Superior Plus Corp. Announces 2015 Third Quarter Results and 2016 Financial Outlook
(firmenpresse) - TORONTO, ONTARIO -- (Marketwired) -- 10/29/15 -- Superior Plus Corp. (TSX: SPB)
Highlights
Third Quarter Financial Summary
Segmented Information
Comparable GAAP Financial Information (1)
Energy Services
Specialty Chemicals
Construction Products Distribution
Corporate Related
Foreign Currency Hedging Contracts
Superior''s foreign currency hedging contracts for the 2015 fiscal year were entered into in prior years when the Canadian dollar was stronger relative to the U.S. dollar. Beginning in 2016, lower value foreign currency hedging contracts expire and Superior''s effective U.S. exchange rate is expected to improve.
The impact of these contracts are embedded in the divisional results as stated in the MD&A. Below is a table that summarizes the impact of the realized losses to the divisional results related to the foreign currency hedging contracts.
A summary of Superior''s U.S. dollar forward contracts for 2015 and beyond is provided in the table below.
For additional details on Superior''s financial instruments, including the amount and classification of gains and losses recorded in Superior''s third quarter condensed consolidated financial statements, summary of fair values, notional balances, effective rates and terms, and significant assumptions used in the calculation of the fair value of Superior''s financial instruments, see Note 14 to the unaudited condensed consolidated financial statements.
CRA Income Tax Update
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 the Conversion. On November 7, 2014 and September 9, 2015 Superior received the Notices of Reassessment for the 2011 to 2013 and 2014 taxation years. The CRA''s position is based on the acquisition of control rules and 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 and August 7, 2013, respectively, Superior filed a Notice of Objection and a Notice of Appeal with respect to the Notice of Reassessments received on April 2, 2013. On February 4, 2015, Superior filed a Notice of Objection with respect to the Notice of Reassessments received on November 7, 2014. Superior anticipates that if the case proceeds in the Tax Court of Canada, the case could be heard within two years, 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 two 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 to the CRA and Superior would not be able to use the tax attributes from the Conversion.
Superior remains confident in the appropriateness of its tax filing position and the expected tax consequences of the Conversion and currently intends to vigorously defend such position and 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 2015 financial outlook of AOCF per share of $1.75, if the tax pools from the Conversion were not available to Superior, the impact would be an increase to cash income taxes of approximately $16.0 million or $0.12 per share for 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.
2015 and 2016 Financial Outlook
Superior expects 2015 AOCF per share of $1.65 to $1.85, consistent with the financial outlook provided at the end of the second quarter of 2015. Superior''s 2015 financial outlook is stated before the impact of regulatory costs related to the acquisition of Canexus and costs related to Superior''s corporate office relocation.
Superior''s 2016 financial outlook is presented without the impact of the acquisition of Canexus due to the fact that the closing date is not yet known. Upon successfully closing the acquisition, Superior will update its 2016 financial outlook, including the forecasted debt and total leverage levels.
Superior is introducing its 2016 financial outlook of AOCF per share of $1.50 to $1.80. In addition to the background provided in the individual business financial outlook sections, key elements of the 2016 financial outlook include:
For additional details on the assumptions underlying the 2015 and 2016 financial outlook, see Superior''s 2015 third quarter MD&A.
Debt Management Update
Superior remains focused on managing both its total debt and its total debt to EBITDA. Superior is currently forecasting a total debt to EBITDA ratio at December 31, 2015 of 3.0X to 3.4X compared to the previously provided range of 3.4X to 3.8X forecast at the second quarter of 2015, and within Superior''s targeted leverage range of 3.0X to 3.5X. The change to Superior''s forecasted debt and leverage levels is due to proceeds from the equity issuance being used to reduce indebtedness and a decrease in anticipated working capital levels.
Superior''s total debt (including convertible debentures) to Compliance EBITDA before restructuring costs was 3.3X as at September 30, 2015 (3.3X after restructuring costs), lower than the 3.5X as at December 31, 2014 (3.6X after restructuring costs). Debt levels and the total leverage ratio as at September 30, 2015 were lower than December 31, 2014 levels due to debt repayment as a result of a decrease in working capital requirements and year to date free cash flow generation. Superior continues to focus on reducing its total leverage through ongoing debt reduction, including reducing working capital requirements and improving business operations.
Superior is currently forecasting a total debt to EBITDA ratio at December 31, 2016 of 3.1X to 3.5X which would maintain Superior within its targeted leverage range of 3.0X to 3.5X. Superior''s anticipated debt repayment for 2016 and total debt to EBITDA leverage ratio as at December 31, 2016 is based on Superior''s 2016 financial outlook, which does not include the acquisition of Canexus and is detailed in the chart below.
2015 Detailed Third Quarter Results
Superior''s 2015 Third Quarter Management''s Discussion and Analysis is attached and is also available on Superior''s website at under the Investor Relations section.
