Superior Plus Corp. Announces 2014 Third Quarter Results, 2014 and 2015 Financial Outlooks and a 20% Dividend Increase
(firmenpresse) - CALGARY, ALBERTA -- (Marketwired) -- 10/30/14 -- Superior Plus Corp. (TSX: SPB) -
Highlights
Third Quarter Financial Summary
Year-to-Date Adjustment Details
During the third quarter of 2014, Superior recognized $10.2 million or $0.08 per share in adjustments related to its supply portfolio management business and its U.S. refined fuels business. The adjustment in the supply portfolio management business was primarily the result of the over accrual of freight charges during the fourth quarter of 2013 and throughout the first and second quarters of 2014. Recognizing this adjustment in 2014 positively impacts Superior''s 2014 year-to-date financial results by $18.0 million as prior period results were previously understated. The adjustment in the U.S. refined fuels business was due to inaccurate inventory costing in prior periods as a result of not appropriately recognizing book to physical inventory adjustments. Recognizing this adjustment in 2014 negatively impacts Superior''s 2014 year-to-date financial results by $7.8 million as prior period results were previously overstated.
Recognition and Disclosure
Superior has recognized an adjustment, as detailed below, of $10.2 million in its year-to-date 2014 results within the Energy Services business. Superior will reclassify its 2014 first and second quarters on a comparative basis when it reports its 2015 financial results to report the adjustments in the period they related to. A summary of Superior''s 2014 first and second quarter results and the impact of the adjustments are detailed below. The net impact to Superior''s prior period financial results is an understatement of previously reported AOCF and net earnings of $0.3 million. Due to the immaterial nature of the net adjustment related to prior periods, Superior will not be adjusting its 2013 financial results on a comparative basis.
Both adjustments were discovered by management and were the result of deficiencies in the performance and application of existing controls and were not a design of internal controls issue. Superior has taken all necessary steps to ensure that the issues that resulted in the adjustments have been fully rectified. Superior has assessed its control environment from both an application and design perspective and has determined that the control environment is now currently functioning appropriately. Testing will be carried out as part of our year-end internal controls certification to ensure the controls are operating effectively.
A summary of the adjustments recognized in the 2014 year-to-date results, including the impact of the first and second quarters of 2014 is as follows:
Energy Services
Specialty Chemicals
Construction Products Distribution
Corporate Related
CRA Income Tax Update
As previously disclosed, on April 2, 2013 Superior received from the CRA Notices of Reassessment for Superior''s 2009 and 2010 taxation years reflecting the CRA''s intent to challenge the tax consequences of Superior''s corporate conversion transaction (Conversion) which occurred on December 31, 2008. The CRA''s position is based on the acquisition of control rules, in addition to the general anti-avoidance rules in the Income Tax Act (Canada).
The table below summarizes Superior''s estimated tax liabilities and payment requirements associated with the received and anticipated Notices of Reassessment. Upon receipt of the Notices of Reassessment, 50% of the taxes payable pursuant to such Notices of Reassessment, must be remitted to the CRA.
On May 8, 2013 Superior filed a Notice of Objection and a Notice of Appeal with respect to the Notice of Reassessments received on April 2, 2013. Superior anticipates that if the case proceeds in the Tax Court of Canada, the case could be heard in late 2015, with a decision rendered six to twelve months after completion of the court hearings are concluded. If a decision of the Tax Court of Canada were to be appealed, the appeal process could reasonably be expected to take an additional 2 years. If Superior receives a positive decision then any taxes, interest and penalties paid to the CRA will be refunded plus interest and if Superior is unsuccessful then any remaining taxes payable plus interest and penalties will have to be remitted.
Superior remains confident in the appropriateness of its tax filing position and the expected tax consequences of the Conversion and intends to vigorously defend such position and intends to file its future tax returns on a basis consistent with its view of the outcome of the Conversion.
Interim tax payments made by Superior will be recorded to the balance sheet and will not materially impact either adjusted operating cash flow or net earnings.
Based on the midpoint of Superior''s 2014 and 2015 financial outlooks of AOCF per share of $1.85 and $1.95, if the tax pools from the Conversion were not available to Superior, the impact would be an increase to cash income taxes of approximately $20.0 million or $0.15 per share for both 2014 and 2015. As previously stated, Superior intends to file its future income tax returns on a basis consistent with its view of the outcome of the Conversion.
2014 and 2015 Financial Outlook
Superior''s 2014 financial outlook of AOCF per share has been adjusted to $1.75 to $1.95 before restructuring costs compared to the financial outlook provided at the second quarter of 2014 of $1.65 to $1.95 before restructuring costs. The increase to the bottom end of the 2014 financial outlook is due to the recognition of $0.08 per share year-to-date adjustment as previously discussed. The improvement in results at Superior''s supply portfolio management recognized as part of the adjustment is a direct result of Superior''s procurement initiatives within the Energy Services business combined with the benefit of market opportunities that were present as a result of the adverse weather and supply conditions experienced in the first quarter of 2014. Superior anticipates that the impact of the procurement initiatives will continue into the future. Using the midpoint of Superior''s 2014 financial outlook, Superior is now anticipating a growth rate of approximately 10% in 2014 compared to the previously provided range of 5% to 7% for 2013. Superior''s 2014 financial outlook is stated before the impact of one-time restructuring costs.
Superior is introducing its 2015 financial outlook of AOCF per share of $1.80 to $2.10, a 5% increase compared to the 2014 financial outlook using the midpoint of the respective financial outlooks. The increase in the financial outlook for 2015 of 5% compared to 2014 is lower than the previously provided range of 9% to 12% due primarily to the increase in the 2014 financial outlook as noted above. As previously noted in the individual business financial outlook sections, the 2015 financial outlook assumes that the Energy Services and CPD results will be higher in 2015 than in 2014 and that the Specialty Chemicals results in 2015 will be consistent to modestly higher than 2014.
For additional details on the assumptions underlying the 2014 and 2105 financial outlook, see Superior''s 2014 third quarter MD&A.
