TORONTO--(BUSINESS WIRE)--Superior Plus Corp. (“Superior”) (TSX:SPB) announced today its financial and operating results for the first quarter ended March 31, 2022. Unless otherwise expressed, all financial figures are expressed in Canadian dollars.
- Q1 2022 Adjusted EBITDA1 was $250.4 million, an 18% increase compared to 2021
- Q1 2022 Net earnings from continuing operations of $141.0 million compared to $75.4 million in 2021
- Superior is increasing its 2022 Adjusted EBITDA Guidance range to $425 million to $465 million
- Total acquisitions announced or acquired in 2022 is $493 million, including the $302 million acquisition of Kamps Propane and Kiva Energy Inc.
- Superior’s Leverage Ratio1 was 4.0x as at March 31, 2022, which is within the targeted Leverage Ratio range of 3.5x to 4.0x
- Q1 2022 U.S. Propane Distribution sales volumes of 618 million litres, a 13% increase from 2021
- Q1 2022 Canadian Propane Distribution sales volumes of 779 million litres, a 9% increase from 2021
1 Adjusted EBITDA and Leverage Ratio are not standardized measures under International Financial Report Standards (“IFRS”). See “Non-GAAP Financial Measures and Reconciliations” section below.
“We achieved an 18% increase in Adjusted EBITDA and 16% increase in EBITDA from operations2, driven by contribution from our acquisitions completed in the past 12 months, colder weather, higher margins and improved demand related to easing of COVID-19 restrictions,” said Luc Desjardins, President and Chief Executive Officer. “Based on our first quarter results and the expected contribution from the acquisition of the propane distribution assets of Quarles Petroleum Inc., we are increasing our Adjusted EBITDA guidance range to $425 million to $465 million. Our EBITDA from operations of $251.6 million was also a record for the Energy Distribution business in the first quarter, demonstrating the success of our recent acquisitions and the improved commercial demand.”
2 EBITDA from operations is not a standardized measure under IFRS. See “Non-GAAP Financial Measures and Reconciliations” section below.
Ms. Beth Summers, Executive Vice President and Chief Financial Officer added, “From a financial perspective, we are well-positioned to execute our growth strategy with ample liquidity following our successful common equity issuance for gross proceeds of $288 million. We have further reduced our debt and expect to fund future acquisitions using cash flow from operations and incremental debt.”
Financial Highlights:
- Net earnings from continuing operations of $141.0 million in the first quarter increased $65.6 million or 87% over the first quarter of 2021 primarily due to higher gross profit related to increased sales volumes and increased average margins, lower finance expense and higher gains on derivatives and foreign currency translation of borrowings, partially offset by higher selling, distribution and administration costs (“SD&A”) and income tax expense.
- Superior achieved first quarter Adjusted EBITDA of $250.4 million, a $38.8 million or 18% increase over the prior year quarter primarily due to higher EBITDA from operations in U.S. propane distribution (“U.S. Propane”) and Canadian Propane distribution (“Canadian Propane”) and lower corporate costs3, partially offset by lower realized gains on foreign exchange hedging contracts.
- Adjusted Operating Cash Flow (“AOCF”) before transaction and other costs3 during the first quarter was $232.4 million, a $47.1 million or 25% increase compared to the prior year quarter primarily due to higher Adjusted EBITDA, lower interest expense and lower current income tax expense. AOCF before transaction and other costs per share was $1.13, an increase of $0.23 per share or 26% primarily due to the increase in AOCF before transaction and other costs.
- Superior’s Leverage Ratio for the trailing twelve months ended March 31, 2022, was 4.0x, which is within Superior’s target range of 3.5x to 4.0x.
- Superior is increasing its Adjusted EBITDA guidance range from the previously disclosed guidance range of $410 million to $450 million to a range of $425 million to $465 million. The increase in the Adjusted EBITDA guidance range is due to the first quarter results and the expected contribution from the acquisition of the propane distribution assets of Quarles Petroleum Inc. Average weather for the remainder of 2022 is anticipated to be consistent with the five-year average for the U.S. and Canada.
3 Corporate costs and AOCF before transaction and other costs are not standardized measures under IFRS. See “Non-GAAP Financial Measures and Reconciliations” section below.
