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CALGARY, ALBERTA -- (Marketwired) -- 05/01/13 -- Superior Plus Corp. (TSX: SPB)
Highlights
-- For the quarter ended March 31, 2013, Superior generated adjusted operating cash flow (AOCF) per share of $0.72, a 20% increase over the prior year quarter of $0.60 per share. Superior's results for the first quarter were consistent with management's expectations. The increase in AOCF per share compared to the prior year quarter is due to improved results at all three of Superior's business segments and lower interest costs, offset in part, by a higher number of weighted average common shares.-- Superior is confirming its 2013 financial outlook of AOCF per share of $1.55 to $1.85. See "2013 Financial Outlook" for additional details.-- Energy Services results for the first quarter benefited from a return to normalized weather in the current year quarter compared to the record, or near record, warm weather experienced in the prior year quarter. Additionally, improved sales margins in the Canadian propane and U.S. refined fuels business more than offset a reduced contribution from the fixed-price energy business.-- Specialty Chemicals results for the quarter were higher than the prior year as a result of improved sodium chlorate gross profits due to improved sales volumes. Chloralkali gross profits were consistent with the prior year quarter as higher caustic gross profits were offset by reduced chlorine gross profits.-- The Construction Products Distribution business results for the quarter benefitted from higher average selling prices and improved sales margins which more than offset a reduction in overall sales volumes.-- On March 27, 2013, Superior closed the issue of 12,960,500 common shares at a price of $11.10 per common share for net proceeds of $137.8 million. Superior will use the net proceeds to repay existing debt obligations and fund capital expenditures. As a result of the equity issuance, Superior's total debt to EBITDA ratio improved to 3.7X at March 31, 2013, compared to 4.5X at December 31, 2012, and 4.8X at March 31, 2012. Superior's March 31, 2013 total debt to EBITDA ratio would be 3.6X on a pro forma basis including the impact of the redemption of the remaining $25 million, 5.85% convertible debentures completed on April 9, 2013. Superior will continue to focus on further reducing its total debt to EBITDA ratio.-- Superior's forecasted December 31, 2013 total debt to EBITDA ratio is consistent with the update provided in conjunction with Superior's common share equity issuance of 3.3X to 3.7X. See "Debt Management Update" for additional details.-- On April 9, 2013, Superior early redeemed the remaining $25.0 million of its 5.85%, October 31, 2015 convertible debentures. The early redemption allows for Superior to benefit from lower average interest rates in addition to actively managing its balance sheet maturities.-- On March 28, 2013, S&P confirmed Superior Plus Corp.'s corporate credit rating as BB- (stable) and Superior Plus LP's secured debt rating as BB+.First Quarter Financial Summary---------------------------------------------------------------------- Three months ended March 31,(millions of dollars except per share amounts) 2013 2012----------------------------------------------------------------------Revenue 1,049.9 1,065.9Gross profit 253.1 238.1----------------------------------------------------------------------EBITDA from operations (1) (2) 105.5 90.5Interest (17.0) (19.7)Cash income tax expense (0.4) (0.2)Corporate costs (6.1) (4.0)----------------------------------------------------------------------Adjusted operating cash flow (1) 82.0 66.6------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Adjusted operating cash flow per share, basic and diluted (1)(3)(4) $0.72 $0.60----------------------------------------------------------------------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 2013 First Quarter Management's Discussion and Analysis (MD&A).(2) The prior year quarter has been restated for the impact of adopting International Accounting Standard 12 - "Employee Benefits" effective January 1, 2013. The impact to EBITDA from operations was a decrease to Energy Services of $0.3 million and a decrease to Specialty Chemicals of $0.5 million. See Superior's 2013 First Quarter MD&A for additional details.(3) The weighted average number of shares outstanding for the three months ended March 31, 2013 is 113.7 million (2012 - 111.1 million).(4) 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 ($83.4 million total on a dilutive basis). For the three months ended March 31, 2012, there were no dilutive instruments.Segmented Information---------------------------------------------------------------------------- Three months ended March 31,(millions of dollars) 2013 2012----------------------------------------------------------------------------EBITDA from operations: Energy Services 67.6 58.1 Specialty Chemicals 32.9 29.1 Construction Products Distribution 5.0 3.3---------------------------------------------------------------------------- 105.5 90.5--------------------------------------------------------------------------------------------------------------------------------------------------------Energy Services-- Energy Services EBITDA from operations for the first quarter was $67.6 million compared to $58.1 million in the prior year quarter. Results were impacted by higher contributions from all the businesses except for the fixed-price energy services business.-- The Canadian propane business generated gross profit of $77.1 million in the first quarter compared to $72.8 million in the prior year quarter due to improved average sales margins and higher sales volumes.-- Canadian propane average sales margins were 18.0 cents per litre in the first quarter compared to 17.6 cents per litre in the prior year quarter. The increase in the average sales margin was due to improved pricing on industrial and commercial contracts, benefits associated with a reduction in the wholesale cost of propane, and improvements to overall pricing management. Average sales margins also benefited from an increase to the proportion of higher margin residential volumes.