Superior Plus Corp. Announces 2022 Third Quarter Results and Confirms 2022 Adjusted EBITDA Guidance

TORONTO--(BUSINESS WIRE)--Nov 9, 2022--

Superior Plus Corp. (“Superior”) (TSX: SPB) announced today its financial and operating results for the third quarter ended September 30, 2022. Unless otherwise expressed, all financial figures are expressed in Canadian dollars.

• Q3 2022 Adjusted EBITDA 1 was negative $8.8 million and consistent with management expectations
  • Q3 results were impacted by the timing of acquisitions completed in the past nine months and related fixed costs
• Adjusted EBITDA for the nine months ended September 30, 2022 was $267.2 million, an increase of 4% from 2021
• Superior is confirming its 2022 Adjusted EBITDA Guidance range of $425 million to $465 million
• Superior has completed 8 acquisitions in 2022 for total consideration of ~$514 million, and expects synergies in the range of $10 million to $12 million within 18 to 24 months
• Superior’s U.S. Propane Distribution and Wholesale Propane Distribution businesses achieved increased sales volumes compared to the prior year quarter:
  • Q3 2022 U.S. Propane Distribution sales volumes of 204 million litres, a 21% increase from 2021
  • Q3 2022 Wholesale Propane Distribution sales volumes of 278 million litres, a 67% increase from 2021

• Q3 2022 Canadian Propane Distribution sales volumes of 180 million litres, a modest decline from Q3 2021 due to significantly warmer weather in Western Canada

• Q3 2022 Net loss from continuing operations was $206.9 million compared to $35.9 million in Q3 2021 primarily due to the unrealized loss on financial and non-financial derivatives and foreign currency translation related to the significant changes in foreign exchange rates late in the third quarter and changes in the market prices of commodities during the third quarter

In announcing these results, Luc Desjardins, President and Chief Executive Officer said, “Our third quarter results were in line with our expectations and, based on our year-to-date performance, we are confirming our 2022 Adjusted EBITDA guidance range. Our sales volumes in the U.S. were higher due to the acquisitions completed in the past nine months, including Kamps Propane, Kiva Energy and the assets of the Quarles Delivered Fuels business. During the quarter, we also made great progress on the integration of the Quarles and Kamps acquisitions ahead of the heating season. These efforts will allow us to make operational improvements on the businesses sooner than anticipated.”

Mr. Desjardins continued, “Consistent with our dynamic capital allocation approach communicated at our Investor Day in 2021, we commenced a normal course issuer bid on October 13, 2022, which provides us with an opportunity to return capital to shareholders and affirms our commitment to creating long-term shareholder value. We also completed three tuck-in acquisitions in Ontario, North Carolina and California as we continue to execute our growth through acquisition strategy in the U.S. and Canada. With these three acquisitions, we achieved the low end of our 2022 acquisition target range of $200 million to $300 million in enterprise value, excluding the Kamps acquisition.”

Financial Highlights:

