compliance costs or otherwise negatively affect the operations of
Energy Services in comparison to such competing energy sources. Any
such changes could have an adverse effect on the operations of
Energy Services.
In 2013, two regions at Canadian propane distribution were
converted to a new order to cash, billing and logistics IT system
to replace the distribution and invoicing functions of the present
enterprise system. While no significant financial or business
issues have resulted, in 2014, Canadian propane distribution will
implement the same system in its remaining four regions by the end
of the second quarter. To mitigate the risk associated with system
changes, Superior Propane has leveraged operational learnings from
the USRF organization, which has have been using this system and
implementation will be rolled out one region at a time. Superior
will migrate its current data center located in Calgary, Alberta to
a new location in New Jersey, United States through 2014;
approximately 120 servers and more than 200 applications will be
transferred. A disruption in the availability of current and future
business applications may result from the migration, leading to
Superior being unable to carry out required business
transactions.
Approximately 18% of Superior's Canadian propane distribution
business employees and 5% of U.S. refined fuels distribution
business employees are unionized. Collective bargaining agreements
are renegotiated in the normal course of business. While labour
disruptions are not expected, there is always risk associated with
the renegotiation process that could have an adverse impact on
Superior.
Fixed-price Energy Services Business
There may be new market entrants in the energy retailing
business that compete directly for the customer base that Superior
targets, slowing or reducing its market share.
Fixed-price energy services purchases natural gas to meet its
estimated commitments to its customers based on their historical
consumption of gas. Depending on a number of factors, including
weather, customer attrition and poor economic conditions affecting
commercial customers' production levels, customer natural gas
consumption may vary from the volume purchased. This variance must
be reconciled and settled at least annually and may require
fixed-price energy services to purchase or sell natural gas at
market prices which may have an adverse impact on the results of
this business. To mitigate potential balancing risk, fixed-price
energy services closely monitors its balancing position and takes
measures such as adjusting gas deliveries and transferring gas
between pools of customers, minimizing imbalances. The reserve is
reviewed monthly to ensure that it is sufficient to absorb any
balancing losses.
Fixed-price energy services matches its customers' estimated
electricity requirements by entering into electricity swaps in
advance of acquiring customers. Depending on several factors,
including weather, customers' energy consumption may vary from the
volumes purchased by fixed-price energy services. Fixed-price
energy services is able to invoice existing commercial electricity
customers for balancing charges when the amount of energy used is
greater or less than the tolerance levels set initially. In certain
circumstances, there can be balancing issues for which fixed-price
energy services is responsible when customer aggregation forecasts
are not realized.
Fixed-price energy services resources its fixed-price term
natural gas sales commitments by entering into various physical and
financial natural gas and U.S. dollar foreign exchange purchase
contracts for similar terms and volumes to create an effective
Canadian dollar fixed-price cost of supply. Superior transacts with
ten financial and physical natural gas counterparties. There can be
no assurance that any of these counterparties will not default on
any of their obligations to Superior. The financial condition of
each counterparty is, however, evaluated and credit limits are
established to minimize Superior's exposure to this risk. There is
also a risk that supply commitments and foreign exchange positions
may become mismatched; however, this is monitored daily in
compliance with Superior's risk management policy.
Fixed-price energy services must retain qualified sales agents
in order to properly execute its business strategy. The continued
growth of fixed-price energy services is reliant on the services of
agents to sign up new customers. There can be no assurance that
competitive conditions will allow these agents to achieve these
customer additions. Lack of success in the marketing programs of
fixed-price energy services would limit future growth of cash
flow.
Fixed-price energy services operates in the highly regulated
energy industry in Ontario and Quebec. Changes to laws could impact
this business' operations. As part of the current regulatory
framework, local delivery companies are mandated to perform certain
services on behalf of fixed-price energy services, including
invoicing, collection, assuming specific bad debt risks, and
storage and distribution of natural gas. Any elimination or changes
to these rules could have a significant adverse effect on the
results of this business. As of May 1, 2014 fixed-price energy
services no longer markets electricity in Pennsylvania and although
it continues to market natural gas in New York State. The
regulatory environment in Pennsylvania is favourable to retail
choice. The Pennsylvania Utility Commission's Retail Market
Investigation focused on solutions to increase retail market share
and included orders for utilities to investigate retail opt-in
auctions to entice customers to consider retail choice, reduce
enrolment timelines, implement retail referral programs and design
seamless moves that would reduce churn as a customer moves or
changes accounts.
Specialty Chemicals
Specialty Chemicals competes with sodium chlorate, chloralkali
and potassium producers on a worldwide basis. Key competitive
factors include price, product quality, logistics capability,
reliability of supply, technical capability and service. The
end-use markets for products are correlated to the general economic
environment and the competitiveness of customers, all of which are
outside of the segment's control, along with market pricing for
pulp.
Specialty Chemicals has long-term electricity contracts or
electricity contracts that renew automatically with power producers
in each of the jurisdictions where its plants are located. There is
no assurance that Specialty Chemicals will remain able to secure
adequate supplies of electricity at reasonable prices or on
acceptable terms.
Potassium chloride (KCl) is a major raw material used in the
production of potassium hydroxide at the Port Edwards, Wisconsin
facility. Substantially all of Specialty Chemicals' KCl is received
from Potash Corporation of Saskatchewan. Specialty Chemicals has
limited ability to source KCl from additional suppliers.
Specialty Chemicals is exposed to fluctuations in the U.S.
dollar and the euro versus the Canadian dollar. Specialty Chemicals
manages its exposure to fluctuations between the U.S. dollar and
Canadian dollar by entering into hedge contracts with external
third parties and internally with other Superior businesses.
Specialty Chemicals' operations involve the handling,
production, transportation, treatment and disposal of materials
that are classified as hazardous and are regulated by
environmental, health and safety laws, regulations and
requirements. There is potential for the release of highly toxic
and lethal substances, including chlorine from a facility or
transportation equipment. Equipment failure could result in damage
to facilities, death or injury and liabilities to third parties. If
at any time the appropriate regulatory authorities deem any of the
segment's facilities unsafe, they may order that such facilities be
shut down.
Specialty Chemicals' operations and activities in various
jurisdictions require regulatory approval for the handling,
production, transportation and disposal of chemical products and
waste substances. The failure to obtain or comply fully with such
applicable regulatory approval may materially adversely affect
Specialty Chemicals.
Specialty Chemicals' does not directly operate or control
Tronox's Hamilton, Mississippi sodium chlorate facility. A major
production outage or unplanned downtime could harm Specialty
Chemicals' reputation and its ability to meet customer
requirements.
Specialty Chemicals' production facilities maintain complex
process and electrical equipment. The facilities have existed for
many years and undergone upgrades and improvements. Routine
maintenance is regularly completed to ensure equipment is operated
within appropriate engineering and technical requirements.
Notwithstanding Specialty Chemicals' operating standards and
history of limited downtime, breakdown of electrical transformer or
rectifier equipment would temporarily reduce production at the
affected facility. Although the segment has insurance to mitigate
substantial loss due to equipment outage, Specialty Chemicals'
reputation and its ability to meet customer requirements could be
harmed by a major electrical equipment failure.
Approximately 25% of Specialty Chemicals' employees are
unionized. Collective bargaining agreements are renegotiated in the
normal course of business. While labour disruptions are not
expected, there is always risk associated with the negotiation
process that could have an adverse impact on Superior.
Construction Products Distribution
Activity in the Construction Products Distribution segment is
subject to changes in general economic activity and, in particular,
residential and non-residential construction. New residential
construction is subject to such factors as household income,
employment levels, customer confidence, population changes and the
local supply of residential units. Residential renovation is not as
sensitive to these factors and can provide some balance in the
demand for residential construction product distribution.
Non-residential activity can be subdivided into commercial,
industrial and institutional. New construction in these sectors is
subject to many of the same general economic factors as residential
activity. In the industrial and institutional subsectors,
government and regulatory programs can also have a significant
impact on the outlook for product distribution, particularly as
related to Superior's insulation businesses. As a result, changes
to general economic activity or other factors mentioned above that
affect the amount of construction or renovation in residential and
non-residential markets can have an adverse effect on the segment's
business and Superior.
Construction Products Distribution competes with other specialty
construction distributors servicing the builder/contractor market,
in addition to big-box home centres and independent lumber yards.
The ability to remain competitive depends on the segment's ability
to provide reliable service at competitive prices.
The GSD market is driven largely by residential and
non-residential construction. Demand for wall and ceiling building
materials is affected by changes in general and local economic
factors including demographic trends, employment levels, interest
rates, consumer confidence and overall economic growth. These
factors in turn affect existing housing sales, new home
construction, new non-residential construction, and
office/commercial space turnover, all of which are significant
factors in determining demand for products and services.
The C&I market is driven largely by C&I construction
spending and economic growth. Demand is influenced by commercial
construction and renovation, the construction, maintenance and
expansion of industrial process facilities (such as oil refineries,
petrochemical plants and power generation facilities) and
institutional facilities in the government, healthcare and
education sectors.
The distribution of walls and ceilings and C&I products
involves risks, including the failure or substandard performance of
equipment, human error, natural disasters, suspension of operations
and new government statutes, regulations, guidelines or policies.
Operations are also subject to various hazards incidental to the
handling, processing, storage and transportation of certain
hazardous materials, including industrial chemicals. These hazards
can result in personal injury including fatalities, damage to and
destruction of property and equipment and environmental damage.
There can be no assurance that as a result of past or future
operations, there will not be claims of injury by employees or
members of the public due to exposure, or alleged exposure, to
these materials. There can be no assurance as to the actual amount
of these liabilities or their timing, if any. The business
maintains safe working practices through proper procedures,
direction and utilization of equipment such as forklifts, boom
trucks, fabrication equipment and carts/dollies. The business
handles and stores a variety of construction materials and
maintains appropriate material handling compliance programs in
accordance with local, state/provincial and federal
regulations.
During 2013, CPD initiated a business transformation project to
fully integrate its C&I and GSD operations. The project
consists of realigning the management structure along geographic
lines, adopting best practice common business processes, and
integrating all operations onto a single ERP system. The ERP system
integration has been suspended as a result of the proposed sale of
the Construction Products Distribution segment. If, and when, the
project resumes, it is expected to take approximately two years to
three years. Upon full commencement of the project, the scoping,
requirements definition, business process definition, design, and
testing of the integrated ERP system would take approximately one
year with the branch conversions taking place the following year.
Implementation problems could result in disruption to the business
and/or inaccurate information for management and financial
reporting. Risk would be mitigated by extensive testing and
regionally phased implementation.
Approximately 4% of Construction Products Distribution's
employees are unionized. Collective bargaining agreements are
renegotiated in the normal course of business. While labour
disruptions are not expected, there is always risk associated with
the negotiation process that could have an adverse impact on the
segment and Superior.
SUPERIOR PLUS CORP.