Divisional Financial Highlights:
- U.S. Propane Adjusted EBITDA from operations of $162.9 million, increased $22.8million or 16% from the prior year quarter primarily due to the contribution from acquisitions completed in the last twelve months and higher average margins. Average weather, as measured by degree days, across markets where U.S. propane operates for the first quarter of 2022 was 3% colder than the prior year quarter and 5% colder than the five-year average.
- Canadian Propane Adjusted EBITDA of $88.7 million, increased $12.4 million or 16% from the prior year quarter primarily due to higher average margins related to stronger wholesale propane fundamentals and higher sales volumes related to improved commercial and wholesale customer demand and colder weather. Average weather across Canada for the first quarter of 2022, as measured by degree days was 8% colder than the prior year and 3% colder than the five-year average.
- Corporate costs for the first quarter of 2022 were $2.7 million, a $7.6 million decrease compared to the prior year quarter due to lower long-term incentive plan costs related to share price decline in the current quarter. In the first quarter of 2022, Superior had realized gains on foreign currency hedging contracts of $1.5 million, a decrease of $4.0 million compared to the prior year quarter due to the average hedge rate of the foreign exchange contracts and the strengthening of the Canadian dollar.
Strategic Developments and Acquisition Update
- On March 8, 2022, Superior acquired the retail propane distribution assets of Reid Gas for an aggregate purchase price of approximately US$1.3 million (C$1.7 million) before adjustments for working capital.
- On March 23, 2022, Superior acquired all the issued and outstanding shares of Kamps Propane and Kiva Energy for an aggregate purchase price of approximately US$240 million (C$302 million) before adjustments for working capital.
- On March 28, 2022, Superior entered into an agreement to acquire the retail propane distribution and refined fuels assets of Quarles Petroleum Inc. (the “Quarles assets”) for an aggregate purchase price of approximately US$145 million (C$180 million) before adjustments for working capital. This transaction is subject to customary regulatory and commercial closing conditions and is anticipated to close by June 30, 2022.
- On April 1, 2022, Superior acquired the assets of Heartland Industries for an aggregate purchase price of approximately US$7.1 million (C$8.9 million) before adjustments for working capital.
- On April 6, 2022, Superior closed its previously announced bought deal equity offering and issued 25,670,300 common shares (“Shares”) at a price of $11.20 per Share (the “Offering Price”), for aggregate gross proceeds of approximately $288 million (the “Offering”). Superior used the net proceeds of the Offering to reduce existing indebtedness under the revolving credit facility.
- On May 5, 2022, Superior finalized the definitive agreement with the Charbone Corporation to distribute green hydrogen for commercial and industrial customers in Quebec.
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Financial Overview |
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Three Months Ended |
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March 31 |
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(millions of dollars, except per share amounts) |
|
2022 |
|
2021 |
|
|
Revenue |
|
1,170.4 |
|
839.5 |
|
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Gross Profit |
|
393.9 |
|
349.1 |
|
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Net earnings from continuing operations |
|
141.0 |
|
75.4 |
|
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Net earnings from continuing operations attributable to Superior per share, diluted (3) |
$ |
0.68 |
$ |
0.36 |
|
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EBITDA from operations (1) |
|
251.6 |
|
216.4 |
|
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Adjusted EBITDA (1) |
|
250.4 |
|
211.6 |
|
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Net cash flows from operating activities |
|
121.8 |
|
126.1 |
|
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Net cash flows from operating activities per share, diluted (3) |
$ |
0.59 |
$ |
0.61 |
|
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AOCF before transaction and other costs (1)(2) |
|
232.4 |
|
185.3 |
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AOCF before transaction and other costs per share, diluted (1)(2)(3) |
$ |
1.13 |
$ |
0.90 |
|
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AOCF (1) |
|
225.3 |
|
175.9 |
|
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AOCF per share, basic and diluted (1)(3) |
$ |
1.09 |
$ |
0.85 |
|
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Cash dividends declared on common shares |
|
31.7 |
|
31.7 |
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Cash dividends declared per share |
$ |
0.18 |
$ |
0.18 |
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(1) |
EBITDA from operations, Adjusted EBITDA, AOCF before transaction and other costs, and AOCF are not standardized measures under IFRS. See “Non-GAAP Financial Measures and Reconciliations”. |
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(2) |
