Read Larry Connors' blog – Short Term Trading Strategies
<<
STRATEGIC GROWTH INITIATIVES
----------------------------
- On November 4, 2009, Superior announced that it entered into an asset
purchase agreement to acquire certain assets of Griffith Energy
Services, Inc. ("GES") that comprise a retail heating oil, propane
and motor fuels distribution business for an aggregate purchase price
of approximately US$76 million. For details on the acquisition,
please refer to press release entitled "Superior Plus Announces
Expansion of its US Refined Fuels Business with a US$76 Million
Acquisition" dated November 4, 2009.
- Construction was substantially completed on the Port Edwards membrane
expansion project in the third quarter of 2009. The plant was
commissioned during October with first production expected in early
November 2009. The project is expected to have annualized incremental
EBITDA of US$20 - $30 million at full capacity.
- On September 24, 2009, Superior completed its acquisition of the
shares of Specialty Products & Insulation Co. ("SPI") for
consideration of CDN$141.8 million.
- On September 30, 2009, Superior acquired the retail heating oil and
propane distribution business from Sunoco, Inc. ("SRH") for an
aggregate purchase price of CDN$96.1 million.
- Superior completed the issuance of 6,773,135 common shares for gross
proceeds of approximately $77.7 million and convertible debentures
for gross proceeds of approximately $69.0 million during the third
quarter of 2009.
- On October 27, 2009, Superior completed the issuance of 8.25% senior
unsecured debentures for gross proceeds of $150 million.
- Long-term funding is now in place for all of Superior's completed
growth initiatives.
OPERATIONAL HIGHLIGHTS
----------------------
- Superior's revised forecast for adjusted operating cash flow per
share is $1.90 - $2.05 in 2009 compared to $2.18 per share in 2008, a
decrease of approximately 10% based upon the mid-point of the 2009
financial outlook range.
- Positive leading indicators in each of the businesses provide
evidence that the economy has bottomed over the past two quarters as
a number of Superior's customers are beginning to increase
inventories, restart deferred projects, and commence work on new
projects as the global economy recovers from the downturn.
- The third quarter results reflected seasonality and the impact from a
global recession. Production at Port Edwards was curtailed due to
construction related downtime which extended into the fourth quarter
of 2009. A cash tax recovery related to the timing of the Port
Edwards project start-up which had previously been expected in the
third quarter is now expected to be recognized in the fourth quarter
of 2009. Inventory management activities in the Fuel Distribution
segment had the effect of deferring expected profit recognition from
the third quarter to the fourth quarter of 2009.
- Adjusted operating cash flow per share for the third quarter and
year-to-date 2009 of $0.22 and $1.13, a decrease of $0.16 and $0.31,
respectively, compared to prior year periods.
- Gross profit and EBITDA from operations were lower in the third
quarter and year-to-date 2009 compared to prior periods due to the
same factors outlined above.
- The impact of our strategic growth initiatives are expected to
improve operating results in the fourth quarter of 2009 and more
fully in 2010.
- Four quarter trailing proforma EBITDA was $265.5 million resulting in
a Senior Debt to EBITDA ratio of 2.4x and a Total Debt to EBITDA
ratio of 3.6x as at September 30, 2009. The proforma EBITDA includes
the SPI and SRH acquisitions completed during the third quarter of
2009.
FINANCIAL SUMMARY
-------------------------------------------------------------------------
Three months ended Nine months ended
(millions of dollars except September 30, September 30,
per share amounts) 2009 2008 2009 2008
-------------------------------------------------------------------------
Revenue 441.3 580.2 1,499.2 1,828.8
-------------------------------------------------------------------------
Gross profit 126.8 152.8 450.1 476.0
-------------------------------------------------------------------------
EBITDA from operations(1) 32.3 49.6 143.3 173.0
Interest (10.1) (9.8) (28.1) (28.0)
Cash taxes 0.9 (4.3) (5.3) (10.2)
Corporate costs (3.8) (2.0) (10.4) (7.5)
-------------------------------------------------------------------------
Adjusted operating cash flow(1) 19.3 33.5 99.5 127.3
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Adjusted operating cash flow
per share, basic(1)(2) and
diluted(1)(3) $0.22 $0.38 $1.13 $1.44
-------------------------------------------------------------------------
Dividends/Distributions
paid per share/unit $0.405 $0.405 $1.215 $1.205
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) EBITDA from operations and adjusted operating cash flow are key
performance measures used by management to evaluate the performance
of Superior. These measures are defined under Non-GAAP Financial
Measures in Management's Discussion and Analysis of the 2009 Third
Quarter Results.
(2) The weighted average number of shares outstanding for the three
months ended September 30, 2009 is 88.7 million (2008 - 88.4 million)
and for the nine months ended September 30, 2009, is 88.4 million
(2008 - 88.3 million).
(3) For the three and nine months ended September 30, 2009 and 2008,
there were no dilutive instruments.
>>
FINANCIAL OUTLOOK
"The length of the global recession has made forecasting the recovery of the businesses difficult. Superior has responded swiftly to capitalize on acquisition opportunities given its strong balance sheet and operational expertise at a low point in the economic cycle. We continue to improve Superior's cost structure and integrate the acquisitions of SPI and SRH into our construction products and fuel distribution businesses. Given the recent improvement in a number of leading indicators in each of the businesses, we believe the third quarter of 2009 is the bottom of one of the most severe economic downturns in the past century. We remain committed to stability of dividends and creating value growth for our shareholders," said Chairman and Chief Executive Officer Grant Billing.
