Superior Plus Corp. Announces 2016 Second Quarter Results
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TORONTO, ONTARIO -- (Marketwired) -- 08/09/16 -- Superior Plus Corp. (TSX: SPB) -
Financial Overview
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Three Months Ended Six Months Ended
June 30 June 30
(millions of dollars, except per
share amounts) 2016 2015 2016 2015
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Revenue 703.6 715.0 1,511.1 1,691.0
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Gross Profit 196.0 189.2 473.2 477.2
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Net earnings (loss) from
continuing operations (6.9) 41.0 98.0 32.0
Net earnings (loss) from
continuing operations per
share, basic $(0.05) $0.32 $0.69 $0.25
Net earnings (loss) from
continuing operations per
share, diluted $(0.05) $0.25 $0.65 $0.25
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EBITDA from operations (1)(3) 51.4 47.5 174.8 176.9
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Net cash flows from operating
activities 39.1 68.1 128.8 200.0
Net cash flows from operating
activities per share - basic $0.27 $0.54 $0.91 $1.58
Net cash flows from operating
activities per share - diluted $0.27 $0.53 $0.91 $1.53
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Adjusted operating cash flow
before transaction costs (2)(4) 27.2 23.4 122.3 119.2
Adjusted operating cash flow
before transaction costs per
share - basic (2)(4) $0.19 $0.18 $0.86 $0.94
Adjusted operating cash flow
before transaction costs per
share - diluted (2)(4) $0.19 $0.18 $0.86 $0.92
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Adjusted operating cash flow (2) 15.7 23.4 102.3 119.2
Adjusted operating cash flow per
share - basic (2) $0.11 $0.18 $0.72 $0.94
Adjusted operating cash flow per
share - diluted (2) $0.11 $0.18 $0.72 $0.92
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Cash dividends declared $25.5 $22.8 $50.9 $45.5
Cash dividends declared per
share $0.18 $0.18 $0.36 $0.36
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(1) EBITDA from operations is a non-GAAP financial measure. Refer to "Non-
GAAP Financial Measures" and "Reconciliation of Net Earnings Before Income
Taxes to EBITDA from Operations" for further details and the calculation and
reconciliation.
(2) Adjusted operating cash flow ("AOCF") is a non-GAAP financial measure.
Refer to "Non-GAAP Financial Measures" for further details and the
reconciliation.
(3) EBITDA from operations excludes realized losses from foreign currency
hedging contracts that hedge U.S. denominated earnings for risk management
purposes. Comparative figures have been reclassified to reflect the current
period presentation.
(4) Transaction costs for the three and six months ended June 30, 2016
include $10.1 million and $18.6 million, respectively, in costs related to
the terminated acquisition of Canexus Corporation ("Canexus Acquisition")
and $1.4 million in costs related to the divesture of CPD. Refer to "Non-
GAAP Acquisition Costs" in the Second Quarter MD&A for further details.
Highlights
-- For the quarter ended June 30, 2016, Superior generated AOCF before
transaction costs of $27.2 million, an increase of $3.8 million compared
to prior year, and AOCF per share before transaction costs of $0.19,
consistent with the prior year quarter.
-- Superior sold its Construction Products Distribution ("CPD") business
for total cash consideration of US$325 million (approximately $428
million CAD) to Foundation Building Materials, LLC (the "Sale of CPD").
The proceeds from the Sale of CPD are expected to be used initially to
repay indebtedness under Superior's credit facility and to redeem the
$150.0 million outstanding principal amount of its 6.00% Debentures due
June 30, 2018.
-- Superior's 2016 financial outlook of AOCF per share has been updated to
$1.40 to $1.60 from $1.50 to $1.80 per share as provided in the second
quarter of 2016. The updated 2016 financial outlook is due to the Sale
of CPD and a reduced outlook for the Specialty Chemicals business for
the third and fourth quarters of 2016. See "Specialty Chemicals" and
"2016 Financial Outlook" for additional details. Superior's current 2016
financial outlook excludes expenses related to the terminated
acquisition of Canexus.
-- Superior's total debt to EBITDA as at June 30, 2016 (before transactions
costs) was 3.3X. Superior's forecasted December 31, 2016, total debt to
EBITDA ratio is expected to be 1.8X to 2.2X EBITDA, which is below
Superior's current target range of 3.0X to 3.5X. See "Debt Management
Update" in the second quarter MD&A (the "MD&A") for additional details.
