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Superior Plus Corp. ("Superior") (TSX:SPB) announced today its financial and operating results for the first quarter ended March 31, 2021. Unless otherwise expressed, all financial figures are expressed in Canadian dollars.
"We delivered strong financial and operating results in the first quarter with our strategic growth and operational initiatives on-track with our plan," said Luc Desjardins, President and Chief Executive Officer. "We successfully completed our transition to a pure-play energy distribution company with the sale of the Specialty Chemicals business on April 9, and we have already announced or completed four acquisitions in 2021 for total consideration of $258 million. Our Energy Distribution EBITDA from operations of $216.4 million was a record for the first quarter, demonstrating the continued resiliency of this business."
Ms. Beth Summers, Executive Vice President and Chief Financial Officer added, "From a financial perspective, we are well-positioned to execute our growth strategy with ample liquidity. To date in 2021, through two high yield issuances and the extension of our credit facility, we have further reduced our debt costs while extending our maturities."
Superior achieved first quarter Adjusted EBITDA of $211.6 million, a $26.2 million or 14% increase over the prior year quarter primarily due to higher EBITDA from operations in U.S. propane distribution ("U.S. Propane") and realized gains on foreign exchange hedging contracts compared to a realized loss in the prior year quarter, partially offset by lower EBITDA from operations in Canadian propane distribution ("Canadian Propane") and higher corporate costs.
Net earnings from continuing operations of $75.4 million in the first quarter increased $74.3 million over the first quarter of 2020 primarily due to the factors described above and gains on derivatives and foreign currency translation of borrowings, partially offset by higher finance expense and income tax expense in the current quarter.
U.S. Propane EBITDA from operations of $140.1 million, increased $36.7 million or 35% from the prior year quarter primarily due to the contribution from acquisitions completed in the last twelve months and colder weather. Average weather, as measured by degree days, across markets where U.S. propane operates for 2021 was 7% colder than the prior year and 4% warmer than the five-year average.
Canadian Propane EBITDA from operations of $76.3 million, decreased $10.3 million or 12% from the prior year quarter primarily due to lower average margins related to weaker wholesale propane fundamentals and lower sales volumes related to the impact of COVID-19, a decline in oilfield activity in Western Canada and warmer weather. Average weather across Canada for 2021, as measured by degree days was 3% warmer than the prior year and 4% warmer than the five-year average.
Corporate costs for the first quarter of 2021 were $10.3 million, a $9.7 million increase compared to the prior year quarter due to higher long-term incentive plan costs related to share price appreciation in the current quarter. In the first quarter of 2021, Superior had realized gains on foreign currency hedging contracts of $5.5 million compared to realized losses of $4.0 million in the prior year quarter due to the average hedge rate of the foreign exchange contracts and the strengthening of the Canadian dollar.
AOCF before transaction and other costs during the first quarter was $185.3 million, a $28.9 million or 18% increase compared to the prior year quarter primarily due to higher Adjusted EBITDA and lower interest expense, partially offset by higher cash tax expenses. AOCF before transaction and other costs per share was $0.90, consistent with the prior year quarter as the increase in AOCF before transaction and other costs was offset by the increase in weighted average shares outstanding. Weighted average shares outstanding, which assumes the exchange of the preferred shares into common shares, were higher than the prior year quarter primarily due to the issuance of preferred shares in the prior year, and to a lesser extent, the impact of shares issued under the Dividend Reinvestment Plan in the prior year.
Superior’s Total Net Debt to Adjusted EBITDA leverage ratio for the trailing twelve months ended March 31, 2021, including the Specialty Chemicals EBITDA from operations, was 3.6x. The pro forma Net Debt to Adjusted EBITDA leverage ratio, adjusted for the cash proceeds received from the sale of the Specialty Chemicals business and excluding the Specialty Chemicals EBITDA from operations, was 2.9x, which is modestly below Superior’s long-term target range of 3.0x to 3.5x.