<<
-------------------------------------------------------------------------
(millions of dollars, except per 2009(1) 2009(2)(4)(5)(6)
share amounts) Prior Current
-------------------------------------------------------------------------
EBITDA from operations
Fuel Distribution 95-105 95-105
Specialty Chemicals 95-105 95-105
Construction Products Distribution 20-25 20-25
Fixed-Price Energy Services 9-12 9-12
-------------------------------------------------------------------------
Adjusted operating cash flow per share $1.95-$2.10 $1.90-$2.05
Dividends paid per share $1.62 $1.62
-------------------------------------------------------------------------
Senior Debt/EBITDA Ratio(3) 1.9 2.0
Total Debt/EBITDA Ratio(3) 3.0 3.2
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) As provided in Superior's 2009 Second Quarter Financial Results.
(2) The assumptions, definitions, and risk factors relating to the
Financial Outlook are discussed in Management's Discussion and
Analysis of the 2009 Third Quarter Results.
(3) Superior's debt ratios take into account the impact of the off-
balance sheet receivable sales program amounts, the efficiency and
growth projects and excludes Port Edwards project debt of
$150 million (US$130 million) as well as project EBITDA contribution.
Including the Port Edwards project debt with no corresponding EBITDA
would result in a year-end Senior Debt to EBITDA ratio of 2.6x and
Total Debt to EBITDA ratio of 3.8x.
(4) The current 2009 financial outlook includes the acquisitions of SPI
and SRH which closed on September 24, 2009 and September 30, 2009,
respectively.
(5) The current 2009 financial outlook includes the convertible
debenture, common share, and senior unsecured debenture financings as
discussed in Management's Discussion and Analysis of the 2009 Third
Quarter Results.
(6) The current 2009 financial outlook does not include any benefit or
cost related to the announced GES acquisition on November 4, 2009.
>>
Superior has revised its annual expectations for adjusted operating cash flow by $0.05 to $1.90 - $2.05 per share in 2009 based upon year-to-date results and its current outlook for the remainder of 2009. The forecast decrease in adjusted operating cashflow was due to higher financing costs partially offset by incremental cash flow from the acquisitions of SPI and SRH. Superior's financial outlook for 2010 adjusted operating cash flow remains at $2.05 - $2.25 and includes the SPI and SRH acquisitions along with the related financings and excludes any benefit or cost relating to the announced GES acquisition.
The Port Edwards membrane expansion project was commissioned in October 2009. Initial start-up has commenced and production is expected in early November 2009. The Port Edwards production facility was shut down for a period of approximately 10 weeks, which included an additional four weeks of downtime not previously forecast in the second quarter of 2009. The reduced revenue and production volumes have been included in the current 2009 financial outlook.
<<
SEGMENTED INFORMATION
-------------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
(millions of dollars) 2009(1) 2008(1) 2009(1) 2008(1)
-------------------------------------------------------------------------
EBITDA from operations:
Fuel Distribution 0.3 6.7 49.9 57.5
Specialty Chemicals 22.1 31.9 74.4 83.6
Construction Products
Distribution 7.1 8.1 11.9 23.9
Fixed-Price Energy Services 2.8 2.9 7.1 8.0
-------------------------------------------------------------------------
32.3 49.6 143.3 173.0
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) EBITDA from operations is a key performance measure used by
management to evaluate the performance of Superior. This measure is
defined under Non-GAAP Financial Measures in Management's Discussion
and Analysis of the 2009 Third Quarter Results.
Fuel Distribution
- EBITDA from operations were $0.3 million and $49.9 million for the
third quarter and year-to-date 2009, a decrease of $6.4 million and
$7.6 million, respectively, compared to prior year periods, primarily
as a result of an 8% decline in sales volumes due to the continued
impact of the economic recession in Canada.
- Total gross profits per litre for the third quarter and year-to-date
2009 were 22.1 cents and 22.7 cents, a decrease of 0.6 cents and an
increase of 1.5 cents, respectively, compared to the prior year
periods.
- Retail propane and delivery gross profits of $44.7 million and
$171.1 million decreased by 8% and 5% in the third quarter and year-
to-date 2009, respectively, compared to the prior year periods.
Superior's sales and marketing program has produced positive results
throughout 2009 with annualized new customer volumes of approximately
119 million litres partially offsetting the impact on sales volumes
due to the economic recession in Canada.
- Wholesale and related gross profits were $0.3 million and
$18.5 million in the third quarter and year-to-date 2009, a decrease
of $2.2 million and an increase of $4.4 million, respectively,
compared to the prior year periods. Inventory management activities
had the effect of deferring expected profit recognition from the
third quarter to the fourth quarter of 2009.
- Superior consolidated logistics functions from six Regional Operation
Centres into two National Operations Centres during the third quarter
of 2009. Installation of handheld computers on the service fleet
commenced in the third quarter and is expected to be completed in the
fourth quarter of 2009.
- EBITDA from operations is expected to be $95 - $105 million for 2009,
including the acquisition of SRH. The previous outlook provided in
the 2009 Second Quarter Results did not include any benefit of the
SRH acquisition completed on September 30, 2009. The benefits of
sales and marketing initiatives, projected efficiency improvements in
the cost structure, and the benefits due to the SRH acquisition
mitigated the impact of the economic recession in North America.
Specialty Chemicals
- EBITDA from operations were $22.1 million and $74.4 million in the
third quarter and year-to-date 2009, a decrease of $9.8 million and
$9.2 million, respectively, compared to the prior year periods.
- Gross profits in the third quarter and year-to-date 2009 decreased by
$11.9 million and $5.1 million to $50.0 million and $163.7 million,
respectively, compared to the prior year periods.
