Superior Plus Corp. Announces 2015 Annual and Fourth Quarter Results
(firmenpresse) - TORONTO, ONTARIO -- (Marketwired) -- 02/18/16 -- Superior Plus Corp. (TSX: SPB)
Highlights
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. Refer to "Foreign Currency Hedging Contracts" in the Fourth Quarter Financial Discussion for a summary of the impact of the realized losses to the divisional results related to 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" in the Fourth Quarter Financial Discussion. For additional details on Superior''s financial instruments, including the amount and classification of gains and losses recorded in Superior''s fourth quarter unaudited 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 for the year ended December 31, 2015.
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. The CRA''s position is based on the acquisition of control rules and the general anti-avoidance rules in the Income Tax Act (Canada). On May 8, 2013 and August 7, 2013, respectively, Superior filed a Notice of Objection and a Notice of Appeal with respect to the Notices of Reassessment received on April 2, 2013. Superior has been reassessed for subsequent taxation years by the CRA and the provincial tax agencies and has filed a Notice of Objection for each Notice of Assessment received.
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 must be remitted to the CRA and the provincial tax agencies within 90 days.
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. 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 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 2016 financial outlook of AOCF per share of $1.65, if the tax pools from the Conversion were not available to Superior, the impact would be an increase to cash income taxes of approximately $5.0 million or $0.04 per share for 2016.
2016 Financial Outlook
Superior''s 2016 financial outlook of AOCF per share of $1.50 to $1.80 is consistent with the financial outlook provided at the end of the third quarter of 2015. However, based on the current mild winter weather and continued weakness in oil prices early results are tracking to the lower end of the range. Superior''s 2016 financial outlook is presented without the impact of the Canexus Acquisition 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.
In addition to the background provided in the individual business financial outlook sections, key elements of the 2016 financial outlook include:
Superior''s AOCF per share (before restructuring and other costs) for the year ended December 31, 2015 of $1.68 was consistent with the previously provided outlook of $1.65 to 1.85 per share.
For additional details on the assumptions underlying the 2016 financial outlook, see Superior''s 2015 Fourth Quarter Financial Discussion.
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, 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, and excluding the acquisition of Canexus, is detailed in the chart below.
Superior''s total debt to Compliance EBITDA before restructuring and other costs was 3.2X as at December 31, 2015 (3.4X after restructuring and other costs), lower than the 3.5X as at December 31, 2014 (3.6x after restructuring costs). Debt levels and total leverage as at December 31, 2015 were lower than December 31, 2014 levels due to proceeds from the offering being used to repay debt and reduced working capital levels in the Energy Services business due to reduced commodity prices. Superior continues to focus on reducing its total leverage through ongoing debt reduction, including reducing working capital requirements and improving business operations. The payout ratio for 2016 is forecast to be 51%, and Superior remains committed to a long term target payout ratio of 40-60%.
2015 Detailed Fourth Quarter Results
Superior''s 2015 Fourth Quarter Financial Discussion and Analysis is available on Superior''s website at under the Investor Relations section.
2015 Fourth Quarter Conference Call
Superior will be conducting a conference call and webcast for investors, analysts, brokers and media representatives to discuss the 2015 Fourth Quarter Results at 10:30 a.m. EST on Friday, February 19, 2016. To participate in the call, dial: 1-800-355-4959. An archived recording of the call will be available for replay until midnight, Monday, March 21, 2016. To access the recording, dial: 1-800-408-3053 and enter pass code 4383788. Internet users can listen to the call live, or as an archived call, on Superior''s website at under the Events section.
Non-GAAP Financial Measures
Throughout the press release, Superior has used the following terms that are not defined by GAAP, but are used by management to evaluate the performance of Superior and its business. Since Non-GAAP financial measures do not have standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other companies, securities regulations require that Non-GAAP financial measures are clearly defined, qualified and reconciled to their nearest GAAP financial measures. Except as otherwise indicated, these Non-GAAP financial measures are calculated and disclosed on a consistent basis from period to period. Specific adjusting items may only be relevant in certain periods.
The intent of Non-GAAP financial measures is to provide additional useful information to investors and analysts and the measures do not have any standardized meaning under IFRS. The measures should not, therefore, be considered in isolation or used in substitute for measures of performance prepared in accordance with IFRS. Other issuers may calculate Non-GAAP financial measures differently.
