2 0 1 3 A n n u a l R e p o r t
CREATING A
SUSTAINABLE
foUNdATIoN
fINANcIAL RESULTS
(millions of dollars)
Revenues
(1)
Gross profit
EBITDA from operations
Adjusted operating cash flow before restructuring costs
(1)
Adjusted operating cash flow after restructuring costs
Net earnings
(1)
Dividends
(dollar per basic share except shares outstanding)
(1)
EBITDA from operations
Adjusted operating cash flow before restructuring costs
(1)
Adjusted operating cash flow after restructuring costs
Net earnings
(1)
Dividends
Weighted average shares outstanding (millions)
fINANcIAL PoSITIoN
(millions of dollars)
Total assets
Total liabilities
Net capital expenditures
Acquisitions
(2)
Senior debt
(2)
Total debt
Senior debt/Compliance EBITDA
(3)
Total debt/Compliance EBITDA
Total debt/Compliance EBITDA
(3)
(3)
before restructuring costs
after restructuring costs
2013
2012
3,752.8
3,624.3
868.8
284.4
207.6
192.3
52.7
73.7
2.31
1.69
1.56
0.43
0.60
123.1
846.3
289.4
200.4
190.4
90.0
67.1
2.59
1.79
1.70
0.80
0.60
111.9
2013
2012
2,141.1
1,600.9
71.9
11.9
578.7
1,073.2
2.2x
3.9x
4.1x
2,032.1
1,657.7
39.3
5.5
489.6
1,181.1
1.9x
4.3x
4.5x
(1) Earnings before interest, taxes, depreciation and amortization (EBITdA), EBITdA from operations and
adjusted operating cash flow (Aocf) are not recognized financial measures under International financial
Reporting Standards (IfRS). See Superior’s Management’s discussion and Analysis, “Non-IfRS financial
Measures” for additional details.
(2) Senior debt and total debt are stated before deferred issue costs.
(3) See Superior’s Management’s discussion and Analysis for additional details and Superior’s consolidated
financial Statements for the calculation of compliance EBITdA.
Management Team
President’s Message
coNTENTS
IFC Performance Highlights
1
4
5
6
8
58 Management’s Report
Corporate Governance
Board of Directors
Management’s Discussion and Analysis
59 Independent Auditor’s Report
60 Consolidated Financial Statements
64 Notes to the Consolidated Financial Statements
129 Selected Historical Information
130 Businesses
131
IBC Shareholder Information
Corporate Information
President’s
Message
Luc
Desjardins
President and
Chief Executive Officer
Improving our day-to-day
operations is at the forefront
of virtually every decision
we make in order to create
a solid foundation which will
result in long-term sustainable
financial improvements.
As I look back at the year ended December 31, 2013 I am pleased to report that
Superior has delivered improvements from both a financial and operational
perspective. From a financial perspective, Superior recorded adjusted operating
cash flow before restructuring costs of $1.69 per share in 2013 compared to $1.79
per share in 2012. When assessing Superior’s 2013 financial performance relative to
2012, it is important to note that Superior’s 2012 results included a one-time payment
from TransCanada of $12.5 million or $0.11 per share. In addition, Superior’s 2013 results
reflect an additional 11.2 million average shares outstanding or 10% higher than in 2012, as
a result of Superior’s $138 million equity issuance in March 2013. Although this resulted in a
modest dilution to our earnings per share, it provided a significant benefit in reducing Superior’s
total debt and leverage. With the benefit of the equity issuance and Superior’s ongoing focus on
reducing debt, we reduced our total debt leverage ratio, excluding restructuring costs, to 3.9x
as at December 31, 2013, down from 4.3x at the prior year-end. The reduced leverage resulted in
lower debt and improved financial flexibility, and it also reduced Superior’s interest costs by $13
million for 2013.
While I am pleased with Superior’s financial progress in 2013, I am even more encouraged by the
progress on our key operational initiatives. As I highlighted in my 2012 letter, 2013 was a year of
“heavy lifting”. Improving our day-to-day operations is at the forefront of virtually every decision
we make in order to create a solid foundation which will result in long-term sustainable financial
improvements. We remain focused on our long-term plans and will not sacrifice our sustainability
for short-term profitability.
1
2013 Annual Report Efforts to improve all aspects of Superior’s businesses were underway throughout 2013. Here are
specific examples I would like to highlight:
> Leadership team was enhanced in our Energy Services business;
> Significant investments were made in the sales and marketing functions in our Energy Services
business;
> Successful implementation of the ADD IT system in the Atlantic and British Columbia regions of
our Canadian Propane business, with the remaining regions scheduled for 2014;
> Improvements were made in distribution and logistics capabilities in our Canadian Propane
business:
> Average fill rate improved from 40% to 46%; and
> 6,000 tank sensors were installed;
> Completion of a strategic supply agreement with Tronox LLC to purchase and market up to
130,000 metric tonnes of sodium chlorate per year; and
> Continuation of branch restructuring in our Construction Products Distribution business.
In addition, at the end of the third quarter, Superior announced that it would undertake
additional restructuring in the Canadian Propane and Construction Products Distribution
businesses. This is designed to accelerate ongoing operational improvements and will
focus on improving day-to-day operations to ensure both businesses continue to build solid,
sustainable platforms.
We are already beginning to see a number of initial financial and operational successes from
these added measures. Although a significant amount of work remains to complete our overall
plans, I am confident that we will execute our initiatives in a disciplined and timely manner.
Approximately 18 months ago we introduced Destination 2015 and the accompanying goals for
improving our businesses. The objective was and remains simple: to identify areas where we
could improve our business in order to become best-in-class in each industry we operate in.
The mechanisms for reaching Destination 2015 are a variety of ongoing operational and financial
improvements that will form the basis for sustainable growth over the medium and long terms.
Despite its title, our plan does not stop in 2015. We will work diligently to ensure the initiatives
that we implement as part of Destination 2015 evolve into an ongoing continuous improvement
project which will ensure Superior’s businesses continue progressing to best-in-class.
Destination 2015 is more than cost-cutting and more than improving the efficiency in which we
conduct business day-to-day – although these are important parts of it. While it is extremely
important that we remain focused on our operations, as it is through improved operations that we
will sustainably reduce our cost structure, we are also focused on generating sustainable growth
over the long term.
2
SUPERIOR PLUS CORP.
We will focus on growing our business through a combination of internal organic growth and
external acquisitions. I firmly believe that all of Superior’s businesses can grow at 2 percent
above the annual industry average by focusing on their core competencies and maintaining a
strong customer-centric focus. We will not lose sight that our businesses exist to service our
customers and that we must provide our customers with an exceptional product or service.
We intend to accomplish this through differentiation.
As we continue to execute our initiatives, we will also consider opportunities to grow through
small acquisitions. It is unlikely that we will contemplate a significant acquisition in the short to
medium term. In 2013 we executed several small “tuck-in” acquisitions in our Energy Services
businesses. These are desirable as the market is highly fragmented with many small to medium-
sized operators, making it easier to find acquisition targets that can be integrated successfully and
that also complement our business mix. Focusing on small to mid-sized acquisitions minimizes
our financial and operational execution risks.
Lastly, I would like to reiterate my commitment to fostering a culture of execution, accountability
and continuous improvement. It is through this culture that we will build a business that will
provide our shareholders with sustainable growth for many years.
This year, 2014, is an important one for Superior as we work to execute the initiatives that will
underpin our future growth. We have much work to do to meet our objectives, but I am confident
that we are up to the task.
Acknowledgements
Superior’s success will ultimately be due to the hard work and dedication of our more than 4,600
employees. I would like to thank each of you for your commitment to your respective businesses.
We are working hard to develop a culture in which every employee is empowered and can flourish.
I look forward to working with all of Superior’s employees as well as each of Superior’s directors
in the coming year. On behalf of the entire organization, I would like to thank securityholders for
your continued support and confidence in Superior.
I would like to thank Norman Gish and Peter Green for their contributions to Superior’s Board of
Directors. Mr. Gish and Mr. Green have decided to not stand for re-election in 2014. Mr. Gish has
been a member of Superior’s Board of Directors since 2003 and Mr. Green has been a member of
Superior’s Board of Director’s since 1996.
On behalf of the Board of Directors,
Luc Desjardins
President and Chief Executive Officer
February 19, 2014
3
2013 Annual Report Management Team
Luc Desjardins
President and
Chief Executive Officer
Wayne M. Bingham
Executive Vice-President and
Chief Financial Officer
Greg L.McCamus
President, Energy Services
and Superior Propane
Paul S. Timmons
President, Specialty Chemicals
Mr. Desjardins joined Superior Plus
as President and CEO in 2011.
Prior to joining Superior Plus,
Mr. Desjardins was a partner of
the Sterling Group LLP, a private
equity firm. Mr. Desjardins also
served as President and CEO at
Transcontinental Inc. from 2004
to 2008 and COO from 2000 to
2004. Mr. Desjardins holds a
Masters of Business
Administration degree from the
University of Quebec and has
taken the Harvard Business
School Management
Development Program.
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. McCamus joined Superior
Energy Management as President
in 2005 before being appointed
President, Energy Services and
Superior Propane in 2012. 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.
Mr. Timmons has been with the
Specialty Chemicals business or
its predecessor organization,
ERCO Worldwide, for 30 years,
and was appointed as President
in 2001. Mr. Timmons holds an
Engineering Diploma from
St. Francis Xavier University and
a degree in Metallurgical
Engineering from Technical
University of Nova Scotia.
Dave Tims
President, Energy Supply and Oilfield
Ross Wonnick
Chief Legal Officer and General Counsel
Keith Wrisley
President, U.S. Refined Fuels
Mr. Tims joined Superior Plus in
2009. Prior to joining Superior
Plus he was CEO of a natural gas
storage development company.
Mr. Tims has extensive energy
marketing, trading and risk
management experience as a
Managing Director with BMO
Nesbitt Burns and prior to that as
Director of Supply Services with
TransCanada. Mr. Tims holds a
B.A. from the University of
Calgary and an M.B.A. in Finance
from the Simon School of
Business at the University of
Rochester.
Mr. Wonnick joined Superior Plus
in 2013. He previously was Senior
Vice-President, General Counsel &
Chief Compliance Officer of
Styrolution Group GmbH, a global
commodity chemical company in
Frankfurt, Germany. Mr. Wonnick
has held General Counsel and
senior legal positions in the United
States and Canada with global
chemical companies. Mr. Wonnick
holds a Bachelor of Business
Administration (Honours) from
Wilfrid Laurier University, an LLB
from the University of Western
Ontario and was admitted to the
Ontario bar in 1991.
Mr. Wrisley joined Superior Plus
in 2009 as Director, U.S. Refined
Fuels and was subsequently
named President in 2012.
Mr. Wrisley has held various
executive positions within the
energy sector over the past 25
years, most recently with Sunoco.
Mr. Wrisley is a graduate of the
State University of New York and
the Leadership Philadelphia
program.
Paul J. Vanderberg
President, Construction Products Distribution
Mr. Vanderberg has been
President of the Construction
Products Distribution business or
its predecessor organization,
Winroc, since 2000. He
previously held various executive
positions in general management
and business development at
USG Corporation, a leading
building products manufacturer.
Mr. Vanderberg holds B.A. and
M.B.A. degrees.
4
SUPERIOR PLUS CORP. Board of Directors
Catherine (Kay)
Best (1)
Director since 2007;
corporate director and
consultant; former
Executive Vice-President,
Risk Management and
Chief Financial Officer of
the Calgary Health
Region; previous partner
with Ernst & Young;
Director of Canadian
Natural Resources
Limited, AltaGas Ltd.,
Aston Hill Financial Inc.
and Wawanesa Insurance.
Grant D. Billing
Luc Desjardins
Robert J.
Engbloom, Q.C. (2)
Randall J.
Findlay (2)
Director since 1996;
Deputy Chair Canada and
Senior Partner of Norton
Rose Fulbright Canada
LLP, formerly Macleod
Dixon LLP; Director of
Parex Resources Inc.
Director since 2007;
corporate director; Past
President of Provident
Energy, Director of
Pembina Pipelines
Corporation, HNZ Group
Inc., Whitemud Resources
Inc., and Spyglass
Resources Inc.
Chairman and Chief
Executive Officer of
Superior since July 2006;
On November 14, 2011,
Mr. Billing retired as Chief
Executive Officer and
continues to serve as
non-executive Chairman;
prior to he was Executive
Chairman since 1998;
previously, President and
CEO of Norcen Energy
Resources Limited;
Director of Pembina
Pipeline Corporation
and Cortex Business
Solutions Inc.
President and Chief
Executive Officer of
Superior since November
14, 2011. Previously,
Mr. Desjardins was a
partner of the Sterling
Group, a private equity
firm; Mr. Desjardins also
served as CEO at
Transcontinental Inc.
from 2004 to 2008 and
President and COO
from 2000 to 2004.
Mr. Desjardins is also a
director of CIBC, a
Canadian chartered bank.
Norman R. Gish (3) Peter A.W.
Green (1) (2)
James S.A.
MacDonald (3)
Walentin (Val)
Mirosh (3)
David P. Smith (1)
Lead Director since 2003;
director since 1996;
corporate director and
business advisor;
Chairman of Frog Hollow
Group Inc., international
business advisors; Director
of Gore Mutual Insurance
Company; Chair of the
Governance and
Nominating Committee.
Director in 1998 and since
2000; corporate director
and Chairman of Cormark
Securities Inc.; former
Chairman and Managing
Partner of Enterprise
Capital Management Inc.;
Director of ICG Propane
Inc. from 1998 to 2000;
Director of Cymbria Inc.
Director since 2007;
corporate director and
President of Mircan
Resources Ltd.; former
Vice-President and
Special Advisor to the
President and COO of
Nova Chemicals Corp.;
former Partner at Macleod
Dixon LLP; Director of
TC Pipelines, LP and
Murphy Oil Corporation.
Director since 1998;
corporate director; former
Managing Partner of
Enterprise Capital
Management Inc.; Chair of
the Audit Committee.
Director since 2003;
corporate director and
independent businessman;
previous Chairman,
President and CEO of
Alliance Pipeline Ltd. and
Aux Sable Liquid Products
Inc.; Chairman of ICG
Propane Inc., from 1998 to
2000; Chair of the
Compensation
Committee.
Committees
(1) Audit Committee
(2) Governance and
Nominating Committee
(3) Compensation Committee
5
2013 Annual Report Corporate Governance
Good governance involves all employees
Superior has earned a well-deserved reputation for honesty, integrity and maintaining a high
standard of business conduct. Established and well-respected governance practices are essential
to helping us maintain that reputation. It is the duty of our Board of Directors (the Board) and
Senior Management to ensure that these governance practices are followed. It is a core principle
of Superior to be socially responsible and lawful in all of our business dealings and operations.
As such, we expect and demand that all of our employees understand and comply with all laws
and corporate policies that are relevant to their responsibilities, that they abide by our company’s
principles and values and are good ambassadors for our company and industry in all dealings
with our different stakeholders.
Superior has formally adopted corporate governance policies and guidelines that demonstrate
the company’s commitment to maintaining a high standard of honesty, integrity and governance.
All directors, officers and employees of Superior must act in accordance with our Code of Business
Conduct and Ethics (the Code). Our Code defines and summarizes what we expect of our businesses
and people regardless of location or background. It provides both guidance in key areas and links
to more detailed standards, policies, instructions and processes for further direction. While the
Code establishes principles for business conduct that are applicable throughout the company,
regardless of location, each of our employees is accountable for knowing and following the laws
that apply to them where they work. Where differences exist as the result of local customs,
norms, laws or regulations, our employees must apply either the Code or local requirements –
whichever sets the highest standard of behaviour. As a minimum, we expect all of our employees
to hold themselves to the highest standards of ethics, integrity, openness and accountability in
the way they conduct business.
Our governance policies are forward-looking and our leadership team is committed to constantly
evaluating and modifying these policies to ensure their effectiveness as our company continues
to grow.
The Board has general authority over Superior’s business and affairs. The Board’s fundamental
objectives are to enhance Superior’s investments and ensure that Superior and its businesses
meet their obligations and that management operates the underlying businesses of Superior
in a responsible, reliable and safe manner while adhering to effective and sound governance
6
SUPERIOR PLUS CORP. practises. The Board works directly with Senior Management to identify business risks and to
oversee the appropriate strategies to maximize shareholder value, while exercising oversight of
the company’s compliance and governance practices.
The Board is comprised of 10 members, eight of whom are independent. Grant Billing, Chairman,
is not considered to be independent until November 15, 2014, which is three years following his
November 2011 retirement as Chief Executive Officer. Luc Desjardins is not considered to be
independent as he is the President and Chief Executive Officer. As the Chairman is not independent,
the Board maintains the position of Lead Director. The current Lead Director, Peter Green, is retiring
from the Board following the Annual General Meeting of Superior on May 7, 2014 and a new Lead
Director will be selected by the Board. The responsibilities of the Board are set forth in a written
mandate of the Board which the Board reviews annually and changes as appropriate.
To assist the Board with its fiduciary responsibilities, the Board is supported by an Audit
Committee, a Compensation Committee, and a Governance and Nominating Committee. In
addition, in 2014 the Board established a Health, Safety and Environment Committee to exercise
oversight of health, safety and environmental matters. Previously that oversight was exercised
through Advisory Committees for each business, but those committees have been disbanded as
their business can be more effectively overseen by the Board and through the Health, Safety and
Environment Committee (the Advisory Committee was not a formal committee of the Board).
Only independent directors serve on Board committees. Each committee has a mandate that sets
out its duties and responsibilities and each committee chair, as well as the Chairman and Lead
Director, have position descriptions. Each committee makes regular reports to the Board. The
Board reviews Superior’s policies upon the recommendation of the Governance and Nominating
Committee. Each of Superior’s businesses also maintains appropriate programs and standards
pertaining to compliance quality, health and safety, while being committed to environmental and
social responsibility and support for its local communities. These and other programs are also
overseen by the Board and its committees.
For complete information on our corporate governance practices, please read our 2013 Information
Circular. All Committee mandates, our Code of Business Conduct and Ethics and our corporate
governance policies and categorical standards are available at www.superiorplus.com.
7
2013 Annual Report 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) as at December 31, 2013 and for the years ended
December 31, 2013 and 2012. The information in this MD&A is current to February 19, 2014. This MD&A should
be read in conjunction with Superior’s audited consolidated financial statements and notes thereto as at and
for the years ended December 31, 2013 and 2012.
The accompanying audited consolidated financial statements of Superior were prepared by and are the
responsibility of Superior’s management. Superior’s audited consolidated financial statements as at and
for the years ended December 31, 2013 and 2012 were prepared in accordance with International Financial
Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Dollar
amounts in this MD&A are expressed in Canadian dollars and millions except where otherwise noted. All
tables and graphs are for the 12 months ended December 31 of the year indicated, unless otherwise stated.
Overview of Superior
Superior is a diversified business corporation. Superior holds 99.9% of Superior Plus LP (Superior LP), a
limited partnership formed between Superior General Partner Inc. (Superior GP) as general partner and
Superior as limited partner. Superior owns 100% of the shares of Superior GP and Superior GP holds 0.1% of
Superior LP. 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 and Superior GP, has three operating segments: the Energy Services’ segment,
which includes a Canadian propane distribution business, a U.S. refined fuels distribution business, a fixed-
price energy services business and a supply portfolio management business; the Specialty Chemicals’
segment; and the Construction Products Distribution segment.
8
SUPERIOR PLUS CORP. Summary of Adjusted Operating Cash Flow
(millions of dollars except per share amounts)
EBITDA from operations: (1)
Energy Services
Specialty Chemicals
Construction Products Distribution
Interest expense
Cash income tax expense
Corporate costs
Adjusted operating cash flow (1) before restructuring costs
Restructuring costs
Adjusted operating cash flow (1)
Adjusted operating cash flow per share before restructuring
costs, basic (2)
Adjusted operating cash flow per share before restructuring
costs, diluted (3)
Adjusted operating cash flow per share, basic (2)
Adjusted operating cash flow per share, diluted (3)
2013 (5)
2012 (4)(5)
137.5
113.7
33.2
284.4
(58.7)
(0.2)
(17.9)
207.6
(15.3)
192.3
136.4
125.7
27.3
289.4
(71.7)
(1.1)
(16.2)
200.4
(10.0)
190.4
$1.69
$1.79
$1.64
$1.74
$1.56
$1.70
$1.53
$1.66
(1) Earnings before interest, taxes, depreciation and amortization (EBITDA) and adjusted operating cash flow are not IFRS measures. See “Non-IFRS
Financial Measures”.
(2) The weighted average number of shares outstanding for the year ended December 31, 2013, is 123.1 million (2012 – 111.9 million).
(3) For the year ended December 31, 2013, the dilutive impact of the 7.50%, October 31, 2016 convertible debentures was 6.6 million shares (129.7 million
total shares on a dilutive basis) with a resulting impact on AOCF before restructuring costs of $5.6 million ($213.2 million total on a dilutive basis) and
on AOCF of $5.6 million ($197.9 million total on a dilutive basis). For the year ended December 31, 2012, the dilutive impact of the 7.50%, October 31,
2016 convertible debentures was 6.6 million shares (118.5 million total shares on a dilutive basis) with a resulting impact on AOCF before restructuring
costs of $5.6 million ($206.0 million total on a dilutive basis) and on AOCF of $5.6 million (196.0 million total on a dilutive basis).
(4) The prior year has been restated for the impact of adopting International Accounting Standard (IAS) 19 Employee Benefits effective January 1, 2013.
The impact to EBITDA from operations was a decrease to Energy Services of $1.3 million as at December 31, 2012 and a decrease to Specialty
Chemicals of $1.8 million as at December 31, 2012, see IAS 19 – Employee Benefits, amendments for further details.
(5) Superior has restated its 2012 financial results and presented its 2013 financial results on a before and after restructuring cost basis due to the one-time
nature of these items. See Restructuring Costs for further details.
Adjusted Operating Cash Flow Reconciled to Net Cash Flow
from Operating Activities (1)
(millions of dollars)
Net cash flow from operating activities
Add: Non-cash interest expense
Less: Decrease in non-cash working capital
Income tax expense
Finance expense recognized in net earnings
Loss (gain) on debenture redemption
Adjusted operating cash flow
2013
250.3
8.8
(0.3)
(0.2)
(71.8)
5.5
192.3
2012
347.9
6.7
(84.7)
(1.1)
(77.6)
(0.8)
190.4
(1) See the audited consolidated financial statements for net cash flow from operating activities and changes in non-cash working capital.
9
2013 Annual Report
Adjusted operating cash flow for the year ended December 31, 2013 (before restructuring costs of
$15.3 million) was $207.6 million ($192.3 million after restructuring costs), an increase of $7.2 million or 4% from
the prior year before restructuring costs. The increase in adjusted operating cash flow was due to increased
EBITDA from operations of Construction Products Distribution and lower interest costs offset in part by
higher corporate costs and a lower Specialty Chemicals contribution due to the one-time TransCanada
Energy Ltd. settlement included in the prior year.
Adjusted operating cash flow per share (before restructuring costs) was $1.69 per share ($1.56 per share
after restructuring costs) for the year ended December 31, 2013, a decrease of $0.10 per share or 6% before
restructuring costs and a decrease of $0.14 per share or 8% after restructuring costs from the prior year.
The increase in adjusted operating cash flow as noted above was more than offset by a 10% increase in
the weighted average number of shares outstanding. The number increased in 2013 as a result of shares
issued from Superior’s Dividend Reinvestment Program and Optional Share Purchase Plan (DRIP) and the
completion of an equity offering of 13.0 million shares on March 27, 2013 for gross proceeds of $137.6 million.
As demonstrated in the following chart, Superior is well diversified with Energy Services, Specialty Chemicals
and Construction Products Distribution contributing respectively 48%, 40%, and 12% of EBITDA from
operations before restructuring costs in 2013.
EBITDA from Operations(1)
$273.0
$289.4
$284.4
$243.0
$213.4
s
n
o
i
l
l
i
M
$
300
250
200
150
100
50
0
Construction Products Distribution
Specialty Chemicals
Energy Services
(1) Before restructuring costs
2009
2010
2011
2012
2013
Superior had net earnings of $52.7 million for 2013, compared to net earnings of $90.0 million for 2012. The
decrease was primarily due to unrealized losses on financial instruments in 2013 as compared to gains in the
prior year due to the appreciation of the U.S. dollar offset in part by higher gross profits and lower interest
costs. Consolidated revenues of $3,752.8 million in 2013 were $128.5 million higher than in the prior year. This
was due primarily to higher Energy Services’ revenue as a result of increased commodity prices and sales
volumes, higher Specialty Chemicals’ revenue due to higher sales volumes and higher Construction Products
Distribution revenue due to improved sales volumes and the benefit of sales initiatives. Gross profit of $868.8
million was $22.5 million higher than in the prior year due to improved gross profit at Energy Services and
Construction Products Distribution due to increased sales volumes, higher revenues and margins offset in
part by lower gross profits at Specialty Chemicals due to lower margins.
10
SUPERIOR PLUS CORP.
Operating expenses of $718.0 million in 2013 were $20.9 million higher than in the prior year, due to restructuring
costs and higher operating expenses associated with increased volumes offset in part by lower amortization
expense. The decrease in amortization expense was due to fully amortizing certain intangible assets during
2013. Total restructuring costs of $15.3 million were incurred by Energy Services and Construction Products
Distribution as part of Superior’s operational improvement efforts. Corporate costs were higher than in the
prior year due to increased long-term incentive costs, which resulted from the increase in Superior’s share
price. Total interest expense of $71.8 million was $5.8 million lower than in the prior year due principally
to lower average debt throughout the year and the benefit of redeeming Superior’s 8.25% $150.0 million
senior unsecured debentures on October 28, 2013 and completion of an equity offering on March 27, 2013.
An intangible asset and goodwill impairment charge of $15.5 million was recognized during 2013 within the
U.S. refined fuels business due to reductions in the short-term forecast for the business and challenging
wholesale market conditions. Unrealized losses on derivative financial instruments were $5.1 million in 2013
compared to unrealized gains of $32.1 million in the prior year. The increase in unrealized losses from the prior
year is primarily due to higher unrealized losses in the current year on Superior’s foreign exchange forward
contracts due to the appreciation of the U.S. dollar offset in part by unrealized gains on natural gas forward
contracts from positive fluctuations in the spot prices of natural gas. Gains and 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 $5.7 million for 2013 compared to an expense of $9.0 million
for 2012 and decreased due to lower net earnings in 2013 and the absence of adjustments associated with
changes in enacted tax rates.
Annual Financial Results of Superior’s Operating Segments
Energy Services
Energy Services’ condensed operating results for 2013 and 2012:
(millions of dollars)
Revenue (1)
Cost of sales (1)
Gross profit
Less: Cash operating and administrative costs (2)
EBITDA from operations
2013
2,372.9
(1,907.7)
465.2
(327.7)
137.5
2012 (2)
2,301.6
(1,854.2)
447.4
(311.0)
136.4
(1) In order to better reflect the results of its operations, Superior has reclassified certain amounts for purposes of this MD&A to present its results as
if it had accounted for various transactions as accounting hedges. See “Reconciliation of Divisional Segmented Revenue, Cost of Sales and Cash
Operating and Administrative Costs Included in this MD&A” for detailed amounts.