- Chemical sales volumes of 163,000 (MTs) for the third quarter were
25,000 (MTs) lower than the prior year quarter primarily due to the
Port Edwards membrane project conversion downtime. The Valdosta,
Georgia sodium chlorate facility was restarted in the third quarter
as planned due to a forecasted increase in sodium chlorate demand.
- The Port Edwards, Wisconsin chloralkali facility membrane expansion
project remains on budget with construction substantially completed
at the end of the third quarter. Project commissioning and testing
was completed during October with first phase of start-up initiated
late October. The temporary closure of the facility was approximately
10 weeks which resulted in reduced revenue and production volumes and
have been reflected in the current financial outlook. The additional
plant capacity is expected to provide an annual incremental US$20 -
$30 million of positive EBITDA contribution at full capacity.
- EBITDA from operations is expected to be $95 - $105 million for 2009,
which is consistent with the previous outlook provided in the 2009
Second Quarter Results.
Construction Products Distribution
- EBITDA from operations were $7.1 million and $11.9 million in the
third quarter and year-to-date 2009, a decrease of $1.0 million and
$12.0 million, respectively, compared to the prior year periods.
- Gross profits in the third quarter and year-to-date 2009 were
$26.9 million and $75.6 million, a decrease of $8.3 million and
$24.3 million, respectively, compared to the prior year periods
primarily due to a 21%, 29%, and 31% decline in drywall sales volumes
in the first, second, and third quarter, respectively. Sales volumes
declined due to a rapid deterioration of the residential and
commercial construction activity as a result of the impact of a
recession in North America.
- Sales margins were modestly higher in most operating areas in the
third quarter and year-to-date 2009, compared to the prior year
periods due to a continued focus on margin management initiatives and
the impact of purchasing programs.
- Aggressive cost reduction initiatives throughout the first half of
the year significantly contributed to lower cash operating and
administrative costs of $19.8 million, a decrease of 27% compared to
the prior year period.
- Several leading indicators such as permits and housing starts have
provided positive signs of both the United States and Canadian
construction markets bottoming with some improvement expected in
2010.
- EBITDA from operations is expected to be $20 - $25 million for 2009,
including the acquisition of SPI. The previous outlook provided in
the 2009 Second Quarter Results did not include any benefit from the
SPI acquisition completed on September 24, 2009. The benefits of
aggressive cost reduction programs and the positive impact of the SPI
acquisition mitigated the full impact of the recession in North
America.
Fixed-Price Energy Services
- EBITDA from operations were $2.8 million and $7.1 million in the
third quarter and year-to-date 2009, a decrease of $0.1 million and
$0.9 million, respectively, compared to the prior year periods.
- Gross profits were $7.9 million and $23.2 million in the third
quarter and year-to-date 2009, a decrease of $0.7 million and
$0.8 million, respectively, compared to the prior year periods.
- SEM continued to focus its sales channels towards acquiring and
retaining Ontario commercial natural gas and electricity customers,
Quebec commercial natural gas customers and British Columbia natural
gas residential and commercial customers.
- Currently, SEM's portfolio of customers is approximately 70%
commercial and 30% residential by volume.
- EBITDA from operations is expected to be $9 - $12 million for 2009,
consistent with the previous outlook provided in the 2009 Second
Quarter Results.
CAPITAL EXPENDITURE SUMMARY
-------------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
(millions of dollars) 2009 2008 2009 2008
-------------------------------------------------------------------------
Efficiency, process improvement
and growth related 5.0 4.5 17.9 15.4
Other capital 2.6 0.5 5.9 4.9
Port Edwards expansion project 31.1 9.1 87.3 17.6
-------------------------------------------------------------------------
Earn-out payment on prior
acquisition - - 0.6 -
Acquisition of SPI 141.8 - 141.8 -
-------------------------------------------------------------------------
Acquisition of SRH 96.1 - 96.1 -
-------------------------------------------------------------------------
Other acquisitions 0.7 (0.1) 0.7 24.5
-------------------------------------------------------------------------
Proceeds on disposition
of capital (1.0) (5.1) (3.9) (6.6)
-------------------------------------------------------------------------
Total net capital expenditures 276.3 8.9 346.4 55.8
-------------------------------------------------------------------------
-------------------------------------------------------------------------
>>
In the third quarter of 2009, Superior continued to improve its cost structure by investing $5.0 million of capital in efficiency projects primarily in the fuel distribution and specialty chemicals divisions. The Port Edwards conversion project made good progress in the third quarter of 2009 with capital spending of $31.1 million (US$28.3 million). The project was commissioned in October 2009 and remains on budget. As at September 30, 2009, Superior has incurred US$119.9 million of the estimated US$130 million costs to complete the Port Edwards project.
<<
KEY CORPORATE ITEMS
- Total interest expense of $10.1 million in the third quarter
increased by $0.3 million compared to the prior year quarter
primarily due to higher average debt levels partially offset by lower
average interest rates and the impact of the appreciation of the
Canadian dollar on US denominated interest costs.
- Superior had a $570 million syndicated credit facility with undrawn
credit capacity of approximately $143.7 million (excluding its
securitization program) as at September 30, 2009. Effective
October 31, 2009, Superior had undrawn credit capacity in excess of
$300 million primarily due to the October 27, 2009 closing of
Superior Plus LP's $150 million senior unsecured debentures.
- As at September 30, 2009, Superior had utilized $66.8 million of its
existing securitization program.