Superior’s outlook for 2021 remains unchanged, with expected Adjusted EBITDA guidance in the previously disclosed guidance range of $370 million to $410 million. Average weather for the remainder of 2021 is anticipated to be consistent with the five-year average for the U.S. and Canada.
Strategic Developments and Highlights:
On April 27, 2021, Superior entered into an underwriting agreement to issue and sell on a private placement basis CDN$500 million aggregate principal amount of 4.25% unsecured notes due May 18, 2028, which will be issued at par (the "Offering"). Closing of the Offering is expected to occur on or about May 18, 2021, subject to customary closing conditions. Superior also issued conditional redemption notices to redeem all of its outstanding: (i) CDN$400 million principal amount of 5.25% senior unsecured notes due February 27, 2024 (the "2024 Notes") in accordance with the indenture governing the 2024 Notes; and (ii) CDN$370 million principal amount of 5.125% senior unsecured notes due August 27, 2025 (the "2025 Notes") in accordance with the indenture governing the 2025 Notes.
On April 22, 2021, Superior entered into an agreement to acquire the assets of a retail propane distribution company based in South Carolina, operating under the tradename, Freeman Gas and Electric Co., Inc. ("Freeman") for an aggregate purchase price of approximately US $170 million ($213 million) before adjustments for working capital. Superior anticipates using available cash to fund the amount of the purchase price due on closing.
On April 19, 2021, recognizing the importance of sustainability and ESG principles in how Superior operates and in its business strategy, Superior published its inaugural Sustainability Report.
On April 9, 2021, Superior amended the syndicated credit facility and extended the maturity to May 8, 2026. There were no changes to the total commitments available under the credit facility ($750 million), the accordion capacity ($300 million) or the financial covenants.
On April 9, 2021, Superior completed the sale of its Specialty Chemicals business to Birch Hill Equity Partners for total consideration of $725 million (the "Transaction"). Under the terms of the Transaction, Superior received $600 million in cash proceeds from Birch Hill, subject to certain adjustments, and $125 million in the form of a 6% unsecured note issued by the affiliate of Birch Hill that is acquiring Specialty Chemicals. The consideration received is subject to certain post-closing adjustments as previously disclosed.
On March 11, 2021, Superior closed the private placement of US$600 million principal amount of 4.500% Senior Unsecured Notes due March 15, 2029, which were issued at par. Superior also completed the redemption of the US$350 million 7.000% senior unsecured notes due July 15, 2026 at a redemption price of 107.444% of the outstanding principal amount, plus accrued and unpaid interest to, but excluding, the redemption date.
On February 11, 2021, Superior acquired the assets of an Ontario retail propane distribution company, operating under the tradename Highlands Propane ("Highlands") for a total consideration of approximately $15.0 million.
On February 1, 2021, Superior acquired a 100% equity interest of a retail propane distribution company, operating in Quebec under the tradename Miller Propane ("Miller") for a total consideration of $7.5 million.
On January 26, 2021, Superior announced the acquisition of the assets of a retail propane and distillate distribution company, operating in Massachusetts under the tradename Holden Oil ("Holden") for total consideration of US$17.5 million ($22.3 million).
Three Months Ended
(millions of dollars, except per share amounts)
Net earnings from continuing operations
Net earnings per share, basic and diluted (4)
EBITDA from operations (2)
Adjusted EBITDA (2)
Cash flows from operating activities
Cash flows from operating activities per share – basic and diluted (4)
AOCF before transaction and other costs (2)(3)
AOCF before transaction and other costs per share – basic and diluted (2)(3)(4)
AOCF per share– basic and diluted (2)(4)
Cash dividends declared on common shares
Cash dividends declared per share
Comparative figures have been reclassified to exclude the results of the Specialty Chemicals segment due to the divestiture of the segment subsequent to the end of the first quarter. See the unaudited condensed interim consolidated financial statements for the quarter ended March 31, 2021.
EBITDA from operations, Adjusted EBITDA, AOCF before transaction and other costs, and AOCF are Non-GAAP measures. See "Non-GAAP Financial Measures".