(2) The prior year has been restated for the impact of adopting IAS 19 Employee Benefits, amendments effective January 1, 2013. Cash operating and
administrative costs were increased by $1.3 million for year ended December 31, 2012.
(3) Energy Services’ EBITDA from operations has been restated and restructuring costs have been excluded from EBITDA from operations. The above
results exclude restructuring costs of $9.1 million from 2013 and $3.5 million from 2012. See Restructuring costs for further details.
Revenues were $2,372.9 million in 2013, an increase of $71.3 million from $2,301.6 million in 2012. The
increase was primarily due to higher commodity prices and sales volumes. Total gross profit for 2013 was
$465.2 million, an increase of $17.8 million or 4% from the prior year. The increase in gross profit is due to
higher sales volumes at Canadian propane distribution, U.S. refined fuels and supply portfolio management
due to colder weather and the benefit of improved customer sales and retention efforts, offset in part by
lower gross profits from the fixed-price energy services business. A review of gross profit is provided on
page 12.
11
2013 Annual Report Gross Profit Review
(millions of dollars)
Canadian propane distribution
U.S. refined fuels distribution
Other services
Supply portfolio management
Fixed-price energy services
Total gross profit
2013
250.4
130.2
42.1
24.9
17.6
465.2
2012
235.7
123.1
39.6
18.3
30.7
447.4
Canadian Propane Distribution
Canadian propane distribution gross profit for 2013 was $250.4 million, an increase of $14.7 million or 6%
from 2012, due to higher gross margins and sales volumes. Residential and commercial sales volumes in 2013
were 37 million litres or 10% higher than in the prior year due to colder weather during the first quarter and
fourth quarter of 2013 and the benefit of improved customer sales and retention efforts. Average weather
across Canada for the year, as measured by degree days, was 6% colder than in the prior year and 3% colder
than the five-year average. Industrial volumes decreased by 17 million litres or 2%, primarily due to lower
oilfield services demand associated with gasification of certain customer sites and lower customer activity.
Automotive propane volumes increased by 6 million litres or 8%. This increase is in contrast to the historical
structural decline experienced in this end-use market, and is due to the continued favourable price spread
between propane and gasoline.
Average propane sales margins for 2013 increased to 18.8 cents per litre from 18.2 cents per litre in the prior
year. The increase was principally due to improved pricing management and favourable movement in the
sales mix as 2013 included an increased proportion of higher-margin sales volumes.
Canadian Propane Distribution Sales Volumes
Volumes by End-Use Application (1)
(millions of litres)
Residential
Commercial
Agricultural
Industrial
Automotive
2013
135
278
73
764
81
2012
121
255
60
781
75
Volumes by Region (2)
(millions of litres)
Western Canada
Eastern Canada
Atlantic Canada
2013
766
465
100
2012
751
440
101
1,331
1,292
1,331
1,292
(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; and Atlantic Canada region consists of New Brunswick,
Newfoundland & Labrador, Nova Scotia and Prince Edward Island.
12
SUPERIOR PLUS CORP.
U.S. Refined Fuels Distribution
U.S. refined fuels gross profit for 2013 was $130.2 million, an increase of $7.1 million or 6% from the prior year.
The increase in gross profit was due to higher sales volumes and gross margins. Sales volumes increased by
34 million litres or 2% from the prior year to 1,633 million litres, primarily due to colder weather during the first
and fourth quarters of 2013 than in the prior year’s quarters and continued growth of the propane customer
offset in part by challenging market conditions for the wholesale business throughout the fourth quarter due
to unusually low rack/spot market prices which resulted in wholesale customers purchasing directly from the
rack at discounted prices. Weather as measured by heating degree days for the year was 18% colder than
the prior year and 2% colder than the five-year average. Average U.S. refined fuels sales margins of 8.0 cents
per litre increased slightly from the 7.7 cents per litre recorded in the prior year. The increase in sales margins
was due to sales mix and pricing management.
U.S. Refined Fuels Distribution Sales Volumes
Volumes by End-Use Application (1)
(millions of litres)
Residential
Commercial
Automotive
2013
304
775
554
2012
274
764
561
Volumes by Region (2)
(millions of litres)
Northeast United States
2013
1,633
2012
1,599
1,633
1,599
1,633
1,599
(1) Volume: Volume of heating oil, propane, diesel and gasoline sold (millions of litres).
(2) Regions: Northeast United States region consists of Pennsylvania, Connecticut, New York, and Rhode Island.
Other Services
Other services gross profit was $42.1 million in 2013, an increase of $2.5 million or 6% from the prior year. The
increase in other services gross profit is due to higher demand for installations offset in part by lower service
contract business.
Supply Portfolio Management
Supply portfolio management gross profits were $24.9 million in 2013, an increase of $6.6 million or 36% from
the prior year due to improved market-related opportunities associated with the cold weather experienced
during 2013, the benefit of lower supply costs and gains realized on fixed-price settlements.
Fixed-Price Energy Services
Fixed-Price Energy Services Gross Profit
2013
2012
(millions of dollars except volume
and per unit amounts)
Natural gas (1)
Electricity (2)
Total
Gross
Profit
11.1
Volume
Per Unit
18.8 GJ
59.0 ¢/GJ
6.5 891.4 KWh 0.73 ¢/KWh
17.6
Gross
Profit
21.5
9.2
30.7
Volume
Per Unit
18.7 GJ
115.0 ¢/GJ
816.7 KWh
1.13 ¢/KWh
(1) Natural gas volumes are expressed in millions of gigajoules (GJ).
(2) Electricity volumes are expressed in thousands of kilowatt hours (KWh).
13
2013 Annual Report
Fixed-price energy services gross profit was $17.6 million in 2013, a decrease of $13.1 million (43%) from
$30.7 million in the prior year. Natural gas gross profit was $11.1 million, a decrease of $10.4 million (48%) from
$21.5 million in the prior year due to lower margins. Gross profit per unit was 59.0 cents per gigajoule (GJ),
a decrease of 56.0 cents per GJ (49%) from the prior year. The decrease in natural gas gross margins was
due to the continued decline of higher-margin residential customers from the pool of previously contracted
business. Sales volumes of natural gas were 18.8 million GJ, consistent with the prior year as the continued
decline in residential volumes as a result of focusing marketing efforts towards the commercial segment was
offset by commercial demand and colder weather. Electricity gross profit in 2013 was $6.5 million, a decrease
of $2.7 million or 29% from the prior year due to lower gross margins offset in part by higher sales volumes.
The decrease in gross margins was due to sales mix as the current year includes a higher proportion of
lower-margin commercial customers. The increase in electricity sales volumes was due to colder weather
and continued aggregation of commercial customers in Ontario and Pennsylvania and commercial customers
in New York.
Operating Costs
Cash operating and administrative costs were $327.7 million in 2013, an increase of $16.7 million or 5% from
the prior year. Operating costs were higher than in the prior year due to higher employee costs due to
increased sales volumes, higher employee incentive costs, higher truck maintenance costs and consulting
costs associated with the Canadian Propane distribution information technology project.
U.S. Refined Fuels Impairments
During the fourth quarter of 2013, Energy Services performed a detailed impairment review of its intangible
assets and goodwill. This calculation was performed as part of the annual impairment test and resulted in
indications of impairment in the U.S. refined fuels segment of Energy Services. As a result of a detailed cash
flow evaluation, Energy Services recorded an impairment charge of $15.5 million to the intangible assets and
goodwill of U.S. refined fuels.
On October 20, 2012, a kerosene leak was discovered in the bottom of a storage tank at U.S. refined fuels
Marcy terminal location. The leak was investigated and contained by management. U.S. refined fuels then
notified the Department of Environmental Conservation (DEC) which performed an independent review of
the leak and other tanks at this location. On December 27, 2012, the DEC issued a notice of violation based
on its inspections and subsequent to discussions between management and the DEC, a consent order was
issued to U.S. refined fuels on February 4, 2013. The consent order stated that the secondary containment
system and storage tanks were not in compliance with DEC design requirements and needed to be rebuilt
to specific standards by September 1, 2013 in order to remain operational. The consent order was modified
in October 2013 to extend the requirement to rebuild to specific standards by September 1, 2014. Repair
of the facility has been suspended pending the outcome of a dispute between Superior and the previous
owner and operator of the facility as to responsibility for the repair. This decision is not expected to have any
material impact on the operations of U.S. refined fuels or operating results going forward.
Due to the leak and receipt of the consent order, management has performed a detailed impairment review
of the Marcy terminal to assess whether the carrying value of all the storage tanks does not exceed the
recoverable amount. The recoverable amount of the assets was based on management’s estimate of the fair
value less costs to sell. Based on a detailed review by management, the fair value less costs to sell of the
storage tanks was lower than the carrying value. An impairment charge of $4.7 million was recorded during
the fourth quarter of 2012 against net earnings along with a $4.7 million reduction in the carrying value of
the impaired storage tanks.
14
SUPERIOR PLUS CORP. Operational Information
Overall, Energy Services’ operations benefit from the segment’s leading market share in the Canadian
propane distribution market and considerable operational and customer diversification throughout Canada
and the Northeast United States through Superior’s U.S. refined fuels assets. Energy Services’ customer
base is well diversified geographically and across end-use applications, and its largest customer contributed
approximately 3% of gross profits in 2013. Energy Services’ top 10 customers comprised approximately
17% of its revenues in 2013, with its largest customer representing approximately 4% of its revenues.
As shown in the chart below, wholesale propane and heating oil prices fluctuated throughout 2013
and started to increase significantly during December due to extremely cold weather in part of Eastern
Canada and North Eastern U.S. Approximately 28% of Superior’s fuel distribution sales volumes are due to
heating-related applications and 72% are due to general economic activity.
Relative Change in Edmonton Propane, WTI Crude Oil, Natural Gas,
NYMEX Heating Oil vs. Sarnia Propane
e
g
n
a
h
C
e
c
i
r
P
e
v
i
t
a
e
R
l
200
175
150
125
100
75
50
25
Jan
2012
Feb
12
Mar
12
Apr
12
May
12
Jun
12
Jul
12
Aug
12
Sep
12
Oct
12
Nov
12
Dec
12
Jan
2013
Feb
13
Mar
13
Apr
13
May
13
Jun
13
Jul
13
Aug
13
Sep
13
Oct
13
Nov
13
Dec
13
NYMEX Heating Oil Future
Sarnia Propane
WTI Crude Oil
AECO Natural Gas
Edmonton Propane
Acquisitions
On November 27, 2013, Superior completed the acquisition of certain assets constituting a retail propane and
commercial fuels distribution business (Townsend) in Le Roy, New York for an aggregate price of $9.6 million
including deferred consideration and net of adjustments for net working capital. The operations will provide
U.S. refined fuels with access to additional propane and fuel oil customers, improved geographic coverage in
upstate New York and additional distribution facilities.
15
2013 Annual Report
On July 17, 2012, Superior completed the acquisition of certain assets constituting a propane distribution
business for an aggregate price of $5.5 million including adjustments for net working capital. The primary
purpose of the acquisition was to expand Energy Services’ business in British Columbia and benefit from
synergies and certain operating assets.
Financial Outlook
EBITDA from operations for 2014 is anticipated to be higher than in 2013 due to improved results at the
Canadian propane and U.S. refined fuels businesses. Improvement in EBITDA is anticipated as a result of
modestly higher sales volumes and improved average sales margins due to the ongoing business operational
improvements. EBITDA from the fixed-price energy services and wholesale supply business is anticipated
to be consistent with 2013. Operating expenses are anticipated to be lower than in 2013 due to improved
efficiency from the operational restructuring offset in part by costs associated with higher volumes. Average
weather, as measured by degree days, is anticipated to be consistent with the five-year average in 2014.
Operating conditions for 2014 are anticipated to be similar to 2013. Superior anticipates that the difficult
wholesale propane supply conditions experienced at the beginning of 2014 which were due in part to lower
than average propane storage levels and colder than average temperatures which in turn increased demand
and caused difficulty in transporting product will moderate towards the end of the first quarter of 2014.
Initiatives to improve results in the Energy Services’ business continued during the fourth quarter of 2013
in conjunction with Superior’s Destination 2015 initiative and Superior’s goal for each of its businesses to
become best-in-class. Business improvement projects for 2013 and 2014 include: a) improving customer
service, b) improving overall logistics and procurement functions, c) enhancing the management of margins,
d) working capital management e) improving existing and implementing new technologies to facilitate
improvements to the business, f) headcount reductions and g) completing a detailed restructuring plan and
commencing the related work.
The restructuring plan for the Canadian Propane distribution and U.S. refined fuels businesses will accelerate
realization of operating efficiencies by implementing a more disciplined and consistent management operating
system across the segment designed to leverage the new processes and information system investments
and by sizing the organization to efficiently meet its operational business needs. The restructuring plan is
expected to be completed by mid-2014.
System Conversion
In 2013, Canadian propane distribution commenced the implementation of an order-to-cash, billing and
logistics IT system to replace the distribution and invoicing functions of the present enterprise system. To
mitigate the risk associated with system changes, Canadian propane distribution will leverage what was
learned in the U.S refined fuels organization, which has been using this system for several years. The total
estimated cost of the implementation is $19.2 million. Approximately $16.5 million has been incurred to date
and the estimated completion is the summer of 2014. During the third and fourth quarters of 2013, the new
system was successfully implemented in the Atlantic and British Columbia regions. The remaining regions
will be converted throughout the first half of 2014. The implementation has been phased in order to minimize
the impact on the business during the heating season.
In addition to the significant assumptions detailed above, refer to “Risk Factors to Superior” for a detailed
review of significant business risks affecting the Energy Services’ businesses.
16
SUPERIOR PLUS CORP. Specialty Chemicals
Specialty Chemicals’ condensed operating results for 2013 and 2012:
(millions of dollars except per metric tonne (MT) amounts)
Chemical revenue (1)
Chemical cost of sales (1)
Chemical gross profit
Less: Cash operating and administrative costs (1)
EBITDA from operations
2013
$ per MT
2012
$ per MT
582.6
(330.8)
251.8
(138.1)
113.7
705
(400)
305
(167)
138
542.2
(283.9)
258.3
(132.6)
125.7
703
(368)
335
(172)
163
Chemical volumes sold (thousands of MTs)
826
771
(1) In order to better reflect the results of its operations, Superior has reclassified certain amounts for purposes of this MD&A related to derivative financial
instruments, non-cash amortization and foreign currency translation losses or gains related to U.S.-denominated working capital. See “Reconciliation
of Divisional Segmented Revenue, Cost of Sales and Cash Operating and Administrative Costs Included in this MD&A” for detailed amounts.
Chemical revenue was $582.6 million in 2013, $40.4 million or 7% higher than in the prior year, primarily as a
result of increased sodium chlorate and chloralkali/potassium sales volumes and pricing.
Gross profit of $251.8 million in 2013 was $6.5 million or 3% lower than in the prior year primarily due to
the one-time favourable net contribution from a settlement payment received from TransCanada Energy
Ltd. in August 2012 (see Settlement). Sodium chlorate gross profit (excluding the settlement) increased by
$10.1 million or 7%, due to higher sales volumes offset in part by lower gross margins. The sodium chlorate
segment also benefited from the execution of a strategic supply agreement in October 2013 (see Strategic
Supply Agreement).
Sodium chlorate sales volumes increased by 42,000 tonnes or 9% over the prior year due to higher demand
in North America as a result of increased demand for pulp, increased Chilean sale volumes and the impact
of the strategic supply agreement.
Average selling prices for sodium chlorate were 4% higher than in the prior year due to price increases
from contract renewals, offset in part by lower U.S. dollar forward exchange contract settlements on U.S.
dollar-denominated sales. See “Financial Instruments — Risk Management” for a discussion of hedge positions.
Cost of sales for sodium chlorate was higher than in the prior year due to increased inventory purchase
costs, higher average electrical input costs and the one-time favourable net contribution from the settlement
payment received from TransCanada Energy Ltd. during the third quarter of 2012 (see Settlement for further
details). Electrical costs, which represent 70% to 85% of the variable costs of the production of sodium
chlorate, were higher than in the prior year due to upward pressure on overall electricity pricing.
Chloralkali/potassium gross profits decreased by $4.1 million or 5%, due to lower gross margins and a higher
proportion of lower priced chlorine sales offset in part by higher sales volumes. Chloralkali/potassium sales
volumes increased by 13,000 tonnes or 5% due to strong potassium product demand for de-icing. Overall
average selling prices were lower than in 2012 due primarily to weakness in the price of chlorine, which
reduced results and margins.
17
2013 Annual Report
Total chemical sales volumes were 826,000 tonnes in 2013, an increase of 55,000 tonnes or 7% from
the prior year, due to higher sodium chlorate and chloralkali/potassium sales volumes as noted above.
Average chemical revenue per MT was $705, consistent with the prior year of $703 per MT. Sodium chlorate
and chloralkali/potassium production capacity utilization in 2013 averaged 90% (2012 — 92%) and 87%
(2012 — 84%), respectively.
Cash operating and administrative costs were $138.1 million in 2013, an increase of $5.5 million or 4% from the
prior year. Operating expenses were affected by higher maintenance expenditures, higher engineering costs
and general inflationary increases.
Strategic Supply Agreement
In October 2013, Specialty Chemicals entered into a supply agreement with Tronox LLC (Tronox) to purchase
up to 130,000 MT of sodium chlorate per year from Tronox’s Hamilton, Mississippi facility, as nominated
annually by Specialty Chemicals. The initial term of the agreement extends to December 31, 2016 and may be
automatically extended in one year increments thereafter. Under the agreement, Tronox will continue to own
and operate the facility, and Specialty Chemicals will purchase sodium chlorate to meet customer demands
under certain customer contracts being assumed and to supply other existing and new customers. Specialty
Chemicals paid an initial fee of $4.3 million and will incur a quarterly fee of $0.8 million during the initial
term, plus a cost for sodium chlorate delivered. As part of the Agreement, Specialty Chemicals will acquire
finished inventory and assume existing railcar leases and customer contracts, as assigned. Additionally, the
parties have entered into a strategic long-term agreement for the supply of chloralalkali product by Specialty
Chemicals to service Tronox’s requirements in North America. Under the agreement, if the annual nominated
volume by Specialty Chemicals is less than the specified volume of product set out in the agreement, Tronox
may terminate the agreement early, at its sole option and its sole cost to permanently shut down the plant
for the manufacture of sodium chlorate.
Settlement
In August 2012, Specialty Chemicals received a payment of $15.8 million from TransCanada Energy Ltd., a
subsidiary of TransCanada Corporation, in connection with the arbitration ruling related to the Sundance
Power Purchase Agreement (PPA) between TransAlta Corporation and TransCanada Energy Ltd. The
payment resulted from an electrical sales agreement between TransCanada Energy Ltd. and Superior whereby
TransCanada Energy Ltd. supplies Superior with fixed-priced energy from the PPA. A one-time gain of $12.5
million, representing the payment net of certain settlement costs, was recorded in cost of goods sold.
Major Capital Projects
As announced in the first quarter of 2012, Superior approved an $18.0 million expansion of hydrochloric
acid production capacity at the Port Edwards, Wisconsin chloralkali facility. The plant’s capacity of
110,000 wet metric tonnes (WMT), or 36,000 dry metric tonnes, is being increased to approximately
220,000 WMT. The expansion project commenced in 2012, with commercial production expected early in
the fourth quarter of 2014.
As announced in the third quarter of 2012, Superior has approved a $25.0 million expansion of
hydrochloric acid production capacity at the Saskatoon, Saskatchewan chloralkali facility. The plant’s
capacity of 70,000 WMT, or 22,000 dry metric tonnes, will be increased to approximately 140,000 WMT. The
expansion project commenced in 2012, with commercial production expected in the fourth quarter of 2014.
18
SUPERIOR PLUS CORP. As at December 31, 2013, a total of $19.0 million had been spent on the two projects. Upon completion of
both projects, Superior will have total hydrochloric acid production capacity of approximately 360,000
WMT. The two expansions will allow Superior to optimize overall returns at both facilities by converting a
larger portion of its chlorine into higher-value hydrochloric acid.
Operational Information
Sodium chlorate sales in 2013 represented 67% of Specialty Chemicals’ EBITDA from operations, excluding
the PPA settlement, an increase of 4% from the 63% contribution in 2011. Sodium chlorate is principally sold
to bleached pulp manufacturers. It is used to generate chlorine dioxide for bleaching pulp. Sodium chlorate
represents approximately 5% of the variable cost to manufacture bleached pulp. As a result, sodium chlorate
sales volumes and prices tend to be stable over time despite the volatility of bleached pulp prices (see the
following chart).
Pulp Prices Compared to Sodium Chlorate Prices and Sales Volumes
1,200
1,000
800
600
400
200
0
2005
2006
2007
2008
2009
2010
2011
2012
2013
NBSK (US$/Air Dry MT(ADMT))
Sodium Chlorate Price (US$/MT)
N Hardwood (US$/ADMT)
Sodium Chlorate Volumes (US$/MT)
Chloralkali/potassium sales in 2013 contributed 33% of EBITDA from operations, a decrease of 4% from 37%
in 2012. Operating rates of the North American Chloralkali segment and electrochemical unit (ECU) pricing
have remained relatively stable in 2013.
19
2013 Annual Report
Chloralkali ECU Pricing Compared to Operating Rates
e
n
n
o
T
t
r
o
h
S
/
$
S
U
1,500
1,000
500
0
100%
75%
50%
25%
0%
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
ECU Contract-Market Value after Discounts (US$/ST)
ECU Operating Rate (%)
Specialty Chemicals’ top 10 customers comprised approximately 50% of its revenues in 2013, with its largest
customer representing 8% of its revenues.
Financial Outlook
EBITDA from operations for 2014 is expected to be lower than in 2013 due to lower sodium chlorate
contribution from higher average electricity prices, offset in part by the contribution from the strategic
supply agreement described above. Contribution from the chloralkali segment is anticipated to be higher
than in 2013 due to the completion of the hydrochloric acid facility expansions during 2014. Selling prices
and sales volumes of caustic, chlorine and hydrochloric acid are anticipated to be similar to 2013 as supply
and demand fundamentals in the chloralkali markets in which Superior operates are anticipated to remain
consistent with the prior year.
In addition to the significant assumptions noted above, refer to “Risk Factors to Superior” for a detailed
review of the significant business risks affecting Superior’s Specialty Chemicals’ segment.
20
SUPERIOR PLUS CORP.
Construction Products Distribution
Construction Products Distribution’s condensed operating results for 2013 and 2012:
(millions of dollars)
2013
2012
Revenue (2)
Gypsum Specialty Distribution (GSD) revenue (1)
Commercial and Industrial Insulation (C&I) revenue
Cost of sales (2)
GSD cost of sales
C&I cost of sales
Gross profit
Less: Cash operating and administrative costs
EBITDA from operations
525.4
274.8
(400.0)
(204.2)
196.0
(162.8)
33.2
517.9
261.0
(401.6)
(193.4)
183.9
(156.6)
27.3
(1) In order to better reflect the results of its operations, Superior has reclassified certain amounts for purposes of this MD&A to present its results as
if it had accounted for various transactions as accounting hedges. See “Reconciliation of Divisional Segmented Revenue, Cost of Sales and Cash
Operating and Administrative Costs Included in this MD&A” for detailed amounts.
(2) The prior year’s revenue and cost of sales classifications between GSD and C&I have been adjusted to align with the current year’s classification.
(3) Construction Products Distribution EBITDA from operations has been restated on a before restructuring cost basis, and the above results exclude
restructuring costs of $6.2 million in 2013 and $6.5 million in 2012. See Restructuring Costs for further details.
GSD and C&I revenues were $800.2 million for 2013, $21.3 million or 3% higher than in the prior year. GSD
revenue increased due to higher sales volumes as a result of ongoing improvement in the U.S. residential
markets offset in part by lower contribution from some Canadian regions due to a slowdown in Canadian
residential markets and branch closures completed during 2012. C&I revenues were higher than in the prior
year due to successful investments in sales and marketing and other initiatives to increase sales.
Gross profit was $196.0 million in 2013, was $12.1 million or 7% higher than in the prior year due to increased
revenues as noted above and higher GSD gross margins. The increase in GSD gross margins was due to
improved average selling prices, successful procurement initiatives and the benefit of exiting less profitable
markets. C&I gross margins were consistent with the prior year.
Cash operating and administrative costs were $162.8 million in 2013, an increase of $6.2 million or 4% from
the prior year. The increase was primarily due to higher employee costs associated with increased sales
volumes, investment in additional sales capabilities, appreciation of the U.S. dollar, the system integration
project costs and general inflationary increases.
Operational Information
Construction Products Distribution enjoys considerable geographical and customer diversification, servicing
over 17,000 customers from 115 distribution branches (see “Total Revenues by Region” pie chart). Its 10
largest customers represent approximately 7% of its annual distribution sales, with the largest customer
generating approximately 1% of annual distribution sales. Construction Products Distribution enjoys a strong
position in its operating markets, supported by its complete walls, ceilings, residential insulation, commercial
and industrial insulation product lines, and by its procurement capabilities (see “Total Revenues by Product”
pie chart).
21
2013 Annual Report Total Revenues by Region — 2013
Total Revenues by Product — 2013
17% Prairies
13% Central/Eastern Canada
7% Residential insulation
8% Steel framing and accessories
10% Stucco, tools and miscellaneous
64% U.S.
32% Commercial and
industrial insulation
6% British Columbia
22% Drywall and components
21% Ceilings
Sales to commercial and industrial builders and contractors are comprised of Construction Products
Distribution’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 58% of sales from servicing
commercial new construction and remodelling activity, 25% from servicing residential new construction and
remodelling activity and 17% from servicing industrial activity. New commercial construction and industrial
demand trends have historically lagged new residential construction (see charts on the Canadian and U.S.
end-use construction segments below).
Canadian End-Use Construction Segments
200
175
150
125
100
75
50
25
22
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12 13*
CDN Housing Starts (thousands of units)
CDN Non-Residential Construction Footage put in Place (mmsf)
*estimate
Index 1984=100
SUPERIOR PLUS CORP.
U.S. End-Use Construction Segments
200
175
150
125
100
75
50
25
0
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12 13*
U.S. Non-Residential Construction Footage put in Place (mmsf)
U.S. Residential Additions and Alterations ($ billions)
U.S. Housing Starts (thousands of units)
U.S. Industrial Construction Footage put in Place (mmsf)
*estimate
Index 1984=100
Financial Outlook
Superior anticipates that EBITDA from operations in 2014 will be higher than in 2013 due to continued
improvements in U.S. residential construction markets as well as benefits resulting from completing ongoing
business initiatives. Superior anticipates that the U.S. commercial market will modestly improve in 2014 over
2013 and that the Canadian residential markets will continue to be challenging.
Initiatives to improve results in the Construction Products Distribution business continued during the fourth
quarter of 2013. Ongoing business improvement projects for 2013 and 2014 include: a) assessment of overall
logistics and existing branch network, b) review of supply chain management including procurement and
transportation, c) review of product pricing, d) working capital management, e) sales growth in select focus
products/markets, and f) completing the detailed restructuring plan.
In late 2013, CPD initiated a business transformation project to fully integrate its C&I and GSD operations.
The project consists of realigning the management structure along geographic lines, adopting best practice
common business processes, and integrating all operations onto a single ERP (computer) system. The project
is expected to take approximately two years and conclude at the end of 2015.