Debt Management Update
Superior remains focused on managing both its total debt and its total debt to EBITDA. Superior''s forecasted total debt to EBITDA ratio before restructuring costs at December 31, 2014 is 3.6X to 4.0X, consistent with the forecast provide by Superior in the fourth quarter of 2013. Superior anticipates being at the lower end of this total debt to EBITDA range as at December 31, 2014.
Superior is currently forecasting a total debt to EBITDA ratio at December 31, 2015 of 3.0X to 3.4X which would bring Superior into its targeted leverage range of 3.0X to 3.5X. Superior''s anticipated debt repayment for 2015 and total debt to EBITDA leverage ratio as at December 31, 2015, based on Superior''s 2015 financial outlook is detailed in the chart below.
Superior''s total debt (including convertible debentures) to Compliance EBITDA before restructuring costs was 3.6X as at September 30, 2014 (3.9X after restructuring costs), lower than the 3.9X as at December 31, 2013. Debt levels and total leverage as at September 30, 2014 were lower than December 31, 2013 levels due to reduced working capital levels in the Energy Services business due to seasonality of sales volumes and inventory levels and the impact of higher EBITDA. Superior continues to focus on reducing its total leverage through ongoing debt reduction, including reducing working capital requirements and improving business operations.
2014 Detailed Third Quarter Results
Superior''s 2014 Third Quarter Management''s Discussion and Analysis is attached and is also available on Superior''s website at under the Investor Relations section.
2014 Third Quarter Conference Call
Superior will be conducting a conference call and webcast for investors, analysts, brokers and media representatives to discuss the 2014 Third Quarter Results at 8:30 a.m. MST on Friday, October 31, 2014. To participate in the call, dial:1-800-952-4972. An archived recording of the call will be available for replay until midnight, December 1, 2014. To access the recording, dial: 1-800-408-3053 and enter pass code 7012290 followed by the # key. Internet users can listen to the call live, or as an archived call, on Superior''s website at .
Supplemental Financial Information
Diluted AOCF Per Share
There are no dilutive instruments for the three months ended September 30, 2014 and 2013. For the nine months ended September 30, 2014, the dilutive impact of the 7.50%, October 31, 2016 convertible debentures was 6.6 million shares (132.8 million total shares on a dilutive basis) with a resulting impact on AOCF before restructuring costs of $4.2 million ($157.1 million total on a dilutive basis) and on AOCF of $4.2 million ($146.0 million total on a dilutive basis). For the nine months ended September 30, 2013 there were no dilutive instruments.
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", "could", "estimate", "expect", "plan", "intend", "forecast", "future", "guidance", "may", "predict", "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 EBITDA from operations, expected adjusted operating cash flow (AOCF) and adjusted operating cash flow per share, expected leverage ratios and debt repayment, debt management summary, expectations in terms of the cost of operations, capital spend and maintenance and the variability of these costs, timing, costs and benefits of restructuring activities, business strategy and objectives, development plans and programs, business expansion and improvement projects, expected timing of commercial production and the costs and benefits associated therewith, market conditions in Canada and the U.S., expected tax consequences of the Conversion, the challenge by the CRA of the tax consequences of the Conversion (and the expected timing and impact of such process including any payment of taxes and the quantum of such payments), appointment and election of directors, future income taxes, the impact of proposed changes to Canadian tax legislation or U.S. tax legislation, future economic conditions, future exchange rates and exposure to such rates, dividend strategy, payout ratio, expected weather, expectations in respect to the global economic environment, our trading strategy and the risk involved in these strategies, the impact of certain hedges on future reported earnings and cash flows, commodity prices and costs, the impact of contracts for commodities, demand for propane, heating oil and similar products, demand for chemicals including sodium chlorate and chloralkali, effect of operational and technological improvements, anticipated costs and benefits of restructuring activities, business enterprise system upgrade plans, future working capital levels, expected governmental regulatory regimes and legislation and their expected impact on regulatory and legislative compliance costs, expectations for the outcome of existing or potential legal and contractual claims, 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 Plus 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, availability and utilization of tax basis, regulatory developments, currency, exchange and interest rates, trading data, cost estimates, our ability to obtain financing on acceptable terms, the assumptions set forth under the "Financial Outlook" sections of our first quarter management''s discussion and analysis ("MD&A") and are 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, 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 .
Management''s Discussion and Analysis of 2014 Third Quarter Results
October 30, 2014
The following Management Discussion & Analysis (MD&A) is a review of the financial performance and position of Superior Plus Corp. (Superior) as at and for the three and nine months ended September 30, 2014 and 2013. The information in this MD&A is current to October 30, 2014. This MD&A should be read in conjunction with Superior''s audited consolidated financial statements and notes to those statements as at and for the twelve months ended December 31, 2013 and its December 31, 2013 MD&A. Additional information regarding Superior, including the Annual Information Form, is available on SEDAR at , and on Superior''s website, .
The accompanying unaudited condensed consolidated financial statements of Superior were prepared by and are the responsibility of Superior''s management. Superior''s unaudited condensed consolidated financial statements were prepared in accordance with International Accounting Standard 34 Interim Financial Reporting as issued by the International Accounting Standards Board (IASB). Dollar amounts in this MD&A are expressed in Canadian dollars and millions except where otherwise noted.
Overview of Superior
Superior is a diversified business corporation. Superior holds 99.9% of Superior Plus LP (Superior LP), a limited partnership formed between Superior General Partner Inc. (Superior GP) as general partner and Superior as limited partner. Superior owns 100% of the shares of Superior GP and Superior GP holds 0.1% of Superior LP. 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 and Superior GP, has three operating segments: the Energy Services segment, which includes a Canadian propane distribution business, a U.S. refined fuels distribution business, a fixed-price energy services business and a supply portfolio management business; the Specialty Chemicals segment; and the Construction Products Distribution segment.
Third quarter Results
Third quarter adjusted operating cash flow and adjusted operating cash flow before restructuring costs was $22.7 million, a decrease of $1.7 million or 7% from the prior year quarter adjusted operating cash flow (before restructuring costs of $0.2 million). The decrease in adjusted operating cash flow was primarily due to lower operating results at Energy Services and higher corporate costs offset in part by higher operating results at Specialty Chemicals and lower interest costs. Adjusted operating cash flow of $0.18 per share is consistent with the prior year quarter of $0.19 per share.