Investors should be cautioned that EBITDA and AOCF should not be construed as alternatives to net earnings, cash flow from operating activities or other measures of financial results determined in accordance with GAAP as an indicator of Superior''s performance.
Non-GAAP financial measures are identified and defined as follows:
Adjusted Operating Cash Flow
AOCF is equal to cash flow from operating activities as defined by IFRS, adjusted for changes in non-cash working capital, other expenses, non-cash interest expense, current income taxes and finance costs. Superior may deduct or include additional items in its calculation of AOCF; these items would generally, but not necessarily, be items of a non-recurring nature. AOCF is the main performance measure used by management and investors to evaluate Superior''s performance. AOCF represents cash flow generated by Superior that is available for, but not necessarily limited to, changes in working capital requirements, investing activities and financing activities of Superior.
The seasonality of Superior''s individual quarterly results must be assessed in the context of annualized AOCF. Adjustments recorded by Superior as part of its calculation of AOCF include, but are not limited to, the impact of the seasonality of Superior''s businesses, principally the Energy Services segment, by adjusting for non-cash working capital items, thereby eliminating the impact of the timing between the recognition and collection/payment of Superior''s revenues and expenses, which can differ significantly from quarter to quarter. Adjustments are also made to reclassify the cash flow related to natural gas and electricity customer contract-related costs in a manner consistent with the income statement''s recognition of these costs. AOCF is reconciled to net cash flow from operating activities on page 5 of the 2015 Fourth Quarter Financial Discussion.
EBITDA
EBITDA represents earnings before taxes, depreciation, amortization, finance expense, and certain other non-cash expenses, and is used by Superior to assess its consolidated results and those of its operating segments. The EBITDA of Superior''s operating segments may be referred to as EBITDA from operations.
EBITDA from operations
EBITDA from operations is defined as EBITDA excluding gains/(losses) on foreign currency hedging contracts. For purposes of the earnings release, foreign currency hedging contract gains and losses are excluded from the results of the operating segments. Foreign currency hedging contracts are entered into for risk management purposes, accordingly these are being reclassified to corporate costs.
Compliance EBITDA
Compliance EBITDA represents earnings before interest, taxes, depreciation, amortization and certain other non-cash expenses calculated on a 12-month trailing basis, giving pro forma effect to acquisitions and divestitures, and is used by Superior to calculate compliance with its debt covenants and other credit information. See Note 16 to the unaudited condensed consolidated financial statements for a reconciliation of net earnings to compliance EBITDA.
Payout Ratio
Payout ratio represents dividends as a percentage of AOCF less other capital expenditures, CRA payments and capital lease repayments and is used by Superior to assess its financial results and leverage. Payout ratio is not a defined performance measure under GAAP. Superior''s calculation of payout ratio may differ from similar calculations used by comparable entities.
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, 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, market conditions in Canada and the U.S., continued improvements in operational efficiencies and sales and marketing initiatives in Energy Services, continued improvements in end-use markets in the U.S. for CPD, 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 chlor-alkali, effect of operational and technological improvements, anticipated costs and benefits of business enterprise system upgrade plans, CPD IT one-time system integration costs, Canexus transaction and bridge facility costs, 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, anticipated leverage related to 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 Fourth Quarter Financial Discussion 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 Fourth Quarter Financial Discussion 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 .
Financial Discussion of 2015 Fourth Quarter and 2015 Year End Results
February 18, 2016
The following Financial Discussion is a review of the financial performance and position of Superior Plus Corp. (Superior) as at December 31, 2015 and for the three and twelve months ended December 31, 2015 and 2014. The information in this Financial Discussion is current to February 18, 2016. This Financial Discussion should be read in conjunction with Superior''s audited consolidated financial statements and notes thereto as at and for the twelve months ended December 31, 2015 and its unaudited condensed consolidated financial statements as at and for the three and twelve months ended December 31, 2015 and 2014.
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 Financial Discussion 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.
For purposes of this Financial Discussion, foreign currency hedging contract gains and losses are excluded from the results of the operating segments. Divisional results exclude the impact of foreign currency hedging contracts as these contracts are entered into for treasury risk management purposes.
