Superior Plus Corp. Announces 2019 Third Quarter Results
TORONTO--(BUSINESS WIRE)--Nov 13, 2019--
Superior Plus Corp. (“Superior”) (TSX:SPB) announced today the financial and operating results for the third quarter ended September 30, 2019. All financial figures are expressed in Canadian dollars.
“Our strong results were $22.3 million higher than the prior year quarter, driven primarily by improved results in our Canadian and U.S. propane distribution businesses related to realized synergies from acquisitions, effective price management, wholesale propane fundamentals and contribution from tuck-in acquisitions,” said Luc Desjardins, President and Chief Executive Officer. “We also made excellent progress in the third quarter on our 2019 realized synergy goal related to the NGL acquisition. Our run-rate synergies as of the third quarter are US $20 million, and we expect to exit 2020 with US $24 million in run-rate synergies.”
Business and Financial Highlights
- Adjusted EBITDA for the third quarter was $48.2 million, a $22.3 million or 86% increase compared to the prior year quarter primarily due to higher EBITDA from operations from Canadian propane distribution (“Canadian Propane”) and Specialty Chemicals, an improvement in U.S. propane distribution (“U.S. Propane”) results and lower realized losses on foreign currency hedging contracts.
- EBITDA from operations for the third quarter was $53.6 million, a $21.4 million or 66% increase compared to the prior year quarter, primarily due to Canadian Propane results, the adoption of IFRS 16 and to a lesser extent, U.S. Propane, partially offset by lower Specialty Chemicals results. The adoption of IFRS 16 resulted in a $9.6 million increase in EBITDA from operations for the third quarter on a consolidated basis.
- Adjusted operating cash flow (“AOCF”) before transaction and other costs for the third quarter was $19.2 million, a $17.0 million increase compared to the prior year quarter primarily due to higher Adjusted EBITDA, partially offset by higher interest and cash tax expenses. AOCF before transaction and other costs per share was $0.11, $0.10 higher than the prior year quarter primarily due to the increase in AOCF, partially offset by the increase in weighted average shares outstanding. AOCF before transaction and other costs per share for the first nine months was $1.49 per share, $0.38 or 34% higher than the prior year comparable period due to an increase in Adjusted EBITDA, partially offset by an increase in interest expense, cash tax expense and weighted average shares outstanding. Weighted average shares outstanding were higher due to the equity financing related to the acquisition of NGL Propane, LLC (“NGL”).
- Superior had a net loss of $59.3 million in the third quarter, an increase of $19.5 million from the net loss of $39.8 million in the prior year quarter. The increase from the prior year quarter is primarily due to an unrealized loss on derivative financial instruments of $26.7 million in the third quarter, compared to a gain in the prior year quarter of $16.8 million, partially offset by a $24.1 million increase in gross profit.
- In the third quarter, U.S. Propane achieved approximately US $2.7 million in realized synergies related to the NGL acquisition, bringing the year-to-date total to US $12.1 million. The realized synergies in the first nine months were primarily due to supply chain efficiencies, margin management improvements and operational expense savings. As of the third quarter, Superior has achieved run rate synergies of US $20 million and expects US $24 million of run-rate synergies exiting 2020.
- Superior is confirming its previously communicated 2019 Adjusted EBITDA guidance range of $490 million to $530 million. The low end of the 2019 Adjusted EBITDA range accounts for warmer than normal weather in Superior’s operating regions, as well as potential adverse market conditions across Superior’s areas of operation, including reduced economic activity in Western Canada and further weakness in caustic soda and hydrochloric acid markets. The high end of the 2019 Adjusted EBITDA range accounts for colder than normal weather in Superior’s operating regions and greater than expected contributions from acquisition synergies, wholesale propane market fundamentals, organic growth and improvements in North American chlor-alkali markets.