Condensed Consolidated Balance Sheets
(unaudited, millions of Canadian dollars) |
Notes |
March 31, 2014 |
December 31, 2013 |
Assets |
|
|
|
Current Assets |
|
|
|
Cash and cash equivalents |
|
14.6 |
8.3 |
Trade and other receivables |
4&13 |
534.8 |
479.8 |
Prepaid expenses |
|
33.2 |
35.3 |
Inventories |
|
185.2 |
206.3 |
Unrealized gains on derivative financial instruments |
13 |
12.8 |
13.7 |
Total Current Assets |
|
780.6 |
743.4 |
|
|
|
|
Non-Current Assets |
|
|
|
Property, plant and equipment |
6 |
888.0 |
877.9 |
Intangible assets |
|
19.7 |
19.0 |
Goodwill |
|
193.9 |
193.7 |
Notes and finance lease receivables |
|
10.3 |
10.2 |
Deferred tax |
14 |
276.5 |
292.3 |
Unrealized gains on derivative financial instruments |
13 |
6.0 |
4.6 |
Total Non-Current Assets |
|
1,394.4 |
1,397.7 |
|
|
|
|
Total Assets |
|
2,175.0 |
2,141.1 |
|
|
|
|
Liabilities and Equity |
|
|
|
Current Liabilities |
|
|
|
Trade and other payables |
8 |
381.4 |
396.2 |
Deferred revenue |
9 |
20.7 |
24.8 |
Borrowing |
11 |
98.1 |
67.0 |
Dividends and interest payable |
|
14.8 |
7.3 |
Unrealized losses on derivative financial instruments |
13 |
24.9 |
25.1 |
Total Current Liabilities |
|
539.9 |
520.4 |
|
|
|
|
Non-Current Liabilities |
|
|
|
Borrowing |
11 |
483.8 |
509.1 |
Convertible unsecured subordinated debentures |
12 |
470.5 |
469.4 |
Other liabilities |
10 |
0.8 |
0.4 |
Provisions |
7 |
20.6 |
19.5 |
Employee future benefits |
|
21.5 |
23.3 |
Deferred tax |
14 |
4.1 |
4.0 |
Unrealized losses on derivative financial instruments |
13 |
57.1 |
54.8 |
Total Non-Current Liabilities |
|
1,058.4 |
1,080.5 |
|
|
|
|
Total Liabilities |
|
1,598.3 |
1,600.9 |
|
|
|
|
Equity |
|
|
|
Capital |
|
1,787.9 |
1,787.9 |
Deficit |
|
(1,218.1) |
(1,239.8) |
Accumulated other comprehensive gain (loss) |
|
6.9 |
(7.9) |
Total Equity |
15 |
576.7 |
540.2 |
|
|
|
|
Total Liabilities and Equity |
|
2,175.0 |
2,141.1 |
See accompanying Notes to the Condensed Consolidated
Financial Statements.
SUPERIOR PLUS CORP.
Condensed Consolidated Statement of Changes in Equity
(unaudited, millions of Canadian dollars) |
Share Capital |
|
Contributed Surplus(1) |
|
Total Capital |
|
Deficit |
|
Accumulated other comprehensive gain (loss) |
|
Total |
|
January 1, 2013 |
1,644.0 |
|
2.5 |
|
1,646.5 |
|
(1,218.2 |
) |
(53.9 |
) |
374.4 |
|
|
Net earnings |
- |
|
- |
|
- |
|
31.4 |
|
- |
|
31.4 |
|
|
Option value associated with redemption of convertible
debentures |
- |
|
(0.4 |
) |
(0.4 |
) |
- |
|
- |
|
(0.4 |
) |
|
Shares issued under dividend reinvestment plan |
3.6 |
|
- |
|
3.6 |
|
- |
|
- |
|
3.6 |
|
|
Issuance of common shares |
138.1 |
|
- |
|
138.1 |
|
- |
|
- |
|
138.1 |
|
|
Issue costs associated with the issuance of common shares |
(0.3 |
) |
- |
|
(0.3 |
) |
- |
|
- |
|
(0.3 |
) |
|
Dividends declared to shareholders |
- |
|
- |
|
- |
|
(17.6 |
) |
- |
|
(17.6 |
) |
|
Unrealized foreign currency gains on translation of foreign
operations |
- |
|
- |
|
- |
|
- |
|
7.8 |
|
7.8 |
|
|
Actuarial defined benefit gains |
- |
|
- |
|
- |
|
- |
|
6.1 |
|
6.1 |
|
|
Income tax expense on other comprehensive income |
- |
|
- |
|
- |
|
- |
|
(1.4 |
) |
(1.4 |
) |
March 31, 2013 |
1,785.4 |
|
2.1 |
|
1,787.5 |
|
(1,204.4 |
) |
(41.4 |
) |
541.7 |
|
|
Net earnings |
- |
|
- |
|
- |
|
21.3 |
|
- |
|
21.3 |
|
|
Option value associated with redemption of convertible
debentures |
- |
|
(0.7 |
) |
(0.7 |
) |
- |
|
- |
|
(0.7 |
) |
|
Shares issued under dividend reinvestment plan |
1.3 |
|
- |
|
1.3 |
|
- |
|
- |
|
1.3 |
|
|
Issue costs associated with the issuance of common shares |
(0.2 |
) |
- |
|
(0.2 |
) |
- |
|
- |
|
(0.2 |
) |
|
Dividends declared to shareholders |
- |
|
- |
|
- |
|
(56.7 |
) |
- |
|
(56.7 |
) |
|
Unrealized foreign currency gains on translation of foreign
operations |
- |
|
- |
|
- |
|
- |
|
19.1 |
|
19.1 |
|
|
Actuarial defined benefit gains |
- |
|
- |
|
- |
|
- |
|
20.2 |
|
20.2 |
|
|
Reclassification of derivatives losses previously deferred |
- |
|
- |
|
- |
|
- |
|
(0.4 |
) |
(0.4 |
) |
|
Income tax expense on other comprehensive loss |
- |
|
- |
|
- |
|
- |
|
(5.4 |
) |
(5.4 |
) |
December 31, 2013 |
1,786.5 |
|
1.4 |
|
1,787.9 |
|
(1,239.8 |
) |
(7.9 |
) |
540.2 |
|
|
Net earnings |
- |
|
- |
|
- |
|
40.6 |
|
- |
|
40.6 |
|
|
Dividends declared to shareholders |
- |
|
- |
|
- |
|
(18.9 |
) |
- |
|
(18.9 |
) |
|
Unrealized foreign currency gains on translation of foreign
operations |
- |
|
- |
|
- |
|
- |
|
14.8 |
|
14.8 |
|
|
Actuarial defined benefit loss |
- |
|
- |
|
- |
|
- |
|
(0.1 |
) |
(0.1 |
) |
|
Income tax recovery on other comprehensive income |
- |
|
- |
|
- |
|
- |
|
0.1 |
|
0.1 |
|
March 31, 2014 |
1,786.5 |
|
1.4 |
|
1,787.9 |
|
(1,218.1 |
) |
6.9 |
|
576.7 |
|
(1) |
Contributed surplus represents Superiors equity reserve for the
option value associated with the issuance of convertible unsecured
subordinated debentures and warrants. |
See accompanying Notes to the Condensed Consolidated
Financial Statements.
SUPERIOR PLUS CORP.
Condensed Consolidated Statement of Net Earnings and Total
Comprehensive Income
(unaudited, millions of Canadian dollars except per
share amounts) |
Notes |
Three months ended March 31, 2014 |
|
Three months ended March 31, 2013 |
|
|
Revenues |
18 |
1,282.4 |
|
1,049.9 |
|
|
Cost of sales (includes products & services) |
18 |
(1,005.8 |
) |
(796.8 |
) |
|
Gross profit |
|
276.6 |
|
253.1 |
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
Selling, distribution and administrative costs |
18 |
(200.7 |
) |
(179.1 |
) |
|
Finance expense |
18 |
(14.4 |
) |
(18.5 |
) |
|
Unrealized losses on derivative financial
instruments |
13 |
(4.1 |
) |
(8.3 |
) |
|
|
|
(219.2 |
) |
(205.9 |
) |
|
|
|
|
|
|
|
|
Net earnings before income taxes |
|
57.4 |
|
47.2 |
|
|
Income tax expense |
14 |
(16.8 |
) |
(15.8 |
) |
|
Net earnings |
|
40.6 |
|
31.4 |
|
|
|
|
|
|
|
|
|
Net earnings |
|
40.6 |
|
31.4 |
|
|
Other comprehensive income: |
|
|
|
|
|
|
|
Unrealized foreign currency gains on translation of foreign
operations |
|
14.8 |
|
7.8 |
|
|
|
Actuarial defined benefit (losses) gains |
|
(0.1 |
) |
6.1 |
|
|
|
Income tax recovery (expense) on other comprehensive income |
|
0.1 |
|
(1.4 |
) |
|
Other comprehensive income |
|
14.8 |
|
12.5 |
|
|
Total Comprehensive income for the period |
|
55.4 |
|
43.9 |
|
|
Net earnings per share |
|
|
|
|
|
|
|
Basic |
16 |
$0.32 |
|
$0.28 |
|
|
|
Diluted |
16 |
$0.28 |
|
$0.27 |
|
See accompanying Notes to the Condensed Consolidated
Financial Statements.
SUPERIOR PLUS CORP.
Condensed Consolidated Statement of Cash Flows
(unaudited, millions of Canadian dollars) |
Notes |
Three months ended March 31, 2014 |
|
Three months ended March 31, 2013 |
|
OPERATING ACTIVITIES |
|
|
|
|
|
Net earnings for the period |
|
40.6 |
|
31.4 |
|
Adjustments for: |
|
|
|
|
|
|
Depreciation included in selling, distribution and administrative
costs |
6 |
11.4 |
|
10.3 |
|
|
Amortization of intangible assets |
|
0.9 |
|
4.6 |
|
|
Depreciation included in cost of sales |
6 |
11.9 |
|
10.3 |
|
|
Losses on disposal of assets |
|
- |
|
0.4 |
|
|
Unrealized losses on derivative financial instruments |
13 |
4.1 |
|
8.3 |
|
|
Customer contract-related costs |
|
(0.4 |
) |
(0.2 |
) |
|
Finance expense recognized in net earnings |
|
14.4 |
|
18.5 |
|
|
Income tax expense recognized in net earnings |
|
16.8 |
|
15.8 |
|
|
Increase in non-cash operating working capital |
17 |
(48.6 |
) |
(4.1 |
) |
Net cash flows from operating activities |
|
51.1 |
|
95.3 |
|
Income taxes paid |
|
(0.1 |
) |
- |
|
Interest paid |
|
(4.8 |
) |
(4.7 |
) |
Cash flows from operating activities |
|
46.2 |
|
90.6 |
|
|
|
|
|
|
|
INVESTING ACTIVITIES |
|
|
|
|
|
Purchase of property, plant and equipment |
6 |
(16.8 |
) |
(11.7 |
) |
Proceeds from disposal of property, plant and
equipment |
|
0.4 |
|
0.5 |
|
Cash flows used in investing activities |
|
(16.4 |
) |
(11.2 |
) |
|
|
|
|
|
|
FINANCING ACTIVITIES |
|
|
|
|
|
Net repayment of revolving term bank credits and other
debt |
|
- |
|
(123.6 |
) |
Repayment of finance lease obligations |
|
(4.7 |
) |
(3.9 |
) |
Redemption of 5.75% convertible debentures |
|
- |
|
(50.0 |
) |
Proceeds from issuance of common shares |
|
- |
|
143.9 |
|
Issuance costs for common shares |
|
- |
|
(6.1 |
) |
Proceeds from the Dividend Reinvestment Plan |
|
- |
|
3.6 |
|
Dividends paid to shareholders |
|
(18.9 |
) |
(16.9 |
) |
Cash flows used in financing activities |
|
(23.6 |
) |
(53.0 |
) |
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
6.2 |
|
26.4 |
|
Cash and cash equivalents, beginning of period |
|
8.3 |
|
7.6 |
|
Effect of translation of foreign currency-denominated
cash and cash equivalents |
|
0.1 |
|
(0.1 |
) |
Cash and cash equivalents, end of period |
|
14.6 |
|
33.9 |
|
See accompanying Notes to the Condensed Consolidated
Financial Statements.