2015 Third Quarter Conference Call
Superior will be conducting a conference call and webcast for investors, analysts, brokers and media representatives to discuss the 2015 Third Quarter Results at 10:30 a.m. EST on Friday, October 30, 2015. To participate in the call, dial:1-800-396-7098. An archived recording of the call will be available for replay until midnight, December 30, 2015. To access the recording, dial: 1-800-408-3053 and enter pass code 3968319 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 were no dilutive instruments for the three months and nine months ended September 30, 2015 and the three months ended September 30, 2014. 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).
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 update, reinstatement of the DRIP, 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, nomination of sodium chlorate volumes under supply agreements and the related costs and potential benefits, future supply and demand fundamentals for North American sodium chlorate, business strategy and objectives, development plans and programs, business expansion and cost structure and other improvement projects, expected product margins and sales volumes, expected timing of commercial production and the costs and benefits associated therewith, anticipated timing and impact of Tronox zero nomination for 2016, 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), future income taxes, the impact of proposed changes to Canadian tax legislation or U.S. tax legislation, future economic conditions, future exchange rates, exposure to such rates and incremental earnings associated with 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 business enterprise system upgrade plans, future working capital levels, estimated CPD IT integration costs, 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, anticipated relocation costs, anticipated leverage and leverage ratios related to the acquisition of Canexus, estimated regulatory costs, expected use of proceeds from the offering, expected closing of the transaction, anticipated benefits of the acquisition of Canexus, 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 third quarter 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, reduced customer demand, operational risks involving our facilities, force majeure, labour relations matters, our ability to access external sources of debt and equity capital, and the risks identified in (i) our MD&A under the heading "Risk Factors" and (ii) Superior''s most recent Annual Information Form. The preceding list of assumptions, risks and uncertainties is not exhaustive.
When relying on our forward-looking information to make decisions with respect to Superior, investors and others should carefully consider the preceding factors, other uncertainties and potential events. Any forward-looking information is provided as of the date of this document and, except as required by law, neither Superior nor Superior LP undertakes to update or revise such information to reflect new information, subsequent or otherwise. For the reasons set forth above, investors should not place undue reliance on forward-looking information.
For more information about Superior, visit our website at .
Management''s Discussion and Analysis of 2015 Third Quarter Results
October 29, 2015
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, 2015 and 2014. The information in this MD&A is current to October 29, 2015. 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, 2014 and its December 31, 2014 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.
Financial Overview
Summary of Adjusted Operating Cash Flow
Comparable GAAP Financial Information (1)
Segmented Information
AOCF Reconciled to Net Cash Flow from Operating Activities (1)
Third quarter AOCF was $25.6 million, an increase of $2.9 million or 13% from the prior year quarter AOCF of $22.7 million. The increase in AOCF was primarily due to lower interest and corporate costs. AOCF per share of $0.20 per share was $0.02 or 11% higher than the prior year quarter of $0.18 per share due to the increase in AOCF and partially offset by modestly higher weighted average shares outstanding. The weighted average shares outstanding increased slightly due to the conversion of $5.3 million of convertible debentures in the first half of 2015.
Adjusted operating cash flow for the nine months ended September 30, 2015 was $144.1 million, a decrease of $8.8 million or 6% from the prior year AOCF of $152.9 million (before restructuring costs of $11.1 million). The decrease in AOCF was primarily due to lower operating results at Specialty Chemicals, partially offset by lower corporate costs. AOCF per share of $1.14 per share was $0.07 or 6% lower than the prior year nine month period of $1.21 per share (before restructuring costs) due to the decrease in AOCF and a modest increase in weighted average shares outstanding as noted above.
Third Quarter Comparison to Prior Year Quarter
Net loss for the third quarter was $36.2 million, compared to a net loss of $42.4 million in the prior year quarter. The increase in net earnings was due primarily to lower unrealized losses on derivative financial instruments and higher income tax recoveries, partially offset by higher operating costs.
Revenue of $750.2 million was $91.2 million lower than in the prior year''s quarter due primarily to decreased Energy Services and Specialty Chemicals revenue, partially offset by increased Construction Products Distribution (CPD) revenue. Energy Services revenue decreased due to lower commodity prices. Specialty Chemicals revenue decreased due to lower sodium chlorate volumes and lower hydrochloric acid selling prices. CPD revenues increased due to higher sales volumes of gypsum and commercial and industrial insulation products and the impact of foreign exchange on U.S. denominated revenues.
Operating expenses of $185.9 million in the third quarter were $8.1 million higher than operating expenses in the prior year quarter primarily due to the impact of the weaker Canadian dollar on the translation of U.S. denominated operating expenses. Finance expenses were lower due to realized gains on an interest rate swap.
Acquisition of Canexus Corporation
On October 6, 2015, the Company announced that it has entered into an arrangement agreement with Canexus Corporation (Canexus), pursuant to which the Company has agreed to acquire all the issued and outstanding common shares of Canexus by way of a court approved plan of arrangement (the Arrangement).
The acquisition of Canexus enhances Superior''s specialty chemicals business and cost position as well as provides growth opportunities for the Company. Completion of the Arrangement will allow the Specialty Chemicals business to better serve its customers and aligns with the Company''s core strategy of investing in businesses that generate strong free cash flow and attractive future growth opportunities. This will also enhance Superior''s ability to service customers by combining the technical strengths of both companies, and allow for better optimization of plants and improved logistics resulting in more consistent, efficient and reliable delivery of products.