-- Canadian propane distribution sales volumes were 16 million litres or 4% higher than the prior year quarter due to improved sales volumes in all lines of business except for industrial; industrial volumes were consistent with the prior year quarter. Sales volumes, specifically residential and commercial sale volumes, benefited from colder average temperatures across Canada throughout the first quarter.-- Average weather across Canada, as measured by degree days, for the first quarter was 7% colder than the prior year and consistent with the 5-year average.-- The U.S. refined fuels business generated gross profits of $52.9 million in the first quarter compared to $45.7 million in the prior year quarter. The increase in gross profit was due to higher sales volumes and an increase in average sales margins.-- U.S. refined fuels average sales margins were 10.3 cents per litre in the quarter, compared to 9.7 cents per litre in the prior year quarter. Sales margins were positively impacted by the reduced cost for wholesale propane and an increased proportion of higher margin propane sales volumes. Average sales margins also benefited from improved general market conditions for heating oil compared to the prior year. Prior year quarter margins were challenged by a rapid decline in the wholesale cost of heating oil due to the unseasonably warm weather experienced in the prior year quarter.-- Sales volumes within the U.S. refined fuels business were 39 million litres or 8% higher than the prior year. Sales volumes in all segments were higher than the prior year due to colder average temperatures across the Northeast throughout the first quarter. The impact of weather more than offset the impact of ongoing customer attrition on heating oil customers.-- Average weather for the U.S. refined fuel business, as measured by degree days, for the first quarter was 23% colder than the prior year and 2% warmer than the 5-year average. The impact of colder weather benefited sales volumes in all business segments, in particular the weather sensitive residential segment.-- The fixed-price energy services business generated gross profits of $4.7 million compared to $7.5 million in the prior year quarter due to reduced natural gas profits. Lower natural gas gross profits were due to a reduction in sales volumes as a result of a reduced contribution from the residential segment which has been in decline due to a change in strategy in prior years to exit that market and focus on small commercial and industrial accounts. Gross profit related to the electricity segment was lower than the prior year as reduced contributions from the Ontario market more than offset improvements in the U.S. market.-- The supply portfolio management business generated gross profits of $7.9 million in the first quarter compared to $6.2 million in the comparative period as market based trading conditions were more favourable compared to the prior year quarter.-- Operating expenses were $85.9 million in the first quarter compared to $84.6 million in the prior year quarter. Operating expenses were impacted by higher sales volumes in the Canadian propane and U.S. refined fuels businesses, offset by cost reduction initiatives implemented throughout 2012.-- Superior expects business conditions in 2013 for its Energy Services business will be similar to 2012. EBITDA from operations is anticipated to be higher in 2013 than in 2012 due in part to the assumption that weather will be consistent with the 5-year average in 2013. Superior's 2012 results were negatively impacted by warm weather, as average weather in the first quarter of 2012, as measured by degree days, across Canada and the Northeastern U.S. was at record or near record levels. Additionally, Superior expects to realize ongoing improvements in its financial results as a result of its business initiative activities which will more than offset a reduction in the contribution from the fixed-price energy services business due to exiting the Canadian residential market in prior years.Specialty Chemicals-- EBITDA from operations for the first quarter was $32.9 million compared to $29.1 million in the prior year quarter.-- Sodium chlorate gross profits were higher than the prior year quarter due to higher sales volumes and modestly higher average selling prices.-- Sodium chlorate sales volumes were 7% higher than the prior year quarter as a result of improved demand from North American customers. The market for sodium chlorate continues to be balanced due to a stable market for pulp.-- Chloralkali gross profits were consistent with the prior year quarter as improved sales volumes were fully offset by reduced average selling prices. Sales volumes in the first quarter benefitted from improved plant operating performance and higher customer demand. The reduction in average selling prices for chloralkali was due to a weak pricing environment for chlorine, the impact of which was offset in part, by an improved proportion of high margin potassium caustic sales volumes. Superior anticipates that pricing pressure on chlorine will moderate throughout the second and third quarters due to the seasonal demand for chlorine/bleach products.-- Operating expenses of $32.8 million were $0.8 million higher than the prior year due to increased employee costs and general inflationary increases.-- As previously announced, Superior has approved an expansion of its hydrochloric acid production capacity at its Port Edwards, Wisconsin and Saskatoon, Saskatchewan facilities. 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. The Port Edwards project is anticipated to cost $18 million with commercial production expected in the first 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 $2.3 million have been incurred with respect to both projects.-- ERCO's collective bargaining agreement covering certain employees at its North Vancouver, British Columbia facility expired on November 30, 2012; terms of the expired agreement continue to govern the ongoing employment relationship. An offer proposed by ERCO for a new agreement was rejected by the union. Both ERCO and the union are committed to continue negotiations in an attempt to reach a new collective bargaining agreement.