- Special Committee of the Board formed to conduct a Strategic Review
to maximize unitholder value
- Monthly cash distribution reduced to $0.13 per trust unit
- Unitholder Rights Plan approved by Board
TSX: SPF.UN
CALGARY, April 24 /CNW/ - Superior Plus Income Fund (the "Fund") and
Superior Plus Inc. ("Superior") announced today that they have initiated a
comprehensive strategic review process, intended to maximize unitholder value.
The strategic review has been launched due to anticipated weakness in the
operating results of ERCO Worldwide over the medium term, one of the principal
businesses of the Fund, following the recent completion of an intensive review
of ERCO's operations and outlook, as well as due to the reduction of the
Fund's monthly distribution, and the recent weakness in the Fund's unit price.
The strategic review process will include consideration of all feasible
alternatives to maximize unitholder value. In commenting on the process, Grant
Billing, Executive Chairman of Superior, stated: "While we see significant
challenges for ERCO Worldwide over the medium term, Winroc our wall and
ceiling products distributor is continuing to grow with numerous opportunities
to expand. JW Aluminum is experiencing strong markets and Superior Energy
Management, our natural gas retailing business, is growing. Superior Propane
has had significantly weaker results recently due to very warm weather but has
begun to execute on its plan to improve its profitability. All of these
businesses, including ERCO, have valuable franchises and we intend to
undertake our review in a deliberate manner. In the interim, we need to
recognize our current operating realities, which include the impact of the
strong Canadian dollar, high energy prices, near term weakness in Superior
Propane's results and the anticipated weakness in ERCO, while our current
liquidity and financial position remain sound."
Superior has $425 million in committed revolving bank facilities of which
approximately $150 million is currently undrawn and available and is
considered to be sufficient to meet Superior's net working capital funding
requirements and expected growth capital expenditures. Superior's senior debt
covenants restrict its ability to make distributions to the Fund and incur
additional long-term indebtedness if Senior Debt to EBITDA exceeds 3.0 times.
There is no default of Superior's debt covenants unless total debt of Superior
exceeds 5.5 times EBITDA. As at March 31, 2006, Senior Debt (including
$35 million raised from the accounts receivable sales program) to EBITDA was
2.6 times.
As a result of these developments, the Board of Directors have today
approved a reduction in the Fund's monthly cash distribution rate to $0.13
from the current level of $0.185 per trust unit, commencing with the May
distribution, payable on June 15, 2006. This is believed to be a prudent
level, based on the current outlook.
A Strategic Review Committee of the Board has been formed, consisting of
Jim MacDonald (Chair), Grant Billing, Norm Gish, and David Smith to oversee
the process. The Board has received advice from financial and legal advisors,
which are currently being retained.
Geoff Mackey, President and Chief Executive Officer of Superior stated,
"In conjunction with this announcement we are providing an update on each of
our businesses as follows." Further information will be provided with the
release of the results of the first quarter on May 3, 2006.
ERCO Worldwide
--------------
ERCO has completed a review of North American sodium chlorate supply and
demand given the announcements since early March 2006 of three additional pulp
mills reducing or closing operations. The instability of the North American
bleached pulp industry due to high energy and fibre costs and the rising
Canadian dollar, is anticipated to continue and may result in an oversupply of
sodium chlorate, leading to sodium chlorate plant closures. ERCO has also
recently received initial estimates of power supply costs starting January 1,
2007 for the Valdosta, Georgia sodium chlorate plant which could significantly
reduce the economic operating level of this facility. ERCO's chloralkali
operations continue to perform above historical levels and demand is expected
to return to more balanced conditions going forward. International
opportunities for sodium chlorate and related technologies are robust and are
expected to lead to growth over the next several years. On balance, we expect
financial performance to continue to move lower over the medium term.
Superior Propane
----------------
Superior Propane initiated a review of operations given the record warm
weather in Canada this winter, particularly in January 2006, and increasing
costs experienced in 2005. A cost reduction program, revenue enhancement
program and initiatives to enhance customer service are being implemented.
These initiatives, along with a return to normal winter weather, are expected
to generate positive financial performance as we look beyond 2006.
JW Aluminum
-----------
JW Aluminum, acquired in October 2005, enjoys strong and growing markets
for its principal products, including the fin stock market, as a result of new
government energy efficiency regulations implemented in the United States.
Start-up of the Phase II expansion of the Russellville plant anticipated for
later this year has been delayed until 2007, due to equipment procurement
delays. Overall, the business continues to work on optimizing its production
mix and will continue to seek opportunities to supply the growing demands of
its customers.
Winroc
------
Winroc continues to provide strong operating results given the strength
of the commercial, renovation and housing construction markets, particularly
in the western North American markets, where it has a strong presence. We
continue to see organic growth and consolidation opportunities in this highly
fragmented industry. The combination of good branch performance from existing
operations and growth potential is anticipated to generate growing financial
results.