• Net loss from continuing operations of $206.9 million in the third quarter compared to $35.9 million in the prior year quarter primarily due to a loss on derivatives and foreign currency translation of borrowings compared to a gain in the prior year quarter, higher selling, distribution and administration costs (“SD&A”), income tax expense and finance expense, partially offset by higher gross profit. The loss on derivatives and foreign currency translation of borrowings compared to a gain in the prior year quarter was primarily due to changes in the market prices of commodities, timing of maturities of underlying financial instruments and changes in foreign exchange rates relative to amounts hedged.
• Superior’s third quarter Adjusted EBITDA was ($8.8) million, a $21.8 million decrease compared to the prior-year quarter, primarily due to lower EBITDA from operations 2. EBITDA from operations decreased primarily due to lower Adjusted EBITDA in Canadian retail propane distribution (“Canadian Propane”), lower Adjusted EBITDA in U.S. retail propane distribution (“U.S. Propane”) and a realized loss on foreign exchange hedging contracts compared to a gain in the prior year quarter and higher corporate costs 2, partially offset by modestly higher Adjusted EBITDA in North American wholesale propane distribution (“Wholesale Propane”).
• U.S. Propane Adjusted EBITDA of ($10.9) million decreased $3.1 million from the prior year quarter of ($7.8) million primarily due to higher operating expenses, partially offset by higher sales volumes from acquisitions completed in the last twelve months and higher average margins.
• Canadian Propane Adjusted EBITDA of $3.6 million decreased $14.4 million or 80% from the prior year quarter of $18.0 million primarily due to higher operating costs, modestly lower sales volumes and average margins. Operating costs were higher primarily due to the $8.2 million Canadian Emergency Wage Subsidy (“CEWS”) received in the prior year quarter, and $nil received in the current quarter. Sales volumes decreased by 3% primarily due to lower commercial demand related to warmer weather in Western Canada. Average weather in Western Canada for the three months ended September 30, 2022, as measured by degree days was 27% warmer than the prior year quarter. Average margins were lower primarily due to the impact from the sale of carbon offset credits in the prior year quarter.
• Wholesale Propane Adjusted EBITDA of $5.1 million increased $1.9 million or 59.4% from the prior year quarter of $3.2 million primarily due to the contribution from the acquisition of Kiva Energy Inc. (“Kiva”).
• Corporate costs for the third quarter of 2022 were $6.2 million, a $5.2 million increase compared to the prior year quarter of $1.0 million primarily due to higher insurance costs, higher professional fees, and a lower long-term incentive plan recovery related to less of a share price decline in the current quarter, and the impact of inflation. In the third quarter of 2022, Superior had a realized loss on foreign currency hedging contracts of $0.4 million, compared to a realized gain of $0.6 million in the prior year quarter due to the impact from the average hedge rate of foreign exchange hedging contracts and the weakening of the Canadian dollar.
• Adjusted Operating Cash Flow (“AOCF”) before transaction and other costs 2 during the third quarter was ($32.9) million, a $28.1 million decrease compared to the prior year quarter primarily due to lower Adjusted EBITDA and higher interest expense. AOCF before transaction and other costs per share was ($0.14), a decrease of $0.12 per share due primarily to the decrease in AOCF before transaction and other costs, partially offset by the impact of higher weighted average shares outstanding. The weighted average shares outstanding increased due to the 25.7 million shares issued at the close of the bought-deal equity offering announced on March 28, 2022.
• Net loss from continuing operations for the nine months ended September 30, 2022 was $150.9 million, compared to net earnings from continuing operations of $3.4 million in the prior year period. The decrease was primarily due to a loss on derivatives and foreign currency translation of borrowings and higher SD&A, partially offset by higher gross profit, lower finance expense and higher income tax recovery.
• Adjusted EBITDA for the nine months ended September 30, 2022 was $267.2 million, an increase of $11.0 million or 4% compared to the prior comparable period. The increase was primarily due to higher EBITDA from operations and, to a lesser extent, lower corporate costs, partially offset by a lower realized gain on foreign currency hedging contracts.
• Superior’s Leverage Ratio for the trailing twelve months ended September 30, 2022, was 4.3x, which is higher than Superior’s target range of 3.5x to 4.0x, and higher than the Leverage Ratio at June 30, 2022. The increase compared to June 30, 2022 was primarily due to the impact of the higher USD/CAD rate on USD denominated debt. On a constant currency basis, using the USD/CAD rate at June 30, 2022, Superior’s Leverage Ratio at September 30, 2022 would be 4.1x.
• Superior is confirming its previously disclosed Adjusted EBITDA guidance range of $425 million to $465 million.
• Average weather for the fourth quarter of 2022 is anticipated to be consistent with the five-year average for the U.S. and Canada.

Acquisition Update

• On November 9, 2022, Superior acquired the assets of McRobert Fuels (“McRobert”) a retail propane and distillates distributor located in Strathroy, Ontario for an aggregate purchase price of approximately $16.0 million before final adjustments for working capital.

• On September 9, 2022, Superior acquired the propane distribution assets of Reed Oil Company (“Reed Oil”) a retail propane supplier and distributor in North Carolina for an aggregate purchase price of approximately $4.6 million (US$3.5 million) before final adjustments for working capital.
• On October 3, 2022, Superior acquired the propane distribution assets of Mountain Flame Gas ("Mountain Flame") a residential commercial and retail propane supplier and distributor in California for an aggregate purchase price of approximately $10.0 million (US$7.4 million) before final adjustments for working capital.

