☰ MENU
Building on our success

Press Releases

February 14, 2019

Superior Plus Corp. Announces Record Fourth Quarter and Full Year Results and Confirms 2018 Results at the Higher End of the AOCF Per Share and Adjusted EBITDA Guidance

TORONTO--(BUSINESS WIRE)-- Superior Plus Corp. (“Superior”) (TSX: SPB) announced today its financial and operating results for the fourth quarter ended December 31, 2018. Unless otherwise expressed, all financial figures are expressed in Canadian dollars.

Superior achieved AOCF before transaction and other costs of $1.91 per share and Adjusted EBITDA of $374.3 million, which were at the higher end of the 2018 Financial Outlook and Adjusted EBITDA guidance.

“We achieved record results in 2018, driven by strong contribution and integration work related to the NGL, Canwest and tuck-in acquisitions in our Energy Distribution business and improved chlor-alkali results in our Specialty Chemicals business. The record fourth quarter results demonstrate the benefits of the acquisition of NGL Propane and our larger scale U.S. Propane Distribution business in the Eastern U.S. We also ended the year exceeding our 2018 run-rate synergy target related to the Canwest Propane acquisition and we were able to realize higher than expected synergies related to the acquisition of NGL Propane,” said Luc Desjardins, Superior’s President and Chief Executive Officer. “We continue to gain momentum on finishing at the higher end of our Evolution 2020 initiatives, and we are focused on lowering our leverage as well as achieving double digit Adjusted EBITDA growth in 2019.”

Business and Financial Highlights

  • Superior achieved record results in the fourth quarter, reporting Adjusted EBITDA of $153.0 million, a $43.9 million or 40% increase over the prior year quarter primarily due to higher Energy Distribution EBITDA from operations and lower corporate costs, partially offset by lower Specialty Chemicals EBITDA from operations and realized losses on foreign currency hedging contracts compared to a gain in the prior year.
  • Adjusted EBITDA during 2018 was $374.3 million, 26% higher than 2017 and at the higher end of the Financial Outlook range of $345.0 - $375.0 million primarily due to the increase in Energy Distribution EBITDA from operations.
  • AOCF per share before transaction and other costs during the fourth quarter was $0.76, 10% higher than the prior year quarter primarily due to an increase in Adjusted EBITDA and a decrease in cash taxes, partially offset by an increase in interest expense and weighted average shares outstanding. The increase in interest expense and weighted average shares outstanding was a result of the debt and equity financing for the NGL transaction.
  • AOCF per share before transaction and other costs during 2018 was $1.91, 9% higher than 2017 and towards the top of the financial outlook range of $1.75 - $1.95 per share.
  • Net cash flows from operating activities in the fourth quarter were $17.6 million lower than the prior year quarter primarily due to income taxes refunded in the prior year partially offset by higher cash generated from operations in the current year.
  • Superior generated a net loss of $48.3 million in the fourth quarter, which was $93.6 million lower than the net earnings of $45.3 million in the prior year quarter. The decline was primarily due to an unrealized loss on derivatives financial instruments in the quarter, an increase in selling, distribution and administration costs as a result of the NGL acquisition, including increased amortization and depreciation expenses, and was offset in part by an increase in gross profit. Gross profit increased $81.4 million primarily due to the contribution from NGL, Canwest and tuck-in acquisitions as well as colder weather. Selling, Distribution and Administrative costs increased $97.2 million primarily due to the incremental expenses from the NGL and tuck-in acquisitions.
  • Energy Distribution EBITDA from operations for the fourth quarter was $129.0 million, an increase of $47.7 million or 59% compared to the prior year quarter primarily due to the contribution from NGL Propane (“NGL”) and the tuck-in acquisitions completed in 2018, as well as colder weather in the Northeast U.S. and Eastern Canada. U.S. propane distribution residential sales volumes increased 193 million litres or 224% primarily due to incremental volumes from NGL and the tuck-in acquisitions. Average sales margin for U.S. propane distribution increased to 34.0 cents per litre in the fourth quarter, an increase of 139% compared to the prior year quarter. The increase reflects the contribution from NGL and the tuck-in acquisitions, which have a higher mix of residential customers, and the positive impact from the divested lower-margin wholesale distillate assets and related business.
  • Specialty Chemicals EBITDA from operations for the fourth quarter was $33.3 million, a decrease of $2.2 million or 6% compared to the prior year quarter due to lower sodium chlorate and sodium chlorite gross profit, partially offset by higher chlor-alkali gross profit. Sodium chlorate gross profit decreased primarily due to higher electricity costs coupled with lower sales volumes. Sodium chlorite gross profit decreased due to lower demand from the oil and gas and municipal sectors. Chlor-alkali gross profit increased primarily due to higher sales prices, primarily hydrochloric acid and caustic soda.
  Financial Overview                      
  Three Months Ended   Twelve Months Ended
December 31 December 31
  (millions of dollars, except per share amounts)   2018     2017     2018     2017
Revenue 887.0   768.9 2,726.7   2,385.0
  Gross Profit   319.5     238.1     938.1     735.4
Net earnings (loss) (48.3) 45.3 (34.0) (27.9)
  Net earnings (loss) per share, basic and diluted $ (0.28)   $ 0.32   $ (0.22)   $ (0.20)
EBITDA from operations (1) 162.3 116.8 402.8 306.8
  Adjusted EBITDA (1)   153.0     109.1     374.3     297.6
Net cash flows from operating activities 41.6 59.2 263.0 183.1
  Net cash flows from operating activities per share – basic and diluted (2) $ 0.24   $ 0.41   $ 1.66   $ 1.28
AOCF before transaction and other costs (1)(3) 132.7 98.7 302.3 250.5
  AOCF before transaction and other costs per share – basic and diluted (1)(2)(3) $ 0.76   $ 0.69   $ $1.91   $ 1.75
AOCF (1) 125.2 94.0 $262.8 217.4
  AOCF per share– basic and diluted (1)(2) $ 0.72   $ 0.66   $ 1.66   $ 1.52
Cash dividends declared 31.5 25.7 114.4 102.8
  Cash dividends declared per share $ 0.18   $ 0.18   $ 0.72   $ 0.72