Adjusted operating cash flow (before restructuring costs of $11.1 million) for the nine months ended September 30, 2014 was $152.9 million, an increase of $15.5 million or 11% from the prior year. The increase in adjusted operating cash flow was primarily due to higher operating results at Energy Services and lower interest costs, partially offset by higher corporate costs. Adjusted operating cash flow (before restructuring costs) of $1.21 per share, increased by $0.09 per share from the prior year due to the increase in adjusted operating cash flow as noted above offset in part by an 3% increase in the weighted average number of shares outstanding. The weighted average number of shares outstanding increased as a result of shares issued from Superior''s Dividend Reinvestment Program and Optional Share Purchase Plan (DRIP) and the completion of a 13.0 million shares equity offering on March 27, 2013 for gross proceeds of $143.9 million.
Year-to-Date Adjustment Details
During the third quarter of 2014 Superior recognized $10.2 million or $0.08 per share in adjustments related to its supply portfolio management business and its U.S. refined fuels business. The adjustment in the supply portfolio management business was primarily the result of the over accrual of freight charges during the fourth quarter of 2013 and throughout the first and second quarters of 2014. Recognizing this adjustment in 2014 positively impacts Superior''s 2014 year-to-date financial results by $18.0 million as prior period results were previously understated. The adjustment in the U.S. refined fuels business was due to inaccurate inventory costing in prior periods as a result of not appropriately recognizing book to physical inventory adjustments. Recognizing this adjustment in 2014 negatively impacts Superior''s 2014 year-to-date financial results by $7.8 million as prior period results were previously overstated.
Recognition and Disclosure
Superior has recognized an adjustment, as detailed below, of $10.2 million in its year-to-date 2014 results within the Energy Services business. Superior will reclassify its 2014 first and second quarters on a comparative basis when it reports its 2015 financial results to report the adjustments in the period they related to. A summary of Superior''s 2014 first and second quarter results and the impact of the adjustments are detailed below. The net impact to Superior''s prior period financial results is an understatement of previously reported AOCF and net earnings of $0.3 million. Due to the immaterial nature of the net adjustment related to prior periods, Superior will not be adjusting its 2013 financial results on a comparative basis.
Both adjustments were discovered by management and were the result of deficiencies in the performance and application of existing controls and were not a design of internal controls issue. Superior has taken all necessary steps to ensure that the issues that resulted in the adjustments have been fully rectified. Superior has assessed its control environment from both an application and design perspective and has determined that the control environment is now currently functioning appropriately. Testing will be carried out as part of our year-end internal controls certification to ensure the controls are operating effectively.
A summary of the adjustments recognized in the 2014 year-to-date results including the impact of the first and second quarters of 2014 is as follows:
Strategic Review
During the second quarter, Superior''s Board of Directors approved the commencement of a formal process to solicit offers for the potential divestiture of Construction Products Distribution and Fixed-price energy services. Superior had retained two separate financial advisors in order to assist with the processes. On October 6, 2014, Superior announced that it had completed the strategic review of its Construction Products Distribution business. As a result of the review, Superior has determined that it is not in the shareholders'' best interests to proceed with a sale of Construction Products Distribution at the current time. Due to the termination of the sales process Superior recognized $2.5 million of related costs in the current quarter. Superior is proceeding with its Construction Products Distribution business initiatives related to supply chain, IT integration, and a move of the corporate office to Dallas, Texas. Superior has also concluded it is not currently in the shareholders'' best interests to proceed with a sale of the Fixed-price energy services at the current time.
Third quarter 2014 compared to third quarter 2013
The net loss for the third quarter was $42.4 million, compared to net earnings of $35.9 million in the prior year quarter. Net earnings were lower due to unrealized losses on derivative financial instruments and higher operating costs offset in part by increased revenues and lower interest costs.
Unrealized losses on derivative financial instrument were recorded in the quarter compared to unrealized gains in the prior year quarter due to the appreciation of the U.S. dollar which decreased the value of Superior''s foreign currency forward contracts whereas the U.S. dollar depreciated in the prior year quarter. Operating expenses of $177.8 million in the third quarter were $10.1 million higher than in the prior year quarter primarily due to costs incurred related to the strategic review of Construction Products Distribution, the impact of a weaker Canadian dollar on the translation of U.S. dollar denominated expenses, and an increase in bad debt expense based on aging of receivables at Canadian Propane Distribution.
Revenue of $841.4 million was $27.6 million higher than in the prior year quarter due to increased Construction Products Distribution revenue as a result of improved U.S. sales volumes, and increased Specialty Chemicals revenue due to contribution from the strategic supply agreement with Tronox which was executed during the fourth quarter of 2013. Gross profit of $188.4 million was $3.5 million higher than in the prior year quarter primarily due to increased Construction Products Distribution gross profits as a result of higher sales volumes and revenue. Interest costs were lower than the prior year quarter due to reduced average debt levels and interest rates.
Nine months ended September 30, 2014 compared to nine months ended September 30, 2014
The net earnings for the nine months ended September 30, 2014 were $13.6 million, compared to net earnings of $41.8 million in the prior year. Net earnings decreased due to higher operating expenses, higher unrealized losses on derivative financial instruments, and higher income tax expense offset in part by higher revenues and lower interest costs.
Revenue of $3,019.1 million was $301.0 million higher than in the prior year due to increased Energy Services revenue as a result of higher commodity prices and sales volumes during the first quarter, increased Specialty Chemicals revenue due to contribution from the strategic supply agreement which was executed during the fourth quarter of 2013, and increased Construction Products Distribution revenue related to improved sales volumes and revenues in the U.S. Gross profit of $674.6 million was $46.6 million higher than in the prior year primarily due to increased Energy Services gross profits as a result of higher volumes and gross margins, increased Specialty Chemicals gross profits as a result of higher sales volumes and revenue, and Construction Products Distribution gross profit as a result of higher sales volumes and execution of strategic pricing and supply chain management initiatives. Interest costs were lower due to reduced average debt levels.