Fourth Quarter Comparison to Prior Year Quarter
Fourth quarter AOCF before restructuring and other costs was $73.1 million, a decrease of $12.7 million or 15% from the prior year quarter AOCF of $85.8 million, inclusive of the foreign exchange hedging program. EBITDA from operations at Specialty Chemicals decreased primarily related to lower North American pulp mill customer demand, lower demand related to the oil and gas industry, and a decrease in hydrochloric acid average selling prices, partially offset by insurance proceeds related to a business interruption claim of $4.9 and the impact of the stronger U.S. dollar on U.S. denominated EBITDA. Energy Services EBITDA from operations decreased resulting from warmer than average weather, and EBITDA from operations at CPD increased due to improved sales volumes as a result of ongoing improvements in the U.S. residential construction sector and the impact of the stronger U.S. dollar on U.S. denominated EBITDA.
AOCF per share before restructuring and other costs of $0.54 per share was $0.14 or 21% lower than the prior year quarter of $0.68 per share due to the decrease in AOCF and the increase in weighted average shares outstanding. The weighted average shares outstanding increased due to the issuance of 13.9 million shares on October 28, 2015. The common share offering had the impact of diluting AOCF per share by approximately 4 cents per share in the fourth quarter of 2015.
Revenue of $813.9 million was $142.9 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 and lower demand on warmer than average weather in the fourth quarter. Specialty Chemicals revenue decreased due to lower sodium chlorate volumes resulting from lower demand in North America related to several pulp mill closures and lower hydrochloric acid selling prices, partially offset by insurance proceeds related to a business interruption claim of $4.9 and the impact of the stronger U.S. dollar on U.S. denominated revenues. CPD revenues increased primarily due to higher sales volumes of gypsum due to improved U.S. sales volumes as a result of ongoing improvements in the U.S. residential construction sector and the impact of the stronger U.S. dollar on U.S. denominated revenues.
Operating expenses of $209.4 million in the fourth quarter were $26.6 million higher than operating expenses in the prior year quarter primarily due to the impact of the stronger U.S. dollar on U.S. denominated expenses and general inflationary increases, partially offset by operational efficiencies from The Superior Way initiatives.
Finance expense was $12.3 million, compared to $10.7 million in the prior year, an increase of $1.6 million. The increase was primarily attributable to the recognition of debt issue costs as a result of the early redemption of the $69.4 million outstanding principal amount of 7.50% Debentures in December 2015, and lower realized gains on foreign currency forward contracts.
Unrealized gains on derivative financial instruments were $2.9 million in the fourth quarter, compared to a loss of $12.7 million in the prior year, mainly related to the changes in market prices of commodities and timing of maturities of the underlying financial instruments.
The net earnings for the year ended December 31, 2015 were $31.6 million, compared to net earnings of $43.3 million in the prior year. The decrease was due to the changes in revenue, operating expenses and finance expenses discussed above.
Acquisition of Canexus Corporation
On October 6, 2015, Superior announced that it entered into an arrangement agreement with Canexus Corporation (Canexus), pursuant to which the Company agreed to acquire all the issued and outstanding common shares of Canexus by way of a court approved plan of arrangement.
The Canexus Acquisition 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 Superior''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.
Canexus shareholders voted to approve the Canexus Acquisition at a special meeting of shareholders held on December 11, 2015, where 99.19% of the Canexus shares voted at the meeting were in favour of the Arrangement. Canexus also obtained a final order from the Court of Queen''s Bench of Alberta approving the Arrangement. The transaction is subject to receipt of regulatory approval and the satisfaction of certain other commercial conditions. Closing of the transaction is expected to occur by mid-2016. The results reported in this Financial Discussion do not include the results of Canexus.