(1) EBITDA from operations, Adjusted EBITDA and AOCF are non-GAAP measures. Refer to “Non-GAAP Financial Measures” for further details and the Annual Management Discussion & Analysis (“MD&A”) for reconciliations.
(2) The weighted average number of shares outstanding for the three months and full year ended December 31, 2018 is 174.9 million and 158.1 million, respectively (three months and full year ended December 31, 2017 - 142.8 million). There were no dilutive instruments for the three months and full year ended December 31, 2018 and 2017.
(3) Transaction and other costs for the three months and year ended December 31, 2018 and 2017 are related to acquisition activities and integration of acquisitions. See “Transaction and Other Costs” in the MD&A for further details.

Segmented Information

    Three Months Ended   Twelve Months Ended
      December 31   December 31
  (millions of dollars)   2018   2017   2018   2017
EBITDA from operations(1)    
Energy Distribution 129.0 81.3 265.2 180.4
Specialty Chemicals   33.3   35.5   137.6   126.4  
      162.3   116.8   402.8   306.8  

(1) See “Non-GAAP Financial Measures”.

Evolution 2020 and Strategy Highlights

  • Superior is confirming the 2019 Adjusted EBITDA guidance (“EBITDA guidance”) in the range of $445 million to $495 million, a 26% increase compared to 2018 using the mid-point of the 2019 EBITDA guidance range. See “2019 Adjusted EBITDA and Leverage Guidance” for additional details.
  • Superior exceeded its previous target of $15.0 million in run-rate synergies related to the Canwest Propane acquisition, achieving $16.5 million in run-rate synergies exiting 2018. Superior now expects to achieve $21.5 million in run-rate synergies by the third quarter of 2019.
  • During the fourth quarter, U.S. propane distribution achieved approximately US $3.6 million in synergies related to the NGL acquisition. The realized synergies include supply chain efficiencies through leveraging the scale and existing supply relationships, as well as operational expense savings. The expected additional run rate synergies of US $16.7 million from the NGL transaction are anticipated to come primarily from operational and procurement cost-savings, effective supply chain management as well as improving margin management through merging the sales and marketing teams and sharing best practices. The U.S. propane distribution business expects to achieve an additional US $6.4 million of synergies in 2019, and an additional US $10.0 million in run-rate synergies by the end of 2020.
  • On October 2, 2018, Superior closed the acquisition of all of the issued and outstanding shares of United Liquid Gas Company Inc., which operates under the trade name United Pacific Energy (“UPE”) an independent wholesale natural gas liquid distributor in California. This acquisition adds significant sales volumes to the wholesale natural gas liquid portfolio, diversifies our customer and geographical base and includes an attractive group of assets with coastal exposure which is integral in the continued expansion of the propane distribution business along the western coast of the U.S.
  • On November 1, 2018, Superior closed the acquisition of all of the propane distribution and other assets of Musco Fuel & Propane LLP, an independent propane distributor in Connecticut serving residential and commercial customers.