- Canadian Propane EBITDA from operations for the third quarter was $20.9 million, an increase of $13.2 million or 171% compared to the prior year quarter primarily due to higher gross profit, the impact from the adoption of IFRS 16 and lower expenses related to synergies from Canwest. Gross profit increased $15.0 million primarily due to higher supply portfolio management gross profit related to wholesale propane market fundamentals, higher volumes and sales and marketing initiatives, partially offset by lower other services gross profit. Total sales volumes of 393 million litres were 53 million litres or 16% higher than the prior year quarter primarily due to an increase in wholesale volumes related to United Pacific Energy (“UPE”), partially offset by a decrease in oilfield and commercial volumes related to the decline in activity in Western Canada. Average margin per litre in the third quarter was 18.4 cents per litre, an 11% increase from the prior year quarter, primarily due to benefits from improved wholesale propane market fundamentals and margin management initiatives in the low wholesale propane price environment. Other services gross profit decreased $1.0 million due to lower equipment rentals and service revenue related to the decline in activity in Western Canada.
- Consistent with the seasonal nature of its business, U.S. Propane had negative EBITDA from operations for the third quarter of $7.0 million, a $4.0 million improvement from the prior year quarter primarily due to unit margin improvement, synergies from the integration of NGL and to a lesser extent tuck-in acquisitions, partially offset by an increase in expenses. Total volumes decreased 3 million litres or 2% as higher residential volumes related to the incremental volumes from the NGL acquisition were offset by lower commercial and wholesale volumes. Residential volumes were 10 million litres or 13% higher than the prior year quarter primarily due to the timing of the acquisition of NGL in 2018. Average margin per litre in the third quarter was 31.9 cents per litre compared to 24.3 cents per litre in the prior year quarter primarily due to sales and marketing initiatives, the higher proportion of residential sales volumes, lower wholesale propane prices and to a lesser extent the positive impact of the weaker Canadian dollar on the translation of USD-denominated gross profit. Similar to Canadian Propane, U.S. Propane also benefitted from improved wholesale propane market fundamentals and margin management initiatives in the low wholesale propane price environment. Other services gross profit was consistent with the prior year quarter. Operating expenses were $7.3 million higher than the prior year quarter primarily due to the timing of the NGL acquisition in 2018 and an increase in incentive costs.
- Specialty Chemicals EBITDA from operations for the third quarter was $39.7 million, an increase of $4.2 million or 12% compared to the prior year quarter due to the impact of adopting IFRS 16 and higher sodium chlorate results, partially offset by weaker chlor-alkali and sodium chlorite results. The adoption of IFRS 16 in 2019 resulted in a $6.2 million increase in third quarter EBITDA from operations compared to the prior year quarter. Sodium chlorate results were higher primarily due to an increase in selling prices and the impact of the weaker Canadian dollar on USD-denominated revenues. Chlor-alkali results were lower due to a decrease in sales volumes and sales prices for hydrochloric acid and caustic soda, partially offset by higher caustic potash and chlorine sales volumes. Sodium chlorite results were lower due to reduced demand from the U.S. oil and gas drilling sector.
Three Months Ended
Nine Months Ended
(millions of dollars, except per share amounts)
Net earnings (loss)
Net earnings (loss) per share, basic and diluted (1)
EBITDA from operations (2)
Adjusted EBITDA (2)
Net cash flows from operating activities
Net cash flows from operating activities per share – basic and diluted (1)
AOCF before transaction and other costs (2)(3)
AOCF before transaction and other costs per share – basic and diluted (1)(2)(3)
AOCF per share – basic and diluted (1)(2)
Cash dividends declared
Cash dividends declared per share
(1) The weighted average number of shares outstanding for the three and nine months ended September 30, 2019 is 174.9 million (September 30, 2018 – 171.4 million and 152.5 million, respectively). There were no dilutive instruments with respect to AOCF per share, net earnings per share or net cash flows from operating activities per share for the three and nine months ended September 30, 2019 or 2018.
Three Months Ended
Nine Months Ended
(millions of dollars)
EBITDA from operations (1)
Canadian Propane Distribution
U.S. Propane Distribution
(1) See “Non-GAAP Financial Measures”.
Specialty Chemicals Process
On June 10, 2019, Superior announced it is considering a sale of its Specialty Chemicals business. Superior continues to work with its financial advisor and has not set a timetable for completion of the review process. Superior expects to provide an update once a specific transaction or alternative is approved by the Board of Directors or the review process has concluded.