Notes to the Unaudited Condensed Consolidated Financial
Statements
(unaudited, Tabular amounts in millions of Canadian dollars,
except per share amounts)
1. Organization
Superior Plus Corp. (Superior) is a diversified business
corporation, incorporated under the Canada Business Corporations
Act. The registered office is at suite 1400, 840 - 7th Avenue S.W.,
Calgary, Alberta. Superior holds 100% of Superior Plus LP (Superior
LP), a limited partnership formed between Superior General Partner
Inc. as general partner and Superior as limited partner. Superior
holds 100% of the interest of Superior General Partner Inc.
Superior does not conduct active business operations but rather
distributes to shareholders a portion of the income it receives
from Superior Plus LP in the form of partnership allocations, net
of expenses and interest payable on the convertible unsecured
subordinated debentures (the debentures). Superior's investments in
Superior Plus LP are financed by share capital and debentures.
Superior is a publicly traded company with its common shares
trading on the Toronto Stock Exchange ("TSX") under the exchange
symbol SPB.
The accompanying unaudited condensed consolidated financial
statements (consolidated financial statements) of Superior as at
March 31, 2014 and the three months ended March 31, 2014 and 2013
were authorized for issuance by the Board of Directors on May 7,
2014.
Reportable Operating Segments
Superior operates three distinct reportable operating segments:
Energy Services, Specialty Chemicals and Construction Products
Distribution. Superior's Energy Services' operating segment
provides distribution, wholesale procurement and related services
in relation to propane, heating oil and other refined fuels under
the following: Canadian propane division and U.S. refined fuels
division. Energy Services also provides fixed-price natural gas and
electricity supply services under Superior Energy Management.
Specialty Chemicals' is a leading supplier of sodium chlorate and
technology to the pulp and paper industries and a regional supplier
of potassium and chloralkali products in the U.S. Midwest.
Construction Products Distribution is one of the largest
distributors of commercial and industrial insulation in North
America and the largest distributor of specialty construction
products to the walls and ceilings industry in Canada (See Note
20).
2. Basis of Presentation
The accompanying consolidated financial statements were prepared
in accordance with International Accounting Standard 34 Interim
Financial Reporting (IAS 34) as issued by the International
Accounting Standards Board (IASB) using the accounting policies
Superior adopted in its annual consolidated financial statements as
at and for the year ended December 31, 2013 other than the
standards adopted as at January 1, 2014. The accounting policies
are based on the International Financial Reporting Standards (IFRS)
and International Financial Reporting Interpretations Committee
(IFRIC) interpretations that were applicable at that time. These
accounting policies have been applied consistently to all periods
presented in these consolidated financial statements, and have been
applied consistently throughout the consolidated entities.
The consolidated financial statements are presented in Canadian
dollars, Superior's functional currency. All financial information
presented in Canadian dollars has been rounded to the nearest
hundred-thousand. These consolidated financial statements should be
read in conjunction with Superior's 2013 annual consolidated
financial statements.
The consolidated financial statements were prepared on the
historical cost basis except for certain financial instruments that
are measured at fair value as explained in Superior's 2013 annual
consolidated financial statements and incorporate the accounts of
Superior and its wholly-owned subsidiaries. Subsidiaries are all
entities over which Superior has the power to govern the financial
and operating policies generally accompanying a shareholding of
more than one-half of the voting rights. The results of
subsidiaries are included in Superior's statement of net earnings
from date of acquisition or, in the case of disposals, up to the
effective date of disposal. All transactions and balances between
Superior and Superior's subsidiaries are eliminated on
consolidation. Superior's subsidiaries are all wholly owned
directly or indirectly by Superior Plus Corp.
Significant Accounting Policies
(a) Significant Accounting Judgments, Estimates and Assumptions
The preparation of Superior's consolidated financial statements in
accordance with IFRS requires management to make judgments,
estimates and assumptions that affect the reported amounts of
assets, liabilities, net earnings and related disclosure. The
estimates and associated assumptions are based on historical
experience and various other factors deemed reasonable under the
circumstances, the results of which form the basis of making the
judgments about carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ
from these estimates. The areas involving a higher degree of
judgment or complexity, or where assumptions and estimates are
significant to the financial statements are consistent with those
disclosed in Superior's 2013 annual consolidated financial
statements.
(b) Recent Accounting Pronouncements Certain new standards,
interpretations, amendments and improvements to existing standards
were issued by the IASB or International Financial Reporting
Interpretations Committee (IFRIC) that are mandatory for accounting
periods beginning January 1, 2014 or later periods. The affected
standards are consistent with those disclosed in Superior's 2013
annual consolidated financial statements.
Superior adopted the following standards on January 1, 2014:
IAS 36 - Impairment of Assets
The IASB issued Recoverable Amount Disclosures for
Non-Financial Assets (Amendments to IAS 36) on May 29, 2013.
The overall effect of the amendments is to reduce the circumstances
in which the recoverable amount of cash-generating units ("CGUs")
is required to be disclosed and to clarify the disclosures required
when an impairment loss has been recognized or reversed in the
period. The amendments are required to be adopted retrospectively
for fiscal years beginning January 1, 2014, with earlier adoption
permitted. Superior adopted the amendments on January 1, 2014, with
no impact to Superior.
IFRIC 21 - Levies
The interpretation was issued on May 20, 2013 provides guidance
on when to recognize a liability for a levy imposed by a
government, both for levies that are accounted for in accordance
with IAS 37 - Provisions, Contingent Liabilities and Contingent
Assets and those where the timing and amount of the levy is
certain. The Interpretation covers the accounting for outflows
imposed on entities by governments (including government agencies
and similar bodies) in accordance with laws and/or regulations.
However, it does not include income taxes (see IAS 12 - Income
Taxes), fines and other penalties, liabilities arising from
emissions trading schemes and outflows within the scope of other
Standards. It also provides the following guidance on recognition
of a liability to pay levies: The liability is recognized
progressively if the obligating event occurs over a period of time
and if an obligation is triggered on reaching a minimum threshold,
the liability is recognized when that minimum threshold is reached.
This standard must be applied for accounting periods beginning on
or after January 1, 2014, with retrospective application from
December 31, 2012. Superior adopted the interpretation on January
1, 2014, with no impact to Superior.
IFRS 10 - Consolidated Financial Statements, IFRS 12 -
Disclosure of Interests in Other Entities and IAS 27 -
Separate Financial Statements
The amendments to IFRS 10 define an investment entity and
require a reporting entity that meets the definition of an
investment entity not to consolidate its subsidiaries but instead
to measure its subsidiaries at fair value through profit or loss in
its consolidated and separate financial statements. Consequently,
IFRS 12 and IAS 27 were amended to introduce new disclosure
requirements for investment entities. Superior adopted the
amendments on January 1, 2014, with no impact to Superior.
New and revised IFRS standards issued but not yet effective
IFRS 9 - Financial Instruments: Classification and
Measurement
IFRS 9 was issued in November 2009 and is intended to replace
IAS 39 - Financial Instruments: Recognition and
Measurement. IFRS 9 uses a single approach to determine
whether a financial asset is measured at amortized cost or fair
value, replacing the multiple rules in IAS 39. The approach in IFRS
9 is based on how an entity manages its financial instruments in
the context of its business model and the contractual cash flow
characteristics of the financial assets. The new standard also
requires a single impairment method to be used, replacing the
multiple impairment methods in IAS 39. Requirements for financial
liabilities were added in October 2010 and they largely carried
forward existing requirements in IAS 39 except that fair value
changes due to credit risk for liabilities designated at fair value
through profit and loss would generally be recorded in other
comprehensive income. This standard must be applied for accounting
periods beginning on or after January 1, 2018, with earlier
adoption permitted. Superior is assessing the effect of IFRS 9 on
its financial results and financial position; changes, if any, are
not expected to be material.
3. Seasonality of Operations
Energy Services
Sales typically peak in the first quarter when approximately
one-third of annual propane and other refined fuels sales volumes
and gross profits are generated due to the demand from heating
end-use customers. They then decline through the second and third
quarters, rising seasonally again in the fourth quarter with
heating demand. Similarly, net working capital is typically at
seasonal highs during the first and fourth quarters, and normally
declines to seasonal low in the second and third quarters. Net
working capital is also significantly influenced by wholesale
propane prices and other refined fuels.
Construction Products Distribution
Sales typically peak during the second and third quarters with
the seasonal increase in building and renovation activities. They
then decline through the fourth quarter and into the subsequent
first quarter. Similarly, net working capital is typically at
seasonally highs levels during the second and third quarters, and
normally decline to seasonal lows in the fourth and first
quarters.
4. Trade and Other Receivables
A summary of trade and other receivables is as follows:
|
Note |
March 31, 2014 |
December 31, 2013 |
Trade receivables, net of allowances |
13 |
502.8 |
443.2 |
Accounts receivable - other |
|
31.0 |
35.7 |
Finance lease receivable |
|
1.0 |
0.9 |
Trade and other receivables |
|
534.8 |
479.8 |
5. Inventories
The cost of inventories recognized as an expense during the
three months ended March 31, 2014 was $909.2 million (March 31,
2013 - $744.5 million). Superior recorded an inventory write down
during the three months ended March 31, 2014 of $nil (March 31,
2013 - $nil). No write-down reversals were recorded during the
three months ended March 31, 2014 and 2013.
6. Property, Plant and Equipment
|
Land |
Buildings |
Specialty Chemicals Plant & Equipment |
Energy Services Retailing Equipment |
Construction Products Distribution Equipment |
Leasehold Improvements |
Total |
Cost |
|
|
|
|
|
|
|
Balance at December 31, 2013 |
29.5 |
154.8 |
816.2 |
629.4 |
48.1 |
11.2 |
1,689.2 |
Balance at March 31, 2014 |
29.8 |
158.1 |
839.7 |
639.9 |
49.5 |
11.4 |
1,728.4 |
|
|
|
|
|
|
|
|
Accumulated Depreciation |
|
|
|
|
|
|
|
Balance at December 31, 2013 |
- |
50.0 |
389.1 |
334.7 |
29.4 |
8.1 |
811.3 |
Balance at March 31, 2014 |
- |
52.2 |
404.5 |
344.4 |
31.0 |
8.3 |
840.4 |
|
|
|
|
|
|
|
|
Carrying Amount |
|
|
|
|
|
|
|
Balance at December 31, 2013 |
29.5 |
104.8 |
427.1 |
294.7 |
18.7 |
3.1 |
877.9 |
Balance at March 31, 2014 |
29.8 |
105.9 |
435.2 |
295.5 |
18.5 |
3.1 |
888.0 |
Depreciation per cost category:
|
March 31, 2014 |
March 31, 2013 |
Cost of sales |
11.9 |
10.3 |
Selling, distribution and administrative costs |
11.4 |
10.3 |
Total |
23.3 |
20.6 |
The carrying amount of Superior's property, plant, and equipment
includes $67.4 million of leased assets as at March 31, 2014
(December 31, 2013 - $68.9 million).
On October 20, 2012, a kerosene leak was discovered in the
bottom of a storage tank at U.S. refined fuels Marcy terminal
location. The leak was investigated and contained. U.S. refined
fuels then notified the Department of Environmental Conservation
(DEC) which performed an independent review of the leak and other
tanks at this location. On December 27, 2012, the DEC issued a
notice of violation based on its inspections and subsequent to
discussions between management and the DEC, a consent order was
issued to U.S. refined fuels on February 4, 2013. The consent order
stated that the secondary containment system and storage tanks were
not in compliance with DEC design requirements and needed to be
rebuilt to specific standards by September 1, 2013 in order to
remain operational. The consent order was modified October 2013 to
extend the requirement to rebuild to specific standards by
September 1, 2014. Repair of the facility has been suspended
pending the outcome of a dispute between Superior and the previous
owner and operator of the facility as to responsibility for the
repair. This decision is not expected to have any material impact
on the operations of U.S. refined fuels or operating results going
forward.
