Strength
andStability
2008 ANNUAL REPORT
sUPERiOR PLUs
2008 HigHLigHTs
Operating HigHligHts
(millions of dollars)
revenue
gross profit
eBitDa (1)
adjusted operating cash flow (1)
net earnings (loss)
Distributions
($ per basic trust unit/share except number of trust units/shares)
eBitDa from operations (1)
adjusted operating cash flow (1)
Distributions
net earnings (loss)
Weighted average trust units/shares outstanding (millions)
Balance sHeet HigHligHts
(millions of dollars except debt ratios)
total assets
total liabilities
total net capital expenditures
senior debt (2)
total debt (2) (3)
senior debt/eBitDa (4) (5)
total debt/eBitDa (4) (5)
2008
2,487.3
669.1
240.1
192.3
67.7
142.2
2.91
2.18
1.61
0.77
88.3
2,026.9
1,452.7
147.5
577.7
825.3
2.2
3.2
2007
2,350.5
661.8
223.8
179.5
119.8
134.9
2.77
2.08
1.56
1.39
86.5
1,542.8
926.1
22.2
440.5
687.5
1.9
3.0
(1) EBITDA, EBITDA from operations and adjusted operating cash flow are not recognized financial measures under Canadian generally accepted accounting principles (GAAP).
Non-GAAP financial measures are defined in the Management’s Discussion and Analysis.
(2) Includes off-balance sheet recievable sales program amount.
(3) Excludes deferred issue costs.
(4) Superior’s debt ratios take into account the impact of the off-balance sheet receivable sales program amounts, the efficiency and growth projects and costs of the corporate
conversion on December 31, 2008 and exclude Port Edwards debt of $51 million in 2008.
(5) Senior and total debt ratios do not include any incremental EBITDA from the Port Edwards conversion project.
■■
Superior Plus had a total return to shareholders of 7% for 2008 in a year when stock market indices declined severely.
■■
Superior Plus had strong consolidated financial results from operations which contributed to a 5% increase in adjusted
operating cash flow per share.
■■
The strong operating performance of our businesses resulted in a 7% increase in EBITDA from operations.
■■
Superior Plus announced a distribution increase of 4% to $0.135 per month per unit ($1.62 annualized) commencing
with the April 15, 2008 payment.
■■
Several efficiency improvement and growth projects made significant progress, including the Port Edwards conversion
project, which is expected to be completed in the latter half of 2009.
■■
Superior Plus maintained a strong balance sheet throughout the year and had estimated undrawn financial capacity of
approximately $294 million as at December 31, 2008.
■■
Effective December 31, 2008, Superior Plus completed its conversion from an income trust to a corporation and
established a cash dividend of $0.135 per month per share starting with the February 13, 2009 payment, which is an
eligible dividend for Canadian income tax purposes.
We ARe buILDInG LonG-TeRM v ALue
FRoM STRonG, STAbLe buSIneSSeS.
Strength
andStability
strength
The foundation of Superior’s strength is the stable cash flow from our
diversified businesses, supported by a strong balance sheet with ample
financial capacity.
stability
Superior is a group of diversified businesses providing goods and
services required by industries, businesses and individuals throughout
the economic cycles. This means that our consolidated cash flow tends to
remain stable over time – providing continued support for our dividend.
contents
2008 Highlights
Letter to Shareholders
Management Team
Corporate Governance
IFC
8
15
16
Management’s Discussion
and Analysis
Management’s Report
Auditors’ Report
18
56
57
Consolidated Financial Statements 58
notes to Consolidated
Financial Statements
Selected Historical Information
Corporate Information
Shareholder Information
61
86
88
IbC
Superior’s scale and diversity contribute to
the strength and stability that benefit our
shareholders. Scale includes our market
capitalization – over $1 billion as of February
2009 – and our revenues – $2.4 billion in 2008.
our businesses operate on a continental and
even a world scale. our businesses have
leading market positions, low cost structures
and minimal capital requirements – and they
generate a lot of cash. Scale is also important to
attract capital.
Diversity is one of Superior’s key advantages.
our four business segments operate in 10
geographical markets across north America.
Diversity opens new opportunities and mitigates
business risks on many levels. As one business
cycles down, another is usually stable while a
third is growing. our specialty chemical and
construction products distribution businesses
outperformed last year, offsetting others.
Scale
anddiverSity
SupeRIoR pLuS
02
2008 AnnuAL RepoRT
HISTORICAL GROSS PROfIT by buSIneSS ($MM)
800
600
$542.8
$623.6
$630.9
$661.8
$669.1
400
200
0
2004
2005
2006
2007
2008
n Propane Distribution
n specialty chemicals
n construction Products Distribution
n Fixed-Price energy services
MARKeT DIVeRSIfICATIOn
As at December 31, 2008
GeOGRAPHIC DIVeRSIfICATIOn
As at December 31, 2008
Each gridline must be stepped .2”
$257.2MM
Try using the Blend tool (specify steps)
3%
$257.2MM
3%
6%
1%
19%
8%
20%
9%
9%
2%
4%
8%
19%
19%
14%
5%
7%
18%
7%
19%
PROPAne DISTRIbuTIOn
n Propane Heating
n Propane non-Heating
n Wholesale supply/
Fixed-Price Programs
SPeCIALTy CHeMICALS
n north American sodium chlorate
n International sodium chlorate
n chloralkali and Potassium
n technology
COnSTRuCTIOn PRODuCTS
DISTRIbuTIOn
n Residential construction
n commercial construction
fIXeD-PRICeD eneRGy SeRVICeS
n natural Gas/electricity
PROPAne DISTRIbuTIOn
n Western canada
n eastern canada
n Atlantic canada
SPeCIALTy CHeMICALS
n north American sodium
chlorate & technology
n International sodium
chlorate & technology
n north American chloralkali
& Potassium
COnSTRuCTIOn PRODuCTS
DISTRIbuTIOn
n Western canada construction
n ontario construction
n U.s. construction
fIXeD-PRICeD eneRGy SeRVICeS
n natural Gas/electricity
Each gridline must be stepped .2”
Try using the Blend tool (specify steps)
03
SupeRIoR pLuS
Superior seeks to grow prudently while continually
improving its existing businesses. our largest
current growth initiative is the two-year expansion of
eRCo’s chloralkali plant at port edwards, Wisconsin.
It will further diversify our chemical business while
contributing materially to Superior’s cash flow
starting next year. In May 2008, Superior acquired
Fackoury’s building Supplies Ltd., augmenting
Winroc’s presence in the ontario residential
construction market. We also undertook several
efficiency programs to improve our internal
cost structure.
Despite today’s generally challenging economic
conditions, Superior is positioned to grow its
cash flow. The port edwards expansion is a major
driver of our 2010 guidance for a 10% increase in
consolidated adjusted operating cash flow. our
conversion to a corporation with ample tax basis
will contribute to tax efficiency, benefitting our
shareholders for several years.
growth
andefficiency
04
2008 AnnuAL RepoRT
2.20-
2.40
2.00-
2.20
CAPITAL buDGeT
ACTuAL ($MM)
$147.5MM
CAPITAL buDGeT
PROjeCTeD ($MM)
$118.7MM
$26.8
$49.8
Efficiency, Process
Improvement
and Growth Related
$7.6
Other Capital
$8.9
Port Edwards
Expansion Project
$26.6
$83.2
$63.3
Net Acquisition Expenditures
2008
2009
ADjuSTeD OPeRATInG
CASH fLOw ($MM)
ADjuSTeD OPeRATInG
CASH fLOw ($/SHARe)
Each gridline must be stepped .2”
2.50
Try using the Blend tool (specify steps)
2.18
194-
212
2.05
177-
194
192
180
155
1.82
2.00
1.50
1.00
0.50
0
250
200
150
100
50
0
06
07
08
09P
10P
06
07
08
09P
10P
Each gridline must be stepped .2”
Try using the Blend tool (specify steps)
Each gridline must be stepped .2”
Try using the Blend tool (specify steps)
05
SupeRIoR pLuS
control
andflexibility
Stable cash flow from our businesses improves
Superior’s risk profile and provides support for its
financial strength. This allows us to have better
access to capital and increased financial capacity
to fund growth and acquisitions. These are key
ingredients for the overall financial stability that
Superior seeks in order to be a high-dividend-
yielding corporation over the long term.
With the Canadian income trust model drawing
to a close in 2011, Superior chose to be proactive
and convert to a corporation early. We have an
estimated $1.4 billion in available tax basis as of
January 1, 2009.
Superior’s capital structure is diversified with a
prudently managed debt portfolio. our debentures
provide low, predictable interest rates with long
terms to maturity, while our bank credit facilities
provide nearly $300 million in additional financial
capacity. our growth initiatives will yield materially
higher cash flows beginning in 2010, which we will
use in part to reduce debt leverage ratios.
06
2008 AnnuAL RepoRT
TeRM DebT RePAyMenT PROfILe ($MM)
450
400
350
300
250
200
150
100
50
0
366.7
216.6
13.0
2009
41.6
41.3
36.7
2010
2011
2012
2013
2014
2015
111.7
* Term debt includes Superior’s Syndicated Credit Facility maturing June 2010 and excludes Letters of Credit.
fInAnCIAL CAPACITy
($MM, as at December 31)
fInAnCIAL CAPACITy PROjeCTeD
($MM, as at December 31)
$1,161MM
$22.8
$22.8
Each gridline must be stepped .2”
Try using the Blend tool (specify steps)
$1,146MM
$16.7
$16.7
$195.9
$195.9
$186.4
$186.4
$294.5
$294.5
$235.8
$235.8
$247.6
$247.6
$247.6
$247.6
$300.5
$300.5
$100.0
$100.0
$359.2
$359.2
$100.0
$100.0
2008
2009
n U.s. notes
n convertible Debentures
n securitization Program
n syndicated credit Facility – Drawn *
* Syndicated Credit Facility includes Letters of Credit.
n syndicated credit Facility – Undrawn
n other Debt
Each gridline must be stepped .2”
Try using the Blend tool (specify steps)
07
SupeRIoR pLuS
letter tO sharehOlDers
dividend Stability
and valUe growth
FoR SupeRIoR pLuS, 2008 WAS An exCeLLenT yeAR WITH STRonG ConSoLIDATeD FInAnCIAL
ReSuLTS FRoM opeRATIonS DeSpITe THe veRy DIFFICuLT eConoMIC AnD FInAnCIAL
ConDITIonS expeRIenCeD In THe LATTeR pART oF THe yeAR.
Revenue
($MM)
GRoSS
pRoFIT
($MM)
ebITDA
FRoM opeRATIonS
($MM)
ADJuSTeD opeRATInG
CASH FLoW
($MM)
$2,487.3
$669.1
$257.2
$192.3
2008
2008
2008
2008
Superior’s market and geographic diversification
strategy continued to be effective mitigating the impact
of the current economic recession due to the stable,
high-quality businesses: Propane Distribution, Specialty
Chemicals, Construction Products Distribution, and
Fixed-Price Energy Services. Our focus on continually
improving the businesses has helped to position
Superior to mitigate the impact of the economic
downturn and provide a stable foundation for future
growth. All of Superior’s businesses have an inventory
of productivity improvement projects enabling Superior
to reduce its cost structure or increase its sales volume.
These projects continue to contribute to Superior’s
long-term objectives of generating stable operating
cash flow and pursuing value-added growth, resulting in
increased support for our dividend. Superior continues
to focus on acquiring assets that have a growth profile
and are complementary to its existing businesses,
and which have a leading market position, low-cost
structure, stable cash flows and attractive
consolidation opportunities.
08
2008 AnnuAL RepoRT
Effective December 31, 2008, Superior completed
a plan of arrangement which resulted in Superior
converting from an income trust to a corporation. This
transaction was important to our shareholders as it
provided certainty on the timing of our conversion
to a corporation as well as on the expected level of
dividends to be paid to investors as a corporation.
The planned termination of the public income trust
market legislated by the federal government created
uncertainty for the trust’s investors and distracted
from our primary focus of building our businesses and
creating long-term shareholder value. This transaction
provided a smooth transition to a corporation as well
as a significant income tax basis to help manage our
Canadian income tax expense.
Over the past year, Superior continued to increase
efficiencies in its businesses, maintained its strong
balance sheet, and proactively managed risk factors.
In the current challenging credit market, Superior
continues to have strong financial capacity with no
significant refinancing requirements until June 2010.
In addition, Superior continues to benefit from the
experience of the Board of Directors through sound
corporate governance practices that help to improve
our businesses and manage business risk during these
uncertain times.
CoRpoRATe oveRvIeW
In order to reflect its new corporate structure,
Superior’s disclosure and discussion of its businesses
will be different than it was as a trust. Adjusted
operating cash flow and EBITDA from operations are
the important performance measures that will be
used by management to evaluate the performance
of Superior. Adjusted operating cash flow represents
cash flow generated from operations which is
primarily available for investing and financing activities
of Superior. Our disciplined approach of carefully
managing our cash flow to maximize our return to
shareholders will remain the same as our previous
practice as a trust. The discussion of our business will
focus on cash flow generated from operations along
with the utilization of this cash flow to improve and
grow our business as well as paying dividends to
our shareholders.
Adjusted operating cash flow increased by 7%
to $192.3 million or $2.18 per share in 2008 from
$179.5 million or $2.08 per share in 2007. The strong
consolidated operating results were led by solid
performance in our businesses with a $17.2 million
or 7% increase in EBITDA from operations to $257.2
million in 2008 from $240.0 million in 2007.
09
SupeRIoR pLuS
buSIneSS InITIATIveS
PrOPane DistributiOn
Our Propane Distribution business’s EBITDA from
operations marginally decreased by $2.6 million to
$96.8 million in 2008 from $99.4 million in 2007. Last
year, there was tremendous volatility in the retail price
of propane with significant customer conservation
occurring in the first half of the year due to rapidly
escalating propane prices followed by a significant
reduction in propane prices as a result of a reduction
in economic activity in the latter half of the year. The
decrease in EBITDA was partially offset by successful
marketing initiatives and an increased focus on
margin management.
In addition, the reorganization of the propane
distribution business has showed signs of improving
customer retention and growth. In 2008, we eliminated
approximately 100 administrative staff positions as
we streamlined functions and moved to six Regional
Operations Centers and two Sales and Administrative
Centers. This new organizational structure allows
for improved customer relationships to be managed
through direct customer contact at the local level or
through one of the Regional Operations or Sales and
Administration Centers while receiving the benefits of
a standardized technology platform and processes.
During 2008, Superior completed the installation of
computers on all bulk and cylinder trucks and planning
is underway to install computers on the petro fuels and
service fleet, which will complete the installation of
computers on all of its fleet. This on-board technology
improves our ability to reduce out-of-gas occurrences
and is expected to improve distribution efficiencies for
routing and scheduling logistics. A new GPS routing
and scheduling tool was installed and began testing in
Atlantic Canada in late 2008 with full implementation
expected nationwide in 2009.
In 2007 and 2008, our fleet renewal program included
245 new delivery and service trucks which replaced
aging vehicles in the Superior Propane fleet. This
initiative has reduced maintenance costs by more than
$1 million in 2008 from 2007. It has reduced unplanned
breakdowns and lowered the average age of our fleet
by 1.4 years over the past two years.
10
Superior Propane remains committed to its high safety
standards, especially in light of the Sunrise Propane
tragedy that occurred last year in Toronto. At Superior,
we strive to set the gold standard for safety practices
in the propane industry. We continue to invest in our
Guardian program, which is a unique health, safety
and environment management system. In addition,
we have in place a rigorous site inspection and safety
meeting process, in which every one of our physical
locations is visually inspected each and every month.
Our work locations have safety committees which
meet and develop action plans every month. These
two items are ingrained as key performance standards
across the organization.
sPecialty chemicals
Our Specialty Chemicals business’s EBITDA from
operations increased by $24.7 million to $116.5 million in
2008 from $91.8 million in 2007. The increase in EBITDA
was a result of strong prices for our sodium chlorate and
chloralkali products. World demand for sodium chlorate
was strong in all regions during most of 2008 but started
to weaken in the last quarter of 2008 in tandem with
the economic slowdown and announced temporary pulp
mill curtailments and permanent pulp mill shutdowns.
Market demand for our chloralkali products increased
throughout 2008. An extremely strong caustic market
drove pricing to higher levels which more than offset
continued weakness in the chlorine market as a result of
the reduced economic activity in North America.
Increased demand for potassium products continued to
be strong throughout the year although our production
was curtailed during the last quarter due to a shortage
of potash supply. One of our key suppliers, Potash
Corporation, was on strike for most of the fourth
quarter. During this period, we switched our production
to chlorine/caustic and converted back to potassium
products upon resolution of the potash strike.
Due to the investment in productivity improvement
projects at our production facilities, we believe our
specialty chemicals business is well-positioned as
a low-cost producer with market and geographical
diversification in Canada, the U.S. and international
markets, to withstand cyclical downturns.
In Vancouver, B.C. and in Chile, we are investigating
various uses for hydrogen, which is produced as a
2008 AnnuAL RepoRT
by-product of our operations. These projects reduce
costs and will have the added benefit of reducing
greenhouse gas emissions.
continue to investigate opportunities to expand into
complementary product areas within the construction
products distribution space.
In August 2007, ERCO announced the modernization
and expansion of its Port Edwards, Wisconsin plant.
This project will allow ERCO to further enhance
Superior’s diversification strategy producing stable
earnings in the regional market it serves. This project is
expected to cost US$130 million resulting in improved
operating efficiencies of approximately 25% and
increased production capacity of 30%. This plant was
originally scheduled to shut down in approximately
five years prior to the Port Edwards conversion
announcement in 2007. The economic model for
this project results in a minimum after-tax return of
15% and is expected to extend plant life by over 25
years. The permitting process and engineering are
substantially complete with over 60% of the costs
locked in and over 90% of equipment purchased. The
project utilizes proven world-class technology and is
projected to be completed in the latter half of 2009.
cOnstructiOn PrODucts DistributiOn
Our Construction Products Distribution business’s
EBITDA from operations increased by $0.7 million to
$37.4 million in 2008 from $36.7 million in 2007. The
continued strength in the Western Canada market
along with the acquisition of the Fackoury business
in the Ontario market in May 2008 more than offset
weakness in U.S. residential markets.
Historically, construction has been a cyclical business,
with changes in new non-residential construction,
including commercial construction, lagging residential
activity. However, 2008 turned out to be a year with
weakness in both the residential and non-residential
sectors in the United States and a decline in residential
activity in Canada.
Winroc continued to focus on growing its business
through operational improvements in existing locations.
We have recently developed a system for tracking key
operating metrics called Logix. This system tracks the
work-to-time relationships required to stock certain
types of jobs, based on type of structure, products,
labour and equipment. This new system provides
for greater operational efficiencies which should
result in an improved cost structure. In addition, we
Winroc focuses on building customer and supplier
relationships by providing value-added services, with
an operating approach that has been successfully
expanded to new geographical markets. Diversification
by geographic location has provided a foundation for
market stability so far over this economic cycle, and
in 2008, diversification proved to support financial
performance during a market downturn.
FixeD-Price energy services
Our Fixed-Price Energy Services business’s EBITDA
decreased by $5.6 million to $6.5 million in 2008 from
$12.1 million in 2007. Gross profit for 2008 was $27.6
million, a decrease of $3.5 million from gross profit
earned in 2007. In addition, gross profit was impacted
by $2.0 million in foreign currency translation losses
due to the rapid decline of the Canadian dollar relative
to the U.S. dollar during the fourth quarter of 2008. The
impact of fluctuations in foreign currency may impact
our energy services business’s quarterly or annual
financial results. However, the long-term financial
results will not be significantly impacted by changes in
foreign currency rates as we are fully hedged from an
economic perspective.
In 2008, the sales conditions were challenging for
natural gas and electricity residential markets. The
acquisition of new customers and the retention of
existing customers was difficult in most markets,
due primarily to the low system price of natural gas
compared to our fixed-price offer. The prolonged
period of low system prices resulted in a reduction in
customer demand throughout the industry.
We believe it is important to have both market and
geographical diversification between residential and
commercial markets in multiple product lines to provide
stability of cash flow during a recession downturn.
In the B.C. market, we had a very successful launch
with more than 19,000 new customers signed and
flowing since the market opened 18 months ago,
expanding our geographic diversification. In the Ontario
and Quebec markets, we focused our resources on
the commercial market and continued to enjoy a solid
position with a strong platform for future growth.
11
SupeRIoR pLuS
CApITAL expenDITuReS
In 2008, we continued to develop productivity
improvement and growth projects with $26.8 million
invested in our propane distribution and specialty
chemicals divisions. We incurred $49.8 million
(US$43.4 million) of the estimated US$130 million
costs to complete the Port Edwards project in 2008.
The Port Edwards conversion project continued to
make good progress throughout the year and is
expected to be on schedule and budget for completion
in the latter half of 2009. Superior also continued to
grow the business by completing two acquisitions
totaling $24.5 million in the construction products
distribution and propane distribution divisions. The
remaining investment of $7.6 million related to
general capital expenditures. Total consolidated capital
expenditures net of dispositions were $147.5 million
in 2008.
Superior’s diversification strategy provides increased
flexibility around the timing of future capital projects
during various economic cycles with each project
providing an expected after-tax rate of return of over
15%. We continue to evaluate acquisition opportunities
in our business to enhance our geographical reach or
strengthen our market position.
For 2009, we expect to invest $26.6 million in
efficiency improvement and growth projects primarily
in our specialty chemical and propane distribution
divisions. In addition, we anticipate spending an
additional $83.2 million to complete our Port Edwards
expansion project. The remaining investment in other
capital is expected to be $8.9 million resulting in a total
capital budget of $118.7 million for 2009.
FInAnCIAL poSITIon
In 2008, Superior Plus continued to maintain its strong
balance sheet. As at December 31, 2008, Superior had
total financial capacity of $695 million, which included
a $595 million syndicated credit facility and a $100
million receivable securitization program. Superior
had approximately $294 million of undrawn financial
capacity as at December 31, 2008.
With its conversion to a corporation, Superior
maintained its long-term debt ratio targets of 1.5 to
2.0 times EBITDA for senior debt and 2.5 to 3.0 times
EBITDA for total debt (which includes convertible
debentures). These are long-term guidelines to
manage leverage and liquidity and may be exceeded
in the short-term due to timing of acquisitions or
growth capital expenditures. Superior’s senior debt
ratio targets are significantly less than the 3.0 times
EBITDA allowed for in our U.S. note agreement and the
3.5 times EBITDA allowed for in our syndicated credit
agreement. Superior’s total debt ratio targets are also
significantly less than the 5.0 times EBITDA allowed
for in our syndicated credit agreement and the 5.5
times EBITDA allowed for in our U.S. note agreement.
As at December 31, 2008, Superior’s senior debt to
EBITDA ratio was 2.3 times and total debt to EBITDA
ratio was 3.4 times. These debt ratios include proceeds
raised from Superior’s receivable securitization
program and are adjusted for the pro forma impact
of acquisitions and dispositions and cash on hand.
Superior exceeded its target leverage ratios primarily
due to Port Edwards growth capital expenditures,
corporate conversion costs and the impact from the
foreign currency translation of U.S. debt, which resulted
in an increase in senior and total debt to EBITDA ratios
of 0.5 times.
12
2008 AnnuAL RepoRT
Excluding the debt for the Port Edwards project, the
2009 senior debt and total debt to EBITDA ratios are
projected to be 2.0 times and 3.0 times, respectively.
No incremental EBITDA for the Port Edwards project
has been included in the forecast for 2009. Over the
medium term, the corporate conversion and associated
tax basis, the Port Edwards expansion project and
other growth and efficiency projects are expected
to generate incremental cash flows, decreasing our
leverage ratios to within our long-term guidelines.
On October 30, 2008 and October 31, 2008, Dominion
Bond Rating Service and Standard and Poor’s
confirmed their corporate credit ratings of the Fund’s
operating subsidiary Superior Plus LP with secured
ratings of BBB (low) and BBB-, respectively. On
November 14, 2008, Standard and Poor’s removed
its negative outlook on Superior and maintained its
corporate credit rating.
SupeRIoR pLuS ConSoLIDATeD
ebITDA FRoM opeRATIonS ($MM)
$240.0
$257.2
$237-267
2007
2008
2009P
FInAnCIAL ouTLook
(millions of dollars, except per trust unit/share amounts and debt ratios)
2008 (1)
2008A
2009 (2)
ebITDA from operations
Propane Distribution
specialty chemicals (5)
construction Products Distribution
Fixed-Price energy services
97-102
107-112
34-39
10-13
Adjusted operating cash flow per share/trust unit
$2.15-$2.25
Dividends paid per trust unit/share
senior debt/eBItDA ratio (5)
total debt/eBItDA ratio (5)
$1.61
2.0 (3)
3.1 (3)
96.8
116.5
37.4
6.5
$2.18
$1.61
2.2 (4)
3.2 (4)
95-105
105-115
28-35
9-12
$2.00-$2.20
$1.62
2.0 (4)
3.0 (4)
(1) As provided in the 2008 Third Quarter Financial Outlook restated for new Non-GAAP performance measures EBITDA from operations and adjusted operating
cash flow per trust unit/share.
(2) The assumptions, definitions, and risk factors relating to the Financial Outlook are discussed in Management’s Discussion and Analysis of the 2008 Annual Results.
(3) Superior’s debt ratios take into account the impact of the off-balance sheet receivable sales program amounts, cash on hand, the efficiency and growth projects, the
corporate conversion costs on January 1, 2009, and $51 million (US$44.8 million) of Port Edwards project debt.
(4) Superior’s debt ratios take into account the impact of the off-balance sheet receivable sales program amounts, the efficiency and growth projects and costs of the corporate
conversion on December 31, 2008 and excludes Port Edwards cumulative project debt of $51 million (US$44.8 million) in 2008 and $150 million (US$130 million) in
2009.
(5) Superior has not included any incremental EBITDA from operations relating to the Port Edwards, Wisconsin expansion in 2008 and 2009.
13
SupeRIoR pLuS
DIvIDenD STRATeGy
In 2008, Superior continued to invest in productivity
improvement projects in all of its businesses providing
a foundation for stable distributions. Total cash
distributions in 2008 were $1.61 per trust unit. The
monthly cash distribution was raised by 4% from $0.13
to $0.135 per unit effective with the April 15, 2008
payment.
In December 2008, the Board of Directors approved
the continuation of the monthly cash payment to
shareholders of $0.135 per share as an eligible dividend
for Canadian income tax purposes. Superior’s dividend
strategy is to provide stable dividends to shareholders
while considering cash flow from operations, overall
financial condition, financial leverage, working capital
requirements, investment opportunities and regulatory
restrictions. Dividends are expected to continue to be
paid monthly at $0.135 per share ($1.62 annualized)
to those who are shareholders of record on the last
business day of each calendar month with actual
payment to be made to such shareholders on or about
the 15th day of the following month.
In the event that future capital is required to fund
Superior’s growth projects, a dividend reinvestment
program may be established for the corporation.
Currently, Superior has a strong financial position with
significant financial capacity and surplus cash flow
available to finance its capital investing requirements.
ConSoLIDATeD FInAnCIAL ouTLook
Given the uncertainty associated with the current weak
economic and financial markets, including the impact
on our customers and suppliers, we are reducing our
expectations for 2009 adjusted operating cash flow
to $2.00-$2.20 per share from $2.10-$2.35 per share.
The pipeline of current growth and efficiency projects
along with the strong financial position of Superior have
partially offset the decrease in cash flow, providing
support for our current dividend level. Assuming
there is no further economic deterioration in 2010, we
expect adjusted operating cash flow to increase by
approximately 10% to a range of $2.20-$2.40 per share
primarily as a result of a stable or improving economy
and a full year of incremental cash flow from the Port
Edwards project. We will provide more guidance later
in the year as the performance of the economy and the
financial system become more predictable.
ReCoGnITIon
Superior Plus continued to have strong financial
performance over the past year due to strong focus
and dedication of our employees. I would like to
thank all of our employees for their hard work and
commitment to their goals and objectives. In addition,
I would also like to thank each of our directors
for your guidance, stewardship, and leadership
in these uncertain times. Finally, on behalf of the
entire organization, I would like to thank all our
securityholders for your past support during the
transition from a trust to a corporation. The team looks
forward to creating additional value for Superior’s new
shareholders.