Business Development and Acquisition Update
- On October 1, 2019, Superior acquired the propane distribution assets of an independent propane distributor in North Carolina for total consideration of US $1.2 million (CDN $1.5 million). The purchase price was paid primarily with cash from Superior’s credit facility, as well as deferred payments.
- On October 9, 2019, Superior acquired the propane distribution assets of an independent propane distributor in Quebec and New Brunswick for total consideration of $4.9 million, excluding taxes. The purchase price was paid with cash from Superior’s credit facility.
Debt and Leverage Update
Superior remains focused on managing both its total debt and its Senior Debt to Credit Facility EBITDA leverage ratio. Superior’s total debt as at September 30, 2019 was $1,947 million, an increase of $41 million from June 30, 2019 primarily due to the timing of interest payments for senior unsecured debentures and, to a lesser extent, the impact of a weaker Canadian dollar on the translation of USD-denominated debt. Superior’s debt for credit facility and note indenture covenant calculations (“Senior Debt”), which excludes the impact of IFRS 16, was $1,785 million as at September 30, 2019, an increase of $42 million from June 30, 2019 and a decrease of $101 million from December 31, 2018. The decrease in debt compared to December 31, 2018 is primarily due to cash generated from operations and a reduction in net working capital. Credit Facility EBITDA, which excludes the impact of IFRS 16 for the trailing twelve months ended September 30, 2019 was $478 million. See “Non-GAAP Financial Measures” for the definition of Senior Debt and Credit Facility EBITDA and “Non-GAAP Financial Measures” in the MD&A for the reconciliation of Credit Facility EBITDA from Adjusted EBITDA. Superior’s Senior Debt to Credit Facility EBITDA ratio as at September 30, 2019 was 3.7x, consistent with June 30, 2019, and compared to 4.2x as at December 31, 2018.
Superior anticipates its Senior Debt to Credit Facility EBITDA leverage ratio (“Credit Facility leverage ratio”) as at December 31, 2019 will be in the range of 3.6x to 4.0x. Superior estimates the total debt to Adjusted EBITDA leverage ratio at December 31, 2019 would be up to 0.1x higher than the Credit Facility leverage ratio due to the impact of IFRS 16.
Superior is well within its covenants related to the credit facility and the note indentures. Superior also had available liquidity of $257 million under the credit facility as at September 30, 2019.
2019 Third Quarter Conference Call
Superior will be conducting a conference call and webcast for investors, analysts, brokers and media representatives to discuss the 2019 Third Quarter Results at 10:30 a.m. EST on Thursday, November 14, 2019. To participate in the call, dial: 1-844-389-8661. Internet users can listen to the call live, or as an archived call on Superior’s website at www.superiorplus.com under the Events section.
Non-GAAP Financial Measures
Throughout the third quarter earnings release, Superior has used the following terms that are not defined by International Financial Reporting Standards (“Non-GAAP Financial Measures”), but are used by management to evaluate the performance of Superior and its business: AOCF before and after transaction and other costs, earnings before interest, taxes, depreciation and amortization (“EBITDA”) from operations, Adjusted EBITDA, Senior Debt, Credit Facility EBITDA and Senior Debt to Credit Facility EBITDA leverage ratio. These measures may also be used by investors, financial institutions and credit rating agencies to assess Superior’s performance and ability to service debt. Non-GAAP financial measures do not have standardized meanings prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other companies. Securities regulations require that non-GAAP financial measures are clearly defined, qualified and reconciled to their most comparable GAAP financial measures. Except as otherwise indicated, these non-GAAP financial measures are calculated and disclosed on a consistent basis from period to period. Specific items may only be relevant in certain periods. See “Non-GAAP Financial Measures” in the MD&A for a discussion of non-GAAP financial measures and their reconciliations to GAAP financial measures.
The intent of non-GAAP financial measures is to provide additional useful information to investors and analysts, and the measures do not have any standardized meaning under IFRS. The measures should not, therefore, be considered in isolation or used in substitute for measures of performance prepared in accordance with IFRS. Other issuers may calculate non-GAAP financial measures differently. Investors should be cautioned that AOCF, EBITDA from operations, Adjusted EBITDA and Credit Facility EBITDA should not be construed as alternatives to net earnings, cash flow from operating activities or other measures of financial results determined in accordance with GAAP as an indicator of Superior’s performance. Non-GAAP financial measures are identified and defined as follows:
Adjusted Operating Cash Flow and Adjusted Operating Cash Flow per Share
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 infrequent in nature and could distort the analysis of trends in business performance. Excluding these items does not imply they are non-recurring. AOCF and AOCF per share are presented before and after transaction and other costs.