Year-to-Date Comparison to Prior Year-to-Date
Adjusted operating cash flow (AOCF) before restructuring and other costs for the year ended December 31, 2015 was $217.2 million, a decrease of $21.5 million or 9% from the prior year AOCF of $238.7 million, inclusive of the foreign exchange hedging program. EBITDA from operations at Specialty Chemicals decreased primarily related to lower North American pulp mill customer demand, lower export shipments and lower chlor-alkali sales volumes as a result of the slowdown in the oil and gas industry, partially offset by the impact of the stronger U.S. dollar on U.S. denominated EBITDA. EBITDA from operations at Energy Services increased as a result of improved pricing management and effective cost control as a result of The Superior Way initiatives, despite lower volumes due to warmer weather and reduced oilfield demand. CPD EBITDA from operations increased due to the strengthening U.S. construction markets and the impact of the stronger U.S. dollar on U.S. denominated EBITDA. The impact of the stronger U.S. dollar on U.S. EBITDA from operations was partially offset by higher realized losses from the result of our foreign exchange hedging program. AOCF for the current year excludes $5.4 million in transaction costs related to the proposed Canexus Acquisition and $4.6 million in costs to relocate the corporate office to Toronto.
AOCF per share before restructuring and other costs of $1.68 per share was $0.21 or 11% lower than the prior year AOCF of $1.89 per share due to the decrease in AOCF and the increase in weighted average shares outstanding. The weighted average shares outstanding increased due to the issuance of 13.9 million shares on October 28, 2015. The common share offering had the impact of diluting AOCF per share by approximately 3 cents per share in 2015.
Revenue for the year ended December 31, 2015 of $3,314.6 million was $661.3 million or 17% lower than the prior year due primarily to decreased Energy Services revenue and decreased Specialty Chemicals revenue, partially offset by increased CPD revenue. Energy Services revenue was lower than the prior year due to lower commodity prices and lower demand related to warmer than normal weather. Specialty Chemicals revenue decreased due to lower volumes resulting from lower demand in North America related to several pulp mill closures and lower oilfield demand related to the oil and gas industry, partially offset by the impact of the stronger U.S. dollar on U.S. denominated revenues. CPD revenue increased from higher volumes related to increased residential and commercial construction activity and the impact of the stronger U.S. dollar on U.S. denominated revenue.
Operating expenses were $790.6 million in 2015, an increase of $45.9 million or 6% from the prior year, primarily due to the impact of the stronger U.S. dollar on U.S. denominated expenses, partially offset by operational efficiencies related to The Superior Way initiatives.
Corporate costs were $16.5 million, compared to $20.0 million in the prior year. The $3.5 million decrease was primarily due to lower short-term incentive costs and a decrease in costs in 2015 associated with the CPD sales process conducted in 2014.
Finance expense was $56.3 million, compared to $52.7 million in the prior year, an increase of $3.6 million. The increase was primarily attributable to the recognition of debt issue costs as a result of the early redemptions of $172.5 million outstanding principal amount of 5.75% Debentures in June 2015 and $69.4 million outstanding principal amount of 7.50% Debentures in December 2015.
Unrealized losses on derivative financial instruments of $39.8 million were $12.2 million lower than in the prior year, mainly related to the changes in market prices of commodities and timing of maturities of the underlying financial instruments.
Total income tax expense of $0.8 million was $15.0 million lower than in the prior year due to a decrease in net earnings before tax in 2015, changes in statutory tax rates and decreased impact from permanent items.
The net earnings for the year ended December 31, 2015 were $26.5 million, compared to net earnings of $56.9 million in the prior year. The decrease was due to the changes in revenue, operating expenses, finance expense and unrealized losses on derivative financial instruments discussed above.
Revenues for the fourth quarter of 2015 were $414.8 million, a decrease of $154.1 million or 27% compared to the prior year quarter. The decrease is primarily due to lower commodity prices and sales volumes compared to the prior year quarter. Total gross profit for the fourth quarter of 2015 was $139.3 million, a decrease of $1.8 million or 1% over the prior year quarter. The decrease in gross profit is primarily due to lower volumes within the Canadian propane and U.S. refined fuels segments offset in part by higher supply portfolio management and fixed-price energy services gross profits. A detailed review of gross profit is provided below.
Canadian Propane Distribution
Canadian propane distribution gross profit for the fourth quarter was $70.9 million, a decrease of $5.4 million or 7% compared to the prior year quarter, due to lower volumes, partially offset by higher unit margins. Residential sales volumes decreased by 5 million litres or 12% from the prior year quarter due primarily to warmer weather during the fourth quarter of 2015 as compared to the prior year quarter. Average weather across Canada for the fourth quarter, as measured by degree days, was 8% warmer than the prior year and 8% warmer than the five-year average. Industrial volumes decreased by 38 million litres or 19%, largely due to lower oilfield customer demand as a result of the continued decline in the price of oil and warmer weather. Commercial volumes decreased by 12 million litres or 15% due to warmer Q4 temperatures across the country and decreased demand from oilfield support industries.