Operating expenses of $561.9 million were $44.8 million higher than the prior year primarily due to increased operating expenses associated with higher sales volumes at Energy Services, increased operating expenses at Specialty Chemicals due to the Tronox strategic supply agreement, the impact of a weaker Canadian dollar on the translation of U.S. dollar denominated expenses and increased operating expenses at Construction Products Distribution related to improved sales volumes. The increase in unrealized losses on derivative financial instruments was due to impact of the appreciation of the U.S. dollar on Superior''s foreign currency forward contracts. Total income tax expense was $17.8 million compared to income tax expense of $12.9 million in the prior year. The increase in income tax expense was due to higher net earnings as well as an increase in statutory rates in Canada and Chile during the first nine months of 2014.
Energy Services
Energy Services'' condensed operating results for 2014 and 2013:
Revenues for the third quarter of 2014 were $454.4 million consistent with prior year quarter revenues of $459.0 million. Total gross profit for the third quarter of 2014 was $83.2 million consistent with the prior year quarter of $83.6 million. Higher gross profits at Canadian propane distribution and U.S. refined fuels due to improved unit margins were offset by lower gross profits at Supply portfolio management and Fixed-price energy services. A summary and detailed review of gross profit is provided below.
Gross Profit Detail
Canadian Propane Distribution
Canadian propane distribution gross profit for the third quarter was $49.9 million, an increase of $2.3 million or 5% from 2013, due to improved unit margins. Residential and commercial sales volumes increased by 4 million litres or 8% from the prior year quarter due to modestly higher demand from the commercial segment as a result of customer retention and sales efforts. Average weather across Canada for the third quarter, as measured by degree days, was 3% colder than the prior year and consistent with the five-year average. However, heating related volumes in the second and third quarters are generally not materially impacted by average weather due to the seasonality of Canadian propane distribution operations. Industrial volumes decreased by 8 million litres or 5% due to lower oilfield demand due to the gasification of some customer sites and the shutdown of lower performing sites. In addition, due to the high pricing environment and increased propane demand experienced in the first quarter of 2014, customers across all lines of business deferred taking deliveries in the third quarter of 2014 due to conservation efforts in light of the high energy spend throughout the most recent winter heating season. Automotive propane sales volumes were consistent with the prior year quarter.
Average propane sales margins for the third quarter decreased slightly to 21.7 cents per litre from 20.5 cents per litre in the prior year quarter. The modest increase is principally due to improved sales mix.
U.S. Refined Fuels Distribution
U.S. refined fuels distribution gross profit for the third quarter was $19.0 million, an increase of $2.2 million or 13% from the prior year quarter. The increase in gross profit was due to higher gross margins and higher sales volumes. Sales volumes of 335 million litres were 9 million litres higher or 3% from the prior year quarter. The increase was primarily due to growth in the propane customer base and retail propane and commercial fuels volume contribution from the Townsend acquisition completed in the fourth quarter of 2014. Average weather as measured by heating degree days for the third quarter was consistent with the prior year quarter and the 5-year average. Heating volumes in the second and third quarters are generally not materially impacted by average weather due to the seasonality of U.S. refined fuels distribution operations. Average U.S. refined fuels sales margins of 5.7 cents per litre modestly increased from 5.2 cents per litre in the prior year quarter. Sales margins were positively impacted by a favourable sales mix due to a higher proportion of higher-margin sales volumes, implementation of a new propane delivery charge and favourable foreign exchange translation contribution.
Other Services
Other services gross profit was $9.4 million in the third quarter, a decrease of $0.6 million from the prior year quarter due to the impact of reducing Superior''s service offering as part of the 2013/2014 restructuring plan.
Supply Portfolio Management
Supply portfolio management gross profits were $1.4 million in the third quarter, a decrease of $3.0 million from the prior year quarter as market conditions were not as favourable compared to the prior year quarter.
Fixed-Price Energy Services
Fixed-Price Energy Services Gross Profit
Fixed-price energy services gross profit was $3.5 million in the third quarter, a decrease of $1.3 million or 27% from prior year quarter. Natural gas gross profit was $2.6 million, a decrease of $0.8 million from the prior year quarter due to lower gross margins and sales volumes. Natural gas gross profit per unit was 63.4 cents per gigajoule (GJ), a decrease of 8.9 cents per GJ or 12% from the prior year quarter due to further reduction of the residential customer base. Sales volumes of natural gas were 4.1 million GJ, a decrease of 0.6 million GJ or 13% from the prior year quarter due to lower customer demand. Electricity gross profit in the third quarter of 2014 was $0.9 million, a decrease of $0.5 million or 36% from the prior year quarter primarily due to lower sales volumes in Canada to wholesale customers and lower sales in the U.S. due to the sale of the U.S. customer base on May 1, 2014.
Operating Costs
Cash operating and administrative costs were $78.4 million in the third quarter of 2014, an increase of $3.3 million or 4% from the prior year quarter. The increase in expenses was primarily due to the impact of a weaker Canadian dollar on the translation of U.S. denominated operating expenses and higher bad debt expense related to an increase in accounts receivable aging at Canadian Propane Distribution related to the first quarter commodity prices and heating demand.
Fixed-Price Energy Service Asset Sale and Strategic Alternatives
On May 1, 2014, Superior closed the sale of its U.S. based residential and commercial electricity customer base to Crius Energy. Superior has decided to exit both the residential and commercial Northeast U.S. based electricity markets in order to focus on the Canadian market and reduce the risk of future losses associated with volatility in electricity prices. Superior received proceeds of $3.1 million upon close of the sale on May 1, 2014 and $0.6 million of deferred consideration was received on June 27, 2014 as certain conditions were satisfied. Another $0.5 million in deferred consideration is contingent upon on the number of flowing customers still active with Crius in January 2015.
In the second quarter, Superior commenced an assessment of the strategic alternatives for its Fixed-price energy services segment and retained a financial advisor. As a result of the review, Superior''s Board authorized the commencement of a formal process to solicit and assess offers for the potential divestiture of the Fixed-Price Energy Services segment. During the third quarter Superior has decided it is not in the shareholders'' best interests to divest the Fixed-price energy services segment.