Under the terms of the Arrangement, Canexus shareholders will receive 0.153 of a Superior common share for each Canexus common share, representing the equivalent of $1.70 per Canexus common share, resulting in an expected purchase price of approximately $932.0 million which includes the assumption of $616.0 million of debt.
The implementation of the Arrangement will be subject to the approval of at least 66 2/3% of the votes cast by holders of Canexus shares at a special meeting of Canexus shareholders expected to take place in December, 2015. In addition to shareholder approval, the Arrangement is also subject to the receipt of certain regulatory, court and stock exchange approvals. Closing of the transaction is expected to occur by mid-2016.
Share Offering
On October 6, 2015, the Company announced that it had entered into an agreement with a syndicate of underwriters co-led by National Bank Financial Inc. and JP Morgan Securities Canada Inc., under which the underwriters agreed to purchase from Superior and sell to the public 12,077,300 common shares of Superior (the "Common Shares") at price of $10.35 per share (the "Offer Price") for gross proceeds of $125 million (the "Offering"). Superior granted the underwriters an option to purchase, in whole or in part, up to an additional 1,811,595 Common Shares at the Offer Price to cover over-allotments. On October 28, 2015 Superior closed the issue of 13.9 million common shares at a price of $10.35 per common share. The net proceeds for the issue including the full exercise of the over-allotment option granted to the underwriters, issue costs and commissions are approximately $138.0 million. Proceeds from the Offering were used to reduce indebtedness and for general corporate purposes.
Dividend Reinvestment Program
On October 29, 2015, Superior''s Board of Directors approved the reinstatement of the Dividend Reinvestment Program and Optional Share Purchase Program ("DRIP") and subject to receipt of regulatory approvals, it will commence with the payment of the December 2015 dividend payable January 15, 2016. Proceeds from the DRIP will be used for debt reduction and general corporate purposes. The DRIP will provide Superior''s shareholders with the opportunity to reinvest their cash dividends in the future growth of the business at a 4% discount to the market price of Superior''s common shares.
Year-to-Date Comparison to Prior Year-to-Date
The net loss for the nine months ended September 30, 2015 was $5.1 million, compared to net earnings of $13.6 million in the prior year. The decrease was due primarily to lower revenue, higher operating expenses, finance costs and unrealized losses on derivative financial instruments.
Revenue for the nine months ended September 30, 2015 of $2,500.7 million was $518.4 million or 17% lower than the prior year due primarily to decreased Energy Services revenue, decreased Specialty Chemicals revenue, partially offset by increased CPD revenue. Energy Services revenue was lower due to the decrease in commodity prices. Specialty Chemicals revenue decreased due to lower volumes. CPD revenue increased primarily due to the favourable impact of foreign exchange and higher volumes.
Operating expenses for the nine months ended September 30, 2015 of $581.2 million were $19.3 million higher than operating expenses in the prior year quarter primarily due to the negative impact of the weaker Canadian dollar on the translation of U.S. denominated operating expenses. Finance expenses were higher primarily due to the interest on the high-yield debenture issuance, partially offset by the impact of interest rate swaps.
Operating Results
Energy Services
Energy Services'' condensed operating results for 2015 and 2014:
Revenues for the third quarter of 2015 were $349.1 million, a decrease of $105.3 million or 23% from revenues of $454.4 million in 2014. The decrease in revenues was primarily due to lower commodity prices as compared to the prior year quarter. The average wholesale cost of propane in the third quarter of 2015 was 58% lower than the prior year quarter. Total gross profit for the third quarter of 2015 was $94.3 million, an increase of $11.1 million or 13% as compared to the prior year quarter. The increase in gross profit was primarily due to higher U.S. refined fuels distribution and supply portfolio management gross profits. 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 $48.2 million, a decrease of $1.7 million from the prior year quarter. Average weather across Canada for the third quarter, as measured by degree days, was 2% warmer than the prior year and 6% colder than the five-year average. Due to the seasonal nature of heating related volumes, weather in the third quarter did not have a material impact on sales volumes.
Residential sales volumes decreased by 2 million litres or 12% as the distribution system implemented in the prior year has optimized deliveries and this has impacted the timing of residential customers'' first tank fill of the upcoming heating season. Commercial sales volumes decreased 4 million litres or 10% due to economic conditions, including the indirect impact from the decline in crude oil prices, and the timing of first tank fills as noted above in residential. Agriculture sales volumes decreased by 3 million litres or 30% due to weather in Western Canada and a slower start to crop drying season in Ontario. Industrial sales volumes decreased by 12 million litres or 9% due to lower oil field demand due to reduced customer activity as a result of the decline in crude oil prices.
Average propane sales margins for the third quarter increased to 23.1 cents per litre from 21.7 cents per litre in the prior year quarter. Average sales margins in the third quarter of 2015 benefitted from a low price environment for the wholesale cost of propane, improved sales mix and the impact of ongoing pricing management initiatives.