As part of the business transformation project, the Calgary, Alberta corporate office will relocate to Dallas,
Texas. This will position the corporate office in a central location and a major North American travel hub,
closer to its customers and suppliers and the majority of its revenue base. The relocation commenced in the
fourth quarter of 2013 and will be completed during the fall of 2014.
During 2012 and 2013, Construction Products Distribution underwent successful operational restructuring
through branch rationalization to reduce operating expenses. In 2014, it will complete its management
realignment to make the organization more agile and increase its ability to capitalize on the U.S. residential
and commercial construction recovery. Common business processes and systems will be implemented across
the business, a project that was delayed over the past several years due to challenging market conditions.
23
2013 Annual Report As part of Superior’s plan to maximize shareholder value, Superior conducts an ongoing review of its portfolio
of businesses and assesses the strategic fit of all its businesses from time-to-time. In light of the ongoing
improvements in the U.S. construction industry, Superior is currently assessing strategic alternatives for its
Construction Products Distribution segment and has hired a financial advisor.
In addition to the Construction Products Distribution segment’s significant assumptions noted above, refer
to “Risk Factors to Superior” for a detailed review of the significant business risks affecting Superior’s
Construction Products Distribution segment.
Consolidated Capital Expenditure Summary
(millions of dollars)
Efficiency, process improvement and growth-related
Other capital
Investment in supply agreement
Acquisitions
Proceeds on disposition of capital
Total net capital expenditures
Capital-equivalent of finance leases
Total expenditures including finance leases
2013
44.3
34.2
78.5
4.3
7.6
(6.6)
83.8
36.9
120.7
2012
11.4
32.4
43.8
–
5.5
(4.5)
44.8
8.1
52.9
Efficiency, process improvement and growth-related expenditures were $44.3 million in 2013 compared to
$11.4 million in the prior year. The increase was primarily related to the expansion projects at Specialty
Chemicals’ and Energy Services’ purchases of rental assets, truck related expenditures and expenditures on
the Canadian Propane distribution system conversion.
Other capital expenditures were $34.2 million in 2013, compared to $32.4 million in the prior year, consisting
primarily of required maintenance and general capital across Superior’s segments.
During October, Specialty Chemicals entered into a strategic supply agreement which required an initial
investment of $4.3 million (see Strategic Supply Agreement).
On November 27, 2013, Superior completed the acquisition of certain assets constituting a retail propane and
commercial fuels distribution business (Townsend) in Le Roy, New York for an aggregate price of $9.6 million
including deferred consideration and net of adjustments for net working capital. The operations will provide
U.S. refined fuels with access to additional propane customers. In July 2012, the Energy Services’ segment
completed the acquisition of the assets of a small regional propane distribution business for $5.5 million,
excluding $1.0 million in net working capital.
Proceeds on the disposal of capital were $6.6 million in 2013 and consisted of Superior’s disposition of
surplus tanks, cylinders and other assets.
During 2013, Superior entered into new leases with capital-equivalent value of $36.9 million, primarily related
to delivery vehicles for the Energy Services and Construction Products Distribution segments and a finance
lease of $21.5 million related to the strategic supply agreement.
Capital expenditures were funded from a combination of operating cash flow, the issuance of common
shares and revolving-term bank credit facilities.
24
SUPERIOR PLUS CORP.
Corporate and Interest Costs
Corporate costs were $17.9 million in 2013, an increase of $1.7 million over the prior year. The increase was
due to higher long-term incentive plan costs associated with the increase in Superior’s share price during
the year.
Interest expense on borrowing and interest on finance lease obligations was $30.2 million for 2013, a
decrease of $8.2 million from the $38.4 million in the prior year. The decrease was due to lower average debt
as a result of Superior’s $143.9 million equity offering ($137.8 million net of issuance costs) which closed on
March 27, 2013, higher cash flows, redemption of Superior’s 8.25% $150 million senior unsecured notes on
October 28, 2013 with lower rate revolving debt and the benefit of debt repayments during the past year. See
“Liquidity and Capital Resources” for further details on the change in average debt levels.
Interest on Superior’s convertible unsecured subordinated debentures (“Debentures” which include all
series of convertible unsecured subordinated debentures) was $28.5 million for 2013, a decrease of $4.8
million from $33.3 million in the prior year. The decrease was due to the redemption of $49.9 million of
Superior’s 5.75% convertible subordinated debentures due December 31, 2012 on August 1, 2012, $50.0
million of Superior’s 5.85% convertible subordinated debentures due October 31, 2015 on January 3, 2013,
$25.0 million of Superior’s 5.85% convertible subordinated debentures due October 31, 2015 on April 9, 2013
and $68.9 million of Superior’s 7.50% convertible subordinated debentures due December 31, 2014 on
September 3, 2013. The above noted decrease was offset in part by the issuance of $97.0 million of 6.00%
convertible subordinated debentures on July 22, 2013 which mature on June 30, 2019.
Restructuring Costs
Superior’s restructuring costs have been categorized together and excluded from segmented results. Below
is a table summarizing these costs:
(millions of dollars)
Severance costs
Branch closure costs and lease termination costs
Consulting costs
Inventory write-downs
Total restructuring costs
2013
5.7
4.7
1.3
3.6
15.3
2012
4.3
5.7
–
–
10.0
Superior recognized $15.3 million of restructuring costs during 2013 as compared to $10.0 million in the
prior year. The increase was due to the completion of a comprehensive restructuring plan during the fourth
quarter of 2013 for the Energy Services and Construction Products Distribution segments. Total costs of
$9.1 million were recognized by Energy Services primarily related to employee severance costs, consulting
costs and inventory write-downs due to exiting a certain portion of the service business. Construction
Products Distribution recognized a total of $6.2 million in costs related to employee severance, branch
closure and lease termination costs. Superior expects to incur between $7 million and $10 million of
additional restructuring costs during the first half of 2014. Superior disclosed in the third quarter MD&A that
it anticipated incurring between $15 million and $20 million of restructuring costs. This estimate was before
inventory write-downs, including inventory write-downs Superior anticipates incurring a total of between
$22 million and $25 million during 2013 and 2014.
25
2013 Annual Report Income Taxes
Consistent with prior periods, Superior recognizes a provision for income taxes for its subsidiaries that are
subject to current and future income taxes, including U.S. income tax, U.S. non-resident withholding tax and
Chilean income tax.
Total income tax expense for 2013 was $5.7 million, comprised of $0.2 million in cash income tax expense and
$5.5 million in deferred income tax expense. This compares to a total income tax expense of $9.0 million in
the prior year, which consisted of $1.1 million in cash income tax expense and a $7.9 million deferred income
tax expense.
Cash income taxes for 2013 were $0.2 million, consisting of income taxes in the U.S. of $0.2 million
(2012 — $1.1 million of U.S. cash tax expense). Deferred income tax expense for 2013 was $5.5 million
(2012 — $7.9 million deferred income tax expense), resulting in a corresponding net deferred income tax
asset of $288.3 million as at December 31, 2013. Deferred income taxes in 2013 were impacted by lower net
earnings in 2013 and the absence of adjustments associated with changes in enacted tax rates.
As at December 31, 2013, Superior had the following tax pools available to be used in future years:
Canada
Tax basis
Non-capital losses
Capital losses
Canadian scientific research expenditures
Investment tax credits
United States
Tax basis
Non-capital losses
Chile
Tax basis
Non-capital loss carry-forwards
(millions of dollars)
258.3
115.4
582.5
604.6
163.1
173.0
119.1
20.1
14.6
See the audited consolidated financial statements for the year ended December 31, 2013 for a summary
of the expiry 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.
26
SUPERIOR PLUS CORP.
Canada Revenue Agency (CRA) Income Tax Update
As previously disclosed, on April 2, 2013 Superior received from the CRA Notices of Reassessment for
Superior’s 2009 and 2010 taxation years reflecting the CRA’s intent to challenge the tax consequences of
Superior’s corporate conversion transaction (Conversion) which occurred on December 31, 2008. The CRA’s
position is based on the acquisition of control rules, in addition to the general anti-avoidance rules in the
Income Tax Act (Canada).
The table below summarizes Superior’s estimated tax liabilities and payment requirements associated with
the received and anticipated Notices of Reassessment. Upon receipt of the Notices of Reassessment, 50% of
the taxes payable pursuant to such Notices of Reassessment, must be remitted to the CRA.
Taxation Year
2009/2010
2011
2012
2013
2014
Total
Taxes Payable (1)(2)
50% of the
Taxes Payable (1)(2)
$
$
$
$
$
13.0
10.0 (3)
10.0 (3)
10.0 (3)
20.0 (3)
$ 63.0
$
$
$
$
$
6.5
5.0
5.0
5.0
10.0
$ 31.5
Payment Dates
Paid in April 2013
2015
2015
2015
2015
(1) In millions of dollars.
(2) Includes estimated interest and penalties.
(3) Estimated based on Superior’s previously filed tax returns, Superior’s 2013 results and the midpoint of Superior’s 2014 outlook.
During 2013, Superior filed a Notice of Objection and a Notice of Appeal with respect to the Notice of
Reassessments received on May 8, 2013. Superior anticipates that if the case proceeds in the Tax Court of
Canada, the case could be heard in the first quarter of 2015, with a decision rendered by the end of fiscal
2015. If a decision of the Tax Court of Canada were to be appealed, the appeal process could reasonably be
expected to take an additional 2 years. If Superior receives a positive decision then any taxes, interest and
penalties paid to the CRA will be refunded plus interest and if Superior is unsuccessful then any remaining
taxes payable plus interest and penalties will have to be remitted.
Superior remains confident in the appropriateness of its tax filing position and the expected tax consequences
of the Conversion and intends to vigorously defend such position and intends to file its future tax returns on
a basis consistent with its view of the outcome of the Conversion.
Interim tax payments made by Superior will be recorded to the balance sheet and will not materially impact
either adjusted operating cash flow or net earnings.
Based on the midpoint of Superior’s current 2014 financial outlook of AOCF per share of $1.80, if the tax
pools from the Conversion were not available to Superior, the impact would be an increase to cash income
taxes of approximately $0.15 per share for 2014. As previously stated, Superior intends to file its future
income tax returns on a basis consistent with its view of the outcome of the Conversion.
27
2013 Annual Report
Financial Outlook
Superior achieved adjusted operating cash flow per share for 2013 of $1.69 (before restructuring costs),
within the 2013 financial outlook range provided in its 2013 third-quarter MD&A. See the detailed discussion
on each segment for a breakdown of the results achieved.
Superior’s outlook is for adjusted operating cash flow for 2014 to be between $1.65 per share and
$1.95 per share, before restructuring costs, consistent with the outlook included in Superior’s 2013
third-quarter MD&A. Achieving Superior’s adjusted operating cash flow depends on the operating results of
its three operating segments.
In addition to the operating results of Superior’s three operating segments, significant assumptions underlying
Superior’s 2014 outlook are:
• Economic growth in Canada and the U.S. is expected to be similar to or modestly higher than in 2013;
• Superior is expected to continue to attract capital and obtain financing on acceptable terms;
• Superior’s estimated total debt to EBITDA ratio is based on maintenance and growth related expenditures
of $72.0 million in 2014 and working capital funding requirements which do not contemplate any significant
commodity price changes;
• The foreign currency exchange rate between the Canadian dollar and U.S. dollar is expected to average
1.05 in 2014 on all unhedged foreign currency transactions;
• Financial and physical counterparties are expected to continue fulfilling their obligations to Superior;
• Regulatory authorities are not expected to impose any new regulations impacting Superior;
• Superior’s average interest rate on floating-rate debt is expected to remain consistent with 2013
levels; and
• Canadian and U.S. based cash taxes are expected to be minimal for 2014 based on existing statutory
income tax rates and the ability to use available tax basis.
Energy Services
• Average temperatures across Canada and the Northeast U.S. in 2014 are expected to be consistent with
the recent five-year average;
• Total propane and U.S. refined fuels-related sales volumes are expected to increase in 2014 due to the
impact from customer win-back and retention programs;
• Wholesale propane and U.S. refined fuels-related prices are not anticipated to significantly affect demand
for propane, refined fuels and related services;
• Supply portfolio management market results for 2014 are expected to increase modestly from 2013 due
to growth in sales volumes and margins;
28
SUPERIOR PLUS CORP. • Fixed-price energy services results for 2014 are expected to decrease slightly from 2013 due to continued
declines in the natural gas segment as the system price of natural gas is expected to remain low offset in
part by growth in the electricity segment; and
• Operating costs are expected to decrease in 2014 from 2013 due to improvements in operational
efficiencies from business initiatives.
Specialty Chemicals
• Sodium chlorate contribution in 2014 is expected to decrease from 2013 due to lower gross margins
associated with higher electricity prices. Sales volumes in 2014 are expected to increase as compared to
2013 due to the impact of the strategic supply agreement;
• Chloralkali contribution in 2014 is expected to be higher than in 2013 due to higher sales volumes associated
with the completion of the Port Edwards and Saskatoon expansions;
• Electricity costs are expected to increase slightly in 2014 as compared to the prior year; and
• Average plant utilization will approximate greater than 94% in 2014.
Construction Products Distribution
• Revenues in 2014 are expected to increase as compared to 2013 due to continued growth in U.S. based
GSD sales as the U.S. residential market continues to improve, and higher C&I sales revenue due to limited
recovery in the U.S. commercial construction segment;
• Sales margins in 2014 are expected to increase modestly from 2013 due to continued focus on price
management, profitability and procurement; and
• Operating costs in 2014 are expected to decrease as a percentage of revenue compared to 2013 due to
anticipated savings from restructuring efforts.
Restructuring Charges
• Superior incurred $15.3 million of restructuring costs during the fourth quarter of 2013, within the range
of $15 million to $20 million provided in Superior’s third-quarter MD&A. Total estimated restructuring
costs are expected to be between $22 million and $25 million, this range includes inventory
impairments which were excluded from the range provided during the third-quarter of 2013. These
one-time restructuring costs are associated with further operational improvements in the Energy Services
and Construction Products Distribution segments. Superior expects to incur between $7 million and
$10 million of additional restructuring costs during the first half of 2014. These costs are excluded from
Superior’s 2013 and 2014 financial outlooks.
29
2013 Annual Report Debt Management Update
Superior’s total debt to EBITDA ratio (before restructuring costs) as at December 31, 2013 of 3.9X was
slightly higher than Superior’s third-quarter 2013 MD&A outlook range of 3.3X to 3.7X. This was due to higher
than anticipated working capital in the Energy Services’ business as a result of a significant increase in the
wholesale cost of propane and heating oil due to tight supply conditions experienced through the fourth
quarter of 2013. The tight supply conditions were as a result of colder than average weather and numerous
winter storms throughout Canada and the U.S. which created significant constraints on supply. In addition,
total debt was negatively impacted by a weaker Canadian dollar relative to the U.S. dollar as it relates to
Superior’s U.S. denominated debt.
Superior’s December 31, 2014 forecast total debt to EBITDA ratios are stated before restructuring costs.
Superior anticipates additional restructuring costs will be recognized over the first and second quarters of
2014. Superior’s forecast December 31, 2014, total debt to EBITDA ratio has been updated to a range of 3.6X
to 4.0X, compared to the previously provided outlook range of 3.3X to 3.7X. The forecast increase is due to
higher than expected actual debt at December 31, 2013, higher than previously forecast working capital and
the impact of a stronger U.S dollar on U.S. denominated debt.
Superior’s anticipated debt repayment for 2014 and total debt to EBITDA leverage ratio as at December 31, 2014,
based on Superior’s 2014 financial outlooks and 2013 results, are detailed in the table below.
Debt Management Summary
2014 financial outlook AOCF per share – mid-point (1)
Maintenance capital expenditures, net
Capital lease obligation repayments
Restructuring costs
Cash flow available for dividends and debt repayment before growth capital
Expansion of Port Edwards and Saskatoon facilities
Other growth capital expenditures
Estimated 2014 free cash flow available for dividends and debt repayment
Dividends
Total estimated debt repayment
Per
Share
Millions of
Dollars
$ 1.80
(0.26)
(0.19)
(0.16)
$ 1.19
(0.19)
(0.12)
$ 0.88
(0.60)
$ 0.28
227.1
(33.0)
(24.5)
(20.0)
149.6
(23.5)
(15.5)
110.6
(75.7)
34.9
Estimated total debt to EBITDA ratio as at December 31, 2014
3.6X – 4.0X
3.6X – 4.0X
Dividends
Calculated payout ratio after all capital and payment to CRA
$ 0.60
69%
75.7
69%
(1) See “Financial Outlook” for additional details including assumptions, definitions and risk factors.
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.
30
SUPERIOR PLUS CORP.
Liquidity and Capital Resources
Superior’s total and available sources of credit are detailed in the chart below:
Available Credit Facilities
As at December 31, 2013
(millions of dollars)
Revolving term bank credit facilities (1)
Term loans (1)
Finance lease obligations
Total
Total
Amount
Letters of
Borrowing Credit Issued
Amount
Available
570.0
77.1
79.3
726.4
422.3
77.1
79.3
578.7
27.9
119.8
–
–
–
–
27.9
119.8
(1) Revolving term bank credit facilities and term loan balances are presented before deferred financing fees.
Superior’s revolving syndicated bank facility (Credit Facility), term loans and finance lease obligations
(collectively Borrowing) before deferred financing fees totaled $578.7 million as at December 31, 2013, a
decrease of $60.9 million from December 31, 2012. The decrease in Borrowing was primarily due to the equity
offering that Superior closed on March 27, 2013 for net proceeds of $137.6 million and the proceeds from the
issuance of $97.0 million of 6.00% debentures on July 22, 2013 offset in part by $143.9 million of debenture
redemptions (see Redemptions below) during 2013.
On October 28, 2013, Superior early redeemed all of its outstanding $150.0 million, 8.25% senior unsecured
debentures due October 27, 2016. The early redemption allows for Superior to benefit from lower average
interest costs.
On June 10, 2013, Superior completed an extension of its $570.0 million Credit Facility with eight lenders.
The Credit Facility matures on June 27, 2016 and can be expanded to $750.0 million. Financial covenant
ratios were unchanged, with a consolidated secured debt to consolidated EBITDA ratio and a consolidated
debt to consolidated EBITDA ratio of 3.0x and 5.0x, respectively. See “Summary of Cash Flow” for details on
Superior’s sources and uses of cash.
As at December 31, 2013, Debentures (before deferred issuance fees and discount values) issued by Superior
totaled $494.5 million which was $47.0 million lower than the balance as at December 31, 2012 due to the
redemption of the 5.85%, 5.85%, and 7.50% convertible unsecured subordinated debentures during 2013
(see Redemptions), offset in part by the issuance of $97.0 million of unsecured subordinated debentures
on July 22, 2013. See Note 19 to the audited consolidated financial statements for additional details on
Superior’s Debentures.
31
2013 Annual Report
Redemptions
On January 3, 2013, Superior completed the previously announced redemption of $50.0 million in principal
of its previously issued 5.85% convertible subordinated debentures (2015 Debentures) due October 31, 2015
and the remaining $25.0 million principal on April 9, 2013. Superior used funds from its Credit Facility to fund
the redemption of the 2015 Debentures. The debentures were redeemed, at the redemption price of $1,000
in cash per $1,000 principal of 2015 Debentures plus accrued and unpaid interest up to but excluding the
redemption date.
On September 3, 2013, Superior redeemed the entire $68.9 million principal of its 7.50% convertible
unsecured subordinated debentures (7.50% Debentures) in accordance with their governing indenture. The
7.50% Debentures were redeemed at the redemption price which is equal to the principal to be redeemed,
together with all accrued and unpaid interest thereon up to the redemption date, being $1,013.3562 per
$1,000 principal. The 7.50% Debentures ceased to bear interest from the redemption date.
On February 14, 2014, Superior closed a $125 million term loan facility which matures on August 14, 2014. The
term loan facility provides additional liquidity to ensure Superior has sufficient financial flexibility to manage
short term fluctuations in working capital requirements. Throughout the end of 2013 and the beginning of
2014, Superior’s working capital requirements have increased due to a rise in the wholesale cost of propane.
Superior anticipates that the wholesale cost of propane and the related working capital will normalize
throughout the remainder of the 2014 heating season. Superior intends to repay the credit facility before the
facility maturity date. As at December 31, 2013, approximately $119.8 million was available under the Credit
Facility which Superior considers sufficient to meet its expected net working capital, capital expenditure and
refinancing requirements during 2014 when combined with the above noted $125 million term loan facility.
Consolidated net working capital was $293.1 million as at December 31, 2013, an increase of $13.9 million
from net working capital of $279.2 million as at December 31, 2012. The increase was primarily due to
higher Specialty Chemicals’ accounts receivable due to increased revenues. Superior’s net working capital
requirements are financed by its Credit Facility.
Proceeds received from the DRIP for 2013 were $4.9 million as compared to $14.2 million in 2012. The decrease
was primarily a result of Superior announcing on March 7, 2013 that it will cease the active operation of its
DRIP following payment of the March dividend in April 2013.
As at December 31, 2013, when calculated in accordance with the Credit Facility, the consolidated secured
debt to compliance EBITDA ratio was 2.2 to 1.0 (December 31, 2012 — 1.9 to 1.0) and the consolidated debt
to compliance EBITDA ratio was 2.2 to 1.0 (December 31, 2012 — 2.4 to 1.0). For both of these covenants
outstanding Debentures are excluded. These ratios are within the requirements of Superior’s debt covenants.
In accordance with the Credit Facility, Superior must maintain a consolidated secured debt to compliance
EBITDA ratio of not more than 3.0 to 1.0 and not more than 3.5 to 1.0 as a result of acquisitions. In addition,
Superior must maintain a consolidated debt to compliance EBITDA ratio of not more than 5.0 to 1.0, excluding
Debentures. Superior’s total debt to compliance EBITDA ratio was 4.1 to 1.0 as at December 31, 2013 and
3.9 to 1.0 on a before restructuring cost basis. Also, Superior is subject to several distribution tests and the
most restrictive stipulates that Distributions (including Debenture holders and related payments) cannot
exceed compliance EBITDA less cash income taxes, plus $35.0 million on a trailing 12-month rolling basis. On
a 12-month rolling basis as at December 31, 2013, Superior’s available distribution amount was $145.0 million
under the above noted distribution test.
32
SUPERIOR PLUS CORP. On December 11, 2013, Standard & Poor’s raised Superior and Superior LP’s long-term corporate credit rating
to BB from BB- and the senior secured debt rating to BBB- from BB+. The outlook rating for Superior
remains stable. On July 2, 2013, Dominion Bond Rating Service confirmed Superior LP’s senior secured rating
of BB (high) and Superior LP’s senior unsecured rating of BB (low). The trend for both ratings is stable.
As at December 31, 2013, Superior had an estimated defined benefit pension solvency deficiency of
approximately $12.8 million (December 31, 2012 — $36.7 million) and a going concern solvency surplus of
approximately $11.5 million (December 31, 2012 — (deficiency $6.5) million). Funding requirements required
by applicable pension legislation are based upon going concern and solvency actuarial assumptions. These
assumptions differ from the going concern actuarial assumptions used in Superior’s financial statements.
Superior has sufficient liquidity through existing its Credit Facility and anticipated future operating cash flow
to fund this deficiency over the prescribed period.
In the normal course of business, Superior is subject to lawsuits and claims. Superior believes the resolution of
these matters will not have a material adverse effect, individually or in the aggregate, on Superior’s liquidity,
consolidated financial position or results of operations. Superior records costs as they are incurred or when
they become determinable.
Contractual Obligations and Other Commitments
(millions of dollars)
Note (1)
Total
Payments Due In
2015-2016
2017-2018
Thereafter
Borrowing (including capital leases)
Debentures
Minimum future lease payment
under finance leases
Operating leases (2)
US$ foreign currency
forward sales contracts (US$)
Natural gas, propane,
heating oil, and electricity
purchase commitments (3)
578.7
469.4
79.3
199.0
17
19
18
18
21
2014
67.0
–
24.8
39.3
496.7
72.7
39.5
66.8
569.4
219.0
299.4
Total contractual obligations
1,989.0
21
93.2
20.9
371.0
36.7
1,011.8
(1) Notes to the consolidated financial statements.
(2) Operating leases comprise Superior’s off-balance-sheet obligations.
(3) Does not include the impact of financial derivatives. See Note 21 to the consolidated financial statements.
11.1
313.5
11.1
92.9
51.0
35.6
515.2
3.9
83.2
3.9
–
–
–
91.0
33
2013 Annual Report
Shareholders’ Capital
The weighted average number of common shares issued and outstanding was 123.1 million in 2013 compared
to 111.9 million in 2012, an increase of 11.2 million from the prior year due to the issuance of 13,415,425 common
shares over the year. The following table provides details:
Average
Issuance
Price
per Share
Issued
Number of
Common
Shares (millions)
Closing Date
As at December 31, 2012
Issuance of common shares under Superior’s DRIP
January 15, 2013 through
Issuance of common shares
As at December 31, 2013
March 15, 2013
$10.76
March 27, 2013
$11.10
112.8
0.4
13.0
126.2
As at February 19, 2014, December 31, 2013 and December 31, 2012, the following common shares and
securities convertible into common shares were issued and outstanding:
February 19, 2014
December 31, 2013
December 31, 2012
Convertible
Securities
–
–
$ 172.5
$ 150.0
$ 75.0
$ 97.0
Shares
126.2
–
–
9.1
9.9
6.6
5.8
Convertible
Securities
–
–
$ 172.5
$ 150.0
$ 75.0
$ 97.0
Shares
126.2
–
–
9.1
9.9
6.6
5.8
Convertible
Securities
$ 75.0
$ 69.0
$ 172.5
$ 150.0
$ 75.0
–
Shares
112.8
2.4
5.3
9.1
9.9
6.6
–
157.6
157.6
146.1
(millions)
Common shares outstanding
5.85% Debentures (1)
7.50% Debentures (2)
5.75% Debentures (3)
6.00% Debentures (4)
7.50% Debentures (5)
6.00% Debentures (6)
Common shares
outstanding and issuable
upon conversion
of Debentures
(1) Convertible at $31.25 per share.
(2) Convertible at $13.10 per share.
(3) Convertible at $19.00 per share.
(4) Convertible at $15.10 per share.
(5) Convertible at $11.35 per share.
(6) Convertible at $16.75 per share.
34
SUPERIOR PLUS CORP.
Dividends Paid to Shareholders
Dividends paid to Superior’s shareholders depend on its cash flow from operating activities with consideration
for Superior’s changes in working capital requirements, investing activities and financing activities.
See “Summary of Adjusted Operating Cash Flow” and “Summary of Cash Flow” for additional details.
Dividends paid to shareholders for 2013 were $73.7 million (before DRIP proceeds of $4.9 million) or
$0.60 per share compared to $67.1 million or $0.60 per share in 2012. The increase of $6.6 million was
due to the issuance of shares under Superior’s DRIP during 2013 and the equity offering completed on
March 27, 2013. Superior’s monthly dividend is $0.05 per share or $0.60 per share on an annualized basis.
See “Debt Management Update” for further details. Dividends to shareholders are declared at the discretion
of Superior’s Board of Directors.