On behalf of the Board of Directors,
(signed) “Grant D. billing”
Grant D. billing
Chairman and Chief Executive Officer
March 10, 2009
14
2008 AnnuAL RepoRT
management
team
GranT D. BILLInG
chairman and
chief executive officer
Wayne M. BInGHaM
executive Vice-President and
chief Financial officer
erIc McFaDDen
executive Vice-President,
Business Development
Mr. Billing has served as Director of superior since
1994. He assumed the role of executive chairman
in 1998. In 2006, Mr. Billing assumed dual role of
chairman and ceo to focus on maximizing unitholder
value and long-term value growth. Mr. Billing has
extensive strategic and business experience and is a
chartered accountant.
Mr. Bingham joined superior Plus in 2006. He
previously was chief Financial officer at Finning
International Inc. and ontario Power Generation.
He has extensive experience in financial reporting,
strategy, compliance, risk management, treasury
and supply chain operations. Mr. Bingham holds a
B.comm. (Honours) and is a chartered accountant.
Mr. McFadden is executive Vice-President, Business
Development at superior Plus. Prior to joining
superior Plus, Mr. McFadden was ceo of a wind
power company, which developed, constructed, and
operated three wind power projects. Mr. McFadden
also spent 14 years at scotia capital Inc., where his
last position was Managing Director and co-head of
Investment Banking in calgary. Mr. McFadden holds a
Masters of Business administration degree from the
university of rochester and an Honours economics
degree from Wilfrid Laurier university.
JoHn D. GLeason
President,
superior Propane
Mr. Gleason joined superior Plus as
senior Vice-President, corporate
Development in 2005 and became
President of superior Propane
in early 2006. He held executive
positions in finance and business
development at MDs Inc. for 14
years and holds B. comm., M.B.a.
and c.a. designations.
PauL s. TIMMons
President,
erco Worldwide
Mr. Timmons has been with erco
for 28 years and was appointed
President in 2001. He holds an
engineering Diploma from st. Francis
Xavier university and a degree in
Metallurgical engineering from
Technical university of nova scotia.
PauL J. VanDerBerG
President,
Winroc
Mr. Vanderberg has been President
of Winroc since 2000 and previously
held various executive positions in
general management and business
development at usG corporation,
a leading building products
manufacturer. He holds B.a. and
M.B.a. designations.
GreG L. MccaMus
President,
superior energy Management
Mr. Mccamus joined seM as
President in 2005. He previously
was President of sprint canada
Business solutions and held various
executive positions within the
deregulated telecom industry over
a 20-year period. He holds B.a. and
M.B.a. designations.
15
SupeRIoR pLuS
corporate
governance
The Board of Directors of Superior Plus Corp. (the ”Corporation”) is responsible for overseeing
the management and operations of the business and the affairs of the Corporation. The Board
of Directors assumes responsibilities of stewardship and oversight of the management of the
Corporation. In addition, the Board of Directors seeks to ensure that the Corporation conducts
its business with honesty and integrity with an objective of creating sustainable long-term value and
profitable growth. Shareholders are entitled to elect the directors at each annual meeting
of the Corporation.
Each director has extensive business and board experience, high standards of ethics and strong
vision dedicated to guiding the strategic direction of your investment. Of the ten members, nine are
independent, with Grant Billing, Chairman and Chief Executive Officer, being the sole management
director. Since 2003, Peter Green has served as Lead Director to strengthen the independence of
the Board of Directors from management.
In keeping with our ongoing commitment to high standards of corporate governance, Superior’s
advisory committees continue to provide strong contributions to the businesses. The focus on
operational performance helps to provide stability of cash flow and long-term value growth. These
disciplines are reinforced throughout the businesses and underpin Superior’s performance-oriented
culture dedicated to economic, environmental and social responsibility.
The Board of Directors’ fundamental objectives are to enhance Superior’s investments and ensure
that Superior Plus meet its obligations and operates the underlying businesses in a responsible,
reliable and safe manner. During 2008, the Board of Directors conducted a two-day strategy session
which included detailed analysis of the five-year business plan for each of Superior’s businesses.
The Board of Directors works with management to identify business risks and to oversee the
appropriate strategies to maximize unitholder value. During this strategy session, the Board of
Directors reviewed a number of strategic alternatives which led to the ultimate conversion of
Superior Plus Income Fund to Superior Plus Corp. on December 31, 2008.
In addition, the Board of Directors reviews the organization’s policies and procedures on an annual
basis, including the Code of Business Conduct and Ethics, as well as the Communication and
Disclosure, Insider Trading and Whistleblower policies, which are all designed to promote honesty
and integrity throughout Superior Plus.
The Board of Directors has established the following standing committees for Superior Plus
Corp.: the Audit Committee, the Compensation Committee and the Governance and Nominating
Committee. Only independent directors serve on board committees. As we move forward, the
Board of Directors of Superior Plus Corp. will continue to be committed to high standards in
corporate governance and corporate conduct.
A detailed overview of Superior’s corporate governance practices, including compliance with
corporate governance guidelines, is contained in Superior’s 2009 Information Circular. The Board
and committee mandates, position descriptions, as well as the policies and procedures, are posted
on Superior’s website at www.superiorplus.com.
16
bOarD OF DirectOrs
2008 AnnuAL RepoRT
Grant D. Billing
chairman and ceo of superior Plus since July 2006;
executive chairman since 1998 and Director since
1994; Director of Provident energy Ltd.; previously,
President and ceo of norcen energy resources
Limited.
cOmmittee
(1) audit committee
(2) Governance and
nominating committee
(3) compensation
committee
catherine (Kay) Best (1)
Director since July 2007; executive Vice-President,
risk Management and chief Financial officer of
the calgary Health region; Director of canadian
natural resources Limited and enbridge Income
Fund.
robert J. engbloom, Q.c. (2)
Director since 1996; Director of Petro andina
resources Inc.; Partner of Macleod Dixon LLP.;
Member of the Governance and nominating
committee.
randall J. Findlay (2)
Director since March 2007; corporate Director
of Provident energy Ltd., canadian Helicopters
Income Trust, Pembina Pipeline corporation
and WellPoint systems Inc.; former President of
Provident energy Ltd.; Member of the Governance
and nominating committee.
norman r. Gish (3)
Director since 2003; served as Trustee of the
corporation from 2000 to 2003 and chairman of
IcG Propane Inc. from 1998 to 2000; corporate
Director of Provident energy Ltd.; chairman and
Director of railpower Technologies corp.; previous
chairman, President and ceo of alliance Pipeline
Ltd. and aux sable Liquid Products Inc.; chair of
the compensation committee.
Peter a.W. Green (1) (2)
Lead Director since 2003; Director since 1996 and
chairman and Trustee of the corporation from 1996
to 2003; chairman of Frog Hollow Group Inc. and
Patheon Inc.; Director of Gore Mutual Insurance
company; chair of the Governance and nominating
committee and member of the audit committee.
James s.a. MacDonald (3)
Director in 1998 and since 2000; Director of IcG
Propane Inc. from 1998 to 2000; chairman and
Managing Partner, enterprise capital Management
Inc.; Director of Manitoba Telecom Inc. chairman
of MDs Inc.; Trustee and Director of cinram
International Income Fund; Director of cymbria
Inc.; Member of the compensation committee.
Walentin (Val) Mirosh (3)
Director since March 2007; Vice-President
and special advisor to the President and chief
operating officer of noVa chemicals corp.;
Director of Tc Pipelines LP and co-chairman of the
advisory council to the Faculty of social sciences,
university of calgary; Member of the compensation
committee.
David P. smith (1)
Director since 1998; Managing Partner, enterprise
capital Management Inc.; Director of Jannock
Properties Limited; chair of the audit committee.
Peter Valentine (1)
Director since 2004; corporate Director and past
senior advisor to the President and ceo of the
calgary Health region and to the Dean of Medicine
of the university of calgary; Trustee, chairman
and Director of Livingston International Income
Fund; Governor and Director of the canada school
for Public service (a Federal crown corporation);
auditor General of alberta from 1995 to 2002;
Member of the audit committee.
17
superior plus
ManageMent’s Discussion
and analysis
The following Management’s Discussion and Analysis (MD&A) is a review of the financial performance and position
of Superior Plus Corp. (Superior), formerly known as Superior Plus Income Fund (the Fund), for the years ended
December 31, 2008 and 2007. The information in this MD&A is current to March 10, 2009. The discussion should be read
in conjunction with Superior’s audited Consolidated Financial Statements and notes to those statements, which have been
prepared in accordance with Canadian generally accepted accounting principles (GAAP) and are expressed in Canadian
dollars, except where otherwise noted. Tables throughout this MD&A labelled “2008” and “2007” cover the full-year
periods ending December 31 of each year, and references in the text to “2008” and “2007” refer to the same full years.
Conversion to a Corporation
On December 31, 2008, the Fund completed a transaction with Ballard Power Systems Inc. (Ballard) which resulted in
the Fund converting from a publicly traded income trust to a publicly traded corporation. The transaction resulted in the
unitholders of the Fund becoming shareholders of Superior Plus Corp., with no changes to the underlying business operations.
Under the continuity of interests method of accounting, Superior’s transfer of the assets, liabilities and equity from the
Fund to Superior are recorded at their net book values as at December 31, 2008. As a result of this conversion, certain
terms such as shareholder/unitholder and dividend/distribution may be used interchangeably throughout this MD&A. For
the years ended December 31, 2008 and 2007 all distributions to unitholders were in the form of trust unit distributions.
overview of superior
Superior Plus Corp. is a diversified business corporation. Superior holds 100% of Superior Plus LP (Superior LP), a limited
partnership formed between Superior General Partner Inc., as general partner and Superior as limited partner. Superior
owns 100% of the shares of Superior General Partner Inc. 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 has four operating businesses: a propane distribution and related services
business operating under the trade name Superior Propane; a specialty chemicals business operating under the trade name
ERCO Worldwide (ERCO); a construction products distribution business operating under the trade name Winroc; and a
fixed-price energy services business operating under the trade name Superior Energy Management (SEM).
summary of adjusted operating Cash flow
(millions of dollars except per share amounts)
EBITDA from operations: (1)
Propane Distribution
Specialty Chemicals
Construction Products Distribution
Fixed-Price Energy Services
Interest
Cash taxes
Corporate costs
Adjusted operating cash flow (1)
2008
96.8
116.5
37.4
6.5
257.2
(36.5)
(13.8)
(14.6)
192.3
2007
99.4
91.8
36.7
12.1
240.0
(44.7)
(5.3)
(10.5)
179.5
Adjusted operating cash flow per share, basic (2) and diluted (3)
$ 2.18
$ 2.08
(1) EBITDA and adjusted operating cash flow are not Canadian GAAP measures. See “Non-GAAP Financial Measures.”
(2) The weighted average number of shares outstanding for the year ended December 31, 2008 is 88.3 million (2007 – 86.5 million).
(3) For the year ended December 31, 2008 and 2007, there were no dilutive instruments.
18
Adjusted Operating Cash Flow Reconciled to Cash Flow from Operating Activities (1)
(millions of dollars)
Cash flows from operating activities
Add: Customer acquisition costs capitalized
Corporate conversion/strategic plan costs
Management internalization costs
Increase in non-cash working capital
Less: Decrease in non-cash working capital
Amortization of customer acquisition costs
Adjusted operating cash flow
2008 annual report
2008
207.6
6.8
5.0
–
–
(20.6) –
(6.5)
192.3
2007
134.3
10.9
5.7
0.5
34.7
(6.6)
179.5
(1) See the Consolidated Financial Statements for cash flows from operating activities, management internalization costs, customer acquisition costs, corporate conversion
costs and changes in non-cash working capital.
Adjusted operating cash flow for the year ended December 31, 2008 was $192.3 million, an increase of $12.8 million or 7%
5%
from the prior year, as improved operating results at ERCO and Winroc, and lower interest costs, more than offset reduced
operating results at Superior Propane and SEM and the impact of higher cash income taxes and corporate costs. Adjusted
operating cash flow was $2.18 per share, compared to $2.08 per share in the prior year due to a 7% increase in the adjusted
operating cash flow partially offset by a 2% increase in the weighted average number of trust units/shares outstanding.
20%
As demonstrated in the following chart, Superior is well diversified with ERCO, Superior Propane, Winroc and SEM
contributing 45%, 37%, 15% and 3% of EBITDA from operations in 2008, respectively.
n JW Aluminum (1)
n Fixed Price Energy Services
n Construction Products Distribution
n Specialty Chemicals
n Propane Distribution
(1) JW Aluminum was sold on
December 7, 2006.
EBITDA FROM OPERATIONS ($MM)
300
200
100
0
$239.7
$257.6
$240.0
$257.2
$282.6
2004
2005
2006
2007
2008
19
superior plus
ManageMent’s Discussion anD analysis
Superior had net earnings of $67.7 million for 2008, compared to net earnings of $119.8 million for 2007. Consolidated
revenues of $2,487.3 million in 2008 were $136.8 million higher than in the prior year due principally to higher revenues at
Superior Propane and ERCO as higher average selling prices more than offset the impact of reduced sales volumes. Gross
profit of $669.1 million was $7.3 million higher than in the prior year, as higher gross profit at Superior Propane, Winroc and
SEM more than offset a reduction in gross profit at ERCO. Gross profit at ERCO was impacted by $38.9 million of non-cash
amortization that is classified as a component of gross profit in 2008, compared to a component of amortization in 2007, as
a result of a revised inventory accounting standard. Operating expenses of $470.8 million in 2008 were $31.1 million higher
than in the prior year and were the result of general inflationary increases, the impact of the appreciation of the U.S. dollar
on U.S.-denominated expenses and increased operating locations at Winroc due to acquisitions. Amortization was lower
than in the prior year due to reduced amortization at ERCO, as a result of the classification of amortization as a component
of cost of goods sold in 2008, as noted above. Total interest expense of $38.5 million was $6.2 million lower than in the
prior year due principally to lower average interest rates on floating-rate debt. Unrealized losses on financial instruments
were $61.2 million in 2008 compared to a gain of $2.7 million in the prior year. The change from the prior year is due to
unrealized losses in the current year on SEM’s natural gas derivative contracts due to changes in the spot price of natural
gas, offset by gains on Superior’s foreign currency derivative contracts and ERCO’s fixed-price electricity contracts. Gains
or losses on Superior’s various financial instruments are without consideration of the fair value of the underlying customer
or supplier commitment. Total income tax expense was $9.9 million for 2008 compared to a recovery of $5.1 million for
2007. Income taxes were impacted by higher U.S. cash income taxes due to improved U.S. operating results, while future
income taxes were impacted by Superior’s conversion to a corporation on December 31, 2008 and the impact of unrealized
gains and losses on financial instruments. Additionally, net earnings for 2008 were affected for the same reasons as the
change in adjusted operating cash flow.
A more detailed discussion and analysis of the annual financial and operating results of Superior’s businesses is provided
on the following pages.
propane distribution
Superior Propane generated EBITDA from operations of $96.8 million for 2008. Compared to 2007, Superior Propane’s
EBITDA from operations decreased by $2.6 million or 3%, as improved retail and delivery propane gross profit and wholesale
gross profit were more than offset by higher operating costs and reduced other services gross profit.
Condensed operating results for 2008 and 2007 are provided in the following table. See page 86 for selected historical
information for the last five years.
(millions of dollars except litres sold and per litre amounts)
Revenue (1)
Cost of sales
Gross profit
Less: cash operating and administrative costs
EBITDA from operations
Propane retail volumes sold (millions of litres)
2008
2007
1,167.6
(863.3)
304.3
(207.5)
96.8
¢/litre
84.8
(62.7)
22.1
(15.1)
7.0
1,075.7
(781.5)
294.2
(194.8)
99.4
¢/litre
75.3
(54.7)
20.6
(13.6)
7.0
1,377
1,429
(1) Effective January 1, 2007, Superior discontinued hedge accounting for all economic hedging activities. As such, amounts related to these contracts must be accounted
for separately on Superior’s financial statements (see Notes 10 and 19 to the Consolidated Financial Statements). Superior has reclassified these amounts for purposes of
this MD&A to present its results as if it had accounted for these transactions as accounting hedges. As such, included in revenue for the year ended December 31, 2008 is
$2.8 million in realized foreign currency forward contract losses and for the year ended December 31, 2007 is $1.2 million in realized foreign currency forward contract
gains.
20
2008 annual report
Revenues were $1,167.6 million in 2008, an increase of $91.9 million from revenues of $1,075.7 million in 2007. The
increase in revenues is due to the impact of higher retail propane prices which more than offset the impact of lower
propane sales volumes. Total gross profit for 2008 was $304.3 million, an increase of $10.1 million over the prior year. Total
gross profit per litre for 2008 was 22.1 cents per litre, an increase of 1.5 cents per litre or 7% from the prior year. A summary
and detailed review of gross profit by segment is provided below.
Gross Profit by Segment (millions of dollars)
Retail propane and delivery
Other services
Wholesale and related
Total gross profit
2008
253.3
22.1
28.9
304.3
2007
246.1
24.7
23.4
294.2
Retail propane and delivery gross profit for 2008 was $253.3 million, an increase of $7.2 million or 3% from 2007, as a
1.2 cent per litre (7%) increase in the average retail and delivery sales margin was partially offset by a 52 million litre (4%)
reduction in sales volumes. Residential and commercial sales volumes in 2008 decreased by 28 million litres or 6% from
the prior year due principally to the impact of customer conservation as a result of an increase in the average retail selling
price of propane due to the approximate 17% increase in the wholesale cost of propane over the prior year. The impact
on sales volumes related to customer conservation more than offset the impact of weather; average temperatures across
Canada in 2008 as calculated based on degree days, were 2% colder than in 2007 and 4% colder than the five-year average.
Additionally, commercial volumes were negatively impacted by a weaker overall economic environment, particularly in
Ontario and Quebec, and residential volumes were negatively impacted by the ongoing conversion to natural gas in Atlantic
Canada. Industrial sales volumes in 2008 increased by 3 million litres, as improved mining and oil field volumes as a result
of activity in Western Canada, were offset in part, by reduced forklift volumes in Eastern Canada. Agricultural volumes were
6 million litres (7%) lower than in the prior year due to reduced demand as a result of drier crop conditions compared to the
prior year. Auto propane sales volumes declined by 21 million litres or 16% due to the continued structural decline in this
end-use market.
Superior Propane continues to actively manage sales margins, resulting in average retail propane and delivery sales margins
of 18.4 cents per litre in 2008, 1.2 cents per litre (7%) higher than in 2007. Average margins compared to the prior year were
positively impacted by strong margin management despite the volatile and high cost of wholesale propane and the impact
of higher delivery charges. As shown in the following chart, wholesale propane costs were driven up by record or near-
record high crude oil prices. Approximately 50% of Superior Propane’s sales volumes are due to heating-related applications
and 50% to general economic activity levels.
21
superior plus
ManageMent’s Discussion anD analysis
Relative Change in WTI Crude Oil and Natural Gas Prices vs. Sarnia Propane Price
)
e
g
n
a
h
c
e
v
i
t
a
l
e
R
(
250
200
150
100
50
J
JMAMF
J
A
S
O
N
D
J
JMAMF
J
A
S
O
N
D
2007
2008
Sarnia Propane
WTI Crude Oil
Average Monthly Empress Natural Gas
Other services gross profit was $22.1 million in 2008, a decrease of $2.6 million or 11% from the prior year. The decrease is
the result of lower service and installation demand and reduced sales of small appliances and related materials. Wholesale
and related gross profits were $28.9 million in 2008, an increase of $5.5 million or 24% from the prior year due principally
to higher profits from Superior Propane’s wholesale trading business, principally due to market opportunities during 2008
as a result of the volatility in the wholesale cost of propane.
Superior Propane continues to benefit from its leading market share and considerable operational and customer diversification.
Superior Propane’s operations are well distributed across its 44 market operations, with the largest five markets representing
approximately 23% of EBITDA from operations. Superior Propane’s customer base is well diversified geographically and
across end-use applications as illustrated in the table below. Its largest customer contributed approximately 4% of gross
profits in 2008.
superior propane annual sales VoluMes:
Volumes by End-Use Application (millions of litres)
Volumes by Region (1)
Residential
Commercial
Agricultural
Industrial
Automotive
2008
159
299
86
719
114
1,377
2007
171
315
92
716
135
1,429
Western Canada
Eastern Canada
Atlantic Canada
2008
772
510
95
2007
768
556
105
1,377
1,429
(1) Regions: Western Canada region consists of British Columbia, Alberta, Saskatchewan, Manitoba, Northwest Ontario, Yukon and Northwest Territories; Eastern Canada
region consists of Ontario (except for Northwest Ontario) and Quebec.
22
2008 annual report
Cash operating and administrative costs were $207.5 million in 2008, an increase of $12.7 million or 7% from 2007. The
increase in expenses was due to higher wages and benefits, higher truck leasing costs, higher fuel and operating costs and
general inflationary pressures. These increases were offset in part by the positive impact of Superior Propane reorganizing
its administrative and marketing centres from a centralized model to a regional model, allowing Superior Propane to focus
on its ongoing customer service improvement initiatives while reducing its cost structure. Cash operating costs were
15.1 cents per litre, an increase of 1.5 cents per litre or 11% over 2007, due to the overall increase in operating costs and
a reduction in sales volumes.
outlook
Superior Propane expects EBITDA from operations for 2009 to be between $95 million and $105 million. Superior Propane’s
previous outlook as provided in the third quarter 2008 MD&A was $100 million to $110 million(1). The reduction in Superior
Propane’s 2009 outlook reflects the ongoing impact of reduced sales volumes due to the current economic environment
within North America which is anticipated to negatively impact Superior Propane’s operations. Superior Propane’s significant
assumptions underlying its current outlook are:
• Superior Propane forecasts average temperatures across Canada to be consistent with the most recent five-year
average;
• Superior Propane expects that wholesale propane prices will not significantly impact demand for propane and related
propane services;
• Total gross profit for Superior Propane is projected to remain stable or improve due to the ongoing implementation of
customer service programs and its business transformation project, offset by reduced economic activity;
• Wholesale trading gross profits will be lower than in 2008 as reduced volatility in the wholesale cost of propane will
result in fewer trading opportunities; and
• Total sales volumes are expected to decline due to a continued slowdown in economic activity resulting in reduced
demand for propane and related services.
(1) Superior Propane’s 2009 outlook provided in its 2008 third quarter MD&A for distributable cash flow was $95 million to $105 million. Superior no longer reports distributable
cash flow as a key performance measure; accordingly, Superior has restated Superior Propane’s 2009 outlook from the third quarter of 2008 to EBITDA from operations of
$100 million to $110 million due to the exclusion of $5 million in capital expenditures. See “Non-GAAP Financial Measures” for additional details.
Superior Propane’s EBITDA from operations of $96.8 million for 2008 was modestly lower than the outlook provided in
Superior’s 2008 third quarter MD&A of $97 million to $102 million(1) as an increase in propane gross profits was offset by
higher operating expenses.
(1) Superior Propane’s 2008 outlook provided in its 2008 third quarter MD&A for distributable cash flow was $95 million to $100 million. Superior no longer reports distributable
cash flow as a key performance measure; accordingly, Superior has restated Superior Propane’s 2008 outlook to EBITDA from operations of $97 million to $102 million due
to the exclusion of $2 million in capital expenditures. Superior Propane’s 2008 distributable cash flow would have been approximately $95.7 million, inclusive of $1.1 million
in capital expenditures. See “Non-GAAP Financial Measures” for additional details.
In addition to Superior Propane’s significant assumptions detailed above, refer to “Risk Factors to Superior” for a detailed
review of Superior Propane’s significant business risks.
23
superior plus
ManageMent’s Discussion anD analysis
speCialty ChemiCals
ERCO generated EBITDA from operations of $116.5 million for 2008, an increase of $24.7 million or 27% from $91.8 million
in 2007. The increase in EBITDA from operations is principally due to improved chemical gross profits, specifically improved
chloralkali/potassium gross profits.
Condensed operating results for 2008 and 2007 are provided in the following table. See page 86 for selected historical
information for the last five years.
(millions of dollars except per metric tonne (MT) amounts)
Revenue
Chemicals (1) (3)
Technology
Cost of sales
Chemicals (2)
Technology
Gross profit
Less: cash operating and administrative costs
EBITDA from operations
Chemical volumes sold (thousands of MT)
2008
$/MT
2007
$/MT
460.1
19.5
(232.3)
(12.0)
235.3
(118.8)
116.5
633
27
(319)
(17)
324
(164)
160
427.8
25.4
(231.9)
(16.1)
205.2
(113.4)
91.8
557
33
(302)
(21)
267
(148)
119
727
768
(1) Effective January 1, 2007, Superior discontinued hedge accounting for all economic hedging activities. As such, amounts related to these contracts must be accounted
for separately on Superior’s financial statements (see Notes 10 and 19 to the Consolidated Financial Statements). Superior has reclassified these amounts for purposes of
this MD&A to present its results as if it had accounted for these transactions as accounting hedges. As such, included in revenue for the year ended December 31, 2008
is $4.0 million in realized foreign currency forward contract gains and included in chemical cost of sales for the year ended December 31, 2008 is $22.0 million in realized
fixed-price electricity gains. Included in revenue for the year ended December 31, 2007 is $13.6 million in realized foreign currency forward contract gains and included in
chemical cost of sales for the year ended December 31, 2007 is $7.6 million in realized fixed-price electricity gains.
(2) Effective January 1, 2008, Superior adopted a revised CICA Handbook section related to inventory. This section impacts the calculation of the cost of inventory at ERCO,
due to the requirement to inventory the cost of certain fixed-overhead items, principally the amortization of property, plant and equipment. Additionally, this section requires
that the amortization that is inventoried be classified as a component of cost of products sold once sold. As such, for the year ended December 31, 2008, Superior has
$38.9 million in non-cash amortization from cost of sales in the calculation of EBITDA from operations. See “Changes in Accounting Policies.”
(3) For the year ended December 31, 2008 Superior has reclassified $5.9 million of foreign currency translation gains (2007 – $2.5 million loss) related to U.S.-denominated
working capital from operating and administrative costs to revenue. Reclassification of the translation gains or losses provides improved matching to the income statement
recognition of the underlying working capital item that resulted in the translation gain or loss.
Chemical and technology revenues were $479.6 million in 2008, $26.4 million or 6% higher than in the prior year, as higher
chemical sales pricing more than offset reduced chemical sales volumes and lower technology revenues. Gross profit of
$235.3 million in 2008 increased by $30.1 million or 15% over 2007 due to higher chemical gross profits, offset by modestly
lower technology gross profits.
Chemical gross profits of $227.8 million increased by $31.9 million or 16% due to an increase in sodium chlorate and
chloralkali/potassium gross profits. Sodium chlorate gross profit increased by $10.5 million or 8%, as an increase in average
selling prices more than offset the impact of reduced sales volumes. Sodium chlorate sales volumes decreased by 25,000
tonnes (5%) due principally to reduced sales volumes in North America, as pulp producers began production curtailments
in the fourth quarter of 2008 as a result of the global financial crisis which resulted in a broad-based economic slowdown,
the impact of which began to hit North America earlier than the global economy.
24
2008 annual report
Average selling prices for sodium chlorate were 4% higher than in the prior year due principally to product price increases,
which more than offset reduced hedging gains. ERCO realized $4.0 million in hedging gains in 2008 as a result of its foreign
currency hedging program, compared to $13.7 million in the prior year. Reduced hedging gains are the result of the normal
course maturities within ERCO’s hedging program, as current hedge positions were entered into at rates closer to the
current exchange rate. See “Financial Instruments – Risk Management” for a discussion of hedge positions. Sales prices
were not significantly impacted by the value of the Canadian dollar compared to the U.S. dollar as the average foreign
currency exchange rate for 2008 was consistent with the prior year. Cost of sales for sodium chlorate was modestly
lower than in the prior year as the impact of reduced sales volumes was offset by higher input costs for salt and increased
transportation costs. Electrical costs, which represent approximately 70% to 85% of the variable costs of the production
of sodium chlorate, were consistent with the prior year as ERCO effectively managed production requirements at facilities
where the cost of electricity is subject to market fluctuations, the impact of which offset the upward pressure on overall
electricity pricing.
