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, our ability to access external sources of debt and equity capital, and the risks identified in (i) this FD&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 FD&A 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.
Financial Discussion of 2012 Fourth Quarter and 2012 Year End Results
February 14, 2013
The following Financial Discussion is a review of the financial performance and position of Superior Plus Corp. (Superior) as at December 31, 2012 and for the three and twelve months ended December 31, 2012 and 2011. The information in this Financial Discussion is current to February 14, 2013. This Financial Discussion should be read in conjunction with Superior's audited consolidated financial statements and notes thereto as at and for the twelve months ended December 31, 2012 and its unaudited condensed consolidated financial statements as at and for the three and twelve months ended December 31, 2012 and 2011.
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 Financial Discussion 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.
Fourth Quarter ResultsSummary of Adjusted Operating Cash Flow---------------------------------------------------------------------------- Three months ended Twelve months ended December 31, December 31,(millions of dollars except per share amounts) 2012 2011 2012 2011----------------------------------------------------------------------------EBITDA from operations: (1) Energy Services 46.1 46.5 134.2 133.6 Specialty Chemicals 29.1 34.5 127.5 115.2 Construction Products Distribution 7.8 6.9 20.8 24.2---------------------------------------------------------------------------- 83.0 87.9 282.5 273.0Interest expense (16.6) (19.4) (71.7) (79.2)Cash income tax expense (0.3) (1.4) (1.1) (1.5)Corporate costs (3.5) (3.3) (16.2) (11.9)----------------------------------------------------------------------------Adjusted operating cash flow(1) 62.6 63.8 193.5 180.4------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Adjusted operating cash flow per share(2), basic(2) and diluted(3) $0.56 $0.58 $1.73 $1.65--------------------------------------------------------------------------------------------------------------------------------------------------------(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 December 31, 2012, is 112.6 million (2011 - 110.4 million) and for the twelve months ended December 31, 2012, is 111.9 million (2011 - 109.2 million).(3) For the three and twelve months ended December 31, 2012 and 2011, there were no dilutive instruments.Adjusted Operating Cash Flow Reconciled to Net Cash Flow from OperatingActivities (1)---------------------------------------------------------------------------- Three months ended Twelve months ended December 31, December 31,(millions of dollars) 2012 2011 2012 2011----------------------------------------------------------------------------Net cash flow from operating activities 21.6 14.8 347.9 291.2Add: Non cash interest expense 1.6 3.0 6.7 8.0Less: Increase (decrease) in non- cash working capital 57.9 69.8 (81.6) (30.1) Income tax expense (0.3) (1.4) (1.1) (1.5) Finance costs recognized in net earnings (18.2) (20.7) (77.6) (85.5) Gain on debenture redemption - (1.7) (0.8) (1.7)----------------------------------------------------------------------------Adjusted operating cash flow 62.6 63.8 193.5 180.4--------------------------------------------------------------------------------------------------------------------------------------------------------(1) See the unaudited condensed consolidated financial statements for net cash flow from operating activities and changes in non-cash working capital.