- Due to the timing of the start-up of the Port Edwards project,
Superior anticipates a US cash income tax recovery of approximately
$5.6 million to occur in the fourth quarter of 2009, which will
result in an increase to adjusted operating cash flow per share of
approximately $0.05. The US cash tax recovery was originally expected
to occur in the third quarter of 2009 and is included in the current
financial outlook in 2009.
- Given Superior's current tax basis of approximately $1.7 billion as
at December 31, 2008, the corporation does not anticipate any
material Canadian cash taxes payable until 2014 based upon the
current level of Canadian taxable income projected from 2009-2014.
Beyond 2014, Superior anticipates incurring Canadian cash taxes at an
approximate rate of 12-13% for a period of 3-4 years.
>>
2009 Third Quarter Results
Superior's 2009 third Quarter Results are attached and available on Superior's website at: www.superiorplus.com under the investor information section and at www.sedar.com.
Conference Call
Superior Plus will be conducting a conference call and webcast for investors, analysts, brokers and media representatives to discuss the 2009 Third Quarter Results at 8:30 a.m. MST on Thursday, November 5, 2009. To participate in the call, dial: 1-866-250-4892. A recording of the call will be available for replay until midnight, December 4, 2009. To access the recording, dial: 1-877-289-8525 and enter pass code: 4170712, followed by the pound key. Internet users can listen to the call live, or as an archived call, on Superior's website at www.superiorplus.com under the events calendar section.
Forward Looking Information
Certain information included herein is forward-looking, within the meaning of applicable Canadian securities laws. Forward looking information can be identified by looking for words such as "believe", "expects", "expected", "will", "intends", "projects", "anticipates", "estimates", "continues" or similar words. Forward-looking information in this press release, including the attached Management's Discussion and Analysis of 2009 Third Quarter Results, includes but is not limited to, consolidated and business segment outlooks, expected EBITDA from operations, expected adjusted operating cash flow, expected adjusted operating cash flow per share, future capital expenditures, business strategy and objectives, dividend strategy, expected senior debt and total debt to EBITDA ratios, future cash flows, anticipated taxes, expected impact of proposed productivity improvement initiatives and statements regarding the future financial position of Superior and Superior LP. Superior believes the expectations reflected in such forward-looking information are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements should not be unduly relied upon.
Forward-looking information is based on various assumptions. Those assumptions are based on information currently available to Superior, including information obtained from third party industry analysts and other third party sources and include, the historic performance of Superior's businesses, current business and economic trends, availability and utilization of tax basis, currency, exchange and interest rates, trading data, cost estimates and the other assumptions set forth under the "Outlook" sections contained in the attached Management's Discussion and Analysis of 2009 Third Quarter Results. Readers are cautioned that the preceding list of assumptions is not exhaustive.
Forward-looking information is not a guarantee of future performance and involves a number of risks and uncertainties some of which are described herein and in the attached Management's Discussion and Analysis of 2009 Third Quarter Results. Such forward-looking information necessarily involves known and unknown risks and uncertainties, which may cause Superior's or Superior LP's actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking information. These risks and uncertainties include but are not limited to the risks referred to under the section entitled "Risk Factors to Superior", in the attached Management's Discussion and Analysis of 2009 Third Quarter Results, the risks associated with the availability and amount of the tax basis and the risks identified in Superior's 2008 Annual Information Form under the heading "Risk Factors". Any forward-looking information is made as of the date hereof and, except as required by law, Superior does not undertake any obligation to publicly update or revise such information to reflect new information, subsequent or otherwise.
<<
Management's Discussion and Analysis of 2009 Third Quarter Results
November 4, 2009
Non-GAAP Financial Measures
Adjusted Operating Cash Flow
>>
Adjusted operating cash flow is equal to cash flow from operating activities as defined by Canadian generally accepted accounting principles (GAAP), adjusted for changes in non-cash working capital and customer acquisition costs. Superior may deduct or include additional items to its calculation of adjusted operating cash flow; these items would generally, but not necessarily, be items of a non-recurring nature. Adjusted operating cash flow is the main performance measure used by management and investors to evaluate the performance of Superior. Readers are cautioned that adjusted operating cash flow is not a defined performance measure under Canadian GAAP and that adjusted operating cash flow cannot be assured. Superior's calculation of adjusted operating cash flow may differ from similar calculations used by comparable entities. Adjusted operating cash flow 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 adjusted operating cash flow. Adjustments recorded by Superior as part of its calculation of adjusted operating cash flow include, but are not limited to, the impact of the seasonality of Superior's businesses, principally Superior Propane, 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 expense, which can differ significantly from quarter to quarter. Adjustments are also made to reclassify the cash flows related to natural gas and electricity customer contract related costs in a manner consistent with the income statement recognition of these costs. Adjusted operating cash flow is reconciled to cash flow from operating activities on page 9.
EBITDA
EBITDA represents earnings before interest, taxes, depreciation, amortization and other non-cash expenses, and is used by Superior to assess its consolidated results and the results of its operating divisions. EBITDA is not a defined performance measure under GAAP. Superior's calculation of EBITDA may differ from similar calculations used by comparable entities. EBITDA of Superior's operating businesses may be referred to as EBITDA from operations. Net earnings (loss) are reconciled to EBITDA from operations on page 24.
Compliance EBITDA
Compliance EBITDA represents earnings before interest, taxes, depreciation, amortization and other non-cash expenses calculated on a 12 month trailing basis giving pro forma effect to acquisitions and divestitures and is used by Superior to calculate its debt covenants and other credit information. Compliance EBITDA is not a defined performance measure under GAAP. Superior's calculation of compliance EBITDA may differ from similar calculations used by comparable entities. See Note 10 to the unaudited Interim Consolidated Financial Statements for a reconciliation of net earnings (loss) to compliance EBITDA.