Chloralkali/potassium gross profits increased by $21.4 million or 30%, as an increase in the average aggregate sales price
more than offset the 16,000-tonne or 7% decrease in sales volumes. Sales prices for potassium products have risen in
response to the dramatic increase in the cost of potash, the primary input cost in producing potassium products. As a
result of ERCO’s acquisition of its Port Edwards, Wisconsin facility in 2005, ERCO had a contract to purchase potash at
a favourable rate until the end of 2008. Upon expiration of the contract, ERCO’s cost of potash will be at current market
prices. Chloralkali/potassium sales volumes were impacted by reduced sales volumes of potassium products in the fourth
quarter of 2008 as a result ERCO’s inability to produce potassium products due to a force majeure that was imposed
related to ERCO’s potash supply contract. The force majeure was removed on November 6, 2008, allowing ERCO to restart
production of potassium products in late December 2008. Technology gross profits of $7.5 million were $1.8 million lower
than in the prior year due to reduced project activity.
Total chemical sales volumes were 727,000 tonnes in 2008, a decrease of 41,000 tonnes or 5% from the prior year, due
to reduced sales volumes of sodium chlorate and chloralkali/potassium as noted above. Average chemical revenue was
$633 per MT in 2008 compared to $557 per MT in 2007, an increase of 14%, reflecting improved overall pricing on sodium
chlorate and chloralkali/potassium. Sodium chlorate and chloralkali/potassium production capacity utilization averaged 96%
(2007 – 99%) and 96% (2007 – 97%), respectively.
Cash operating and administration costs were $118.8 million in 2008, an increase of $5.4 million or 5% from the prior year.
Operating expenses were impacted by higher employee-related costs, increased provisions for bad debts and general
inflationary pressures.
Chloralkali/potassium sales in 2008 contributed 43% of EBITDA from operations, an increase of 11% from the 32%
contribution in 2007. Sodium chlorate sales in 2008 represented 57% of ERCO’s EBITDA from operations, a decrease
of 11% from the 68% contribution in 2007. Sodium chlorate is principally sold to bleached pulp manufacturers, as it is a
required input to generate chlorine dioxide, which is in turn used to bleach pulp. Sodium chlorate represents approximately
5% of the variable cost to manufacture bleached pulp. As a result, sodium chlorate sales volumes and prices tend to be
stable over time despite the volatility of bleached pulp prices (see the following chart). ERCO’s top 10 customers comprised
approximately 44% of its revenues in 2008, with its largest customer representing 6% of its revenues.
25
superior plus
ManageMent’s Discussion anD analysis
Pulp Prices Compared to Sodium Chlorate Prices and Sales Volumes
)
e
n
n
o
t
/
$
S
U
(
950
900
850
800
750
700
650
600
550
500
450
400
950
900
850
800
750
700
650
600
550
500
450
400
)
s
e
n
n
o
t
c
i
r
t
e
m
s
0
0
0
(
2001
2002
2003
2004
2005
2006
2007
2008
Sodium Chlorate
(Source: Market Wire)
NBSK
(Source: Paper Loop)
Sodium Chlorate Sales Volumes
(ERCO Worldwide)
During 2007, ERCO determined that it would convert its Port Edwards, Wisconsin chloralkali facility from mercury-based
technology to membrane technology. The project maintains the facility’s ability to produce both sodium and potassium
products, provides increased production capacity of approximately 30%, provides a significant extension of the plant life
and enhances the efficiency of ERCO’s use of electrical energy. The cost of the conversion is estimated to be US$130
million, reflecting the substantial completion of the process engineering and significant completion of detailed engineering
on the project, providing improved cost estimates. The conversion is anticipated to be completed in the second half of
2009. See “Consolidated Capital Expenditure Summary” for additional details on costs incurred related to Port Edwards.
outlook
ERCO expects EBITDA from operations for 2009 to be between $105 million and $115 million. ERCO’s previous outlook
as provided in the 2008 third quarter MD&A was $102 million to $112 million(1). The increased 2009 outlook reflects the
ongoing impact of higher sales prices on chloralkali/potassium products. ERCO’s significant assumptions underlying its
current outlook are:
• Current supply and demand fundamentals for sodium chlorate will weaken, resulting in declining sales volumes
throughout 2009;
• Chloralkali/potassium gross profits are expected to continue to benefit from improved overall pricing;
• ERCO’s average plant utilization is expected to be approximately 80-90%;
• The foreign currency exchange rate between the Canadian and United States dollar is expected to be 1.18 on all
unhedged foreign currency transactions;
• ERCO’s conversion of its Port Edwards, Wisconsin chloralkali facility from mercury-based technology to membrane
technology for US$130 million is expected to be completed on-budget in the second half of 2009; and
• No incremental cash flow is anticipated as a result of the Port Edwards project in 2009.
(1) ERCO’s 2009 outlook provided in its 2008 third quarter MD&A for distributable cash flow was $85 million to $95 million. Superior no longer reports distributable cash
flow as a key performance measure; accordingly, Superior has restated ERCO’s 2009 outlook from the third quarter of 2008 to EBITDA from operations of $102 million to
$112 million due to the exclusion of $10 million in capital expenditures and $7 million in cash taxes. See “Non-GAAP Financial Measures” for additional details.
26
2008 annual report
ERCO’s EBITDA from operations of $116.5 million for 2008 was higher than the outlook provided in Superior’s 2008 third
quarter MD&A of $107 million to $112 million(1) due principally to improved chemical gross profits.
(1) ERCO’s 2008 outlook provided in its 2008 third quarter MD&A for distributable cash flow was $85 million to $90 million. Superior no longer reports distributable cash flow
as a key performance measure; accordingly, Superior has restated ERCO’s 2008 outlook to EBITDA from operations of $107 million to $112 million due to the exclusion
of $10 million in capital expenditures and $12 million in cash taxes. ERCO’s 2008 distributable cash flow would have been approximately $106.5 million, inclusive of
$10.0 million in capital expenditures and $13.4 million in cash taxes. See “Non-GAAP Financial Measures” for additional details.
In addition to ERCO’s significant assumptions detailed above, refer to “Risk Factors to Superior” for a detailed review of
ERCO’s significant business risk.
ConstruCtion produCts distribution
Winroc generated EBITDA from operations of $37.4 million in 2008, an increase of $0.7 million or 2% from $36.7 million
in 2007. EBITDA from operations was impacted by higher gross profits, offset in part, by higher operating and
administrative expenses.
Condensed operating results for 2008 and 2007 are provided in the following table. See page 86 for selected historical
information for the last five years.
(millions of dollars)
Distribution and direct sales revenue
Distribution and direct sales cost of sales
Distribution and direct sales gross profit
Less: cash operating and administrative costs
EBITDA from operations
2008
523.6
(382.9)
140.7
(103.3)
37.4
2007
512.3
(382.5)
129.8
(93.1)
36.7
Distribution and direct sales revenues of $523.6 million were $11.3 million (2%) higher than in the prior year, as an increase
in overall average selling prices more than offset a reduction in sales volumes. Distribution and direct sales gross profit
was $140.7 million in 2008, an increase of $10.9 million or 8% from 2007, as the impact of the acquisition of Fackoury’s
Building Supplies Ltd. (Fackoury’s) on May 9, 2008, and modestly higher gross margins, were only partially offset by a
reduction in sales volumes at other operating locations. Distribution drywall sales volumes, an indicator of overall sales
volumes, decreased by 9% from the prior year. The decrease in distribution sales volumes was principally due to weakness
in the United States, reflecting the ongoing slowdown in new residential housing starts, particularly in the Southwest
and Midwest U.S. Volumes were also negatively impacted by reduced sales volumes in the Prairies, offset in part,
by improved sales volumes in Ontario and B.C. Sales volumes in the Prairies were impacted by a slowdown in new
residential volumes from near-record levels in the prior year, while sales volumes in Ontario benefited from the acquisition
of Fackoury’s. Sales margins were modestly higher than in the prior year due to improved product mix and the continued
focus on margin management.
27
superior plus
ManageMent’s Discussion anD analysis
Cash operating and administration costs were $103.3 million for 2008, an increase of $10.2 million or 11% over 2007
due to increased costs associated with additional operating branches, increased fuel costs, higher provisions for bad
debts, general inflationary pressures and the implementation of a comprehensive operating lease program in 2007. Winroc
continues to actively manage its cost structure in response to the current economic uncertainty.
On May 9, 2008, Winroc acquired the shares of Fackoury’s and associated entities, a privately held gypsum and related
products distributor, with operating locations in Cambridge and Concord, Ontario, for consideration of $21.2 million (net of
$2.2 million in cash acquired).
Winroc enjoys considerable geographical and customer diversification, servicing over 8,300 customers across 42 distribution
branches. (See “Distribution Revenues by Region” pie chart below.) Winroc’s 10 largest customers represent approximately
8% of its annual distribution sales. Winroc enjoys a strong position in the distribution markets where it operates, supported
by its complete walls and ceilings product line and procurement capabilities. (See “Distribution Revenues by Product” pie
chart below.)
Distribution Revenues by Region – 2008
Distribution Revenues by Product – 2008
26%
26%
� U.S.
� Prairies
� B.C.
20%
27%
� Central/Eastern Canada
5%
7%
13%
16%
17%
� Drywall & Components
� Ceilings
42%
� Steel Framing
� Insulation
� Stucco & Plaster
� Tools, Fasteners & Misc.
Sales to commercial builders and contractors are comprised of Winroc’s full product line whereas sales to residential builders
and contractors are principally comprised of drywall and components, insulation and plaster products. Demand for walls and
ceiling construction products is influenced by overall economic conditions with approximately 50% of sales from servicing
residential new construction and remodelling activity and 50% of sales from servicing commercial new construction and
remodelling activity. Overall demand has grown steadily over time as new commercial construction demand trends have
historically lagged new residential construction, while remodelling expenditures have increased steadily. (See “U.S. and
Canadian demand profiles on next page.)
28
2008 annual report
Canadian End-Use Construction Segments
)
e
g
n
a
h
c
t
n
e
c
r
e
P
(
200
175
150
125
100
75
50
)
e
g
n
a
h
c
t
n
e
c
r
e
P
(
225
200
175
150
125
100
75
50
1984
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
2008*
CDN Non-Residential Construction
Footage Put In Place
CDN Housing
Starts
*Estimate
U.S. End-Use Construction Segments
1984
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
2008*
U.S. Non-Residential Construction
Footage Put In Place
U.S. Residential Additions
and Alterations
U.S. Housing
Starts
*Estimate
29
superior plus
ManageMent’s Discussion anD analysis
outlook
Winroc expects EBITDA from operations for 2009 to be between $28 million and $35 million. Winroc’s previous outlook as
provided in the 2008 third quarter MD&A was $32 million to $39 million(1). The reduction in Winroc’s 2009 outlook reflects
the ongoing impact of reduced sales volumes due to the current economic environment within North America, which is
anticipated to negatively impact Winroc’s operations. Winroc’s significant assumption underlying its current outlook is:
• EBITDA from operations is expected to decline as volumes will continue to be negatively impacted by the ongoing
decline in new home residential and commercial activity in both Canada and the United States.
(1) Winroc’s 2009 outlook provided in its 2008 third quarter MD&A for distributable cash flow was $30 million to $37 million. Superior no longer reports distributable cash
flow as a key performance measure; accordingly, Superior has restated Winroc’s 2009 outlook from the third quarter of 2008 to EBITDA from operations of $32 million to
$39 million due to the exclusion of $1 million in capital expenditures and $1 million in cash taxes. Winroc’s 2008 distributable cash flow would have been approximately
$36.8 million, inclusive of $0.6 million in capital expenditures and $0.4 million in cash taxes. See “Non-GAAP Financial Measures” for additional details.
Winroc’s EBITDA from operations of $37.4 million for 2008 was consistent with the outlook provided in Superior’s
2008 third quarter MD&A of $34 million to $39 million(1) as improved sales margins more than offset the impact of reduced
sales volumes.
(1) Winroc’s 2008 outlook provided in its 2008 third quarter MD&A for distributable cash flow was $32 million to $37 million. Superior no longer reports distributable cash flow
as a key performance measure; accordingly, Superior has restated Winroc’s 2008 outlook to EBITDA from operations of $34 million to $39 million due to the exclusion of
$1.0 million in capital expenditures and $1.0 million in cash taxes. See “Non-GAAP Financial Measures” for additional details.
In addition to Winroc’s significant assumptions detailed above, refer to “Risk Factors to Superior” for a detailed review of
Winroc’s significant business risks.
fixed-priCe energy serviCes
SEM generated EBITDA from operations of $6.5 million in 2008, a decrease of $5.6 million or 46% from $12.1 million in
2007, due to reduced gross profit.
Condensed operating results for 2008 and 2007 are provided in the following table. See page 86 for selected historical
information for the last five years.
(millions of dollars)
Revenue
Cost of sales (1) (2)
Gross profit
Less: operating, administrative and selling costs
EBITDA from operations
2008
323.6
(296.0)
27.6
(21.1)
6.5
2007
320.4
(289.3)
31.1
(19.0)
12.1
(1) For the year ended December 31, 2008, Superior has reclassified $4.0 million of foreign currency translation losses (2007 – $1.0 million gain) related to U.S.-denominated
working capital from operating and administrative expense to cost of sales. Reclassification of the translation gains or losses provides improved matching to the income
statement recognition of the underlying working capital item that resulted in the translation gains or losses. For the year ended December 31, 2007, Superior has reclassified
$1.0 million of translation gains.
(2) Effective January 1, 2007, Superior discontinued hedge accounting for all economic hedging activities. As such, amounts related to these contracts must be accounted for
separately on Superior’s financial statements (see Notes 10 and 19 to the Consolidated Financial Statements). Superior has reclassified these amounts for purposes of this
MD&A to present its results as if it had accounted for these transactions as accounting hedges. As such, included in cost of sales for the year ended December 31, 2008 is
$17.6 million in realized foreign currency forward contract losses and $34.3 million related to natural gas commodity realized fixed-price gains. Included in cost of sales for
the year ended December 31, 2007 is $19.3 million in realized foreign currency forward contract losses and $14.9 million related to natural gas commodity realized fixed-
price losses.
30
gross profit by segMent
(millions of dollars except volume and per unit amounts)
Natural gas (1)
Electricity (2)
Total
Gross
Profit
26.74
0.86
27.60
2008 annual report
2008
2007
Volume
Per Unit
80.5 ¢/GJ
69.9 kWh 1.23 ¢/kWh
33.2 GJ
Gross
Profit
31.10
–
31.10
Volume
Per Unit
37.0 GJ
84.1 ¢/GJ
–
–
(1) Natural gas volumes are expressed in millions of gigajoules (GJ), while per unit amounts are expressed in gigajoules.
(2) Electricity volumes are expressed in millions of kilowatt hours (kWh), while per unit amounts are expressed in kWh.
SEM provides fixed-price, term natural gas sales to residential customers in Ontario and British Columbia and to commercial
and light industrial consumers in Ontario and Quebec. On August 1, 2007, SEM began marketing fixed-price electricity
sales contracts to residential and commercial customers in Ontario.
SEM’s revenues of $323.6 million in 2008 were $3.2 million or 1% higher than in the prior year, as the impact of revenues
associated with the start-up of SEM’s electricity business more than offset lower natural gas revenues due to reduced
sales volumes. Gross profit for 2008 was $27.6 million, a decrease of $3.5 million (11%) from $31.1 million in gross profit
earned in 2007. Natural gas gross profit was $26.7 million, a decrease of $4.4 million from the prior year due to reduced
margins and lower sales volumes. Gross profit was impacted by approximately $2.0 million in foreign currency translation
losses due to the dramatic appreciation of the U.S. dollar relative to the Canadian dollar during the fourth quarter of 2008.
Foreign currency fluctuations impacted SEM’s EBITDA from operations due to the discontinuation of hedge accounting in
the prior year, which results in a timing difference between the recognition of the accrual for the U.S. dollar cost of sales
and the subsequent realization of the related foreign currency derivative gain or loss. In the absence of significant foreign
exchange volatility, operating results with or without hedge accounting would not be significantly different. The impact of
fluctuations in foreign currency can impact SEM’s year-over-year results, but over the fullness of time, SEM’s results are
not significantly impacted by changes in foreign currency rates as SEM is fully hedged from an economic perspective.
Additionally, Superior’s decision to discontinue hedge accounting effective January 1, 2007 resulted in a one-time benefit
of $0.5 million to SEM’s 2007 gross profits. Gross profit per unit was 80.5 cents per GJ, a decrease of 3.6 cents per GJ
(4%) from the prior year. The reduction in gross profit per GJ was impacted by lower gross profits as noted above combined
with the impact of a change in sales mix, as a higher proportion of natural gas sales volumes in the current year were lower-
margin, commercial volumes than in the prior year. Sales volumes of natural gas were 33.2 million GJ, 3.8 million GJ (10%)
lower than in the prior year as reduced residential customer volumes more than offset the impact of higher commercial
volumes. Residential and small commercial customer volumes comprised approximately 30% of natural gas sales volumes
in 2008 compared to 32% in 2007.
Electricity gross profit in 2008 was $0.9 million, with no contribution from electricity in the prior year as electricity only
began to flow to customers in 2008. SEM is continuing to work on further market penetration of the Ontario fixed-price
electricity market. Operating, administrative and selling costs were $21.1 million in 2008, an increase of $2.1 million (11%)
over 2007. The increase in costs is due principally to higher selling and marketing costs as a result of rebuilding sales
channels, in addition to costs associated with SEM’s entrance into the British Columbia fixed-price natural gas and Ontario
fixed-price electricity markets. Amortization of customer acquisition costs of $6.5 million in 2008 was consistent with the
prior year’s $6.6 million.
31
superior plus
ManageMent’s Discussion anD analysis
SEM invested $6.8 million in customer acquisition costs ($0.3 million net of amortization) during 2008, compared to
$10.9 million ($4.3 million net of amortization) in 2007, resulting in a customer base of 91,800 residential natural gas
customers, 6,300 commercial natural gas customers and 3,700 electricity customers. The acquisition of new customers
and the retention of SEM’s existing customers has been challenging in all of SEM’s markets due in part to the low system
price of natural gas compared to the fixed-rate alternative SEM is able to offer. Over the previous 12 months, the system
price of natural gas has been both constant and low due to the low spot price of natural gas over the prior quarters. This has
resulted in reduced customer demand for long-term, higher fixed-price natural gas contracts, as the immediate perceived
benefit of entering into a long-term deal is reduced at the current fixed-price rates. Similar to the sign-up of natural gas
customers, SEM’s sign-up for fixed-price electricity customers has been lower than expected due to a low regulated price
plan for electricity.
SEM’s fixed-price natural gas contracts are for a maximum term of five years. As at December 31, 2008, the average
remaining term of SEM’s contracts was 28 months (December 31, 2007 – 37 months), due to the slowdown in the sign-up
of new customers, and the retention of existing customers. SEM’s largest customer represented 1% of 2008 gross profits
(2007 – 1%). At December 31, 2008, SEM’s largest fixed-price natural gas supplier represented 27% (December 31, 2007
– 30%) of its supply portfolio.
On January 7, 2008, SEM announced it had entered into a long-term natural gas supply agreement with Constellation
Energy Commodities Group, Inc., providing SEM with a dependable long-term, fixed-price natural gas supply.
outlook
SEM expects EBITDA from operations for 2009 to be between $9 million and $12 million. SEM’s previous outlook as
provided in the 2008 third quarter MD&A was $12 million to $16 million(1). The reduction in SEM’s 2009 outlook reflects
reduced customer demand for fixed-price energy contracts due to the low system price for natural gas and electricity.
SEM’s significant assumptions underlying its current outlook are:
• SEM is able to access sales channel agents on acceptable contract terms;
• Natural gas markets in Ontario and British Columbia will provide growth opportunities for SEM; and
• The residential and commercial electricity markets in Ontario are expected to provide additional growth opportunities
for SEM.
SEM’s EBITDA from operations of $6.5 million for 2008 was less than the outlook provided in Superior’s 2008 third quarter
MD&A of $10 million to $13 million(1) principally due to the impact of losses on foreign currency translation and lower than
expected sales volumes.
(1) SEM’s 2008 and 2009 outlook provided in Superior’s 2008 third quarter MD&A for distributable cash flow was $10 million to $13 million for 2008, and $12 million to $16
million for 2009. SEM’s calculation of EBITDA from operations is unchanged from its prior reporting measure of distributable cash flow. SEM’s distributable cash flow would
have been approximately $6.5 million. See “Non-GAAP Financial Measures” for additional details.
In addition to SEM’s significant assumptions detailed above, refer to “Risk Factors to Superior” for a detailed review of
SEM’s significant business risks.
32
Consolidated Capital expenditure summary
(millions of dollars)
Efficiency, process improvement and growth-related
Other capital
Port Edwards expansion project
Acquisitions
Transaction with Ballard
Proceeds on disposition of capital (1)
Total net capital expenditures
Capital-equivalent value of operating leases (2)
Total capital including operating leases
2008 annual report
2008
26.8
7.6
49.8
84.2
24.5
46.3
(7.5)
147.5
27.4
174.9
2007
13.2
7.7
1.4
22.3
4.3
−
(4.4)
22.2
20.0
42.2
(1) Does not include $4.0 million of proceeds on the sale of ERCO’s Bruderheim, Alberta facility. See “Corporate Conversion and Other Strategic Costs” for additional details.
(2) Capital-equivalent value of operating leases reflects the total dollar value of capital items that have been acquired through operating leases.
Efficiency, process improvement and growth-related expenditures were $26.8 million in 2008 compared to $13.2 million
in 2007. Efficiency, process improvement and growth-related expenditures were principally incurred in relation to ERCO’s
electrical cell replacement program, ERCO’s hydrogen capture and utilization projects and Superior Propane’s business
transformation project. Other capital expenditures were $7.6 million in 2008 compared to $7.7 million in the prior year,
consisting primarily of required maintenance and general capital at ERCO and Superior Propane. Proceeds on the disposal
of capital were $7.5 million in 2008 compared to $4.4 million in the prior year. Proceeds consisted principally of Superior
Propane’s disposition of excess properties. ERCO incurred $49.8 million (US$43.4 million) in 2008 related to its Port Edwards
expansion project. To year-end 2008, ERCO had incurred US$44.8 million cumulatively on the project which is anticipated
to cost US$130.0 million in aggregate.
Acquisitions for 2008 totalled $24.5 million and were comprised of Winroc’s acquisition of Fackoury’s for $21.1 million,
as previously discussed in the review of Winroc, and Superior Propane’s acquisition of certain propane assets in Atlantic
Canada for $3.4 million.
Capital expenditures were funded from a combination of operating cash flow, proceeds received from Superior’s trust unit
reinvestment program and revolving term bank credit facilities.
Corporate and interest Costs
Cash corporate and administrative costs were $14.6 million in 2008, an increase of $4.1 million from 2007. The increase over
the prior year was due principally to $3.2 million of foreign currency translation losses on the revaluation of U.S. dollar cash
transactions and U.S. dollar-denominated interest payables. Excluding the impact of foreign currency translation losses, the
increase in corporate costs is due to higher long-term incentive plan costs, due in turn to additional long-term incentive plan
grants, the addition of an Executive Vice-President of Business Development and the impact of performance-related shares
as a result of Superior’s share performance throughout 2008. Excluding the impact of foreign currency translation losses
and long-term incentive plan costs, corporate and administrative costs were consistent with the prior year.
Interest expense on Superior’s revolving term bank credits and term loans was $21.7 million for 2008 (net of $2.0 million in
realized gains on interest rate swaps), a decrease of $3.5 million from $25.2 million incurred in the prior year. The decrease
in interest expense was due to lower interest rates on floating-rate debt offset by the impact of higher average debt levels
due to capital expenditures incurred in the year, including the expansion of ERCO’s Port Edwards, Wisconsin facility and
the impact of the appreciation of the U.S. dollar on U.S.-denominated interest costs.
33
superior plus
ManageMent’s Discussion anD analysis
Interest on Superior’s convertible unsecured subordinated debentures (the debentures) was $14.8 million for 2008, a
decrease of $4.7 million from 2007. The reduction in debenture interest is due to the maturity of $8.1 million in Series I, 8%
debentures on July 31, 2007 and Superior’s early redemption of $59.2 million in Series II, 8% debentures on November 5,
2007, comprising all of the Series II debentures.
Corporate Conversion and other strategiC Costs
Corporate conversion costs incurred in 2008 were $5.0 million and consisted primarily of professional fees related to the
planning and execution of the transaction with Ballard.
During 2008, ERCO completed the sale of its Bruderheim, Alberta facility for proceeds of $4.0 million, which have been
treated as a recovery of strategic plan costs previously expensed. ERCO has retained 130 acres of the surrounding
property.
Superior did not incur any strategic plan costs during 2008. Strategic plan costs incurred in the prior year totalled
$5.7 million and related to the completion of employee retention programs and ERCO’s closure of its Bruderheim, Alberta
sodium chlorate facility.
inCome taxes
On December 31, 2008, the Fund converted from a publicly traded income trust to a publicly traded corporation by way of a
plan of arrangement with Ballard for cash consideration of $46.3 million. The transaction resulted in Superior increasing its
tax basis by approximately $1,013.0 million. Additional consideration may be payable to Ballard in future periods based on
the finalization of tax basis available to Superior. Superior’s calculation of current and future income taxes for the year ended
December 31, 2008 is based on the conversion to a corporate structure effective December 31, 2008, whereas Superior’s
calculation of current and future income taxes for the year ended December 31, 2007 is based on Superior being a publicly
traded income trust. Consistent with prior periods, Superior recognizes a provision for income taxes for its subsidiaries that
are subject to current and future income taxes, including United States income tax, United States non-resident withholding
tax and Chilean income tax.
Total income tax expense for the year ended 2008 was $9.9 million, comprised of $13.8 million in cash income taxes and a
$3.9 million future income recovery, compared to a total income tax recovery of $5.1 million in the prior year, comprised of
$5.3 million in cash income taxes and a $10.4 million future income tax recovery.
Cash income and withholding taxes for the year ended 2008 were $13.8 million, consisting of cash taxes in the
United States of $12.3 million and withholding taxes of $1.5 million (2007 – $5.3 million in the United States). The increase
in United States cash income taxes was due to higher U.S.-denominated taxable earnings as a result of improved operating
results at ERCO.
Future income tax recovery for the year ended 2008 was $3.9 million (2007 – $10.4 million future income tax recovery),
resulting in a corresponding net future income tax asset of $384.9 million as at December 31, 2008 and a net deferred
credit of $307.7 million. The change in future income taxes and the deferred credit is principally the result of Superior’s
conversion to a corporation and related transaction with Ballard.
34
As at December 31, 2008, Superior had the following tax pools available to be used in future years:
(millions of dollars)
Canada
Tax basis
Non-capital losses
Capital losses
Canadian scientific research expenditures
Investment tax credits
United States
Tax basis
Capital loss carry-forwards
Chile
Tax basis
Non-capital loss carry-forwards
2008 annual report
423.4
206.7
630.6
590.7
192.3
46.0
56.8
43.2
24.1
See the audited consolidated financial statements for the year ended December 31, 2008 for a summary of the expiration
of the non-capital loss carry-forwards and investment tax credits. Capital loss carry-forwards, Canadian scientific research
expenditures and Chilean non-capital losses are eligible to be carried forward indefinitely.
Consolidated outlook
Superior expects adjusted cash flow from operations for 2009 to be between $2.00 and $2.20 per share and for 2010 to be
between $2.20 and $2.40 per share. Superior’s previous outlook for 2009 as provided in the 2008 third quarter MD&A was
between $2.10 and $2.35(1) per share. Prior to this outlook, Superior had not disclosed its expectations for 2010. Superior’s
consolidated adjusted operating cash flow outlook is dependent on the operating results of its four divisions. See the
discussion of operating results by division for additional details on Superior’s 2009 guidance. In addition to the operating
results of Superior’s four divisions, significant assumptions underlying Superior’s current 2009 and 2010 outlook are:
• Current economic conditions in Canada and the United States prevail for 2009 with a modest improvement in 2010;
• Superior continues to attract capital and obtain financing on acceptable terms;
• The foreign currency exchange rate between the Canadian and U.S. dollar averages 1.18 in 2009 and 1.11 in 2010 on all
unhedged foreign currency transactions;
• Superior’s average interest rate on floating-rate debt remains stable to marginally lower throughout 2009, increasing
modestly in 2010;
• Financial and physical counterparties continue to fulfill their obligations to Superior;
• Regulatory authorities do not impose any new regulations impacting Superior;
• EBITDA from operations of the divisions in 2010 is consistent, to modestly improved, compared to 2009; and
• Incremental EBITDA is generated in 2010 from the Port Edwards expansion project, which is due to be completed in the
latter half of 2009.