Superior’s primary sources and uses of cash are detailed below:
Summary of Cash Flow (1)
(millions of dollars)
Cash flow from operating activities
Investing activities: (2)
Purchase of property, plant and equipment
Proceeds on disposal of property, plant and equipment
Investment in supply agreement
Acquisitions
Cash flow used in investing activities
Financing activities:
Net proceeds (repayment) of revolving term bank credits and other debt
Redemption of senior unsecured debentures
Redemption premium on senior unsecured debentures
Repayment of senior secured notes
Repayment of finance lease obligation
Redemption of 5.75% convertible debentures
Redemption of 5.85% convertible debentures
Redemption of 7.50% convertible debentures
Proceeds from issuance of 6.00% convertible debentures
Issuance costs incurred on 6.00% convertible debentures
Proceeds from issuance of common shares
Issuance costs on common shares
DRIP proceeds
Dividends paid to shareholders
Cash flow used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents, beginning of period
Effect of translation of foreign-denominated cash and cash equivalents
Cash and cash equivalents, end of period
(1) See the consolidated statements of cash flow for additional details.
(2) See “Consolidated Capital Expenditure Summary” for additional details.
2013
185.3
(78.5)
6.6
(4.3)
(7.6)
(83.8)
87.4
(150.0)
(6.2)
(34.0)
(15.9)
–
(75.0)
(68.9)
97.0
(3.8)
143.9
(6.3)
4.9
(73.7)
(100.6)
0.9
7.6
(0.2)
8.3
2012
273.3
(43.8)
4.5
–
(5.5)
(44.8)
(74.4)
–
–
(31.8)
(16.4)
(49.9)
–
–
–
–
–
–
14.2
(67.1)
(225.4)
3.1
5.2
(0.7)
7.6
35
2013 Annual Report
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, share-based compensation 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 and,
as a result, Superior does not apply hedge accounting and is required to designate its derivatives and
non-financial derivatives as held for trading.
Energy Services enters into natural gas financial swaps in order to manage its economic exposure of providing
fixed-price natural gas to its customers and maintains its natural gas swap positions with six counterparties.
Energy Services monitors its fixed-price natural gas positions on a daily basis to evaluate compliance with
established risk management policies. Superior maintains a substantially balanced fixed-price natural gas
position in relation to its customer supply commitments.
Energy Services entered into electricity financial swaps with seven counterparties to manage the economic
exposure of providing fixed-price electricity to its customers. Energy Services monitors its fixed-price
electricity positions on a daily basis to evaluate compliance with established risk management policies.
Energy Services maintains a substantially balanced fixed-price electricity position in relation to its customer
supply commitments.
Energy Services entered into various propane forward purchase and sale agreements with more than
20 counterparties to manage the economic exposure of its wholesale customer supply contracts. Energy
Services monitors its fixed-price propane positions on a daily basis to monitor compliance with established
risk management policies. Energy Services maintains a substantially balanced fixed-price propane gas
position in relation to its wholesale customer supply commitments.
Superior, on behalf of its operating divisions, entered into foreign currency forward contracts with
12 counterparties to manage the economic exposure of its operations to movements in foreign currency
exchange rates. Energy Services contracts a portion of its fixed-price natural gas, propane and heating
oil purchases and sales in U.S. dollars and enters into forward U.S. dollar purchase contracts to create an
effective Canadian dollar fixed-price purchase cost. Specialty Chemicals 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.
36
SUPERIOR PLUS CORP. As at December 31, 2013, Superior had hedged approximately 86% of its estimated U.S. dollar exposure
for 2014. The estimated sensitivity of adjusted operating cash flow 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
United States exchange rate for 2014, is $0.2 million after giving effect to U.S. dollar forward contracts for
2014, as shown in the table below. Superior’s sensitivities and guidance are based on an anticipated average
Canadian to U.S. dollar foreign currency exchange rate for 2014 of 1.05.
2016
2017
2019 and
2018 Thereafter
(US$ millions except exchange rates)
Energy Services – US$ forward sales
Construction Products Distribution –
US$ forward sales
Specialty Chemicals – US$ forward sales
Corporate – US$ forward purchases
2014
26.0
12.0
181.0
(27.0)
2015
26.0
12.0
148.0
–
–
12.0
101.4
–
Net US$ forward sales
192.0
186.0
113.4
Energy Services – Average US$
forward sales rate
Construction Products Distribution –
Average US$ forward sales rate
Specialty Chemicals – Average
US$ forward sales rate
Corporate – US$ forward purchases rate
Net average external
US$/CDN$ exchange rate
1.01
1.01
–
1.00
1.00
1.03
1.03
1.01
1.02
–
1.04
–
1.04
–
1.02
1.01
1.04
1.04
–
–
51.0
–
51.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
52.0
36.0
481.4
(27.0)
542.4
1.01
1.01
1.03
1.01
1.02
Superior has interest rate swaps with four counterparties 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 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 creditworthiness of its significant
counterparties at the inception and throughout the term of a contract. Superior is also exposed to customer
credit risk. Energy Services and Construction Products Distribution deal with a large number of small
customers, thereby reducing this risk. Specialty Chemicals, due to the nature of its operations, sells its
products to a relatively small number of customers. Specialty Chemicals mitigates its customer credit risk
by actively monitoring the overall creditworthiness of its customers. Energy Services’ fixed-price energy
services business has minimal exposure to customer credit risk as local natural gas and electricity distribution
utilities have been mandated, for a nominal fee, to provide invoicing, collection and the assumption of bad
debt risk for residential and small commercial customers. Fixed-price energy services actively monitors the
creditworthiness of its direct-billed industrial customers. All of Superior’s business segments have credit risk
policies to minimize credit exposure.
For additional details on Superior’s financial instruments, including the amount and classification of gains and
losses recorded in Superior’s year-end consolidated financial statements, summary of fair values, notional
balances, effective rates and terms, and significant assumptions used in the calculation of the fair value of
Superior’s financial instruments, see Note 22 to the audited consolidated financial statements.
37
2013 Annual Report
Sensitivity Analysis
Superior’s estimated cash flow sensitivity in 2013 to various changes is provided below:
Change
Change
Impact on
AOCF
Per Share
Energy Services
Change in propane sales margin
Change in propane sales volume
Change in U.S. refined fuels sales margin
$0.005/litre
50 million litres
$0.005/litre
Change in U.S. refined fuels sales volume
50 million litres
Change in natural gas sales margin
Change in natural gas sales volume
Specialty Chemicals
Change in sales price
Change in sales volume
Construction Products Distribution
Change in sales margin
$0.10/GJ
2 million GJ
$10.00/MT
15,000 MT
1% change in average
gross margin
Change in sales volume
5% change in sales volume
3%
4%
6%
3%
18%
11%
1%
2%
4%
5%
$6.7 million
$8.3 million
$8.2 million
$3.5 million
$1.9 million
$1.1 million
$8.3 million
$4.6 million
$7.6 million
$4.8 million
Corporate
Change in CDN$/US$ exchange rate
Corporate change in interest rates
$0.01
0.5%
1%
17%
$0.2 million
$1.3 million
$0.05
$0.07
$0.07
$0.03
$0.02
$0.01
$0.07
$0.04
$0.06
$0.04
$nil
$0.01
Disclosure Controls and Procedures and Internal Controls Over
Financial Reporting
Disclosure controls and procedures are designed by or designed under the supervision of Superior’s President
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 organization 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 a Disclosure Committee (DC), which is
composed of senior managers of Superior. The DC has established procedures so that it becomes 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, 2013 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 (NI 51-109), are effective
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.
38
SUPERIOR PLUS CORP.
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 IFRS.
The evaluation of the design of Superior’s internal controls over financial reporting was conducted as at
December 31, 2013 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 controls
over financial reporting, as defined in NI 52-109, provides reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements in accordance with IFRS.
The evaluation of the effectiveness of Superior’s internal controls over financial reporting was conducted as
at December 31, 2013 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 NI 52-109, were effective at December 31, 2013.
The Canadian propane business information technology system implementation (see System Conversion)
commenced during the third quarter of 2013 and management has concluded that the change materially
affected Superior’s internal controls over financial reporting. Superior’s management team has participated
at all levels of planning and execution of the IT system and has concluded that no material deficiency has
resulted from this change to internal controls over financial reporting. The planning and execution of the
system transition will continue to be overseen by senior management with involvement by the President and
VP Finance of the business and the certifying officers.
No changes were made in Superior’s internal controls over financial reporting that have materially affected,
or are reasonably likely to materially affect, Superior’s internal control over financial reporting in the year
ended December 31, 2013.
Critical Accounting Policies and Estimates
Superior’s audited consolidated financial statements were prepared in accordance with IFRS. The significant
accounting policies are described in the audited consolidated financial statements for the year ended
December 31, 2013. Certain of these accounting policies, as well as estimates made by management in
applying such policies, are recognized as critical because they require management to make subjective or
complex judgments about matters that are inherently uncertain. Superior’s critical accounting estimates
relate to the allowance for doubtful accounts, employee future benefits, future income tax assets and
liabilities, the valuation of derivatives and non-financial derivatives, asset impairments and the assessment of
potential asset retirement obligations.
39
2013 Annual Report Critical Accounting Estimates
Superior’s significant accounting policies are described 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, actual results or specific industry trends differ from Superior’s expectations, Superior will
adjust its allowance for doubtful accounts and its bad debt 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 flow, 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.
40
SUPERIOR PLUS CORP. Fair values determined using valuation models require assumptions concerning the amount and timing of
estimated future cash flow 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 Specialty Chemicals’ 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.
Recent Accounting Pronouncements
Certain new standards, interpretations, amendments or improvements to existing standards were issued by
the IASB or the International Financial Reporting Interpretations Committee (IFRIC) that are mandatory for
accounting periods beginning on January 1, 2013 or later. The affected standards that apply to Superior are
as follows:
IFRS 9 — Financial Instruments: Classification and Measurement
IFRS 9, Financial Instruments, was issued in November 2009 and is intended to replace International
Accounting Standard (IAS) 39, Financial Instruments: Recognition and Measurement. IFRS 9 uses a single
approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the
multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments
in the context of its business model and the contractual cash flow characteristics of the financial assets.
The new standard also requires a single impairment method to be used, replacing the multiple impairment
methods in IAS 39. Requirements for financial liabilities were added in October 2010 and they largely carried
forward existing requirements in IAS 39, except that fair value changes due to credit risk for liabilities
designated at fair value through profit and loss would generally be recorded in other comprehensive income.
This standard must be applied for accounting periods beginning on or after January 1, 2017, with earlier
adoption permitted. Superior is assessing the effect of IFRS 9 on its financial results and financial position;
changes, if any, are not expected to be material.
International Financial Reporting Interpretations Committee (IFRIC) 21, Levies
IFRIC 21, Levies, issued on May 20, 2013 provides guidance on when to recognize a liability for a levy
imposed by a government, both for levies that are accounted for in accordance with IAS 37 Provisions,
Contingent Liabilities and Contingent Assets and those where the timing and amount of the levy is certain.
The Interpretation covers the accounting for outflows imposed on entities by governments (including
government agencies and similar bodies) in accordance with laws and/or regulations. However, it does not
include income taxes (see IAS 12 Income Taxes), fines and other penalties, liabilities arising from emissions
trading schemes and outflows within the scope of other Standards. It also provides the following guidance
on recognition of a liability to pay levies: the liability is recognized progressively if the obligating event
occurs over a period of time and if an obligation is triggered on reaching a minimum threshold, the liability is
recognized when that minimum threshold is reached. This standard must be applied for accounting periods
beginning on or after January 1, 2014, with retrospective application from December 31, 2012. Superior is
assessing the effect of IFRIC 21 on its financial results and financial position; changes, if any, are not expected
to be material to Superior’s annual results although significant changes may result on a quarterly basis.
41
2013 Annual Report Superior adopted the following on January 1, 2013:
IFRS 7 — Financial Instruments: Disclosures, Amendments
The amendments to IFRS 7 require entities to disclose information about rights of offset and related
arrangements (such as collateral posting requirements under an enforceable master netting agreement or
similar arrangement). Financial assets and liabilities are offset and the net amount reported in the balance
sheet when Superior has the legally enforceable right to set-off the recognized amounts and there is an
intention to settle on a net basis or realize the asset and settle the liability simultaneously. This standard
must be applied for accounting periods beginning on or after January 1, 2013. Superior adopted IFRS 7
amendments on January 1, 2013, with retrospective application from December 31, 2012 with no impact to
its financial results.
IFRS 7 — Financial Instruments: Disclosures, Amendments Regarding Disclosures —
Transfer of Financial Assets
The December 2011 changes by the IASB and the Financial Accounting Standards Board (FASB) to IFRS 7
require quantitative and qualitative disclosure regarding transfers of financial assets when the transferred
assets are not derecognized in their entirety or the transferor retains continuing managerial involvement. The
amendment also requires disclosure of supplementary information if a substantial portion of the total amount
of the transfer activity occurs in the closing days of a reporting period. Superior adopted the amendments
on January 1, 2012, with no impact to Superior.
IFRS 10 — Consolidated Financial Statements
IFRS 10 establishes principles for the presentation and preparation of consolidated financial statements when
an entity controls one or more other entities. IFRS 10 requires an entity to consolidate an investee when it
is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to
affect those returns through its power over the investee. Under existing IFRS, consolidation is required when
an entity has the power to govern the financial and operating policies of an entity so as to obtain benefits
from its activities. The revised standard was effective for Superior on January 1, 2013. Superior adopted the
amendments on January 1, 2013, with no impact to Superior.
IFRS 11 — Joint Arrangements
IFRS 11 requires a venture to classify its interest in a joint arrangement as a joint venture or joint operation.
Joint ventures will be accounted for using the equity method, whereas joint operations will require the venture
to recognize its share of the assets, liabilities, revenue and expenses. This standard became applicable on
January 1, 2013. Superior adopted the amendments on January 1, 2013, with no impact to Superior.
IFRS 12 — Disclosure of Interests in Other Entities
IFRS 12 establishes disclosure requirements for interests in other entities, such as joint arrangements,
associates, special purpose vehicles and off-balance-sheet vehicles. The standard carries forward
existing disclosure and introduces significant additional disclosure requirements that address the nature of,
and risks associated with, an entity’s interests in other entities. This standard became effective for Superior
on January 1, 2013. Superior adopted the amendments on January 1, 2013, with no impact to Superior.
42
SUPERIOR PLUS CORP. IFRS 13 — Fair Value Measurement
IFRS 13 defines fair value, sets out a single IFRS framework for measuring fair value and requires disclosure
about fair value measurements. IFRS 13 applies to accounting standards that require or permit fair value
measurements or disclosure about fair value measurements (and measurements, such as fair value less costs
to sell, based on fair value or disclosure about those measurements), except in specified circumstances.
IFRS 13 became applicable on January 1, 2013. Superior adopted the amendments on January 1, 2013, with
no impact to Superior.
IAS 1 — Presentation of Other Comprehensive Income
The amendments to IAS 1, Presentation of Financial Statements, issued in June 2011, require entities to
group items presented in other comprehensive income on the basis of whether they might be reclassified
to the consolidated statement of income in subsequent periods and items that will not be reclassified to the
consolidated statement of income. The amendments did not address which items are presented in other
comprehensive income and did not change the option to present items net of tax. The amendments to
IAS 1 became effective for annual periods beginning on or after July 1, 2012, which was January 1, 2013 for
Superior, and are to be applied retrospectively. Superior adopted the amendments on January 1, 2013, with
no impact to Superior.
IAS 12 — Income Taxes, Amendments Regarding Deferred Tax: Recovery of Underlying Assets
IAS 12 was amended in December 2010 to remove subjectivity in determining on which basis an entity
measures the deferred tax relating to an asset. The amendment introduced a presumption that an entity
will assess whether an asset’s sale will recover its carrying amount. Superior’s adoption of IAS 12 on
January 1, 2012 did not affect Superior’s financial results or financial position.
IAS 19 — Employee Benefits, Amendments
IAS 19 amendments were issued in June 2011 that changed the accounting and disclosure for defined benefit
plans and termination benefits. This standard requires that the changes in defined benefit obligations
are recognized as they occur, eliminating the corridor approach and accelerating the recognition of past
service costs. The changes in defined benefit obligations and plan assets are to be disaggregated into three
components: service costs, net interest on the net defined benefit liabilities (assets) and re-measurements of
the net defined benefit liabilities (assets). This standard must be applied for accounting periods beginning
on or after January 1, 2013. Superior adopted IAS 19 on January 1, 2013, with retrospective application from
January 1, 2012. Under the retrospective application of the new standard, the financial impact is an increase
of $3.1 million to pension expense and a corresponding decrease to accumulated other comprehensive
loss for the year ended December 31, 2012. The impact on Superior’s balance sheet as at January 1, 2012
is a $4.0 million increase to deficit, a $0.1 million decrease in employee benefit obligations and a
corresponding decrease to accumulated other comprehensive loss of $4.1 million. The impact on the year end
December 31, 2012 was an increase in selling, distribution and administrative costs of $3.1 million, respectively.
See below for the quarterly impact to AOCF in 2012.
43
2013 Annual Report Reconciliation of the Retrospective Impact of IAS 19
AOCF as reported under IFRS in 2012
IAS 19 quarterly impact:
Q1 decrease in AOCF
Q2 decrease in AOCF
Q3 decrease in AOCF
Q4 decrease in AOCF
AOCF as revised for 2012
Selected Financial Information
(millions of dollars except per share amounts)
Total assets (as at December 31)
Revenues
Gross profit
Net earnings
Per share, basic
Per share, diluted
Cash flow from operating activities
Adjusted operating cash flow
Per share, basic
Per share, diluted
Adjusted operating cash flow before restructuring costs
Per share before restructuring costs, basic
Per share before restructuring costs, diluted
Cash dividends per share
Current and long-term borrowing (1) (as at December 31)
Millions of Dollars
Per Share
193.5
$ 1.73
(0.8)
(0.8)
(0.8)
(0.7)
$ (0.01)
$ (0.01)
$ (0.01)
–
190.4
$ 1.70
2013
2,141.1
3,752.8
868.3
52.7
$ 0.43
$ 0.40
185.3
192.3
$ 1.56
$ 1.53
207.6
$ 1.69
$ 1.64
$ 0.60
578.7
2012 (2(3)
2,032.1
3,624.3
846.3
90.0
$ 0.80
$ 0.80
273.3
190.4
$ 1.70
$ 1.66
200.4
$ 1.79
$ 1.74
$ 0.60
639.6
(1) Current and long-term borrowing before deferred financing fees, option value and accounts receivable securitization and Debentures.
(2) The year ended December 31, 2012 was restated for the impact of adopting IAS 19, Employee Benefits, amendments effective January 1, 2013.
(3) December 31, 2012 was restated for the impact of a prior period adjustment. Refer to Note 15 to the consolidated financial statements.
Fourth Quarter Results
Fourth quarter adjusted operating cash flow (before restructuring costs of $14.2 million) was $70.1 million, an
increase of $4.2 million or 6% from the prior year quarter. The increase in adjusted operating cash flow was
primarily due to higher operating results at Specialty Chemicals and lower interest costs. Adjusted operating
cash flow (before restructuring costs) of $0.56 per share, decreased by $0.03 per share from the prior year
quarter due to a 12% increase in the weighted average number of shares outstanding offset in part by the
increase in adjusted operating cash flow as previously noted. The average number of shares outstanding
increased in 2013 as a result of shares issued from Superior’s DRIP and the completion of an equity offering
on March 27, 2013 for gross proceeds of $137.6 million and 13.0 million shares.
44
SUPERIOR PLUS CORP.
The net loss for the fourth quarter was $10.9 million, compared to net earnings of $13.5 million in the prior
year quarter. Net earnings were reduced mainly by higher restructuring costs and impairments offset in part
by a lower unrealized derivative financial instrument losses and a higher income tax recovery. The decrease
in unrealized losses on derivative financial instruments was principally due to lower losses in the fourth
quarter on Superior’s foreign currency financial derivatives compared to the prior year quarter as a result
of fluctuations in the spot and forward price for U.S. dollars. An intangible asset and goodwill impairment
charge of $15.5 million was recognized during 2013 within the U.S. refined fuels business due to reductions
in the short-term forecast for the business and challenging wholesale market conditions. Revenue of
$1,034.7 million was $100.7 million higher than in the prior year’s quarter due to increased Energy Services’
revenue as a result of higher propane prices and sales volumes and increased Specialty Chemicals’ revenue
due to higher sales volumes and pricing. Gross profit of $240.8 million was $12.6 million higher than in
the prior year quarter primarily due to increased Energy Services’ gross profits due in turn to higher sales
volumes and gross margins and higher Construction Products Distribution gross profits due to higher gross
margins. Operating expenses of $200.9 million in the fourth quarter were $22.3 million higher than in the prior
year quarter due to increased operating expenses associated with higher sales volumes and restructuring
costs incurred at Construction Products Distribution and Energy Services. Total income tax recovery for the
fourth quarter was $7.2 million compared to income tax recovery of $0.9 million in the prior year quarter. The
increase in income tax recovery was due to lower net earnings in the fourth quarter of 2013 than the prior
year quarter.
Quarterly Financial and Operating Information
(millions of dollars except
per share amounts)
Canadian propane sales volumes
2013 Quarters
2012 Quarters (2)(3)
Fourth
Third
Second
First
Fourth
Third
Second
First
(millions of litres)
405
232
265
429
383
240
255
413
U.S. refined fuels sales volumes
(millions of litres)
411
326
383
512
428
335
363
473
Natural gas sales volumes
(millions of GJs)
Electricity sales volumes
(millions of KWh)
Chemical sales volumes
(thousands of MT)
Revenues
Gross profit
Net earnings (loss)
Per share, basic
Per share, diluted
Adjusted operating cash flow
Per share, basic
Per share, diluted
Adjusted operating cash flow
before restructuring costs
Per share, basic
Per share, diluted
Net working capital (1)
(millions of dollars)
5
5
5
5
5
5
5
5
228
249
205
205
200
245
187
185
199
204
813.8
184.9
35.9
220
1,034.7
240.8
10.9
203
854.4 1,049.9
253.1
190.0
31.4
(25.5)
200
934.0
228.2
13.5
$ 0.09 $ 0.28 $ (0.20) $ 0.28 $ 0.12
$ 0.05 $ 0.12 $ (0.20) $ 0.27 $ 0.12
61.9
$ 0.44 $ 0.19 $ 0.24 $ 0.72 $ 0.55
$ 0.43 $ 0.19 $ 0.24 $ 0.69 $ 0.53
82.0
30.2
55.9
24.2
70.1
65.9
$ 0.56 $ 0.19 $ 0.24 $ 0.72 $ 0.59
24.4
30.9
82.2
193
790.1
195.9
35.9
$ 0.32
$ 0.29
33.7
$ 0.30
$ 0.30
190
834.3
184.1
12.7
$ 0.11
$ 0.11
28.2
$ 0.25
$ 0.25
188
1,065.9
238.1
27.9
$ 0.25
$ 0.24
66.6
$ 0.60
$ 0.60
37.3
$ 0.33
29.3
$ 0.26
67.9
$ 0.61
$ 0.54 $ 0.19 $ 0.24 $ 0.72 $ 0.57
$ 0.33
$ 0.26
$ 0.61
293.1
202.0
242.3
280.5
279.2
218.3
234.4
325.3
(1) Net working capital reflects amounts as at the quarter-end and is comprised of accounts receivable and inventories, less trade and other payables and
deferred revenue.
(2) Superior’s 2012 quarterly results were restated for the adoption of IAS 19 Employee Benefits, amendments.
(3) December 31, 2012 was restated for the impact of a prior period adjustment. Refer to Note 8 to the consolidated financial statements.
45
2013 Annual Report
Forward-Looking Information
Certain information included herein is forward-looking information within the meaning of applicable
Canadian securities laws. Forward-looking information may include statements regarding the objectives,
business strategies to achieve those objectives, expected financial results (including those in the area of risk
management), economic or market conditions, and the outlook of or involving Superior, Superior LP and
its businesses. Such information is typically identified by words such as “anticipate”, “believe”, “continue”,
“could”, “estimate”, “expect”, “plan”, “intend”, “forecast”, “future”, “guidance”, “may”, “predict”, “project”,
“should”, “strategy”, “target”, “will” or similar expressions suggesting future outcomes.
Forward-looking information in this document includes: future financial position, consolidated and business
segment outlooks, expected EBITDA from operations, expected adjusted operating cash flow (AOCF) and
AOCF per share, expected leverage ratios and debt repayment, debt management summary, expectations
in terms of the cost of operations, capital spending and maintenance and the variability of these costs,
business strategy and objectives, development plans and programs, business expansion and improvement
projects, expected timing of commercial production and the costs and benefits associated therewith, market
conditions in Canada and the U.S., expected tax consequences of the Conversion, the expected challenge by
the CRA of the tax consequences of the Conversion (and the expected timing and impact of such process
including any payment of taxes and the quantum of such payments), future income taxes, the impact of
proposed changes to Canadian tax legislation or U.S. tax legislation, future economic conditions, future
exchange rates and exposure to such rates, dividend strategy, payout ratio, expected weather, expectations
in respect to the global economic environment, Superior’s trading strategy and the risk involved in executing
it, the impact of certain hedges on future reported earnings and cash flows, commodity prices and costs,
the impact of contracts for commodities, demand for propane, heating oil and similar products, demand for
chemicals including sodium chlorate and chloralkali, effect of operational and technological improvements,
anticipated costs and benefits of restructuring activities, business enterprise system upgrade plans, future
working capital, expected government regulatory regimes and legislation and their expected impact on
Superior’s compliance costs, expectations for the outcome of existing or potential legal and contractual
claims, Superior’s ability to obtain financing on acceptable terms, expected life of facilities and statements
regarding net working capital and capital expenditure requirements of Superior or Superior Plus LP.
Forward-looking information is provided for the purpose of providing information about management’s
expectations and plans about the future and may not be appropriate for other purposes. Forward-looking
information herein is based on various assumptions and expectations that Superior believes are reasonable
in the circumstances. No assurance can be given that these assumptions and expectations will prove to
be correct. Those assumptions and expectations are based on information currently available to Superior,
including information obtained from third-party industry analysts and other third-party sources, and the
historical performance of Superior’s businesses. Such assumptions include anticipated financial performance,
current business and economic trends, the amount of future dividends paid by Superior, business prospects,
availability and utilization of tax basis, regulatory developments, currency, exchange and interest rates,
trading data, cost estimates, Superior’s ability to obtain financing on acceptable terms, the assumptions set
forth under the “Financial Outlook” sections of this MD&A and are subject to the risks and uncertainties set
forth on subsequent pages.
46
SUPERIOR PLUS CORP. By its very nature, forward-looking information involves numerous assumptions, risks and uncertainties,
general and specific. Should one or more of these risks and uncertainties materialize or should underlying
assumptions prove incorrect, as many important factors are beyond Superior’s control, Superior’s or Superior
LP’s actual performance and financial results may vary materially from those estimates and intentions
contemplated, expressed or implied in the forward-looking information. These risks and uncertainties include
incorrect assessments of value when making acquisitions, increases in debt service charges, the loss of key
personnel, fluctuations in foreign currency and exchange rates, inadequate insurance coverage, liability for
cash taxes, counterparty risk, compliance with environmental laws and regulations, operational risks involving
Superior’s facilities, force majeure, labour relations matters, Superior’s ability to access external sources of
debt and equity capital, and the risks identified in (i) this MD&A under Risk Factors and (ii) Superior’s most
recent Annual Information Form. The preceding list of assumptions, risks and uncertainties is not exhaustive.