Overview of Superior
Superior Plus Corp. is a diversified business corporation. Superior holds 100% of Superior LP, a limited partnership formed between Superior General Partner Inc., as general partner and Superior as limited partner. Superior owns 100% of the shares of Superior General Partner Inc. 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 has four operating segments: a fuel distribution and related service business operating under the trade names Superior Propane, Superior Plus Energy Services, Montour Home Comfort Services and Mohawk Home Comfort Services; a specialty chemicals business operating under the trade name ERCO Worldwide (ERCO); a construction products distribution business operating under the trade names Winroc and Specialty Products and Insulation Co. (SPI); and a fixed-price energy services business operating under the trade name Superior Energy Management (SEM).
<<
Third Quarter Results
---------------------
Summary of Adjusted Operating Cash Flow
-------------------------------------------------------------------------
Three months ended Nine months ended
(millions of dollars except September 30, September 30,
per share amounts) 2009 2008 2009 2008
-------------------------------------------------------------------------
EBITDA from operations:
Fuel Distribution 0.3 6.7 49.9 57.5
Specialty Chemicals 22.1 31.9 74.4 83.6
Construction Products
Distribution 7.1 8.1 11.9 23.9
Fixed-Price Energy Services 2.8 2.9 7.1 8.0
-------------------------------------------------------------------------
32.3 49.6 143.3 173.0
Interest (10.1) (9.8) (28.1) (28.0)
Cash income tax recovery
(expense) 0.9 (4.3) (5.3) (10.2)
Corporate costs (3.8) (2.0) (10.4) (7.5)
-------------------------------------------------------------------------
Adjusted operating cash flow 19.3 33.5 99.5 127.3
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Adjusted operating cash flow
per share, basic(1) and
diluted(2) $0.22 $0.38 $1.13 $1.44
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) The weighted average number of shares outstanding for the three
months ended September 30, 2009, is 88.7 million (2008 -
88.4 million) and for the nine months ended September 30, 2009, is
88.4 million (2008 - 88.3 million).
(2) For the three and nine months ended September 30, 2009 and 2008,
there were no dilutive instruments.
Adjusted Operating Cash Flow Reconciled to Cash Flow from Operating
Activities(1)
-------------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
(millions of dollars) 2009 2008 2009 2008
-------------------------------------------------------------------------
Cash flows from operating
activities 29.3 8.7 187.7 154.1
Add: Customer contract related
costs capitalized 0.9 2.6 3.0 5.0
Less: Decrease in non-cash
working capital (9.2) 23.8 (86.1) (26.9)
Amortization of customer
contract related costs (1.7) (1.6) (5.1) (4.9)
-------------------------------------------------------------------------
Adjusted operating cash flow 19.3 33.5 99.5 127.3
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) See the unaudited Interim Consolidated Financial Statements for cash
flows from operating activities, customer contract related costs and
changes in non-cash working capital.
>>
Third quarter adjusted operating cash flow was $19.3 million, a decrease of $14.2 million or 42% compared to the prior year quarter. The decrease in adjusted operating cash flow was due to reduced EBITDA from operations at Superior's fuel distribution, specialty chemicals and construction products distribution businesses and higher corporate costs, offset in part by lower cash income taxes. Adjusted operating cash flow per share was $0.22 per share in the third quarter, a decrease of 42% from $0.38 per share in the prior year quarter due to the decrease in adjusted operating cash flow noted above. The weighted average number of shares outstanding was consistent with the prior year quarter. A comprehensive review of EBTIDA from operations for all of Superior's businesses is contained later in this management's discussion and analysis.
Adjusted operating cash flow for the nine months ended September 30, 2009 was $99.5 million, a decrease of $27.8 million or 22% compared to the prior year period. The decrease in adjusted operating cash flow was due to reduced EBITDA from operations at all of Superior's business and higher corporate costs, offset in party by reduced cash income taxes. Adjusted operating cash flow per share was $1.13 per share for the nine months ended September 30, 2009, a decrease of $0.31 per share or 22% due to the decrease in adjusted operating cash flow as noted above. The weighted average number of shares outstanding was consistent with the prior year period.
Net earnings for the third quarter were $33.0 million, compared to a net loss of $203.9 million in the prior year quarter. Net earnings were impacted by $33.9 million in unrealized gains on financial instruments in the current quarter, compared to unrealized losses of $232.7 million in the prior year quarter. The change in the unrealized gains and losses on financial instruments was due principally to gains in the current quarter on SEM's natural gas financial derivatives compared to losses in the prior year as a result of fluctuations in the spot and forward price for natural gas. Revenues of $441.3 million were $138.9 million lower than the prior year quarter due principally to a decrease in the retail selling price of propane as a result of a reduction in the wholesale cost of propane, in addition to reduced sales volumes and selling prices within the construction products distribution business. Gross profit of $126.8 million was $26.0 million lower than the prior year quarter due principally to reduced sales volumes at all of Superior's operating businesses. Total income tax for the third quarter was an expense of $5.0 million compared to an income tax recovery of $3.3 million in the prior year quarter. Income taxes were impacted by Superior's conversion to a corporation on December 31, 2008, and the reversal of Superior's deferred tax credit. Additionally, third quarter net earnings were affected for the same reasons as the analysis of adjusted operating cash flow for the third quarter which is detailed by operating business throughout this management's discussion and analysis.