Transaction and other costs for the three months ended March 31, 2022 and 2021 are related to acquisition activity, restructuring and the integration of acquisitions and the divestiture of the Specialty Chemical segment. See “Transaction and Other Costs” for further details. |
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(3) |
The weighted average number of shares outstanding for the three months ended March 31, 2022 was 206.0 million (three months March 31, 2021 was 206.0 million). The weighted average number of shares assumes the exchange of the preferred shares into common shares. There were no other dilutive instruments with respect to AOCF per share and AOCF before transaction and other costs per share for the three months ended March 31, 2022 and 2021. |
Segmented Information |
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Three Months Ended |
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March 31 |
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(millions of dollars) |
2022 |
2021 |
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EBITDA from operations(1) |
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|
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U.S. Propane Distribution Adjusted EBITDA(1) |
162.9 |
140.1 |
|
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Canadian Propane Distribution Adjusted EBITDA(1) |
88.7 |
76.3 |
|
|
|
251.6 |
216.4 |
|
| (1) | EBITDA from operations and Adjusted EBITDA are not standardized measures under IFRS. See “Non-GAAP Financial Measures and Reconciliations” section below. Comparative figures have been restated to exclude the results of the Specialty Chemicals segment as a result of the announced divestiture and subsequent closing of the transaction. See the unaudited consolidated financial statements and notes thereto as at and for the quarters ended March 31, 2022 and 2021. |
Debt and Leverage Update
Superior is focused on managing both Total Net Debt and its Leverage Ratio. Superior’s Leverage Ratio at March 31, 2022 was 4.0x, modestly higher than 3.9x at December 31, 2021 primarily due to the increase in Total Net Debt, partially offset by the increase in Pro Forma Adjusted EBITDA. Pro forma the application of the net proceeds from the equity issuance of approximately $275 million, the Leverage Ratio would be 3.4x, which is modestly below the targeted range of 3.5x to 4.0x. The acquisition of the Quarles assets is expected to increase the Leverage Ratio to the lower end of the targeted range of 3.5x to 4.0x as the acquisition of the Quarles assets is anticipated to be funded primarily with borrowings from the revolving credit facility.
MD&A and Financial Statements
Superior’s MD&A, the unaudited Interim Consolidated Financial Statements and the Notes to the unaudited condensed consolidated financial statements as at and for the three months ended March 31, 2022 provide a detailed explanation of Superior’s operating results. These documents are available online at Superior’s website at www.superiorplus.com under the Investor Relations section and on SEDAR under Superior’s profile at www.sedar.com.
Virtual Annual General Meeting
We are holding our annual meeting in a virtual-only format so shareholders may attend and participate in the annual meeting via live webcast on Tuesday, May 10, 2022 at 4:00 PM EDT. Please see Superior's website at www.superiorplus.com for detailed instructions.
2022 First Quarter Conference Call
Superior will be conducting a conference call and webcast for investors, analysts, brokers and media representatives to discuss the First Quarter Results at 10:30 a.m. EDT on Wednesday, May 11, 2022. To participate in the call, dial: 1-844-389-8661. Internet users can listen to the call live, or as an archived call on Superior’s website at www.superiorplus.com under the Events section.
Non-GAAP Financial Measures and Reconciliations
Throughout this news release, Superior has identified certain terms that it uses that are not standardized measures under International Financial Reporting Standards (“Non-GAAP Financial Measures”), and therefore may not be comparable to similar financial measures disclosed by other issuers. Reconciliations of these Non-GAAP Financial Measures to the most directly comparable financial measures in Superior’s annual financial statements are provided below. Certain additional disclosures for these Non-GAAP Financial Measures, including an explanation of the composition of these financial measures, how they provide useful information to an investor and any additional purposes management uses for them are incorporated by reference from the “Non-GAAP Financial Measures and Reconciliations” section in Superior’s First Quarter 2022 MD&A dated May 10, 2022, available on www.sedar.com
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Propane Distribution |
Results from
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Corporate |
Total |
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For the Three Months Ended March 31, 2022 |
U.S. |
Canada |
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Earnings (loss) from continuing operations before income taxes |
128.2 |
|
69.1 |
|
197.3 |
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(10.2 |
) |
187.1 |
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Adjust for: |
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|