(1) Superior’s 2009 outlook provided in its 2008 third quarter MD&A for distributable cash flow per share was $1.95 to $2.20. Superior no longer uses distributable cash flow
as a key performance measure; accordingly, Superior has restated its 2009 outlook to adjusted operating cash flow per share of $2.10 to $2.35. Adjusted operating cash
flow per share does not have a deduction for capital expenditures, which differs from distributable cash flow per share which had a deduction for capital expenditures of
$15 million. See “Non-GAAP Financial Measures” for additional details.
35
superior plus
ManageMent’s Discussion anD analysis
Consolidated adjusted operating cash flow for 2008 of $2.18 per share was consistent with Superior’s outlook provided in
its 2008 third quarter MD&A of $2.15 to $2.25(1).
(1) Superior’s 2008 outlook provided in its 2008 third quarter MD&A for distributable cash flow per share was $2.05 to $2.15. Superior no longer uses distributable cash flow
as a key performance measure; accordingly, Superior has restated its 2008 outlook to adjusted operating cash flow per share of $2.15 to $2.25. Adjusted operating cash
flow per share does not have a deduction for capital expenditures, which differs from distributable cash flow per share which had a deduction for capital expenditures.
Superior’s 2008 distributable cash flow per share would have been approximately $2.04 per share, inclusive of $11.7 million in capital expenditures. Distributable cash flow
was marginally below the outlook, due to lower operating results at SEM and higher corporate costs. See “Non-GAAP Financial Measures” for additional details.
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
Superior’s total and available sources of credit are detailed in the table below:
Available Credit Facilities
As at December 31, 2008
(millions of dollars)
Revolving term bank credit facilities (1)
Term loans (1)
Accounts receivable sales program
Total
Total
Amount
595.0
218.7
100.0
913.7
Borrowings
259.0
218.7
100.0
577.7
Letters of
Credit Issued
41.5
−
−
41.5
Amount
Available
294.5
−
−
294.5
(1) Revolving term bank credit facilities and term loan balances are presented before deferred financing fees.
Superior has a secured revolving syndicated bank facility of $595.0 million with 10 banks. The facility matures on June 28,
2010 and can be expanded to $600.0 million.
Superior’s revolving term bank credit and term loans before deferred financing fees, including $100.0 million related
to the accounts receivable securitization program, totalled $577.7 million as at December 31, 2008, an increase of
$137.2 million from the prior year. The increase in revolving term bank credits and term loans is predominately due to the
non-cash impact of the appreciation of the U.S. dollar on U.S. dollar-denominated debt (approximately a $60 million impact),
Superior’s transaction with Ballard on December 31, 2008 for $46.3 million and the impact of other capital expenditures
during the year, offset in part by operating cash flow in excess of distributions for the year. See “Summary of Cash Flows”
for a complete summary of Superior’s sources and uses of cash.
As at December 31, 2008, debentures before deferred issue costs issued by Superior totalled $247.6 million, $0.4 million
higher than the balance at December 31, 2007. The change in the stated cost of the debentures is due to the accretion of
the original discount to interest expense during 2008.
As at December 31, 2008, $294.5 million was available under the credit facilities and accounts receivable sales program,
which is considered sufficient to meet Superior’s net working capital funding requirements and expected capital expenditures.
Principal covenants are described in “Contractual Obligations and Other Commitments” on page 39.
Consolidated net working capital was $168.9 million as at December 31, 2008, a decrease of $4.1 million from December
31, 2007 ($173.0 million). Net working capital was consistent with the prior year-end, as an increase in working capital
at ERCO and Winroc as a result of the appreciation of the U.S. dollar on U.S.-denominated working capital was offset
by reduced working capital requirements at Superior Propane as a result of a reduction in the retail cost of propane
and reduced working capital at Corporate as a result of the requirement to fund the December 31, 2008 distribution to
Superior’s trust agent in advance of the payment on January 15, 2008, due to the transaction with Ballard. Superior’s net
working capital requirements are financed from revolving term bank credit facilities and by proceeds raised from a trade
accounts receivable sales program.
36
2008 annual report
Proceeds received from Superior’s distribution reinvestment plan (DRIP) were $8.9 million for 2008 (2007 – $25.3 million).
The reduction is a result of Superior announcing on February 28, 2008 that it would suspend the DRIP after the February
2008 distribution. In February 2009, Superior adopted a dividend reinvestment plan (also called DRIP) in relation to its
conversion to a corporation. The current DRIP can be implemented at Superior’s request, subject to meeting certain
regulatory requirements.
Superior has entered into an agreement to sell, with limited recourse, certain accounts receivables on a 30-day revolving
basis to an entity sponsored by a Canadian chartered bank to finance a portion of its working capital requirements, which
represents an off-balance-sheet obligation. The receivables are sold at a discount to face value based on prevailing money
market rates. As at December 31, 2008, proceeds of $100.0 million (December 31, 2007 – $100.0 million) had been
raised from this program and were used to repay revolving term bank credits (see Note 4 to the Consolidated Financial
Statements). Superior is able to adjust the size of the sales program on a seasonal basis in order to match the fluctuations of
its accounts receivable funding requirements. The program requires Superior to maintain a minimum secured credit rating
of BB and meet certain collection performance standards. Superior is currently fully compliant with program requirements.
The program expires on December 29, 2009.
On October 30, 2008, Superior announced its intention to convert from a trust to a corporation, completing this transaction
on December 31, 2008. On October 30, 2008, DBRS confirmed Superior’s senior secured notes rating at BBB (low) with a
stable outlook. On October 31, 2008, Standard and Poor’s confirmed Superior’s BBB- (negative outlook) secured long-term
debt credit rating. On November 14, 2008, Standard and Poor’s removed Superior’s negative outlook and confirmed its
credit ratings of BBB- secured and BB+ unsecured.
ContraCtual obligations and other Commitments
(millions of dollars)
Revolving term bank credits and term loans
Convertible debentures
Operating lease and capital commitments (2)
CDN$ equivalent of US$ foreign currency
forward purchase contracts
US$ foreign currency forward sales contracts (US$)
Fixed-price electricity purchase commitments
Natural gas, propane and
electricity purchase commitments (3) (4)
Future employee benefits (5)
Total contractual obligations
Notes (1)
7
8
16(i)
10
10
10
10
9
Total
477.7
249.9
164.7
269.2
182.6
159.3
332.1
21.9
1,857.4
2009
13.0
–
37.7
133.5
92.2
17.7
211.5
3.9
509.5
Payments Due In
2010-2011
2012-2013
Thereafter
308.3
–
61.3
75.7
90.4
35.4
112.0
7.8
690.9
83.0
174.9
39.2
–
–
35.4
8.6
7.8
73.4
75.0
26.5
60.0
–
70.8
–
2.4
348.9
308.1
(1) Notes to Consolidated Financial Statements.
(2) Operating lease and capital commitments together with the accounts receivable sales program comprise Superior’s off-balance sheet obligations.
(3) Superior, with respect to its natural gas and propane commitments, is similarly committed to long-term natural gas and propane customer sales commitments.
(4) Does not include the impact of financial derivatives. See Note 10 to the Consolidated Financial Statements.
(5) Does not include the Superior Propane defined benefit pension asset.
Revolving term bank credits and term loans are secured by a general charge over the assets of Superior and certain of its
subsidiaries. As at December 31, 2008, Superior’s senior debt to bank compliance EBITDA ratio (see Bank Compliance
EBITDA in “Non-GAAP Financial Measures”) was 2.3 times after taking into account the impact of the off-balance sheet
receivable sales program and the impact of cash on hand (December 31, 2007 – 1.9 times).
37
superior plus
ManageMent’s Discussion anD analysis
Senior bank debt covenants limit the incurrence of additional long-term debt and payments of distributions/dividends
to Superior and its shareholders if Superior’s consolidated senior debt (including proceeds raised from the accounts
receivable sales program) exceeds 3.5 times bank compliance EBITDA for the last 12-month period as adjusted for
the pro forma impact of acquisitions and dispositions. Senior secured notes covenants limit incurring the incurrence of
additional long-term debt and payments of dividends to Superior’s shareholders if Superior’s consolidated senior debt
(including proceeds raised from the accounts receivable sales program) exceeds 3.0 times bank compliance EBITDA for
the last 12-month period as adjusted for the pro forma impact of acquisitions and dispositions. Additionally, Superior’s
distributions/dividends (including payments to debenture holders) cannot exceed bank compliance EBITDA plus
$25.0 million. At December 31, 2008, senior debt and total debt ratios when calculated in accordance with Superior’s senior
credit agreements were 2.4 times to (December 31, 2007 – 2.0 times). Total debt to bank compliance EBITDA ratio for
purposes of senior credit agreements does not include the debentures.
Debentures are obligations of Superior and consist of $174.9 million in Series I, 5.75% debentures maturing on
December 31, 2012 and $75.0 million in Series 1, 5.85% debentures maturing on October 31, 2015. The 5.75% Series I
and 5.85% Series I debentures are convertible at the option of the holder into common shares at $36.00 and $31.25 per
common share, respectively. Superior may elect to satisfy interest and principal debenture obligations by the issuance of
common shares.
As at December 31, 2008, Superior’s total debt (including debentures) to bank compliance EBITDA ratio was 3.4 times
(December 31, 2007 – 3.0 times) after taking into account the impact of the off-balance sheet receivable sales program
amounts and the impact of cash on hand. Debt covenants limit incurring additional long-term debt and payments of
dividends to Superior and its shareholders if Superior’s total debt (including proceeds raised from the accounts
receivable sales program) exceeds 5.0 times bank compliance EBITDA for senior bank debt and 5.5 times bank
compliance EBITDA for senior secured notes for the last 12-month period as adjusted for the pro forma impact of
acquisitions and dispositions.
As at December 31, 2008, approximately 16% of Superior’s revolving term bank credits and term loans and debenture
obligations were not repayable for at least five years and approximately 47% of Superior’s total debt obligations (including
accounts receivable sales program) are subject to fixed interest rates. Superior’s policy is to target a fixed-to-floating
interest rate profile of approximately 50%.
Operating leases consist of rail cars, distribution/delivery fleet, other vehicles, premises and other equipment. Rail car
leases at December 31, 2008 comprised 22% (December 31, 2007 – 23%) of total operating lease commitments and are
used to transport ERCO’s finished product to its customer locations and by Superior Propane to transport propane from
supply sources to its branch distribution locations. Distribution/delivery operating leases at December 31, 2008 comprised
31% (December 31, 2007 – 21%) of total operating lease commitment and are used by Superior Propane and Winroc to
deliver product to customers.
Natural gas and propane fixed-price supply commitments are used to resource similar volume and term fixed-price sales
commitments to customers of SEM and Superior Propane. ERCO has entered into fixed-price electricity contracts for a
term of up to nine years representing 100% of its annual power requirements in deregulated jurisdictions.
Superior’s operating lease and capital commitments, natural gas, propane and electricity purchase commitments and future
employee benefits are normal course operating commitments. Superior expects to fund these commitments through
a combination of cash flow from operations, proceeds on revolving term bank credits and proceeds on the issuance of
common share equity.
38
2008 annual report
At December 31, 2008 Superior had an estimated defined benefit pension solvency deficiency of approximately $40 million.
Funding requirements required by applicable pension legislation are based upon solvency actuarial assumptions. These
assumptions differ from the going concern actuarial assumptions used in Superior’s financial statements. Superior has
sufficient liquidity through existing revolving term bank credits and anticipated future operating cash flows to fund this
deficiency over the prescribed funding 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 outstanding was 88.3 million in 2008 compared to 86.5 million shares in
2007, an increase of 2% due to trust units/common shares issued under Superior’s distribution reinvestment program. The
quoted market value of Superior’s share capital and debentures was $966.9 million and $194.2 million, respectively, based
on closing prices on December 31, 2008 on the Toronto Stock Exchange.
As at March 10, 2009, December 31, 2008 and 2007, the following common shares and securities convertible into common
shares were outstanding:
March 10, 2009
December 31, 2008
December 31, 2007
(millions)
Convertible
Securities
Shares outstanding
Series I, 5.75% debentures (1)
Series I, 5.85% debentures (2)
Warrants (3)
Shares outstanding and issuable upon
conversion of debenture and warrant securities
$ 174.9
75.0
$
–
Convertible
Securities
$ 174.9
75.0
$
–
Shares
88.4
4.9
2.4
–
95.7
Shares
88.4
4.9
2.4
–
95.7
Convertible
Securities
$ 174.9
$
75.0
2.3
Shares
87.6
4.9
2.4
2.3
97.2
(1) Convertible at $36.00 per share.
(2) Convertible at $31.25 per share.
(3) Warrants were exercisable at $20.00 per share and expired on May 8, 2008.
distributions/dividends paid to unitholders/shareholders
Superior’s distributions/dividends to its unitholders/shareholders are dependent on its cash flow from operating activities
with consideration for changes in working capital requirements, investing activities and financing activities of Superior. See
“Summary of Adjusted Operating Cash Flow” on page 20 and “Summary of Cash Flows” on page 42 for additional details
on the sources and uses of Superior’s cash flow.
Distributions paid to unitholders for 2008 were $142.2 million or $1.61 per trust unit compared to $134.9 million or
$1.56 per trust unit in 2007. The increase in distributions paid to unitholders over the prior year is the result of Superior
increasing its monthly distribution to $0.135 per trust unit ($1.62 on an annualized basis) from $0.13 per trust unit effective
the March 2008 distribution.
For income tax purposes, distributions paid in 2008 of $1.61 per trust unit are classified as other income. A summary
of cash distributions since inception and related tax information is posted under the “Investor Information” section of
Superior’s website at www.superiorplus.com. For 2009, as a result of Superior’s conversion to a corporation, Superior’s
Canadian taxable shareholders will receive the added benefit of a dividend tax credit on eligible dividends, compared to
their prior tax treatment of trust unit distributions as other income. For the years ended December 31, 2008 and 2007 all
distributions to unitholders were in the form of trust unit distributions.
39
superior plus
ManageMent’s Discussion anD analysis
Superior’s primary sources and uses of cash are detailed below:
Summary of Cash Flows (1) (millions of dollars)
Cash flows from operating activities
Investing activities:
Purchase of property, plant and equipment (2)
Proceeds on disposal of property, plant and equipment (2)
Transaction with Ballard
Acquisitions
Gain on sale of facility
Proceeds on the sale of JW Aluminum
Cash flows from investing activities
Financing activities:
Distributions/dividends to shareholders
Repayment of 8%, Series I convertible debentures
Redemption of 8%, Series II convertible debentures
Proceeds from DRIP
Revolving term bank credits and term loans
Other
Cash flows from financing activities
Net increase (decrease) in cash
Cash, beginning of period
Cash, end of period
(1) See the Consolidated Statements of Cash Flows for additional details.
(2) See “Consolidated Capital Expenditure Summary” on page 35 for additional details.
finanCial instruments – risk management
2008
207.6
(84.2)
7.5
(46.3)
(24.5)
4.0
–
(143.5)
(142.2)
–
–
8.9
82.6
(11.4)
(62.1)
2.0
14.1
16.1
2007
134.3
(22.3)
4.4
–
(4.3)
–
1.4
(20.8)
(134.9)
(8.1)
(59.2)
25.3
38.4
5.5
(133.0)
(19.5)
33.6
14.1
Derivative and non-financial derivatives are used by Superior to manage its exposure to fluctuations in foreign currency
exchange rates, interest rates and commodity prices. Superior assesses the inherent risks of these instruments by grouping
derivative and non-financial derivatives related to the exposures these instruments mitigate. Superior’s policy is not to
use derivative or non-financial derivative instruments for speculative purposes. Superior does not formally designate its
derivatives as hedges; as a result, Superior does not apply hedge accounting and is required to designate its derivatives and
non-financial derivatives as held for trading.
Effective 2008, SEM entered into natural gas financial swaps primarily with Constellation Energy Commodities Group,
Inc. for distributor-billed natural gas business in Canada to manage its economic exposure of providing fixed-price natural
gas to its customers. Additionally, SEM is maintaining its historical natural gas swap positions with seven additional
counterparties. SEM monitors its fixed-price natural gas positions on a daily basis to evaluate compliance with established
risk management policies. SEM maintains a substantially balanced fixed-price natural gas position in relation to its customer
supply commitments.
SEM enters into electricity financial swaps with counterparties to manage the economic exposure of providing fixed-price
electricity to its customers. SEM monitors its fixed-price electricity positions on a daily basis to evaluate compliance with
established risk management policies. SEM maintains a substantially balanced fixed-price electricity position in relation to
its customer supply commitments.
40
2008 annual report
ERCO has entered into fixed-price electricity purchase agreements to manage the economic exposure of certain of its
chemical facilities to changes in the market price of electricity, in markets where the price of electricity is not fixed.
Substantially all of the fair value with respect to these agreements is with a single counterparty.
Superior Propane enters into various propane forward purchase and sale agreements with more than 20 counterparties
to manage the economic exposure of its wholesale customer supply contracts. Superior Propane monitors its
fixed-price propane positions on a daily basis to monitor compliance with established risk management policies.
Superior Propane maintains a substantially balanced fixed-price propane gas position in relation to its wholesale customer
supply commitments.
Superior, on behalf of its operating divisions, enters into foreign currency forward contracts with ten counterparties to
manage the economic exposure of Superior’s operations to movements in foreign currency exchange rates. SEM and
Superior Propane contract a portion of their fixed-price natural gas and propane purchases and sales in U.S. dollars and
enter into forward U.S. dollar purchase contracts to create an effective Canadian dollar fixed-price purchase cost. ERCO
enters into U.S. dollar forward sales contracts on an ongoing basis to mitigate the impact of foreign exchange fluctuations
on sales margins on production from its Canadian plants that is sold in U.S. dollars. Interest expense on Superior’s U.S.
dollar debt is also used to mitigate the impact of foreign exchange fluctuations.
As at December 31, 2008, SEM and Superior Propane had hedged virtually 100% of their U.S. dollar natural gas and
propane purchase (sales) obligations and ERCO had hedged 75%(3) and 53%(3) of its estimated U.S. dollar exposure for the
remainder of 2009 and 2010, respectively. The estimated distributable cash flow sensitivity for Superior, including divisional
U.S. exposures and the impact on U.S.-denominated debt with respect to a $0.01 change in the Canadian to U.S. dollar
exchange rate for 2009 is $0.2 million, after giving effect to United States forward contracts for 2009, as shown in the table
below. Superior’s sensitivities and guidance are based on an anticipated Canadian to U.S. dollar exchange rate of 1.18 for
2009.
(US$ millions)
SEM – US$ forward purchases (1)
Superior Propane – US$ forward purchases (sales)
Superior Plus LP (2)
ERCO – US$ forward sales (3)
Net US$ forward purchases
SEM – average US$ forward purchase rate (1)
Superior Propane – average US$ forward rate
Superior Plus LP (2)
ERCO – Average US$ forward sales rate (3)
Net average external US$/CDN$ exchange rate
2009
111.2
(1.0)
–
(92.2)
18.0
1.21
1.08
–
1.06
1.13
2010
61.9
(1.7)
–
(78.4)
(18.2)
1.16
1.22
–
1.06
1.10
2011
5.4
–
–
(12.0)
(6.6)
1.11
–
–
1.26
1.21
2012
2013
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2014 and
Thereafter
−
–
60.0
Total
178.5
(2.7)
60.0
–
(182.6)
60.0
53.2
−
–
1.00
–
1.00
1.19
1.17
1.00
1.07
1.11
(1) SEM is now sourcing its fixed-price natural gas requirements in Canadian dollars; as such, SEM will no longer be required to use U.S. dollar forward contracts to fix its
Canadian dollar exposure.
(2) Superior has entered into a U.S. dollar forward purchase contract for $60.0 million in relation to the repayment profile of its U.S. dollar senior secured notes (see Note 7 of
the consolidated financial statements).
(3) Does not include the impact of the U.S. dollar conversion of ERCO’s Port Edwards, Wisconsin chloralkali facility, which is anticipated to cost US$130.0 million in aggregate,
of which $49.8 million (US$43.4 million) was incurred in 2008 (US$44.8 million cumulatively), with the majority of the remaining costs expected in 2009.
Superior has interest rate swaps with a single counterparty to manage the interest rate mix of its total debt portfolio and
related overall cost of borrowing. Superior manages its overall liquidity risk in relation to its general funding requirements
by utilizing a mix of short-term and longer-term maturity debt instruments. Superior reviews it mix of short-term and longer-
term debt instruments on an ongoing basis to ensure it is able to meet its liquidity requirements.
41
superior plus
ManageMent’s Discussion anD analysis
Superior utilizes a variety of counterparties in relation to its derivative and non-financial derivative instruments in order
to mitigate its counterparty risk. Superior assesses the credit worthiness of its significant counterparties at the inception
and throughout the term of a contract. Superior is also exposed to customer credit risk. Superior Propane and Winroc
deal with a large number of small customers, thereby reducing this risk. ERCO, due to the nature of its operations, sells
its products to a relatively small number of customers. ERCO mitigates its customer credit risk by actively monitoring the
overall credit worthiness of its customers. SEM has minimal exposure to customer credit risk as local natural gas and
electricity distribution utilities have been mandated, for a nominal fee, to provide SEM with invoicing, collection and the
assumption of bad debts risk for residential and small commercial customers. SEM actively monitors the credit worthiness
of its industrial customers.
For additional details on Superior’s financial instruments, including the amount and classification of gains and losses
recorded in Superior’s Consolidated Financial Statements and significant assumptions used in the calculation of the fair
value of Superior’s financial instruments, see Note 10 to the Consolidated Financial Statements.
sensitivity analysis
Superior’s estimated cash flow sensitivity in 2008 to the following changes is provided below:
Superior Propane
Change in sales margin
Change in sales volume
ERCO
Change in sales price
Change in sales volume
Winroc
Change in distribution sales margin
Change in sales volume
SEM
Change in sales margin
Change in sales volume
Corporate
Change in Cdn$/US$ exchange rate (1)
Corporate change in interest rates
Change
$0.005/litre
50 million litres
$10.00/tonne
15,000 metric tonnes
1% point change in average gross margin
5% change in sales volume
$0.02/GJ
2 million GJ
$0.01
0.5%
Impact on
Adjusted
Operating
Cash Flow
$6.9 million
$7.0 million
$6.3 million
$4.4 million
$4.3 million
$4.7 million
$0.7 million
$1.6 million
Change
3%
4%
2%
2%
3%
5%
2%
6%
1%
10%
$0.1 million
$1.3 million
Per Share
$0.08
$0.08
$0.07
$0.05
$0.05
$0.05
$0.01
$0.02
−
$0.01
(1) After giving effect to US$ forward sales contracts for 2008. See “Financial Instruments – Risk Management.”
42
2008 annual report
CritiCal aCCounting estimates
Superior’s significant accounting policies are contained in Note 2 to the Consolidated Financial Statements. Certain of
these policies involve critical accounting estimates because they require Superior to make particularly subjective or
complex judgments about matters that are inherently uncertain and because of the likelihood that materially different
amounts could be reported under different conditions or using different assumptions. Superior constantly evaluates these
estimates and assumptions.
allowance for Doubtful accounts
Superior expects that a certain portion of required customer payments will not be made and maintains an allowance
for these doubtful accounts. This allowance is based on Superior’s estimate of the likelihood of recovering its accounts
receivable. It incorporates current and expected collection trends. If economic conditions change, or if actual results or
specific industry trends differ from Superior’s expectations, Superior will adjust its allowance for doubtful accounts and its
bad debts expense accordingly.
eMployee future benefits
The accrued benefit obligation is determined by independent actuaries using the projected benefit method prorated on
service and based on management’s best economic and demographic estimates. The benefit relates to Superior’s defined
benefit plans. The expected return on plan assets is determined by considering long-term historical returns, future estimates
of long-term investment returns and asset allocations.
asset iMpairMent
Superior reviews long-lived assets and intangible assets with finite lives whenever events or changes in circumstances
indicate that the carrying amounts of such assets may not be fully recoverable. Determination of recoverability is based
on an estimate of undiscounted future cash flows, and measurement of an impairment loss is based on the fair value of
the assets.
Goodwill is not amortized, but is assessed for impairment at the reporting unit level annually, or sooner if events or changes
in circumstances indicate that the carrying amount could exceed fair value. Goodwill is assessed for impairment using a
two-step approach, with the first step being to assess whether the fair value of the reporting unit to which the goodwill
is assigned is less than its carrying value. If this is the case, a second impairment test is performed which requires a
comparison of the fair value of goodwill to its carrying amount. If fair value is less than the carrying value, goodwill is
considered to be impaired and an impairment charge would be recognized immediately.
Valuation of DeriVatiVes anD non-financial DeriVatiVes
The valuation of derivatives and non-financial derivatives is determined by reference to quoted bid or asking prices, as
appropriate, in the most advantageous active market for that instrument to which Superior has immediate access. Where
bid and ask prices are unavailable, Superior uses the closing price of the most recent transaction of the instrument. In
the absence of an active market, Superior determines fair value based on prevailing market rates (bid and ask prices, as
appropriate) for instruments with similar characteristics and risk profiles or internal or external valuation models, such as
discounted cash flow analysis, using observable market-based inputs.
Fair values determined using valuation models require the use of assumptions concerning the amount and timing of
estimated future cash flows and discount rates. In determining these assumptions, Superior looks primarily to external
readily observable market inputs including interest rate yield curves, currency rates, and price and rate volatilities as
applicable. With respect to the valuation of ERCO’s fixed-price electricity agreements, Superior makes assumptions about
the long-term price of electricity in electricity markets for which active market information is not available. This assumption
has a material impact on the fair value of these agreements. Any changes in the fair values of financial instruments
classified or designated as held-for-trading are measured at fair value and are recognized in net income.
43
superior plus
ManageMent’s Discussion anD analysis
asset retireMent obligations
Certain of ERCO’s assets may be subject to asset retirement obligations as ERCO is required to remove or remedy
the effect of its activities on the environment at its operating sites by dismantling and removing production facilities at the
end of a respective plant’s operating life, commonly referred to as asset retirement obligations. ERCO’s potential asset
retirement obligations could also be impacted by interpretation and changes to environmental laws and regulations in the
countries in which ERCO operates. In certain instances, ERCO does not view the potential asset retirement obligations
to be significant based on a combination of past experience related to the prior remediation of similar facilities and/or
the existence of indemnification agreements related to environmental liabilities. Additionally, at some facilities, ERCO
is currently unable to accurately estimate its potential asset retirement obligations, as these facilities currently have an
indeterminate life. The asset retirement obligation for these assets is reviewed regularly, and will be recorded in the first
period in which the lives of the assets and the extent of obligations are known. Accordingly, ERCO has not recorded a
provision for asset retirement obligations.
Changes in aCCounting poliCies
inVentory
On January 1, 2008, Superior adopted the Canadian Institute of Chartered Accountants (CICA) Handbook Section 3031
Inventory. This section provides increased guidance on the determination of the cost and financial statement presentation
of inventory. The implementation of Section 3031 impacts the calculation of the cost of inventory at ERCO, due to the
requirement to inventory the cost of certain fixed overhead items, principally, the amortization of property, plant and
equipment. Additionally, Section 3031 requires that amortization that is inventoried be classified as a component of costs
of product sold. Previously, all amortization was expensed and classified on the income statement as amortization. Superior
adopted Section 3031 retrospectively, but did not restate prior periods. Accordingly, Superior increased the carrying value
of its inventory as at January 1, 2008 by $1.2 million, with a corresponding decrease to Superior’s opening accumulated
deficit; comparative earnings and inventory balances for prior periods have not been restated.
financial instruMents – Disclosure anD presentation
On January 1, 2008, Superior adopted CICA Handbook Section 3862 Financial Instruments – Disclosures and Handbook
Section 3863 Financial Instruments – Presentation. These standards provide enhanced disclosure and presentation
requirements, with an increased emphasis on disclosures about the nature and extent of risks arising from financial
instruments and how the entity manages these risks.
capital Disclosures
On January 1, 2008, Superior adopted CICA Handbook Section 1535 Capital Disclosures. This section requires the disclosure
of (i) Superior’s objectives, policies and processes for managing capital; (ii) quantitative data about what Superior regards
as capital; (iii) whether Superior has complied with any capital requirements; and (iv) if Superior has not complied, the
consequences of such non-compliance.
future aCCounting Changes
gooDwill anD intangible assets
In February 2008, the CICA issued Handbook Section 3064 Goodwill and Intangible Assets, replacing Handbook Section
3062 Goodwill and Other Intangible Assets and Handbook Section 3450 Research and Development Costs. The purpose of
Section 3064 is to provide more specific guidance on the recognition of internally developed intangible assets and requires
that research and development expenditures be evaluated against the same criteria as expenditures for intangible assets.