Average propane sales margins for the fourth quarter increased to 22.5 cents per litre from 20.3 cents per litre in the prior year quarter. The increase was principally due to improved pricing management in a declining price environment and favourable movement in the sales mix as the current quarter included a higher proportion of higher-margin sales volumes.
U.S. Refined Fuels Distribution
U.S. refined fuels distribution gross profit for the fourth quarter was $42.5 million, a decrease of $2.3 million or 3% compared to the prior year quarter. The decrease in gross profit was due to lower sales volumes offset in part by higher gross margins. Sales volumes of 390 million litres decreased by 17 million litres or 4% from the prior year quarter. The decrease in residential volumes was primarily due to warmer weather. Weather as measured by heating degree days for the fourth quarter was 16% warmer than the prior year quarter and 21% warmer than the five-year average. Commercial sales volumes decreased by 16 million litres or 8% largely due to warmer weather and increased competition. Wholesale volumes increased 16 million litres or 13% due to increased reseller volumes.
Average U.S. refined fuels sales margins of 10.9 cents per litre were consistent with the prior year quarter.
Other Services
Other services primarily include equipment installation, maintenance and repair. Gross profit was $9.4 million in the fourth quarter, a decrease of $1.2 million or 11% from the prior year quarter due to decreased installations and the impact of exiting non-core service business lines associated with restructuring.
Supply Portfolio Management
Supply portfolio management gross profits were $13.7 million in the fourth quarter, an increase of $6.4 million over prior year quarter. Results in the current year quarter benefitted from market conditions associated with commodity prices, and improved procurement from a new long-term supply agreement for propane compared to the prior year quarter.
Fixed-price energy services gross profit was $2.8 million in the fourth quarter, an increase of $0.7 million or 33% from the prior year quarter. Natural gas gross profit was $1.5 million, consistent with the prior year quarter. Electricity gross profit in the fourth quarter of 2015 was $1.3 million, an increase of $0.9 million as the prior year quarter included the impact of selling the U.S. business.
In 2015, Superior decided to cease marketing efforts and allow existing customer contracts to expire with the intention to exit the business. Given the size of the operations this will not have a material impact to the Energy Services portfolio.
Operating Costs
Energy Services operating and administrative costs were $85.6 million in the fourth quarter of 2015, an increase of $4.5 million or 6% from the prior year quarter. The increase in expenses was primarily due to the impact of the stronger U.S. dollar on 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 2016 for the Energy Services business is anticipated to be consistent with 2015, despite the impact of warmer weather at the start of 2016 and the impact of continued low oil prices on the Canadian oil and gas industry. EBITDA from the Canadian propane and U.S. refined fuels businesses will benefit from ongoing operational improvements and improved sales and marketing initiatives. Gross profits in the Canadian propane business are anticipated to be consistent with 2015. Gross profits in the U.S. refined fuels business are anticipated to be higher than 2015 due primarily to the impact of the stronger U.S. dollar on U.S. denominated gross profit. Gross profit from the supply portfolio business is anticipated to be consistent to modestly lower than 2015 due to less favourable market conditions. Gross profit from the fixed-price energy business is expected to 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.
Chemical revenue for the fourth quarter of $170.4 million was $4.6 million or 3% lower than in the prior year quarter due primarily to a decrease in sodium chlorate sales volumes and a decrease in hydrochloric acid average selling prices, partially offset by the impact of the stronger U.S. dollar on U.S. denominated revenues. Sodium chlorate sales volumes were 13% lower than the prior year quarter due to reduced demand from North American pulp customers and lower Tronox purchases. Chlor-alkali sales volumes increased due to higher production and sales of chlorine, caustic and potassium hydroxide, however this was more than offset by lower hydrochloric acid average selling prices. Revenue also includes insurance proceeds related to a business interruption claim of $4.9 million from 2013 for the Port Edwards'' hydrochloric acid burner.