-- On June 30, 2016, Superior terminated the Arrangement Agreement by
providing Canexus with a termination notice specifying that Canexus had
breached the arrangement agreement, failed to remedy such breaches and
that, as a result, Superior was seeking payment from Canexus of a
termination fee of $25 million.
-- On July 12, 2016, Superior announced it had commenced legal action to
recover the $25 million termination fee from Canexus. Superior also
filed a statement of defence to Canexus' claim for a reverse termination
fee of $25 million from Superior. Superior believes that Canexus' claim
for the reverse termination fee is without merit and intends to
vigorously defend Canexus' claim and pursue payment of the $25 million
termination fee owed by Canexus. See "Terminated Acquisition of Canexus
Corporation" in the MD&A for additional details.
-- On July 5, 2016, S&P announced it had revised its outlook on Superior
from negative to stable. On July 6, 2016, DBRS announced it had revised
its credit rating from Under Review with Negative Implications to
Confirmed with a Stable trend. See "Liquidity and Capital Resources" in
the MD&A for additional details.
Segmented Information
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Three months ended Six months ended
June 30 June 30
(millions of dollars) 2016 2015 2016 2015
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EBITDA from operations(1)(2):
Energy Distribution 16.9 14.6 103.7 103.1
Specialty Chemicals 22.3 19.4 49.6 55.5
Construction Products Distribution
(CPD) 12.2 13.5 21.5 18.3
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51.4 47.5 174.8 176.9
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(1) EBITDA from operations excludes realized losses from foreign currency
hedging contracts that hedge U.S. denominated earnings for risk management
purposes. Comparative figures have been reclassified to reflect the current
period presentation. See "Non-GAAP Financial Measures".
(2) EBITDA from operations excludes the results of the fixed-price energy
services business as the segment was divested during Q1 2016. Comparative
figures have been reclassified to reflect the current period presentation.
Energy Distribution
-- EBITDA from operations for the second quarter was $16.9 million compared
to $14.6 million in the prior year quarter. Results were $2.3 million
higher due to an increase in gross profit, and a decrease in operating
costs.
-- The Canadian propane distribution ("Canadian propane") business
generated gross profit of $58.5 million in the second quarter compared
to $54.4 million in the prior year quarter as higher average sales
margins offset the reduction in sales volumes due primarily to the
decrease in oilfield related demand. Consistent with the first quarter,
the Canadian propane gross profit includes the results from the supply
portfolio management business as approximately 80% of the gross profit
of the supply portfolio management business is directly related to
supply requirements for Canadian propane.
-- Average weather across Canada, as measured by degree days, for the
second quarter was 2% warmer than the prior year and 6% warmer than the
5-year average. Due to the seasonal nature of heating related volumes,
weather in the second quarter did not have a material impact on sales
volumes.
-- Canadian propane average sales margins were 22.9 cents per litre in the
second quarter compared to 19.4 cents per litre in the prior year
quarter due to an increase in average retail sales margins and benefits
from procurement initiatives. Average retail sales margins in the second
quarter of 2016 benefitted from the continued low price environment for
the wholesale cost of propane and sales mix. In addition, Canadian
propane margins were higher than the prior year quarter due to the
benefit of procurement initiatives related to supply contracts and the
impact of improved basis differentials. Superior anticipates the impact
from the low price environment on propane margins will moderate for the
remainder of 2016 as both retail pricing and the wholesale cost of
propane normalize.
-- Canadian propane sales volumes were 9% lower than the prior year quarter
due primarily to a decrease in industrial volumes. Industrial sales
volumes were lower due to a decrease in oilfield volumes, which were
negatively impacted by reduced demand related to the continued decline
in oilfield activity.
-- During the quarter, Superior acquired the assets of Caledon Propane Inc.
("Caledon"), a family-owned propane business with operations in Ontario
and Manitoba. The total purchase price was $8.1 million, representing
approximately 6.0X EBITDA.
-- The U.S. refined fuels business generated gross profits of $28.6 million
in the second quarter compared to $30.7 million in the prior year
quarter. Gross profits decreased $2.1 million or 7% due primarily to
lower sales margins, partially offset by higher sales volumes.
-- Average weather for the U.S. refined fuel business, as measured by
degree days, for the second quarter was 30% colder than the prior year
and 27% colder than the 5-year average. Due to the seasonal nature of
heating related volumes, weather in the second quarter did not have a
material impact on sales volumes.