The section harmonizes Canadian GAAP with International Financial Reporting Standards (IFRS) and applies to annual and
interim financial statements relating to fiscal years beginning on or after October 1, 2008. Superior does not anticipate that
this section will have a material impact on its consolidated financial statements.
44
2008 annual report
international financial reporting stanDarDs
The Accounting Standards Board of Canada (AcSB) has announced plans that will require the convergence of Canadian
GAAP with IFRS for publicly accountable enterprises, including Superior Plus Corp. The changeover date from Canadian
GAAP to IFRS is for annual and interim financial statements relating to fiscal years beginning on or after January 1, 2011.
During 2008, Superior formed an IFRS project team to develop an IFRS transition plan. Superior’s approach is to assess
and coordinate ongoing training requirements in conjunction with the development of a comprehensive diagnostic/planning
document throughout the first and second quarters of 2009. Superior’s diagnostic plan will include the assessment of
differences between Canadian GAAP and IFRS, options available under IFRS, potential system requirements as a result of
the adoption of IFRS, and the impact on internal controls and other business activities. Upon completion of a comprehensive
diagnostic, Superior will focus its efforts on the development and execution of a detailed IFRS transition plan.
At this time, Superior is unable to reasonably estimate the impact that the adoption of IFRS may have on its future operating
results or financial position. Superior’s preliminary assessment of areas that may have a significant impact upon adoption
of IFRS consist of, but may not be limited to:
• Property, plant and equipment may be impacted by the requirement to record, disclose and amortize on the basis of
material components;
• Employee future benefit obligations will be impacted as IFRS does not allow the deferral of certain actuarial gains and
losses which are currently deferred under Canadian GAAP;
• Asset impairments recorded in prior years, under certain circumstances, are eligible to be reversed under IFRS;
• The classification of financial statement items may differ under IFRS; and
• Financial statement disclosures under IFRS tend to be more robust than those under Canadian GAAP.
Superior will continue to assess the impact of IFRS throughout 2009, including the impact on its consolidated financial
statements, financial reporting systems and internal control systems.
seleCted finanCial information
(millions of dollars except per share amounts)
Total assets (as at December 31)
Total revenue
Gross profit
Net earnings (loss) from continuing operations
Net earnings (loss)
Per share from continuing operations, basic and diluted
Per share, basic and diluted
Cash generated from continuing operations
Adjusted operating cash flow
Per share, basic and diluted
Cash distributions per share (1)
Current and long-term debt (2) (as at December 31)
(1) Cash distributions per share paid in fiscal year.
(2) Current and long-term debt before deferred financing fees.
2008
2,026.9
2,487.3
669.1
67.7
67.7
$ 0.77
$ 0.77
207.6
192.3
$ 2.18
$ 1.61
477.7
2007
1,542.8
2,350.5
661.8
119.4
119.8
$ 1.38
$ 1.38
134.3
179.5
$ 2.08
$ 1.56
340.5
2006
1,536.9
2,264.3
630.9
$
$
(55.6)
(80.8)
(0.65)
(0.94)
151.7
194.2
$ 2.27
$ 1.82
346.7
45
superior plus
ManageMent’s Discussion anD analysis
fourth quarter results
Fourth quarter 2008 adjusted operating cash flow was $65.0 million, an increase of $0.1 million from the prior year’s
quarter. Adjusted operating cash flow for the fourth quarter of 2008 was impacted by improved operating results at ERCO
and Winroc and lower interest costs, offset by lower operating results at SEM and higher cash taxes and corporate costs.
Superior Propane’s operating results for the fourth quarter of 2008 were consistent with the prior year’s quarter. ERCO’s
fourth quarter results benefited from improved chemical gross profits. Winroc’s fourth quarter 2008 results benefited from
strong gross margins and interest costs were lower than in the prior year’s quarter due to lower interest rates on floating-
rate debt. SEM’s results were negatively impacted by foreign currency translation losses due to the appreciation of the
U.S. dollar on U.S.-denominated working capital and a one-time adjustment related to previously unrecorded transportation
charges. Higher cash taxes were due to increased U.S. taxable income as a result of ERCO’s improved profits. Corporate
costs were impacted by foreign currency translation losses and the higher long-term incentive plan costs due to fluctuations
in Superior’s share price. Adjusted operating cash flow per trust unit was $0.74 per share in the fourth quarter of 2008,
consistent with the prior year’s quarter.
Net loss for the fourth quarter was $19.9 million, compared to net earnings of $64.5 million in the prior year’s quarter. In
addition to the items noted in the analysis of adjusted operating cash flow, net earnings were impacted by $83.6 million
in unrealized losses on financial instruments, compared to unrealized gains of $26.3 million in the prior year’s quarter.
The change in the unrealized gains and losses on financial instruments was due to losses on SEM’s natural gas financial
derivatives as a result of a decrease in the spot price for natural gas. Net loss was also impacted by a reduction in
amortization expense due to the requirement to classify the majority of ERCO’s amortization expense as a component of
cost of goods sold in 2008 as opposed to classifying it as amortization in 2007. Income taxes for the fourth quarter of 2008
were a recovery of $15.8 million compared to an income tax expense of $9.3 million in the prior year’s quarter. Income
taxes were impacted by Superior’s conversion to a corporation on December 31, 2008 and the unrealized losses on financial
instruments in the fourth quarter of 2008 as discussed above. Further discussion of the 2008 fourth quarter results is
provided in Superior’s Fourth Quarter and 2008 Earnings Release, dated February 18, 2009.
quarterly finanCial and operating information
Quarterly financial and operating information for 2008 and 2007 is provided in the table below. Superior’s overall adjusted
operating cash flow and working capital funding requirements are modestly seasonal. Approximately 80% of Superior
Propane’s operating cash flow is generated during the first and fourth quarters of each year as approximately 50% of its
sales are generated from space heating end-uses. Net working capital funding requirements follow a similar seasonal trend,
peaking during the first quarter of each year and declining to seasonal lows during the third quarter. The seasonality of
Winroc’s operating cash flow and working capital funding requirements is modestly complementary to Superior Propane’s
as new construction and remodelling activity typically peaks during the second and third quarters of each year. ERCO and
SEM’s operating cash flow and net working capital requirements do not have significant seasonal fluctuations.
46
2008 annual report
2007 Quarter
Fourth
Third Second
416
194
9
2
256
187
9
−
280
193
9
−
185.8
145.9
144.4
64.5
64.5
(25.9)
(26.9)
(25.5)
(25.5)
First
477
194
10
−
185.7
106.3
107.7
$ 0.74 $ (0.30) $ (0.30) $ 1.24
$ 0.74 $ (0.30) $ (0.30) $ 1.24
$ 0.74 $ (0.31) $ (0.30) $ 1.26
$ 0.74 $ (0.31) $ (0.30) $ 1.26
(millions of dollars except per share amounts and sales volumes) Fourth
Propane sales volumes (millions of litres)
390
Chemical sales volumes (thousands of MT)
Natural gas sales volumes (millions of GJs)
Electricity sales volumes (millions of kWh)
Gross profit
Net earnings (loss) from continuing operations
Net earnings (loss)
Per share from continuing operations, basic
$ (0.23) $ (2.31) $ 1.86
Per share from continuing operations, diluted
$ (0.23) $ (2.31) $ 1.86
2008 Quarter
Third Second
244
188
8
18
274
188
8
14
160
8
28
193.1
152.8
(19.9)
(203.9)
(19.9)
(203.9)
153.3
164.3
164.3
$ (0.23) $ (2.31) $ 1.86
$ (0.23) $ (2.31) $ 1.86
First
469
191
9
10
169.9
127.2
127.2
$ 1.44
$ 1.44
$ 1.44
$ 1.44
55.7
Per share, basic
Per share, diluted
Adjusted operating cash flow
Per share, basic
Per share, diluted
Net working capital (1)
33.5
38.1
65.0
62.6
$ 0.74 $ 0.38 $ 0.43 $ 0.63 $ 0.74 $ 0.35 $ 0.25 $ 0.73
$ 0.74 $ 0.38 $ 0.43 $ 0.63 $ 0.74 $ 0.35 $ 0.25 $ 0.73
162.7
134.1
141.9
173.0
273.9
231.4
252.2
168.9
21.7
30.3
64.9
(1) Net working capital reflects amounts as at the quarter-end and is comprised of cash and cash equivalents, accounts receivable and inventories, less bank indebtedness,
accounts payable and accrued liabilities.
reConCiliation of net earnings (loss) to ebitda from operations (1)
2008 (millions of dollars)
Net earnings (loss)
Add: Amortization of property, plant and equipment,
intangible assets and accretion of convertible
debenture issue costs
Amortization included in cost of sales
Superior Propane non-cash pension expense
Unrealized (gains) losses on financial instruments
Strategic plan costs
EBITDA from operations
2007 (millions of dollars)
Net earnings
Add: Amortization of property, plant and equipment,
intangible assets and accretion of convertible
debenture issue costs
Superior Propane non-cash pension expense
Unrealized (gains) losses on financial instruments
Strategic plan costs
EBITDA from operations
Superior
Propane
75.2
12.4
–
2.4
6.8
−
96.8
Superior
Propane
83.9
15.7
1.7
(2.3)
0.4
99.4
ERCO
90.3
Winroc
33.0
6.5
38.9
−
(15.2)
(4.0)
116.5
4.4
–
−
−
−
37.4
ERCO
38.8
Winroc
32.5
42.6
−
5.5
4.9
91.8
4.2
−
−
−
36.7
SEM
(61.0)
0.3
–
−
67.2
−
6.5
SEM
18.6
–
−
(6.9)
0.4
12.1
(1) See the Consolidated Financial Statements for net earnings (loss), amortization of property, plant and equipment, intangible assets and accretion of convertible debenture
issue costs, tax expense (recovery), management internalization costs, non-cash pension expense and unrealized (gains) losses on financial instruments.
47
superior plus
ManageMent’s Discussion anD analysis
reConCiliation of net earnings (loss) to bank ComplianCe ebitda (1)
(millions of dollars)
Net earnings from continuing operations
Adjusted for:
Interest on revolving term bank credits and term loans
Interest on convertible unsecured subordinated debentures
Realized gains on interest rate swaps
Accretion of convertible debenture issue costs
Amortization of property, plant and equipment
Amortization included in cost of sales
Amortization of intangible assets
Income tax expense (recovery)
Unrealized (gains) losses on financial instruments
Management internalization costs
Gain on sale of facility
Superior Propane non-cash pension expense
Proforma impact of acquisitions
Bank compliance EBITDA
(1) See the Consolidated Financial Statements for additional details.
disClosure Controls and proCedures
2008
67.7
23.7
14.8
(2.0)
1.4
18.3
38.9
5.3
9.9
61.2
−
(4.0)
2.4
2.5
240.1
2007
119.4
25.2
19.5
–
2.8
57.6
–
4.9
(5.1)
(2.7)
0.5
−
1.7
−
223.8
Disclosure controls and procedures are designed by or designed under the supervision of Superior’s Chairman and Chief
Executive Officer (CEO) and the Executive Vice President and Chief Financial Officer (CFO) in order to provide reasonable
assurance that all material information relating to Superior is communicated to them by others in the organizations as it
becomes known and is appropriately disclosed as required under the continuous disclosure requirements of securities
legislation and regulation. In essence, these types of controls are related to the quality and timeliness of financial and non-
financial information in securities filings. The CEO and CFO are assisted in this responsibility by the Disclosure Committee
(DC), which is composed of senior managers of Superior. The DC has established procedures so that it can be aware of any
material information affecting Superior in order to evaluate and discuss this information and determine the appropriateness
and timing of its public release. An evaluation of the effectiveness of the design and operation of Superior’s disclosure
controls and procedures was conducted as at December 31, 2008 by and under the supervision of Superior’s management,
including the CEO and CFO. Based on this evaluation, the CEO and CFO have concluded that Superior’s disclosure controls
and procedures, as defined in National Instrument 52-109, Certification of Disclosure in Issuers’ Annual and Interim Filings,
are not effective (as a result of the two weaknesses in internal controls over financial reporting identified below) to ensure
that information required to be disclosed in reports that are filed or submitted under Canadian securities legislation and
regulation is recorded, processed, summarized and reported within the times specified in those rules and forms.
internal Control over finanCial reporting
Superior’s management, including the CEO and CFO, is responsible for establishing and maintaining adequate internal
control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with Canadian GAAP.
The evaluation of the design of Superior’s internal controls over financial reporting was conducted as at December 31, 2008
by and under the supervision of Superior’s management, including the CEO and CFO. Based on this evaluation, the CEO and
CFO have concluded that the design of Superior’s internal control over financial reporting provides reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP.
48
2008 annual report
The evaluation of effectiveness of Superior’s internal controls over financial reporting was conducted as at
December 31, 2008 by and under the supervision of Superior’s management, including the CEO and CFO. Based on
this evaluation, the CEO and CFO have concluded that Superior’s internal controls over financial reporting, as defined in
National Instrument 52-109, Certification of Disclosure in Issuers’ Annual and Interim Filings, were not effective at
December 31, 2008 due to the issues identified below.
In 2008, Superior’s CEO and CFO became aware of two issues at SEM where key internal controls over financial reporting
had been designed, however did not operate effectively. In 2008, SEM contributed approximately 2.5% of Superior’s total
EBITDA from operations. The first issue relates to a reconciliation that management considers to be a key internal control,
which had not been completed in the year, and as a result, the financial accounts were not up to date. As part of its year-end
review, management identified the deficiency and completed the account analysis as part of its regular year-end process.
The second issue relates to the mark-to-market gain or loss on financial instruments which was calculated using incorrect
market value data. The key internal control did not operate at December 31, 2008 and the error was subsequently identified
during the year-end audit and the calculation corrected. On both issues, the CEO and the CFO have concluded that no
material error resulted in the annual or interim financial statements and has overseen needed changes to ensure these
controls will operate effectively. Management will test the operation of the controls in 2009.
No changes have been made in Superior’s internal control over financial reporting that have materially affected, or
are reasonably likely to materially affect, Superior’s internal control over financial reporting in the quarter ended
December 31, 2008.
forward-looking information
Certain information included herein is forward-looking, within the meaning of applicable Canadian securities laws. Forward-
looking information includes, without limitation, statements regarding the future financial position, business strategy,
budgets, litigation, projected costs, capital expenditures, financial results, adjusted operating cash flow, EBITDA from
operations, taxes, and plans and objectives of or involving Superior Plus Corp. (Superior) or Superior Plus LP (Superior
LP or the Partnership). Much of this information can be identified by looking for words such as “believe”, “expects”,
“expected”, “will”, “intends”, “projects”, “anticipates”, “estimates”, “continues” or similar words. Forward-looking
information in this annual report includes but is not limited to consolidated and business segment outlooks, expected
EBITDA from operations, expected adjusted operating cash flow, expected adjusted operating cash flow per share, future
capital expenditures, business strategy and objectives, dividend strategy, expected senior debt and total debt to EBITDA
ratios, future cash flows, anticipated taxes and statements regarding the future financial position of Superior and Superior LP.
Specifically, under the heading “Outlook”, each operating business and the company as a whole has disclosed certain
forward-looking information. Superior and Superior LP believe the expectations reflected in such forward-looking
information 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 information is based on various assumptions. Those assumptions are based on information currently
available to Superior, including information obtained from third-party industry analysts and other third-party sources and
include the historical performance of Superior’s businesses, current business and economic trends, availability and utilization
of tax basis, currency, exchange and interest rates, trading data, cost estimates and the other assumptions set forth under
the “Outlook” sections contained in the MD&A included in this Annual Report. The reader is cautioned that the preceding
list of assumptions is not exhaustive.
49
superior plus
ManageMent’s Discussion anD analysis
Forward-looking information is not a guarantee of future performance and involves a number of risks and uncertainties
some of which are described herein. Such forward-looking information necessarily involves known and unknown risks and
uncertainties, which may cause Superior’s or Superior LP’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 information.
These risks and uncertainties include but are not limited to the risks referred to under “Risk Factors to Superior”, the risks
associated with the availability and amount of the tax basis and the risks identified in Superior’s 2008 Annual Information
Form under “Risk Factors”. Any forward-looking information is made as of the date hereof and, except as required by law,
neither Superior nor Superior LP undertakes any obligation to publicly update or revise such information to reflect new
information, subsequent or otherwise.
non-gaap finanCial measures
aDjusteD operating cash flow
Adjusted operating cash flow is equal to cash flow from operating activities as defined by Canadian GAAP, adjusted for
changes in non-cash working capital and customer acquisition costs. Superior may deduct or include additional items to its
calculation of adjusted operating cash flow; these items would generally, but not necessarily, be items of a non-recurring
nature. Adjusted operating cash flow is the main performance measure used by management and investors to evaluate the
performance of Superior. Readers are cautioned that adjusted operating cash flow is not a defined performance measure
under GAAP and that adjusted operating cash flow cannot be assured. Superior’s calculation of adjusted operating cash
flow may differ from similar calculations used by comparable entities. Adjusted operating cash flow 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 adjusted operating
cash flow. Adjustments recorded by Superior as part of its calculation of adjusted operating cash flow include, but are not
limited to, the impact of the seasonality of Superior’s businesses, principally Superior Propane, 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 expense, which can differ significantly from quarter to quarter. Adjustments are also made to
reclassify the cash flows related to natural gas and electricity customer acquisition costs in a manner consistent with the
income statement recognition of these costs. Adjusted operating cash flow is reconciled to cash flow from operating
activities on Page 19.
ebitDa
EBITDA represents earnings before interest, taxes, depreciation, amortization and other non-cash expenses, and is used by
Superior to assess its consolidated results and the results of its operating divisions. EBITDA is not a defined performance
measure under GAAP. Superior’s calculation of EBITDA may differ from similar calculations used by comparable entities.
EBITDA of Superior’s operating businesses may be referred to as EBITDA from operations. Net earnings (loss) is reconciled
to EBITDA from operations on Page 47.
bank coMpliance ebitDa
Bank compliance EBITDA represents earnings before interest, taxes, depreciation, amortization and 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 its debt covenants and other credit information. Bank compliance EBITDA is not a defined performance
measure under GAAP. Superior’s calculation of bank compliance EBITDA may differ from similar calculations used by
comparable entities. Net earnings (loss) is reconciled to bank compliance EBITDA on Page 48.
50
2008 annual report
Distributable cash flow
Distributable cash flow was a financial measure previously used by Superior. In the fourth quarter of 2008, as a result
of Superior’s conversion to a corporation, Superior discontinued the use of this financial measure, instead focusing on a
measure now referred to as adjusted operating cash flow. The primary difference between these measures is the focus
and disclosure of capital expenditures. Superior has provided disclosure of adjusted operating cash flow on a comparative
basis. Distributable cash flow is not a defined performance measure under GAAP. Superior’s calculation of distributable
cash flow may differ from similar calculations used by comparable entities.
risk faCtors to superior
The risk factors and uncertainties detailed below are a summary of Superior’s assessment of its material risk factors
as identified in Superior’s 2008 Annual Information Form under “Risk Factors”. For a detailed discussion of these
risks see Superior’s 2008 Annual Information Form, filed on the Canadian Securities Administrators’ website,
www.sedar.com and Superior’s website, www.superiorplus.com.
risks to superior
Superior is entirely dependent upon the operations and assets of Superior LP. Superior’s ability to make dividend payments
to shareholders is dependent upon the ability of Superior LP to make distributions on its outstanding limited partnership
units as well as the operations and business of Superior LP.
Although Superior intends to distribute the income allocated from Superior LP, less the amount of its expenses, indebtedness
and other obligations and less amounts, if any, Superior pays in connection with the redemption of common shares, there
is no assurance regarding the amounts of cash to be distributed by Superior LP or generated by Superior LP and therefore
funds available for dividends to shareholders. The actual amount distributed in respect of the limited partnership units will
depend on a variety of factors including, without limitation, the performance of Superior LP’s operating businesses, the
effect of acquisitions or dispositions on Superior LP, and other factors that may be beyond the control of Superior LP or
Superior. In the event significant sustaining capital expenditures are required by Superior LP or the profitability of Superior
LP declines, there would be a decrease in the amount of cash available for dividends to shareholders and such decrease
could be material.
Superior’s dividend policy and the distribution policy of Superior LP are subject to change at the discretion of the Board
of Directors of Superior or the Board of Directors of Superior General Partner Inc., the General Partner of Superior LP, as
applicable. Superior’s dividend policy and the distribution policy of Superior LP are also limited by contractual agreements
including agreements with lenders to Superior and its affiliates and by restrictions under corporate law.
The credit facilities of Superior LP contain covenants that require Superior LP to meet certain financial tests and that restrict,
among other things, the ability of Superior LP to incur additional debt, dispose of assets or pay dividends/distributions in
certain circumstances. These restrictions may preclude Superior LP from returning capital or making distributions on the
limited partnership units.
The payout by Superior LP of substantially all of its available cash flow means that capital expenditures to fund growth
opportunities can only be made in the event that other sources of financing are available. Lack of access to such additional
financing could limit the future growth of the business of Superior LP and, over time, have a material adverse effect on the
amount of cash available for dividends to Shareholders.
To the extent that external sources of capital, including public and private markets, become limited or unavailable, Superior’s
and Superior LP’s ability to make the necessary capital investments to maintain or expand the current business and to make
necessary principal payments, uncertainties and assumptions under its term credit facilities may be impaired.
51
superior plus
ManageMent’s Discussion anD analysis
Superior maintains a substantial floating interest rate exposure through a combination of floating interest rate borrowings and
the use of derivative instruments. Demand levels for approximately half of Superior Propane’s sales and substantially all of ERCO
and Winroc’s sales are affected by general economic trends. Generally speaking, when the economy is strong, interest rates
increase as does sales demand from Superior’s customers, thereby increasing Superior’s ability to pay higher interest costs and
vice versa. In this way, there is a common relationship among economic activity levels, interest rates and Superior’s ability to
pay higher or lower rates.
A portion of Superior’s net cash flows is denominated in U.S. dollars. Accordingly, fluctuations in the Canadian/U.S. dollar
exchange rate can impact profitability.
The timing and amount of capital expenditures incurred by Superior LP or by its subsidiaries will directly affect the amount
of cash available to Superior for dividends to shareholders. Dividends may be reduced, or even eliminated, at times when
significant capital expenditures are incurred or other unusual expenditures are made.
If the Board of Directors of Superior decides to issue additional common shares, preferred shares or securities convertible into
common shares, existing shareholders may suffer significant dilution.
Superior is or may be exposed to third-party credit risk relating to any obligations of Ballard that are not transferred, or if transferred,
from which obligations Superior has not been released. Superior has, through the contractual provisions in the Arrangement
Agreement, the indemnity agreement and the divestiture agreement contemplated thereby, and through securing certain
insurance coverage, attempted to ensure that the liabilities and obligations relating to the business of Ballard are transferred
to and assumed by the new corporation which continued to carry on Ballard’s business (New Ballard), that Superior is released
from any such obligations and, even where such transfer or release is not effective or is not obtained, Superior is indemnified by
New Ballard for all such obligations. However, in the event New Ballard fails or is unable to meet such contractual obligations to
Superior and to the extent any applicable insurance coverage is not available, Superior may be liable for such obligations which
could have a material adverse effect on the business, financial condition and results of operations of Superior.
Although Superior has conducted investigations of, and engaged legal counsel to review, the corporate, legal, financial and
business records of Ballard and attempted to ensure, through the contractual provisions in the agreement entered into with
Ballard in connection with Superior’s corporate conversion (the Arrangement Agreement), the indemnity agreement and the
divestiture agreement, and through securing certain insurance coverage, that the liabilities and obligations relating to the
business of Ballard are transferred to and assumed by New Ballard, there may be liabilities or risks that Superior may not have
uncovered in its due diligence investigations, or that may have an unanticipated material adverse effect on Superior. These
liabilities and risks could have, individually or in the aggregate, a material adverse effect on the business, financial condition and
results of operations of Superior.
The steps under the plan of arrangement pursuant to which the corporate conversion was completed (the Plan of Arrangement)
were structured to be tax-deferred to the Fund and Fund unitholders based on certain proposals to facilitate tax deferred
conversions of certain mutual fund trusts into taxable Canadian corporations (the SIFT Reorganization Amendments) proposed
by the federal Department of Finance on July 14, 2008. Although there has been no suggestion that the Department of
Finance is not committed to passing the SIFT Reorganization Amendments with its originally proposed effective date of
July 14, 2008, if the SIFT Reorganization Amendments are not passed in their current form or other legislation or amendments
to existing legislation are proposed or announced, there is a risk that the tax consequences contemplated by the Fund or
the tax consequences of the Plan of Arrangement to the Fund and the unitholders may be materially different from the tax
consequences described in the Plan of Arrangement. While Superior is confident in its position, there is a possibility that the
Canada Revenue Agency could successfully challenge the tax consequences of the Plan of Arrangement or prior transactions
of Ballard, or that legislation could be enacted or amended resulting in different tax consequences from those contemplated in
the Plan of Arrangement for Superior. Such a challenge or legislation could potentially affect the availability or amount of the tax
basis or other tax accounts of Superior.
52
2008 annual report
risks to the businesses
Superior Propane
Propane is sold in competition with other energy sources such as fuel oil, electricity and natural gas, along with alternative
energy sources that are currently under development. In addition to competition from other energy sources, Superior
Propane competes with other retail marketers. Superior Propane’s ability to remain an industry leader depends on its ability
to provide reliable service at competitive selling prices.
Weather and general economic conditions affect propane market volumes. Weather influences the demand for propane
primarily for space heating uses and also for agricultural applications.
The trend towards increased conservation measures and technological advances in energy efficiency may have a detrimental
effect on propane demand and Superior Propane’s sales. Further, increases in the cost of propane encourage customers
to conserve fuel and to invest in more energy-efficient equipment, reducing demand. Changes in propane supply costs are
normally passed through to customers, but timing lags (the time between when Superior Propane purchases the propane
and when the customer purchases the propane) may result in positive or negative gross margin fluctuations.
Superior Propane offers its customers various fixed-price propane programs. In order to mitigate the price risk from
offering these services, Superior Propane uses its physical inventory position, supplemented by forward commodity
transactions with various third parties having terms and volumes substantially the same as its customers’ contracts. In
periods of high propane price volatility the fixed price programs create exposure to over or under supply positions as the
demand from customers may significantly exceed or fall short of supply procured. In addition, if propane prices decline
significantly subsequent to customers signing up for a fixed price program there is a risk that customers will default on
their commitments.
Superior Propane’s operations are subject to the risks associated with handling, storing and transporting propane in bulk.
Slight quantities of propane may also be released during transfer operations. To mitigate risks, Superior Propane has
established a comprehensive program directed at environmental, health and safety protection. This program consists
of an environmental policy, codes of practice, periodic self-audits, employee training, quarterly and annual reporting and
emergency prevention and response.
Approximately 22% of Superior Propane’s employees are unionized. Collective bargaining agreements are renegotiated in
the normal course of business.
ERCO
ERCO competes with sodium chlorate, chloralkali and potassium producers on a worldwide basis. Key competitive factors
include price, product quality, logistics capability, reliability of supply, technical capability and service. The end-use markets
for ERCO’s products are correlated to the general economic environment and the competitiveness of its customers, all of
which are outside of its control.
ERCO has long-term electricity contracts or electricity contracts that renew automatically with power producers in each of
the jurisdictions where its plants are located. There is no assurance that ERCO will continue to be able to secure adequate
supplies of electricity at reasonable prices or on acceptable terms.
Potassium Chloride (KCl) is a major raw material used in the production of potassium hydroxide at ERCO’s Port Edwards,
Wisconsin facility. Substantially all of ERCO’s KCl is received from Potash Corporation of Saskatchewan. ERCO currently
has a limited ability to source KCl from additional suppliers.
ERCO is exposed to fluctuations in the U.S. dollar and the euro to the Canadian dollar.