When relying on Superior’s forward-looking information to make decisions with respect to Superior, investors
and others should carefully consider the preceding factors, other uncertainties and potential events. Any
forward-looking information is provided as of the date of this MD&A and, except as required by law, neither
Superior nor Superior LP undertakes to update or revise such information to reflect new information,
subsequent or otherwise. For the reasons set forth above, investors should not place undue reliance on
forward-looking information.
Non-IFRS Financial Measures
Adjusted Operating Cash Flow
AOCF is equal to cash flow from operating activities as defined by IFRS, adjusted for changes in non-
cash working capital, other expenses, non-cash interest expense, current income taxes and finance costs.
Superior may deduct or include additional items in its calculation of AOCF; these items would generally,
but not necessarily, be items of a non-recurring nature. AOCF is the main performance measure used by
management and investors to evaluate Superior’s performance. Readers are cautioned that it is not a defined
performance measure under IFRS and cannot be assured. Superior’s calculation of AOCF may differ from
similar calculations used by comparable entities. AOCF 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
AOCF. Adjustments recorded by Superior as part of its calculation of AOCF include, but are not limited to,
the impact of the seasonality of Superior’s businesses, principally the Energy Services’ segment, 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 expenses, which can differ significantly from quarter to
quarter. Adjustments are also made to reclassify the cash flow related to natural gas and electricity customer
contract-related costs in a manner consistent with the income statement’s recognition of these costs. AOCF
is reconciled to net cash flow from operating activities on page 9.
EBITDA
EBITDA represents earnings before taxes, depreciation, amortization, finance expense and certain other
non-cash expenses, and is used by Superior to assess its consolidated results and those of its operating
segments. EBITDA is not a defined performance measure under IFRS. Superior’s calculation of EBITDA may
differ from similar calculations used by comparable entities. The EBITDA of Superior’s operating segments
may be referred to as EBITDA from operations. Net earnings before income taxes are reconciled to EBITDA
from operations on page 48.
47
2013 Annual Report Compliance EBITDA
Compliance EBITDA represents earnings before interest, taxes, depreciation, amortization and certain
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 compliance with its debt covenants and other credit
information. Compliance EBITDA is not a defined performance measure under IFRS. Superior’s calculation
of compliance EBITDA may differ from similar calculations used by comparable entities. See Note 23 to the
audited consolidated financial statements for a reconciliation of net earnings to compliance EBITDA.
Payout Ratio
Payout ratio represents dividends as a percentage of AOCF less other capital expenditures, and is used by
Superior to assess its financial results and leverage. Payout ratio is not a defined performance measure under
IFRS. Superior’s calculation of payout ratio may differ from similar calculations used by comparable entities.
Reconciliation of Net Earnings before Income Taxes to EBITDA
from Operations (1)(2)
2013 (millions of dollars)
Net earnings before income taxes
Add: Depreciation included in selling, distribution, and
administrative costs and amortization of intangible assets
Depreciation included in cost of sales
Customer contract-related costs
(Gains) losses on disposal of assets
Impairment of intangible assets and goodwill
Restructuring costs
Finance expense
Unrealized gains on derivative financial instruments
EBITDA from operations
2012 (millions of dollars)
Net earnings before income taxes (3)
Add: Depreciation included in selling, distribution,
and administrative costs and amortization of intangible assets
Depreciation included in cost of sales
Customer contract-related costs
Losses on disposal of assets
Impairment of property, plant and equipment
Restructuring costs
Finance expense
Unrealized gains on derivative financial instruments
EBITDA from operations
Energy
Services
94.5
55.1
−
(0.8)
(3.2)
15.5
9.1
2.7
(35.4)
137.5
Energy
Services
111.7
56.7
−
(1.1)
0.2
4.7
3.5
4.5
(43.8)
136.4
Specialty
Chemicals
72.1
−
41.3
−
0.2
−
−
0.4
(0.3)
Construction
Products
Distribution
20.3
6.0
−
−
0.1
−
6.2
0.6
−
113.7
33.2
Specialty
Chemicals
75.2
6.3
44.9
−
0.6
−
−
0.3
(1.6)
Construction
Products
Distribution
13.8
6.1
−
−
0.2
−
6.5
0.7
−
125.7
27.3
(1) See the audited consolidated financial statements for net earnings before income taxes, depreciation of property, plant and equipment, intangible
assets and accretion of convertible debenture issuance costs, depreciation included in cost of sales, customer contract-related costs and unrealized
gains or losses on derivative financial instruments.
(2) See “Non-IFRS Financial Measures” for additional details.
(3) The year ended December 31, 2012 was restated for the impact of adopting IAS 19, Employee Benefits, amendments effective January 1, 2013.
48
SUPERIOR PLUS CORP.
Reconciliation of Divisional Segmented Revenue, Cost of Sales and
Cash Operating and Administrative Costs Included in this MD&A
2013
2012
Energy
Services
Construction
Specialty
Products
Chemicals Distribution
Energy
Services
Specialty
Chemicals
Construction
Products
Distribution
Revenue per financial statements
2,372.9
579.7
800.2
2,301.6
543.8
778.9
Foreign currency gains (losses)
related to working capital
−
2.9
−
−
Revenue per the MD&A
2,372.9
582.6
800.2
2,301.6
(1.6)
542.2
−
778.9
Cost of products sold per
financial statements
Non-cash amortization
Cost of products sold
per the MD&A
(1,907.7)
(372.1)
(604.2)
(1,854.2)
(328.8)
(595.0)
−
41.3
−
−
44.9
−
(1,907.7)
(330.8)
(604.2)
(1,854.2)
(283.9)
(595.0)
Gross profit
465.2
251.8
196.0
447.4
258.3
183.9
Cash operating and administrative
costs per financial statements
Amortization and depreciation
expenses
(Gains) losses on disposal of assets
Customer contract-related costs
Restructuring costs
Reclassification of foreign currency
(gains) losses related to
working capital
Cash operating and administrative
costs per the MD&A
(387.9)
(135.4)
(175.1)
(370.3)
(141.1)
(169.4)
55.1
(3.2)
(0.8)
9.1
−
0.2
−
−
6.0
0.1
−
6.2
56.7
0.2
(1.1)
3.5
6.3
0.6
−
−
−
(2.9)
−
−
1.6
6.1
0.2
−
6.5
−
(327.7)
(138.1)
(162.8)
(311.0)
(132.6)
(156.6)
49
2013 Annual Report
Reconciliation of Net Earnings to Compliance EBITDA(2)(3)
(millions of dollars)
Net earnings
Adjusted for:
Finance expense
Realized gains on derivative financial instruments included in finance expense
Depreciation included in selling, distribution and administrative costs
Depreciation included in cost of sales
Amortization of intangible assets
(Gains) losses on disposal of assets
Impairment of property, plant and equipment
Income tax expense
Unrealized losses (gains) on derivative financial instruments
Pro-forma impact of acquisitions
Compliance EBITDA (2)(3)
Restructuring costs
Compliance EBITDA before restructuring costs
2013
52.7
71.8
3.9
42.2
41.3
19.4
(2.9)
15.5
5.7
5.1
8.5
263.2
15.3
278.5
2012 (1)
90.0
77.6
2.2
42.4
44.9
23.5
1.0
4.7
9.0
(32.1)
−
263.2
10.0
273.2
(1) The year ended December 31, 2012 was restated for the impact of adopting IAS 19 Employee Benefits, amendments effective January 1, 2013.
(2) See the consolidated financial statements for additional details.
(3) See “Non-IFRS Financial Measures” for additional details.
Risk Factors to Superior
The risks factors and uncertainties detailed below are a summary of Superior’s assessment of its
material risk factors as detailed in Superior’s 2013 Annual Information Form under “Risk Factors” which
is filed on the Canadian Securities Administrators’ website, www.sedar.com, and on Superior’s website,
www.superiorplus.com.
Risks to Superior
Superior depends entirely on the operations and assets of Superior LP. Superior’s ability to make dividend
payments to its shareholders depends on the ability of Superior LP to make distributions on its outstanding
limited partnership units, as well as on the operations and business of Superior LP.
There is no assurance regarding the amount of cash to be distributed by Superior LP or generated by Superior
LP and, therefore, there is no assurance regarding funds available for dividends to shareholders. The 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.
50
SUPERIOR PLUS CORP.
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.
As previously disclosed by Superior, on April 2, 2013, Superior received from the CRA, Notices of Reassessment
for Superior’s 2009 and 2010 taxation years reflecting the CRA’s intent to challenge the tax consequences
of the Conversion. The CRA’s position is based on the acquisition of control rules, in addition to the general
anti-avoidance rules in the Tax Act. See Canada Revenue Agency Income Tax Update.
During 2013, Superior filed a Notice of Objection and a Notice of Appeal with respect to the Notice of
Reassessments received on May 8, 2013. Superior anticipates that if the case proceeds in the Tax Court of
Canada, the case could be heard in the first quarter of 2015, with a decision rendered by the end of fiscal
2015. If a decision of the Tax Court of Canada were to be appealed, the appeal process could reasonably be
expected to take an additional 2 years. If Superior receives a positive decision then any taxes, interest and
penalties paid to the CRA will be refunded plus interest and if Superior is unsuccessful then any remaining
taxes payable plus interest and penalties will have to be remitted.
Superior remains confident in the appropriateness of its tax filing position and the expected tax
consequences of the Conversion and intends to vigorously defend such position. Superior also strongly
believes that there was no acquisition of control of Ballard and that the general anti-avoidance rule does not
apply to the Conversion and intends to file its future tax returns on a basis consistent with its view of the
outcome of the Conversion.
Upon receipt of the Notices of Reassessment, 50% of the taxes payable pursuant to such Notices of
Reassessment, must be remitted to the CRA. Superior would also be required to make a payment of 50% of
the tax liability claimed by the CRA in order to appeal any reassessment and, based on Superior’s 2011 and
2012 taxation years, that amount would be approximately $10 million. Superior would also be required to
make a payment of 50% of the taxes the CRA claims are owed in any future tax year if the CRA were to issue
a similar notice of reassessment for such years and Superior were to appeal such other years. Superior has
90 days from any future Notice of Reassessment to prepare and file a Notice of Objection, which would be
reviewed by the CRA’s appeals division. If the CRA is not in agreement with Superior’s Notice of Objection,
Superior has the option to appeal to the Tax Court of Canada following the same process described above.
The credit facilities and U.S. notes 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 and debenture redemptions under
its term credit facilities may be impaired.
51
2013 Annual Report Superior maintains substantial floating interest rate exposure through a combination of floating interest rate
borrowing and the use of derivative instruments. Demand levels for approximately half of Energy Services’
sales and substantially all of Specialty Chemicals’ and Construction Products Distribution’s sales are affected
by general economic trends. Generally speaking, when the economy is strong, interest rates increase, as
does demand from Superior’s customers, thereby increasing Superior’s sales and its 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. Increased interest rates, however, will affect
Superior’s borrowing costs, which may have an adverse effect on Superior.
A portion of Superior’s net cash flow is denominated in U.S. dollars. Accordingly, fluctuations in the Canadian/
U.S. dollar exchange rate can affect profitability. Superior attempts to mitigate this risk by hedging.
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.
There can be no assurance that income tax laws in the numerous jurisdictions in which Superior operates
will not be changed, interpreted or administered in a manner which adversely affects Superior and its
shareholders. In addition, there can be no assurance that the CRA (or a provincial tax agency), the U.S.
Internal Revenue Service (or a state or local tax agency), or the Chilean Internal Revenue Service (collectively,
the Tax Agencies) will agree with how Superior calculates its income for tax purposes or that the various
Tax Agencies will not change their administrative practices to the detriment of Superior or its shareholders.
Risks to Superior’s Segments
Energy Services
Canadian Propane Distribution and U.S. Refined Fuels
Propane is sold in competition with other energy sources such as fuel oil, electricity and natural gas, some
of which are less costly on an energy-equivalent basis. While propane is usually more cost-effective than
electricity, electricity is a major competitor in most areas. Fuel oil is also used as a residential, commercial
and industrial source of heat and, in general, is less costly on an equivalent-energy basis, although operating
efficiencies, environmental and air quality factors help make propane competitive with fuel oil. Except for
certain industrial and commercial applications, propane is generally not competitive with natural gas in
areas with natural gas service. Other alternative energy sources such as compressed natural gas, methanol
and ethanol are available or could be further developed and could have an impact on the propane industry
in general and Canadian propane distribution in particular, in the future. The trend towards increased
conservation measures and technological advances in energy efficiency may have a detrimental effect
on propane demand and Canadian propane distribution’s sales. Demand for traditional propane end-use
applications is increasing marginally with general economic growth. However, increases in the cost of
propane encourage customers to reduce fuel consumption and to invest in more energy efficient equipment,
reducing demand. Automotive propane demand is currently stabilizing after several years of decline but the
decline trend could resume depending on propane pricing and the market acceptance of propane conversion
options and the availability of infrastructure.
52
SUPERIOR PLUS CORP. Competition in the U.S. refined fuels business’ markets generally occurs on a local basis between large,
full-service, multi-state marketers and smaller, independent local marketers. Marketers primarily compete
based on price and service and tend to operate in close proximity to customers, typically within a 35-mile
marketing radius from a central depot, in order to minimize delivery costs and provide prompt service.
Weather and general economic conditions affect distillates market volumes. Weather influences the
immediate demand for distillates, primarily for heating, while longer-term demand declines due to economic
conditions as customers trend towards conservation and supplement heating with alternative sources such
as wood pellets. Also, harsh weather can create conditions that exacerbate demand for propane, impede the
transportation and delivery of propane, or restrict the ability for Superior Propane to obtain propane from its
suppliers. Such conditions may also increase Superior Propane’s operating costs and may reduce customers’
demand for propane, any of which may have an adverse effect on Superior. Spikes in demand caused by
weather or other factors can stress the supply chain and hamper Superior’s ability to obtain additional
quantities of propane. Transportation providers (rail and truck) have limited ability to provide resources in
terms of extreme peak demand.
The trend towards increased conservation measures and technological advances in energy efficiency may
have a detrimental effect on propane and heating oil demand and Superior’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 (between when Superior purchases the propane and when the customer purchases the propane) may
result in positive or negative gross margin fluctuations.
Superior offers its customers various fixed-price propane and heating oil programs. In order to mitigate the
price risk from offering these services, Superior 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’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 has established a comprehensive environmental, health and safety protection program. It consists
of an environmental policy, codes of practice, periodic self-audits, employee training, quarterly and annual
reporting and emergency prevention and response.
The U.S. refined fuels business, through a centralized safety and environment management system, ensures
that safety practices and regulatory compliance are an important part of its business. The storage and
delivery of refined fuels pose the risk of spills which could adversely affect the soil and water of storage
facilities and customer properties.
Superior’s fuel distribution businesses are based and operate in Canada and the United States and, as a
result, such operations could be affected by changes to laws, rules or policies which could either be more
favourable to competing energy sources or increase compliance costs or otherwise negatively affect the
operations of Energy Services in comparison to such competing energy sources. Any such changes could
have an adverse effect on the operations of Energy Services.
53
2013 Annual Report In 2013, two regions at Superior Propane converted to a new order to cash, billing and logistics IT system
to replace the distribution and invoicing functions of the present enterprise system. While no significant
financial or business issues have resulted, in 2014, Superior Propane will be implementing the same
system in its remaining four regions in 2014. To mitigate the risk associated with system changes,
Superior Propane has leveraged operational learnings from the USRF organization, which has been using
this system and implementation will be rolled out one region at a time. Superior will migrate its current data
center located in Calgary, Alberta to a new location in New Jersey, United States through 2014 along with
approximately 175 services and more than 200 applications. A disruption in the availability of current and
future business applications may result from the migration, leading to Superior being unable to carry out
required business transactions.
Approximately 18% of Superior’s Canadian propane distribution business employees and 5% of U.S. refined
fuels distribution business employees are unionized. Collective bargaining agreements are renegotiated in
the normal course of business. While labour disruptions are not expected, there is always risk associated with
the renegotiation process that could have an adverse impact on Superior.
Fixed-price Energy Services Business
There may be new market entrants in the energy retailing business that compete directly for the customer
base that Superior targets, slowing or reducing its market share.
Superior Energy Management (SEM) purchases natural gas to meet its estimated commitments to its
customers based on their historical consumption of gas. Depending on a number of factors, including
weather, customer attrition and poor economic conditions affecting commercial customers’ production
levels, customer 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 potential balancing risk, SEM
closely monitors its balancing position and takes measures such as adjusting gas deliveries and transferring
gas between pools of customers, minimizing imbalances. The reserve is reviewed monthly to ensure that it is
sufficient to absorb any balancing losses.
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 or less than the tolerance
levels set initially. In certain circumstances, there can be balancing issues for which SEM is responsible when
customer aggregation forecasts are not realized.
Fixed-price energy services sources its fixed-price term natural gas sales commitments by entering into
various physical and financial 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. Superior transacts
with ten 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 Superior. The financial condition of each
counterparty is, however, evaluated and credit limits are established to minimize Superior’s exposure to this
risk. There is also a risk that supply commitments and foreign exchange positions may become mismatched;
however, this is monitored daily in compliance with Superior’s risk management policy.
54
SUPERIOR PLUS CORP. Fixed-price energy services must retain qualified sales agents in order to properly execute its business
strategy. The continued growth of fixed-price energy services 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 fixed-price energy services would
limit future growth of cash flow.
Fixed-price energy services operates in the highly regulated energy industry in Ontario and Quebec. Changes
to laws could impact this business’ operations. As part of the current regulatory framework, local delivery
companies are mandated to perform certain services on behalf of fixed-price energy services, 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.
Fixed-price energy services also markets electricity in Pennsylvania and New York State and natural gas in
New York State. The regulatory environment in Pennsylvania is favourable to retail choice. The Pennsylvania
Utility Commission’s Retail Market Investigation focused on solutions to increase retail market share and
included orders for utilities to investigate retail opt-in auctions to entice customers to consider retail choice,
reduce enrolment timelines, implement retail referral programs and design seamless moves that would
reduce churn as a customer moves or changes accounts.
Specialty Chemicals
Specialty Chemicals 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 products are correlated to the general economic environment
and the competitiveness of customers, all of which are outside of the segment’s control, along with market
pricing for pulp.
Specialty Chemicals 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
Specialty Chemicals will remain 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 the Port
Edwards, Wisconsin facility. Substantially all of Specialty Chemicals’ KCl is received from Potash Corporation
of Saskatchewan. Specialty Chemicals has limited ability to source KCl from additional suppliers.
Specialty Chemicals is exposed to fluctuations in the U.S. dollar and the euro versus the Canadian dollar.
Specialty Chemicals manages its exposure to fluctuations between the U.S. dollar and Canadian dollar by
entering into hedge contracts with external third parties and internally with other Superior businesses.
Specialty Chemicals’ operations involve the handling, production, transportation, treatment and disposal
of materials that are classified as hazardous and are regulated by environmental, health and safety laws,
regulations and requirements. There is potential for the release of highly toxic and lethal substances, including
chlorine from a facility or transportation equipment. 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 segment’s facilities unsafe, they may order that such facilities be shut down.
55
2013 Annual Report Specialty Chemicals’ operations and activities in various jurisdictions require regulatory approval
for the handling, production, transportation and disposal of chemical products and waste substances. The
failure to obtain or comply fully with such applicable regulatory approval may materially adversely affect
Specialty Chemicals.
Specialty Chemicals does not directly operate or control Tronox’s Hamilton, Mississippi sodium chlorate
facility. A major production outage or unplanned downtime could harm Specialty Chemicals’ reputation and
its ability to meet customer requirements.
Specialty Chemicals’ production facilities maintain complex process and electrical equipment. The facilities
have existed for many years and undergone upgrades and improvements. Routine maintenance is regularly
completed to ensure equipment is operated within appropriate engineering and technical requirements.
Notwithstanding Specialty Chemicals’ operating standards and history of limited downtime, breakdown of
electrical transformer or rectifier equipment would temporarily reduce production at the affected facility.
Although the segment has insurance to mitigate substantial loss due to equipment outage, Specialty
Chemicals’ reputation and its ability to meet customer requirements could be harmed by a major electrical
equipment failure.
Approximately 25% of Specialty Chemicals’ employees are unionized. Collective bargaining agreements are
renegotiated in the normal course of business. While labour disruptions are not expected, there is always risk
associated with the negotiation process that could have an adverse impact on Superior.
Construction Products Distribution
Activity in the Construction Products Distribution segment is subject to changes in general economic activity
and, in particular, residential and non-residential construction. New residential construction is subject to
such factors as household income, employment levels, customer confidence, population changes and the
local supply of residential units. Residential renovation is not as sensitive to these factors and can provide
some balance in the demand for residential construction product distribution. Non-residential activity can
be subdivided into commercial, industrial and institutional. New construction in these sectors is subject
to many of the same general economic factors as residential activity. In the industrial and institutional
subsectors, government and regulatory programs can also have a significant impact on the outlook for
product distribution, particularly as related to Superior’s insulation businesses. As a result, changes to general
economic activity or other factors mentioned above that affect the amount of construction or renovation in
residential and non-residential markets can have an adverse effect on the segment’s business and Superior.
Construction Products Distribution competes with other specialty construction distributors servicing the
builder/contractor market, in addition to big-box home centres and independent lumber yards. The ability to
remain competitive depends on the segment’s ability to provide reliable service at competitive prices.
The GSD market is driven largely by residential and non-residential construction. Demand for wall and
ceiling 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 affect existing housing sales, new home construction, new non-residential construction,
and office/commercial space turnover, all of which are significant factors in determining demand for products
and services.
56
SUPERIOR PLUS CORP. The C&I market is driven largely by C&I construction spending and economic growth. Demand is influenced
by commercial construction and renovation, the construction, maintenance and expansion of industrial
process facilities (such as oil refineries, petrochemical plants and power generation facilities) and institutional
facilities in the government, healthcare and education sectors.
The distribution of walls and ceilings and C&I products involves risks, including the failure or substandard
performance of equipment, human error, natural disasters, suspension of operations and new government
statutes, regulations, guidelines or policies. Operations are also subject to various hazards incidental to
the handling, processing, storage and transportation of certain hazardous materials, including industrial
chemicals. These hazards can result in personal injury including fatalities, damage to and destruction of
property and equipment and environmental damage. There can be no assurance that as a result of past or
future operations, there will not be claims of injury by employees or members of the public due to exposure,
or alleged exposure, to these materials. There can be no assurance as to the actual amount of these liabilities
or their timing, if any. The business maintains safe working practices through proper procedures, direction
and utilization of equipment such as forklifts, boom trucks, fabrication equipment and carts/dollies. The
business handles and stores a variety of construction materials and maintains appropriate material handling
compliance programs in accordance with local, state/provincial and federal regulations.
During 2013, CPD initiated a business transformation project to fully integrate its C&I and GSD operations.
The project consists of realigning the management structure along geographic lines, adopting best practice
common business processes, and integrating all operations onto a single ERP system. The project is expected
to take approximately two years to three years. Upon full commencement of the project, the scoping,
requirements definition, business process definition, design, and testing of the integrated ERP system will
take approximately one year with the branch conversions taking place the following year. Implementation
problems could result in disruption to the business and/or inaccurate information for management and
financial reporting. Risk will be mitigated by extensive testing and regionally phased implementation.
Approximately 4% of Construction Products Distribution’s employees are unionized. Collective bargaining
agreements are renegotiated in the normal course of business. While labour disruptions are not expected,
there is always risk associated with the negotiation process that could have an adverse impact on the
segment and Superior.
57
2013 Annual Report 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 were prepared by management in accordance with International
Financial Reporting Standards 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 basis consistent with that in the consolidated financial statements.
The Board of Directors of Superior is responsible for reviewing and approving the consolidated 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 consolidated financial statements and the external auditor’s report. The Committee reports its findings
to the Board for the Board’s consideration in approving the consolidated 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 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 International Financial Reporting
Standards. Deloitte LLP has provided an independent professional opinion.
Luc Desjardins
President and Chief Executive Officer
Superior Plus Corp.
Wayne M. Bingham
Executive Vice-President and Chief Financial Officer
Superior Plus Corp.
Calgary, Alberta
February 19, 2014
58
SUPERIOR PLUS CORP. Independent Auditor’s Report
To the Shareholders of Superior Plus Corp.
We have audited the accompanying consolidated financial statements of Superior Plus Corp., which comprise
the consolidated balance sheets as at December 31, 2013 and December 31, 2012, and the consolidated
statement of changes in equity, consolidated statement of net earnings and total comprehensive income
and consolidated statement of cash flows for the years then ended, and the notes to the consolidated
financial statements.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with International Financial Reporting Standards, and for such internal control as
management determines is necessary to enable the preparation of consolidated financial statements that
are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We
conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards
require that we comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor’s judgment, including
the assessment of the risks of material misstatement of the consolidated financial statements, whether due
to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the
entity’s preparation and fair presentation of the consolidated financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a
basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of Superior Plus Corp. as at December 31, 2013 and December 31, 2012, and its financial performance
and its cash flows for the years then ended in accordance with International Financial Reporting Standards.
Chartered Accountants
February 19, 2014
Calgary, Alberta
59
2013 Annual Report
Consolidated Balance Sheets
(millions of Canadian dollars)
Assets
Current Assets
Cash and cash equivalents
Trade and other receivables
Prepaid expenses
Inventories
Unrealized gains on derivative financial instruments
Total Current Assets
Non-Current Assets
Property, plant and equipment
Intangible assets
Goodwill
Notes and finance lease receivables
Deferred tax
Unrealized gains on derivative financial instruments
Total Non-Current Assets
Total Assets
LiAbiLities And equity
Current Liabilities
Trade and other payables
Deferred revenue
Borrowing
Convertible unsecured subordinated debentures
Dividends and interest payable
Unrealized losses on derivative financial instruments
Total Current Liabilities
Non-Current Liabilities
Borrowing
Convertible unsecured subordinated debentures
Other liabilities
Provisions
Employee future benefits
Deferred tax
Unrealized losses on derivative financial instruments
Total Non-Current Liabilities
Total Liabilities
Equity
Capital
Deficit
Accumulated other comprehensive loss
Total Equity
Total Liabilities and Equity
Notes
December 31,
2013
December 31,
2012 (1)(2)
5 & 21
6 & 15
7
21
10
11
13
22
21
15
16
17 & 18
19
21
17 & 18
19
16
14
20
22
21
24
23
8.3
479.8
35.3
206.3
13.7
743.4
877.9
19.0
193.7
10.2
292.3
4.6
7.6
389.0
20.5
213.7
16.6
647.4
829.9
39.6
189.1
10.1
303.1
12.9
1,397.7
2,141.1
1,384.7
2,032.1
396.2
24.8
67.0
–
7.3
25.1
520.4
509.1
469.4
0.4
19.5
23.3
4.0
54.8
318.5
18.2
59.7
50.0
7.3
36.5
490.2
574.7
475.1
1.0
17.6
54.0
2.5
42.6
1,080.5
1,600.9
1,167.5
1,657.7
1,787.9
(1,239.8)
(7.9)
540.2
2,141.1
1,646.5
(1,218.2)
(53.9)
374.4
2,032.1
(1) December 31, 2012 has been restated for the impact of adopting IAS 19 – Employee Benefits, amendments effective January 1, 2013. Refer to Note 2.