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Amortization and depreciation included in selling, distribution and administrative costs |
32.9 |
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18.5 |
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51.4 |
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0.2 |
|
51.6 |
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Finance expense |
1.3 |
|
0.9 |
|
2.2 |
|
13.8 |
|
16.0 |
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EBITDA |
162.4 |
|
88.5 |
|
250.9 |
|
3.8 |
|
254.7 |
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Loss (gain) on disposal of assets and other |
0.2 |
|
(1.2 |
) |
(1.0 |
) |
– |
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(1.0 |
) |
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Transaction, restructuring and other costs |
3.9 |
|
0.2 |
|
4.1 |
|
3.0 |
|
7.1 |
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Unrealized gains on derivative financial instruments |
(3.6 |
) |
1.2 |
|
(2.4 |
) |
(8.0 |
) |
(10.4 |
) |
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Adjusted EBITDA |
162.9 |
|
88.7 |
|
251.6 |
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(1.2 |
) |
250.4 |
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Adjust for: |
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|
|
|
|
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Current income tax expense |
– |
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– |
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– |
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(1.7 |
) |
(1.7 |
) |
|||||
Transaction, restructuring and other costs |
(3.9 |
) |
(0.2 |
) |
(4.1 |
) |
(3.0 |
) |
(7.1 |
) |
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Interest expense |
(0.9 |
) |
(0.9 |
) |
(1.8 |
) |
(14.5 |
) |
(16.3 |
) |
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AOCF |
158.1 |
|
87.6 |
|
245.7 |
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(20.4 |
) |
225.3 |
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Propane Distribution |
Results from
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Corporate |
Total |
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For the Three Months Ended March 31, 2021 |
U.S. |
Canada |
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Earnings from continuing operations before income taxes |
106.3 |
|
55.5 |
|
161.8 |
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(60.0 |
) |
101.8 |
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Adjust for: |
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Amortization and depreciation included in selling, distribution and administrative costs |
30.6 |
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17.8 |
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48.4 |
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0.1 |
|
48.5 |
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Finance expense |
1.2 |
|
0.9 |
|
2.1 |
|
60.2 |
|
62.3 |
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EBITDA |
138.1 |
|
74.2 |
|
212.3 |
|
0.3 |
|
212.6 |
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Loss (gain) on disposal of assets and other |
0.1 |
|
(0.7 |
) |
(0.6 |
) |
– |
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(0.6 |
) |
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Transaction, restructuring and other costs |
3.0 |
|
3.3 |
|
6.3 |
|
3.1 |
|
9.4 |
|
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Unrealized losses on derivative financial instruments(1) |
(1.1 |
) |
(0.5 |
) |
(1.6 |
) |
(8.2 |
) |
(9.8 |
) |
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Adjusted EBITDA |
140.1 |
|
76.3 |
|
216.4 |
|
(4.8 |
) |
211.6 |
|
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Adjust for: |
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|
|
|
|
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Current income tax expense |
– |
|
– |
|
– |
|
(4.3 |
) |
(4.3 |
) |
|||||
Transaction, restructuring and other costs |
(3.0 |
) |
(3.3 |
) |
(6.3 |
) |
(3.1 |
) |
(9.4 |
) |
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Interest expense |
(0.7 |
) |
(1.1 |
) |
(1.8 |
) |
(20.2 |
) |
(22.0 |
) |
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AOCF |
136.4 |
|
71.9 |
|
208.3 |
|
(32.4 |
) |
175.9 |
|
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(1) |
Unrealized gains (losses) on derivative financial instruments includes the realized foreign exchange gain on the settlement of the US$350 million senior notes of $20 million, see Note 13 of the unaudited condensed consolidated financial statements. |
Total Net Debt to Adjusted EBITDA Leverage Ratio and Pro Forma Adjusted EBITDA
Adjusted EBITDA for the Total Net Debt to Adjusted EBITDA Leverage Ratio is defined as Adjusted EBITDA calculated on a 12-month trailing basis giving pro forma effect to acquisitions and dispositions adjusted to the first day of the calculation period (“Pro Forma Adjusted EBITDA”). Pro Forma Adjusted EBITDA is used by Superior to calculate its Total Net Debt to Adjusted EBITDA Leverage Ratio.
To calculate the Total Net Debt to Adjusted EBITDA Leverage Ratio divide the sum of borrowings before deferred financing fees and lease liabilities by Pro Forma Adjusted EBITDA. The Total Net Debt to Adjusted EBITDA Leverage Ratio is used by Superior and investors to assess its ability to service debt.