Financial Outlook
EBITDA from operations for 2014 is anticipated to be higher than in 2013 due to improved results at the Canadian propane and U.S. refined fuels businesses. Improvement in EBITDA is anticipated as a result of modestly higher sales volumes and improved average sales margins due to the ongoing implementation of business initiatives. EBITDA from the wholesale supply business is anticipated to be higher than in 2013 due to year-to-date results, whereas EBITDA from the fixed-price business is anticipated to be lower than 2013 due to 2014 year-to-date results.
Operating costs as a percentage of gross profits are anticipated to be modestly lower than the prior year due to improvements from business initiatives offset in part by costs associated with difficult operating conditions throughout the first quarter of 2014. Average weather, as measured by degree days, for the fourth quarter of 2014 is anticipated to be consistent with the 5-year average period. Operating conditions for the remainder 2014 are anticipated to be similar to 2013.
EBITDA from operations for 2015 is anticipated to be higher than in 2014 due to improved results at the Canadian propane and U.S. refined fuels businesses due to the same reasons as noted above for the increase in 2014 compared to 2013. EBITDA from the wholesale supply business and the fixed-price energy services business are anticipated to be consistent with 2014. Operating costs as a percentage of gross profits are anticipated to continue to improve in 2015 due to a full year run rate of business initiatives and The Superior Way project. Average weather, as measured by degree days, for 2015 is anticipated to be consistent with the 5-year average period. Operating conditions for 2015 are anticipated to be similar to 2014 with the exception of the adverse weather conditions experienced during the first quarter of 2014.
Initiatives to improve results in the Energy Services business continued during the first nine months of 2014 in conjunction with Superior''s Destination 2015 initiative and Superior''s goal for each of its businesses to become best-in-class. Business improvement projects for 2014 include: a) improving customer service, b) improving overall logistics and procurement functions, c) enhancing the management of margins, d) working capital management e) improving existing and implementing new technologies to facilitate improvements to the business, f) headcount reductions and g) execution of the detailed restructuring plan.
The restructuring plan for the Canadian Propane distribution and U.S. refined fuels businesses are expected to accelerate realization of operating efficiencies by implementing a more disciplined and consistent management operating system across the segment designed to leverage the new processes and information system investments and by sizing the organization to efficiently meet its operational business needs. The restructuring plans are still on track and are expected to be completed before the end of 2014. All costs associated with the restructuring plans have been recognized and no additional costs are anticipated.
System Conversion
In 2013, Canadian propane distribution commenced the implementation of an order-to-cash, billing and logistics IT system to replace the distribution and invoicing functions of the present enterprise system. During the third quarter of 2014, the new system was successfully rolled out to the final three regions of Ontario, Quebec and Manitoba. A total of $21.8 million was incurred in order to complete the entire project.
During 2014, Canadian propane distribution commenced the migration of its current data center located in Calgary, Alberta to a new location in New Jersey, U.S. along with approximately 120 servers and more than 200 applications. The migration was completed in the third quarter.
In addition to the significant assumptions detailed above, refer to "Risk Factors to Superior" for a detailed review of significant business risks affecting the Energy Services'' businesses.
Specialty Chemicals
Specialty Chemicals'' condensed operating results for 2014 and 2013:
Chemical revenue for the third quarter of $163.5 million was $19.9 million or 14% higher than in the prior year quarter primarily due to higher average selling prices for sodium chlorate and increased sodium chlorate and chloralkali/potassium sales volumes. Third quarter gross profit of $64.5 million was $5.3 million higher than the prior year quarter due to higher sodium chlorate and chloralkali/potassium gross profits. Sodium chlorate gross profits increased due to higher sales volumes and gains on the translation of U.S. dollar denominated net working capital offset in part by lower gross margins as a result of higher average electricity costs. Sodium chlorate sales volumes increased by approximately 17,000 tonnes or 13% compared to the prior year quarter primarily due to the incremental contribution from the Tronox agreement announced in the fourth quarter of 2013 which provides Superior with access to up to 130,000 tonnes of supply on an annual basis. Chloralkali/potassium products gross profits were higher than the prior year quarter due to increased gross margins and sale volumes. Sales volumes were higher due to increased demand for potassium and strong hydrochloric acid sales to the oil and gas sector. Gross margins were higher due to increased average selling prices for caustic and hydrochloric acid.
Cash operating and administrative costs of $37.2 million were $2.6 million or 8% higher than in the prior year quarter due to costs associated with the Tronox strategic supply agreement and the impact of a weaker Canadian dollar on the translation of U.S. dollar denominated expenses.
Major Capital Projects
As announced in the first quarter of 2012, Superior approved an $18.0 million expansion of hydrochloric acid production capacity at the Port Edwards, Wisconsin chloralkali facility. The plant''s capacity of 110,000 wet metric tonnes (WMT), or 36,000 dry metric tonnes, is being increased to approximately 220,000 WMT. The Port Edwards burner expansion was completed and commissioned during September 2014 and hydrochloric acid shipments from the new burner commenced in September.
As announced in the third quarter of 2012, Superior has approved a $25.0 million expansion of hydrochloric acid production capacity at the Saskatoon, Saskatchewan chloralkali facility. The plant''s capacity of 70,000 WMT, or 22,000 dry metric tonnes, will be increased to approximately 140,000 WMT. The expansion project is expected to be commenced commercial production on schedule during the fourth quarter however total estimated costs are expected to be $28 million as compared to the previously provided estimate of $25 million due to higher than anticipated labour costs in Western Canada.
As at September 30, 2014, a total of $41.0 million had been spent on the two projects. Upon completion of both projects, Superior will have total hydrochloric acid production capacity of approximately 360,000 WMT. The two expansions will allow Superior to optimize overall returns at both facilities by converting a larger portion of its chlorine into higher-value hydrochloric acid.