Canadian Propane Distribution Sales Volumes
U.S. Refined Fuels Distribution
U.S. refined fuels distribution gross profit for the third quarter was $22.7 million, an increase of $3.7 million or 19% from the prior year quarter. The increase in gross profit was due primarily to higher average sales margins and higher volumes. Average weather in the Northeastern U.S., as measured by heating degree days, for the third quarter was 53% warmer than the prior year quarter and 50% warmer than the 5-year average. Similar to the Canadian propane business, the impact of weather on the third quarter results is typically not material due to the seasonal nature of heating related volumes.
Sales volumes of 342 million litres were 8 million litres or 2% higher than the prior year quarter due primarily to increased wholesale volumes. Average U.S. refined fuels sales margins of 6.6 cents per litre increased from 5.7 cents per litre in the prior year quarter. Sales margins were positively impacted by the lower wholesale cost of propane and heating oil, ongoing price and supply management initiatives, the implementation of a standardized delivery charge for residential propane customers, and favourable foreign exchange translation contribution.
U.S. Refined Fuels Distribution Sales Volumes
Other Services
Other services gross profit was $7.7 million in the third quarter, a decrease of $1.7 million from the prior year quarter due primarily to a significant reduction in service technicians in the U.S. refined fuels business as part of the restructuring activities in 2013 and 2014.
Supply Portfolio Management
Supply portfolio management gross profits were $12.5 million in the third quarter, an increase of $11.1 million from the prior year quarter. Results in the current year quarter benefitted from improved market conditions and improved procurement from a new long-term supply agreement for propane compared to the prior year quarter.
Fixed-Price Energy Services
Fixed-Price Energy Services Gross Profit
Fixed-price energy services gross profit was $3.2 million in the third quarter, a decrease of $0.3 million from the prior year quarter. Natural gas gross profit was $1.7 million, a decrease of $0.9 million from the prior year quarter due to lower margins. Natural gas gross profit per unit was 37.0 cents per gigajoule (GJ), a decrease of 26.4 cents per GJ from the prior year mainly related to customer mix. Sales volumes of natural gas were 4.6 million GJ, an increase of 0.5 GJ from the prior year quarter. Electricity gross profit in the third quarter of 2015 was $1.5 million, an increase of $0.6 million from the prior year quarter. This was a result of exit costs incurred in Q3 2014 related to the sale of the U.S. customer base in 2014.
Operating Costs - Energy Services
Energy Services cash operating and administrative costs were $80.5 million in the third quarter of 2015, an increase of $2.1 million or 3% from the prior year quarter. The increase in expenses was primarily due to the impact from a stronger U.S. dollar on the translation of U.S. denominated expenses, offset in part by the reduced headcount and operational improvements from The Superior Way initiatives.
Financial Outlook
EBITDA from operations for 2015 for the Energy Services business is anticipated to be consistent to modestly higher than in 2014, consistent with the forecast provided in the second quarter of 2015. EBITDA from the Canadian propane and U.S. refined fuels businesses will benefit from ongoing operational improvements. Operating costs as a percentage of gross profits are anticipated to benefit from a full year run rate of business initiatives and The Superior Way project, offset in part, by the impact of reduced oil field gross profits. Gross profits in the Canadian Propane and U.S. refined fuels business are anticipated to be consistent with 2014 with the exception of industrial related gross profits in the Canadian propane business. Superior is forecasting a modest reduction in gross profits related to oil and gas sales volumes within the Canadian propane business as a result of ongoing volatility in crude oil. Gross profit from the supply portfolio management business is anticipated to be higher than in 2014 and gross profit from the fixed-price energy business will be higher in 2015 than in 2014 due to the absence of balancing losses resulting from commodity price volatility. Average weather, as measured by degree days, for the remainder of 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 decline in the wholesale cost of propane which Superior anticipates will persist throughout 2015.
EBITDA from operations for 2016 for the Energy Services business is anticipated to be consistent to modestly higher than in 2015. EBITDA from the Canadian propane business will benefit from ongoing operational improvements and improved sales and marketing initiatives. U.S. refined fuels will benefit from the impact of a stronger U.S. dollar on the translation of U.S. denominated EBITDA. Gross profits in the Canadian propane and U.S. refined fuels businesses are anticipated to be consistent to modestly higher than 2015. Gross profit from the supply portfolio business is anticipated to be higher than 2015 due to the impact of improved supply agreements and execution of procurement initiatives. Gross profit from the fixed-price energy business will be modestly lower than 2015 due to a wind-down of the business. Average weather, as measured by degree days, for 2016 is anticipated to be consistent with the 5-year average period. Operating conditions for 2016 are anticipated to be similar to 2015.
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 Energy Services'' segment.
Specialty Chemicals
Specialty Chemicals'' condensed operating results for 2015 and 2014:
Chemical revenue for the third quarter of $155.6 million was $7.9 million or 5% lower than in the prior year quarter due primarily to a decrease in sodium chlorate sales volumes and lower hydrochloric acid selling prices. Sodium chlorate sales volumes were 9% lower than the prior year quarter due to reduced customer demand related to reduced North American pulp customer demand and lower export shipments. Chloralkali sales volumes increased due to higher production and sales of chlorine, hydrochloric acid and caustic.