2019 Adjusted EBITDA and Leverage Guidance

Superior is confirming its 2019 Adjusted EBITDA guidance range of $445 million to $495 million, a 26% increase compared to 2018 using the mid-point of guidance. Energy Distribution EBITDA from operations is anticipated to be higher than 2018 primarily due to full year results from NGL as well as the incremental contribution from the six tuck-in acquisitions completed in 2018. The increase also reflects approximately $5.0 million in incremental synergies related to Canwest and US $6.4 million in synergies related to NGL to be realized in 2019. Supply market fundamentals in the Canadian propane distribution business are anticipated to be consistent with 2018. Average weather, as measured by degree days for 2019 is anticipated to be consistent with the five-year average. Specialty Chemicals EBITDA from operations is anticipated to be consistent to modestly lower than 2018 as sodium chlorate EBITDA is anticipated to be consistent, chlor-alkali EBITDA is anticipated to be modestly lower and sodium chlorite EBITDA is anticipated to be higher.

Superior expects to update the Adjusted EBITDA and Leverage guidance after the first quarter, incorporating the impact of IFRS 16. Based on the mid-point of 2019 Adjusted EBITDA guidance, IFRS 16 is estimated to positively impact Adjusted EBITDA by approximately 5% in 2019. IFRS 16 is expected to increase total debt by the end of 2019 by approximately $150 million primarily due to railcar leases previously treated as operating leases and excluded from debt.

Debt Management Update

Superior remains focused on managing both its total debt and its total net debt to Adjusted EBITDA ratio. Superior’s total debt to Adjusted EBITDA ratio for the trailing twelve months (TTM) was 4.1x as at December 31, 2018, compared to 3.3x at December 31, 2017. The debt levels and total leverage ratio as at December 31, 2018 were higher than December 31, 2017, due to increased borrowings on the credit facilities and the issuance of $605 million in unsecured notes associated with the NGL and tuck-in acquisitions. The TTM Adjusted EBITDA includes pro forma Adjusted EBITDA for acquisitions completed in 2018.

Superior’s total debt to Adjusted EBITDA ratio as at December 31, 2018 was in line with the previously communicated guidance of 3.8x to 4.2x as at December 31, 2018. Superior anticipates total debt to Adjusted EBITDA will be in the range of 3.6x to 4.0x as at December 31, 2019 as cash generated from operations is used to repay debt.

At-the-Market Equity Program

Superior’s “at-the-market” equity offering program (the “ATM”) which allowed Superior to sell up to $100,000,000 in common shares of Superior on the Toronto Stock Exchange expired on December 9, 2018, concurrent with the expiry of Superior’s short form base shelf prospectus dated November 9, 2016. Under the ATM, Superior sold an aggregate of 29,300 common shares at an average price of $12.76 per share for net proceeds of $0.4 million.

MD&A and Financial Statements

Superior’s MD&A, the audited Consolidated Financial Statements and the Notes to the Consolidated Financial Statements for year ended December 31, 2018 provide a detailed explanation of Superior’s operating results. These documents are available online at Superior’s website at www.superiorplus.com under the Investor Relations section and on SEDAR under Superior’s profile at www.sedar.com.

2018 Fourth Quarter Conference Call

Superior will be conducting a conference call and webcast for investors, analysts, brokers and media representatives to discuss the 2018 Annual and Fourth Quarter Results at 10:30 a.m. EST on Friday, February 15, 2019. To participate in the call, dial: 1-844-389-8661. A live audio webcast of the meeting, including a corporate presentation will be accessible through this link also posted on Superior’s website under the Webcasts section. Internet users can listen to the call live, or as an archived call on Superior’s website at www.superiorplus.com under the Events section.

Non-GAAP Financial Measures

Throughout the fourth quarter earnings release, Superior has used the following terms that are not defined by International Financial Reporting Standards (“Non-GAAP Financial Measures”), but are used by management to evaluate the performance of Superior and its business: AOCF before and after transaction and other costs, earnings before interest, taxes, depreciation and amortization (“EBITDA”) from operations, and Adjusted EBITDA. These measures may also be used by investors, financial institutions and credit rating agencies to assess Superior’s performance and ability to service debt. Non-GAAP financial measures do not have standardized meanings prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other companies. Securities regulations require that non-GAAP financial measures are clearly defined, qualified and reconciled to their most comparable GAAP financial measures. Except as otherwise indicated, these non-GAAP financial measures are calculated and disclosed on a consistent basis from period to period. Specific items may only be relevant in certain periods. See “Non-GAAP Financial Measures” in the MD&A for a discussion of non-GAAP financial measures and their reconciliations to GAAP financial measures.

The intent of non-GAAP financial measures is to provide additional useful information to investors and analysts, and the measures do not have any standardized meaning under IFRS. The measures should not, therefore, be considered in isolation or used in substitute for measures of performance prepared in accordance with IFRS. Other issuers may calculate non-GAAP financial measures differently.