7. Provisions
|
Restructuring |
|
Decommissioning |
Environmental |
|
Total |
|
Balance at December 31, 2013 |
12.2 |
|
14.3 |
1.3 |
|
27.8 |
|
|
Additions |
0.2 |
|
- |
0.1 |
|
0.3 |
|
|
Utilization |
(1.2 |
) |
- |
(0.2 |
) |
(1.4 |
) |
|
Unwinding of discount |
- |
|
0.1 |
- |
|
0.1 |
|
|
Impact of change in discount rate |
- |
|
0.7 |
- |
|
0.7 |
|
|
Net foreign currency exchange difference |
0.1 |
|
0.3 |
0.1 |
|
0.5 |
|
Balance at March 31, 2014 |
11.3 |
|
15.4 |
1.3 |
|
28.0 |
|
|
March 31, 2014 |
December 31, 2013 |
Current |
7.4 |
8.3 |
Non-current |
20.6 |
19.5 |
|
28.0 |
27.8 |
Restructuring
Restructuring costs are recorded in selling, distribution, and
administrative costs. For the three months ended March 31, 2014
restructuring expense was $1.8 million (March 31, 2013 - $0.2
million). Provisions for restructuring are recorded in provisions,
except for the current portion, which is recorded in trade and
other payables. As at March 31, 2014, the current portion of
restructuring costs was $7.4 million (December 31, 2013 - $8.3
million). As at March 31, 2014, the long term portion of
restructuring costs was $3.9 million (December 31, 2013 - $3.9
million). The provision is primarily for severance, lease costs and
consulting fees.
Decommissioning
Specialty Chemicals
Superior makes full provision for the future cost of
decommissioning Specialty Chemicals' chemical facilities. The
provision is on a discounted basis and is based on existing
technologies at current prices or long-term price assumptions,
depending on the activity's expected timing. As at March 31, 2014,
the discount rate used in Superior's calculation was 2.95%
(December 31, 2013 - 3.14%). Superior estimates the total
undiscounted expenditures required to settle its decommissioning
liabilities to be approximately $20.9 million (December 31, 2013 -
$20.6 million) which will be paid over the next 18 to 26 years.
While Superior's provision for decommissioning costs is based on
the best estimate of future costs and the economic lives of the
chemical facilities, the amount and timing of these costs is
uncertain.
Energy Services
Superior makes full provision for the future costs of
decommissioning certain assets associated with the Energy Services
segment. Superior estimates the total undiscounted expenditures
required to settle its decommissioning liabilities to be
approximately $9.8 million at March 31, 2014 (December 31, 2013 -
$9.5 million) which will be paid over the next 18 years. The
discount rate of 2.95% at March 31, 2014 (December 31, 2013 -
3.14%) was used to calculate the present value of the estimated
cash flows.
Environmental
Provisions for environmental remediation are made when a
clean-up is probable and the amount of the obligation can be
reliably estimated. Generally, this coincides with commitment to a
formal plan or, if earlier, on divestment or closure of inactive
sites. Superior estimates the total undiscounted expenditures
required to settle its environmental expenditures to be
approximately $1.4 million at March 31, 2014 (December 31, 2013 -
$1.3 million) which will be paid over the next two years. The
provision for environmental expenditures has been estimated using
existing technology, at current prices and discounted using a
discount rate of 2.95% at March 31, 2014 (December 31, 2013 -
3.14%). The extent and cost of future remediation programs are
inherently difficult to estimate. They depend on the scale of any
possible contamination, the timing and extent of corrective
actions, and Superior's share of the liability.
8. Trade and Other Payables
A summary of trade and other payables is as follows:
|
Notes |
March 31, 2014 |
December 31, 2013 |
Trade payables |
|
284.7 |
300.7 |
Other payables |
|
62.4 |
63.2 |
Net benefit obligation |
|
4.2 |
3.8 |
Restructuring provision |
7 |
7.4 |
8.3 |
Amounts due to customers under construction contracts |
|
2.6 |
1.3 |
Share-based payments |
|
20.1 |
18.9 |
Trade and other payables |
|
381.4 |
396.2 |
9. Deferred Revenue
|
March 31, 2014 |
|
December 31, 2013 |
|
Balance at the beginning of the period |
24.8 |
|
19.2 |
|
|
Deferred during the period |
4.4 |
|
32.8 |
|
|
Released to net earnings |
(9.0 |
) |
(28.5 |
) |
|
Foreign exchange impact |
0.5 |
|
1.3 |
|
Balance at the end of the period |
20.7 |
|
24.8 |
|
The deferred revenue relates to Energy Services' unearned
service revenue and Specialty Chemicals' unearned product-related
revenues.
10. Other Liabilities
|
March 31, 2014 |
December 31, 2013 |
Supply agreement |
0.8 |
0.4 |
|
0.8 |
0.4 |
The supply agreement above relates to the Specialty Chemicals
supply agreement with Tronox LLC ("Tronox") to purchase up to
130,000 MT of sodium chlorate per year from Tronox's Hamilton,
Mississipi facility as nominated annually by Specialty Chemicals.
As part of the agreement, the parties have entered into a strategic
long-term agreement for the supply of chloralakali product by
Specialty Chemicals to service Tronox's requirements in North
America.
11. Borrowing
|
Year of Maturity |
|
Effective Interest Rate |
|
March 31, 2014 |
|
December 31, 2013 |
|
Revolving Term Bank Credit Facilities(1) |
|
|
|
|
|
|
|
|
|
Bankers' Acceptances (BA) |
2016 |
|
Floating BA rate plus applicable credit spread |
|
276.5 |
|
246.5 |
|
|
Short-Term Credit Facility(4) |
2014 |
|
Floating BA rate plus applicable credit spread |
|
25.0 |
|
- |
|
|
Canadian Prime Rate Loan |
2016 |
|
Prime rate plus credit spread |
|
- |
|
26.3 |
|
|
LIBOR Loans |
2016 |
|
Floating LIBOR rate plus applicable credit spread |
|
119.4 |
|
137.3 |
|
|
(US $108.0 million; 2013 US $129.0 million) |
|
|
|
|
|
|
|
|
|
US
Base Rate Loan |
2016 |
|
US Prime rate plus credit spread |
|
3.3 |
|
12.2 |
|
|
(US $3.0; 2013- US$11.5 million) |
|
|
|
|
|
|
|
|
|
|
|
|
|
424.2 |
|
422.3 |
|
Other Debt |
|
|
|
|
|
|
|
|
|
Accounts receivable factoring program(2) |
- |
|
Floating BA Plus |
|
13.4 |
|
9.3 |
|
|
Deferred consideration |
2014-2018 |
|
Non-interest-bearing |
|
4.0 |
|
4.0 |
|
|
|
|
|
|
17.4 |
|
13.3 |
|
Senior Secured Notes(3) |
|
|
|
|
|
|
|
|
|
Senior secured notes subject to fixed interest rates (US$60.0
million; 2013 - US$60.0 million) |
2014-2015 |
|
7.62 |
% |
66.3 |
|
63.8 |
|
Finance Lease Obligations |
|
|
|
|
|
|
|
|
|
Finance lease obligations |
|
|
|
|
76.4 |
|
79.3 |
|
|
|
|
|
|
|
|
|
|
Total borrowing before deferred financing fees |
|
|
|
|
584.3 |
|
578.7 |
|
Deferred financing fees |
|
|
|
|
(2.4 |
) |
(2.6 |
) |
Borrowing |
|
|
|
|
581.9 |
|
576.1 |
|
Current maturities |
|
|
|
|
(98.1 |
) |
(67.0 |
) |
Borrowing |
|
|
|
|
483.8 |
|
509.1 |
|
(1) |
On
June 10, 2013, Superior and its wholly-owned subsidiaries, Superior
Plus Financing Inc. and Commercial E Industrial (Chile) Limitada,
extended their $570.0 million credit facility which can be expanded
up to $750.0 million. The credit facility matures on June 27, 2016
and is secured by a general charge over the assets of Superior and
certain of its subsidiaries. As at March 31, 2014, Superior had
$32.8 million of outstanding letters of credit (December 31, 2013 -
$27.9 million) and approximately $118.2 million of outstanding
financial guarantees (December 31, 2013 - $115.3 million). The fair
value of Superior's revolving term bank credit facilities, other
debt, letters of credit, and financial guarantees approximates
their carrying value as a result of the market-based-interest
rates, the short-term nature of the underlying debt instruments and
other related factors. |
(2) |
Superior has entered into a Master Receivables Purchase Agreement
(MRPA) with a financial institution by which it may purchase from
time to time, on an uncommitted revolving basis, a 100% interest in
receivables from Superior. The maximum aggregate amount of
purchased receivables purchased by the financial institution under
this agreement and outstanding at any time is limited to $15.0
million. As at March 31, 2014, the accounts receivable factoring
program totalled CDN $13.4 million (December 31, 2013 - CDN $9.3
million). |
(3) |
Senior secured notes (the Notes) totalling US $60.0 million and US
$60.0 million (respectively, CDN $66.3 million at March 31, 2014
and CDN $63.8 million at December 31, 2013) are secured by a
general charge over the assets of Superior and certain of its
subsidiaries. Principal repayments began in the fourth quarter of
2009. Management has estimated the fair value of the Notes based on
comparisons to Treasury instruments with similar maturities,
interest rates and credit risk profiles. The estimated fair value
of the Notes as at March 31, 2014 was CDN $71.7 million (December
31, 2013 - CDN $68.5 million). |
(4) |
On
February 14, 2014, Superior closed a $125.0 million term loan
facility which matures on August 14, 2014. The term loan facility
provides additional liquidity to ensure Superior has sufficient
financial flexibility to manage short term fluctuations in working
capital requirements. Throughout the end of 2013 and the beginning
of 2014, Superior's working capital requirements increased due to a
rise in the wholesale cost of propane. Superior anticipates that
the wholesale cost of propane and the related working capital will
continue to normalize throughout the remainder of the 2014 heating
season. Superior repaid the short-term credit facility on April 25,
2014. |
Repayment requirements of borrowing before deferred financing
fees are as follows:
Current maturities |
98.1 |
Due in 2015 |
58.1 |
Due in 2016 |
415.2 |
Due in 2017 |
6.5 |
Due in 2018 |
4.6 |
Due in 2019 |
1.8 |
Subsequent to 2019 |
- |
Total |
584.3 |
12. Convertible Unsecured Subordinated Debentures
Superior's debentures are as follows:
Maturity |
June 2017 |
June 2018 |
October 2016 |
June 2019 |
Total |
Interest rate |
5.75% |
6.00% |
7.50% |
6.00% |
Carrying |
Conversion price per share |
$19.00 |
$15.10 |
$11.35 |
$16.75 |
Value |
Debentures outstanding as at March 31, 2014 |
168.9 |
145.2 |
72.7 |
83.7 |
470.5 |
Debentures outstanding as at December 31, 2013 |
168.6 |
144.9 |
72.7 |
83.2 |
469.4 |
Quoted market value as at March 31, 2014 |
176.8 |
157.5 |
86.2 |
100.9 |
521.4 |
Quoted market value as at December 31, 2013 |
174.4 |
156.8 |
86.3 |
99.5 |
517.0 |
The debentures may be converted into shares at the option of the
holder at any time prior to maturity and may be redeemed by
Superior in certain circumstances. Superior may elect to pay
interest and principal upon maturity or redemption by issuing
shares to a trustee in the case of interest payments, and to the
debenture holders in the case of payment of principal. The number
of any shares issued will be determined based on market prices for
the shares at the time of issuance. Superior also has a cash
conversion put option which allows Superior to settle any
conversion of debentures in cash, in lieu of delivering common
shares to the debenture holders of the October 2016, June 2018 and
June 2019 convertible debentures. The cash conversion put option
has been classified as an embedded derivative and measured at fair
value through net earnings (FVTNE) (see Note 13 for further
details).