Net earnings for the nine months ended September 30, 2009 were $50.9 million, compared to net earnings of $87.6 million in the prior year period. Net earnings were impacted by $20.4 million in unrealized losses on financial instruments in the current period, compared to unrealized gains of $22.4 million in the prior year period. The change in the unrealized gains and losses on financial instruments was due principally to a reduction in the value of ERCO's fixed-price power purchase agreements due to changes in the spot and forward prices of electricity; additionally, losses in the current period on SEM's natural gas financial derivatives compared to a small gain in the prior year period were the result of fluctuations in the spot and forward price for natural gas. Revenues of $1,499.2 million were $329.6 million lower than the prior year period due principally to a decrease in the retail selling price of propane as a result of a reduction in the wholesale cost of propane, in addition to reduced sales volumes and selling prices within the construction products distribution business. Gross profit of $450.0 million was $26.0 million lower than the prior year period due principally to reduced sales volumes at all of Superior's businesses. Total income tax recovery in the current period was $8.3 million compared to an income tax expense of $25.7 million in the prior year quarter. Income taxes were impacted by Superior's conversion to a corporation on December 31, 2008, and the reversal of Superior's deferred tax credit.
Fuel Distribution
Superior Propane generated EBITDA from operations of $0.3 million in the third quarter, a decrease of $6.4 million from the prior year quarter due to lower gross profit and modestly higher operating costs.
Condensed operating results for the three and nine months ended September 30, 2009 and 2008 are provided in the following table.
<<
-------------------------------------------------------------------------
(millions of dollars
except per litre Three months ended September 30,
amounts) 2009 2008
-------------------------------------------------------------------------
cents/ cents/
litre litre
----- -----
Revenue(1)(2) 147.6 65.9 236.6 97.0
Cost of sales (98.0) (43.8) (181.3) (74.3)
-------------------------------------------------------------------------
Gross profit 49.6 22.1 55.3 22.7
Less: Cash operating and
administration costs (49.3) (22.0) (48.6) (19.9)
-------------------------------------------------------------------------
EBITDA from operations 0.3 0.1 6.7 2.8
Propane retail volumes sold
(millions of litres) 224 244
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(millions of dollars
except per litre Nine months ended September 30,
amounts) 2009 2008
-------------------------------------------------------------------------
cents/ cents/
litre litre
----- -----
Revenue(1)(2) 614.4 68.0 834.2 84.5
Cost of sales (409.6) (45.3) (625.2) (63.3)
-------------------------------------------------------------------------
Gross profit 204.8 22.7 209.0 21.2
Less: Cash operating and
administration costs (154.9) (17.1) (151.5) (15.3)
-------------------------------------------------------------------------
EBITDA from operations 49.9 5.6 57.5 5.9
Propane retail volumes sold
(millions of litres) 904 987
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Effective January 1, 2007, Superior discontinued hedge accounting for
all economic hedging activities, as such, amounts related to these
contracts must be accounted for separately on Superior's financial
statements (see Notes 9 and 13 to the unaudited Interim Consolidated
Financial Statements). In order to better reflect the results of its
operations, Superior has reclassified these amounts for purposes of
this management's discussion and analysis to present its results as
if it had accounted for these transactions as accounting hedges. As
such, included in revenue for the three and nine months ended
September 30, 2009 is $0.1 million and $1.0 million in realized
foreign currency forward contract losses, and included in revenue for
the three and nine months ended September 30, 2008 is $0.2 million
and ($0.4) million in realized foreign currency forward contract
gains (losses).
(2) For the three and nine months ended September 30, 2009 for purposes
of the management's discussion and analysis, Superior has
reclassified $0.1 million and $nil, of foreign currency translation
gains related to US-denominated working capital from operating and
administrative expense to revenue and for the three and nine months
ended September 30, 2008 has reclassified $nil and $0.6 million of
foreign currency translation losses related to US-denominated working
capital from operating and administrative expense to revenue.
Reclassification of the translation gains or losses provides improved
matching to the income statement recognition of the underlying
working capital item that resulted in the translation gains or
losses.
>>
Revenues for the third quarter of 2009 were $147.6 million, a decrease of $89.0 million from revenues of $236.6 million in 2008. The decrease in revenues was due to lower retail propane sales volumes, combined with a lower average retail selling price of propane as a result of a reduction in the wholesale cost of propane. Total gross profit for the third quarter of 2009 was $49.6 million, a decrease of $5.7 million or 10% over the prior year quarter. Total gross profit per litre for the third quarter of 2009 was 22.1 cents per litre, a decrease of 0.6 cents per litre or 3% compared to the prior year quarter. A summary and detailed review of gross profit by segment is provided below.
<<
Gross Profit by Segment
-------------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
(millions of dollars) 2009 2008 2009 2008
-------------------------------------------------------------------------
Retail propane and delivery 44.7 48.4 171.1 180.1
Other services 4.6 4.4 15.2 14.8
Wholesale and related 0.3 2.5 18.5 14.1
-------------------------------------------------------------------------
Total gross profit 49.6 55.3 204.8 209.0
-------------------------------------------------------------------------
-------------------------------------------------------------------------
>>
Retail propane and delivery gross profit for the third quarter was $44.7 million, a decrease of $3.7 million or 8% from the prior year quarter, due principally to a 20 million litre or 8% reduction in sales volumes, offset in party by a modestly higher average retail and delivery sales margins. Residential and commercial volumes decreased by 4 million litres or 6% and were negatively impacted by a weaker overall economic environment throughout most of Canada and the ongoing impact of the customer conservation trend which began in 2008. Superior Propane's ongoing marketing efforts have been successful in acquiring new customers, partially offsetting the impact of reduced volumes due to the weaker economic environment. Average weather, as measured by degree days, for the third quarter was 6% warmer than the prior year and 10% warmer than the five year average, negatively impacting heating related volumes. However, heating related volumes in the second and third quarters are generally not materially impacted by average weather due to the seasonality of Superior Propane's operations. Industrial volumes decreased by 12 million litres or 9%, due principally to the impact of a weaker economic environment as noted above. In particular, volumes were negatively impacted by customer cutbacks and closures in the manufacturing and mining sectors, throughout Eastern Canada and the Prairies in addition to the impact of reduced activity levels in the oil and gas sector. Automotive propane volumes declined by 3 million litres or 9%, which was modestly below the historical decline trend in this end-use market due to a favourable pricing differential between retail propane and retail gas. Superior Propane continued to actively manage sales margins in the third quarter, resulting in an average retail propane and delivery sales margin of 19.9 cents per litre, which was consistent with the prior year quarter average margin of 19.8 cents per litre. Average margins compared to the prior year quarter were positively impacted by margin management initiatives, offset by the impact of competitive pressures.
