TSX: SPF.UN
CALGARY, Aug. 8 /CNW/ -
Highlights
- Operating distributable cash flow prior to discontinued operations for
the second quarter and year to date was $35.7 million and
$112.0 million, compared to the prior year periods of $36.6 million
and $102.1 million.
- Operating distributable cash flow for the second quarter reflects
stronger performance at Winroc and SEM, offset by lower results from
Superior Propane and ERCO as compared to the prior year period.
- Distributable cash flow per trust unit for the second quarter and year
to date was $0.23 and $0.93, consistent with management expectations
and within our 2007 annual guidance estimates.
- Distributions paid per trust unit remained stable at $0.13 per month
($1.56 annualized) for the quarter resulting in a year to date payout
ratio of 82% before strategic plan costs.
- The continued reduction of Senior Bank Debt has resulted in Senior
Debt to EBITDA ratio of 1.6x and Total Debt to EBITDA ratio of 3.0x,
compared to first quarter levels of 1.8x and 3.2x.
- Superior entered into a new $535 million syndicated credit facility
expandable up to $600 million, creating increased financial
flexibility for future growth at a lower cost of capital.
- Superior's US denominated cash flows are currently 84% hedged for 2007
at an exchange rate of 1.21 and 82% for 2008 at an exchange rate of
1.17.
- ERCO announced plans for a US$95 million expansion of its Port Edwards
Chloralkali facility.
Financial Summary
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Three Months Ended Six Months Ended
(millions of dollars, except June 30 June 30
per trust unit amounts) 2007 2006 2007 2006
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Financial
Operating distributable cash flow
before strategic plan costs
Superior Propane 9.2 10.4 51.5 48.0
ERCO Worldwide ("ERCO") 13.7 16.5 38.5 34.9
Winroc 9.5 7.0 15.7 14.8
Superior Energy Management ("SEM") 3.3 2.7 6.3 4.4
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35.7 36.6 112.0 102.1
Discontinued operations -
JW Aluminum ("JWA") - 10.3 - 19.7
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35.7 46.9 112.0 121.8
Interest (11.9) (15.2) (23.0) (29.6)
Corporate cost recovery (expense) (4.4) 2.9 (7.3) (1.1)
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Distributable cash flow before
strategic plan costs 19.4 34.6 81.7 91.1
Strategic plan recovery (costs) 0.2 (6.0) (1.4) (6.0)
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Distributable cash flow 19.6 28.6 80.3 85.1
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Distributable cash flow per trust
unit (before strategic plan costs),
basic $0.23 $0.40 $0.95 $1.07
Distributable cash flow per trust
unit, basic $0.23 $0.33 $0.93 $1.00
Average number of trust units
outstanding (millions) 86.2 85.5 85.9 85.5
Distributions paid per trust unit $0.39 $0.445 $0.78 $1.04
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Key Quarterly Corporate Items
- Corporate costs for the second quarter were $4.4 million, compared to
a recovery of $2.9 million in the prior year quarter.
- On a normalized basis corporate costs for the second quarter were
$2.0 million and $2.4 million in the prior year quarter excluding the
impact of long term incentive costs and recoveries. These costs and
recoveries are primarily related to long term incentive compensation
and reflect a significant decline in unit price in the prior year
period followed by a significant increase in the unit price in the
current year period.
- Interest expense of $11.9 million in the second quarter decreased by
$3.3 million compared to the prior year quarter due to lower debt
levels and the benefit of the appreciation of the Canadian dollar on
US denominated debt.
Corporate Growth Strategy
- Superior Plus completed a comprehensive five year plan of our four
core business units in conjunction with its review of SIFT tax
implications anticipated for 2011.
- All four businesses have excellent growth profiles which should offset
the impact of tax legislation in 2011.
- Superior Propane commenced its program of creating regional centers as
part of its business transformation platform to increase gross profit
per customer, focusing on value-added customer service programs.
- ERCO announced plans to convert its Port Edwards chloralkalai facility
from mercury based technology to membrane technology at an estimated
cost of US $95 million, and the project is expected to be completed in
the last half of 2009.
- Winroc continues to evaluate additional greenfield locations and
acquisition opportunities as part of their diversification growth
strategy.
- Superior Energy Management entered into the high growth fixed-price
retail electricity market in Ontario and expanded into the newly
deregulated British Columbia residential natural gas market.
Superior Propane
- Operating distributable cash flow of $9.2 million for the second
quarter was in line with expectations and compares to $10.4 million
for the prior year quarter.
- Sales volumes increased to 280 from 270 million litres reflecting
colder weather and growth in industrial volumes.
- Propane sales margins were impacted due to competitive pressures on
residential and industrial market segments.
- Operating distributable cash flow guidance for 2007 continues to be
$95 - $100 million, increasing in 2008 to $100 - $105 million.
ERCO
- Operating distributable cash flow of $13.7 million for the second
quarter was in line with expectations and compares to $16.5 million
for the prior year quarter.
- Gross profit remained strong at $48.5 million due to strong pricing
received on sodium chlorate and chloralkali/potassium products
partially offset by the appreciation of the Canadian dollar.
- Pulp prices continued to remain firm throughout the quarter supporting
a stable sodium chlorate demand profile.
- ERCO continued its diversification strategy resulting in North
American sodium chlorate operations contributing 46% of operating
distributable cash flow compared to 69% in the prior year quarter.
- Chemical sales volumes were 193,000 tonnes as compared to
183,000 tonnes in the prior year quarter, reflecting higher operating
rates and the inclusion of volumes at ERCO's Chilean facility which
more than offset the lost volumes associated with the Bruderheim
facility closure.
- Operating distributable cash flow guidance remains unchanged at
$70 - $75 million for 2007 and 2008.