(2) December 31, 2012 has been restated for the impact of a prior-period adjustment. Refer to Note 15.
See accompanying Notes to the Consolidated Financial Statements.
60
SUPERIOR PLUS CORP.
Consolidated Statement of
Changes in Equity
(millions of Canadian dollars)
Note
Share
Capital
Contributed
Surplus (1)
Total
Capital
Deficit
Accumulated
Other
Comprehensive
Loss
Total
January 1, 2012
Impact of adopting IAS 19 –
Employee Benefits,
amendments (2)
Impact of prior-period
adjustment (3)
1,629.8
3.3
1,633.1 (1,228.2)
(55.3)
349.6
–
–
–
–
–
–
(4.0)
(8.8)
4.1
0.1
–
(8.8)
Restated as at January 1, 2012
1,629.8
3.3
1,633.1 (1,241.0)
(51.2)
340.9
Net earnings
Option value associated with
redemption of convertible
debentures
Shares issued under the
Dividend Reinvestment Plan
Dividends declared
to shareholders
Unrealized foreign currency losses
on translation of
foreign operations
Actuarial defined benefit gains
Income tax expense on other
comprehensive income
24
–
–
14.2
–
–
–
–
–
–
90.0
(0.8)
(0.8)
14.2
–
–
–
–
–
–
–
–
(67.2)
–
–
–
–
–
–
–
–
–
–
90.0
(0.8)
14.2
(67.2)
(8.8)
7.2
(8.8)
7.2
(1.1)
(1.1)
December 31, 2012
1,644.0
2.5
1,646.5 (1,218.2)
(53.9)
374.4
Net earnings
Option value associated with
redemption of convertible
debentures
Shares issued under the
Dividend Reinvestment Plan
Issuance of common shares
Dividends declared
to shareholders
Unrealized foreign currency gains
on translation of foreign operations
Actuarial defined benefit gains
Reclassification of derivatives
losses previously deferred
Income tax expense on other
comprehensive income
24
–
–
4.9
137.6
–
–
–
–
–
–
–
52.7
(1.1)
(1.1)
–
–
–
–
–
–
–
4.9
137.6
–
–
–
–
–
–
–
–
(74.3)
–
–
–
–
–
–
–
–
–
26.6
26.4
52.7
(1.1)
4.9
137.6
(74.3)
26.6
26.4
(0.4)
(0.4)
(6.6)
(6.6)
December 31, 2013
1,786.5
1.4
1,787.9 (1,239.8)
(7.9)
540.2
(1) Contributed surplus represents Superior’s equity reserve for the option value associated with the issuance of convertible unsecured subordinated
debentures and warrants.
(2) December 31, 2012 has been restated for the impact of adopting IAS 19 – Employee Benefits, amendments effective January 1, 2013. Refer to Note 2.
(3) Superior restated the January 1, 2012 deficit by $8.8 million due to a prior-period adjustment. Refer to Note 15.
See accompanying Notes to the Consolidated Financial Statements.
61
2013 Annual Report
Consolidated Statement of
Net Earnings and Total
Comprehensive Income
Years ended December 31
(millions of Canadian dollars except per share amounts)
Notes
2013
2012 (1)
REVENUES
Cost of sales
Gross profit
ExPENSES
Selling, distribution and administrative costs
Finance expense
Impairment of property, plant and equipment,
intangible assets, and goodwill
Unrealized (losses) gains on derivative financial instruments
Net earnings before income taxes
Income tax expense
Net earnings
Net earnings
Other comprehensive income:
Unrealized foreign currency gains (losses) on
translation of foreign operations
Actuarial defined benefit gains
Reclassification of derivatives losses previously deferred
Income tax expense on other comprehensive income
Total Comprehensive Income
Net earnings per share
Basic
Diluted
25
25
25
25
10,11&13
21
3,752.8
(2,884.0)
868.8
3,624.3
(2,778.0)
846.3
(718.0)
(71.8)
(15.5)
(5.1)
(697.1)
(77.6)
(4.7)
32.1
(810.4)
(747.3)
58.4
(5.7)
52.7
52.7
26.6
26.4
(0.4)
(6.6)
98.7
99.0
(9.0)
90.0
90.0
(8.8)
7.2
–
(1.1)
87.3
$ 0.43
$ 0.40
$ 0.80
$ 0.80
22
23
23
23
22
26
26
(1) December 31, 2012 has been restated for the impact of adopting IAS 19 – Employee Benefits, amendments effective January 1, 2013. Refer to Note 2.
See accompanying Notes to the Consolidated Financial Statements.
62
SUPERIOR PLUS CORP.
Consolidated Statement
of Cash Flows
Years ended December 31
(millions of Canadian dollars)
Notes
2013
2012 (1)
OPERATING ACTIVITIES
Net earnings
Adjustments for:
Depreciation included in selling, distribution and administrative costs
Amortization of intangible assets
Depreciation included in cost of sales
(Gains) losses on disposal of assets
Impairment of property, plant and equipment,
intangible assets, and goodwill
Unrealized losses (gains) on derivative financial instruments
Customer contract-related costs
Finance expense recognized in net earnings
Income tax expense recognized in net earnings
Decrease in non-cash operating working capital
Net cash flows from operating activities
Income taxes paid
Interest paid
Cash flows from operating activities
INVESTING ACTIVITIES
Purchase of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Investment in supply agreement
Acquisitions
Cash flows used in investing activities
FINANCING ACTIVITIES
Net proceeds (repayment) of revolving term bank credits and other debt
Redemption of senior unsecured debentures
Redemption premium on senior unsecured debentures
Repayment of senior secured notes
Repayment of finance lease obligations
Redemption of 5.75% convertible debentures
Redemption of 5.85% convertible debentures
Redemption of 7.50% convertible debentures
Proceeds from issuance of 6.00% convertible debentures
Issue costs incurred for the 6.00% convertible debentures
Proceeds from issuance of common shares
Issuance costs for common shares
Proceeds from the Dividend Reinvestment Plan
Dividends paid to shareholders
Cash flows used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents, beginning of the year
Effect of translation of foreign currency-denominated cash and cash equivalents
Cash and cash equivalents, end of the year
10
11
10
21
28
10
10
4
19
19
19
19
52.7
42.2
19.4
41.3
(2.9)
15.5
5.1
(0.8)
71.8
5.7
0.3
250.3
(6.5)
(58.5)
185.3
(78.5)
6.6
(4.3)
(7.6)
(83.8)
87.4
(150.0)
(6.2)
(34.0)
(15.9)
–
(75.0)
(68.9)
97.0
(3.8)
143.9
(6.3)
4.9
(73.7)
(100.6)
0.9
7.6
(0.2)
8.3
90.0
42.4
26.8
44.9
1.0
4.7
(32.1)
(1.1)
77.6
9.0
84.7
347.9
(0.3)
(74.3)
273.3
(43.8)
4.5
–
(5.5)
(44.8)
(74.4)
–
–
(31.8)
(16.4)
(49.9)
–
–
–
–
–
–
14.2
(67.1)
(225.4)
3.1
5.2
(0.7)
7.6
(1) December 31, 2012 has been restated for the impact of adopting IAS 19 – Employee Benefits, amendments effective January 1, 2013. Refer to Note 2.
See accompanying Notes to the Consolidated Financial Statements.
63
2013 Annual Report
Notes to the Consolidated
Financial Statements
( Tabular amounts in Canadian millions of dollars, except per share amounts and as otherwise noted. Tables labeled “2013” and
“2012” are for full year ended December 31.)
1. Organization
Superior Plus Corp. (Superior) is a diversified business corporation, incorporated under the Canada Business
Corporations Act. The registered office is at Suite 1400, 840 — 7th Avenue SW, Calgary, Alberta. 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 holds 100% of the shares of Superior General
Partner Inc. 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. Superior is a publicly traded company with
its common shares trading on the Toronto Stock Exchange (“TSX”) under the exchange symbol SPB.
The consolidated financial statements of Superior for the year ended December 31, 2013 and 2012 were
authorized for issuance by the Board of Directors on February 19, 2014.
Reportable Operating Segments
Superior operates three distinct reportable operating segments: Energy Services, Specialty Chemicals and
Construction Products Distribution. Superior’s Energy Services’ operating segment provides distribution,
wholesale procurement and related services in relation to propane, heating oil and other refined fuels under
the following: Canadian propane division and U.S. refined fuels division. Energy Services also provides
fixed-price natural gas and electricity supply services under Superior Energy Management. Specialty
Chemicals is a leading supplier of sodium chlorate and technology to the pulp and paper industries and a
regional supplier of potassium and chloralkali products in the U.S. Midwest. Construction Products Distribution
is one of the largest distributors of commercial and industrial insulation in North America and the largest
distributor of specialty construction products to the walls and ceilings industry in Canada (See Note 32).
2. Basis of Presentation
The accompanying consolidated financial statements were prepared in accordance with International
Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB)
using the accounting policies Superior adopted in its annual consolidated financial statements as at and for
the year ended December 31, 2013. The financial statements were prepared on a going concern basis.
The consolidated financial statements are presented in Canadian dollars, Superior’s functional currency. All
financial information presented in Canadian dollars has been rounded to the nearest hundred-thousand.
64
SUPERIOR PLUS CORP. The consolidated financial statements were prepared on the historical cost basis except for the revaluation
of certain financial instruments and incorporate the accounts of Superior and its subsidiaries. Subsidiaries
are all entities over which Superior has the power to govern the financial and operating policies generally
accompanying a shareholding of more than one-half of the voting rights. The results of subsidiaries
are included in Superior’s statement of net earnings from date of acquisition, or in the case of disposals,
up to the effective date of disposal. All transactions and balances between Superior and Superior’s
subsidiaries are eliminated on consolidation. Superior’s subsidiaries are all wholly owned directly or indirectly
by Superior Plus Corp.
Significant Accounting Policies
(a) 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.
(b) Inventories
Energy Services
Inventories are valued at the lower of cost and net realizable value. Costs of inventories are determined either
on a weighted average cost or first-in, first-out basis. Appliances, materials, supplies and other inventories
are stated at the lower of cost and net realizable value, as appropriate. The net realizable value of inventory
is based on estimated selling price in the ordinary course of business less the estimated costs necessary to
complete the sale.
Specialty Chemicals
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. The net realizable
value of inventory is based on estimated selling price in the ordinary course of business less the estimated
costs necessary to complete the sale. In the case of manufactured inventories cost includes an appropriate
share of production overhead based on normal operating capacity.
Construction Products Distribution
Inventories of building products are valued at the lower of cost and net realizable value. Cost is calculated
on a weighted-average cost basis and any trade discounts and rebates are deducted from the cost. The net
realizable value of inventory is based on estimated selling price in the ordinary course of business less the
estimated costs necessary to complete the sale.
65
2013 Annual Report (c) Financial Instruments and Derivative Financial Instruments
Derivative Financial Instruments
Superior enters into a variety of derivatives to manage its exposure to certain financial risks. Further details
of derivative financial instruments are disclosed in Note 21.
Derivatives are initially recognized at fair value at the date a derivative contract is entered into and are
subsequently re-valued to their fair value at each balance sheet date. The resulting gain or loss is recognized
in net earnings. Realized gains and losses on derivatives are recognized as a component of revenue, cost
of sales or finance expense/revenue, the classification of which depends on the underlying nature of the
economic exposure being managed. Derivatives embedded in other financial instruments or other host
contracts are treated as separate derivatives when their risks and characteristics are not closely related to
those of the host contracts and the host contracts are not measured at fair value with changes in fair value
recognized in net earnings.
Superior does not formally designate and document economic hedges, in accordance with the requirements
of applying hedge accounting under IFRS and, therefore, does not apply hedge accounting.
Financial Assets
A financial asset is classified at fair value through net earnings (FVTNE) if it is classified as held for trading
or is designated as such upon initial recognition. Upon initial recognition, attributable transaction costs are
recognized in net earnings as incurred. Financial assets at FVTNE are measured at fair value, and changes
therein are recognized in net earnings.
Loans and Receivables
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an
active market. Such assets are recognized initially at fair value plus any directly attributable transaction
costs. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the
effective interest method, less any impairment losses.
Separable Embedded Derivatives
Changes in the fair value of separable embedded derivatives are recognized immediately in net earnings.
Impairment of Financial Assets
Financial assets measured at amortized cost are assessed for indicators of impairment at each reporting
date. Financial assets are impaired when there is objective evidence that, as a result of one or more events
that occurred after the financial asset’s initial recognition, the estimated future cash flows of the investment
have been negatively impacted.
For certain categories of financial assets, such as trade receivables, assets that are assessed as not impaired
individually are subsequently assessed for collective impairment. Objective evidence of the impairment of a
portfolio of receivables could include Superior’s past experience of collecting payments, an increase in the
number of delayed payments past the average credit period, in addition to changes in economic conditions
that correlate with defaults on receivables. For financial assets carried at amortized cost, the amount of
impairment recognized is the difference between the asset’s carrying amount and the present value of
estimated future cash flows, discounted at the financial asset’s original effective interest rate.
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SUPERIOR PLUS CORP. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets
with the exception of trade receivables, in which case the carrying amount is reduced through the use
of an allowance account. When a trade receivable is considered uncollectible, it is written off against the
allowance account. Subsequent recoveries of amounts previously written off are credited to the statement
of net earnings and comprehensive income. Changes in the carrying amount of the allowance account are
recognized in net earnings.
Classification as Debt or Equity
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the
substance of the contractual arrangement.
Equity Instruments
An equity instrument is any contract which has a residual interest in the assets of an entity after deducting
all of its liabilities. Equity instruments issued by Superior are recorded at the proceeds received, net of direct
issuance costs.
Compound Financial Instruments
The components of compound instruments issued by Superior are classified separately as financial liabilities
and equity in accordance with the substance of the contractual arrangement. At the date of issuance, the
fair value of the liability component is estimated using the prevailing market interest rate for a similar non-
convertible instrument. This amount is recorded as a liability on an amortized cost basis using the effective
interest method until extinguished upon conversion or at the instrument’s maturity. The equity component is
determined by deducting the liability component from the fair value of the compound instrument as a whole.
This is recognized and included in equity, net of income tax, and is not subsequently re-measured.
Financial Liabilities
Financial liabilities are classified as either financial liabilities at FVTNE or other financial liabilities.
Financial Liabilities at FVTNE
Financial liabilities are classified as FVTNE when the financial liability is held for trading or are designated as
FVTNE upon initial recognition. Financial liabilities at FVTNE are stated at fair value with any resulting gain
or loss recognized in net earnings. The net gain or loss recognized in net earnings incorporates any related
interest expense. Upon initial recognition, attributable transaction costs are recognized in net earnings or
loss as incurred. Fair value is determined in the manner described in Note 21.
Other Financial Liabilities
Other financial liabilities, including borrowing, are initially measured at fair value, net of transaction costs.
Other financial liabilities are subsequently measured at amortized cost using the effective interest method,
with interest expense recognized on an effective interest basis. Financial liabilities are recognized at amortized
cost, using the effective interest rate method, at each reporting period, net of transaction costs directly
attributable to the issuance of the liability. Transaction costs related to the issuance of any liability are netted
against the carrying value of the associated liability and amortized as part of financing costs over the life of
that debt using the effective interest rate method.
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2013 Annual Report Derecognition of Financial Liabilities
Superior derecognizes financial liabilities when, and only when, Superior’s obligations are discharged,
cancelled or they expire.
Financial Guarantees at FVTNE
Financial guarantees are classified as FVTNE when the financial liability is designated as FVTNE upon initial
recognition. Financial guarantees at FVTNE are stated at fair value with any resulting gain or loss recognized
in net earnings. Fair value is determined in the manner described in Note 21.
(d) Property, Plant and Equipment
Cost
Property, plant and equipment are recorded at cost less accumulated depreciation and impairment losses.
Major renewals and improvements which provide future economic benefits and can be reliably measured are
capitalized, while repair and maintenance expenses are charged to operations as incurred. Property, plant
and equipment in the course of construction are carried at cost less any recognized impairment losses.
Cost includes directly attributable expenses, professional fees and, for qualifying assets, borrowing costs
capitalized in accordance with Superior’s accounting policy. Depreciation of these assets, on the same basis
as other property assets, commences when the assets are available for their intended use. Disposals are
derecognized at carrying costs less accumulated depreciation and impairment losses, with any resulting gain
or loss reflected in net earnings.
Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets,
which are assets that necessarily take substantial time to ready for their intended use or sale, are included in
the cost of those assets, until such time as the assets are available for their intended use. All other borrowing
costs are recognized in net earnings in the period in which they are incurred.
Depreciation
Depreciation is calculated using the straight-line method, based on the estimated useful life. Land is not
depreciated. Depreciation of property in the course of construction commences when the assets are available
for their intended use. In the majority of cases, residual value is estimated to be insignificant. Depreciation
by class of assets is as follows:
Buildings
Leasehold improvements
Energy Services’ tanks and cylinders
Energy Services’ truck tank bodies, chassis and other
Construction Products Distribution equipment
Manufacturing equipment
Furniture and fixtures
Computer equipment
over the lease term up to 10 years
15 to 40 years
30 years
5 to 15 years
5 to 40 years
10 years
3 years
Deprecation rates, residual values and depreciation methods are reviewed at the end of each annual reporting
period, with the effect of any changes in estimate being accounted for on a prospective basis.
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SUPERIOR PLUS CORP. (e) Intangible Assets
Intangible assets are reported at cost less accumulated amortization and accumulated impairment losses.
For intangible assets with a determinate life, amortization is charged on a straight-line basis over their
estimated useful lives.
Intangible assets acquired in a business combination are identified and recognized separately from goodwill
when they satisfy the recognition criteria. The initial cost of such intangible assets is their fair value at the
acquisition date. Subsequent to initial recognition, intangible assets acquired in a business combination are
reported at cost less accumulated amortization and accumulated impairment losses, on the same basis as
intangible assets acquired separately.
Amortization rates, residual values and amortization methods are reviewed at least annually, with the effect
of any changes in estimate being accounted for on a prospective basis.
Energy Services
Costs incurred by Energy Services to acquire natural gas and electricity customer contracts are capitalized
as deferred costs at the time the cost is incurred. The costs are recognized in 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 being approximately two years.
Superior’s other intangible assets and related amortization rates are summarized as follows:
Non-competition agreements
Term of the agreements (1-5 years)
Royalty agreements
Software
Technology patents
Investment Properties
1-10 years
1-3 years
Approximately 10 years
Property held for a currently undetermined future use, long-term rental yields, or for capital appreciation,
and that is not occupied by Superior is classified as investment property. Property being constructed or
developed for future use as investment property is also classified as investment property.
Superior amortizes its investment property over a period of 40 years using the straight-line method.
Cost
Investment property is measured at cost, including related transaction costs and borrowing costs. After
initial recognition, investment property is carried at cost less accumulated depreciation and any impairment
losses.
Subsequent expenditure is capitalized to the investment property’s carrying amount only when it is probable
that future economic benefits associated with the expenditure will flow to Superior and the cost of the item
can be measured reliably. Repair and maintenance costs are expensed when incurred. When part of an
investment property is replaced, the carrying amount of the replaced part is derecognized.
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2013 Annual Report Borrowing Costs
Borrowing costs incurred for the purpose of acquiring, constructing or producing a qualifying investment
property are capitalized as part of its cost. Borrowing costs are capitalized while acquisition or construction
is actively underway, which ceases once the asset is substantially complete or suspended if the development
of the asset is suspended.
Depreciation
Depreciation is calculated using the straight-line method, based on the estimated useful life. Land is not
amortized. Depreciation of investment property in the course of construction commences when the assets
are ready for their intended use. In the majority of cases, residual value is estimated to be insignificant.
Investment properties are depreciated over 40 years. The estimated useful life, depreciation method, and
residual values are reviewed at least annually, with the effect of any changes in estimate being accounted for
on a prospective basis.
Disclosure of Fair Value
Fair value is based on active market prices, adjusted, if necessary for any difference in the nature, location or
condition of the specific asset. If this information is not available, Superior uses alternate valuation methods,
such as recent prices in less active markets, discounted cash flow projections, or recent property tax
assessments. Valuations performed by professional valuators can be used although Superior has sufficient
internal resources to determine reliable fair values.
The fair value of investment property reflects, among other things, rental income from current leases and
assumptions about rental income from future leases in the light of current market conditions. The fair value
also reflects, on a similar basis, any cash outflows that could be expected in respect of the property.
The fair value of investment property does not reflect future capital expenditure that will improve or enhance
the property and does not reflect the related future benefits from this future expenditure other than those a
rational market participant would take into account when determining the value of the property.
(f) Impairment of Property, Plant and Equipment, Intangible Assets and Investment Properties
At each balance sheet date and when circumstances indicate that the carrying value may be impaired,
Superior reviews the carrying amounts of its tangible and intangible assets to determine whether there
is any indication that those assets have suffered an impairment loss. If so, the recoverable amount of the
asset is estimated in order to determine the extent of the impairment loss, if any. Where it is not possible to
estimate the recoverable amount of an individual asset, Superior estimates the recoverable amount of the
cash-generating unit (CGU) to which the asset belongs. For the impairment testing, assets that cannot be
tested individually are grouped into the smallest group of assets that generates cash inflows from continuing
use that are largely independent of the cash inflows of other assets or groups.
Recoverable amount is the higher of fair value less costs to sell and value-in-use. In assessing value-in-use,
the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset for which
the estimates of future cash flows have not been adjusted.
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SUPERIOR PLUS CORP. If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the carrying
amount is reduced to its recoverable amount. An impairment loss is recognized immediately in net earnings.
When an impairment loss, other than an impairment loss on goodwill, subsequently reverses, the carrying
amount of the asset is increased to the revised estimate of its recoverable amount, which cannot exceed the
original carrying amount less normal depreciation.
(g) Business Combinations
All business combinations are accounted for using the acquisition method. The consideration transferred in
a business combination is measured at fair values, at the acquisition date of the assets given up, the liabilities
incurred or assumed and equity instruments issued by Superior in exchange for control of the acquiree.
Transaction costs, other than those associated with the issuance of debt or equity securities, that Superior
incurs in connection with a business combination, are expensed as incurred. The acquiree’s identifiable
assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 — Business
Combinations are recognized at their fair values at the acquisition date, except for non-current assets that
are classified as held for sale in accordance with IFRS 5 — Non-current Assets Held for Sale and Discontinued
Operations, which are recognized at fair values less costs to sell, except that:
• Deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are
recognized and measured in accordance with International Accounting Standards (“IAS”) IAS 12 — Income
taxes and IAS 19 — Employee Benefits respectively;
• Liabilities or equity instruments related to the replacement by Superior of an acquiree’s share-based
payment awards are measured in accordance with IFRS 2 — Share-based Payment; and
• Assets or disposals that are classified as held for sale in accordance with IFRS 5 — Non-current Assets
Held for Sale and Discontinued Operations are measured in accordance with that standard.
Contingent liabilities acquired in a business combination are initially measured at fair value at the date of
acquisition. At subsequent reporting dates, such contingent liabilities are measured at the amount that
would be recognized in accordance with IAS 37 — Provisions, Contingent Liabilities and Contingent Assets.
Intangible assets arising on acquisition are recognized at fair value at the date of acquisition. The fair
value is based on detailed cash flow models and other metrics depending on the type of intangible asset
being recognized.
Goodwill arising on acquisition is recognized as an asset and initially measured at cost, being the excess
of the cost of the business combination over Superior’s interest in the net fair value of the identifiable
assets, liabilities and contingent liabilities recognized. If the net amounts assigned to the assets acquired and
liabilities assumed exceed the cost of the purchase then Superior is required to reassess the value of both
the cost and net assets acquired and any excess remaining after this reassessment is recognized immediately
in net earnings. Goodwill is initially recognized as an asset at cost and is subsequently measured at cost less
any accumulated impairment losses.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which
the combination occurs, Superior will report provisional amounts for the items for which the accounting is
incomplete. Those provisional amounts are adjusted during the measurement period (see below), or additional
assets or liabilities are recognized, to reflect new information obtained about facts and circumstances at the
acquisition date that, if known, would have affected the amounts recognized at that date.
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2013 Annual Report The measurement period is the period from the date of acquisition to the date Superior obtains complete
information about facts and circumstances as of the acquisition date, to a maximum of one year.
(h) Goodwill
Goodwill arising in a business combination is recognized as an asset at the date control is acquired (the
acquisition date). Goodwill is measured as the excess of the sum of the consideration transferred, the
amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held
equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets
acquired and the liabilities assumed.
If, after reassessment, Superior’s interest in the fair value of the acquiree’s identifiable net assets exceeds the
sum of the consideration transferred, the amount of any non-controlling interest in the acquiree, and the fair
value of the previously held equity interest in the acquiree (if any), the excess is recognized immediately in
net earnings as a bargain purchase gain.
Goodwill is not amortized but is reviewed for impairment at least annually. For purposes of impairment
testing, goodwill is allocated to each of Superior’s CGUs expected to benefit from the synergies of the
combination. CGUs to which goodwill has been allocated are tested for impairment annually or more
frequently upon indication of impairment. If the recoverable amount of the CGU is less than its carrying
amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the
unit and then to other assets of the unit pro-rata on the basis of the carrying amount of each asset in the
unit. An impairment loss recognized for goodwill is not reversed in a subsequent period.
On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the net
earnings on disposal.
(i) Revenue Recognition
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced
for estimated customer returns, rebates and other similar allowances. Revenue from the sale of goods is
recognized when all the following conditions are satisfied:
• Superior has transferred to the buyer the significant risks and rewards of ownership of the goods;
• Superior retains neither continuing managerial involvement to the degree usually associated with
ownership nor effective control over the goods sold;
• The amount of revenue can be measured reliably;
• It is probable that the economic benefits associated with the transaction will flow to Superior; and
• The costs incurred or to be incurred in respect of the transaction can be measured reliably.
Energy Services
Revenues from sales are recognized at the time of delivery, or when related services are performed and the
above conditions related to revenue from sale of goods are satisfied.
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SUPERIOR PLUS CORP. Natural gas revenues are recognized as gas is delivered to local distribution companies and when the above
conditions related to revenue from sale of goods are satisfied. Costs associated with balancing the amount
of gas used by Energy Services’ customers with the volumes delivered by Energy Services 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.
Rental revenues arising from operating leases are accounted for based on the terms contained in the lease
agreements as earned.
Specialty Chemicals
Revenues from chemical sales are recognized at the time of delivery and when the above conditions related
to revenue from sale of goods are satisfied.
Construction Contracts
When the outcome of a construction contract for the construction of chlorine dioxide generators can be
estimated reliably, revenues and costs are recognized by reference to the percentage of completion of the
contract activity at the end of the reporting period, measured based on the proportion of contract costs
incurred for work performed to date relative to the estimated total contract costs. Engineer’s reviews are
used to determine the stage of completion of contracts in progress.
When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognized
to the extent it is probable that contract costs will be recoverable. Contract costs are recognized as expenses
in the period in which they are incurred.
When it is probable that total contract costs will exceed total contract revenue, the expected loss is
immediately recognized as an expense.
Construction Products Distribution
Revenue is recognized when products are delivered to the customer and when the above conditions related
to revenue from sale of goods are satisfied. Revenue is stated net of discounts and rebates granted.