Transaction and other costs for the three months ended March 31, 2021 and 2020 are related to acquisition activity, restructuring and the integration of acquisitions and the divestiture of the Specialty Chemical segment. See "Transaction and Other Costs" for further details.
The weighted average number of shares outstanding for the three months ended March 31, 2021 was 206.0 million (March 31, 2020 was 174.9 million). The weighted average number of shares assumes the exchange of the preferred shares into common shares. There were no other dilutive instruments with respect to AOCF per share and AOCF before transaction and other costs per share for the three months ended March 31, 2021 and 2020.
Three Months Ended
(millions of dollars)
EBITDA from operations (1)
U.S. Propane Distribution
Canadian Propane Distribution
See "Non-GAAP Financial Measures".
MD&A and Financial Statements
Superior’s MD&A, the unaudited Interim Consolidated Financial Statements and the Notes to the Interim Consolidated Financial Statements for the three months ended March 31, 2021 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.
Virtual Annual General Meeting
Due to the COVID-19 pandemic and the directives from public health and other government authorities to maintain physical distance and eliminate social gatherings, we are holding our annual meeting in a virtual-only format so shareholders may attend and participate in the annual meeting via live webcast on Wednesday, May 12, 2021 at 4:00 PM EDT. Please see Superior's website at www.superiorplus.com for detailed instructions.
2021 First Quarter Conference Call
Superior will be conducting a conference call and webcast for investors, analysts, brokers and media representatives to discuss the First Quarter Results at 10:30 a.m. EDT on Thursday, May 13, 2021. To participate in the call, dial: 1-844-389-8661. 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.
2021 Virtual Investor Day
Superior will host a virtual Investor Day on May 25, 2021 at 1 p.m. EDT. During the event, members of the executive leadership team will provide an update on Superior’s markets and businesses, strategic transformational initiative, the Superior Way Forward, and future financial outlook. For parties interested in attending the event, please email email@example.com. A link to the webcast along with the agenda for the event will be emailed to all participants and will also be posted on Superior’s website in the "Events" section closer to the time of Investor Day.
Non-GAAP Financial Measures
Throughout the first 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, Adjusted Gross Profit, Adjusted EBITDA, Total Debt to Adjusted EBITDA leverage ratio, Senior Debt, Credit Facility EBITDA and Senior Debt to Credit Facility EBITDA leverage ratio. 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 certain 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, Adjusted EBITDA and Credit Facility 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.
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.
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 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. Please refer to the Financial Overview section of the MD&A for the reconciliation.
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. Please refer to the Results of Operating Segments in the MD&A for the reconciliations.
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.
Adjusted EBITDA is a significant performance measure used by management and investors to evaluate Superior’s ongoing performance of its businesses. Adjusted EBITDA 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 Adjusted EBITDA.
Total Net Debt to Adjusted EBITDA Leverage Ratio and Pro Forma Adjusted EBITDA
Adjusted EBITDA for the Total Net Debt to Adjusted EBITDA Leverage Ratio is defined as Adjusted EBITDA calculated on a 12-month trailing basis giving pro forma effect to acquisitions and dispositions adjusted to the first day of the calculation period ("Pro Forma Adjusted EBITDA"). Pro Forma Adjusted EBITDA is used by Superior to calculate its Total Net Debt to Adjusted EBITDA Leverage Ratio.
To calculate the Total Net Debt to Adjusted EBITDA Leverage Ratio divide the sum of borrowings before deferred financing fees and lease liabilities by Pro Forma Adjusted EBITDA. The Total Net Debt to Adjusted EBITDA Leverage Ratio is used by Superior and investors to assess its ability to service debt.
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, the markets for our products and our financial results, business strategy and objectives, development plans and programs, organic growth, weather, economic activity in Western Canada, product pricing and sourcing, wholesale propane market fundamentals, exchange rates, expected seasonality of demand, and future economic conditions.
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, expected life of facilities and statements regarding net working capital and capital expenditure requirements of Superior or Superior LP, 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, the anticipated impact of the COVID-19 pandemic and the expected economic recession, 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.
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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)