-- U.S. refined fuels average sales margin of 8.1 cents per litre in the
second quarter compared to 9.1 cents per litre in the prior year quarter
due primarily to increased competition in the commercial and wholesale
segments, partially offset by the appreciation of the U.S. dollar
compared to the prior year quarter.
-- Sales volumes within the U.S. refined fuels business were 4% higher than
the prior year quarter due to an increase in wholesale and residential
volumes. Residential sales volumes were modestly higher due to the
colder temperatures relative to the prior year quarter. Wholesale sales
volumes increased due to improved demand for gasoline and heating oil
related to the colder weather.
-- Other services gross profit was $6.2 million in the second quarter
compared to $7.2 million in the prior year quarter due to reduced
oilfield activity related to the continued low price of oil.
-- Cash operating and administrative costs were $76.4 million in the second
quarter, a decrease of $1.3 million or 2.0% compared to the prior year
quarter. Operating expenses in the current year quarter were lower due
to a decrease in wages related to reduced volumes in the Canadian
propane business and decreased fuel expenses, partially offset by the
impact of a stronger U.S. dollar compared to the prior year quarter.
-- EBITDA from operations for 2016 for the Energy Distribution business is
anticipated to be consistent with 2015. EBITDA from the Canadian propane
and U.S. refined fuels businesses should benefit from ongoing
operational and procurement improvements and sales and marketing
initiatives. Gross profits in the Canadian propane business are
anticipated to be consistent with 2015 as lower volumes related to the
warmer weather in the first quarter and decline in oilfield activity are
anticipated to be offset by improvements in average margins. Gross
profits in the U.S. refined fuels business are anticipated to be
modestly lower than 2015 due to a decrease in expected average margins
in the commercial and wholesale business, partially offset by the
strengthening of the U.S. dollar on the translation of U.S. denominated
gross profit. Cash operating costs are anticipated to be lower than 2015
due to continuous improvement initiatives and reduced volumes related to
weather, partially offset by the translation of U.S. denominated
operating expenses. Average weather, as measured by degree days, for the
remainder of 2016 is anticipated to be consistent with the 5-year
average.
Specialty Chemicals
-- EBITDA from operations for the second quarter was $22.3 million compared
to $19.4 million in the prior year quarter. Specialty Chemicals
generated gross profit of $60.5 million, consistent with the prior year
quarter.
-- Sodium chlorate gross profits were modestly lower than the prior year
due to the modest decrease in sales volumes and average selling prices,
partially offset by the impact of the stronger U.S. dollar on the
translation of U.S. denominated sales. Sodium chlorate sales volumes
were 3% lower than the prior year quarter due to a decrease in sales
volumes associated with purchases under the Tronox agreement and reduced
North American demand.
-- Chlor-alkali gross profits were lower than the prior year quarter due to
a decrease in pricing for hydrochloric acid, caustic soda and caustic
potash and a decrease in sales volumes for hydrochloric acid, partially
offset by an increase in sales volumes and pricing for chlorine, an
increase in sales volumes for caustic soda and caustic potash and the
positive impact of the stronger U.S. dollar on U.S. denominated sales.
-- Cash operating and administrative costs of $38.2 million were $3.0
million or 7% lower than the prior year quarter due to the decrease in
Tronox-related and plant operating expenses, partially offset by the
impact of a stronger U.S. dollar on the translation of U.S. denominated
expenses.
-- On August 6, 2016, the North Vancouver, British Columbia sodium chlorate
facility, which represents 22% of Superior's North American sodium
chlorate manufacturing capacity, suffered damage due to an equipment
failure. The facility was appropriately shut-down to assess the damage
from the incident. Superior is in the process of completing its initial
assessment of the damage and the process of remediation has commenced.
Superior estimates that the facility will return to normal operating
rates by the end of August 2016. Physical damage to the property and
loss of production is covered by Superior's insurance program, subject
to customary deductibles and waiting periods.
-- Superior expects EBITDA from operations for 2016 to be lower than 2015.
Superior's forecast for its Specialty Chemicals business at the end of
the first quarter of 2016 was for results in 2016 to be consistent with
2015. The reduction in the 2016 forecast is due to lower than
anticipated sodium chlorate and chlor-alkali gross profits in the third
and fourth quarters of 2016. Sodium chlorate gross profits are
anticipated to be lower than previously forecast due to decreased sales
volumes related to longer than anticipated pulp mill plant maintenance
closures and a reduction in export volumes. Chlor-alkali gross profits
are now anticipated to be weaker than previously forecast due to lower
caustic netback prices and lower caustic potash sales prices and
volumes.