Other services gross profit was $4.6 million in the third quarter, an increase of $0.2 million over the prior year quarter as increased rental gross profits more than offset weaker demand for service and installations. Wholesale and related gross profits were $0.3 million in the third quarter, a decrease of $2.2 million compared to the prior year quarter due to lower gross profits within the wholesale trading business as a result of weaker trading conditions during the quarter in addition to the timing of the recognition of gross profits compared to the prior year quarter. On an annualized basis, Superior Propane anticipates that wholesale trading gross profits will be higher than the prior year assuming normal volatility in the wholesale cost of propane for the remainder of 2009.
<<
Superior Propane Annual Sales Volumes:
Volumes by End-Use Application(1) Volumes by Region(1)(2)
-------------------------------------------------------------------------
Three months ended Three months ended
September 30, September 30,
2009 2008 2009 2008
--------------------------------- -------------------------------------
Residential 18 19 Western Canada 115 134
Commercial 40 43 Eastern Canada 90 92
Agricultural 8 9 Atlantic Canada 19 18
Industrial 127 139
Automotive 31 34
--------------------------------- -------------------------------------
224 244 224 244
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Volumes by End-Use Application(1) Volumes by Region(1)(2)
-------------------------------------------------------------------------
Nine months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
--------------------------------- -------------------------------------
Residential 103 109 Western Canada 494 550
Commercial 203 214 Eastern Canada 338 366
Agricultural 39 44 Atlantic Canada 72 71
Industrial 478 529
Automotive 81 91
--------------------------------- -------------------------------------
904 987 904 987
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Volume: Volume of retail propane sold (millions of litres).
(2) Regions: Western Canada region consists of British Columbia, Alberta,
Saskatchewan, Manitoba, Northwest Ontario, Yukon and Northwest
Territories; Eastern Canada region consists of Ontario (except for
Northwest Ontario) and Quebec.
>>
Cash operating and administrative costs of $49.3 million increased by $0.7 million or 1% from the prior year quarter due to increased equipment and truck maintenance and telecommunications costs, offset by lower wages and benefits and fuel costs. Superior Propane continues to actively manage expenses, particularly wages and benefits in response to fluctuations in volumes.
Acquisition of Heating Oil Assets
On September 30, 2009, Superior acquired certain assets which make up a US retail heating oil and propane distribution business (heating oil assets) from Sunoco, Inc. (R&M), and Sunoco, Inc. both Pennsylvania corporations, for an aggregate purchase price of $96.1 million (US$89.6 million), inclusive of transaction related costs. The heating oil assets distribute a broad range of liquid fuels and propane gas and related services, serving markets in Pennsylvania and New York. As the heating oil assets were acquired on September 30, 2009, there is no contribution to Superior's third quarter results.
Outlook
Fuel Distribution
Superior expects fuel distribution's EBITDA from operations, inclusive of the contribution from the heating oils assets, for 2009 to be between $95 million and $105 million. The outlook provided in the second quarter 2009 Management's Discussion and Analysis of $95 million to $105 million was that of Superior Propane, whereas the current outlook includes the impact of the acquisition of the heating oil assets. The current outlook reflects a reduction in contribution from Superior Propane, offset by the contribution from the heating oil assets. Significant assumptions underlying the current outlook are:
<<
- Superior forecasts average temperatures across Canada and the North
Eastern United States to be consistent with the most recent five-year
average;
- Total propane sales volumes compared to the prior year are expected
to decline due to a continued slowdown in economic activity resulting
in reduced demand for propane and related services;
- Commercial and industrial propane volumes are anticipated to improve
in the last quarter of 2009 relative to the first three quarters of
2009 due to customer sales initiatives and a modestly improved
outlook for the general economy;
- Total heating oil sales volumes will be consistent with Superior's
acquisition assumptions;
- Superior expects that wholesale propane and heating oil prices will
not significantly impact demand for propane and heating oil and
related services;
- Total gross profit for Superior Propane compared to the prior year is
anticipated to decrease due to reduced economic activity and
resulting demand; and
- Wholesale trading gross profits will be higher than in 2008 assuming
normal volatility in the wholesale cost of propane for the remainder
of 2009.
>>
Effective with the fourth quarter of 2009, Superior anticipates that it will no longer provide individual reporting and outlook's for its propane distribution, heating oil distribution and fixed-price energy services (SEM) businesses, rather it will report actual results and outlook's on a grouped basis which may be referred to as Energy Services. Superior's 2009 outlook for its Energy Services business, as defined above, based on the individual businesses outlook's provided in this management's discussion and analysis would be between $104 and $117 million.