13. Financial Instruments
IFRS requires disclosure around fair value and specifies a
hierarchy of valuation techniques based on whether the inputs to
those valuation techniques are observable or unobservable.
Observable inputs reflect market data obtained from independent
sources, while unobservable inputs reflect Superior's market
assumptions. These two types of input create the following
fair-value hierarchy:
- Level 1 - Quoted prices in active markets for
identical instruments.
- Level 2 - Quoted prices for similar instruments in
active markets; quoted prices for identical or similar instruments
in markets that are not active; and model-derived valuations in
which all significant inputs and significant value drivers are
observable in active markets.
- Level 3 - Valuations derived from valuation techniques
in which one or more significant inputs or significant value
drivers are unobservable.
The fair value of a financial instrument is the consideration
estimated to be agreed upon in an arm's-length transaction between
knowledgeable, willing parties who are under no compulsion to act.
Fair values are determined by reference to quoted bid or asking
prices, as appropriate, in the most advantageous active market for
that instrument to which Superior has immediate access (Level 1).
Where bid and ask prices are unavailable, Superior uses the closing
price of the instrument's most recent transaction. In the absence
of an active market, Superior estimates fair values based on
prevailing market rates (bid and ask prices, as appropriate) for
instruments with similar characteristics and risk profiles or
internal or external valuation models, such as discounted cash flow
analysis using, to the extent possible, observable market-based
inputs (Level 2). Superior uses internally developed methodologies
and unobservable inputs to determine the fair value of some
financial instruments when required (Level 3).
Fair values determined using valuation models require
assumptions concerning the amount and timing of estimated future
cash flows and discount rates. In determining those assumptions,
Superior looks primarily to available readily observable external
market inputs including forecast commodity price curves, interest
rate yield curves, currency rates, and price and rate volatilities
as applicable.
With respect to the valuation of Specialty Chemicals'
fixed-price electricity agreement, the valuation of this agreement
requires Superior to make assumptions about the long-term price of
electricity in electricity markets for which active market
information is not available. The impact of the assumption for the
long-term forward price curve of electricity has a material impact
on the fair value of this agreement. A $1/MWh change in the
forecast price of electricity would result in a change in the fair
value of this agreement of $0.8 million, with a corresponding
impact to net earnings before income taxes.
No changes in valuation techniques were made by Superior during
the period ended March 31, 2014 and no financial instruments have
been reclassified between the different fair value input
levels.
|
|
|
|
|
|
Asset (Liability) |
Description |
|
Notional(1) |
Term |
Effective Rate |
Fair Value Input Level |
March 31, 2014 |
December 31, 2013 |
Natural gas financial swaps−AECO |
|
22.26 GJ(2) |
2014-2018 |
CDN $4.13 GJ |
Level 1 |
(2.3) |
(12.7) |
Foreign currency forward contracts, net sale |
|
US$515.0(3) |
2014-2017 |
1.02 |
Level 1 |
(46.3) |
(29.2) |
Foreign currency forward contracts, balance sheet-related |
|
US$27.0(3) |
2014 |
1.01 |
Level 1 |
2.7 |
1.6 |
Interest rate swaps - CDN$ |
|
$200.0(3) |
2014-2017 |
Six-month BA rate plus 2.65% |
Level 2 |
7.4 |
6.2 |
Equity derivative contracts |
|
$14.0 (3) |
2014-2017 |
$11.81 /share |
Level 2 |
0.9 |
1.5 |
Debenture-embedded derivative |
|
$322.0(3) |
2014-2019 |
- |
Level 3 |
(24.5) |
(26.9) |
Energy Services' propane wholesale purchase and sale contracts, net
sale |
|
1.54 USG(4) |
2014 |
$1.20 /USG |
Level 2 |
(1.5) |
1.9 |
Energy Services' electricity swaps |
|
0.88 MWh (5) |
2014-2018 |
$39.55 /MWh |
Level 2 |
(0.9) |
(6.1) |
Energy Services' heating oil purchase and sale contracts |
|
4.83 Gallons(4) |
2014 |
US $3.20 /Gallon |
Level 2 |
(0.1) |
0.2 |
Specialty Chemicals' fixed-price electricity purchase
agreements |
|
34-45 MW(6) |
2014-2017 |
$37-$59 /MWh |
Level 3 |
1.4 |
1.9 |
(1) Notional values as at March 31, 2014. (2) Millions
of gigajoules (GJ) purchased. (3) Millions of dollars. (4) Millions
of United States gallons purchased. (5) Millions of megawatt hours
(MWh). (6) Megawatts (MW) on a 24/7 continual basis per year
purchased. |
|
|
All financial and non-financial derivatives
are designated as held-for-trading upon their initial
recognition. |
|
|
|
|
|
|
Description |
Current Assets |
Long-term Assets |
Current Liabilities |
Long-term Liabilities |
Natural gas financial swaps -AECO |
4.0 |
0.4 |
3.8 |
2.9 |
Energy Services' electricity swaps |
1.1 |
- |
0.6 |
1.4 |
Foreign currency forward contracts, net sale |
- |
- |
18.1 |
28.2 |
Foreign currency forward contracts, balance sheet-related |
2.7 |
- |
- |
- |
Interest rate swaps |
2.7 |
4.9 |
0.1 |
0.1 |
Equity derivative contracts |
0.9 |
- |
- |
- |
Debenture-embedded derivative |
- |
- |
- |
24.5 |
Energy Services' propane wholesale purchase and sale contracts |
0.7 |
- |
2.2 |
- |
Energy Services' heating oil purchase and sale contracts |
- |
- |
0.1 |
- |
Specialty Chemicals' fixed-price electricity purchase
agreements |
0.7 |
0.7 |
- |
- |
As
at March 31, 2014 |
12.8 |
6.0 |
24.9 |
57.1 |
As at December 31, 2013 |
13.7 |
4.6 |
25.1 |
54.8 |
|
|
For the three months ended March 31, 2014 |
|
|
For the three months ended March 31, 2013 |
|
Description |
|
Realized Gain (Loss) |
|
|
Unrealized Gain (Loss) |
|
|
Realized Gain (Loss) |
|
|
Unrealized Gain (Loss) |
|
Natural gas financial swaps - AECO |
|
(0.4 |
) |
|
10.4 |
|
|
(7.7 |
) |
|
14.5 |
|
Energy Services electricity swaps |
|
8.7 |
|
|
5.2 |
|
|
(1.6 |
) |
|
3.6 |
|
Foreign currency forward contracts, net sale |
|
(3.5 |
) |
|
(17.1 |
) |
|
0.1 |
|
|
(13.6 |
) |
Foreign currency forward contracts, balance sheet-related |
|
- |
|
|
1.1 |
|
|
- |
|
|
1.0 |
|
Interest rate swaps |
|
- |
|
|
1.2 |
|
|
- |
|
|
0.3 |
|
Equity derivative contracts |
|
- |
|
|
(0.4 |
) |
|
- |
|
|
1.0 |
|
Energy Services' propane wholesale purchase and sale contracts |
|
- |
|
|
(3.4 |
) |
|
- |
|
|
(0.6 |
) |
Energy Services' butane wholesale purchase and sale contracts |
|
- |
|
|
- |
|
|
- |
|
|
0.2 |
|
Energy Services' heating oil purchase and sale contracts |
|
0.6 |
|
|
(0.3 |
) |
|
0.7 |
|
|
0.2 |
|
Energy Services' diesel purchase and sale contracts |
|
- |
|
|
- |
|
|
- |
|
|
0.1 |
|
Specialty Chemicals' fixed-price electricity purchase
agreements |
|
0.7 |
|
|
(0.5 |
) |
|
- |
|
|
0.1 |
|
Total gains (losses) on financial and non-financial
derivatives |
|
6.1 |
|
|
(3.8 |
) |
|
(8.5 |
) |
|
6.8 |
|
Foreign currency translation of senior secured notes |
|
- |
|
|
(2.6 |
) |
|
- |
|
|
(1.8 |
) |
Unrealized change in fair value of debenture-embedded
derivative |
|
- |
|
|
2.3 |
|
|
- |
|
|
(13.3 |
) |
Total gains (losses) |
|
6.1 |
|
|
(4.1 |
) |
|
(8.5 |
) |
|
(8.3 |
) |
Realized gains or losses on financial and non-financial
derivatives and foreign currency translation gains or losses on the
revaluation of Canadian domiciled US-denominated working capital
have been classified on the statement of net earnings based on the
underlying nature of the financial statement line item and/or the
economic exposure being managed.
Offsetting of financial instruments
Financial assets and liabilities are offset and the net amount
reported on the consolidated balance sheets where Superior
currently has a legally enforceable right to set-off the recognized
amounts and there is an intention to settle on a net basis or
realize the asset and settle the liability simultaneously. In the
normal course of business, Superior enters into various master
netting agreements or other similar arrangements that do not meet
the criteria for offsetting, however, although still allow for the
related amount to be set-off in certain circumstances, such as
bankruptcy or the termination of contracts.