AOCF per share before transaction and other costs is calculated by dividing AOCF before transaction and other costs by the weighted average number of shares outstanding. AOCF per share is calculated by dividing AOCF by the weighted average number of shares outstanding.
AOCF is a performance measure used by management and investors to evaluate Superior’s ongoing performance of its businesses and ability to generate cash flow. 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. AOCF is also used as one component in determining short-term incentive compensation for certain management employees.
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 Distribution 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. AOCF is reconciled to cash flow from operating activities.
Adjusted EBITDA represents earnings before interest, taxes, depreciation, amortization, losses (gains) on disposal of assets, finance expense, restructuring costs, transaction and other costs, and unrealized gains (losses) on derivative financial instruments. Adjusted EBITDA is used by Superior and investors to assess its consolidated results and ability to service debt. Adjusted EBITDA is reconciled to net earnings before income taxes.
EBITDA from operations
EBITDA from operations is defined as Adjusted EBITDA excluding costs that are not considered representative of Superior’s underlying core operating performance, including gains and losses on foreign currency hedging contracts, corporate costs and transaction and other costs. Management uses EBITDA from operations to set targets for Superior (including annual guidance and variable compensation targets). EBITDA from operations is reconciled to net earnings before income taxes.
Non-GAAP Financial Measures Used for bank covenant purposes
Senior Debt includes total borrowing before deferred financing fees and vehicle lease obligations, and excludes the remaining lease obligations. Senior Debt is used by Superior to calculate its debt covenants and other credit information.
Credit Facility EBITDA
Credit Facility EBITDA is defined as Adjusted EBITDA calculated on a 12-month trailing basis giving pro forma effect to acquisitions and dispositions adjusted to the first day of the calculation period, and excludes the impact from the adoption of IFRS 16 and EBITDA from undesignated subsidiaries. Credit Facility EBITDA is used by Superior to calculate its debt covenants and other credit information.
Credit Facility leverage ratio
Credit Facility leverage ratio is defined as Senior Debt divided by Credit Facility EBITDA. Senior Debt to Credit Facility EBITDA is used by Superior for calculation of bank covenants and other credit information.
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”, “estimate”, “expect”, “plan”, “forecast”, “future”, “outlook, “guidance”, “may”, “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 Adjusted EBITDA, anticipated impact of IFRS 16 on leverage, expected total debt to Adjusted EBITDA ratio, expected Senior Debt to Credit Facility EBITDA leverage ratio, business strategy and objectives, development plans and programs, organic growth, weather, economic activity in Western Canada, product pricing and sourcing, caustic soda and hydrochloric acid markets, wholesale propane market fundamentals, electricity costs, exchange rates, expected synergies from the acquisition of NGL and other acquisitions, improvements in North American chlor-alkali markets, expected seasonality of demand, and future economic conditions. Forward-looking information in this document includes expected 2019 Adjusted EBITDA, which assumes no material divestitures in 2019.
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, utilization of tax basis, regulatory developments, currency, exchange and interest rates, future commodity prices relating to the oil and gas industry, future oil rig activity levels, trading data, cost estimates, 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 LP, the assumptions set forth under the “Financial Outlook” sections of our MD&A. The forward looking information is also 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, reduced customer demand, 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.
View source version on businesswire.com:https://www.businesswire.com/news/home/20191113005939/en/
CONTACT: Beth Summers
Phone: (416) 340-6015
ExecutiveVice President and Chief Financial OfficerRob Dorran
Phone: (416) 340-6003
Toll Free: 1-866-490-PLUS (7587)
Vice President, Investor Relations and Treasurer
KEYWORD: NORTH AMERICA CANADA
INDUSTRY KEYWORD: OIL/GAS ENERGY
SOURCE: Superior Plus
Copyright Business Wire 2019.
PUB: 11/13/2019 05:05 PM/DISC: 11/13/2019 05:05 PM