Superior remains confident in the appropriateness of its tax filing position and the expected tax consequences of the Conversion and intends to vigorously defend such position and intends to file its future tax returns on a basis consistent with its view of the outcome of the Conversion.
Superior's 2013 financial outlook as provided in this MD&A includes the impact of the reassessment although the 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. Please refer to the Debt Management Summary on page 21 for the cash flow implications.
Based on the midpoint of Superior's current 2013 financial outlook of adjusted operating cash flow per share of $1.70, 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 for 2013. 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's outlook is for adjusted operating cash flow for 2013 to be between $1.55 per share and $1.85 per share, this outlook has been reduced from the $1.65 to $1.95 range included in Superior's fourth quarter Financial Discussion. The reduction in the financial outlook is due to the dilution of additional common shares outstanding throughout 2013 due to the equity issuance which closed on March 27, 2013 net of reduced interest costs. 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 $75.7 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.
Energy Services
-- Average temperatures across Canada and the Northeast U.S. are expected to be consistent with the recent five-year average for 2013;-- Total propane and U.S. refined fuels-related sales volumes are expected to increase in 2013, due to assumptions that weather will be consistent with the five-year average and that there will be an impact from customer win-back and retention programs;-- Wholesale propane and U.S. refined fuels-related prices are not anticipated to significantly impact demand for propane, refined fuels and related services;-- Supply portfolio management market results in 2013 are expected to increase as compared to 2012 due to supply chain management efforts and higher sales volumes due to a return to normal weather; and-- Fixed-price energy services is expected to be able to access sales channel agents on acceptable contract terms although gross profits in 2013 will decrease from 2012. The decrease will be primarily related to lower natural gas gross margins due to lower transportation-related gross profits and lower contribution from residential customer renewals and residential customer count. Total new customer aggregation volumes are expected to decline from 2012 as the system price for natural gas remains low. Growth in the fixed-price electricity segment is expected to offset a portion of the decline in natural gas gross profits.