On June 29, 2014, the Hargrave, Manitoba sodium chlorate facility, which represents 8% of Superior''s North American sodium chlorate manufacturing capacity, was impacted by local area flooding. The plant was properly shut-down in advance of the flooding; however certain pumps and motors and some electrical equipment were damaged as a result of the flooding. The facility was successfully restarted during the third quarter and is operating at normal capacity utilization. Physical damage to the property and loss of production is covered by Superior''s insurance program subject to customary deductibles and waiting periods.
Financial Outlook
Superior expects EBITDA from operations for 2014 to be lower than in 2013 due to a reduced contribution from sodium chlorate as a result of higher electricity prices and plant operating costs, offset in part by the contribution from the Tronox agreement. Contribution from the chloralkali segment is anticipated to be higher than 2013 due to the completion of the hydrochloric acid capacity expansions in the third and fourth quarters of 2014. Sales volumes of caustic, chlorine and hydrochloric acid are anticipated to be modestly higher than 2013, offset by lower average selling prices. Supply and demand fundamentals in the chloralkali markets in which Superior operates are anticipated to remain similar with the prior year.
Superior expects EBITDA from operations for 2015 to be consistent to modestly higher than in 2014 as increased EBITDA from the chloralkali segment as a result of the hydrochloric acid expansions completed in the third and fourth quarters of 2014 is being offset by reduced contributions from sodium chlorate. Sodium chlorate gross profits are being negatively impacted by higher electricity prices, higher plant operating costs, modestly lower sales volumes and increased competition. Supply and demand fundamentals in the chloralkali markets in which Superior operates are anticipated to remain similar to 2014.
In addition to the significant assumptions detailed above, refer to "Risk Factors to Superior" for a detailed review of the significant business risks affecting Superior''s Specialty Chemicals'' segment.
Construction Products Distribution
Construction Products Distribution''s condensed operating results for 2014 and 2013:
Revenues of $225.6 million for the third quarter of 2014 were $15.5 million or 7% higher than in the prior year quarter. Revenue increased due to higher U.S. based industrial sector activity, continued U.S. residential construction market improvements and the benefit of a weaker Canadian dollar on the translation of U.S. dollar revenue. This was offset in part by lower revenue from Canada due to competitive conditions and the slowdown in general construction activity.
Gross profits of $54.3 million in the third quarter were $2.9 million or 6% higher than in the prior year quarter primarily due to increased revenue, partially offset by lower gross margin due to geographic sales mix.
Cash operating and administrative costs were $43.6 million in the second quarter, an increase of $2.3 million or 6% from the prior year quarter. The increase was primarily due to higher sales volumes in the U.S., the impact of a weaker Canadian dollar on the translation of U.S. denominated operating costs and the opening of a new branch in Baton Rouge, LA.
Financial Outlook
Superior anticipates EBITDA from operations in 2014 will be higher than in 2013 due to continued improvements in U.S. residential and industrial construction markets and benefits resulting from ongoing business initiatives. Superior anticipates the U.S. commercial market will be modestly improved in 2014 compared to 2013 and the Canadian residential market will continue to be challenging. Superior anticipates construction activity, which was negatively impacted by adverse weather conditions in the first and second quarters, will continue to recover in the fourth quarter of 2014.
Superior anticipates EBITDA from operations in 2015 will be higher than in 2014 due to the reasons noted above as market conditions continue to trend similarly in 2015 relative to 2014. In particular, Superior anticipates continued recovery in its U.S. markets and ongoing improvements in margins due to growth in gypsum sales and procurement and pricing initiatives.
Initiatives to improve results in the Construction Products Distribution business continued during the third quarter of 2014. Ongoing business improvement projects include: a) assessment of overall logistics and existing branch network, b) review of supply chain management including procurement and transportation, c) review of product pricing, d) working capital management, e) sales growth in select focus products/markets, and f) execution of the detailed restructuring plan.
In addition to the Construction Products Distribution segment''s significant assumptions detailed above, refer to "Risk Factors to Superior" for a detailed review of the significant business risks affecting Superior''s Construction Products Distribution segment.
Consolidated Capital Expenditure Summary
Efficiency, process improvement and growth related expenditures were $12.0 million in the third quarter compared to $11.0 million in the prior year quarter. These are primarily related to the facility expansion projects at Specialty Chemicals and Energy Services'' purchases of rental assets and truck related expenditures. Other capital expenditures were $11.9 million in the third quarter compared to $12.3 million in the prior year quarter, consisting primarily of required maintenance and general capital across all of Superior''s segments although additional expenditures were made at Specialty Chemicals. Proceeds on the disposal of capital and intangible assets were $1.3 million in the third quarter and consisted of Superior''s disposition of surplus tanks, cylinders and property. During the third quarter Superior entered into new leases with a capital equivalent value of $1.3 million primarily related to delivery vehicles and information technology equipment for the Energy Services and Construction Products Distribution segments.
Corporate and Interest Costs
Corporate costs for the third quarter were $6.9 million, compared to $3.7 million in the prior year quarter. The increase was primarily due to higher long term incentive costs and costs associated with the sales process of Construction Products Distribution.
Interest expense on borrowing and finance lease obligations for the third quarter was $5.1 million, compared to $7.3 million in the prior year quarter. The decrease was due to lower average interest rates as a result of redeeming Superior''s 8.25% $150 million senior unsecured notes on October 28, 2013 with lower rate revolving debt and the benefit of debt repayment efforts. See "Liquidity and Capital Resources" discussion for further details on the change in average debt levels.
Interest on Superior''s convertible unsecured subordinated debentures ("Debentures" which include all series of convertible unsecured subordinated debentures) for the third quarter was $7.7 million compared to $8.2 million in the prior year quarter. The decrease was due to the redemption of $49.9 million of Superior''s $25.0 million of Superior''s 5.85% convertible subordinated debentures due October 31, 2015 on April 9, 2013 and $68.9 million of Superior''s 7.50% convertible subordinated debentures due December 31, 2014 on September 3, 2013 offset in part by the issuance of $97.0 million of 6.00% convertible subordinated debentures on July 22, 2013 which mature on June 30, 2019.