53
superior plus
ManageMent’s Discussion anD analysis
ERCO’s operations involve the handling, production, transportation, treatment and disposal of materials that are classified
as hazardous and are regulated by environmental and health and safety laws, regulations and requirements. The potential
exists for the release of highly toxic and lethal substances, including chlorine. Equipment failure could result in damage to
facilities, death or injury and liabilities to third parties. If at any time the appropriate regulatory authorities deem any of the
facilities unsafe, they may order that such facilities be shut down.
ERCO’s operations and activities in various jurisdictions require regulatory approvals for the handling, production,
transportation and disposal of chemical products and waste substances. The failure to obtain or comply fully with such
applicable regulatory approvals may materially adversely affect ERCO.
Approximately 25% of ERCO employees are unionized. Collective bargaining agreements are renegotiated in the normal
course of business.
Winroc
Winroc competes with other specialty construction distributors servicing the builder/contractor market, in addition to big-
box home centres and independent lumber yards. Winroc’s ability to remain competitive depends on its ability to provide
reliable service at competitive prices.
Demand for walls and ceilings building materials is affected by changes in general and local economic factors
including demographic trends, employment levels, interest rates, consumer confidence and overall economic growth.
These factors in turn impact the level of existing housing sales, new home construction, new non-residential construction,
and office/commercial space turnover, all of which are significant factors in the determination of demand for Winroc’s
products and services.
Approximately 8% of Winroc’s employees are unionized. Collective bargaining agreements are renegotiated in the normal
course of business.
SEM
New entrants in the energy retailing business may enter the market and compete directly for the customer base that SEM
targets, slowing or reducing its market share.
SEM purchases natural gas to meet its estimated commitments to its customers based upon their historical consumption.
Depending on a number of factors, including weather, customer attrition and poor economic conditions affecting commercial
customers’ production levels, customers’ combined natural gas consumption may vary from the volume purchased. This
variance must be reconciled and settled at least annually and may require SEM to purchase or sell natural gas at market
prices which may have an adverse impact on the results of this business. To mitigate balancing risk, SEM closely monitors
its balancing position and takes measures such as adjusting gas deliveries and transferring gas between pools of customers,
so that imbalances are minimized. In addition, SEM maintains a reserve for potential balancing costs. The reserve is
reviewed on a monthly basis to ensure that it is sufficient to absorb any losses that might arise from balancing.
SEM matches its customers’ estimated electricity requirements by entering into electricity swaps in advance of acquiring
customers. Depending on several factors, including weather, customers’ energy consumption may vary from the volumes
purchased by SEM. SEM is able to invoice existing commercial electricity customers for balancing charges when the amount
of energy used is greater than or less than 10% of the amount of energy that SEM estimated. In certain circumstances,
there can be balancing issues for which SEM is responsible when customer aggregation forecasts are not realized.
54
2008 annual report
SEM resources its fixed-price term natural gas sales commitments by entering into various physical natural gas and U.S.
dollar foreign exchange purchase contracts for similar terms and volumes to create an effective Canadian dollar fixed-price
cost of supply. SEM transacts with nine financial and physical natural gas counterparties. There can be no assurance that
any of these counterparties will not default on any of their obligations to SEM. However, the financial condition of each
counterparty is evaluated and credit limits are established to minimize SEM’s exposure to this risk. There is also a risk
that supply commitments and foreign exchange positions may become unmatched; however, this is monitored daily in
compliance with SEM’s risk management policy.
SEM must retain qualified sales agents in order to properly execute its business strategy. The continued growth of SEM
is reliant on the services of agents to sign up new customers. There can be no assurance that competitive conditions will
allow these agents to achieve these customer additions. Lack of success in the marketing programs of SEM would limit
future growth of the cash flow.
SEM operates in the highly regulated energy industry in Ontario, British Columbia and Quebec. Changes to existing
legislation could impact this business’s operations. As part of the current regulatory framework, local delivery companies
are mandated to perform certain services on behalf of SEM, including invoicing, collection, assuming specific bad debt
risks and storage and distribution of natural gas. Any elimination or changes to these rules could have a significant adverse
effect on the results of this business.
In November 2008, Ontario MPP David Ramsay’s private member’s Bill 131 was introduced and passed second reading.
The bill was scheduled to go the Ontario Provincial Parliament’s Standing Committee on Regulations and Private Bills in
February 2009. If it were to pass through committee and pass third reading, it could receive Royal Assent. The bill contains
several consumer protection measures, such as the requirement for a written re-affirmation with the customer. The bill, if
passed, could negatively impact the acquisition of residential natural gas and power customers in Ontario.
55
superior plus
ManageMent’s report
management’s responsibility for finanCial reporting
The accompanying Consolidated Financial Statements of Superior Plus Corp. (Superior) and all of the information in this
annual report are the responsibility of management and have been approved by the Board of Directors.
The Consolidated Financial Statements have been prepared by management in accordance with Canadian generally accepted
accounting principles and include certain estimates that are based on management’s best judgments. Actual results may
differ from these estimates and judgments. Management has ensured that the Consolidated Financial Statements are
presented fairly in all material respects.
Management has developed and maintains a system of internal controls to provide reasonable assurance that Superior’s
assets are safeguarded, transactions are accurately recorded, and the financial statements report Superior’s operating and
financial results in a timely manner. Financial information presented elsewhere in this annual report has been prepared on
a consistent basis with that in the Consolidated Financial Statements.
The Board of Directors of Superior is responsible for reviewing and approving the financial statements and primarily through
its Audit Committee ensures that management fulfills its responsibilities for financial reporting. The Audit Committee
meets with management and Superior’s external auditors, to discuss internal controls over the financial reporting process,
auditing matters and financial reporting issues, to satisfy itself that each party is properly discharging its responsibilities and
to review the annual report, the financial statements and the external auditors’ report. The Committee reports its findings
to the Board for the Board’s consideration in approving the financial statements for issuance to the shareholders. The
Committee also considers, for review by the Board and approval by the shareholders, the engagement or re-appointment
of the external auditors.
Deloitte & Touche LLP, an independent firm of chartered accountants, was appointed at Superior’s last annual meeting to
audit Superior’s Consolidated Financial Statements in accordance with Canadian generally accepted auditing standards. It has
provided an independent professional opinion. Deloitte & Touche LLP has full and free access to the Audit Committee.
(signed) “grant d. billing”
(signed) “wayne m. bingham”
grant d. billing
wayne m. bingham
Chairman and Chief Executive Officer
Executive Vice-President and Chief Financial Officer
Superior Plus Corp.
Calgary, Alberta
February 6, 2009
Superior Plus Corp.
56
2008 annual report
auDitors’ report
to the shareholders of superior plus Corp. (formerly superior plus inCome fund):
We have audited the consolidated balance sheets of Superior Plus Corp. (the Company) as at December 31, 2008 and 2007
and the consolidated statements of net earnings, comprehensive income and deficit and cash flows for the years then
ended. These financial statements are the responsibility of the Company. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require
that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the
Company as at December 31, 2008 and 2007 and the results of its operations and its cash flows for the years then ended
in accordance with Canadian generally accepted accounting principles.
Calgary, Alberta
February 6, 2009
(signed) “deloitte & touche llp”
deloitte & touche llp
Chartered Accountants
57
superior plus
consoliDateD balance sheets
As at December 31
(millions of dollars)
ASSETS
Current assets
Cash and cash equivalents
Accounts receivable and other (Notes 4 and 10)
Future income tax asset (Note 11)
Inventories (Note 5)
Current portion of unrealized gains on financial instruments (Note 10)
Property, plant and equipment (Note 6)
Customer acquisition costs (Note 6)
Intangible assets (Note 6)
Goodwill
Accrued pension asset (Note 9)
Future income tax asset (Note 11)
Long-term portion of unrealized gains on financial instruments (Note 10)
LIABILITIES AnD ShAREhOLDERS’ EQUITy
Current liabilities
Accounts payable and accrued liabilities
Current portion of term loans (Note 7)
Distributions and interest payable to shareholders and debenture holders
Current portion of deferred credit (Note 11)
Current portion of unrealized losses on financial instruments (Note 10)
Revolving term bank credits and term loans (Note 7)
Convertible unsecured subordinated debentures (Note 8)
Future employee benefits (Note 9)
Deferred credit (Note 11)
Long-term portion of unrealized losses on financial instruments (Note 10)
Total liabilities
Shareholders’ equity
Shareholders’ capital (Note 12)
Accumulated deficit
Accumulated other comprehensive income (loss) (Note 12)
Total shareholders’ equity
(See Notes to Consolidated Financial Statements)
Approved by the Board of Directors of Superior Plus Inc.
(signed) “grant d. billing”
(signed) “peter valentine”
grant d. billing
Director
58
peter valentine
Director
2008
16.1
246.8
65.9
136.5
42.0
507.3
553.8
17.7
28.8
472.7
19.5
319.0
108.1
2007
14.1
265.8
−
105.2
48.0
433.1
514.4
17.4
23.5
451.8
21.9
20.3
60.4
2,026.9
1,542.8
230.5
13.0
0.7
63.3
87.8
395.3
462.8
241.7
18.0
244.4
90.5
1,452.7
1,375.7
(803.1)
1.6
(801.5)
574.2
2,026.9
212.1
3.9
12.1
−
51.1
279.2
334.1
240.0
18.5
−
54.3
926.1
1,366.8
(729.8)
(20.3)
(750.1)
616.7
1,542.8
consoliDateD stateMents of net earnings,
coMprehensiVe incoMe anD Deficit
2008 annual report
Years ended December 31
(millions of dollars except per share amounts)
Revenues
Cost of products sold (Note 2(b))
Realized gains (losses) on financial instruments (Note 10)
Gross profit
Expenses
Operating and administrative
Amortization of property, plant and equipment (Note 2(b))
Amortization of intangible assets
Interest on revolving term bank credits and term loans
Interest on convertible unsecured subordinated debentures
Accretion of convertible debenture issue costs
Gain on disposal of facility
Management internalization costs
Unrealized losses (gains) on financial instruments (Note 10)
Net earnings from continuing operations before income taxes
Income tax recovery (expense) (Note 11)
Net earnings from continuing operations
Net earnings from discontinued operations (Note 18)
net earnings
Net earnings
Other comprehensive income (loss), net of tax:
Unrealized foreign currency gains (losses) on translation of
self-sustaining foreign operations
Reclassification of derivative gains and losses previously deferred
Comprehensive income
Deficit, beginning of year
Cumulative impact of adopting new accounting requirements for
inventory (Note 2(b))
Net earnings
Distributions to unitholders
Deficit, end of year
2008
2,487.3
(1,860.1)
41.9
669.1
470.8
18.3
5.3
23.7
14.8
1.4
(4.0)
−
61.2
591.5
77.6
(9.9)
67.7
−
67.7
67.7
30.1
(8.2)
89.6
(729.8)
1.2
67.7
(142.2)
(803.1)
2007
2,350.5
(1,676.9)
(11.8)
661.8
439.7
57.6
4.9
25.2
19.5
2.8
−
0.5
(2.7)
547.5
114.3
5.1
119.4
0.4
119.8
119.8
(13.6)
11.3
117.5
(714.7)
−
119.8
(134.9)
(729.8)
Net earnings per share from continuing operations, basic and diluted (Note 13)
Net earnings per share from discontinued operations, basic and diluted (Note 13)
Net earnings per share, basic and diluted (Note 13)
$
$
$
0.77
–
0.77
$
$
$
1.38
–
1.38
(See Notes to Consolidated Financial Statements)
59
superior plus
consoliDateD stateMents of cash flows
Years ended December 31
(millions of dollars)
Operating activities
Net earnings
Net earnings from discontinued operations
Items not affecting cash:
Amortization of property, plant and equipment and intangible
assets and accretion of convertible debenture issue costs
Amortization of customer acquisition costs
Amortization included in cost of sales (Note 2(b))
Pension expense
Unrealized losses (gains) on financial instruments
Future income tax recovery
Customer acquisition costs
Proceeds on disposal of facility
Decrease (increase) in non-cash operating working capital items (Note 15)
Cash flows from operating activities of continuing operations
Investing activities
Purchase of property, plant and equipment
Proceeds on disposal of property, plant and equipment
Proceeds on disposal of facility
Transaction with Ballard Power Systems Inc. (Note 11)
Acquisitions (Note 3)
Proceeds on sale of JW Aluminum Company (Note 18)
Cash flows from investing activities
Financing activities
Revolving term bank credits and term loans
Repayment of 8%, Series I subordinated unsecured convertible debentures
Repayment of 8%, Series II subordinated unsecured convertible debentures
Net proceeds of accounts receivable sales program
Receipt of management internalization loans receivable
Proceeds from distribution reinvestment plan
Distributions to unitholders
Decrease in non-cash operating working capital
Cash flows from financing activities
net increase (decrease) in cash
Cash and cash equivalents beginning of year
Cash and cash equivalents end of year
Supplementary cash flow information:
Cash income taxes paid
Cash interest paid
(See Notes to Consolidated Financial Statements)
60
2008
67.7
−
25.0
6.5
38.9
2.4
61.2
(3.9)
(6.8)
(4.0)
20.6
207.6
(84.2)
7.5
4.0
(46.3)
(24.5)
−
(143.5)
82.6
−
−
−
−
8.9
(142.2)
(11.4)
(62.1)
2.0
14.1
16.1
14.1
37.8
2007
119.8
(0.4)
65.3
6.6
−
1.7
(2.7)
(10.4)
(10.9)
−
(34.7)
134.3
(22.3)
4.4
−
−
(4.3)
1.4
(20.8)
38.4
(8.1)
(59.2)
5.0
0.5
25.3
(134.9)
−
(133.0)
(19.5)
33.6
14.1
7.8
43.4
2008 annual report
notes to consoliDateD financial stateMents
(Tabular amounts in Canadian millions of dollars, unless noted otherwise, except per share amounts.
Tables labelled “2008” and “2007” are for the full years ended December 31.)
1. organization
Superior Plus Corp. (Superior) is an incorporated entity under the Canada Business Corporations Act. Superior, directly
and indirectly, owns 100% interest in Superior Plus LP. Superior does not conduct active business operations but rather
distributes to shareholders the income it receives from Superior Plus LP in the form of partnership allocations, net of
expenses and interest payable on the convertible unsecured subordinated debentures (the debentures). Superior’s
investments in Superior Plus LP are financed by share capital and debentures.
On December 31, 2008, Superior Plus Income Fund (the Fund) completed a transaction with Ballard Power Systems Inc.
(Ballard) which resulted in Superior converting from a publicly traded income trust to a publicly traded corporation. The
transaction resulted in the unitholders of the Fund becoming shareholders of Superior with no substantive changes to the
underlying business operations.
2. aCCounting poliCies
(a) basis of presentation
The accompanying Consolidated Financial Statements have been prepared according to Canadian generally accepted
accounting principles (GAAP), applied on a consistent basis, and include the accounts of Superior and its wholly owned
subsidiaries. Superior Plus Corp. is considered a continuation of Superior Plus Income Fund; as such, these consolidated
financial statements follow the continuity of interests method of accounting. Under the continuity of interests method
of accounting, Superior’s transfer of the assets, liabilities and equity from the Fund to Superior are recorded at their net
book values as at December 31, 2008. As a result of the application of the continuity of interests method of accounting,
certain terms such as shareholder/unitholder and dividend/distribution may be used interchangeably throughout these
Consolidated Financial Statements. For the years ended December 31, 2008 and 2007 all dividends/distributions to
shareholders/unitholders were in the form of trust unit distributions. The accounting principles applied are consistent with
those as set out in Superior’s annual financial statements for the year ended December 31, 2007, except as noted in Note
2(b). All transactions and balances between Superior and Superior’s subsidiaries have been eliminated on consolidation.
(b) changes in accounting policies
Inventory
On January 1, 2008, Superior adopted Canadian Institute of Chartered Accountants (CICA) Handbook Section 3031
Inventory. This section provides increased guidance on the determination of the cost and financial statement presentation
of inventory. The implementation of Section 3031 impacts the calculation of the cost of inventory at ERCO Worldwide, due
to the requirement to inventory the cost of certain fixed overhead items, principally, the amortization of property, plant and
equipment. Additionally, Section 3031 requires that amortization that is inventoried be classified as a component of costs
of product sold. Previously, all amortization was expensed and classified on the income statement as amortization. Superior
adopted Section 3031 retrospectively, but did not restate prior periods. Accordingly, Superior increased the carrying value
of its inventory as at January 1, 2008 by $1.2 million, with a corresponding decrease to Superior’s opening accumulated
deficit; comparative earnings and inventory balances for prior periods have not been restated.
61
superior plus
notes to consoliDateD financial stateMents
Financial Instruments – Disclosure and Presentation
On January 1, 2008, Superior adopted CICA Handbook Section 3862 Financial Instruments – Disclosures and Handbook
Section 3863 Financial Instruments – Presentation. These standards provide enhanced disclosure and presentation
requirements, with an increased emphasis on disclosures about the nature and extent of risks arising from financial
instruments and how the entity manages these risks.
Capital Disclosures
On January 1, 2008, Superior adopted CICA Handbook Section 1535 Capital Disclosures. This section requires the disclosure
of (i) Superior’s objectives, policies and processes for managing capital; (ii) quantitative data about what Superior regards
as capital; (iii) whether Superior has complied with any capital requirements; and (iv) if Superior has not complied, the
consequences of such non-compliance.
(c) business segMents
Superior operates four distinct business segments: a propane distribution and related services business operating under
the Superior Propane trade name; a specialty chemicals manufacturer operating under the ERCO Worldwide trade name
(ERCO); a construction products distribution business operating under the Winroc trade name; and a fixed-price energy
services business operating under the Superior Energy Management (SEM) trade name. (See Note 19.)
(D) cash anD cash equiValents
Cash and cash equivalents include cash and highly liquid short-term investments which, on acquisition, have a term to
maturity of three months or less.
(e) accounts receiVable sales prograM
Superior has a revolving trade accounts receivable sales program under which all transactions are accounted for as sales.
Losses on sales depend in part on the previous carrying amount of trade accounts receivable involved in the sales and have
been included in interest on revolving term bank credits and term loans. The carrying amount is allocated between the
assets sold and retained interests based on their relative fair value at the date of the sale which is calculated by discounting
expected cash flows at prevailing money market rates.
(f) inVentories
Superior Propane
Propane inventories are valued at the lower of weighted average cost and market determined on the basis of estimated
net realizable value. Appliances, materials, supplies and other inventories are stated at the lower of cost and market
determined on the basis of estimated replacement cost or net realizable value, as appropriate.
ERCO
Inventories are valued at the lower of cost and net realizable value. The cost of chemical inventories is determined on a
first-in, first-out basis. Stores and supply inventories are costed on an average basis. Transactions are entered into from
time to time with other companies to exchange chemical inventories in order to minimize working capital requirements
and to facilitate distribution logistics. Balances related to quantities due to or payable by ERCO are included in accounts
receivable.
Winroc
Inventories of building products are valued at the lower of cost and net realizable value. Cost is calculated on a weighted
average cost basis.
62
2008 annual report
(g) financial instruMents anD DeriVatiVes
Financial Instruments
Financial instruments are recognized at fair value upon their initial recognition. Measurement in subsequent periods is
dependent on whether the financial instrument has been classified as held-for-trading, available-for-sale, held-to-maturity,
loans and receivables, or other financial liabilities. After initial recognition, items classified as held-for-trading or available-
for-sale are revalued at fair values, while items classified as held-to-maturity, loans and receivables, and other financial
liabilities are measured at amortized cost using the effective interest method. Transaction costs are expensed as incurred
for financial instruments classified or designated as held-for-trading. For other financial instruments, transaction costs are
recorded as part of the underlying financial instrument and are amortized or accreted into net income.
Derivatives
Financial and non-financial derivatives, including derivatives that are embedded in financial or non-financial contracts that are
considered to be derivatives, are recognized at fair value upon their initial recognition. Measurement in subsequent periods
is at fair value with changes in fair value recorded to net income. Superior does not formally designate and document
economic hedges in accordance with the requirements of applying hedge accounting under GAAP.
(h) property, plant anD equipMent
Cost
Property, plant and equipment is recorded at cost less accumulated amortization. Major renewals and improvements which
extend the useful lives of equipment are capitalized, while repair and maintenance expenses are charged to operations as
incurred. Disposals are removed at carrying costs less accumulated amortization with any resulting gain or loss reflected
in operations.
Interest Capitalization
Interest costs relating to major capital projects are capitalized as part of property, plant and equipment. Capitalization of
interest ceases when the related asset is substantially complete and ready for its intended use.
Amortization
superior propane and winroc
Property, plant and equipment assets are amortized over their respective estimated useful lives using the straight-line
method except for loaned propane dispensers which use the declining balance method at a rate of 10%. The estimated
useful lives of major classes of property, plant and equipment are:
Buildings
Tanks and cylinders
20 to 40 years
20 years
Truck tank bodies, chassis and other Winroc distribution equipment
7 to 10 years
erCo
Property, plant and equipment assets are amortized on a straight-line basis. The estimated useful lives of major classes of
property, plant and equipment are:
Furniture and fixtures
Plant and equipment
3 to 5 years
15 to 30 years
63
superior plus
notes to consoliDateD financial stateMents
Asset Retirement Obligations
Certain of ERCO’s assets may be subject to asset retirement obligations as ERCO is required to remove or remedy the
effect of its activities on the environment at its operating sites by dismantling and removing production facilities at the end of
a respective plant’s operating life, commonly referred to as asset retirement obligations. ERCO’s potential asset retirement
obligations could also be impacted by interpretation and changes to environmental laws and regulations in the countries in
which ERCO operates. In certain instances, ERCO does not view the potential asset retirement obligations to be significant
based on a combination of past experience related to the prior remediation of similar facilities and/or the existence of
indemnification agreements related to environmental liabilities. Additionally, at some facilities, ERCO is currently unable
to accurately estimate its potential asset retirement obligations, as these facilities currently have an indeterminate life.
The asset retirement obligation for these assets is reviewed regularly, and will be recorded in the first period in which
the lives of the assets and the extent of obligations are known. Accordingly, ERCO has not recorded a provision for asset
retirement obligations.
Impairment
Superior reviews long-lived assets and intangible assets with finite lives whenever events or changes in circumstances
indicate that the carrying amounts of such assets may not be fully recoverable. Determination of recoverability is based
on an estimate of undiscounted future cash flows, and measurement of an impairment loss is based on the fair value of
the assets.
(i) intangible assets anD custoMer acquisition costs
ERCO
The value of acquired royalty assets is amortized over the remaining term of the royalty agreements up to 10 years. The
costs of patents are amortized on a straight-line basis over their estimated useful lives, which is approximately 10 years.
Customer Acquisition Costs
Costs incurred by SEM to acquire natural gas and electricity customer contracts are capitalized as deferred costs at the
time the cost is incurred. The costs are recognized into net earnings as an operating and administrative expense over the
term of the underlying contracts. The contracts range from one to five years with the average remaining life approximately
three years.
(j) gooDwill
All business combinations are accounted for using the purchase method. Goodwill is carried at cost, is not amortized and
represents the excess of the purchase price and related costs over the fair value assigned to the net tangible assets of
businesses acquired. Goodwill is tested for impairment on an annual basis using a two-step approach, with the first being
to assess whether the fair value of the reporting unit to which goodwill is associated is less than its carrying value. If this
is the case, a second impairment test is performed which requires a comparison of the fair value of goodwill to its carrying
amount. If the fair value is less than the carrying value, goodwill is considered to be impaired and an impairment charge
would be recognized immediately.
(k) reVenue recognition
Superior Propane
Revenues from sales are recognized at the time of delivery, or when related services are performed and there is evidence
of an arrangement at a fixed or determinable price and the collectability of the sale is assured.
ERCO
Revenues from chemical sales are recognized at the time of delivery and when there is evidence of an arrangement at
a fixed or determinable price and the collectability of the sale is assured. Revenues associated with the construction of
chlorine dioxide generators are recognized using the percentage-of-completion method based on cost incurred compared
to the total estimated cost.
64
2008 annual report
Winroc
Revenue is recognized when products are delivered to the customer and when there is evidence of an arrangement
at a fixed or determinable price and the collectability of the sale is assured. Revenue is stated net of discounts and
rebates granted.
SEM
Natural gas revenues are recognized as gas is delivered to local natural gas distribution companies and when there is
evidence of an arrangement at a fixed or determinable price and the collectability of the sale is assured. Costs associated
with balancing the amount of gas used by SEM’s customers with the volumes delivered by SEM to the local distribution
companies are recognized as period costs. Electricity revenues are recognized as the electricity is consumed by the
end-use customer or sold to third parties.
(l) rebates – winroc
Purchase rebates are recognized as a reduction of cost of goods sold when the related performance is completed and
the inventory is sold. Vendor rebates that are contingent upon completing a specified level of purchases are recognized
as a reduction of cost of goods sold based on a systematic and rational allocation of the cash consideration to each of the
underlying transactions that results in progress toward earning that rebate or refund, assuming that the rebate can be
reasonably estimated and it is probable that the specified target will be obtained. Otherwise, the rebate is recognized as
the milestone is achieved and the inventory is sold.
(M) future eMployee benefits
Superior has a number of defined benefit and defined contribution plans providing pension and other post-employment
benefits to most of its employees, and accrues its obligations under the plans and the related costs, net of plan assets.
Past service costs and actuarial gains and losses in excess of 10% of the greater of the accrued benefit obligation and the
fair value of the plan assets, are amortized into income over the expected average remaining life of the active employees
participating in the plans.
(n) incoMe taxes
Current income taxes are recorded based on the estimated income taxes payable on taxable income for the current year.
Future income tax assets and liabilities are determined based on differences between the accounting and tax bases of
assets and liabilities, and are measured using substantively enacted tax rates and laws that will be in effect when the
differences are expected to reverse. A future tax asset is recognized if it is more likely than not to be realized. The effect of
a change in tax rates on future income tax assets and liabilities is recorded in the period in which the change occurs.
(o) foreign currency translation
The accounts of the operations of ERCO and Winroc in the United States and ERCO’s operations in Chile are considered to
be self-sustaining foreign operations and are translated using the current rate method, under which all assets and liabilities
are translated at the exchange rate prevailing at the balance sheet date, and revenues and expenses at average rates of
exchange during the period. Exchange gains and losses arising from this translation, representing the net unrealized foreign
currency translation gain or loss on Superior’s net investment in these foreign operations, are recorded as a component of
accumulated other comprehensive income. Other monetary assets and liabilities held by Superior are converted using the
current rate method.
Transactions denominated in a foreign currency, other than the translation of self-sustaining operations, are translated into
the functional currency at rates in effect at the date of the transaction. At the balance sheet date, monetary foreign currency
assets and liabilities are translated at exchange rates then in effect. The resulting translation gains or losses are recognized
in the determination of earnings.
65
superior plus
notes to consoliDateD financial stateMents
(p) share-baseD coMpensation
Superior has established share-based compensation plans whereby restricted shares and/or performance shares may be
granted to employees. The fair value of these shares is estimated and recorded as an expense with an offsetting amount
to accrued liabilities, with the payments settled in cash.
(q) net earnings per share
Basic net earnings per share is calculated by dividing the net earnings by the weighted average number of shares outstanding
during the period. The weighted average number of shares outstanding during the year is calculated using the number of
shares outstanding at the end of each month during the year. Diluted net earnings per share is calculated by factoring in the
dilutive impact of the dilutive instruments, including the conversion of debentures to shares using the converted method to
assess the impact of dilution. Superior uses the treasury stock method to determine the impact of dilutive options, which
assumes that the proceeds from in-the-money share options are used to repurchase shares at the average market price
during the period.
(r) use of estiMates anD assuMptions
The preparation of Superior’s Consolidated Financial Statements in accordance with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets, liabilities, net income and related disclosures.
Certain estimates, including the calculation of the fair value of various financial instruments, the allowance for doubtful
accounts, employee future benefits, future income tax assets and liabilities and asset impairments, require management
to make subjective or complex judgments. Accordingly, actual results could differ from these and other estimates, thereby
impacting Superior’s Consolidated Financial Statements.
(s) future accounting changes
International Financial Reporting Standards
The Accounting Standards Board of Canada (AcSB) has announced plans that will require the convergence of Canadian
GAAP with International Financial Reporting Standards (IFRS) for publicly accountable enterprises, including Superior.