(j) Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all of the risks
and rewards of ownership to the lessee. All other leases are classified as operating leases.
Assets held under finance leases are initially recognized as assets of Superior at their fair value at the inception
of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to
Superior is included in the balance sheet as a finance lease obligation as part of borrowing.
Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to
achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognized
immediately in net earnings, unless they are directly attributable to qualifying assets, in which case they are
capitalized in accordance with Superior’s general policy on borrowing costs (see (d) above). Contingent
rentals are recognized as expenses in the period in which they are incurred.
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2013 Annual Report Operating lease payments are recognized as an expense based on terms contained in the lease agreements.
Contingent rentals arising under operating leases are recognized as an expense in the period in which they
are incurred.
In the event lease incentives are received to enter into operating leases, such incentives are recognized as
a liability. The aggregate benefit of incentives is recognized as a reduction of rental expense and amortized
over the term of the lease.
(k) Rebates — Construction Products Distribution
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.
(l) Provisions
Provisions are recognized when there is a present legal or constructive obligation as a result of past events,
for which it is probable that payment will be required to settle the obligation, and where the amount can be
reliably estimated.
The amount is the best estimate of the consideration required to settle the present obligation at the
reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision
is measured using the cash flows estimated to settle the present obligation, its carrying amount is the
present value of those cash flows.
When some or all of the economic benefit required to settle a provision is expected to be recovered from
a third party, the receivable is recognized as an asset if it is virtually certain that reimbursement will be
received and the receivable can be measured reliably.
Decommissioning Costs
Liabilities for decommissioning costs are recognized when Superior has an obligation to dismantle
and remove a facility or an item of plant and to restore the site on which it is located, and when a
reliable estimate of that liability can be made. Generally, the costs relate to Specialty Chemicals facilities
and Energy Services’ assets. Decommissioning costs are provided at the present value of expected costs
to settle the obligation using estimated cash flows. The cash flows are discounted at a current pre-tax rate
that reflects the risks specific to the decommissioning liability. The unwinding of the discount is expensed as
incurred and recognized in net earnings as a finance expense. The estimated future costs of decommissioning
are reviewed annually and adjusted as appropriate. A corresponding item of property, plant and equipment
of an amount equal to the provision is also created. This is subsequently amortized as part of the asset.
Changes in the estimated future costs or in the discount rate applied are added to or deducted from the
cost of the asset.
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SUPERIOR PLUS CORP. Environmental Expenditures and Liabilities
Environmental expenditures that relate to current or future revenues are expensed or capitalized as
appropriate. Expenditures that relate to an existing condition caused by past operations and do not
contribute to current or future earnings are expensed.
Liabilities for environmental costs are recognized when a clean-up is probable and the associated costs can
be reliably estimated. Generally, the timing of recognition of these provisions coincides with the commitment
to a formal plan of action or, if earlier, on divestment or on closure of inactive sites.
The amount recognized is the best estimate of the expenditure required. When the liability will not be settled
for a number of years, the amount recognized is the present value of the estimated future expenditure.
Restructuring
A restructuring provision is recognized when Superior has developed a detailed formal restructuring plan
and has raised a valid expectation in those affected that it will carry out the restructuring by starting to
implement the plan or announcing its main features to those affected. The measurement of a restructuring
provision includes only the direct expenditures arising from the restructuring.
(m) Employee Future Benefits
Superior has a number of defined benefit and defined contribution plans providing pension and other
post-employment benefits to most of its employees. Superior accrues its obligations under the plans and
the related costs, net of plan assets.
Contributions to defined contribution plans are recognized as an expense when employees have rendered
service entitling them to the contributions.
For defined benefit plans, the cost of providing benefits is determined using the projected unit credit method,
with actuarial valuations being carried out at each balance sheet date. Actuarial gains and losses arising
from experience adjustments and changes in actuarial assumptions are recognized in other comprehensive
income in the period in which they occur. The net obligation for each defined benefit plan is discounted
to determine the present value using the yield at the reporting date on high-quality Canadian corporate
bonds. Past service costs are recognized immediately to the extent that the benefits are already vested, and
otherwise are amortized on a straight-line basis over the average period until the benefits become vested.
The defined benefit obligation recognized in the balance sheet represents the present value adjusted for
unrecognized actuarial gains and losses and unrecognized past service cost, and reduced by the fair value
of plan assets. Any asset resulting from this calculation is limited to unrecognized actuarial losses and past
service cost, plus the present value of available refunds and reductions in future contributions to the plan.
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2013 Annual Report (n) Income Taxes
Income tax expense represents the sum of current income taxes payable and deferred income taxes.
Current Income Taxes
The income tax currently payable is based on taxable net earnings for the year. Taxable net earnings differs
from net earnings as reported in the consolidated statement of net earnings and total comprehensive
income because it excludes items of income or expense that are taxable or deductible in other years and
it further excludes items that are never taxable or deductible. Superior’s liability for current income tax is
calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred Income Taxes
Deferred income tax is recognized on differences between the carrying amounts of assets and liabilities in
the financial statements and the corresponding tax basis used in the computation of taxable net earnings.
Deferred income tax assets are generally recognized for all deductible temporary differences to the extent
that it is probable that taxable net earnings will be available against which those deductible temporary
differences can be utilized. Deferred tax liabilities are recognized for all taxable temporary differences,
except for the following:
• When the deferred tax liability arises from the initial recognition of goodwill; or
• When an asset or liability in a transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting net earnings or taxable net earnings ; and
• In respect of taxable temporary differences associated with investments in subsidiaries, associates and
interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled
by Superior and it is probable that the temporary differences will not be reversed in the foreseeable future.
Deferred tax assets arising from deductible temporary differences associated with such investments and
interests are only recognized to the extent that they are expected to be reversed in the foreseeable future
and it is probable that there will be sufficient taxable net earnings against which to utilize the benefits of the
temporary differences. A deferred tax asset may also be recognized for the benefit expected from unused
tax losses available for carry-forward, to the extent that it is probable that future taxable earnings will be
available against which the tax losses can be applied.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in
which the liability is settled or the asset realized, based on tax rates and tax laws that have been enacted
or substantively enacted by the balance sheet date. The measurement of deferred tax liabilities and assets
reflects the tax consequences that would follow from the manner in which Superior expects, at the reporting
date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax
assets against current liabilities and when they are related to income taxes levied by the same taxation
authority and Superior intends to settle its current tax assets and liabilities on a net basis. Also, Superior
recognizes any benefit associated with investment tax credits as deferred tax assets to the extent they are
expected to be utilized in accordance with IAS 12 — Income Taxes.
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SUPERIOR PLUS CORP. Uncertain Tax Positions
Superior is subject to taxation in numerous jurisdictions. There are many transactions and calculations during
the course of business for which the ultimate tax determination is uncertain. It is possible, however, that at
some future date, liabilities in excess of Superior’s provisions could result from audits by or litigation with tax
authorities. Where the final outcome of these tax-related matters is different from the amounts that were
initially recorded, such differences will affect the tax provisions in the period in which such determination is
made.
Current and Deferred Tax for the Period
Current and deferred tax are recognized as an expense in net earnings, except where they relate to amounts
recognized outside of net earnings (whether in other comprehensive income or directly in equity), in which
case the tax is also recognized outside net earnings, or where they arise from the initial accounting for a
business combination. In the case of a business combination, the tax effect is included in the accounting for
the business combination.
(o) Foreign Currencies
The financial statements of each subsidiary of Superior are translated into the currency of the subsidiary’s
primary economic environment (its functional currency). For the purpose of the consolidated financial
statements, the results and balance sheets of each subsidiary are expressed in Canadian dollars, Superior’s
functional currency.
The accounts of the foreign operations of Energy Services, Specialty Chemicals and Construction Products
Distribution in the United States, and of Specialty Chemicals operations in Chile, translate all assets and
liabilities at the exchange rate prevailing at the balance sheet date, and revenues and expenses at average
exchange rates during the period. Exchange gains and losses arising from this translation are recorded
as a component of accumulated other comprehensive income. Other monetary assets and liabilities held
by Superior are converted at the exchange rate prevailing at the balance sheet date. Gains and losses are
recognized on monetary assets and liabilities when those items are settled.
Transactions denominated in a foreign currency 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 net earnings.
(p) Share-Based Payments
Superior has established share-based compensation plans whereby notional restricted shares and/or notional
performance shares may be granted to employees. The fair value of these notional shares is estimated using
the period-end quoted market price and recorded as an expense with an offsetting amount to accrued
liabilities, re-measured at each balance sheet date. All share-based payments are settled in cash.
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2013 Annual Report (q) Government Grants
Government grants are not recognized until there is a reasonable assurance that Superior will comply with
the conditions attaching to them and that the grants will be received.
Government grants whose primary condition is that Superior should purchase, construct or otherwise
acquire non-current assets are recognized as a reduction of the carrying value of the related asset. Other
government grants are recognized as income over the periods necessary to match them with the costs
they are intended to compensate, on a systematic basis. Government grants receivable as compensation
for expenses or losses already incurred or for the purpose of giving immediate financial support to Superior
with no future related costs are recognized in net earnings in the period in which they become receivable.
(r) Net Earnings per Common Share
Basic net earnings per share are calculated by dividing the net earnings by the weighted average number of
shares outstanding during the period, which is calculated using the number of shares outstanding at the end
of each month in that year. Diluted net earnings per share are calculated by factoring in the dilutive impact
of the dilutive instruments, including the conversion of debentures to shares using the if-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.
(s) Significant Accounting Judgments, Estimates and Assumptions
The preparation of Superior’s consolidated financial statements in accordance with IFRS requires management
to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, net
earnings and related disclosure. The estimates and associated assumptions are based on historical experience
and various other factors deemed reasonable under the circumstances, the results of which form the basis of
making the judgments about carrying values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates. The areas involving a higher degree of judgment or
complexity, or where assumptions and estimates are significant to the financial statements are as follows:
Fair Value of Derivative and Non-Financial Derivative Instruments
Where the fair values of derivatives and non-financial derivatives cannot be derived from active markets, they
are determined using valuation techniques including a discounted cash flow model. This requires assumptions
concerning the amount and timing of estimated future cash flows and discount rates. Differences between
actual values and assumed values will affect net earnings in the period when the determination of the
difference is made.
Allowance for Doubtful Accounts
Superior recognizes an allowance for doubtful accounts based on historical customer collection history,
general economic indicators and other customer-specific information, all of which require Superior to make
certain assumptions. Where the actual collectability of accounts receivable differs from these estimates,
such differences will have an impact on net earnings in the period such a determination is made.
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SUPERIOR PLUS CORP. Property, Plant and Equipment and Intangible Assets
Capitalized assets, including property, plant and equipment and intangible assets are amortized over their
respective estimated useful lives. All estimates of useful lives are set out in 2(d) and 2(e) above.
Provisions
Provisions have been estimated for decommissioning costs, restructuring and environmental expenditures.
The actual costs and timing of future cash flows depend on future events. Any differences between estimates
and the actual future liability will be accounted for in the period when such determination is made.
Employee Future Benefits
Superior has a number of defined benefit pension plans and other benefit plans. The cost of defined benefit
pension plans and the present value of the pension obligation are determined using actuarial valuations.
These require assumptions including the determination of the discount rate, future salary increases, mortality
rates and future pension increases. Due to the valuation’s complexity, its underlying assumptions and
long-term nature, a defined benefit obligation is highly sensitive to changes in the underlying assumptions.
Income Tax Assets and Liabilities
Superior recognizes expected tax assets and liabilities based on estimates of current and future taxable net
earnings, which may require significant judgment regarding the ultimate tax determination of certain items.
If taxable net earnings differ from the estimates there may be an impact on current and future income tax
provisions in the period when the difference is determined.
Decommissioning Liabilities
Determining decommissioning liabilities requires estimates regarding the useful life of certain operating
facilities, the timing and cost of future remediation activities, discount rates and the interpretation and
changes to various environmental laws and regulations. Differences between estimates and results will affect
Superior’s accrual for decommissioning liabilities, with an effect on net earnings.
Asset Impairments
Financial and non-financial assets are subject to impairment reviews based on whether current or future
events and circumstances suggest that their recoverable amount may be less than their carrying value.
Recoverable amounts are based on a calculation of expected future cash flows, which includes management
assumptions and estimates of future performance.
79
2013 Annual Report Critical Judgments in Applying Accounting Policies
In applying Superior’s accounting policies, described above, management makes judgments that could
significantly affect the amounts recognized in the consolidated financial statements. The most critical of
these judgments are:
Impairment of Property, Plant and Equipment
An impairment evaluation involves consideration of whether there are indicators of impairment. Indicators
include: significant underperformance relative to historical or projected operating results, significant changes
in the manner in which an asset is used or in Superior’s overall business strategy, or significant negative
industry or economic trends. In some cases, these events are clear. However, in many cases, there is no such
clearly identifiable event. Instead, a series of individually insignificant events, some of them only later known,
leads to an indication that an asset may be impaired. Management continually monitors Superior’s segments,
the markets, and the business environment, and makes judgments and assessments about conditions and
events in order to conclude whether a possible impairment exists.
Income Taxes
Preparation of the consolidated financial statements involves making an estimate of, or provision for, income
taxes in each of the jurisdictions in which Superior operates. The process also involves estimating taxes
currently payable and taxes expected to be payable or recoverable in future periods, referred to as deferred
income taxes. Deferred income taxes result from the effects of temporary differences due to items that are
treated differently for tax and accounting purposes. The tax effects of these differences are reflected in the
balance sheet as deferred income tax assets and liabilities. An assessment must also be made to determine
the likelihood that Superior’s future taxable income will be sufficient to permit the recovery of deferred
income tax assets. To the extent that such recovery is not probable, recognized deferred income tax assets
must be reduced. Judgment is required in determining the provision for income taxes and recognition of
deferred income tax assets and liabilities. Management must also exercise judgment in its assessment of
continually changing tax interpretations, regulations and legislation, to ensure deferred income tax assets
and liabilities are complete and fairly presented. The effects of differing assessments and applications could
be material.
Financial Instruments
The fair value of financial instruments is determined and classified within three categories, which are outlined
below and discussed in more detail in Note 21.
Level I
Fair values in Level I are determined using inputs that are unadjusted quoted prices in active markets for
identical assets or liabilities that Superior has the ability to access.
Level II
Fair values in Level II are determined, directly or indirectly, using inputs that are observable for the asset
or liability.
80
SUPERIOR PLUS CORP. Level III
Fair values in Level III are determined using inputs for the asset or liability that are not readily observable.
The fair value measurement of a financial instrument is included in only one of the three levels, the
determination of which is based on the lowest-level input that is significant to the derivation of the fair
value. Classification of financial instruments requires management to use judgment in respect of both the
determination of fair value and the lowest-level input of significance.
Recent Accounting Pronouncements
Certain new standards, interpretations, amendments and improvements to existing standards were issued
by the IASB or International Financial Reporting Interpretations Committee (“IFRIC”) that are mandatory for
accounting periods beginning January 1, 2013 or later periods. The affected standards applicable to Superior
are as follows:
IFRS 7 — Financial Instruments: Disclosures, amendments
The amendments to IFRS 7 require entities to disclose information about rights of offset and related
arrangements (such as collateral posting requirements under an enforceable master netting agreement or
similar arrangement). Financial assets and liabilities are offset and the net amount reported in the balance
sheet where Superior has the legally enforceable right to set-off the recognized amounts and there is an
intention to settle on a net basis or realize the asset and settle the liability simultaneously. This standard
must be applied for accounting periods beginning on or after January 1, 2013. Superior adopted IFRS 7
amendments on January 1, 2013, with retrospective application from December 31, 2012 with no impact.
IFRS 10 — Consolidated Financial Statements
IFRS 10 establishes principles for the presentation and preparation of consolidated financial statements when
an entity controls one or more other entities. IFRS 10 requires an entity to consolidate an investee when it
is exposed, or has rights, to variable returns from its involvement with the investee and can affect those
returns through its power over the investee. Under existing IFRS, consolidation is required when an entity
can govern the financial and operating policies of an entity so as to obtain benefits from its activities. The
revised standard was effective on January 1, 2013 and Superior adopted the amendments with no impact.
IFRS 11 — Joint Arrangements
IFRS 11 requires a venture to classify its interest in a joint arrangement as a joint venture or joint operation.
Joint ventures will be accounted for using the equity method of accounting, whereas joint operations will
require the venture to recognize its share of the assets, liabilities, revenue and expenses relating to its interest
in the joint operation. The standard was effective on January 1, 2013 and Superior adopted the amendments
with no impact.
81
2013 Annual Report IFRS 12 — Disclosure of Interests in Other Entities
IFRS 12 establishes disclosure requirements for interests in other entities, such as joint arrangements,
associates, and/or unconsolidated structured entities. The standard carries forward existing disclosure and
introduces significant additional disclosure requirements that address the nature of, and risks associated
with, an entity’s interests in other entities. This standard was effective for Superior on January 1, 2013 and
Superior adopted the amendments with no impact.
IFRS 13 — Fair Value Measurement
IFRS 13 defines fair value, sets out a single IFRS framework for measuring fair value and requires disclosure
about fair value measurements. IFRS 13 applies to IFRS that require or permit fair value measurements or
disclosures about fair value measurements (and measurements, such as fair value less costs to sell, based on
fair value or disclosure about those measurements), except in specified circumstances. Superior adopted the
amendments on January 1, 2013, with no impact to Superior.
IAS 1 — Presentation of Other Comprehensive Income
The amendments to IAS 1 were issued in June 2011 and require entities to group items presented in other
comprehensive net earnings on the basis of whether they might be reclassified to the consolidated statement
of net earnings in subsequent periods and items that will not be reclassified to the consolidated statement of
net earnings. The amendments did not address which items are presented in other comprehensive income
and did not change the option to present items net of tax. The amendments to IAS 1 are effective for annual
periods beginning on or after July 1, 2012, which will be January 1, 2013 for Superior, and are to be applied
retrospectively. Superior adopted the amendments on January 1, 2013, with no impact to Superior.
IAS 19 — Employee Benefits, amendments
IAS 19 amendments were issued in June 2011 that changed the accounting and disclosure for defined benefit
plans and termination benefits. This standard requires that the changes in defined benefit obligations
are recognized as they occur, eliminating the corridor approach and accelerating the recognition of past
service costs. The changes in defined benefit obligations and plan assets are to be disaggregated into three
components: service costs, net interest on the net defined benefit liabilities or assets and re-measurements
of the net defined benefit liabilities or assets. This standard must be applied for accounting periods beginning
on or after January 1, 2013. Superior adopted IAS 19 on January 1, 2013, with retrospective application from
January 1, 2012. The financial impact was an increase of $3.1 million to pension expense and a corresponding
decrease to accumulated other comprehensive loss for the year ended December 31, 2012. The impact on
Superior’s balance sheet as at January 1, 2012 is a $4.0 million increase to deficit, a $0.1 million decrease in
employee benefit obligations and a corresponding decrease to accumulated other comprehensive loss of
$4.1 million. The impact as at December 31, 2012 was an increase in selling, distribution and administrative
costs of $3.1 million.
82
SUPERIOR PLUS CORP. New and Revised IFRS Standards Issued But Not Yet Effective
IFRS 9 — Financial Instruments: Classification and Measurement
IFRS 9 was issued in November 2009 and is intended to replace IAS 39 — Financial Instruments: Recognition
and Measurement. IFRS 9 uses a single approach to determine whether a financial asset is measured at
amortized cost or fair value, replacing the multiple rules in IAS 39. The approach in IFRS 9 is based on how
an entity manages its financial instruments in the context of its business model and the contractual cash
flow characteristics of the financial assets. The new standard also requires a single impairment method to
be used, replacing the multiple impairment methods in IAS 39. Requirements for financial liabilities were
added in October 2010 and they largely carried forward existing requirements in IAS 39 except that fair value
changes due to credit risk for liabilities designated at fair value through profit and loss would generally be
recorded in other comprehensive income. This standard must be applied for accounting periods beginning
on or after January 1, 2017, with earlier adoption permitted. Superior is assessing the effect of IFRS 9 on its
financial results and financial position; changes, if any, are not expected to be material.
IFRS 10 — Consolidated Financial Statements, IFRS 12 — Disclosure of Interests in Other
Entities and IAS 27 — Separate Financial Statements
The amendments to IFRS 10 define an investment entity and require a reporting entity that meets the
definition of an investment entity not to consolidate its subsidiaries but instead to measure its subsidiaries
at fair value through profit or loss in its consolidated and separate financial statements. Consequently, IFRS
12 and IAS 27 were amended to introduce new disclosure requirements for investment entities. Superior
does not anticipate these will have any effect on the consolidated financial statements as Superior is not an
investment entity.
IAS 32 — Financial Instruments: Presentation
The amendments to IAS 32 clarify the requirements relating to the offset of financial assets and financial
liabilities. Specifically, the amendments clarify the meaning of ‘currently has a legally enforceable right of
off-set’ and ‘simultaneous realization and settlement’. Superior does not anticipate significant impact on the
consolidated financial statements from these amendments.
IFRIC 21 — Levies
The interpretation, issued on May 20, 2013, provides guidance on when to recognize a liability for a levy
imposed by a government, both for levies that are accounted for in accordance with IAS 37 — Provisions,
Contingent Liabilities and Contingent Assets and those where the timing and amount of the levy is certain.
The Interpretation covers the accounting for outflows imposed on entities by governments (including
government agencies and similar bodies) in accordance with laws and/or regulations. However, it does not
include income taxes (see IAS 12 — Income Taxes), fines and other penalties, liabilities arising from emissions
trading schemes and outflows within the scope of other Standards. It also provides the following guidance
on recognition of a liability to pay levies: The liability is recognized progressively if the obligating event
occurs over a period of time and if an obligation is triggered on reaching a minimum threshold, the liability is
recognized when that minimum threshold is reached. This standard must be applied for accounting periods
beginning on or after January 1, 2014, with retrospective application from December 31, 2012. Superior is
assessing the effect of IFRIC 21 on its financial results and financial position; changes, if any, are not expected
to be material to Superior’s annual results although significant changes may result on a quarterly basis.
83
2013 Annual Report 3. Seasonality of Operations
Energy Services
Sales typically peak in the first quarter when approximately one-third of annual propane and other refined
fuels sales volumes and gross profits are generated due to the demand from heating end-use customers. They
then decline through the second and third quarter rising seasonally again in the fourth quarter with heating
demand. Similarly, net working capital is typically at seasonal highs during the first and fourth quarter, and
normally declines to seasonal lows in the second and third quarter. Net working capital is also significantly
influenced by wholesale propane prices and other refined fuels.
Construction Products Distribution
Sales typically peak during the second and third quarter with the seasonal increase in building and renovation
activities. They then decline through the fourth quarter and into the subsequent first quarter. Similarly, net
working capital is typically at seasonal highs during the second and third quarter, and normally decline to
seasonal lows in the fourth and first quarter.
4. Acquisitions
On November 27, 2013, Superior completed the acquisition of certain assets constituting a retail propane and
commercial fuels distribution business (Townsend Energy) in Le Roy, New York for an aggregate purchase
price of $9.6 million including adjustments to net working capital and deferred consideration. The operations
will provide U.S. refined fuels with access to additional propane customers.
Townsend Energy Acquisition
Property, plant and equipment
Intangible assets
Trade and other payables
Net identifiable assets and liabilities
Goodwill arising on acquisition
Total consideration
Purchase consideration components:
Cash (paid on November 27, 2013)
Deferred consideration
Total purchase consideration
Fair Value Recognized on Acquisition
2.6
3.5
(2.0)
4.1
4.1
5.5
9.6
7.6
2.0
9.6
Revenue and net earnings for the 12 months ended December 31, 2013 would have been $102.1 million and
$0.4 million, respectively, if the acquisition had occurred on January 1, 2013. Subsequent to the acquisition
date of November 27, 2013, the acquisition contributed revenue and net earnings, respectively, of $6.3 million
and $0.1 million to Energy Services for the period ended December 31, 2013.
84
SUPERIOR PLUS CORP.
On July 17, 2012, Superior completed the acquisition of certain assets which constitute a propane distribution
business for an aggregate purchase price of $5.5 million including adjustments for net working capital. The
main purposes were to expand Energy Services’ business in British Columbia and benefit from synergies.
Propane Acquisition
Trade and other receivables (1)
Inventories
Property, plant and equipment
Net identifiable assets and liabilities
Goodwill arising on acquisition
Total consideration
Purchase consideration components:
Cash (paid on August 2, 2012)
Total purchase consideration
Fair Value Recognized on Acquisition
0.9
0.1
1.9
2.9
2.9
2.6
5.5
5.5
5.5
(1) The gross amount of trade and other receivables is $0.9 million, of which $nil is expected to be uncollectible.
Revenue and net earnings for the period ended December 31, 2012 would have been $8.3 million and
$1.9 million, respectively, if the acquisition had occurred on January 1, 2012. Subsequent to the acquisition
date of July 17, 2012, the acquisition contributed revenue and net earnings, respectively, of $4.4 million and
$1.5 million to Energy Services for the period ended December 31, 2012.
5. Trade and Other Receivables
A summary of trade and other receivables is as follows:
Trade receivables, net of allowances
Accounts receivable – other
Finance lease receivable
Trade and other receivables
6. Prepaid expenses
Balance at the beginning of the year
Added to prepaid assets
Expensed to net earnings
Foreign exchange impact
Balance at the end of the year
Note
21
2013
443.2
35.7
0.9
479.8
2013
20.5
141.2
(127.2)
0.8
35.3
2012
355.9
32.3
0.8
389.0
2012 (1)
16.5
89.2
(85.1)
(0.1)
20.5
(1) December 31, 2012 has been restated for the impact of a prior-period adjustment. Refer to Note 15.
85
2013 Annual Report
7.
Inventories
Propane, heating oil and other refined fuels
Propane retailing materials, supplies, appliances and other
Chemical finished goods and raw materials
Chemical stores, supplies and other
Wall, ceiling and insulation construction products
2013
93.5
9.0
21.3
11.3
71.2
206.3
2012
105.1
10.7
21.1
9.3
67.5
213.7
The cost of inventories recognized as an expense in the year ended December 31, 2013 was $2,540.1 million
(December 31, 2012 — $2,528.9 million). Inventories of $nil as at December 31, 2013 (December 31, 2012 —
$nil) are expected to be recovered after more than 12 months. Inventory was written down during the year
ended December 31, 2013 by $3.6 million (December 31, 2012 — $3.6 million). No write-down reversals were
recorded during the years ended December 31, 2013 and 2012.
8. Finance Lease Receivable
In November 2010, Superior entered into a finance lease arrangement with a customer from the Specialty
Chemicals segment. It is related to capital assets used to produce electricity at a Specialty Chemicals sodium
chlorate facility in Chile. The lease contract term is ten years and contains an early termination option for the
customer after five years.
Current portion
Long-term portion
Less: unearned finance income
Present value of minimum lease payments
Minimum Lease Payments
2013
1.7
9.6
11.3
(3.1)
8.2
2012
1.6
10.6
12.2
(3.7)
8.5
Present Value of Minimum
Lease Payments
2013
2012
0.9
7.3
8.2
–
8.2
0.8
7.7
8.5
–
8.5
The interest rate inherent in the lease is fixed at a constant effective interest rate of 10% per year. There is no
allowance for doubtful accounts, as the finance lease receivables are neither past due nor impaired.