Third quarter gross profit of $55.7 million was $8.8 million or 14% lower than in the prior year quarter due primarily to the impact of lower sodium chlorate volumes and lower hydrochloric acid average selling prices.
Cash operating and administrative costs of $39.6 million were $2.4 million or 6% higher than in the prior year quarter due to impact of a weaker Canadian dollar on the translation of U.S. dollar denominated expenses and general inflationary increases.
Strategic Supply Agreement
As previously disclosed, Specialty Chemicals has provided notification that it will not be nominating any volume for fiscal 2016 related to its 130,000MT sodium chlorate supply agreement with Tronox. During the second quarter, Tronox provided formal notification to Superior that it will be commencing with a decommissioning of the facility upon completion of Superior''s 2015 supply requirements. The decommissioning of the facility will result in the acceleration of certain fees, requiring Superior to make a payment to Tronox of approximately US $3.3 million in the first quarter of 2016.
Financial Outlook
Superior expects EBITDA from operations for 2015 to be approximately $27 million lower than in 2014, which is consistent with the updated guidance provided in the second quarter. Sodium chlorate gross profits are anticipated to be consistent with guidance provided in the second quarter with lower volumes partially offset by improved average selling prices. The reduction in sodium chlorate sales volumes is due largely to higher than normal maintenance downtime in the second quarter, lower North American pulp mill demand and lower export shipments. Chloralkali gross profits are anticipated to be consistent with the guidance provided in the second quarter as Superior continues to forecast weakness in hydrochloric acid sales volumes and pricing for the remainder of 2015. Since the first quarter of 2015, there has been a significant reduction in demand for hydrochloric acid impacting sales volumes and average realized prices. Sales prices and sales volumes of caustic and chlorine are consistent with the previously provided forecast and are anticipated to be modestly higher than the prior year. Supply and demand fundamentals in the chloralkali markets in which Superior operates are anticipated to remain similar to 2014 with the exception of hydrochloric acid as noted above.
Superior expects EBITDA from operations for 2016 to be consistent with 2015 due to continued weakness in the chloralkali segment as a result of lower hydrochloric acid pricing and volumes, offset in part by improved EBITDA from sodium chlorate. Hydrochloric sales prices are anticipated to be consistent and volumes are anticipated to be lower due to reduced demand related to the decline in oilfield activity experienced in 2015 and anticipated to continue into 2016. Sodium chlorate gross profits are anticipated to be consistent to modestly lower due to an increase in electricity costs, offset in part by an increase in average realized prices. Sodium chlorate operating expenses are anticipated to be lower due to the termination of the Tronox supply agreement. The positive impact of improved foreign exchange hedging rates will be fully offset by the continued weakness in the chloralkali market.
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 2015 and 2014:
Revenues of $250.2 million for the third quarter of 2015 were $24.6 million or 11% higher than in the prior year quarter due to increased gypsum and commercial and industrial insulation (C&I) revenues. Gypsum revenues were higher than the prior year quarter due to improved U.S. sales volumes as a result of ongoing improvements in the U.S. residential construction sector, higher average selling prices and the impact of a stronger U.S. dollar on the translation of U.S. denominated revenues. Canadian revenues were lower than the prior year quarter due to delays in the timing of construction projects. Commercial and industrial insulation (C&I) revenues increased over the prior year quarter due to the impact of a stronger U.S. dollar on the translation of U.S. denominated revenues. Excluding the impact of foreign exchange, C&I revenue was down 7% compared to the prior year quarter due primarily to the slowdown in upstream oil and gas projects in Canada and the western U.S. C&I gross margins were modestly higher than the prior year quarter.
Gross profits of $61.0 million in the third quarter were $6.7 million or 12% higher than in the prior year quarter primarily due to improved sales volumes, effective price management and the impact of the stronger U.S. dollar. Average sales margins were higher than the prior year quarter due to ongoing pricing and procurement initiatives and improved market conditions.
Cash operating and administrative costs were $48.8 million in the third quarter, an increase of $5.2 million or 12% from the prior year quarter. The increase was primarily due to higher sales volumes and the impact of the stronger U.S. dollar on the translation of U.S. denominated operating costs.
System Integration
CPD has continued to make significant progress on the systems integration project that will replace two legacy ERP systems with a single, standardized solution. The updated system will provide enhanced procurement, pricing and operational effectiveness, enabling CPD to further improve margins and operating costs once complete. CPD anticipates that the project will be completed over the next two years at a total cost of approximately US$22.0 million which is split between capital investment of US$14.5 million and one-time operating costs of US$7.5 million (US$2.1 million 2015 and US$5.4 million 2016). Total costs incurred to date are US$5.8 million consisting of US$4.7 million in capital and US$1.1 million in operating expense.
Financial Outlook
Superior anticipates that EBITDA from operations in 2015 will be higher than in 2014 due to continued improvements in the U.S. residential market, the product expansion of drywall into ceiling-only branches and benefits resulting from ongoing pricing and procurement initiatives. Superior anticipates that the U.S. commercial market will be modestly improved in 2015 compared to 2014 and that the Canadian residential market will continue to be challenging.