Update on the Integration of Prior Acquisitions and Anticipated Synergies

• Since Q3 2020, Superior has acquired 16 propane distribution businesses in the U.S., and based on Superior’s prior experience, the estimated synergies from these acquisitions is expected to be in the range of US$24 million to US$28 million. As of September 30, 2022, Superior has achieved $17 million or 65% of the run-rate synergies on the U.S. acquisitions completed in 2020 and 2021, and expects to achieve an additional US $5 million to US$9 million in run-rate synergies exiting 2023, with the remaining synergies anticipated in 2024.
• On March 23, 2022, Superior acquired all the issued and outstanding shares of Kamps Propane (“Kamps”). On June 1, 2022, Superior acquired the assets of the Quarles Petroleum Delivered Fuels Business (“Quarles”). During the third quarter of 2022, Superior made significant progress in the integration of Kamps and Quarles, including the migration of data into Superior’s operating dashboard, and Superior is on plan for the realization of synergies for both acquisitions.

Normal Course Issuer Bid

• On October 11, 2022, the TSX accepted Superior’s notice of intention to establish a new normal course issuer bid program (the “NCIB”). The NCIB permits the purchase of up to 10.1 million shares of Superior’s common shares, representing approximately 5% of the issued and outstanding common shares as of September 30, 2022, by way of normal course purchases effected through the facilities of the TSX and/or alternative Canadian trading systems. The NCIB commenced on October 13, 2022 and will terminate on October 13, 2023, or on such earlier date as Superior may complete its purchases pursuant to the notice of intention filed with the TSX in respect of the NCIB. On October 13, 2022, Superior also entered into an automatic share purchase plan in connection with the NCIB.

Debt and Leverage Update

Superior is focused on managing both Total Net Debt and its Leverage Ratio. Superior’s Leverage Ratio on September 30, 2022 was 4.3x, an increase from 3.7x on June 30, 2022, primarily due to the increase in Total Net Debt and a decrease in Pro Forma Adjusted EBITDA. Total Net Debt increased primarily due to the impact of the higher USD/CAD rate at September 30, 2022 on U.S. denominated debt. On a constant currency basis, using the USD/CAD rate on June 30, 2022, Superior’s Leverage Ratio was 4.1x at September 30, 2022. Pro Forma Adjusted EBITDA decreased $21.6 million primarily due to lower EBITDA from operations and, to a lesser extent, higher corporate costs and a realized loss on foreign currency hedging contracts compared to a gain in the prior year quarter. EBITDA from operations decreased primarily due to the sale of carbon credits and the CEWS recorded in the prior year quarter. In the third quarter, the CEWS was $nil compared to $8.2 million in the prior year quarter, and the sale of carbon credits was $nil compared to $4.7 million in the prior year quarter.

MD&A and Financial Statements

Superior’s MD&A, the unaudited condensed Interim Consolidated Financial Statements and the Notes to the unaudited condensed consolidated financial statements as at and for the three and nine months ended September 30, 2022 provide a detailed explanation of Superior’s operating results. These documents are available online on Superior’s website at www.superiorplus.com under the Investor Relations section and on SEDAR under Superior’s profile at www.sedar.com.

2022 Third Quarter Conference Call

Superior will conduct a conference call and webcast for investors, analysts, brokers and media representatives to discuss the Third Quarter Results at 10:30 a.m. EST on Thursday, November 10, 2022. To listen to the live webcast, please use the following link: Register Here. he webcast will be available for replay on Superior's website at: www.superiorplus.com under the Events section.

Non-GAAP Financial Measures and Reconciliation

Throughout this news release, Superior has identified specific 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 helpful 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 Third Quarter 2022 MD&A dated November 9, 2022, available on www.sedar.com.

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.

Forward-Looking Information

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, expected run-rate synergies from acquisitions completed in 2022, expected run-rate synergies exiting the first quarter of 2024, expectations on operational improvements for the Kamps and Quarles acquisitions, and expected average weather for the remainder of 2022 consistent with the five-year average.

Forward-looking information is provided to provide information about management’s expectations and plans for 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 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 obtaining the expected synergies from the Kamps and Quarles acquisitions 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

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CONTACT: Beth Summers ExecutiveVice President and Chief Financial Officer

Phone: (416) 340-6015Rob DorranVice President, Capital Markets

Phone: (416) 340-6003

Toll Free: 1-866-490-PLUS (7587)

KEYWORD: NORTH AMERICA CANADA

INDUSTRY KEYWORD: ENERGY UTILITIES OIL/GAS

SOURCE: Superior Plus

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