Investors should be cautioned that AOCF, EBITDA from operations, and Adjusted EBITDA should not be construed as alternatives to net earnings, cash flow from operating activities or other measures of financial results determined in accordance with GAAP as an indicator of Superior’s performance. Non-GAAP financial measures are identified and defined as follows:

Adjusted Operating Cash Flow and Adjusted Operating Cash Flow per Share

AOCF is equal to cash flow from operating activities as defined by IFRS, adjusted for changes in non-cash working capital, other expenses, non-cash interest expense, current income taxes and finance costs. Superior may deduct or include additional items in its calculation of AOCF; these items would generally, but not necessarily, be infrequent in nature and could distort the analysis of trends in business performance. Excluding these items does not imply they are non-recurring. AOCF and AOCF per share are presented before and after transaction and other costs.

AOCF per share before transaction and other costs is calculated by dividing AOCF before transaction and other costs by the weighted average number of shares outstanding. AOCF per share is calculated by dividing AOCF by the weighted average number of shares outstanding.

AOCF is a performance measure used by management and investors to evaluate Superior’s ongoing performance of its businesses and ability to generate cash flow. AOCF represents cash flow generated by Superior that is available for, but not necessarily limited to, changes in working capital requirements, investing activities and financing activities of Superior. AOCF is also used as one component in determining short-term incentive compensation for certain management employees.

The seasonality of Superior’s individual quarterly results must be assessed in the context of annualized AOCF. Adjustments recorded by Superior as part of its calculation of AOCF include, but are not limited to, the impact of the seasonality of Superior’s businesses, principally the Energy Distribution segment, by adjusting for non-cash working capital items, thereby eliminating the impact of the timing between the recognition and collection/payment of Superior’s revenues and expenses, which can differ significantly from quarter to quarter. AOCF is reconciled to cash flow from operating activities.

Adjusted EBITDA

Adjusted EBITDA represents earnings before interest, taxes, depreciation, amortization, losses (gains) on disposal of assets, finance expense, restructuring costs, transaction and other costs, and unrealized gains (losses) on derivative financial instruments. Adjusted EBITDA is used by Superior and investors to assess its consolidated results and ability to service debt. Adjusted EBITDA is reconciled to net earnings before income taxes.

EBITDA from operations

EBITDA from operations is defined as Adjusted EBITDA excluding costs that are not considered representative of Superior’s underlying core operating performance, including gains and losses on foreign currency hedging contracts, corporate costs and transaction and other costs. Management uses EBITDA from operations to set targets for Superior (including annual guidance and variable compensation targets). EBITDA from operations is reconciled to net earnings before income taxes.

Forward Looking Information

Certain information included herein is forward-looking information within the meaning of applicable Canadian securities laws. Forward-looking information may include statements regarding the objectives, business strategies to achieve those objectives, expected financial results (including those in the area of risk management), economic or market conditions, and the outlook of or involving Superior, Superior LP and its businesses. Such information is typically identified by words such as “anticipate”, “believe”, “continue”, “estimate”, “expect”, “plan”, “forecast”, “future”, “outlook, “guidance”, “may”, “project”, “should”, “strategy”, “target”, “will” or similar expressions suggesting future outcomes.

Forward-looking information in this document includes: future financial position, consolidated and business segment outlooks, expected Adjusted EBITDA, anticipated financial impact of IFRS 16, expected total debt to Adjusted EBITDA ratio, business strategy and objectives, development plans and programs, business expansion and cost structure and other improvement projects, weather, product pricing and sourcing, electricity costs, exchange rates, expected synergies from the integration of Canwest, EBITDA and synergies associated with the NGL acquisition, expected seasonality of demand, future economic conditions, our ability to obtain financing on acceptable terms, expected life of facilities and statements regarding net working capital and capital expenditure requirements of Superior or Superior LP.

Forward-looking information is provided for the purpose of providing information about management’s expectations and plans about the future and may not be appropriate for other purposes. Forward-looking information herein is based on various assumptions and expectations that Superior believes are reasonable in the circumstances. No assurance can be given that these assumptions and expectations will prove to be correct. Those assumptions and expectations are based on information currently available to Superior, including information obtained from third party industry analysts and other third party sources, and the historic performance of Superior’s businesses. Such assumptions include anticipated financial performance, current business and economic trends, the amount of future dividends paid by Superior, business prospects, utilization of tax basis, regulatory developments, currency, exchange and interest rates, future commodity prices relating to the oil and gas industry, future oil rig activity levels, trading data, cost estimates, our ability to obtain financing on acceptable terms, the assumptions set forth under the “Financial Outlook” sections of our MD&A. The forward looking information is also subject to the risks and uncertainties set forth below.

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, reduced customer demand, operational risks involving our facilities, force majeure, labour relations matters, our ability to access external sources of debt and equity capital, and the risks identified in (i) our MD&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 document 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.

Contacts

Beth Summers Executive Vice President and Chief Financial Officer
Phone: (416) 340-6015

Rob Dorran Vice President, Investor Relations and Treasurer
Phone: (416) 340-6003
Toll Free: 1-866-490-PLUS (7587)