Operating Costs
Cash operating and administrative costs were $85.9 million in the first quarter of 2013, a slight increase of $1.3 million or 2% from the prior year quarter. The increase in expenses was primarily due to the timing of truck maintenance and higher employee costs associated with increased sales volumes offset in part by the impact of cost reduction initiatives implemented in 2012.
Outlook
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 Superior exiting the Canadian residential market in prior years.
Initiatives to improve results in the Energy Services business continued during the first quarter of 2013 in conjunction with Superior's goal for each of its businesses to become best-in-class. Business improvement projects for 2013 include: a) improving customer service, b) improving overall logistics and procurement functions, c) enhancing the management of margins, d) working capital management, and e) improving existing and implementing new technologies to facilitate improvements to the business.
In addition to the significant assumptions detailed above, refer to "Risk Factors to Superior" for a detailed review of significant business risks affecting the Energy Services' businesses.
Specialty Chemicals
Specialty Chemicals' condensed operating results for 2013 and 2012;
----------------------------------------------------------------------------(millions of dollars except per metric tonne Three months ended March 31,(MT) amounts) 2013 2012(2)---------------------------------------------------------------------------- $ per MT $ per MTChemical revenue(1) 144.6 711 132.9 707Chemical cost of sales (1) (78.9) (388) (71.8) (382)----------------------------------------------------------------------------Chemical gross profit 65.7 323 61.1 325Less: Cash operating and administrative costs(1) (32.8) (161) (32.0) (170)----------------------------------------------------------------------------EBITDA from operations 32.9 162 29.1 155Chemical volumes sold (thousands of MTs) 203 188--------------------------------------------------------------------------------------------------------------------------------------------------------(1) In order to better reflect the results of its operations, Superior has reclassified certain amounts for purposes of this MD&A related to derivative financial instruments, non-cash amortization and foreign currency translation losses or gains related to U.S.-denominated working capital. See "Reconciliation of Divisional Segmented Revenue, Cost of Sales and Cash Operating and Administrative Costs Included in this MD&A" for detailed amounts.(2) The prior year quarter has been restated for the impact of adopting IAS 19 Employee Benefits on January 1, 2013. The prior year quarter cash operating and administrative costs were increased by $0.5 million due to the accounting standard change.