Fourth quarter gross profit was $74.3 million, an increase of $0.7 million or 1% compared to the prior year quarter. This was due to the impact of the stronger U.S. dollar on U.S. based earnings, partially offset by lower sodium chlorate volumes and lower hydrochloric acid average selling prices.
Operating and administrative costs of $41.8 million were $1.4 million or 3% higher than in the prior year quarter due to the impact of the stronger U.S. dollar on U.S. based expenses and general inflationary increases.
Strategic Supply Agreement
As previously disclosed, Specialty Chemicals 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 of 2015, 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 2016 to be consistent with 2015 as improvements in the sodium chlorate and chlor-alkali business is expected to be offset by reduced gains on the translation of U.S. denominated working capital. Sodium chlorate EBITDA is anticipated to be higher in 2016 due to the termination of the Tronox agreement and related plant expenses. Sodium chlorate gross profits are anticipated to be lower in 2016 due to an increase in electricity costs and a decrease in sales volumes. EBITDA from the chlor-alkali segment is anticipated to be higher in 2016 due to an increase in sales volumes and consistent to modestly higher pricing in all products except hydrochloric acid. Hydrochloric acid sales prices are anticipated to be consistent with 2015 and volumes are anticipated to be lower due to reduced demand related to the decline in oilfield activity experienced in 2015 and expected to continue into 2016.
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.
Revenues of $243.6 million for the fourth quarter of 2015 were $23.4 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, an increase in average selling prices and the impact of the stronger U.S. dollar on U.S. denominated revenues. C&I revenues increased over the prior year quarter due to the impact of the stronger U.S. dollar on U.S. denominated revenues. Excluding the impact of foreign exchange, C&I revenue was down 12% 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 profit was $64.6 million in the fourth quarter, an increase of $9.0 million or 16% from the prior year quarter primarily due to improved sales volumes, effective price management and the impact of the stronger U.S. dollar on U.S. denominated earnings. Average sales margins were higher than the prior year quarter due to ongoing pricing and procurement initiatives and improved market conditions.
Operating and administrative costs were $48.7 million in the fourth quarter, an increase of $5.1 million or 12% from the prior year quarter. The increase was primarily due to higher sales volumes, system integration project costs and the appreciation of the U.S. dollar.
System Integration
CPD continues to make significant progress on the systems integration project that will replace two legacy ERP systems with a single, standardized solution. The updated system is expected to 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 by the end of 2016 at a total cost of approximately $30.3 million which is split between capital investment of $19.7 million ($10.4 million in 2015 and $9.3 million in 2016) and one-time operating costs of $10.6 million ($2.6 million 2015 and $8.0 million 2016). Total costs incurred to date are $13.0 million consisting of $10.4 million in capital and $2.6 million in operating expense.
Financial Outlook
Superior anticipates that EBITDA from operations in 2016 will be modestly lower than 2015 as continued improvements in the U.S. residential, commercial and industrial markets, benefits resulting from ongoing pricing and procurement initiatives and the system integration project will be more than offset by the system integration project costs. As previously discussed, in 2016 Superior will incur $8.0 million in one-time operating costs related to the implementation and roll out of the system integration project compared to $2.6 million in 2015. Superior anticipates 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. For a summary of Superior''s outstanding U.S. dollar forward contracts for 2016 and beyond, refer to "Financial Instruments - Risk Management."
The impact of these contracts is excluded from the divisional results as discussed above in this Financial Discussion. Below is a table that summarizes the impact of the realized losses to the divisional results related to the foreign currency hedging contracts.
For additional details on Superior''s financial instruments, including the amount and classification of gains and losses recorded in Superior''s fourth 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.
Efficiency, process improvement and growth related expenditures were $18.9 million in the fourth quarter compared to $13.7 million in the prior year quarter and are primarily related to Energy Services'' purchases of rental assets and truck related expenditures.
Maintenance capital expenditures were $14.2 million in the fourth quarter compared to $20.4 million in the prior year quarter, a decrease of $6.2 million due primarily to Canadian propane distribution incurring higher tank refurbishment costs in the fourth quarter of 2014.
Superior entered into new leases with capital-equivalent value of $14.6 million in the fourth quarter compared to $6.0 million in the prior year quarter, primarily related to delivery vehicles for the Energy Services and Construction Products Distribution segments to support growth and replace aging vehicles in the fleet.