In addition to the significant assumptions detailed above, refer to the section "Risk Factors to Superior" for a detailed review of significant business risks affecting Superior's propane and heating oil businesses.
Specialty Chemicals
ERCO Worldwide generated EBITDA from operations in the third quarter of $22.1 million, a decrease of $9.8 million or 31% from the prior year quarter due to lower gross profits, offset by lower operating expenditures.
Condensed operating results for the three and nine months ended September 30, 2009 and 2008 are provided in the following table.
<<
-------------------------------------------------------------------------
(millions of dollars except Three months ended September 30,
per metric tonne (MT) amounts) 2009 2008
-------------------------------------------------------------------------
Revenue $ per MT $ per MT
Chemical(1)(3) 112.8 692 122.1 649
Technology 1.6 10 1.6 9
Cost of Sales
Chemical(1)(2) (64.0) (393) (61.2) (326)
Technology (0.4) (2) (0.6) (3)
-------------------------------------------------------------------------
Gross Profit 50.0 307 61.9 329
Less: Cash operating and
administrative costs(3) (27.9) (171) (30.0) (160)
-------------------------------------------------------------------------
EBITDA from operations 22.1 136 31.9 169
Chemical volumes sold
(thousands of MTs) 163 188
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(millions of dollars except Nine months ended September 30,
per metric tonne (MT) amounts) 2009 2008
-------------------------------------------------------------------------
Revenue $ per MT $ per MT
Chemical(1)(3) 343.4 726 344.6 608
Technology 6.8 14 9.9 17
Cost of Sales
Chemical(1)(2) (183.9) (389) (180.2) (318)
Technology (2.6) (5) (5.5) (9)
-------------------------------------------------------------------------
Gross Profit 163.7 346 168.8 298
Less: Cash operating and
administrative costs(3) (89.3) (189) (85.2) (150)
-------------------------------------------------------------------------
EBITDA from operations 74.4 157 83.6 148
Chemical volumes sold
(thousands of MTs) 473 567
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Effective January 1, 2007, Superior discontinued hedge accounting for
all economic hedging activities. As such, amounts related to these
contracts must be accounted for separately on Superior's financial
statements (see Notes 9 and 13 to the unaudited Interim Consolidated
Financial Statements). In order to better reflect the results of its
operations, Superior has reclassified these amounts for purposes of
this management's discussion analysis to present its results as if it
had accounted for these transactions as accounting hedges. As such,
included in revenue for the three and nine months ended September 30,
2009 is $0.5 million and $7.3 million in realized foreign currency
forward contract losses and included in chemical cost of sales and
for the three and nine months ended September 30, 2009 is
$0.3 million and $0.4 million in realized fixed-price electricity
gains. Included in revenue for the three and nine months ended
September 30, 2008 is $1.5 million and $6.3 million in realized
foreign currency forward contract gains and included in chemical cost
of sales for the three and nine months ended September 30, 2008 is
$5.4 million and $17.2 million in realized fixed-price electricity
gains.
(2) Effective January 1, 2008, Superior adopted a revised CICA Handbook
section related to Inventory. This section impacts the calculation of
the cost of inventory at ERCO Worldwide, due to the requirement to
inventory the cost of certain fixed overhead items, principally the
amortization of property, plant and equipment. Additionally, this
section requires that the amortization that is inventoried be
classified as a component of cost of products sold once sold. As
such, for the three and nine months ended September 30, 2009, for
purposes of the management's discussion and analysis, Superior has
excluded $9.1 million and $27.3 million in non-cash amortization from
cost of sales in the calculation of ERCO Worldwide's EBITDA from
operations and for the three and nine months ended September 30,
2008, Superior has excluded $9.1 million and $28.8 million.
(3) For the three and nine months ended September 30, 2009 for purposes
of the management's discussion and For full details for SUUIF click here.
More News:
Market Updates |
Stock Alerts |
All Trading News |
Stock Index
Email
Print
Archives
Feedback
Email Article Link
Close X
About TradingMarkets | Contact | Advertise | Careers | Link to Us | Site Map | Help | Terms & Conditions | Privacy Policy | Return Policy | Testimonials | Feedback
The Connors Group, Inc. ("Company") is not an investment advisory service, nor a registered investment advisor or broker-dealer and does not purport to tell or suggest which securities or currencies customers should buy or sell for themselves. The analysts and employees or affiliates of Company may hold positions in the stocks, currencies or industries discussed here. You understand and acknowledge that there is a very high degree of risk involved in trading securities and/or currencies. The Company, the authors, the publisher, and all affiliates of Company assume no responsibility or liability for your trading and investment results. Factual statements on the Company's website, or in its publications, are made as of the date stated and are subject to change without notice.
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results of any individual trader or trading system published by Company are not indicative of future returns by that trader or system, and are not indicative of future returns which be realized by you. In addition, the indicators, strategies, columns, articles and all other features of Company's products (collectively, the "Information") are provided for informational and educational purposes only and should not be construed as investment advice. Examples presented on Company's website are for educational purposes only. Such set-ups are not solicitations of any order to buy or sell. Accordingly, you should not rely solely on the Information in making any investment. Rather, you should use the Information only as a starting point for doing additional independent research in order to allow you to form your own opinion regarding investments. You should always check with your licensed financial advisor and tax advisor to determine the suitability of any investment.
HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING AND MAY NOT BE IMPACTED BY BROKERAGE AND OTHER SLIPPAGE FEES. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.
The Connors Group, Inc.
10 Exchange Place, Suite 1800
Jersey City, NJ 07302
© Copyright 2009 The Connors Group, Inc.