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March 31 |
December 31 |
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(in millions) |
2022 |
2021 |
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Current borrowings |
20.9 |
|
11.4 |
|
|
Current lease liabilities |
47.2 |
|
44.9 |
|
|
Non-current borrowings |
1,687.2 |
|
1,444.9 |
|
|
Non-current lease liabilities |
153.5 |
|
129.6 |
|
|
|
1,908.8 |
|
1,630.8 |
|
|
Add back deferred financing fees and discounts |
20.9 |
|
22.1 |
|
|
Deduct cash and cash equivalents |
(44.1 |
) |
(28.4 |
) |
|
Net debt |
1,885.6 |
|
1,624.5 |
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|
|
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Adjusted EBITDA for the year ended 2021 |
398.4 |
|
398.4 |
|
|
Adjusted EBITDA for the quarter ended 2022 |
250.4 |
|
– |
|
|
Adjusted EBITDA for the quarter ended 2021 |
(211.6 |
) |
– |
|
|
Pro-forma adjustment |
35.2 |
|
18.4 |
|
|
Pro-forma Adjusted EBITDA for the year ended |
472.4 |
|
416.8 |
|
|
|
|
|
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Leverage Ratio |
4.0x |
3.9x |
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Forward Looking Information
Certain information included herein is forward-looking information within the meaning of applicable Canadian securities laws. Forward-looking information may include statements regarding the objectives, business strategies to achieve those objectives, expected financial results (including those in the area of risk management), economic or market conditions, and the outlook of or involving Superior, Superior LP and its businesses. Such information is typically identified by words such as “anticipate”, “believe”, “continue”, “estimate”, “expect”, “plan”, “forecast”, “future”, “outlook, “guidance”, “may”, “project”, “should”, “strategy”, “target”, “will” or similar expressions suggesting future outcomes.
Forward-looking information in this document includes: future financial position, expected 2022 Adjusted EBITDA, the anticipated closing of the acquisition of the Quarles assets and the associated timing, the expected contribution from the acquisition of the Quarles assets, pro forma Leverage Ratio after the close of the acquisition of the Quarles assets, funding of the Quarles assets using borrowings from the revolving credit facility, expectations related to the funding of future acquisitions using cash flow from operations and incremental debt, commercial demand recovery in the second half of 2022, and average weather for the remainder of 2022 consistent with the five-year average.
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 and businesses it has acquired. Such assumptions include the satisfaction of the conditions to closing, including receipt of required regulatory approvals for the acquisition of the Quarles assets, obtaining the expected synergies from the Kamps acquisition and other acquisitions consistent with historical averages at approximately 25% over the relevant period, no material divestitures, anticipated financial performance, current business and economic trends, the amount of future dividends paid by Superior, business prospects, utilization of tax basis, regulatory developments, currency, exchange and interest rates, future commodity prices relating to the oil and gas industry, future oil rig activity levels, trading data, cost estimates, our ability to obtain financing on acceptable terms, expected net working capital and capital expenditure requirements of Superior or Superior LP, and the assumptions set forth under the “Financial Outlook” sections of our MD&A. The forward looking information is also subject to the risks and uncertainties set forth below.
By its very nature, forward-looking information involves numerous assumptions, risks and uncertainties, both general and specific. Should one or more of these risks and uncertainties materialize or should underlying assumptions prove incorrect, as many important factors are beyond our control, Superior’s or Superior LP’s actual performance and financial results may vary materially from those estimates and intentions contemplated, expressed or implied in the forward-looking information. These risks and uncertainties include incorrect assessments of value when making acquisitions, increases in debt service charges, the loss of key personnel, the anticipated impact of the COVID-19 pandemic and the related public health restrictions, fluctuations in foreign currency and exchange rates, inadequate insurance coverage, liability for cash taxes, counterparty risk, compliance with environmental laws and regulations, reduced customer demand, operational risks involving our facilities, force majeure, labour relations matters, our ability to access external sources of debt and equity capital, and the risks identified in (i) our MD&A under the heading “Risk Factors” and (ii) Superior’s most recent Annual Information Form. The preceding list of assumptions, risks and uncertainties is not exhaustive.
When relying on our forward-looking information to make decisions with respect to Superior, investors and others should carefully consider the preceding factors, other uncertainties and potential events. Any forward-looking information is provided as of the date of this document and, except as required by law, neither Superior nor Superior LP undertakes to update or revise such information to reflect new information, subsequent or otherwise. For the reasons set forth above, investors should not place undue reliance on forward-looking information.
For more information about Superior, visit our website at www.superiorplus.com.