Corporate and Interest Costs
Corporate costs for the fourth quarter were $2.5 million, compared to $2.2 million in the prior year quarter. The $0.3 million increase was primarily due to increased long-term incentive plan costs relative to the prior year quarter as a result of fluctuations in Superior''s share price after normalizing for one-time expenses in the prior year related to the CPD sales process.
Interest expense on borrowing and finance lease obligations for the fourth quarter was $10.1 million, compared to $10.8 million in the prior year quarter. Interest expense was positively impacted by lower average debt levels, settlements on interest rate swaps and the December 2015 redemption of $69.3 million outstanding principal amount of its 7.50% Debentures, 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. The relocation of the corporate office provides closer proximity for Superior''s corporate executive team to Superior''s operating businesses. Superior''s President and Chief Executive Officer and Chief Legal Officer 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 assumed the role of Vice President and Chief Financial Officer beginning November 23, 2015. Mr. Wayne Bingham assisted with an orderly transition prior to his retirement at the end of 2015.
Non-GAAP Restructuring and Other Costs
Superior''s restructuring and other costs have been categorized together and excluded from segmented results. Below is a table summarizing these costs for comparative purposes:
For the three and twelve months ended December 31, 2015, Superior incurred $4.6 million in costs related to the corporate office relocation and $5.4 million in costs related to the Canexus Acquisition.
Superior incurred restructuring costs in 2014 associated with operational improvements at its Energy Services and Construction Products Distribution. Restructuring costs incurred during 2014 consisted of both costs included in, and excluded from, the restructuring provision. Total restructuring costs incurred during 2014 and 2013 in order to complete the restructuring projects were $26.6 million.
Income Taxes
Total income tax recovery for the fourth quarter was $9.3 million and consists of $0.1 million in cash income tax expense and $9.4 million in deferred income tax recovery, compared to a total income tax recovery of $2.0 million in the prior year quarter, which consisted of $0.4 million in cash income tax expense and a $2.4 million deferred income tax recovery.
Cash income tax expense for the fourth quarter was $0.1 million and consisted of income tax expense in the U.S. of $0.1 million (2014 Q4 - $0.4 million of U.S. cash tax recovery). Deferred income tax recovery for the fourth quarter was $9.4 million (2014 Q4 - $2.4 million deferred income tax recovery), resulting in a corresponding net deferred income tax asset of $275.8 million as at December 31, 2015. The increase in deferred income tax recovery was due to lower net earnings in the fourth quarter of 2015 and decreased impact from permanent items.
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. The CRA''s position is based on the acquisition of control rules and the general anti-avoidance rules in the Income Tax Act (Canada). On May 8, 2013 and August 7, 2013, respectively, Superior filed a Notice of Objection and a Notice of Appeal with respect to the Notices of Reassessment received on April 2, 2013. Superior has been reassessed for subsequent taxation years by the CRA and the provincial tax agencies and has filed a Notice of Objection for each Notice of Assessment received.
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 Notice of Reassessment must be remitted to the CRA and the provincial tax agencies within 90 days.
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. 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 2016 financial outlook of AOCF per share of $1.65, if the tax pools from the Conversion were not available to Superior, the impact would be an increase to cash income taxes of approximately $5.0 million or $0.04 per share for 2016.
Financial Outlook
Superior achieved adjusted operating cash flow per share for 2015 of $1.68 (before restructuring and other costs), within the 2015 financial outlook range provided in its third quarter MD&A. See the detailed discussion on each segment for a breakdown of the results achieved.
Superior''s 2016 financial outlook of AOCF per share of $1.50 to $1.80 is consistent with the financial outlook provided at the end of the third quarter of 2015. However, based on the current mild winter weather and continued weakness in oil prices early results are tracking to the lower end of the range. Superior''s 2016 financial outlook is presented without the impact of the Canexus Acquisition 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.
In addition to the background provided in the individual business financial outlook sections, key elements of the 2016 financial outlook 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 to achieve Superior''s 2016 midpoint guidance 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 excluding the impact of the Canexus Acquisition 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, and excluding the Canexus Acquisition, is detailed in the chart below.