Superior Energy Management ("SEM")
----------------------------------
SEM has significantly improved its performance starting in the fall of
2005 and continuing into 2006 with strength in both margins and contracted
sales volumes. We see continuing opportunities to further grow the business.
Unitholder Rights Plan
----------------------
The Board of Directors has approved the adoption of a short term
Unitholder Protection Rights Plan (the "Rights Plan") while it undertakes the
strategic review process. The Rights Plan is designed to encourage the fair
treatment of the unitholders of the Fund in connection with any takeover
offer. The Rights Plan is not intended to prevent takeover bids for the Fund
but will provide the Board of Directors and unitholders with an appropriate
amount of time to fully consider any unsolicited takeover bid and will allow
the Board of Directors to pursue other alternatives, if appropriate, to
maximize unitholder value. The Rights Plan is effective immediately and has a
term of 6 months and was not adopted in response to any specific proposal to
acquire control of the Fund, nor is the Fund aware of any such effort. The
Rights Plan is similar to plans adopted by other Canadian trusts and
companies.
The rights issued under the Rights Plan will become exercisable only when
a person, including any persons related to it, acquires or announces its
intention to acquire 20% or more of the Fund's outstanding units without
complying with the "Permitted Bid" provisions of the Rights Plan or without
approval of the Board of Directors. Should such an acquisition occur, each
right would entitle a holder, other than the acquiring person and persons
related to it, to purchase units at a 50% discount to the market price.
A Permitted Bid is a bid made to all unitholders that, among other
things, is open for at least 60 days. If at the end of the 60 days, at least
50% of the outstanding Units, other than those owned by the offeror and
certain related parties, have been tendered, the offeror may take up and pay
for the Units but must extend the bid for a further 10 days to allow other
unitholders to tender.
About the Fund
--------------
The Fund holds 100% of Superior Plus Inc., which has five different
businesses. The Fund's operating distributable cash flow by business for the
year ended December 31, 2005 after giving effect to the acquisition of JW
Aluminum, as if it had been acquired January 1, 2005, is as follows:
35% Superior Propane, Canada's largest distributor of propane, related
products and services;
35% ERCO Worldwide, a provider of specialty chemicals and related
technology;
17% JW Aluminum, a manufacturer of specialty flat-rolled aluminum
products;
11% Winroc, a distributor of specialty construction products to the walls
and ceilings construction industry; and
2% Superior Energy Management, a fixed price natural gas retailer.
The Fund's trust units and convertible debentures trade on the Toronto
Stock Exchange as follows:
<<
Trading Symbol Security Issued and Outstanding
-------------------------------------------------------------------------
SPF.un Trust Units 85.5 million
SPF.db 8% Debentures, Series 1 $ 8.1 million principal amount
SPF.db.a 8% Debentures, Series 2 $ 59.0 million principal amount
SPF.db.b 5.75% Debentures $174.9 million principal amount
SPF.db.c 5.85% Debentures $ 75.0 million principal amount
-------------------------------------------------------------------------
Analyst Conference Call: Superior Plus will be conducting a conference
call and webcast for investors, analysts, brokers and media representatives to
discuss this news release at 10:30 a.m. EST (8:30 a.m. MST) on Monday,
April 24, 2006. To participate in the call, dial: 1-866-249-2157. A recording
of the call will be available for replay until midnight, May 2, 2006 by
dialing: 877-289-8525 and entering the access code: 21186361 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 Statements: Certain information included herein is
forward-looking. Forward-looking statements include, without limitation,
statements regarding the future financial position, business strategy,
budgets, projected costs, capital expenditures, financial results, taxes and
plans and objectives of or involving the Fund and Superior. Many of these
statements can be identified by looking for words such as "believe",
"expects", "expected", "will", "intends", "projects", "anticipates",
"estimates", "continues", or similar words. The Fund and Superior believe the
expectations reflected in such forward-looking statements are reasonable but
no assurance can be given that these expectations will prove to be correct and
such forward-looking statements should not be unduly relied upon.
Forward-looking statements are not guarantees of future performance and
involve a number of risks and uncertainties some of which are described in the
Fund's annual report, renewal annual information form and other continuous
disclosure documents. Such forward-looking statements necessarily involve
known and unknown risks and uncertainties, which may cause the Fund's or
Superior's actual performance and financial results in future periods to
differ materially from any projections of future performance or results
expressed or implied by such forward-looking statements. Any forward-looking
statements are made as of the date hereof and neither the Fund nor Superior
undertakes any obligation, except as required under applicable law, to
publicly update or revise such statements to reflect new information,
subsequent or otherwise.
Non-GAAP Measures
-----------------
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 net working capital, less
amortization of natural gas customer acquisition costs and maintenance capital
expenditures. Maintenance capital expenditures are equal to capital
expenditures incurred to sustain the ongoing 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. See Note 1 to the
Consolidated Financial Statements for 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, maintenance
capital expenditures and growth capital are not defined performance measures
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 expenditures 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 acquisition 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.
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