Derivative Assets |
|
Amounts Offset |
|
Amounts not offset |
March 31, 2014 |
|
Gross Assets |
|
Gross Liabilities Offset |
|
Net Amounts Presented |
|
Financial Instruments |
|
Cash Collateral Pledged |
|
Net |
Natural gas financial swaps - AECO (1) |
|
5.6 |
|
(1.2) |
|
4.4 |
|
- |
|
- |
|
4.4 |
Energy Services' electricity swaps (1) |
|
1.6 |
|
(0.5) |
|
1.1 |
|
- |
|
- |
|
1.1 |
Energy Services' propane wholesale purchase and sale contracts
(4) |
|
0.1 |
|
- |
|
0.1 |
|
0.6 |
|
- |
|
0.7 |
Energy Services' heating oil purchase and sale contracts (2) |
|
- |
|
- |
|
- |
|
- |
|
0.6 |
|
0.6 |
Specialty Chemicals' fixed-price electricity purchase agreements
(3) |
|
53.8 |
|
(52.4) |
|
1.4 |
|
- |
|
- |
|
1.4 |
Total |
|
61.1 |
|
(54.1) |
|
7.0 |
|
0.6 |
|
0.6 |
|
8.2 |
(1) |
Subject to an enforceable master netting agreement in the form of
an International Swaps and Derivatives Association agreement
("ISDA"). |
(2) |
Regularly settled net in the normal course of business and is
considered standardized brokerage accounts. As at March 31, 2014,
Energy Services has pledged cash of $0.6 million under a
standardized agreement with respect to open derivative
contracts. |
(3) |
Standard terms of the Power Purchase Agreement ("PPA") allowing net
settlement of payments in the normal course of business. |
(4) |
Regularly settled gross in the normal course of business. |
|
|
Derivative Liabilities |
|
Amounts Offset |
|
Amounts not offset |
March 31, 2014 |
|
Gross Liabilities |
|
Gross Assets Offset |
|
Net Amounts Presented |
|
Financial Instruments |
|
Cash Collateral Pledged |
|
Net |
Natural gas financial swaps - AECO (1) |
|
7.6 |
|
(0.9) |
|
6.7 |
|
- |
|
- |
|
6.7 |
Energy Services' electricity swaps (1) |
|
3.2 |
|
(1.2) |
|
2.0 |
|
- |
|
- |
|
2.0 |
Energy Services' heating oil purchase and sale contracts (2) |
|
0.1 |
|
- |
|
0.1 |
|
- |
|
- |
|
0.1 |
Total |
|
10.9 |
|
(2.1) |
|
8.8 |
|
- |
|
- |
|
8.8 |
(1) |
Subject to an enforceable master netting agreement in the form of
an International Swaps and Derivatives Association agreement
("ISDA"). |
(2) |
Regularly settled net in the normal course of business and are
considered standardized brokerage accounts. |
|
|
Derivative Assets |
|
Amounts Offset |
|
Amounts not offset |
December 31, 2013 |
|
Gross Assets |
|
Gross Liabilities Offset |
|
Net Amounts Presented |
|
Financial Instruments |
|
Cash Collateral Pledged |
|
Net |
Natural gas financial swaps - AECO (1) |
|
1.2 |
|
(0.1) |
|
1.1 |
|
- |
|
- |
|
1.1 |
Energy Services electricity swaps (1) |
|
0.7 |
|
(0.3) |
|
0.4 |
|
- |
|
- |
|
0.4 |
Energy Services propane wholesale purchase and sale contracts
(2)(4) |
|
1.1 |
|
(0.2) |
|
0.9 |
|
3.9 |
|
- |
|
4.8 |
Energy Services heating oil purchase and sale contracts (2) |
|
0.3 |
|
- |
|
0.3 |
|
- |
|
0.4 |
|
0.7 |
Specialty Chemicals fixed-price electricity purchase agreements
(3) |
|
56.1 |
|
(54.2) |
|
1.9 |
|
- |
|
- |
|
1.9 |
Total |
|
59.4 |
|
(54.8) |
|
4.6 |
|
3.9 |
|
0.4 |
|
8.9 |
(1) |
Subject to an enforceable master netting agreement in the form of
an International Swaps and Derivatives Association agreement
("ISDA"). |
(2) |
Regularly settled net in the normal course of business and is
considered standardized brokerage accounts. As at December 31,
2013, Energy Services has pledged cash of $0.4 million under a
standardized agreement with respect to open derivative
contracts. |
(3) |
Standard terms of the Power Purchase Agreement ("PPA") allowing net
settlement of payments in the normal course of business. |
(4) |
Regularly settled gross in the normal course of business. |
|
|
Derivative Liabilities |
|
Amounts Offset |
|
Amounts not offset |
December 31, 2013 |
|
Gross Liabilities |
|
Gross Assets Offset |
|
Net Amounts Presented |
|
Financial Instruments |
|
Cash Collateral Pledged |
|
Net |
Natural gas financial swaps - AECO (1) |
|
14.9 |
|
(1.1) |
|
13.8 |
|
- |
|
- |
|
13.8 |
Energy Services electricity swaps (1) |
|
6.9 |
|
(0.4) |
|
6.5 |
|
- |
|
- |
|
6.5 |
Energy Services propane wholesale purchase and sale contracts
(3) |
|
- |
|
- |
|
- |
|
2.9 |
|
- |
|
2.9 |
Energy Services heating oil purchase and sale contracts (2) |
|
0.2 |
|
(0.1) |
|
0.1 |
|
- |
|
- |
|
0.1 |
Total |
|
22.0 |
|
(1.6) |
|
20.4 |
|
2.9 |
|
- |
|
23.3 |
(1) |
Subject to an enforceable master netting agreement in the form of
an International Swaps and Derivatives Association agreement
("ISDA"). |
(2) |
Regularly settled net in the normal course of business and are
considered standardized brokerage accounts. |
(3) |
Regularly settled gross in the normal course of business. |
The following summarizes Superior's classification and
measurement of financial assets and liabilities:
|
Classification |
Measurement |
Financial Assets |
|
|
Cash and cash equivalents |
Loans and receivables |
Amortized cost |
Trade and other receivables |
Loans and receivables |
Amortized cost |
Derivative assets |
FVTNE |
Fair Value |
Notes and finance lease receivables |
Loans and receivables |
Amortized cost |
Financial liabilities |
|
|
Trade and other payables |
Other liabilities |
Amortized cost |
Dividends and interest payable |
Other liabilities |
Amortized cost |
Borrowing |
Other liabilities |
Amortized cost |
Convertible unsecured subordinated debentures(1) |
Other liabilities |
Amortized cost |
Derivative liabilities |
FVTNE |
Fair Value |
(1) |
Except for derivatives embedded in the related financial
instruments that are classified as FVTNE and measured at fair
value. |
Non-Derivative Financial Instruments
The fair value of Superior's cash and cash equivalents, trade
and other receivables, notes and finance lease receivables, trade
and other payables, and dividends and interest payable approximates
their carrying value due to the short-term nature of these amounts.
The carrying value and the fair value of Superior's borrowing and
convertible unsecured subordinated debentures are provided in Notes
11 and 12.
Financial Instruments - Risk Management
Market Risk
Financial derivatives and non-financial derivatives are used by
Superior to manage its exposure to fluctuations in foreign currency
exchange rates, interest rates and commodity prices. Superior
assesses the inherent risks of these instruments by grouping
derivative and non-financial derivatives related to the exposures
these instruments mitigate. Superior's policy is not to use
financial derivative or non-financial derivative instruments for
speculative purposes. Superior does not formally designate its
derivatives as hedges and, as a result, Superior does not apply
hedge accounting and is required to designate its financial
derivatives and non-financial derivatives as fair value through net
earnings. Details on Superior's market risk policies are consistent
with those disclosed in Superior's 2013 annual consolidated
financial statements.
Credit Risk
Superior utilizes a variety of counterparties in relation to its
derivative and non-financial derivative instruments in order to
mitigate its counterparty risk. Superior assesses the
credit-worthiness of its significant counterparties at the
inception and throughout the term of a contract. Superior is also
exposed to customer credit risk. Energy Services deals with a large
number of small customers, thereby reducing this risk. Specialty
Chemicals, due to the nature of its operations, sells its products
to a relatively small number of customers. Specialty Chemicals
mitigates its customer credit risk by actively monitoring the
overall credit-worthiness of its customers. Energy Services has
minimal exposure to customer credit risk as local natural gas and
electricity distribution utilities have been mandated, for a
nominal fee, to provide Energy Services with invoicing, collection
and the assumption of bad debt risk for residential customers.
Energy Services actively monitors the credit-worthiness of its
commercial customers. Overall, Superior's credit quality is
enhanced by its portfolio of customers which is diversified across
geographical (primarily Canada and the United States) and end-use
(primarily commercial, residential and industrial) markets.
Allowances for doubtful accounts receivables are reviewed by
Superior at each balance sheet date. Superior updates its estimate
of the allowance for doubtful accounts based on the evaluation of
the recoverability of trade receivables with each customer, taking
into account historical collection trends of past due accounts and
current economic conditions. Trade receivables are written-off once
it is determined they are not collectible.
Pursuant to their respective terms, trade receivables, before
deducting an allowance for doubtful accounts, are aged as
follows:
|
March 31, 2014 |
December 31, 2013 |
Current |
310.3 |
317.8 |
Past due less than 90 days |
181.5 |
118.0 |
Past due over 90 days |
20.4 |
14.7 |
Trade receivables |
512.2 |
450.5 |
The current portion of Superior's trade receivables is neither
impaired nor past due and there are no indications as of the
reporting date that the debtors will not make payment.
Superior's trade receivables are stated after deducting a
provision of $9.4 million as at March 31, 2014 (December 31, 2013 −
$7.3 million). The movement in the provision for doubtful accounts
was as follows:
|
March 31, 2014 |
|
December 31, 2013 |
|
Allowance for doubtful accounts, at the beginning of
the period |
(7.3 |
) |
(7.2 |
) |
|
Impairment losses recognized on receivables |
(2.9 |
) |
(3.6 |
) |
|
Amounts written off during the period as uncollectible |
0.1 |
|
3.0 |
|
|
Amounts recovered |
0.7 |
|
0.5 |
|
Allowance for doubtful accounts at the end of the
period |
(9.4 |
) |
(7.3 |
) |
Liquidity Risk
Liquidity risk is the risk that Superior cannot meet a demand
for cash or fund an obligation as it comes due. Liquidity risk also
includes the risk of not being able to liquidate assets in a timely
manner at a reasonable price.
To ensure it is able to react to contingencies and investment
opportunities quickly, Superior maintains sources of liquidity at
the corporate and subsidiary levels. The main sources of liquidity
are cash and other financial assets, the undrawn committed
revolving-term bank credit facility, equity markets and debenture
markets.
Superior is subject to the risks associated with debt financing,
including the ability to refinance indebtedness at maturity.
Superior believes these risks are mitigated through the use of
long-term debt secured by high-quality assets, maintaining debt
levels that in management's opinion are appropriate, and by
diversifying maturities over an extended period. Superior also
seeks to include in its agreements terms that protect it from
liquidity issues of counterparties that might otherwise impact
liquidity.
Superior's contractual obligations associated with its financial
liabilities are as follows:
|
|
2014 |
|
|
2015 |
|
2016 |
|
2017 |
|
2018 |
|
2019 and Thereafter |
|
Total |
|
Borrowing |
|
98.1 |
|
|
58.1 |
|
415.2 |
|
6.5 |
|
4.6 |
|
1.8 |
|
584.3 |
|
Convertible unsecured subordinated debentures |
|
- |
|
|
- |
|
72.8 |
|
168.8 |
|
145.2 |
|
83.7 |
|
470.5 |
|
US$ foreign currency forward sales contracts |
|
164.4 |
|
|
186.0 |
|
113.4 |
|
51.0 |
|
- |
|
- |
|
514.8 |
|
US$ foreign currency forward purchases contracts |
|
(27.0 |
) |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(27.0 |
) |
CDN$ natural gas purchases |
|
21.0 |
|
|
2.9 |
|
0.4 |
|
0.2 |
|
- |
|
- |
|
24.5 |
|
CDN$ propane purchases |
|
6.1 |
|
|
0.2 |
|
- |
|
- |
|
- |
|
- |
|
6.3 |
|
US$ propane purchases |
|
1.5 |
|
|
- |
|
- |
|
- |
|
- |
|
- |
|
1.5 |
|
Fixed-price electricity purchase commitments |
|
27.5 |
|
|
17.7 |
|
17.7 |
|
17.7 |
|
- |
|
- |
|
80.6 |
|
Superior's contractual obligations are considered normal-course
operating commitments and do not include the impact of
mark-to-market fair values on financial and non-financial
derivatives. Superior expects to fund these obligations through a
combination of cash flow from operations, proceeds on revolving
term bank credit facilities and proceeds on the issuance of share
capital. Superior's financial instruments' sensitivities as at
March 31, 2014 are consistent with those disclosed in Superior's
2013 annual consolidated financial statements.
14. Income Taxes
Consistent with prior periods, Superior recognizes a provision
for income taxes for its subsidiaries that are subject to current
and deferred income taxes, including United States income tax and
Chilean income tax.
Total income tax expense, comprised of current taxes and
deferred taxes for the three months ended March 31, 2014 was $16.8
million, compared to $15.8 million in the comparative period. For
the three months ended March 31, 2014, deferred income tax expense
from operations in Canada, the United States and Chile was $16.4
million which resulted in a corresponding total net deferred income
tax asset of $272.4 million at March 31, 2014.
As previously disclosed, on April 2, 2013 Superior received from
the CRA Notices of Reassessment for Superior's 2009 and 2010
taxation years reflecting the CRA's intent to challenge the tax
consequences of Superior's corporate conversion transaction
(Conversion) which occurred on December 31, 2008. The CRA's
position is based on the acquisition of control rules, in addition
to the general anti-avoidance rules in the Income Tax Act
(Canada).