Superior anticipates that EBITDA from operations in 2016 will be consistent with 2015 as continued improvements in the U.S. residential market, benefits resulting from ongoing pricing and procurement initiatives and improvements in the industrial market will be offset by the system integration project costs. As previously discussed, in 2016 Superior will incur US$5.4 million (CAD $7.0 million) in one-time operating costs related to the implementation and roll out of the system integration project. Superior anticipates that the U.S. commercial market will be modestly improved in 2016 compared to 2015 and that the Canadian residential, commercial and industrial markets will continue to be challenging.
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.
Foreign Currency Hedging Contracts
Superior''s foreign currency hedging contracts for the 2015 fiscal year were entered into in prior years when the Canadian dollar was stronger relative to the U.S. dollar. Beginning in 2016, lower value foreign currency hedging contracts expire and Superior''s effective U.S. exchange rate is expected to improve.
The impact of these contracts are embedded in the divisional results as stated in the MD&A. Below is a table that summarizes the impact of the realized losses to the divisional results related to the foreign currency hedging contracts.
For a summary of Superior''s outstanding U.S. dollar forward contracts for 2015 and beyond, refer to "Financial Instruments - Risk Management." For additional details on Superior''s financial instruments, including the amount and classification of gains and losses recorded in Superior''s third quarter condensed consolidated financial statements, summary of fair values, notional balances, effective rates and terms, and significant assumptions used in the calculation of the fair value of Superior''s financial instruments, see Note 14 to the unaudited condensed consolidated financial statements.
Consolidated Capital Expenditure Summary
Efficiency, process improvement and growth related expenditures were $14.2 million in the third quarter compared to $12.0 million in the prior year quarter and are primarily related to Energy Services'' purchases of rental assets and truck related expenditures. Other capital expenditures were $16.6 million in the third quarter compared to $11.9 million in the prior year quarter, consisting primarily of required maintenance and general capital across all of Superior''s segments.
Corporate and Interest Costs
Corporate costs for the third quarter were $4.2 million, compared to $6.9 million in the prior year quarter. The $2.7 million decrease was primarily due to reduced long-term incentive plan costs relative to the prior year quarter as a result of fluctuations in Superior''s share price. Additionally, corporate costs in the prior year quarter included one-time costs associated with the potential CPD sales process.
Interest expense on borrowing and finance lease obligations for the third quarter was $11.6 million, compared to $12.8 million in the prior year quarter. Interest expense was positively impacted by settlements on interest rate swaps which more than offset the impact of higher interest rates due to Superior''s 7-year, $200 million, 6.50% senior unsecured note offering which closed on December 9, 2014.
Superior Plus Office Relocation
As previously disclosed, Superior relocated its corporate office to Toronto, Ontario from the previous location of Calgary, Alberta as of September 8, 2015. The relocation of the corporate office will provide closer proximity for Superior''s corporate executive team to Superior''s operating businesses. Superior''s President and Chief Executive Officer and Chief Legal Officer, along with other members of Superior''s corporate team have relocated to Toronto as part of the corporate office relocation.
Appointment of Chief Financial Officer
As announced on October 27, 2015, Ms. Beth Summers will assume the Chief Financial Officer role beginning November 23, 2015. Mr. Bingham will continue at Superior to assist with an orderly transition until his retirement at the end of the year.
Non-GAAP Restructuring Costs
Superior''s restructuring costs incurred during 2014 were categorized together and excluded from segmented results. Below is a table summarizing these costs for comparative purposes:
Restructuring costs incurred during 2014 consisted of both costs included in, and excluded from, the restructuring provision. Superior did not incur any restructuring costs during the third quarter. Total restructuring costs incurred during 2014 and 2013 in order to complete the restructuring projects were $26.6 million.
Income Taxes
Consistent with prior periods, Superior recognizes a provision for income taxes for its subsidiaries that are subject to current and deferred income taxes, including United States and Chilean income tax.
Total income tax (recovery) expense, comprised of current taxes and deferred taxes for the three and nine months ended September 30, 2015 was $(10.4) million and $10.1 million respectively, compared to $(2.0) million recovery and $17.8 million expense in the comparative period. For the three and nine months ended September 30, 2015, deferred income tax expense (recovery) from operations in Canada, the United States and Chile was $(11.1) million and $8.1 million, respectively, which resulted in a corresponding total net deferred income tax asset of $267.0 million at September 30, 2015.
Canada Revenue Agency ("CRA") Income Tax Update
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 the Conversion. On November 7, 2014 and September 9, 2015 Superior received the Notices of Reassessment for the 2011 to 2013 and 2014 taxation years. The CRA''s position is based on the acquisition of control rules and 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 and August 7, 2013, respectively, Superior filed a Notice of Objection and a Notice of Appeal with respect to the Notice of Reassessments received on April 2, 2013. On February 4, 2015, Superior filed a Notice of Objection with respect to the Notice of Reassessments received on November 7, 2014. Superior anticipates that if the case proceeds in the Tax Court of Canada, the case could be heard within two years, 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 two 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 and Superior would not be able to use the tax attributes from the Conversion.
