Superior is required to make a payment of 50% of the tax liability claimed by the CRA in order to appeal the expected reassessment and, based on Superior's 2009, 2010, and 2011 taxation years, that amount is approximately $10 million and approximately $5 million for the 2012 taxation year once that information is filed with CRA and then ultimately reassessed. 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 it. Superior has 90 days from the 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 file its case with the Tax Court of Canada. Superior anticipates that legal proceedings through the various tax courts would take approximately two to four years. If Superior is ultimately successful in defending its position, such payments plus applicable interest, will be refunded to Superior. If the CRA is successful, Superior will be required to pay the balance of the taxes claimed plus applicable interest and penalties.
Superior's 2013 financial outlook as provided in this MD&A does not include the impact of a potential reassessment, as any interim tax payments made by Superior will be recorded to the balance sheet and will not impact either adjusted operating cash flow or net earnings.
Based on the midpoint of Superior's current 2013 financial outlook of adjusted operating cash flow 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. 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 achieved adjusted operating cash flow per share of $1.73, within the 2012 financial outlook range as provided in Superior's 2012 third quarter MD&A. See the detailed discussions on each segment for a breakdown of the results achieved.
Superior's outlook is for adjusted operating cash flow for 2013 to be between $1.65 per share and $1.95 per share, consistent with Superior's previous financial outlook as provided in the 2012 third quarter MD&A. Achieving Superior's adjusted operating cash flow is dependent 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 2013 outlook are:
-- Economic growth in Canada and the U.S. is expected to be similar to or modestly higher than in 2012;-- 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 $76.1 million 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 par in 2013 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 2012 levels; and-- Canadian and U.S. based cash taxes are expected to be minimal for 2013 based on existing statutory income tax rates and the ability to use available losses.