Superior''s total debt to Compliance EBITDA before restructuring and other costs was 3.2X as at December 31, 2015 (3.4X after restructuring and other costs), lower than the 3.5X as at December 31, 2014 (3.6x after restructuring costs). Debt levels and total leverage as at December 31, 2015 were lower than December 31, 2014 levels due to proceeds from the offering and reduced working capital levels in the Energy Services business due to reduced commodity prices. 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 $625.6 million as at December 31, 2015, an increase of $92.4 million from $533.2 million as at December 31, 2014. The increase in borrowing was primarily due to the redemption of the $172.5 million 5.75% debentures and the $69.3 million 7.5% debentures, offset in part by cash proceeds from the issuance of 13.9 million shares in October, 2015.
On December 22, 2015, Superior extended the maturity date of its credit facility to December 22, 2019. In addition to the extension of the syndicated credit facility, Superior has agreed with its lenders that the syndicated credit facility will automatically increase to $775 million from the existing $570 million, with the same financial covenant package, concurrent with the completion of the plan of arrangement between Superior and Canexus Corporation, the acquisition of all of the shares of Canexus Corporation by Superior and certain other related conditions precedent. 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. In addition, Superior secured a committed $650 million bridge financing facility with National Bank of Canada and J.P. Morgan Securities LLC, which was reduced to $445 million in December 2015, to complete the Canexus Acquisition. Permanent financing for the transaction is expected to be obtained in due course through new debt issuances. See "Summary of Cash Flow" for details on Superior''s sources and uses of cash.
On December 14, 2015, Superior redeemed the entire $69.3 million outstanding principal amount of its 7.50% Debentures in accordance with the indenture governing the 7.50% Debentures. Superior used funds from its existing credit facility to fund the redemption of the 7.50% Debentures.
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 December 31, 2015, the fixed-charge coverage ratio for purposes of this agreement was 4.5 to 1.0.
As at December 31, 2015, convertible debentures (before deferred issuance fees and discount values) issued by Superior totaled $247.0 million, $247.2 million lower than December 31, 2014 due to the $172.5 million redemption of the 5.75% convertible debentures and the $69.3 million redemption of the 7.5% 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 $242.5 million as at December 31, 2015, a decrease of $22.3 million from net working capital of $264.8 million as at December 31, 2014. The decrease was due primarily to a decline in net working capital requirements at Energy Services resulting from lower commodity prices, offset in part by higher net working capital requirements at CPD related to an increase in U.S. construction activity. Superior''s net working capital requirements are financed from its credit facility.
As at December 31, 2015, when calculated in accordance with the credit facility, the consolidated secured debt to compliance EBITDA ratio was 1.6 to 1.0 (December 31, 2014 - 1.2 to 1.0) and the consolidated debt to compliance EBITDA ratio was 2.4 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 3.4 to 1.0 as at December 31, 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 December 31, 2015, Superior''s available distribution amount was $109.6 million under the above noted distribution test.
On October 30, 2015, US$30 million of notes, issued October 29, 2003 by way of private placement, were repaid in full.
On October 6, 2015, in conjunction with Superior''s announcement of the Canexus Acquisition, 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 December 31, 2015, Superior had an estimated defined benefit pension solvency deficiency of approximately $14.2 million (December 31, 2014 - $12.3 million) and a going concern surplus of approximately $28.0 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 during the fourth quarter was 135.9 million shares, an increase over the prior year quarter due to the October 2015 issuance of 13.9 million common shares.
As at December 31, 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 the monthly dividend will 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 $92.8 million (before DRIP proceeds of $nil) or $0.72 per share compared to $77.0 million or $0.62 per share in 2014. Dividends paid to shareholders increased by $15.8 million due primarily to the higher dividend and a higher number of shares outstanding associated with the equity offering completed on October 28, 2015. See "Debt Management Update" for further details. Dividends to shareholders are declared at the discretion of Superior''s Board of Directors.
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") commencing with the payment of the December 2015 dividend paid on 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 Superior at a 4% discount to the market price of Superior''s common shares.
Share Offering
On October 6, 2015, Superior 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 $137.4 million. Proceeds from the Offering were used to reduce indebtedness under Superior''s credit facility and for general corporate purposes. The indebtedness was incu
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