-- Sodium chlorate EBITDA is anticipated to be higher in 2016 due to the
termination of the Tronox agreement and related plant expenses. EBITDA
from the chlor-alkali segment is anticipated to be lower in 2016 due to
a decrease in netback prices for hydrochloric acid, caustic soda and
caustic potash, coupled with a decrease in caustic potash volumes.
Hydrochloric acid netback prices and volumes are anticipated to be lower
than 2015 due to reduced demand related to the continued decline in
oilfield activity expected in 2016. Caustic potash netback prices and
volumes are anticipated to be lower than 2015 due to weakness in the
agriculture sector. Caustic soda netback prices are anticipated to
decrease compared to 2015 due to a shift in sales mix to lower margin
customers.
Construction Products Distribution
-- EBITDA from operations for the second quarter was $12.2 million compared
to $13.5 million in the prior year quarter as stronger results due to
continued improvements in the U.S. residential end-use markets and the
impact of the stronger U.S. dollar on U.S. denominated sales were offset
by higher operating costs related to the system integration project.
-- Gross profit was $4.8 million higher than the prior year quarter due to
improved sales volumes, higher average selling prices and the impact of
a stronger U.S. dollar on U.S. denominated sales.
-- Gypsum revenues were higher than the prior year quarter due primarily 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 a stronger U.S. dollar on the translation of U.S.
denominated revenues. Canadian revenues were modestly lower than the
prior year quarter due to a drywall worker strike in the Greater Toronto
area and continued weakness in the Prairies, partially offset by
improvements in the B.C. markets.
-- Commercial and industrial insulation (C&I) revenues increased over the
prior year quarter due primarily to the impact of a stronger U.S. dollar
on the translation of U.S. denominated revenues, partially offset by
lower export sales and lower sales in the West related to a decline in
oil-related activity. C&I gross margins were modestly higher than the
prior year due to the impact of effective price management initiatives.
-- Cash operating and administrative costs for the second quarter were
$52.9 million compared to $46.8 million in the prior year quarter.
Operating expenses were impacted by higher sales volumes, the costs
associated with the system integration project and the stronger U.S.
dollar on the translation of U.S. denominated expenses.
-- CPD made significant progress on the systems integration project that
will replace two legacy ERP systems with a single, standardized
solution. The updated system was designed to provide enhanced
procurement, pricing and operational effectiveness, enabling CPD to
further improve margins and operating costs once complete. Total costs
incurred to date are $25.2 million consisting of $19.5 million in
capital and $5.7 million in operating expense.
-- On July 5, 2016, Superior announced it had entered into a definitive
agreement to sell its CPD business to Foundation Building Materials,
LLC. On August 9, 2016, the Sale of CPD was completed for total cash
consideration of US$325 million (approximately $428 million CAD).
Corporate Related
-- Interest expense for the second quarter was $9.8 million compared to
$11.1 million in the prior year quarter. Interest expense was $1.3
million lower than the prior year quarter as a result of lower average
effective interest rates and reduced average debt levels.
-- Corporate costs were $3.8 million in the second quarter which was $1.6
million higher than the prior year quarter due primarily to an increase
in long-term incentive plan costs. Long-term incentive plan costs are
higher due to fluctuations in Superior's share price compared to the
prior year quarter. Corporate costs exclude one-time transaction costs
for the Canexus Acquisition in the second quarter of $10.1 million and
$1.4 million related to the divesture of CPD.
-- Superior's total debt (including convertible debentures) to Compliance
EBITDA (before transaction costs) was 3.3X as at June 30, 2016 compared
to 3.2X at December 31, 2015. See "Debt Management Update" for
additional details.
-- Realized losses on foreign currency hedging contracts were $8.9 million
compared to $10.2 million in the prior year quarter. Realized losses
were $1.3 million lower due to the increase in Superior's effective
average hedge rate and a decrease in the notional hedges settled in the
quarter.