Restructuring Costs
Superior''s restructuring costs have been categorized together and excluded from segmented results. Below is a table summarizing these costs:
Superior recognized restructuring costs of $nil during the third quarter 2014 as compared to $0.2 million in the prior year quarter. Total restructuring costs incurred during 2013 and 2014 in order to complete the restructuring projects was $26.4 million, higher than the range provided in Superior''s first-quarter MD&A of $22 million to $25 million due to higher than expected facility termination costs.
Income Taxes
Total income tax recovery in the third quarter was $2.0 million and consists of $0.4 million in cash income tax expense and $2.4 million in deferred income tax recovery, compared to a total income tax expense of $0.2 million in the prior year quarter, which consisted of $0.4 million in cash income tax recovery and a $0.6 million deferred income tax expense.
Cash income tax expense for the third quarter was $0.4 million and consisted of income tax expense in the U.S. of $0.4 million (2014 Q3 - $0.4 million of U.S. cash tax recovery). Superior''s net deferred income tax asset was $274.1 million as at September 30, 2014.
Canada Revenue Agency (CRA) Income Tax Update
As previously disclosed, on April 2, 2013 Superior received from the CRA Notices of Reassessment for Superior''s 2009 and 2010 taxation years reflecting the CRA''s intent to challenge the tax consequences of Superior''s corporate conversion transaction (Conversion) which occurred on December 31, 2008. The CRA''s position is based on the acquisition of control rules, in addition to the general anti-avoidance rules in the Income Tax Act (Canada).
The table below summarizes Superior''s estimated tax liabilities and payment requirements associated with the received and anticipated Notices of Reassessment. Upon receipt of the Notices of Reassessment, 50% of the taxes payable pursuant to such Notices of Reassessment, must be remitted to the CRA.
On May 8, 2013 Superior filed a Notice of Objection and a Notice of Appeal with respect to the Notice of Reassessments received on April 2, 2013. Superior anticipates that if the case proceeds in the Tax Court of Canada, the case could be heard in late 2015, with a decision rendered six to twelve months after completion of the court hearings. If a decision of the Tax Court of Canada were to be appealed, the appeal process could reasonably be expected to take an additional 2 years. If Superior receives a positive decision then any taxes, interest and penalties paid to the CRA will be refunded plus interest and if Superior is unsuccessful then any remaining taxes payable plus interest and penalties will have to be remitted.
Superior remains confident in the appropriateness of its tax filing position and the expected tax consequences of the Conversion and intends to vigorously defend such position and intends to file its future tax returns on a basis consistent with its view of the outcome of the Conversion.
Interim tax payments made by Superior will be recorded to the balance sheet and will not materially impact either adjusted operating cash flow or net earnings.
Based on the midpoint of Superior''s 2014 financial outlook of AOCF per share of $1.85, if the tax pools from the Conversion were not available to Superior, the impact would be an increase to cash income taxes of approximately $20.0 million $0.15 per share for 2014. As previously stated, Superior intends to file its future income tax returns on a basis consistent with its view of the outcome of the Conversion.
Financial Outlook
Superior''s outlook is for adjusted operating cash flow for 2014 has been increased to between $1.75 per share and $1.95 per share before restructuring costs compared to the financial outlook provided at the second quarter of 2014 of $1.65 to $1.95 before restructuring costs. The increase in the 2014 financial outlook is due to the recognition of the $0.08 per share year-to-date adjustments at Energy Services previously discussed. The improvement in results at Superior''s supply portfolio management business recognized as part of the adjustment is a direct result of Superior''s procurement initiatives within the Energy Services business combined with the benefit of market opportunities present as a result of the adverse weather and supply conditions experienced in the first quarter of 2014. Superior anticipates the impact of the procurement initiatives will continue into the future.
Superior is introducing its 2015 financial outlook of AOCF per share of $1.80 to $2.10, a 5% increase compared to the 2014 financial outlook using the mid-point of the respective financial outlooks. The increase in the financial outlook for the 2015 of 5% compared to 2014 is lower than the previously provided range of 9% to 12% due primarily to the increase in the 2014 financial outlook as previously discussed. As previously noted in the individual business financial outlook sections, the 2015 financial outlook assumes the Energy Services and Construction Products Distribution results will be higher in 2015 than in 2014 and the Specialty Chemicals results in 2015 will be consistent to modestly higher than 2014. Achieving Superior''s adjusted operating cash flow depends on the operating results of its three operating segments.
In addition to the operating results of Superior''s three operating segments, significant assumptions underlying Superior''s 2014 and 2015 outlooks are:
Energy Services
Specialty Chemicals
Construction Products Distribution
Restructuring Costs
Debt Management Update
Superior''s anticipated debt repayment for 2015 and total debt to EBITDA leverage ratio as at December 31, 2015, based on Superior''s 2015 financial outlook and year-to-date results, are detailed in the chart below.
Debt Management Summary
In addition to Superior''s significant assumptions detailed above, refer to "Risk Factors to Superior" for a detailed review of Superior''s significant business risks.
Liquidity and Capital Resources
Superior''s revolving syndicated bank facility (Credit Facility), term loans and finance lease obligations (collectively Borrowing) before deferred financing fees totaled $508.5 million as at September 30, 2014, a decrease of $70.2 million from December 31, 2013. The decrease in Borrowing was primarily due to lower net working capital requirements associated with the exit of the heating season and cash flow from operating activities offset in part by capital expenditures and dividend payments.
On June 20, 2014, Superior completed an extension of $450 million of its $570 million Credit Facility with eight lenders. The Credit Facility matures on June 27, 2016 and can be expanded to $750 million. Financial covenant ratios were unchanged with a consolidated secured debt to consolidated EBITDA ratio and a consolidated debt to consolidated EBITDA ratio of 3.0x and 5.0x, respectively. The Credit Facility has a maturity of June 27, 2018 for $450 million of the facility with the remaining $120 million maturing on June 27, 2016. Superior maintains the flexibility to extend the $120 million portion of the facility to June 27, 2018 as well as to expand the facility up to $750 million. See "Summary of Cash Flow" for details on Superior''s sources and uses of cash.