-- Superior expects business conditions in 2013 for its Specialty Chemicals business will be similar to 2012. EBITDA from operations, excluding the impact of the $12.5 million one-time payment from TransCanada received in the third quarter of 2012, is anticipated to be modestly higher in 2013 due to improved performance of the chloralkali product segment as a result of higher gross profits from hydrochloric acid and modestly higher selling prices for caustic soda, which will more than offset reduced pricing for chlorine. Superior does anticipate that electricity prices will be modestly higher than the prior year due to recent increases in the price of natural gas. Superior continues to see a stable market for sodium chlorate as a result of the current market for pulp. Superior also expects a stable market for chloralkali sales volumes and pricing as North American supply demand fundamentals continue to be balanced. The market for chloralkali continues to be supported by historically low natural gas prices.Construction Products Distribution-- EBITDA from operations for the first quarter was $5.0 million compared to $3.3 million in the prior year quarter. Prior year results included $1.1 million in one-time restructuring costs. Excluding the impact of the restructuring costs noted above, results in the first quarter were higher than the prior year quarter due to improved selling prices and improved sales margins.-- Gross profit was modestly higher than the prior year quarter as improved average selling prices and modestly higher average sales margins more than offset reduced sales volumes. Gypsum sales volumes were lower than the prior year quarter as a result of reduced sales in Canada, due in part, to a reduction of branch locations as a result of restructuring activities completed throughout 2012 combined with a slowdown in new housing starts and general construction related activity. The reduction in Canadian sales volumes was offset, in part, by higher U.S. sales volumes due to ongoing improvements in new house construction activity and the introduction of the full interiors product line into select U.S. markets that were previously acoustical ceiling focused. Gypsum sales margins benefited from improved board pricing and the withdrawal from certain Canadian markets that were less profitable, partially offset, by the introduction of lower margin products and a slowdown in the Ontario market.-- Commercial and industrial insulation (C&I) sales volumes were modestly lower than the prior year quarter as end-use markets continue to be challenging. In addition, volumes were impacted by severe winter weather conditions in parts of the U.S. East and Midwest which impacted the timing of various construction projects. C&I gross margins were consistent with the prior year.-- Operating expenses for the first quarter were $40.1 million compared to $40.7 million in the prior year quarter. Prior year operating costs included $1.1 million in one-time restructuring costs. Excluding the impact of prior year restructuring costs, operating costs were impacted by cost associated with higher sales volumes in the U.S. operations and inflationary increases of wages and other operating costs. Operating expenses as a percentage of sales, excluding restructuring costs, were consistent with the prior year quarter.-- Superior expects business conditions in 2013 for its Construction Products Distribution business to be similar to 2012 with slightly improving conditions in the U.S. and lower residential construction in Canada. EBITDA from operations is anticipated to be higher in 2013 than 2012 due in part to the absence of restructuring costs incurred in 2012. In addition, results will benefit from the ongoing business initiative activities. Superior continues to see difficult market conditions in both the residential and commercial segments in Canada and the U.S, although the U.S. residential market continues to show signs of improvement. Superior does not anticipate significant improvements in the end-use markets in the near term.Corporate Related-- Total interest expense for the first quarter was $17.0 million compared to $19.7 million in the prior year quarter. Interest expense was lower than the prior year quarter as a result of lower average debt levels due to Superior's ongoing focus to reduce its total debt levels.-- Corporate costs were $6.1 million in the first quarter an increase of $2.1 million compared to the prior year quarter. The increase in corporate costs was due to higher costs associated with long-term incentive plans as a result of an increase in Superior's share price.-- Superior's total debt (including convertible debentures) to Compliance EBITDA improved to 3.7X (3.6X adjusted for the pro forma impact of the $25 million, 5.85% convertible debenture redemption on April 9, 2013) as at March 31, 2013, compared to 4.5X as at December 31, 2012 and 4.8X as at March 31, 2012. The reduction in total leverage compared to December 31, 2012 is due to Superior using the $137.8 million in net proceeds from its common share equity issue to repay existing indebtedness. Superior continues to focus on reducing its total leverage through ongoing debt reduction, including reducing working capital requirements and improving business operations. See "Debt Management Update" for details on Superior's anticipated December 31, 2013 total debt to EBITDA ratio.-- On March 28, 2013, S&P confirmed Superior Plus Corp.'s corporate credit rating as BB- (stable) and Superior Plus LP's secured debt rating as BB+.-- On April 9, 2013, Superior early redeemed the remaining $25 million of its 5.85%, October 31, 2015 convertible debentures. The early redemption allows for Superior to benefit from lower average interest rates in addition to actively managing its balance sheet maturities. Superior has no material balance sheet maturities which require refinancing in 2013.