The changeover date from Canadian GAAP to IFRS is for annual and interim financial statements relating to fiscal years
beginning on or after January 1, 2011. Superior is currently assessing the future impact of these new standards on its
consolidated financial statements.
Goodwill and Intangible Assets
In February 2008, the CICA issued Handbook Section 3064 Goodwill and Intangible Assets, replacing Handbook Section
3062 Goodwill and Other Intangible Assets and Handbook Section 3450 Research and Development Costs. The purpose of
Section 3064 is to provide more specific guidance on the recognition of internally developed intangible assets and requires
that research and development expenditures be evaluated against the same criteria as expenditures for intangible assets.
The section harmonizes Canadian GAAP with IFRS and applies to annual and interim financial statements relating to fiscal
years beginning on or after October 1, 2008. Superior does not anticipate that this section will have a material impact on
its consolidated financial statements.
66
2008 annual report
3. aCquisitions
On June 4, 2008 Superior Propane acquired certain propane assets of Irving Oil Limited and Irving Oil Marketing Limited
for consideration of $3.4 million.
On May 9, 2008 Winroc acquired the shares of Fackoury’s Building Supplies Ltd. and associated entities, a privately held
gypsum and related products distributor, for consideration of $21.1 million (net of $2.2 million in cash acquired).
Using the purchase method of accounting for acquisitions, Superior consolidated the assets and liabilities from the
acquisitions and included earnings as of the closing date. The allocation of the consideration paid for these acquisitions is
as follows:
Cash consideration paid
Transaction costs
Total consideration
Working capital, net
Property, plant and equipment
Intangible asset
Goodwill
Future income tax liability
Acquisition of
Propane Assets
Acquisition of
Fackoury’s
3.1
0.3
3.4
0.4
1.0
–
2.0
–
3.4
20.9
0.2
21.1
3.8
1.0
1.3
15.1
(0.1)
21.1
Total
24.0
0.5
24.5
4.2
2.0
1.3
17.1
(0.1)
24.5
During 2007, Winroc acquired the assets of two gypsum supply dealers, for consideration of $4.3 million.
4. aCCounts reCeivable and other
Superior sells, with limited recourse, certain trade accounts receivable on a revolving basis to an entity sponsored by a
Canadian chartered bank. The accounts receivable are sold at a discount to face value based on prevailing money market
rates. Superior has retained the servicing responsibility for the accounts receivable sold and has therefore recognized a
servicing liability. The level of accounts receivable sold under the program fluctuates seasonally with the level of accounts
receivable. As at December 31, 2008 proceeds of $100.0 million (December 31, 2007 – $100.0 million) had been received.
The accounts receivable program expires on December 29, 2009.
Included in accounts receivable and other as at December 31, 2008 is $15.4 million (December 31, 2007 – $15.1 million)
of prepaid expenses.
A summary of accounts receivable and other is as follows:
December 31,
Accounts receivable trade
Accounts receivable other
Prepaid expenses
Accounts receivable and other
2008
225.5
5.9
15.4
246.8
2007
241.0
9.7
15.1
265.8
67
superior plus
notes to consoliDateD financial stateMents
5. inventories
December 31,
Propane
Propane retailing materials, supplies, appliances and other
Chemical finished goods and raw materials
Chemical stores, supplies and other
Walls and ceilings construction products
2008
55.2
12.6
15.7
11.9
41.1
136.5
2007
36.8
13.9
7.9
11.0
35.6
105.2
6. property, plant and equipment, Customer aCquisition Costs and intangible assets
December 31,
Land
Buildings
ERCO plant and equipment
Superior Propane retailing equipment
Winroc distribution equipment
Property, plant and equipment
Customer acquisition costs
ERCO royalty assets and patents
SEM intangible assets
Winroc intangible assets
Superior Propane intangible assets
Intangible assets
2008
Accumulated
Cost
Amortization
22.5
98.8
646.8
344.0
29.7
1,141.8
24.2
51.1
2.8
3.3
6.3
63.5
−
35.5
248.2
294.7
9.6
588.0
6.5
30.8
−
1.4
2.5
34.7
net Book
Value
22.5
63.3
398.6
49.3
20.1
553.8
17.7
20.3
2.8
1.9
3.8
28.8
2007
Accumulated
Net Book
Cost
22.9
94.3
558.3
367.6
28.0
1,071.1
28.9
41.5
1.2
2.1
2.8
47.6
Amortization
–
31.7
211.8
306.0
7.2
556.7
11.5
20.9
−
0.9
2.3
24.1
Value
22.9
62.6
346.5
61.6
20.8
514.4
17.4
20.6
1.2
1.2
0.5
23.5
Total property, plant and equipment, customer
acquisition costs and intangible assets
1,229.5
629.2
600.3
1,147.6
592.3
555.3
68
2008 annual report
7. revolving term bank Credits and term loans
Year of
Maturity
Effective Interest Rate
December 31, December 31,
2007
2008
Revolving Term Bank Credits (1)
Bankers Acceptances (“BA”)
LIBOR Loans
(US$71.6 million; 2007 – US$66.7 million)
Other Debt
Notes payable
Deferred consideration
Loan payable
Mortgage payable (2007 – US$1.0 million)
Senior Secured notes
Senior secured notes subject to floating interest
2010
2010
Floating BA rate plus
applicable credit spread
Floating LIBOR rate plus
applicable credit spread
2009-2010
2009-2010
2009-2014
–
Prime
Non-interest bearing
6.3%
7.53%
168.9
90.1
259.0
6.2
4.8
11.8
–
22.8
rates (US$60.0 million; 2007 – US$85.0 million) (2) 2009-2015
Floating LIBOR rate plus 1.7%
73.5
Senior secured notes subject to fixed interest
rates (US$100.0 million; 2007 – US$75.0 million) (2) 2009-2015
6.65%
Total revolving term bank credits and term loans
before deferred financing fees
Deferred financing fees
Revolving term bank credits and term loans
Current maturities
Revolving term bank credits and term loans
122.4
195.9
477.7
(1.9)
475.8
(13.0)
462.8
96.5
65.9
162.4
6.8
7.0
5.2
1.0
20.0
84.0
74.1
158.1
340.5
(2.5)
338.0
(3.9)
334.1
(1) Superior and its wholly-owned subsidiaries, Superior Plus US Holdings Inc. and Commercial e Industrial (Chile) Limitada, have revolving term bank credit borrowing capacity
of $595.0 million. These facilities are secured by a general charge over the assets of Superior and certain of its subsidiaries. As at December 31, 2008, Superior had
$41.5 million of outstanding letters of credit (December 31, 2007 – $31.7 million). The fair value of Superior’s revolving term bank credits and other debt approximates its
carrying value as a result of the market-based interest rates and the short-term nature of the underlying debt instruments.
(2) Senior secured notes (the notes) totalling US$160.0 million (CDN$195.9 million at December 31, 2008 and CDN$158.1 million at December 31, 2007) are secured
by a general charge over the assets of Superior and certain of its subsidiaries. Principal repayments begin in 2009. Management has estimated the fair value of the
notes based on comparisons to treasury instruments with similar maturities, interest rates and credit risk profiles. The estimated fair value of the notes at
December 31, 2008 was CDN$208.0 million (December 31, 2007 – CDN$163.8 million). In conjunction with the issue of the notes, Superior swapped US$60.0 million
(CDN$73.5 million) (December 31, 2007 – US$85.0 million (CDN$84.0 million)) of the fixed rate obligation into a U.S. dollar floating rate obligation. Additionally, at December
31, 2008, Superior has entered into US$60.0 million (December 31, 2007 – US$60.0 million) of foreign currency contracts in relation to future principal repayments at a rate
of US$1.00 to CDN dollar.
Repayment requirements of the revolving term bank credits and term loans are as follows:
Current portion
Due in 2010
Due in 2011
Due in 2012
Due in 2013
Subsequent to 2013
Total
13.0
266.7
41.6
41.7
41.3
73.4
477.7
69
superior plus
notes to consoliDateD financial stateMents
8. Convertible unseCured subordinated debentures
Superior has issued two series of debentures denoted as 5.75% Series I and 5.85% Series I as follows:
Maturity date
Interest rate
Conversion price per share
Debentures outstanding at December 31, 2007
Conversion and repayment/redemption of
debentures and accretion of discount during 2008
Deferred issue costs
Debentures outstanding December 31, 2008
Quoted market value December 31, 2008
Quoted market value December 31, 2007
Series I
Series I
December 31,
October 31,
2012
5.75%
2015
5.85%
$
36.00
$
31.25
174.9
–
(3.9)
171.0
141.7
152.2
75.0
–
(2.0)
73.0
52.5
67.5
Unamortized
Discount
Total
Carrying
Value
(3.3)
1.0
(2.3)
246.6
1.0
(5.9)
241.7
The debentures may be converted into shares at the option of the holder at any time prior to maturity and may be redeemed
by Superior in certain circumstances. Superior may elect to pay interest and principal upon maturity or redemption by issuing
shares to a trustee in the case of interest payments, and to the debenture holders in the case of payment of principal. The
number of any shares issued will be determined based on market prices for the shares at the time of issuance.
9. future employee benefits
Superior Propane and ERCO have defined benefit (DB) and defined contribution (DC) pension plans covering most
employees. The benefits provided under DB pension plans are based on the employees’ years of service and on the highest
average earnings for a specified number of consecutive years. Information about Superior’s DB and other post-retirement
benefit plans as at December 31, 2008 and 2007 in aggregate is as follows:
70
2008 annual report
Superior Propane Pension
Benefit Plans
ERCO Pension
Benefit Plans
Other
Benefit Plans
2008
51.2
0.1
−
2.7
(3.8)
(8.3)
41.9
57.1
(8.1)
(2.7)
−
(3.8)
42.5
0.6
18.9
−
19.5
2007
53.9
0.1
−
2.7
(4.1)
(1.4)
51.2
63.6
0.2
(2.6)
−
(4.1)
57.1
5.9
16.0
−
21.9
Accrued benefit obligation, beginning of year
Current service cost
Past service cost
Interest cost
Benefits paid
Actuarial loss
Accrued benefit obligation, end of year
Fair value of plan assets, beginning of year
Actual return on plan assets
Transfers to defined contribution plan
Employer contributions
Benefits paid
Fair value of plan assets, end of year
Funded status – plan surplus (deficit)
Unamortized net actuarial loss (gain)
Unamortized past service costs
Accrued net pension asset
Accrued net benefit obligation
Current portion of accrued net benefit
obligation recorded in accounts payable
and accrued liabilities
Long-term accrued net benefit obligation
(2008 – $18.0 million; 2007 – $18.5 million)
2008
64.0
2.3
−
3.6
(3.2)
(13.6)
53.1
55.9
(7.4)
−
5.0
(3.2)
50.3
(2.8)
(0.5)
−
2007
60.9
2.7
−
3.3
(1.7)
(1.2)
64.0
53.2
0.6
−
3.8
(1.7)
55.9
(8.1)
1.8
0.3
2008
24.7
0.3
−
1.3
(1.3)
(2.2)
22.8
−
−
−
1.3
(1.3)
−
(22.8)
6.5
(2.3)
2007
26.3
0.5
(2.5)
1.4
(1.1)
0.1
24.7
−
−
−
1.1
(1.1)
−
(24.7)
9.4
(2.5)
(3.3)
(6.0)
(18.6)
(17.8)
(2.6)
(0.7)
(4.2)
(1.8)
(1.3)
(1.1)
(17.3)
(16.7)
The accrued net pension asset related to the Superior Propane pension benefit plan in 2008 was $19.5 million
(2007 – $21.9 million), and the expense for 2008 was $2.4 million (2007 – $1.8 million). The accrued net benefit obligation
related to the ERCO Worldwide pension benefit plan in 2008 was $3.3 million (2007 – $6.0 million), and the expense for
2008 was $2.3 million (2007 – $2.5 million).
The accrued net benefit obligation related to the total other benefit plans of Superior Propane and ERCO Worldwide in 2008
was $18.6 million (2007 – $17.8 million), and the expense for 2008 was $2.1 million (2007 – $2.5 million).
Superior’s DC pension plans are fully funded by their nature. Accordingly, DC pension plan assets equal the related obligation.
The total cost of Superior’s DC plans in 2008 was $4.5 million (2007 – $3.9 million).
The significant actuarial assumptions adopted in measuring accrued benefit obligations are as follows:
Discount rate
Expected long-term rate-of-return on plan assets (1)
Rate of compensation increase
(1) Based on market-related values.
DB Plans
2008
7.50%
7.00%
3.50%
2007
5.50%
7.00% –
3.50%
2007
Other Benefit Plans
2008
7.50%
–
3.50%
3.50%
5.50%
The weighted average annual assumed health care cost inflation trend used in the calculation of accrued other benefit plan
obligations is 10% initially, decreasing gradually to 5% in 2018 and thereafter. A 1% change in the health care trend rate
would result in a change to the accrued benefit obligation of $2.2 million and a change to the current service expense of
$0.2 million.
71
superior plus
notes to consoliDateD financial stateMents
The most recent funding valuation dates for Superior’s DB plans range from January 1, 2006 to January 1, 2007. The next
funding valuation dates are scheduled between January 1, 2009 and January 1, 2010.
The fair values of DB plan assets at December 31, 2008 is comprised of the following major investment categories: cash
and cash equivalents 3% (2007 – 3%); bonds 41% (2007 – 34%); equities 56% (2007 – 63%).
10. finanCial instruments
The fair value of a financial instrument is the amount of consideration that would be estimated to be agreed upon in an
arm’s-length transaction between knowledgeable, willing parties who are under no compulsion to act. Fair values are
determined by reference to quoted bid or asking prices, as appropriate, in the most advantageous active market for that
instrument to which Superior has immediate access. Where bid and ask prices are unavailable, Superior uses the closing
price of the most recent transaction of the instrument. In the absence of an active market, Superior estimates fair values
based on prevailing market rates (bid and ask prices, as appropriate) for instruments with similar characteristics and risk
profiles or internal or external valuation models, such as discounted cash flow analysis, using, to the extent possible,
observable market-based inputs.
Fair values determined using valuation models require the use of assumptions concerning the amount and timing of
estimated future cash flows and discount rates. In determining those assumptions, Superior looks primarily to available
readily observable external market inputs including factors such as interest rate yield curves, currency rates, and price and
rate volatilities as applicable. With respect to the valuation of ERCO’s fixed-price electricity agreements, the valuation of
these agreements requires Superior to make assumptions about the long-term price of electricity in electricity markets
for which active market information is not available. The impact of the assumption for the long-term forward price curve
of electricity has a material impact on the fair value of these agreements. Any changes in the fair values of financial
instruments classified or designated as held-for-trading are recognized in net income.
financial anD non-financial DeriVatiVes
Description
Natural gas financial swaps − NYMEX
Natural gas financial swaps − AECO
Foreign currency forward contracts, net
Interest rate swaps − USD
Notional (1)
25.0 GJ (2)
36.0 GJ (2)
US$53.2 (4)
US$60.0 (4)
Asset (Liability) Asset (Liability)
as at
December 31, December 31,
2007
as at
Term
Effective Rate
2009-2011
US$7.54/GJ
2009-2014
CDN$7.93/GJ
2009-2015
1.11
2013-2015
Floating LIBOR rate
plus 1.7%
2008
(33.5)
(34.8)
(11.5)
11.7
Propane wholesale purchase and sale
contracts, net
ERCO fixed-price electricity purchase agreement
SEM electricity swaps
5.2 USG (5)
45 MW (3)
0.5 MWh (6)
2009-2010
$1.67/USG
2009-2017
$45-$52/MWh
2009-2014
$65.69/MWh
(1.3)
42.1
(0.9)
(1) Notional values as at December 31, 2008.
(2) Millions of gigajoules purchased.
(3) Mega watts (MW) on a 24/7 continual basis per year purchase.
(4) Millions of dollars purchased.
(5)
(6)
Millions of United States gallons purchased.
Millions of mega watt hours (MWh).
72
33.4
(18.7)
(46.0)
2.6
5.5
26.6
(0.4)
2008 annual report
All financial and non-financial derivatives are designated as held for trading upon their initial recognition.
Description
Natural gas financial swaps – NYMEX and AECO
SEM electricity swaps
Foreign currency forward contracts, net
Interest rate swaps
Propane wholesale purchase and sale contracts
ERCO fixed-price power purchase agreements
As at December 31, 2008
As at December 31, 2007
Current
Assets
Long-term
Assets
Current
Liabilities
Long-term
Liabilities
9.5
0.1
7.7
−
18.1
6.6
42.0
48.0
6.2
0.8
53.9
11.7
−
35.5
108.1
60.4
46.7
0.9
20.8
−
19.4
−
87.8
51.1
37.3
0.9
52.3
−
−
−
90.5
54.3
Description
Natural gas financial swaps – NYMEX and AECO
SEM electricity swaps
Foreign currency forward contracts, net
Interest rate swaps
Propane wholesale purchase and sale contracts
ERCO fixed-price power purchase agreements
Total realized and unrealized gains (losses) on financial and
non-financial derivatives
Foreign currency translation of senior secured notes
Foreign currency translation of ERCO royalty assets
Total realized and unrealized gains (losses)
non-DeriVatiVe financial instruMents
2008
Realized Unrealized
Gain (Loss) Gain (Loss)
2007
Realized Unrealized
Gain (Loss) Gain (Loss)
34.7
(0.4)
(16.4)
2.0
−
22.0
41.9
−
−
41.9
(66.7)
(0.5)
26.5
9.0
(6.8)
15.1
(23.4)
(37.8)
−
(61.2)
(14.9)
−
(4.5)
−
−
7.6
(11.8)
−
−
(11.8)
7.3
(0.4)
(33.3)
3.8
2.3
(0.7)
(21.0)
27.7
(4.0)
2.7
Superior’s accounts receivables have been designated as available for sale due to Superior’s accounts receivable
securitization program while Superior’s accounts payable, distributions and interest payable to shareholders and debenture
holders, revolving term bank credits and term loans and debentures have been designated as other liabilities. The carrying
value of Superior’s cash and cash equivalents, accounts receivable, accounts payable, and distributions and interest payable
to shareholders and debenture holders approximates their fair value due to the short-term nature of these amounts. The
carrying value and the fair value of Superior’s revolving term bank credits and term loans, and debentures, is provided in
Notes 7 and 8 of the Consolidated Financial Statements.
financial instruMents – risk ManageMent
Derivative and non-financial derivatives are used by Superior to manage its exposure to fluctuations in foreign currency
exchange rates, interest rates and commodity prices. Superior assesses the inherent risks of these instruments by grouping
derivative and non-financial derivatives related to the exposures these instruments mitigate. Superior’s policy is not to
use derivative or non-financial derivative instruments for speculative purposes. Superior does not formally designate its
derivatives as hedges; as a result, Superior does not apply hedge accounting and is required to designate its derivatives and
non-financial derivatives as held for trading.
73
superior plus
notes to consoliDateD financial stateMents
Effective 2008, SEM enters into natural gas financial swaps primarily with Constellation Energy Commodities Group, Inc.
for distributor-billed natural gas business in Canada to manage its economic exposure of providing fixed-price natural
gas to its customers. Additionally, SEM maintains its historical natural gas swap positions with seven additional
counterparties. SEM monitors its fixed-price natural gas positions on a daily basis to monitor compliance with established
risk management policies. SEM maintains a substantially balanced fixed-price natural gas position in relation to its customer
supply commitments.
SEM enters into electricity financial swaps with two counterparties to manage the economic exposure of providing fixed-
price electricity to its customers. SEM monitors its fixed-price electricity positions on a daily basis to monitor compliance
with established risk management policies. SEM maintains a substantially balanced fixed-price electricity position in relation
to its customer supply commitments.
ERCO has entered into fixed-price electricity purchase agreements to manage the economic exposure of certain of its
chemical facilities to changes in the market price of electricity, in markets where the price of electricity is not fixed.
Substantially all of the fair value with respect to these agreements is with a single counterparty.
Superior Propane enters into various propane forward purchase and sale agreements with more than 20 counterparties
to manage the economic exposure of its wholesale customer supply contracts. Superior Propane monitors its
fixed-price propane positions on a daily basis to monitor compliance with established risk management policies.
Superior Propane maintains a substantially balanced fixed-price propane gas position in relation to its wholesale customer
supply commitments.
Superior, on behalf of its operating divisions, enters into foreign currency forward contracts with 10 counterparties to
manage the economic exposure of Superior’s operations to movements in foreign currency exchange rates. SEM and
Superior Propane contract a portion of their fixed-price natural gas and propane purchases and sales in U.S. dollars and
enter into forward U.S. dollar purchase contracts to create an effective Canadian dollar fixed-price purchase cost. ERCO
enters into U.S. dollar forward sales contracts on an ongoing basis to mitigate the impact of foreign exchange fluctuations
on sales margins on production from its Canadian plants that is sold in U.S. dollars. Interest expense on Superior’s U.S.
dollar debt is also used to mitigate the impact of foreign exchange fluctuations.
Superior has interest rate swaps with a single counterparty to manage the interest rate mix of its total debt portfolio and
related overall cost of borrowing. Superior manages its overall liquidity risk in relation to its general funding requirements by
utilizing a mix of short-term and longer-term maturity debt instruments. Superior reviews its mix of short-term and longer-
term debt instruments on an ongoing basis to ensure it is able to meet its liquidity requirements.
Superior utilizes a variety of counterparties in relation to its derivative and non-financial derivative instruments in order
to mitigate its counterparty risk. Superior assesses the credit worthiness of its significant counterparties at the inception
and throughout the term of a contract. Superior is also exposed to customer credit risk. Superior Propane and Winroc
deal with a large number of small customers, thereby reducing this risk. ERCO, due to the nature of its operations, sells
its products to a relatively small number of customers. ERCO mitigates its customer credit risk by actively monitoring the
overall credit worthiness of its customers. SEM has minimal exposure to customer credit risk as local natural gas and
electricity distribution utilities have been mandated, for a nominal fee, to provide SEM with invoicing, collection and the
assumption of bad debts risk for residential and small commercial customers. SEM actively monitors the credit worthiness
of its industrial customers.
74
2008 annual report
Allowances for doubtful accounts and past due receivables are reviewed by Superior at each balance sheet reporting
date. Superior updates its estimate of the allowance for doubtful accounts based on the evaluation of the recoverability
of accounts receivable balances of each customer taking into account historical collection trends of past due accounts.
Accounts receivable are written-off once it is determined they are not collectable.
Pursuant to their respective terms, accounts receivable are aged as follows:
Current
Past due less than 90 days
Past due over 90 days
Accounts receivable trade
December 31, 2008
December 31, 2007
150.5
67.6
16.7
234.8
170.9
66.0
9.2
246.1
Superior’s accounts receivable are stated after deducting a provision of $9.3 million as at December 31, 2008
(December 31, 2007 − $5.1 million). The movement in the provision for doubtful accounts was as follows:
Allowance for doubtful accounts, opening
Bad debt expense, net of recoveries
Written-off
Allowance for doubtful accounts, ending
December 31, 2008
(5.1)
(8.1)
3.9
(9.3)
December 31, 2007
Superior’s contractual obligations associated with its financial liabilities are as follows:
Revolving term bank credits and term loans
Convertible unsecured subordinated debentures
CDN$ equivalent of US$ foreign currency
forward purchase contracts
US$ foreign currency forward sales contracts (US$)
Fixed-price electricity purchase commitments
CDN$ natural gas purchases
US$ natural gas purchases (US$)
CDN$ propane purchases
US$ propane purchases (US$)
2009
13.0
−
133.5
92.2
17.7
50.1
98.8
1.2
32.0
2010
266.7
−
69.7
78.4
17.7
43.7
46.8
−
0.5
2011
41.6
−
6.0
12.0
17.7
7.6
2.3
−
−
2012
41.7
−
−
−
17.7
5.0
−
−
−
2013
41.3
174.9
−
−
17.7
3.6
−
−
−
2014 and
Thereafter
73.4
75.0
60.0
−
70.8
−
−
−
−
(2.9)
(4.3)
2.1
(5.1)
Total
477.7
249.9
269.2
182.6
159.3
110.0
147.9
1.2
32.5
Superior’s contractual obligations are considered to be normal course operating commitments and do not include the
impact of mark-to-market fair values on financial and non-financial derivatives. Superior expects to fund these obligations
through a combination of cash flow from operations, proceeds on revolving term bank credits and proceeds on the issuance
of share capital.
Superior’s financial instruments’ sensitivities to changes in foreign currency exchange rates, interest rates and various
commodity prices and the impact to net earnings are detailed below:
Increase (decrease) to net earnings of a $0.01 increase in the CDN$ to the US$
Increase (decrease) to net earnings of a 0.5% increase in interest rates
Increase (decrease) to net earnings of a $0.40/GJ increase in the spot price of natural gas
Increase (decrease) to net earnings of a $0.04/litre increase in the spot price of propane
Increase (decrease) to net earnings of a $1.00/kWh increase in the spot price of electricity
year Ended
December 31, 2008
0.9
(1.3)
24.0
0.8
2.2
75
superior plus
notes to consoliDateD financial stateMents
The calculation of Superior’s sensitivity to changes in foreign currency exchange rates, interest rates and various commodity
prices represents the change in fair value of the financial instrument without consideration of the value of the underlying
variable, for example, the underlying customer contracts. The recognition of the sensitivities identified above would have
impacted Superior’s unrealized gain or loss on financial instruments and would not have had a material impact on Superior’s
cash flow from operations.
11. inCome taxes of superior
On December 31, 2008, Superior converted from a publicly traded income trust to a publicly traded corporation by
way of a plan of arrangement with Ballard Power Systems Inc. (Ballard) for cash consideration of $46.3 million. The
transaction resulted in Superior increasing its tax basis by approximately $1,013.0 million. Additional consideration may
be payable to Ballard in future periods based on the finalization of tax basis available to Superior. Superior’s calculation
of current and future income taxes for the year ended December 31, 2008 is based on the conversion to a corporate
structure effective December 31, 2008, whereas Superior’s calculation of current and future income taxes for the year
ended December 31, 2007 is based on Superior being a publicly traded income trust. Consistent with prior periods, Superior
recognizes a provision for income taxes for its subsidiaries that are subject to current and future income taxes, including
United States income tax, United States non-resident withholding tax and Chilean income tax.
Total income taxes are different than the amount computed by applying the corporate Canadian enacted statutory rate for
2008 of 31.2% (2007 – 31.5%). The reduction in statutory rates reflects previously enacted federal tax rate reductions. The
reasons for these differences are as follows:
Net earnings (loss) from continuing operations
Less: net earnings of Superior taxed directly in the hands of the unitholders
Income tax expense (recovery) of Superior
Earnings of Superior before taxes and after distribution of income to unitholders
Computed income tax expense (recovery) as a corporate entity
Establishment of future income tax due to conversion to a corporation (1)
Establishment of future income tax due to taxation of trusts effective 2011 (1)
Higher effective foreign tax rates
Changes in future income tax rates
Non-deductible costs and other
Income tax expense (recovery) of Superior
2008
67.7
(40.4)
9.9
37.2
11.6
(18.7)
–
2.6
14.4
−
9.9
2007
119.4
(89.1)
(5.1)
25.2
7.9
–
(12.9)
1.7
0.3
(2.1)
(5.1)
(1) For the year ended December 31, 2008, Superior’s income tax expense or recovery was calculated on the basis of Superior converting to a corporation on
December 31, 2008. For the year ended December 31, 2007, Superior’s income tax expense or recovery was calculated on the basis of Superior being a publicly traded
income trust in accordance with legislation related to the taxation of certain income trusts.
Income tax expense or recovery of Superior for the years ended December 31, 2008 and 2007 is comprised of the
following:
Current income tax expense (recovery)
Future income tax expense (recovery)
Total income tax expense (recovery)
76
2008
13.8
(3.9)
9.9
2007
5.3
(10.4)
(5.1)
2008 annual report
The components of the net future income tax asset as at December 31, 2008 and 2007 are as follows:
Tax values over carrying value of tangible assets
Accounting reserves, deductible when paid
Benefit of capital and non-capital tax loss carry-forwards
Canadian federal and provincial investment tax credits
Unrealized gains/losses on financial instruments
Capitalized customer acquisition costs
Other
Total future income tax asset
Less:
Valuation allowance – Canadian capital loss carry-forwards
Valuation allowance – United States capital loss carry-forwards
Future income tax asset (1)
2008
(3.3)
15.5
340.5
133.1
9.4
(5.2)
1.4
491.4
(84.4)
(22.1)
384.9
(1) As at December 31, 2008, Superior had a total deferred credit of $307.7 million related to its transaction with Ballard.