2016 Financial Outlook
Superior's 2016 financial outlook of AOCF per share has been updated to $1.40 to $1.60 from $1.50 to $1.80 per share as provided in the second quarter of 2016. The updated 2016 financial outlook is due to the Sale of CPD and a reduced outlook for the Specialty Chemicals business for the third and fourth quarters of 2016. The reduction in the outlook for the Specialty Chemicals business is due to lower than anticipated results in the chlor-alkali and sodium chlorate segments in the second half of 2016.
In addition to the background provided in the individual business financial outlook sections, key assumptions underlying the 2016 financial outlook include:
-- The 2016 financial outlook includes CPD IT one-time system integration
costs of $4.0 million or approximately $0.03 per share;
-- The 2016 financial outlook excludes Canexus transaction and bridge
facility costs of $19.0 million and CPD transaction costs estimated to
be $19.0 million;
-- Continued improvements in operational efficiencies and sales and
marketing initiatives in Energy Distribution; and
-- Specialty Chemicals results are expected to be lower than 2015 due to
weakness in the chlor-alkali segment, partially offset by improved
sodium chlorate contribution.
For additional details on the assumptions underlying the 2016 financial outlook, see Superior's 2016 Second Quarter MD&A.
Debt Management Update
Superior remains focused on managing both its total debt and its total debt to EBITDA. Superior's total debt (including convertible debentures) to Compliance EBITDA (before transaction costs) was 3.3X as at June 30, 2016, compared to 3.2X at December 31, 2015. Superior anticipates a total debt to EBITDA ratio in the range of 1.8X to 2.2X at December 31, 2016 as the proceeds from the Sale of CPD will be used to reduce indebtedness. For additional details on the anticipated debt as at December 31, 2016, see the "Debt Management Summary" in the MD&A.
MD&A and Financial Statements
Superior's MD&A, the unaudited Consolidated Financial Statements and the Notes to the Consolidated Financial Statements for the three and six months ended June 30, 2016, are available online at Superior's website at www.superiorplus.com under the Investor Relations section and on www.sedar.com.
2016 Second Quarter Conference Call
Superior will be conducting a conference call and webcast for investors, analysts, brokers and media representatives to discuss the 2016 Second Quarter Results at 10:30 a.m. EST on Wednesday, August 10, 2016. To participate in the call, dial: 1-866-223-7781. An archived recording of the call will be available for replay until midnight, September 10, 2016. To access the recording, dial: 1-800-408-3053 and enter pass code 4700400. 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 second quarter earnings release, Superior has used the following terms that are not defined by GAAP, but are used by management to evaluate the performance of Superior and its business. Since non-GAAP financial measures do not have standardized meaning 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 be clearly defined, qualified and reconciled to their nearest 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 adjusting items may only be relevant in certain periods.
The intent of non-GAAP financial measures is to provide additional useful information to investors and analysts. 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 EBITDA, EBITDA from operations, compliance EBITDA and AOCF 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
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. 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 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. 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.
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. The EBITDA of Superior's operating segments may be referred to as EBITDA from operations.
EBITDA from Operations
EBITDA from operations is defined as EBITDA excluding gains/(losses) on foreign currency hedging contracts. For purposes of this MD&A, foreign currency hedging contract gains and losses are excluded from the results of the operating segments. Comparative figures for the prior periods have been reclassified to reflect this change.