As at September 30, 2014, Debentures (before deferred issuance fees and discount values) issued by Superior totaled $494.2 million which was $0.3 million lower than the balance as at December 31, 2013 due to the conversion of $0.3 million of 7.50% convertible debentures into common shares. See Note 13 to the unaudited condensed consolidated financial statements for additional details on Superior''s Debentures.
As previously announced, on February 14, 2014, Superior closed a $125 million term loan facility which matured on August 14, 2014. The term loan facility provided additional liquidity to ensure Superior had sufficient financial flexibility to manage short term fluctuations in working capital requirements. Throughout the end of 2013 and the beginning of 2014, Superior''s working capital requirements increased due to a rise in the wholesale cost of propane. The wholesale cost of propane and the related working capital started to normalize during March which allowed Superior repay the facility in full on April 25, 2014.
As at September 30, 2014, approximately $170 million was available under the Credit Facility which Superior considers sufficient to meet its expected net working capital, capital expenditure and refinancing requirements during 2014.
Consolidated net working capital was $225.1 million as at September 30, 2014, a decrease of $68.0 million from net working capital of $293.1 million as at December 31, 2013. The decrease was primarily due to the seasonal decline in net working capital requirements at Energy Services offset in part by higher net working capital requirements at Construction Products Distribution due to increased accounts receivables from the pickup in construction activity. Superior''s net working capital requirements are financed from its Credit Facility.
Proceeds received from the DRIP during the third quarter of 2014 were $nil as compared to $nil in the prior year quarter. The decrease was due to Superior suspending the DRIP following payment of the March dividend in April 2013.
As at September 30, 2014, when calculated in accordance with the Credit Facility, the consolidated secured debt to compliance EBITDA ratio was 2.0 to 1.0 (December 31, 2013 - 2.2 to 1.0) and the consolidated debt to compliance EBITDA ratio was 2.0 to 1.0 (December 31, 2013 - 2.2 to 1.0). For both of these covenants, Debentures are excluded. These ratios are within the requirements of Superior''s debt covenants. In accordance with the Credit Facility, Superior must maintain a consolidated secured debt to compliance EBITDA ratio of not more than 3.0 to 1.0 and not more than 3.5 to 1.0 as a result of acquisitions. In addition, Superior must maintain a consolidated debt to compliance EBITDA ratio of not more than 5.0 to 1.0, excluding Debentures. Superior''s total debt to compliance EBITDA ratio was 3.9 to 1.0 as at September 30, 2014 and 3.6 to 1.0 on a before restructuring cost basis. Also, Superior is subject to several distribution tests and the most restrictive stipulates that Distributions (including Debenture holders and related payments) cannot exceed compliance EBITDA less cash income taxes, plus $35.0 million on a trailing 12-month rolling basis. On a 12-month rolling basis as at September 30, 2014, Superior''s available distribution amount was $130.0 million under the above noted distribution test.
On June 27, 2014, Standard & Poor''s confirmed Superior and Superior LP''s long-term corporate credit rating of BB and the senior secured debt rating of BBB-. The outlook rating for Superior remains stable. On June 27, 2014, Dominion Bond Rating Service confirmed Superior LP''s senior secured rating of BB (high) and Superior LP''s senior unsecured rating of BB (low). The trend for both ratings is stable.
As at September 30, 2014, Superior had an estimated defined benefit pension solvency deficiency of approximately $10.6 million (December 31, 2013 - $12.8 million) and a going concern surplus of approximately $17.8 million (December 31, 2013 - surplus - $11.5 million). Funding requirements required by applicable pension legislation are based upon going concern and solvency actuarial assumptions. These assumptions differ from the going concern actuarial assumptions used in Superior''s financial statements. Superior has sufficient liquidity through its existing Credit Facility and anticipated future operating cash flow to fund this deficiency over the prescribed period.
In the normal course of business, Superior is subject to lawsuits and claims. Superior believes the resolution of these matters will not have a material adverse effect, individually or in the aggregate, on Superior''s liquidity, consolidated financial position or results of operations. Superior records costs as they are incurred or when they become determinable.
Shareholders'' Capital
The weighted average number of common shares issued and outstanding at the end of the third quarter was 126.2 million shares, consistent with the prior year quarter.
As at September 30, 2014 and December 31, 2013, the following common shares and securities convertible into common shares were issued and outstanding:
Dividends Paid to Shareholders
Dividends paid to Superior''s shareholders depend on its cash flow from operating activities with consideration for Superior''s changes in working capital requirements, investing activities and financing activities. See "Summary of Adjusted Operating Cash Flow" and "Summary of Cash Flow" for additional details.
Dividends paid to shareholders for the three months ended September 30, 2014 was $18.9 million (before DRIP proceeds of $nil) or $0.15 per share compared to $18.9 million (before DRIP proceeds of $1.3 million) or $0.15 per share in 2013. Dividends paid to shareholders during the nine months ended September 30, 2014 was $56.8 million (before DRIP proceeds of $nil) or $0.45 per share, an increase of $2.4 million as compared to the prior year due to the issuance of shares under the DRIP during 2013 and the equity offering completed on March 27, 2013. Superior''s monthly dividend is $0.05 per share or $0.60 per share on an annualized basis. See "Debt Management Update" for further details. Dividends to shareholders are declared at the discretion of Superior''s Board of Directors.
Superior''s primary sources and uses of cash are detailed below:
Financial Instruments - Risk Management
Derivative and non-financial derivatives are used by Superior to manage its exposure to fluctuations in foreign currency exchange rates, interest rates, share-based compensation and commodity prices. Superior assesses the inherent risks of these instruments by grouping derivative and non-financial derivatives related to the exposures these instruments mitigate. Superior''s policy is not to use derivative or non-financial derivative instruments for speculative purposes. Superior does not formally designate its derivatives as hedges and, as a result, Superior does not apply hedge accounting and is required to designate its derivatives and non-financial derivatives as held for trading. Refer to Superior''s 2013 Annual MD&A for further details on financial instrument risk management.
As at September 30, 2014, Superior has hedged approximately 77% of its estimated US dollar exposure for 2014 and 72% for 2015. The estimated sensitivity of adjusted operating cash
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