Superior remains confident in the appropriateness of its tax filing position and the expected tax consequences of the Conversion and currently intends to vigorously defend such position and 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 2015 financial outlook of AOCF per share of $1.75, if the tax pools from the Conversion were not available to Superior, the impact would be an increase to cash income taxes of approximately $16.0 million or $0.12 per share for 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.
Financial Outlook
Superior expects 2015 AOCF per share of $1.65 to $1.85, consistent with the financial outlook provided at the end of the second quarter of 2015. Superior''s 2015 financial outlook is stated before the impact of regulatory costs related to the acquisition of Canexus anticipated to be incurred in the fourth quarter and costs related to Superior''s corporate office relocation.
Superior is introducing its 2016 financial outlook of AOCF per share of $1.50 to $1.80. Key highlights include:
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 2015 and 2016 outlooks are:
Energy Services
Specialty Chemicals
Construction Products Distribution
Debt Management Update
Superior remains focused on managing both its total debt and its total debt to EBITDA. Superior is currently forecasting a total debt to EBITDA ratio at December 31, 2015 of 3.0X to 3.4X compared to the previously provided range of 3.4X to 3.8X forecast at the second quarter of 2015, and within Superior''s targeted leverage range of 3.0X to 3.5X. The change to Superior''s forecasted debt and leverage levels is due to proceeds from the equity issuance being used to reduce indebtedness and a decrease in anticipated working capital levels.
Superior is currently forecasting a total debt to EBITDA ratio at December 31, 2016 of 3.1X to 3.5X which would maintain Superior within its targeted leverage range of 3.0X to 3.5X. Superior''s anticipated debt repayment for 2016 and total debt to EBITDA leverage ratio as at December 31, 2016, based on Superior''s 2016 financial outlook, which does not include the acquisition of Canexus and is detailed in the chart below.
Superior''s total debt (including convertible debentures) to Compliance EBITDA before restructuring costs was 3.3X as at September 30, 2015 (3.3X after restructuring costs), lower than the 3.5X as at December 31, 2014 (3.6X after restructuring costs). Debt levels and the total leverage ratio as at September 30, 2015 were lower than December 31, 2014 levels due to debt repayment as a result of a decrease in working capital requirements and year to date free cash flow generation. Superior continues to focus on reducing its total leverage through ongoing debt reduction, including reducing working capital requirements and improving business operations.
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 $640.1 million as at September 30, 2015, an increase of $106.9 million from December 31, 2014. The increase in borrowing was primarily due to the redemption of the $172.5 million 5.75% debentures, offset in part by cash flow from operating activities.
On May 26, 2015, Superior extended the maturity date of its credit facility to June 27, 2019. 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. Superior maintains the flexibility to expand the facility up to $750.0 million. See "Summary of Cash Flow" for details on Superior''s sources and uses of cash.
On December 9, 2014, Superior completed an offering of $200.0 million 6.50% senior unsecured notes (senior notes). The senior notes were issued at par value and mature on December 9, 2021. The senior notes contain certain early redemption options under which Superior has the option to redeem all or a portion of the senior notes at various redemption prices, which include the principal amount plus accrued and unpaid interest, if any, to the applicable redemption date. Interest is payable semi-annually on June 9 and December 9, commencing June 9, 2015. Under the terms of the agreement, Superior must maintain a fixed-charge coverage ratio of no less than 2.0 to 1.0. As at September 30, 2015, the fixed-charge coverage ratio for purposes of this agreement was 4.5 to 1.0.
As at September 30, 2015, convertible debentures (before deferred issuance fees and discount values) issued by Superior totaled $316.3 million, $177.9 million lower than December 31, 2014 due to the $172.5 million redemption of the 5.75% convertible debentures plus costs and interest. See Note 13 to the unaudited condensed consolidated financial statements for additional details on Superior''s convertible debentures.
Consolidated net working capital was $196.4 million as at September 30, 2015, a decrease of $68.4 million from net working capital of $264.8 million as at December 31, 2014. The decrease was due primarily to the seasonal decline in net working capital requirements at Energy Services, offset in part by higher net working capital requirements at CPD related to the pickup in U.S. construction activity. Superior''s net working capital requirements are financed from its credit facility.
As at September 30, 2015, when calculated in accordance with the credit facility, the consolidated secured debt to compliance EBITDA ratio was 1.5 to 1.0 (December 31, 2014 - 1.2 to 1.0) and the consolidated debt to compliance EBITDA ratio was 2.2 to 1.0 (December 31, 2014 - 1.9 to 1.0). For both of these covenants, convertible 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 convertible debentures. Superior''s total debt to compliance EBITDA ratio was 3.3 to 1.0 as at September 30, 2015. 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, 2015, Superior''s available distribution amount was $128.1 million under the above noted distribution test.