The future income tax asset relates to the following tax jurisdictions as at December 31, 2008 and 2007:
Canada
United States
Chile
Total income tax asset
2008
377.0
7.8
0.1
384.9
Superior has available to carry forward the following as at December 31, 2008 and 2007:
Canadian non-capital losses
Canadian scientific research expenditures
Canadian capital losses
United States capital losses
Chilean non-capital losses
Canadian federal and provincial investment tax credits
2008
206.7
590.7
630.6
56.8
24.1
192.3
2007
18.0
1.3
4.9
–
(3.0)
(1.0)
0.1
20.3
–
–
20.3
2007
12.8
6.7
0.8
20.3
2007
–
–
–
45.8
5.0
–
As at December 31, 2008, Superior had non-capital loss carry-forwards available to reduce future years’ taxable income,
which expire as follows:
2009
2010
2011
2012
2013
Thereafter
12.0
15.5
–
–
–
179.2
206.7
The Canadian scientific research expenditures, Canadian and United States capital losses and the Chilean non-capital losses
may be carried forward indefinitely.
77
superior plus
notes to consoliDateD financial stateMents
As at December 31, 2008, Superior had Canadian federal and provincial investment tax credits available to reduce future
years’ taxable income, which expire as follows:
2009
2010
2011
2012
2013
Thereafter
12. shareholders’ equity
authorizeD
–
6.7
11.5
10.7
10.9
152.5
192.3
Superior is authorized to issue an unlimited number of common shares and an unlimited number of preferred shares. The
holders of common shares are entitled to dividends if, as and when declared by the Board of Directors; to one vote per
share at meetings of the holders of common shares; and upon liquidation, dissolution or winding up of Superior to receive
pro rata the remaining property and assets of Superior, subject to the rights of any shares having priority over the common
shares, of which none are outstanding.
Preferred shares are issuable in series with each class of preferred share having such rights as the Board of Directors
may determine. Holders of preferred shares are entitled, in priority of holders of common shares, to be paid rateably with
holders of each other series of preferred shares the amount of accumulated dividends, if any, specified to be payable
preferentially to the holders of such series upon liquidation, dissolution or winding up of Superior to be paid rateably with
holders of each other series of preferred shares the amount, if any, specified as being payable preferentially to holders of
such series. Superior does not have any preferred shares outstanding.
Unitholders’ equity, December 31, 2006
Distribution reinvestment program
Conversion of 8%, Series I debentures ($0.7 million
converted at $16 per trust share)
Transitional adjustment to accumulated other comprehensive
income (loss) upon implementation of financial instruments
Cumulative impact of deficit upon implementation of financial instruments
Other comprehensive income (loss)
Net earnings
Distributions to unitholders (2)
Unitholders’ equity, December 31, 2007
Distribution reinvestment program
Cumulative impact of implementing revised inventory standard
Net earnings
Other comprehensive income
Distributions to unitholders (2)
Shareholders’ equity, December 31, 2008
Issued Number of
Common Shares (Millions) (1)
85.5
2.0
–
–
–
–
–
–
87.5
0.8
–
–
–
–
88.3
Shareholders’
Equity (1)
595.6
25.3
0.7
(18.1)
30.6
(2.3)
119.8
(134.9)
616.7
8.9
1.2
67.7
21.9
(142.2)
574.2
(1) On December 31, 2008, Superior redeemed its outstanding trust units in exchange for shares as a result of its conversion from a publicly traded income trust to a publicly
traded corporation. (See Note 2(a).)
(2) Dividends/distributions to shareholders are declared at the discretion of Superior.
78
2008 annual report
Shareholders’ capital, deficit and accumulated other comprehensive income (loss) as at December 31, 2008 and
December 31, 2007 consist of the following components:
Shareholders’ capital
Share capital
Conversion feature on warrants and convertible debentures
Accumulated deficit
Retained earnings from operations
Cumulative impact to deficit upon implementation of new accounting
requirements for inventory (Note 2(b))
Accumulated distributions
Accumulated other comprehensive income (loss)
Balance at beginning of period
Transitional adjustment upon implementation of financial instruments
Unrealized foreign currency gains (losses) on translation
of self-sustaining foreign operations
Reclassification of derivative gains and losses previously deferred
2008
1,372.1
3.6
1,375.7
531.6
1.2
(1,335.9)
(803.1)
(20.3)
−
30.1
(8.2)
1.6
2007
1,362.0
4.8
1,366.8
463.9
−
(1,193.7)
(729.8)
−
(18.0)
(13.5)
11.2
(20.3)
As at December 31, 2008, Superior had nil share/trust unit warrants outstanding (December 31, 2007 – 2.3 million). The
share/trust unit warrants, exercisable at $20 per share/trust unit warrant, expired on May 8, 2008.
aDDitional capital Disclosures
Superior’s objectives when managing capital are: (i) to maintain a flexible capital structure to preserve its ability to meet
its financial obligations, including potential obligations from acquisitions; and (ii) to safeguard Superior’s assets while
maximizing the growth of its businesses and returns to its shareholders.
In the management of capital, Superior includes shareholders’ equity (excluding accumulated other comprehensive
income) (AOCI), current and long-term debt, convertible debentures, securitized accounts receivable and cash and cash
equivalents.
Superior manages its capital structure and makes adjustments in light of changes in economic conditions and nature of
the underlying assets. In order to maintain or adjust the capital structure, Superior may adjust the amount of dividends
to shareholders, issue additional share capital, issue new debt or convertible debentures, issue new debt or convertible
debentures with different characteristics and/or increase or decrease the amount of securitized accounts receivable.
Superior monitors its capital based on the ratio of senior debt outstanding to net earnings before interest, taxes, depreciation,
amortization and other non-cash expenses (EBITDA), as defined by its revolving term credit facility, and the ratio of total
debt outstanding to EBITDA. Superior’s reference to EBITDA as defined by its revolving term credit facility may be referred
to as compliance EBITDA in other public reports of Superior.
Superior is subject to various financial covenants in its credit facility agreements, including senior debt and total debt to
EBITDA ratios, which are measured on a quarterly basis. As at December 31, 2008 and December 31 2007, Superior was
in compliance with all of its financial covenants.
Superior’s financial objectives and strategy related to managing its capital as described above have remained unchanged
from the prior fiscal year. Superior believes that its debt to EBITDA ratios are within reasonable limits, in light of Superior’s
size, the nature of its businesses and its capital management objectives.
79
superior plus
notes to consoliDateD financial stateMents
The capital structure of Superior and the calculation of its key capital ratios are as follows:
December 31, 2008
December 31, 2007
Total shareholders’ equity
Exclude accumulated other comprehensive loss (income)
Shareholders’ equity (excluding AOCI)
Current portion of term loans
Revolving term bank credits and term loans (1)
Accounts receivable securitization program
Total senior debt
Convertible unsecured subordinated debentures (1)
Total debt
Cash
Total capital
Net earnings from continuing operations
Adjusted for:
Interest on revolving term bank credits and term loans
Interest on convertible unsecured subordinated debentures
Realized gain on interest rate swaps
Accretion of convertible debenture issue costs
Amortization of property, plant and equipment
Amortization included in cost of sales
Amortization of intangible assets
Income tax expense (recovery)
Unrealized (gains) losses on financial instruments
Management internalization costs
Gain on sale of facility
Superior Propane non-cash pension expense
Proforma impact of acquisitions
EBITDA (2)
574.2
(1.6)
572.6
13.0
464.7
100.0
577.7
247.6
825.3
(16.1)
1,381.8
2008
67.7
23.7
14.8
(2.0)
1.4
18.3
38.9
5.3
9.9
61.2
−
(4.0)
2.4
2.5
240.1
616.7
20.3
637.0
3.9
336.6
100.0
440.5
247.3
687.8
(14.1)
1,310.7
2007
119.4
25.2
19.5
−
2.8
57.6
−
4.9
(5.1)
(2.7)
0.5
−
1.7
−
223.8
Senior debt to EBITDA ratio (2)
Total debt to EBITDA ratio (2)
Target
1.5:1 – 2.0:1
2.5:1 – 3.0:1
December 31, 2008
2.4:1
3.4:1
December 31,
2007
2.0:1
3.1:1
(1) Revolving term bank credits and term loans and convertible unsecured subordinated debentures are before deferred issue costs.
(2) EBITDA, as defined by Superior’s revolving term credit facility, is calculated on a trailing 12-month basis taking into consideration the proforma impact of acquisitions
and dispositions in accordance with the requirements of Superior’s credit facility. Superior’s calculation of EBITDA and debt to EBITDA ratios may differ from those of
similar entities.
80
2008 annual report
13. net earnings per share
Net earnings per share computation, basic and diluted (1)
Net earnings from continuing operations
Net earnings from discontinued operations
Net earnings
Weighted average shares outstanding
Net earnings from continuing operations per share, basic and diluted
Net earnings from discontinued operations per share, basic and diluted
Net earnings per share, basic and diluted
2008
67.7
–
67.7
88.3
$ 0.77
–
$
$ 0.77
2007
119.4
0.4
119.8
86.5
$ 1.38
$
–
$ 1.38
(1) All convertible debentures, trust unit options and warrants were excluded from this calculation as they were anti-dilutive.
14. share-based Compensation
(i) restricteD/perforMance shares
Under the terms of Superior’s long-term incentive program, restricted shares (RSs) and/or performance shares (PSs) can
be granted to directors, senior officers and employees of Superior. Both types of units entitle the holder to receive cash
compensation in relation to the value of a specified number of underlying notional shares. RSs vest evenly over a period of
three years commencing from the date of grant, except for RSs issued to directors which vest three years from the date
of grant. Payments are made on the anniversary dates of the RS to the holders entitled to receive them on the basis of a
cash payment equal to the value of the underlying notional shares. PSs vest three years from the date of grant and their
notional value is dependant on Superior’s performance vis-à-vis other companies/trusts’ performance based on certain
benchmarks. As at December 31, 2008 there were 921,446 RSs outstanding (December 31, 2007 – 738,827 RSs) and
583,576 PSs outstanding (December 31, 2007 – 220,992 PSs). For the year ended December 31, 2008 total compensation
expense related to RSs and PSs was $6.2 million (2007 – $4.7 million).
(ii) trust unit incentiVe plan (tuip)
During 2008, in conjunction with Superior’s conversion to a corporation, Superior’s trust unit incentive plan was terminated
and all outstanding trust unit options were cancelled. During 2008 and 2007, no options were issued and no trust units
were issued as a result of the TUIP.
A summary of the status of Superior’s TUIP as at December 31, 2008 and 2007 and changes during these years is
provided below:
2008
2007
Options outstanding at beginning of year
Granted
Exercised
Forfeited/cancelled
Options outstanding at end of year
Options exercisable at end of year
Options Weighted Average
Exercise Price
$ 23.87
(000s)
501
−
−
(501)
−
−
−
−
$ 23.87
−
−
Options
(000s)
1,086
Weighted Average
Exercise Price
$ 22.69
−
−
(585)
501
432
−
−
21.67
$ 23.87
$ 22.96
81
superior plus
notes to consoliDateD financial stateMents
15. supplemental disClosure of non-Cash operating working Capital Changes
Changes in non-cash working capital:
Accounts receivable and other
Inventories
Accounts payable and accrued liabilities
Other
16. Commitments
2008
19.0
(31.3)
18.4
14.5
20.6
2007
(19.7)
37.6
(31.5)
(21.1)
(34.7)
(i) Lease and capital commitments for rail cars, vehicles, premises and other equipment for the next five years and thereafter
are as follows:
2009
2010
2011
2012
2013
2014 and thereafter
37.7
33.5
27.8
22.0
17.2
26.5
(ii) Purchase commitments under long-term natural gas and propane contracts for the next five years and thereafter are
as follows:
2009
2010
2011
2012
2013
2014 and thereafter
CDN$ (1)
US$ (1)
Natural Gas
Natural Gas
50.1
43.7
7.6
5.0
3.6
−
98.8
46.8
2.3
−
−
−
CDN$
Propane
1.2
−
−
−
−
−
US$
Propane
32.0
0.5
−
−
−
−
(1) Does not include the impact of financial derivatives. (See Note 10.)
Superior is similarly committed to long-term natural gas and propane sales contracts to supply customers.
(iii) ERCO Worldwide has entered into a fixed-price electricity purchase contract for its Alberta power requirements, for
nine years at an average cost of $45.00 to $52.00 per MWh. Commitments for the next five years and thereafter are as
follows:
2009
2010
2011
2012
2013
2014 and thereafter
82
17.7
17.7
17.7
17.7
17.7
70.8
2008 annual report
17. related-party transaCtions and agreements
(i) ManageMent internalization transaction
On May 8, 2003, Superior completed the internalization of its management and administration agreements.
The internalization process resulted in the elimination of management incentive and administration fees effective
January 1, 2003. The funds paid to the Manager and Administrator to terminate the contracts were immediately re-invested
into trust units and warrants. As part of the internalization transaction, non-interest-bearing loans aggregating $6.5 million
were advanced to the executive officers and were used to fund the purchase of 0.325 million trust units at $20.00 per trust
unit. The loans are repayable over a four-year period in the form of annual retention bonuses of which $Nil was repaid in
2008 (2007 – $0.5 million). As at December 31, 2008 and 2007 the remaining loans receivable was $Nil.
18. disposition – jw aluminum
In July 2006 Superior announced the results of its strategic review designed to maximize unitholder/shareholder value
which included the decision to sell JW Aluminum in order to reduce debt levels and refocus its operations on its existing
Canadian businesses. Accordingly, effective July 1, 2006, JWA’s balance sheet, results of operations and cash flows were
classified as discontinued operations on a retroactive basis.
On December 7, 2006, Superior completed the sale of all the issued and outstanding shares of JW Aluminum on a cash
and debt-free basis to Wellspring Capital Management LLC, for total consideration of $356.1 million (US$310.1 million),
net of $4.9 million (US$4.3 million) in disposition costs. Final post-closing adjustments were completed during 2007
and, accordingly, $0.4 million in net earnings and $1.4 million of proceeds on disposition from discontinued operations
for the year ended December 31, 2007 were recorded. There was no impact on the balance sheet for the year ended
December 31, 2007.
83
superior plus
notes to consoliDateD financial stateMents
19. business segments
Superior operates four distinct business segments: a propane distribution and related services business operating under
the Superior Propane trade name; a specialty chemicals manufacturer operating under the ERCO Worldwide trade name
(ERCO); a construction products distribution business operating under the Winroc trade name; and a fixed-price energy
services business operating under the Superior Energy Management trade name (SEM). Superior’s corporate office arranges
intersegment foreign exchange contracts from time to time between its business segments. Realized gains and losses
pertaining to intersegment foreign exchange gains and losses are eliminated under the Corporate cost column.
2008
Revenue
Cost of products sold
Realized gains (losses) on financial instruments
Gross profit
Expenses
Operating and administrative
Amortization of property, plant and equipment
Amortization of intangible assets
Interest on revolving term bank
credits and term loans
Interest on convertible unsecured
subordinated debentures
Gain on disposal of facility
Accretion of convertible debenture issue costs
Unrealized (gains) losses on financial instruments
Net earnings (loss) before income taxes
Income tax recovery (expense)
net earnings (loss)
2007
Revenue
Cost of products sold
Realized gains (losses) on financial instruments
Gross profit
Expenses
Operating and administrative
Amortization of property, plant and equipment
Amortization of intangible assets
Superior
Propane
1,170.4
(863.3)
(2.8)
304.3
209.9
12.4
–
–
–
–
–
6.8
229.1
75.2
–
75.2
Superior
Propane
1,075.7
(782.7)
1.2
294.2
196.9
15.7
–
–
Interest on revolving term bank credits and term loans
Interest on convertible unsecured
subordinated debentures
Accretion of convertible debenture issue costs
Management internalization costs
Unrealized (gains) losses on financial instruments
Net earnings (loss) before income taxes
from continuing operations
Income tax recovery (expense)
Net earnings (loss) from continuing operations
Net earnings from discontinued operations (Note 18)
net Earnings
84
–
–
–
(2.3)
210.3
83.9
–
83.9
ERCO
469.7
(305.2)
26.0
190.5
Winroc
523.6
(382.9)
−
140.7
112.9
103.3
2.0
4.5
–
–
(4.0)
–
(15.2)
100.2
90.3
–
90.3
ERCO
442.1
(255.6)
21.2
207.7
120.8
38.0
4.6
–
–
–
–
5.5
168.9
38.8
–
38.8
3.9
0.5
–
–
–
–
–
107.7
33.0
–
33.0
Winroc
512.3
(382.5)
−
129.8
93.1
3.9
0.3
–
–
–
–
–
97.3
32.5
–
32.5
Total
SEM Corporate Consolidated
323.6
(308.7)
16.7
31.6
25.1
–
0.3
–
–
–
–
67.2
92.6
(61.0)
–
(61.0)
−
−
2.0
2.0
19.6
–
–
23.7
14.8
–
1.4
2.4
61.9
(59.9)
(9.9)
(69.8)
2,487.3
(1,860.1)
41.9
669.1
470.8
18.3
5.3
23.7
14.8
(4.0)
1.4
61.2
591.5
77.6
(9.9)
67.7
SEM Corporate
Total
Consolidated
320.4
(256.1)
(34.2)
30.1
−
−
−
–
2,350.5
(1,676.9)
(11.8)
661.8
18.4
10.5
439.7
–
–
–
–
–
–
(6.9)
11.5
18.6
–
18.6
–
–
25.2
19.5
2.8
0.5
1.0
59.5
(59.5)
5.1
(54.4)
57.6
4.9
25.2
19.5
2.8
0.5
(2.7)
547.5
114.3
5.1
119.4
0.4
119.8
2008 annual report
total assets, net working capital, acquisitions anD purchase
of property, plant anD equipMent
As at December 31, 2008
Net working capital
Total assets
As at December 31, 2007
Net working capital
Total assets
For the year ended December 31, 2008
Acquisitions
Purchase of property, plant and equipment
For the year ended December 31, 2007
Acquisitions
Purchase of property, plant and equipment
geographic inforMation
Superior
Propane
69.2
658.2
73.9
663.0
3.4
8.2
–
4.1
Revenues for the year ended December 31, 2008
Property, plant and equipment as at December 31, 2008
Goodwill as at December 31, 2008
Total assets as at December 31, 2008
Revenues for the year ended December 31, 2007
Property, plant and equipment as at December 31, 2007
Goodwill as at December 31, 2007
Total assets as at December 31, 2007
ERCO
Winroc
SEM Corporate
Consolidated
Total
27.6
618.3
19.0
533.1
–
72.2
–
14.7
76.5
211.3
65.7
195.2
21.1
1.8
4.3
2.0
Canada
2,056.0
391.8
454.6
1,761.1
1,929.1
428.1
437.2
1,360.2
4.8
69.5
8.8
115.2
–
2.0
–
1.5
United
States
348.0
92.4
18.1
188.7
346.4
28.8
14.6
117.8
(9.2)
469.6
5.6
36.3
–
–
–
–
168.9
2,026.9
173.0
1,542.8
24.5
84.2
4.3
22.3
Total
Other
Consolidated
83.3
69.6
–
77.1
75.0
57.5
–
64.8
2,487.3
553.8
472.7
2,026.9
2,350.5
514.4
451.8
1,542.8
85
superior plus
selecteD historical inforMation
superior propane
(millions of dollars except litres of propane and per litre amounts)
Litres of propane sold (millions)
Total sales margin (cents per litre)
Revenues
Cost of products sold
Gross profit
Cash operating, and administrative costs
EBITDA from operations
erco worlDwiDe
(millions of dollars except thousands of metric tonnes
(MT) and per MT amounts)
Total chemical sales (MT)
Average chemical selling price (dollars per MT)
Revenues
Cost of products sold
Gross profit
Cash operating, and administrative costs
EBITDA from operations
winroc
(millions of dollars)
Revenues
Cost of products sold
Gross profit
Cash operating, and administrative costs
EBITDA from operations
2008
1,377
22.1
1,167.6
863.3
304.3
207.5
96.8
2008
727
633
479.6
244.3
235.3
118.8
116.5
2008
523.6
382.9
140.7
103.3
37.4
Years Ended December 31
2007
1,429
20.6
1,075.7
781.5
294.2
194.8
99.4
2006
1,386
19.7
985.4
712.5
272.9
181.9
91.0
2005
1,468
19.4
856.2
571.8
284.4
186.6
97.8
Years Ended December 31
2007
768
557
453.2
252.9
205.2
113.4
91.8
2006
756
540
437.2
233.1
204.1
117.1
87.0
2005
742
550
431.6
224.7
206.9
101.9
105.0
2004
1,546
18.6
720.2
433.5
286.7
173.9
112.8
2004
649
571
396.0
202.8
193.2
92.2
101.0
Years Ended December 31
2007
512.3
382.5
129.8
93.1
36.7
2006
518.7
386.5
132.2
87.1
45.1
2005
486.6
368.8
117.8
78.9
38.9
2004 (1)
384.3
300.0
84.3
52.0
32.3
(1) Winroc was acquired effective June 11, 2004. Prior year results are unaudited and provided for comparison purposes.
superior energy ManageMent
(millions of dollars except per gigajoule (GJ)
and per GJ amounts)
Natural gas sold (millions of GJs)
Natural gas sales margin (cents per GJ)
Revenues
Cost of products sold
Gross profit
Cash operating, administrative and selling costs
EBITDA from operations
Years Ended December 31
2008
33
80.5
323.6
296.0
27.6
21.1
6.5
2007
37
84.1
320.4
289.3
31.1
19.0
12.1
2006
40
54.3
325.6
303.9
21.7
11.4
10.3
2005
37
39.2
288.4
273.9
14.5
9.2
5.3
2004
28
47.7
211.3
197.9
13.4
5.7
7.7
86
2008 annual report
consoliDateD financials
(millions of dollars except average number of shares/trust
units and per share/trust unit amounts)
Revenues
Gross profit
EBITDA from operations
Adjusted operating cash flow
Per share/trust unit
Average number of shares/trust units outstanding (millions)
Capital expenditures, net
Total assets
Total revolving term bank credit and term loans (2)
(1) Adjusted for discontinued operations.
(2) Includes accounts receivable securitization program.
Years Ended December 31
2008
2,487.3
669.1
257.2
192.3
2.18
88.3
147.5
2,026.9
577.7
2007
2006
2005
$
2,355.4
661.8
240.0
179.5
2.08
86.5
22.2
1,542.8
441.0
2,264.3(1)
630.9(1)
233.4(1)
197.0
$
2.30
$
85.5
66.8(1)
1,536.9
441.7
2,059.2(1)
623.6(1)
247.0(1)
195.0(1)
2.45
79.7
522.9(1)
2,373.6
744.7
2004
1,552.8
542.8
239.6
200.3
2.76
72.7
142.1
1,579.7
546.2
$
$
87
superior plus
corporate inforMation
board of direCtors
offiCers
superior plus corp.
grant d. billing
Chairman and CEO
Calgary, Alberta
Catherine (kay) m. best (1)
Calgary, Alberta
robert j. engbloom, q.C. (2)
Calgary, Alberta
randall j. findlay (2)
Calgary, Alberta
norman r. gish (3)
Calgary, Alberta
peter a.w. green (1) (2)
Lead Director
Campbellville, Ontario
james s.a. macdonald (3)
Toronto, Ontario
walentin (val) mirosh (3)
Calgary, Alberta
david p. smith (1)
Toronto, Ontario
peter valentine (1)
Calgary, Alberta
(1) Member of Audit Committee
(2) Member of Governance and Nominating Committee
(3) Member of Compensation Committee
superior general partner inc.
general partner of superior plus lp
grant d. billing
Chairman and CEO
wayne m. bingham
Executive Vice-President
and Chief Financial Officer
eric mcfadden
Executive Vice-President
Business Development
john d. gleason
President, Superior Propane
a division of Superior Plus LP
greg l. mcCamus
President, Superior Energy Management
a division of Superior Plus LP
paul s. timmons
President, ERCO Worldwide
a division of Superior Plus LP
paul j. vanderberg
President, Winroc
a division of Superior Plus LP
jay bachman
Corporate Controller
a. scott daniel
Vice-President, Treasurer and
Investor Relations
Craig s. flint
Vice-President, Business Process
and Compliance
DiVisions of superior plus lp
superior propane
1111 – 49 avenue ne
Calgary, alberta t2e 8v2
telephone: 403-730-7500
facsimile: 403-730-7512
toll free: 1-877-341-7500
website: www.superiorpropane.com
erco worldwide
302 the east mall, suite 200
toronto, ontario m9b 6C7
telephone: 416-239-7111
facsimile: 416-239-0235
website: www.ercoworldwide.com
winroc
4949 – 51 street se
Calgary, alberta t2b 3s7
telephone: 403-236-5383
facsimile: 403-279-0372
website: www.winroc.com
superior energy Management
6860 Century avenue
east tower, suite 2001
mississauga, ontario l5n 2w5
telephone: 866-772-7727
facsimile: 905 542-7715
website: www.superiorenergy.ca
88
2008 ANNUAL REPORT
ANNUAL MEETiNg OF sHAREHOLdERs
The Corporation’s Annual Meeting of shareholders will
be held in the grand Lecture Theatre of The Metropolitan
Centre, 333 – 4 Avenue sW, Calgary, Alberta on
Wednesday, May 6, 2009 at 2:00 p.m. (MdT).
CAsH dividENds
superior Plus pays dividends on a monthly basis. The
record date for each dividend will be the last day of the
month and the payment will be made on or before the
fifteenth day of the following month.
TORONTO sTOCk ExCHANgE (Tsx) LisTiNgs
sPB:
superior Plus Corp. shares
sPB.db.b: 5.75% Convertible debentures Convertible at
$36.00 per share
Maturity date: december 31, 2012
sPB.db.c: 5.85% Convertible debentures Convertible at
$31.25 per share
Maturity date: October 31, 2015
Shareholder InformatIon
sUPERiOR PLUs CORP.
suite 2820, 605 – 5 Avenue sW
Calgary, Alberta T2P 3H5
Telephone: 403-218-2970
Facsimile: 403-218-2973
Toll Free: 1-866-490-PLUs (7587)
E-mail: info@superiorplus.com
Website: www.superiorplus.com
TRUsTEE ANd TRANsFER AgENT
Computershare Trust Company of Canada
suite 710, 530 – 8 Avenue sW
Calgary, Alberta T2P 3s8
or:
9th Floor, 100 University Avenue
Toronto, Ontario M5J 2Y1
Telephone: 1-888-564-6253
Facsimile: 1-888-453-0330
E-mail inquiries: careregistryinfo@computershare.com
Website: www.computershare.com
AUdiTORs
deloitte & Touche LLP
Chartered Accountants
3000 scotia Centre
700 – 2nd street sW
Calgary, Alberta T2P 0s7
Superior Plus Unit Price and Volumes – tSX
Quarterly high, low, close and volumes for 2008 and 2007.
The table below sets forth the high and low prices, as well as the volumes, for the trust units as traded on the Tsx, on a
quarterly basis.
First quarter
second quarter
third quarter
Fourth quarter
Year
High
2008
Low
Volume
High
2007
low
Volume
$ 14.32
$ 10.49
11,739,584
$ 12.93
$ 10.62
18,350,330
$ 14.08
$ 11.38
15,115,504
$ 15.80
$ 12.46
20,360,232
$ 13.85
$ 11.05
7,829,906
$ 16.27
$ 12.50
14,856,184
$ 13.31
$ 14.32
$ 8.51
13,271,784
$ 13.48
$ 10.99
10,183,631
$
8.51
47,956,778
$ 16.27
$ 10.62
63,750,377
a
d
a
n
a
C
n
i
d
e
t
n
i
r
P
.
c
n
i
e
g
d
E
n
i
l
r
e
M
y
b
d
e
c
u
d
o
r
p
d
n
a
d
e
n
g
i
s
e
d
For more information about the superior Plus Corp.
send your inquiries to: info@superiorplus.com
superior Plus Corp.
suite 2820, 605 – 5 Avenue sW
Calgary, Alberta T2P 3H5
Tel: 403-218-2970 Fax: 403-218-2973 Toll Free: 1-866-490-7587
www.superiorplus.com