Winroc
- Operating distributable cash flow of $9.5 million for the second
quarter, increased by $2.5 million from the prior year quarter,
principally due to lower maintenance capital expenditures, as stronger
performance in Western Canada was offset by weaker residential markets
in Ontario and the United States.
- Ontario and US residential sales volumes in 2007 continue to remain
soft with improvement expected in these markets in late 2008.
- The fragmented nature of the specialty buildings product distribution
industry, combined with the market downturn in Ontario and US
residential markets, provides for excellent consolidation and
greenfield opportunities for Winroc.
- Operating distributable cash flow guidance for 2007 continues to be
$30 - $35 million, increasing to $32 - $37 million in 2008.
SEM
- Operating distributable cash flow of $3.3 million for the second
quarter increased by $0.6 million over the prior year quarter.
- SEM continues to focus on growing its high-margin residential and
small commercial customer base.
- SEM successfully entered the British Columbia fixed-price natural gas
market adding 15,000 new customers with cash flow expected in late
2007.
- SEM established entry into the Ontario fixed-price electricity market
with Bruce Power LP as the energy provider. SEM has started selling
fixed-price electricity contracts to residential customers as of
August 1, 2007.
- Operating distributable cash flow guidance for 2007 continues to be
$12 - $15 million, increasing to $15 - $18 million in 2008.
Financial Projections
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(millions of dollars, except per trust unit amounts) 2007 2008
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Operating distributable cash flow
Superior Propane 95-100 100-105
ERCO 70-75 70-75
Winroc 30-35 32-37
SEM 12-15 15-18
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Distributable cash per trust unit 1.75-1.90 1.85-2.05
Payout ratio (target of 85% - 90%) 85%(1) 80%(1)
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Average Senior Debt/EBITDA (target of 1.5 to 2.0x) 1.7x(2) 1.7x(2)
Average Total Debt/EBITDA (target of 2.5 to 3.0x) 3.1x(2) 2.8x(2)
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(1) Based on mid-point of the distributable cash flow per unit range.
(2) Superior's debt ratios take into account the impact of the
off-balance sheet receivable sales program amounts, cash on hand,
DRIP and the Port Edwards conversion.
Consolidated Outlook
Superior's second quarter results continue to support year-end expectations of consolidated distributable cash flow per trust unit for 2007 to be between $1.75 and $1.90, increasing in 2008 to the $1.85 to $2.05 range. The payout ratios are also in line with guidance for 2007 and 2008 at 85% and 80%, respectively. The projected Senior Debt to EBITDA and Total Debt to EBITDA ratios of 1.7x and 3.1x for 2007 and 1.7x and 2.8x for 2008 reflect US $54 million of the total US $95 million investment in the Port Edwards conversion. We believe our diversified portfolio of four growth-orientated businesses, our improved financial strength, and our strategic approach to capital allocation will result in long-term stability of distributions and value growth for our Unitholders.
Second Quarter Results
The Fund's financial statements for the period ended June 30, 2007, including its Management's Discussion and Analysis, are available on Superior's website at: www.superiorplus.com under investor information section and at www.sedar.com.
Conference Call
Superior Plus will be conducting a conference call and webcast for investors, analysts, brokers and media representatives to discuss the 2007 Second Quarter Results 9:30 a.m. EST (7:30 a.m. MST) on Thursday, August 9, 2007. To participate in the call, dial: 1-800-587-1893. An archived recording of the call will be available for replay until midnight, August 16, 2007. To access the recording, dial: 1-877-289-8525 and enter pass code 21241309 followed by the number key. Internet users can listen to the call live, or as an archived call, on Superior's website at: www.superiorplus.com under the Events and Presentations section.
Forward Looking and Non-GAAP Statements
Forward Looking Statements
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Except for the historical and present factual information, certain statements contained herein are forward-looking. Such forward-looking statements are not guarantees of future performance and involve a number of known and unknown risks and uncertainties which may cause the actual results of the Superior Plus Income Fund (the "Fund") or its wholly owned partnership, Superior Plus LP ("Superior") in future periods to differ materially from any projections expressed or implied by such forward-looking statements and therefore should not be unduly relied upon. Any forward-looking statements are made as of the date hereof and neither the Fund nor Superior undertakes any obligation to publicly update or revise such statements to reflect new information, subsequent events or otherwise.
Distributable Cash Flow and Other Non-GAAP Measures
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Distributable cash flow of the Fund available for distribution to Unitholders, is equal to cash generated from operations before natural gas customer acquisition costs and changes in working capital, less amortization of natural gas customer acquisition costs and maintenance capital expenditures. Maintenance capital expenditures are equal to capital expenditures incurred to maintain the capacity of Superior's operations and are deducted from the calculation of distributable cash flow. Acquisitions and other capital expenditures incurred to expand the capacity of Superior's operations or to increase its profitability ("growth capital"), are excluded from the calculation of distributable cash flow. Distributable cash flow is the main performance measure used by management and investors to evaluate the performance of the Fund and its businesses. Readers are cautioned that distributable cash flow is not a defined performance measure under Canadian generally accepted accounting principles ("GAAP"), and that distributable cash flow cannot be assured. The Fund's calculation of distributable cash flow, maintenance capital and growth capital may differ from similar calculations used by comparable entities. Operating distributable cash flow is distributable cash flow before corporate and interest expenses. It is also a non-GAAP measure and is used by management to assess the performance of the operating divisions.
EBITDA represents earnings before interest, taxes, depreciation and amortization calculated on a 12 month trailing basis giving pro forma effect to acquisitions and divestitures and is used by Superior to calculate its debt covenants and other credit information. Superior's calculation of EBITDA may differ from similar calculations used by comparable entities.