The table below summarizes Superior's estimated tax liabilities
and payment requirements associated with the received and
anticipated Notices of Reassessment. Upon receipt of the Notices of
Reassessment, 50% of the taxes payable pursuant to such Notices of
Reassessment, must be remitted to the CRA.
Taxation Year |
Taxes Payable (1)(2) |
50% of the Taxes Payable(1)(2) |
Payment Dates |
2009/2010 |
$13.0 |
|
$6.5 |
Paid in April 2013 |
2011 |
$10.0 |
(3) |
$5.0 |
2015 |
2012 |
$10.0 |
(3) |
$5.0 |
2015 |
2013 |
$10.0 |
(3) |
$5.0 |
2015 |
2014 |
$20.0 |
(3) |
$10.0 |
2015 |
Total |
$63.0 |
|
$31.5 |
|
(1) |
In
millions of dollars. |
(2) |
Includes estimated interest and penalties. |
(3) |
Estimated based on Superior's previously filed tax returns,
Superior's 2013 results and the midpoint of Superior's 2014
outlook. |
During 2013, Superior filed a Notice of Objection and a Notice
of Appeal with respect to the Notice of Reassessments received on
May 8, 2013. Superior anticipates the case could be heart in the
Tax Court of Canada, in the first quarter of 2015, with a decision
rendered by the end of fiscal 2015. If a decision of the Tax Court
of Canada were to be appealed, the appeal process could reasonably
be expected to take an additional 2 years. If Superior receives a
positive decision then any taxes, interest and penalties paid to
the CRA will be refunded plus interest and if Superior is
unsuccessful then any remaining taxes payable plus interest and
penalties will have to be remitted.
Superior remains confident in the appropriateness of its tax
filing position and the expected tax consequences of the Conversion
and intends to vigorously defend such position and intends to file
its future tax returns on a basis consistent with its view of the
outcome of the Conversion.
15. Total Equity
Superior is authorized to issue an unlimited number of common
shares and an unlimited number of preferred shares. The holders of
common shares are entitled to dividends if, as and when, declared
by the Board of Directors: to one vote per share at shareholders'
meetings; and upon liquidation, dissolution or winding up of
Superior to receive pro rata the remaining property and assets of
Superior, subject to the rights of any shares having priority over
the common shares, of which none is outstanding.
Preferred shares are issuable in series with each class of
preferred share having such rights as the Board of Directors may
determine. Holders of preferred shares are entitled, in priority
over holders of common shares, to be paid ratably with holders of
each other series of preferred shares the amount of accumulated
dividends, if any, specified to be payable preferentially to the
holders of such series upon liquidation, dissolution or winding up
of Superior. Superior has no preferred shares outstanding.
|
Issued Number of Common Shares (Millions) |
Total Equity |
|
Total Equity, December 31, 2013 |
126.2 |
540.2 |
|
|
Net earnings |
- |
40.6 |
|
|
Other comprehensive income |
- |
14.8 |
|
|
Dividends declared to shareholders (1) |
- |
(18.9 |
) |
Total Equity, March 31, 2014 |
126.2 |
576.7 |
|
(1) |
Dividends to shareholders are declared at the discretion of
Superior. During the three months ended March 31, 2014, Superior
paid dividends of $18.9 million or $0.15 per share (March 31, 2013
- $16.9 million or $0.13 per share). |
|
|
|
March 31, 2014 |
|
December 31, 2013(2) |
|
Accumulated other comprehensive loss before
reclassification |
|
|
|
|
|
Currency translation adjustment |
|
|
|
|
|
|
Balance at the beginning of the period |
4.3 |
|
(22.6 |
) |
|
|
Unrealized foreign currency gains on translation of foreign
operations |
14.8 |
|
26.9 |
|
|
|
Balance at the end of the period |
19.1 |
|
4.3 |
|
|
|
|
|
|
|
|
Actuarial defined benefits |
|
|
|
|
|
|
Balance at the beginning of the period |
(5.8 |
) |
(25.3 |
) |
|
|
Actuarial defined benefit (loss) gain |
(0.1 |
) |
26.3 |
|
|
|
Income tax recovery (expense) on actuarial (loss) gain |
0.1 |
|
(6.8 |
) |
|
|
Balance at the end of the period |
(5.8 |
) |
(5.8 |
) |
|
Total accumulated other comprehensive gain (loss)
before reclassification |
13.3 |
|
(1.5 |
) |
|
|
|
|
|
Amounts reclassified from accumulated other
comprehensive loss |
|
|
|
|
|
Accumulated derivative losses |
|
|
|
|
|
|
Balance at the beginning of the period |
(6.4 |
) |
(6.0 |
) |
|
|
Reclassification of derivative losses previously deferred(1) |
- |
|
(0.4 |
) |
|
|
Balance at the end of the period |
(6.4 |
) |
(6.4 |
) |
Total amounts reclassified from accumulated other
comprehensive loss |
(6.4 |
) |
(6.4 |
) |
|
|
|
|
|
Accumulated other comprehensive gain (loss) at the end
of the period |
6.9 |
|
(7.9 |
) |
(1) |
The
reclassification of derivative losses previously deferred is
included in unrealized losses on derivative financial instruments
on the statement of net earnings and total comprehensive
income. |
Other Capital Disclosures
Additional Capital Disclosure
Superior's objectives when managing capital are: (i) to maintain
a flexible capital structure to preserve its ability to meet its
financial obligations, including potential obligations from
acquisitions; and (ii) to safeguard its assets while maximizing the
growth of its businesses and returns to its shareholders.
In the management of capital, Superior includes shareholders'
equity (excluding accumulated other comprehensive gain (loss)),
current and long-term borrowing, convertible unsecured subordinated
debentures, securitized accounts receivable and cash and cash
equivalents. Superior manages its capital structure and makes
adjustments in light of changes in economic conditions and the
nature of the underlying assets. In order to maintain or adjust the
capital structure, Superior may adjust the amount of dividends to
Shareholders, issue additional share capital, issue new debt or
convertible unsecured subordinated debentures with different
characteristics.
Superior monitors its capital based on the ratio of senior and
total debt outstanding to net earnings before interest, taxes,
depreciation, amortization and other non-cash expenses (EBITDA), as
defined by its revolving term credit facility, and the ratio of
total debt outstanding to EBITDA. Superior's reference to EBITDA as
defined by its revolving term credit facility may be referred to as
compliance EBITDA in its other public reports.
Superior is subject to various financial covenants in its credit
facility agreements, including senior debt, total debt to EBITDA
ratio and restricted payments test, which are measured on a
quarterly basis. As at March 31, 2014 and December 31, 2013
Superior was in compliance with all of its financial covenants.
Superior's financial objectives and strategy related to managing
its capital as described above remained unchanged from the prior
fiscal year. Superior believes that its debt to EBITDA ratios are
within reasonable limits, in light of Superior's size, the nature
of its businesses and its capital management objectives.
Financial Measures utilized for bank covenant purposes
Compliance EBITDA
Compliance EBITDA represents earnings before interest, taxes,
depreciation, amortization and other non-cash expenses calculated
on a 12-month trailing basis giving pro forma effect to
acquisitions and divestitures and is used by Superior to calculate
its debt covenants and other credit information. Compliance EBITDA
is not a defined performance measure under IFRS. Superior's
calculation of compliance EBITDA may differ from similar
calculations used by comparable entities.
The capital structure of Superior and the calculation of its key
capital ratios are as follows:
As at |
March 31, 2014 |
|
December 31, 2013 |
Total shareholders' equity |
576.7 |
|
540.2 |
Exclude accumulated other comprehensive (gain) loss |
(6.9 |
) |
7.9 |
Shareholders' equity excluding accumulated other comprehensive
(gain) loss |
569.8 |
|
548.1 |
|
|
|
|
Current borrowing (1) |
98.1 |
|
67.0 |
Borrowing (1) |
486.2 |
|
511.7 |
Consolidated debt |
584.3 |
|
578.7 |
Convertible unsecured subordinated debentures (1) |
494.4 |
|
494.5 |
Total debt |
1,078.7 |
|
1,073.2 |
Total capital |
1,648.5 |
|
1,621.3 |
(1) |
Borrowing and convertible unsecured subordinated debentures are
before deferred financing fees and option value. |
|
|
Twelve months ended |
March 31, 2014 |
|
December 31, 2013 |
|
|
Net earnings |
61.9 |
|
52.7 |
|
|
Adjusted for: |
|
|
|
|
|
|
Finance expense |
67.7 |
|
71.8 |
|
|
|
Realized gains on derivative financial instruments included in
finance expense |
3.9 |
|
3.9 |
|
|
|
Depreciation included in selling, distribution and administrative
costs |
43.3 |
|
42.2 |
|
|
|
Depreciation included in cost of sales |
42.9 |
|
41.3 |
|
|
|
Gains on disposal of assets |
(3.3 |
) |
(2.9 |
) |
|
|
Amortization of intangible assets |
16.4 |
|
19.4 |
|
|
|
Impairment of property, plant and equipment |
15.5 |
|
15.5 |
|
|
|
Income tax expense |
6.7 |
|
5.7 |
|
|
|
Unrealized losses on derivative financial instruments |
0.9 |
|
5.1 |
|
|
|
Pro-forma impact of acquisitions |
5.1 |
|
8.5 |
|
Compliance EBITDA (1) |
261.0 |
|
263.2 |
|
(1) |
EBITDA, as defined by Superior's revolving-term credit facility, is
calculated on a trailing 12-month basis taking into consideration
the pro-forma impact of acquisitions and dispositions in accordance
with the requirements of Superior's credit facility. Superior's
calculation of EBITDA and debt to EBITDA ratios may differ from
those of similar entities. |
|
|
|
March 31, 2014 |
December 31, 2013 |
Consolidated secured debt to compliance EBITDA |
2.2:1 |
2.2:1 |
Consolidated debt to compliance EBITDA |
2.2:1 |
2.2:1 |
Total debt to compliance EBITDA |
4.1:1 |
4.1:1 |
16. Net Earnings per Share
|
Three months ended March 31, 2014 |
Three months ended March 31, 2013 |
Net earnings per share computation, basic |
|
|
|
Net earnings for the period |
40.6 |
31.4 |
|
Weighted average shares outstanding (millions) |
126.2 |
113.7 |
Net earnings per share, basic |
$0.32 |
$0.28 |
|
Three months ended March 31, 2014(1) |
Three months ended March 31, 2013(2) |
Net earnings per share computation, diluted |
|
|
|
Net earnings for the period |
44.3 |
34.1 |
|
Weighted average shares outstanding (millions) |
157.6 |
128.0 |
Net earnings per share, diluted |
$0.28 |
$0.27 |
(1) |
For
the three months ended March 31, 2014, all outstanding convertible
debentures have been included in the dilutive net earnings per
share calculation. |
(2) |
The
following outstanding convertible debentures have been excluded
from the calculation for the three months ended March 31, 2013 as
they were anti-dilutive: 5.75% convertible debentures due June
2017, 5.85% convertible debentures due October 2015, 6.00%
convertible debentures due June 2018, and 7.50% convertible
debentures due October 2016. |
17. Supplemental Disclosure of Non-Cash Operating Working
Capital Changes
|
Three months ended March 31, 2014 |
|
Three months ended March 31, 2013 |
|
Changes in non-cash working capital |
|
|
|
|
Trade receivables and other |
(53.0 |
) |
(26.1 |
) |
Inventories |
21.1 |
|
40.1 |
|
Trade and other payables |
(19.0 |
) |
(19.8 |
) |
Other |
2.3 |
|
1.7 |
|
|
(48.6 |
) |
(4.1 |
) |
18. Supplemental Disclosure of Condensed Consolidated Statement
of Comprehensive Income
Revenue is recognized at the fair value of consideration
received or receivable when the significant risks and rewards of
ownership have been transferred.