As of September 30, 2015, US$30 million of U.S. notes, issued October 29, 2003 by way of private placement, were outstanding. On March 30, 2010, certain financial covenant ratios of the U.S. Note Agreement were amended to make them consistent with the financial covenant ratios under the amended credit facility other than the exclusion of any obligations owing under an accounts receivable securitization program from the calculation of consolidated secured debt for purposes of the consolidated secured debt to compliance EBITDA ratio calculation.
On October 6, 2015, in conjunction with Superior''s announcement of its acquisition of Canexus, Standard & Poor''s confirmed Superior Plus Corp.''s corporate credit rating as BB and Superior Plus LP''s senior secured debt rating as BBB- and Superior Plus LP''s senior unsecured debt rating as BB. The outlook for the long-term corporate rating was revised to negative. Also on October 6, 2015, DBRS confirmed Superior Plus Corp.''s corporate credit rating as BB high (under review with negative implications), Superior Plus LP''s senior secured rating as BB high (under review with negative implications) and Superior Plus LP''s senior unsecured debt rating as BB low (under review with negative implications).
As at September 30, 2015, Superior had an estimated defined benefit pension solvency deficiency of approximately $15.2 million (December 31, 2014 - $12.3 million) and a going concern surplus of approximately $24.0 million (December 31, 2014 - surplus of $22.6 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 126.5 million shares, which was a 0.3 million increase from the prior year quarter related to conversions of the 7.50% debentures in 2015.
As at October 29, 2015, September 30, 2015 and December 31, 2014, 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.
On October 30, 2014, Superior announced that its monthly dividend would be increased by 20% to $0.06 per share or $0.72 per share on an annualized basis from the previous dividend of $0.05 or $0.60 per share on an annualized basis. Dividends paid to shareholders for 2015 were $68.3 million or $0.54 per share compared to $56.8 million or $0.45 per share in 2014. The increase of $11.5 million was due to the higher dividend rate. See "Debt Management Update" for further details. Dividends to shareholders are declared at the discretion of Superior''s Board of Directors.
Summary of Cash Flows
Superior''s primary sources and uses of cash are detailed below(1):
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 2014 Annual MD&A for further details on financial instrument risk management.
As at September 30, 2015, Superior has substantively hedged its estimated U.S. dollar exposure for 2015 and 93% for 2016. Due to the hedge position, a change in the Canadian to U.S, dollar exchange rate for 2015 would not have a material impact to Superior. A summary of Superior''s U.S. dollar forward contracts for 2015 and beyond is provided in the table below.
Superior''s foreign currency hedge contracts for the 2015 fiscal year were entered into in prior years when the Canadian dollar was stronger relative to the U.S. dollar. Beginning in 2016, lower value foreign currency contracts expire and Superior''s effective U.S. exchange rate is expected to improve. For additional details on Superior''s financial instruments, including the amount and classification of gains and losses recorded in Superior''s third quarter condensed consolidated financial statements, summary of fair values, notional balances, effective rates and terms, and significant assumptions used in the calculation of the fair value of Superior''s financial instruments, see Note 14 to the unaudited condensed consolidated financial statements.
Changes in Internal Controls over Financial Reporting
Superior''s Management is responsible for establishing and maintaining disclosure controls and procedures ("DC&P") and internal control over financial reporting ("ICFR"), as those terms are defined in National Instrument 52-109 "Certification of Disclosure in Issuers'' Annual and Interim Filings". The objective of this instrument is to improve the quality, reliability and transparency of information that is filed or submitted under securities legislation.
Superior''s President and Chief Executive Officer ("CEO") and the Executive Vice President and Chief Financial Officer ("CFO"), with the assistance of Superior employees, have designed DC&P and ICFR to provide reasonable assurance that material information relating to Superior''s business is communicated to them, reported on a timely basis, financial reporting is reliable, and the financial statements for external purposes are in accordance with IFRS.
During the third quarter of 2015, there were no changes made to Superior''s ICFR that materially affected, or are reasonably likely to materially affect, Superior''s ICFR.
Critical Accounting Policies and Estimates
Superior''s unaudited condensed consolidated financial statements have been prepared in accordance with IFRS. The significant accounting policies are described in the unaudited condensed consolidated financial statements for the period ended September 30, 2015. Certain of these accounting policies, as well as estimates made by management in applying such policies, are recognized as critical because they require management to make subjective or complex judgments about matters that are inherently uncertain. Our critical accounting estimates relate to the allowance for doubtful accounts, employee future benefits, future income tax assets and liabilities, the valuation of derivatives and non-financial derivatives and asset impairments and the assessment of potential provision retirement obligations.
Recent Accounting Pronouncements
Certain new standards, interpretations, amendments or improvements to existing standards were issued by the IASB or the International Financial Reporting Interpretations Committee ("IFRIC") that are mandatory for accounting periods beginning on January 1, 2015 or later. The affected standards are consistent with those disclosed in Superior''s 2014 annual consolidated financial statements.
New and revised IFRS standards issued but not yet effective
IFRS 9 - Financial Instruments: Classification and Measurement
IFRS 9 was issued in November 2009 and is intended to replace IAS 39 - Financial Instruments: Recognition and Measurement. IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments in the context of its business model and the contractual cash flow characteristics of the financial assets. The new standard also requires a sing
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