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. 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 maintenance capital expenditures, CRA and other tax payments and capital lease repayments and is used by Superior to assess its financial results and leverage. Payout ratio is not a defined performance measure under GAAP. 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)
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For the three months ended June 30,
2016 Construction
Energy Specialty Products
Services Chemicals Distribution
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Net earnings before income taxes 5.8 2.9 8.8
Add: Depreciation included in selling,
distribution and administrative
costs and amortization of
intangible assets 13.8 - 2.0
Depreciation included in cost of
sales - 13.4 -
Realized losses on foreign
currency hedging contracts - 7.7 1.2
Losses (gains) on disposal of
assets 0.7 0.3 (0.1)
Finance expense 0.7 0.1 0.3
Unrealized gains on derivative
financial instruments (4.1) (2.1) -
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EBITDA from operations 16.9 22.3 12.2
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Construction
Energy Specialty Products
For the three months ended June 30,
2015 Services Chemicals Distribution
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Net earnings before income taxes 7.5 1.5 10.8
Add: Depreciation included in selling,
distribution and administrative
costs and amortization of
intangible assets 12.4 - 1.7
Depreciation included in cost of
sales - 15.3 -
Realized losses on foreign
currency hedging contracts - 9.4 0.8
Finance expense 0.7 0.2 0.2
Unrealized gains on derivative
financial instruments (6.0) (7.0) -
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EBITDA from operations 14.6 19.4 13.5
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Construction
Energy Specialty Products
For the six months ended June 30, 2016 Services Chemicals Distribution
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Net earnings before income taxes 105.0 4.1 13.8
Add: Add: Depreciation included in
selling, distribution and
administrative costs and
amortization of intangible assets - 27.2 -
Depreciation included in cost of
sales 28.8 - 4.1
Realized losses on foreign
currency hedging contracts - 19.0 3.1
Losses (gains) on disposal of
assets 0.5 0.3 (0.1)
Finance expense 1.5 0.2 0.6
Unrealized gains on derivative
financial instruments (32.1) (1.2) -
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EBITDA from operations 103.7 49.6 21.5
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Construction
Energy Specialty Products
For the six months ended June 30, 2015 Services Chemicals Distribution
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Net earnings (loss) before income taxes 95.5 13.2 12.8
Add: Depreciation included in selling,
distribution and administrative
costs and amortization of
intangible assets 24.7 - 3.5
Depreciation included in cost of
sales - 28.8 -
Realized losses on foreign
currency hedging contracts 4.6 15.0 1.6
Losses on disposal of assets 0.3 0.2 -
Finance expense 1.3 0.4 0.4
Unrealized gains on derivative
financial instruments (23.3) (2.1) -
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EBITDA from operations 103.1 55.5 18.3
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(1) See the unaudited condensed consolidated financial statements for net
earnings before income taxes, depreciation and amortization included in
selling, distribution and administrative costs, depreciation included in
cost of sales, depreciation included in cost of sales, customer contract-
related costs, finance expense and unrealized (losses) gains on derivative
financial instruments.
(2) EBITDA from operations excludes realized losses from foreign currency
hedging contracts that hedge U.S. denominated earnings for risk management
purposes. Comparative figures have been reclassified to reflect the current
period presentation. See "Non-GAAP Financial Measures" for additional
details.
(3) EBITDA from operations excludes the results of the Fixed-price energy
services business as substantially all assets were divested during Q1 2016.
Comparative figures have been reclassified to reflect the current period
presentation.
Adjusted Operating Cash Flow Reconciled to Net Cash Flow from Operating
Activities(1)(2)
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Three months ended Six months ended
June 30 June 30
(millions of dollars) 2016 2015 2016 2015
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Net cash flow from operating
activities 39.1 68.1 128.8 200.0
Add (Deduct):
Non-cash interest expense 1.4 3.8 2.8 5.5
Increase (decrease) in non-
cash working capital (12.6) (33.1) (4.0) (54.8)
Discontinued operations 0.7 0.1 0.8 0.7
Cash income tax expense (1.7) (0.6) (2.9) (1.3)
Finance expense recognized in
net earnings (11.2) (14.9) (23.2) (30.9)
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Adjusted Operating Cash Flow 15.7 23.4 102.3 119.2
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(1) See "Non-GAAP Financial Measures".
(2) See the unaudited condensed consolidated financial statements for net
cash flow from operating activities and changes in non-cash working capital.
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 EBITDA from operations, expected AOCF and AOCF per share, expected leverage ratios and debt repayment, expectations in terms of the cost of operations, business strategy and objectives, development plans and programs, business expansion and cost structure and other improvement projects, expected product margins and sales volumes, market conditions in Canada and the U.S., continued improvements in operational efficiencies and sales and marketing initiatives in Energy Distribution, impact on results and leverage from the Sale of CPD, proceeds from the Sale of CPD expected to be used initially to repay indebtedness under Superior's credit facility and to redeem the $150.0 million outstanding principal amount of its 6.00% Debentures due June 30, 2018, future economic conditions, future exchange rates, exposure to such rates and incremental earnings associated with such rates, 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 chlor-alkali, effect of operational and technological improvements, anticipated costs and benefits of business enterprise system upgrade plans, CPD IT one-time integration costs, Canexus transaction costs, 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 Second Quarter 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, 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 Second Quarter 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.
Contacts: Beth Summers Vice-President and Chief Financial Officer [email protected] (416) 340-6015 Rob Dorran Vice-President, Investor Relations and Treasurer [email protected] (416) 340-6003 Toll Free: 1-866-490-PLUS (7587)
Source: Superior Plus Corp.
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