|
Three months ended March 31, 2014 |
|
Three months ended March 31, 2013 |
|
Revenues |
|
|
|
|
|
Revenue from products |
1,261.9 |
|
1,028.2 |
|
|
Revenue from the rendering of services |
16.9 |
|
15.2 |
|
|
Rental revenue |
5.2 |
|
5.5 |
|
|
Construction contract revenue |
0.3 |
|
(0.5 |
) |
|
Realized (losses) gains on derivative financial instruments |
(1.9 |
) |
1.5 |
|
|
1,282.4 |
|
1,049.9 |
|
|
|
|
|
|
Cost of sales (includes products and services) |
|
|
|
|
|
Cost of products and services |
(1,001.8 |
) |
(778.0 |
) |
|
Depreciation included in cost of sales |
(11.9 |
) |
(10.3 |
) |
|
Realized gains (losses) on derivative financial instruments |
7.9 |
|
(8.5 |
) |
|
(1,005.8 |
) |
(796.8 |
) |
|
|
|
|
|
Selling, distribution and administrative costs |
|
|
|
|
|
Other selling, distribution and administrative costs |
(81.3 |
) |
(67.6 |
) |
|
Restructuring costs |
(1.8 |
) |
(0.2 |
) |
|
Employee costs |
(106.5 |
) |
(95.5 |
) |
|
Employee future benefit expense |
(0.9 |
) |
(1.5 |
) |
|
Depreciation included in selling, distribution and administrative
costs |
(11.4 |
) |
(10.3 |
) |
|
Amortization of intangible assets |
(0.9 |
) |
(4.5 |
) |
|
Losses on disposal of assets |
- |
|
(0.4 |
) |
|
Realized gains on the translation of U.S. denominated net working
capital |
2.1 |
|
0.9 |
|
|
(200.7 |
) |
(179.1 |
) |
|
|
|
|
|
Finance expense |
|
|
|
|
|
Interest on borrowing |
(4.3 |
) |
(8.2 |
) |
|
Interest on convertible unsecured subordinated debentures |
(7.5 |
) |
(7.9 |
) |
|
Interest on obligations under finance leases |
(1.1 |
) |
(0.9 |
) |
|
Gain on debenture redemptions |
- |
|
0.2 |
|
|
Unwinding of discount on debentures, borrowing and decommissioning
liabilities |
(1.5 |
) |
(1.7 |
) |
|
(14.4 |
) |
(18.5 |
) |
19. Related Party Transactions
Transactions between Superior and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note.
For the three months ended March 31, 2014, Superior incurred
$0.2 million (March 31, 2013 - $0.1 million) in legal fees
respectively, with Norton Rose Canada LLP, a related party with
Superior because a member of Superior's Board of Directors is a
Partner at the law firm.
20. Reportable Segment Information
Superior has adopted IFRS 8 - Operating Segments, which
requires operating segments to be identified on the basis of
internal reports about components of the Company that are regularly
reviewed by the chief operating decision-maker in order to allocate
resources to the segments and to assess their performance.
Superior operates three distinct reportable operating segments:
Energy Services, Specialty Chemicals and Construction Products
Distribution. Superior's Energy Services' operating segment
provides distribution, wholesale procurement and related services
in relation to propane, heating oil and other refined fuels under
the following: Canadian propane division and U.S. refined fuels
division. Energy Services also provides fixed-price natural gas and
electricity supply services under Superior Energy Management.
Specialty Chemicals' is a leading supplier of sodium chlorate and
technology to the pulp and paper industries and a regional supplier
of potassium and chloralkali products in the U.S. Midwest.
Construction Products Distribution is one of the largest
distributors of commercial and industrial insulation in North
America and the largest distributor of specialty construction
products to the walls and ceilings industry in Canada.
Superior's corporate office arranges intersegment foreign
exchange contracts from time to time. Realized gains and losses
pertaining to intersegment foreign exchange gains and losses are
eliminated under the corporate cost column. All of Superior's
operating segments conduct business with customers of various sizes
and do not rely extensively on any single customer for their
revenue stream.
For the three months ended March 31, 2014 |
|
Energy Services |
|
|
Specialty Chemicals |
|
|
Construction Products Distribution |
|
|
Corporate |
|
|
Total Consolidated |
|
Revenue |
|
939.6 |
|
|
157.0 |
|
|
185.8 |
|
|
- |
|
|
1,282.4 |
|
Cost of sales (includes products & services) |
|
(764.5 |
) |
|
(103.0 |
) |
|
(138.3 |
) |
|
- |
|
|
(1,005.8 |
) |
Gross Profit |
|
175.1 |
|
|
54.0 |
|
|
47.5 |
|
|
- |
|
|
276.6 |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, distribution and administrative costs |
|
(114.9 |
) |
|
(36.3 |
) |
|
(44.6 |
) |
|
(4.9 |
) |
|
(200.7 |
) |
|
Finance expense |
|
(0.7 |
) |
|
(0.3 |
) |
|
(0.2 |
) |
|
(13.2 |
) |
|
(14.4 |
) |
|
Unrealized gains (losses) on derivative financial instruments |
|
11.8 |
|
|
(0.5 |
) |
|
- |
|
|
(15.4 |
) |
|
(4.1 |
) |
|
|
(103.8 |
) |
|
(37.1 |
) |
|
(44.8 |
) |
|
(33.5 |
) |
|
(219.2 |
) |
Net earnings (loss) before income taxes |
|
71.3 |
|
|
16.9 |
|
|
2.7 |
|
|
(33.5 |
) |
|
57.4 |
|
Income tax expense |
|
- |
|
|
- |
|
|
- |
|
|
(16.8 |
) |
|
(16.8 |
) |
Net Earnings (Loss) |
|
71.3 |
|
|
16.9 |
|
|
2.7 |
|
|
(50.3 |
) |
|
40.6 |
|
For the three months ended March 31, 2013 |
|
Energy Services |
|
|
Specialty Chemicals |
|
|
Construction Products Distribution |
|
|
Corporate |
|
|
Total Consolidated |
|
Revenue |
|
719.7 |
|
|
143.7 |
|
|
186.5 |
|
|
- |
|
|
1,049.9 |
|
Cost of sales (includes products & services) |
|
(566.2 |
) |
|
(89.2 |
) |
|
(141.4 |
) |
|
- |
|
|
(796.8 |
) |
Gross Profit |
|
153.5 |
|
|
54.5 |
|
|
45.1 |
|
|
- |
|
|
253.1 |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, distribution and administrative costs |
|
(99.3 |
) |
|
(31.9 |
) |
|
(41.7 |
) |
|
(6.2 |
) |
|
(179.1 |
) |
|
Finance expense |
|
(0.8 |
) |
|
(0.1 |
) |
|
(0.1 |
) |
|
(17.5 |
) |
|
(18.5 |
) |
|
Unrealized gains (losses) on derivative financial instruments |
|
17.9 |
|
|
0.1 |
|
|
- |
|
|
(26.3 |
) |
|
(8.3 |
) |
|
|
(82.2 |
) |
|
(31.9 |
) |
|
(41.8 |
) |
|
(50.0 |
) |
|
(205.9 |
) |
Net earnings (loss) before income taxes |
|
71.3 |
|
|
22.6 |
|
|
3.3 |
|
|
(50.0 |
) |
|
47.2 |
|
Income tax expense |
|
- |
|
|
- |
|
|
- |
|
|
(15.8 |
) |
|
(15.8 |
) |
Net Earnings (Loss) |
|
71.3 |
|
|
22.6 |
|
|
3.3 |
|
|
(65.8 |
) |
|
31.4 |
|
Net Working Capital, Total Assets, Total Liabilities, and
Purchase of Property, Plant and Equipment
|
|
Energy Services |
|
Specialty Chemicals |
|
Construction Products Distribution |
|
Corporate |
|
|
Total Consolidated |
As at March 31, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
Net working capital (1) |
|
223.9 |
|
28.7 |
|
108.0 |
|
(24.3 |
) |
|
336.3 |
|
Total assets |
|
825.3 |
|
611.5 |
|
211.7 |
|
526.5 |
|
|
2,175.0 |
|
Total liabilities |
|
294.6 |
|
172.8 |
|
90.2 |
|
1,040.7 |
|
|
1,598.3 |
As at December 31, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
Net working capital (1) |
|
178.7 |
|
28.5 |
|
103.1 |
|
(17.2 |
) |
|
293.1 |
|
Total assets |
|
779.3 |
|
651.3 |
|
209.6 |
|
500.9 |
|
|
2,141.1 |
|
Total liabilities |
|
317.9 |
|
178.0 |
|
96.4 |
|
1,008.6 |
|
|
1,600.9 |
For the three months ended March 31, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment |
|
5.3 |
|
11.0 |
|
0.5 |
|
- |
|
|
16.8 |
For the three months ended March 31, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment |
|
5.8 |
|
5.6 |
|
0.3 |
|
- |
|
|
11.7 |
(1) |
Net
working capital reflects amounts as at the quarter end and is
comprised of trade and other receivables, prepaid expenses and
inventories, less trade and other payables, deferred revenue and
dividends and interest payable. |
21. Geographical Information
|
Canada |
United States |
Other |
Total Consolidated |
Revenues for the three months ended March 31, 2014 |
557.9 |
710.6 |
13.9 |
1,282.4 |
Property, plant and equipment as at March 31, 2014 |
459.1 |
383.9 |
45.0 |
888.0 |
Intangible assets as at March 31, 2014 |
15.7 |
4.0 |
- |
19.7 |
Goodwill as at March 31, 2014 |
188.2 |
5.7 |
- |
193.9 |
Total assets as at March 31, 2014 |
1,430.4 |
681.3 |
63.3 |
2,175.0 |
Revenues for the three months ended March 31, 2013 |
391.6 |
641.2 |
17.1 |
1,049.9 |
Property, plant and equipment as at December 31, 2013 |
458.9 |
374.6 |
44.4 |
877.9 |
Intangible assets as at December 31, 2013 |
15.2 |
3.8 |
- |
19.0 |
Goodwill as at December 31, 2013 |
188.2 |
5.5 |
- |
193.7 |
Total assets as at December 31, 2013 |
1,388.1 |
691.4 |
61.6 |
2,141.1 |
22. Subsequent Events
On May 1, 2014, Superior closed the sale of its U.S. based
residential and commercial electricity customer base to Crius
Energy. Superior has decided to exit both the residential and
commercial Northeast U.S. based electricity markets in order to
focus on the Canadian market and reduce the future risk of future
losses associated with the volatility in electricity prices.
Superior received proceeds of $3.1 million from the sale on May 1,
2014 and expects to receive deferred consideration of approximately
$1.9 million during the next nine months if certain conditions are
met.
On May 7, 2014, Superior's Board of Directors has authorized the
commencement of a formal process to solicit and assess offers for
the potential divestiture of Superior's Construction Products
Distribution segment. Superior has retained BMO Capital Markets as
a financial advisor for the process.
Superior Plus Corp.Wayne BinghamExecutive Vice-President and
Chief Financial Officer(403) 218-2951(403)
218-2973wbingham@superiorplus.comSuperior Plus Corp.Jay
BachmanVice-President, Investor Relations and Treasurer(403)
218-2957 / Toll Free: 1-866-490-PLUS (7587)(403)
218-2973jbachman@superiorplus.com
Grafico Azioni Superior Plus (TSX:SPB)
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Grafico Azioni Superior Plus (TSX:SPB)
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