9. Construction Contracts
Revenue relating to construction contracts is recognized based on the stage of completion, based in turn on engineering
estimates of the proportion of work completed to date.
Contracts in progress at the balance sheet date:
Construction costs incurred plus recognized profits less
recognized losses to date
Less: Progress billings to date
2013
2012
14.9
(16.2)
(1.3)
12.9
(14.2)
(1.3)
86
SUPERIOR PLUS CORP.
Recognized and included in the financial statements as amounts due:
Accounts payable to customers under construction contracts
Note
15
2013
1.3
1.3
2012
1.3
1.3
10. Property, Plant and Equipment
Specialty
Chemicals
Plant &
Equipment
Land
Buildings
Energy Construction
Services
Products
Retailing Distribution
Equipment
Leasehold
Equipment Improvements
Cost
Balance at
December 31, 2011
Additions
Additions from
business combinations
Disposals
Impairment loss charged
29.7
147.0
–
–
(0.3)
3.5
–
(0.8)
728.4
17.6
591.5
24.9
–
(2.0)
1.9
(17.9)
41.2
4.9
–
(1.9)
to net earnings
–
–
–
(4.7)
–
Net foreign currency
exchange differences
Reclassification
Balance at
December 31, 2012
(0.2)
0.5
(1.2)
0.1
(5.7)
–
(1.7)
(4.2)
(0.9)
–
29.7
148.6
738.3
589.8
43.3
9.7
1,559.4
Total
1,547.7
51.0
1.9
(23.3)
(4.7)
(9.6)
(3.6)
9.9
0.1
–
(0.4)
–
0.1
–
Accumulated Depreciation and Impairment
Balance at
December 31, 2011
Depreciation expense
Eliminated on disposal
of assets
Net foreign currency
exchange differences
Reclassification
Balance at
December 31, 2012
–
–
–
–
–
–
38.6
5.6
308.2
40.8
285.7
34.9
(0.6)
(0.2)
–
(1.4)
(11.1)
(1.3)
–
(0.6)
(2.9)
22.4
5.2
(1.8)
(0.2)
–
7.8
0.8
662.7
87.3
(0.2)
(15.1)
(0.2)
–
(2.5)
(2.9)
43.4
346.3
306.0
25.6
8.2
729.5
87
2013 Annual Report
Specialty
Chemicals
Plant &
Equipment
Land
Buildings
Energy Construction
Services
Products
Retailing Distribution
Equipment
Leasehold
Equipment Improvements
Total
Cost
Balance at
December 31, 2012
Additions
Additions from
business combinations
Disposals
Investment in
supply agreement
Net foreign currency
exchange differences
Other
Balance at
December 31, 2013
Accumulated Depreciation
Balance at
December 31, 2012
Depreciation expense
Eliminated on
disposal of assets
Net foreign currency
exchange differences
Other
Balance at
December 31, 2013
Carrying Amount
29.7
148.6
–
–
(0.7)
–
0.5
–
2.2
–
(0.5)
–
4.5
–
738.3
36.5
589.8
36.5
43.3
6.0
–
–
23.5
17.9
–
2.6
(10.9)
–
12.3
(0.9)
–
(2.8)
–
1.5
0.1
9.7
2.3
–
(0.9)
1,559.4
83.5
2.6
(15.8)
–
23.5
0.2
(0.1)
36.9
(0.9)
29.5
154.8
816.2
629.4
48.1
11.2
1,689.2
–
–
–
–
–
–
43.4
6.0
346.3
36.5
306.0
34.6
25.6
5.4
8.2
0.5
729.5
83.0
(0.5)
1.1
–
–
6.3
–
(7.8)
2.5
(0.6)
(2.6)
(0.8)
(11.7)
1.0
–
0.1
0.1
11.0
(0.5)
50.0
389.1
334.7
29.4
8.1
811.3
As at December 31, 2012
As at December 31, 2013
29.7
29.5
105.2
104.8
392.0
427.1
283.8
294.7
17.7
18.7
1.5
3.1
829.9
877.9
Depreciation per cost category:
Cost of sales (1)
Selling, distribution and administrative costs
Total
2013
41.3
42.2
83.5
2012
44.9
42.4
87.3
(1) The cost of Specialty Chemicals’ finished goods inventory includes an allocation of fixed production overheads, which includes depreciation.
Depreciation included in costs of sales includes a charge of $0.5 million which is reflected in the cost of inventory as at December 31, 2013 (December
31, 2012 – $0.2 million).
The carrying value of Superior’s property, plant, and equipment includes $68.9 million of leased assets as at
December 31, 2013 (December 31, 2012 — $67.8 million).
88
SUPERIOR PLUS CORP.
On October 20, 2012, a kerosene leak was discovered in the bottom of a storage tank at U.S. refined fuels
Marcy terminal location. The leak was investigated and contained by management. U.S. refined fuels then
notified the Department of Environmental Conservation (DEC) which performed an independent review of
the leak and other tanks at this location. On December 27, 2012, the DEC issued a notice of violation based
on its inspections and subsequent to discussions between management and the DEC, a consent order was
issued to U.S. refined fuels on February 4, 2013. The consent order stated that the secondary containment
system and storage tanks were not in compliance with DEC design requirements and needed to be rebuilt
to specific standards by September 1, 2013 in order to remain operational. The consent order was modified
October 2013 to extend the requirement to rebuild to specific standards by September 1, 2014. Repair of the
facility has been suspended pending the outcome of a dispute between Superior and the previous owner
and operator of the facility as to responsibility for the repair. This decision is not expected to have any
material impact on the operations of U.S. refined fuels or operating results going forward.
Due to the leak and receipt of the consent order, management has performed a detailed impairment review
of the Marcy terminal to assess whether the carrying value of all the storage tanks exceeds their recoverable
amount. The recoverable amount of the assets was based on management’s estimate of the fair value less
costs to sell. Based on a detailed review by management, the fair value less costs to sell of the storage tanks
was lower than the carrying value. In 2012, an impairment charge of $4.7 million was recorded against net
earnings along with a $4.7 million reduction in the carrying value of the impaired storage tanks.
11.
Intangible Assets
Energy
Services
Customer
Contract-
Customer
Trademarks, Construction
Products
Base & Distribution
Intangible
Assets
Related Non-Compete
Costs Agreements
Specialty
Chemicals
Royalty
Assets and
Patents
Investment
Property
Total
39.8
69.7
1.7
65.4
1.0
177.6
Cost
Balance at December 31, 2011
Additions from internal
development activities
Additions acquired separately
Disposals
Reclassifications
Net foreign currency
exchange differences
–
1.1
–
–
–
Balance at December 31, 2012
40.9
Accumulated Amortization
Balance at December 31, 2011
Amortization expense
Disposals
Reclassification
Net foreign currency exchange
differences
Balance at December 31, 2012
31.2
3.3
–
–
–
34.5
1.0
0.1
(1.7)
2.4
(1.0)
70.5
20.7
17.0
(1.0)
2.6
(0.5)
38.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1.0
1.2
(1.7)
2.4
(1.0)
1.7
65.4
1.0
179.5
1.0
0.2
–
–
–
1.2
59.1
6.3
–
–
–
65.4
–
–
–
–
–
–
112.0
26.8
(1.0)
2.6
(0.5)
139.9
89
2013 Annual Report
Energy
Services
Customer
Contract-
Customer
Trademarks, Construction
Products
Base & Distribution
Intangible
Assets
Related Non-Compete
Costs Agreements
Specialty
Chemicals
Royalty
Assets and
Patents
Investment
Property
Total
Cost
Balance at December 31, 2012
40.9
70.5
1.7
65.4
1.0
179.5
Acquisitions through
business combinations
Additions from internal
development activities
Additions acquired separately
Impairment losses charged
to net earnings
Disposals
Net foreign currency
exchange differences
Other (derecognition of assets)
Balance at December 31, 2013
–
–
0.8
–
–
–
(25.1)
16.6
Accumulated Amortization and Impairment
Balance at December 31, 2012
Amortization expense
Disposal
Impairment losses charged
to net earnings
Net foreign currency
exchange differences
Other (derecognition of assets)
Balance at December 31, 2013
Carrying value (1)
As at December 31, 2012
As at December 31, 2013
34.5
2.9
–
–
–
(25.1)
12.3
3.5
7.7
0.1
(43.1)
(11.5)
3.0
–
30.2
38.8
16.3
(11.6)
(29.2)
1.7
0.1
16.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(0.7)
–
–
–
3.5
7.7
0.9
(43.8)
(11.5)
3.0
(25.1)
1.7
65.4
0.3
114.2
1.2
0.2
–
–
–
–
65.4
–
–
–
–
–
1.4
65.4
–
–
–
–
–
–
–
139.9
19.4
(11.6)
(29.2)
1.7
(25.0)
95.2
39.6
19.0
6.4
4.3
31.7
14.1
0.5
0.3
–
–
1.0
0.3
(1) Superior has pledged 100% of the intangible assets balance as at December 31, 2013, excluding leased assets, as security on its borrowing.
An impairment charge was recorded to the intangible assets of Superior’s Energy Services’ segment during
the fourth quarter; see Note 13 for further details.
Depreciation per cost category:
Selling, distribution and administrative costs
Total
2013
19.4
19.4
2012
26.8
26.8
90
SUPERIOR PLUS CORP.
12. Investment Properties
At Cost
Investment property
Depreciation expense
Impairment losses charged to net earnings
Accumulated amortization and impairment
Carrying value
Rental income from investment properties
Net income from investment properties
All of Superior’s investment property is held under freehold interests.
Fair value of investment properties
Investment property is included with intangible assets on the balance sheet.
13. Goodwill
Balance at the beginning of the year
Additional amounts recognized from business combinations during the year
Purchase price equation adjustments
Impairment of Energy Services
Balance at the end of the year
Impairment of Goodwill and Intangible Assets
2013
1.0
–
(0.7)
(0.7)
0.3
2013
–
–
2013
1.0
2012
1.1
(0.1)
–
(0.1)
1.0
2012
–
–
2012
1.0
2013
189.1
5.5
–
(0.9)
2012
186.1
2.6
0.4
–
193.7
189.1
All CGU’s to which goodwill has been allocated are tested for impairment annually, or more frequently
when there is an indication that the unit may be impaired. Below is a summary of the result of the annual
impairment test of the U.S. refined fuels CGU.
91
2013 Annual Report
Energy Services
During the fourth quarter of 2013 it was determined that Superior’s Energy Services’ segment was impaired.
As such, Superior completed a detailed assessment of the business segment’s operations. The recoverable
amount of the Energy Services’ segment was determined using a detailed cash flow model based on
current market assumptions surrounding the U.S. refined fuels industry, which was adversely affected by
the challenging wholesale market conditions and lower-than-expected customer growth. Based on the
calculated recoverable amount, it was determined that the goodwill and intangible assets for U.S. refined
fuels were impaired. A goodwill impairment charge of $0.9 million and an intangible assets impairment
charge of $14.6 million were recognized as reductions in the carrying values of the respective balances
during the fourth quarter of 2013.
Basis on Which Recoverable Amount was Determined
The recoverable amount for U.S. refined fuels was determined using a detailed cash flow model which was
based on evidence from an internal budget approved by the Board of Directors. Management’s internal
budgets are based on past experience and were adjusted to reflect market trends and economic conditions.
The resulting recoverable amount was then compared to the carrying amount of the business segment
which resulted in an impairment charge that was allocated to goodwill and intangible assets. The impairment
charge was recognized as an expense against Superior’s net earnings for the year ended December 31, 2013.
Key Rates Used in Calculation of Recoverable Amount
Growth Rate to Perpetuity
The first five years of cash flow projections used in the model were based on management’s internal budgets
and projections after five years were extrapolated using growth rates in line with historical long-term growth
rates. The long-term growth rate used in determining the recoverable amount for U.S. refined fuels was 2.0%.
Discount Rates
Cash flows in the model were discounted using a discount rate specific to U.S. refined fuels. Discount rates
reflect the current market assessments of the time value of money and are derived from the business
segment’s weighted average cost of capital. Risks specific to U.S. refined fuels were reflected within the cash
flow model. The weighted average cost of capital was then adjusted to reflect the impact of tax in order to
calculate an equivalent pre-tax discount rate. The after-tax discount rate used in determining the recoverable
amount for U.S. refined fuels was 11.2%
92
SUPERIOR PLUS CORP. Inflation Rates
Inflation rates used in the cash flow model were based on a blend of a number of publicly available inflation
forecasts. The inflation rate used in determining the recoverable amount for U.S. refined fuels was 2.0%.
Key Assumptions
The model used to determine the recoverable amount of U.S. refined fuels includes the assumption that the
growth of the business in 2014 will be less than anticipated and wholesale market challenges will continue
into 2014.
14. Provisions
Balance at December 31, 2011
Utilization
Additions
Unwinding of discount
Impact of change in discount rate
Net foreign currency exchange difference
Balance at December 31, 2012
Utilization
Additions
Unwinding of discount
Impact of change in discount rate
Net foreign currency exchange difference
Balance at December 31, 2013
Current
Non-current
Restructuring
Restructuring Decommissioning
Environmental
–
–
5.5
–
–
–
5.5
(2.8)
9.5
–
–
–
12.2
15.5
–
–
0.4
0.4
(0.1)
16.2
–
0.2
(0.6)
(2.0)
0.5
14.3
1.7
(0.3)
–
–
–
–
1.4
(0.6)
0.4
–
–
0.1
1.3
2013
8.3
19.5
27.8
Total
17.2
(0.3)
5.5
0.4
0.4
(0.1)
23.1
(3.4)
10.1
(0.6)
(2.0)
0.6
27.8
2012
5.5
17.6
23.1
Restructuring costs are recorded in selling, distribution, and administrative costs. As at December 31, 2013,
the restructuring expense was $9.5 million (December 31, 2012 – $5.5 million). Provisions for restructuring
are recorded in provisions, except for the current portion, which is recorded in trade and other payables.
As at December 31, 2013, the current portion of restructuring costs was $8.3 million (December 31, 2012
– $5.5 million). As at December 31, 2013, the long-term portion of restructuring costs was $3.9 million
(December 31, 2013 – $nil). The provision is primarily for severance, lease costs and consulting fees.
93
2013 Annual Report
Decommissioning
Specialty Chemicals
Superior makes full provision for the future cost of decommissioning Specialty Chemicals’ chemical
facilities. The provision is on a discounted basis and is based on existing technologies at current prices
or long-term price assumptions, depending on the activity’s expected timing. As at December 31, 2013,
the discount rate used in Superior’s calculation was 3.14% (December 31, 2012 — 2.4%). Superior estimates
the total undiscounted expenditures required to settle its decommissioning liabilities to be approximately
$20.6 million (December 31, 2012 — $20.1 million) which will be paid over the next 18 to 26 years. While
Superior’s provision for decommissioning costs is based on the best estimate of future costs and the
economic lives of the chemical facilities, the amount and timing of incurring these costs is uncertain.
Energy Services
Superior makes full provision for the future costs of decommissioning certain assets associated with the
Energy Services’ segment. Superior estimates the total undiscounted expenditures required to settle its
asset retirement obligations to be approximately $9.5 million at December 31, 2013 (December 31, 2012 —
$8.8 million) which will be paid over the next 18 years. The credit-adjusted free-risk rate of 3.14% at
December 31, 2013 (December 31, 2012 — 2.4%) was used to calculate the present value of the estimated
cash flows.
Environmental
Provisions for environmental remediation are made when a clean-up is probable and the amount of the
obligation can be reliably estimated. Generally, this coincides with a commitment to a formal plan or,
if earlier, on divestment or closure of inactive sites. Superior estimates the total undiscounted expenditures
required to settle its environmental expenditures to be approximately $1.3 million at December 31, 2013
(December 31, 2012 — $1.4 million) which will be paid over the next two years. The provision for environmental
expenditures has been estimated using existing technology, at current prices and discounted using a
risk-free discount rate of 3.14% at December 31, 2013 (December 31, 2012 — 2.4%). The extent and cost of
future remediation programs are inherently difficult to estimate. They depend on the scale of any possible
contamination, the timing and extent of corrective actions, and Superior’s share of the liability.
94
SUPERIOR PLUS CORP. 15. Trade and Other Payables
A summary of trade and other payables is as follows:
Trade payables
Net benefit obligation
Restructuring provision
Other payables
Amounts due to customers under construction contracts
Share-based payments
Trade and other payables
Notes
20
14
9
27
2013
300.7
3.8
8.3
63.2
1.3
18.9
2012 (1)
236.1
3.6
5.5
62.1
1.3
9.9
396.2
318.5
(1) In the third quarter of 2013, Superior discovered an understatement of trade and other payables and an overstatement of prepaid expenses, which
relates to fiscal 2010 and 2009. Superior has corrected the prior-period error in accordance with IAS 8 – Accounting Policies, Changes in Accounting
Estimates and Errors which states that an entity shall correct material prior-period errors retrospectively in the first set of financial statements authorized
for issuance after their discovery, by restating comparative amounts for the prior-period presented in which the error occurred or, if the error occurred
before the earliest prior-period presented, restating the opening balances of assets, liabilities and equity for the earliest prior-period presented.
Consequently, as at January 1, 2012, to correct the error, Superior increased the deficit by $8.8 million (refer to the consolidated statement of changes
in equity) and increased trade and other payables by $4.4 million, reduced prepaid expenses by $4.2 million, and decreased accumulated other
comprehensive loss by $0.2 million.
The average credit period on purchases by Superior is 23 days. No interest is charged on the trade payables
between seven and 30 days from the date of the invoice. Thereafter, interest is charged at 12% per annum
on the balance. Superior’s financial risk management policies ensure that payables are normally paid within
the pre-agreed credit terms.
16. Deferred Revenue
Balance at the beginning of the year
Deferred during the year
Released to net earnings
Foreign exchange impact
Balance at the end of the year
Current
Non-current
2013
19.2
33.2
(28.5)
1.3
25.2
2013
24.8
0.4
25.2
2012
14.2
29.1
(23.9)
(0.2)
19.2
2012
18.2
1.0
19.2
The deferred revenue relates to Energy Services’ unearned service revenue and Specialty Chemicals’
unearned product-related revenues.
95
2013 Annual Report
17. Borrowing
Revolving term bank credits (1)
Bankers Acceptances (BA)
Year of
Maturity
Effective Interest Rate
2013
2012
2016
Floating BA rate plus
applicable credit spread
Canadian Prime Rate Loan
2016
Prime rate plus credit spread
LIBOR Loans
(US$129.0 million; 2012 – US$138.0 million)
2016
Floating LIBOR rate plus
applicable credit spread
US Base Rate Loan
(US$11.5 million; 2012 – US$34.6 million)
2016
US Prime rate plus credit
spread
Other Debt
Accounts receivable factoring program (2)
–
Floating BA Plus
Deferred consideration
2014-2016 Non-interest bearing
246.5
26.3
148.6
13.0
137.3
137.3
12.2
422.3
34.5
333.4
9.3
4.0
13.3
–
2.7
2.7
Senior Secured Notes (3)
Senior secured notes subject to
fixed interest rates (US$60.0 million;
2012 – US$92.0 million)
Senior Unsecured Debentures
2014-2015
7.62%
63.8
91.5
Senior unsecured debentures (4)
2016
8.25%
–
150.0
Finance Lease Obligations
Finance lease obligations (Note 18)
Total borrowing before deferred financing fees
Deferred financing fees
Borrowing
Current maturities
Borrowing (5)
79.3
578.7
(2.6)
576.1
(67.0)
509.1
62.0
639.6
(5.2)
634.4
(59.7)
574.7
(1) On June 10, 2013, Superior and its wholly-owned subsidiaries, Superior Plus Financing Inc. and Commercial E Industrial (Chile) Limitada, extended
their $570.0 million credit facility which can be expanded up to $750.0 million. The credit facility matures on June 27, 2016 and is secured by a general
charge over the assets of Superior and certain of its subsidiaries. As at December 31, 2013, Superior had $27.9 million of outstanding letters of credit
(December 31, 2012 – $31.1 million) and approximately $115.3 million of outstanding financial guarantees (December 31, 2012 – $121.9 million). The
fair value of Superior’s revolving term bank credit facilities, other debt, letters of credit, and financial guarantees approximates their carrying value as a
result of the market based-interest rates, the short-term nature of the underlying debt instruments and other related factors.
(2) Superior has entered into a Master Receivables Purchase Agreement (MRPA) with a financial institution by which it may purchase from time to time, on
an uncommitted revolving basis, 100% interest in receivables from Superior. The maximum aggregate amount of purchased receivables purchased by
the financial institution under this agreement and outstanding at any time is limited to $15.0 million. As at December 31, 2013, the accounts receivable
factoring program totalled CDN $9.3 million (December 31, 2012 – CDN $nil).
(3) Senior secured notes (the Notes) totalling US $60.0 million and US $92.0 million (respectively, CDN $63.8 million at December 31, 2013 and CDN $91.5
million at December 31, 2012) are secured by a general charge over the assets of Superior and certain of its subsidiaries. Principal repayments began in
the fourth quarter of 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 as at December 31, 2013 was CDN $68.5 million (December 31, 2012 – CDN
$94.4 million).
(4) Superior redeemed all of its outstanding $150.0 million 8.25% senior unsecured debentures due October 27, 2016 in accordance with the indenture
governing the 8.25% Debentures on October 28, 2013. The 8.25% Debentures were redeemed at the redemption price set forth in the indenture of
$1,041.25 per $1,000 principal amount of 8.25% Debentures, together with all accrued and unpaid interest thereon up to October 28, 2013, for a total
amount on redemption of $1,041.47603 per $1,000 principal amount of 8.25% Debentures.
(5) On February 14, 2014, Superior closed a $125.0 million term loan facility which matures on August 14, 2014. The term loan facility provides additional
liquidity to ensure Superior has sufficient financial flexibility to manage short term fluctuations in working capital requirements. Throughout the end
of 2013 and the beginning of 2014, Superior’s working capital requirements have increased due to a rise in the wholesale cost of propane. Superior
anticipates that the wholesale cost of propane and the related working capital will normalize throughout the remainder of the 2014 heating season.
Superior intends to repay the credit facility before the facility maturity date.
96
SUPERIOR PLUS CORP.
Repayment requirements of borrowing before deferred finance costs are as follows:
Current maturities
Due in 2015
Due in 2016
Due in 2017
Due in 2018
Due in 2019
Subsequent to 2019
Total
18. Leasing Arrangements
Operating Lease Commitments
67.0
57.2
439.5
6.5
4.6
3.9
–
578.7
Superior has entered into leases on certain vehicles, rail cars, premises and other equipment. Leases have an
average life of between three and five years with no renewal option included in the contracts. There are no
restrictions placed upon Superior by entering into these leases.
Future minimum lease payments under non-cancellable operating leases are as follows:
Not later than one year
Later than one year and not later than five years
Later than five years
2013
39.3
93.7
66.0
199.0
2012
38.1
89.9
35.6
163.6
Obligations under Finance Lease
Finance leases relate to fuel distribution and construction products vehicles, equipment and office space
with lease terms of five to 15 years. Superior has options to purchase the assets for a nominal amount at the
conclusion of the lease agreements. Superior’s obligations under finance leases are secured by the lessors’
title to the leased assets.
In October 2013, Specialty Chemicals entered into a supply agreement with Tronox LLC (“Tronox”) to purchase
up to 130,000 MT of sodium chlorate per year from Tronox’s Hamilton, Mississippi facility, as nominated
annually by Specialty Chemicals. The initial term of the agreement extends to December 31, 2016 and may be
automatically extended in one year increments thereafter. Under the agreement, Tronox will continue to own
and operate the facility, and Specialty Chemicals will purchase sodium chlorate to meet customer demands
under certain customer contracts being assumed and to supply other existing and new customers. Specialty
Chemicals paid an initial fee of $4.3 million and will incur a quarterly fee of $0.8 million during the initial
term, plus a cost for sodium chlorate delivered. As part of the Agreement, Specialty Chemicals will acquire
finished inventory and assume existing railcar leases and customer contracts, as assigned. Additionally, the
parties have entered into a strategic long-term agreement for the supply of chloralalkali product by Specialty
Chemicals to service Tronox’s requirements in North America. Under the agreement, if the annual nominated
volume by Specialty Chemicals is less than the specified volume of product set out in the agreement, Tronox
may terminate the agreement early, at its sole option and its sole cost to permanently shut down the plant
for the manufacture of sodium chlorate. Superior recognized approximately $19.2 million of finance lease
obligations upon execution of the agreement.
97
2013 Annual Report
Not later than one year
Later than one year and not later than five years
Later than five years
Less: future finance charges
Present value of minimum lease payments
Included in the Consolidated Financial Statements as:
Current portion of finance lease
Non-current portion of finance lease
Minimum Lease Payments
Present Value of Minimum
Lease Payments
2013
20.3
63.5
4.3
(8.8)
79.3
2012
17.0
49.5
3.1
(7.6)
62.0
2013
19.0
56.5
3.8
–
79.3
2013
24.8
54.5
79.3
2012
16.4
43.1
2.5
–
62.0
2012
16.4
45.6
62.0
19. Convertible Unsecured Subordinated Debentures
Superior’s debentures are as follows:
Maturity
October
December
2015 (1)(2)
2014 (3)
Interest rate
Conversion price per share
5.85%
$31.25
7.50%
$13.10
Face value, December 31, 2012
Conversions
Debentures issued
Debentures redeemed
Face value, December 31, 2013
Issuance costs, December 31, 2012
Issuance costs incurred
Redemption adjustment
Accretion of issuance costs
Issuance costs, December 31, 2013
Discount value, December 31, 2012
Impact of redemption
Accretion of discount value
Discount value, December 31, 2013
Option value, December 31, 2013
Debentures outstanding as at
December 31, 2013
Debentures outstanding as at
December 31, 2012
Quoted market value as at
December 31, 2013
Quoted market value as at
December 31, 2012
June
2017
5.75%
$19.00
172.5
–
–
–
172.5
(4.8)
–
–
1.0
(3.8)
(0.1)
–
–
(0.1)
–
June
2018
6.0%
$15.10
150.0
–
–
–
150.0
(4.6)
–
–
0.7
(3.9)
(1.4)
–
0.2
(1.2)
–
October
2016
7.50%
$11.35
June
2019 (4)
6.0%
16.75
Total
Carrying
Value
75.0
–
–
–
75.0
(2.6)
–
–
0.6
(2.0)
(0.4)
–
0.1
(0.3)
–
–
–
97.0
–
97.0
–
(3.7)
–
0.1
(3.6)
–
–
0.4
0.4
(10.6)
541.5
(0.1)
97.0
(143.9)
494.5
(14.1)
(3.7)
1.8
2.7
(13.3)
(2.3)
0.4
0.7
(1.2)
(10.6)
75.0
–
–
(75.0)
–
(0.7)
–
0.7
–
–
(0.2)
0.2
–
–
–
69.0
(0.1)
–
(68.9)
–
(1.4)
–
1.1
0.3
–
(0.2)
0.2
–
–
–
–
–
168.6
144.9
72.7
83.2
469.4
74.1
67.4
167.6
144.0
72.0
–
525.1
–
–
174.4
156.8
86.3
99.5
517.0
75.2
71.4
169.2
148.0
84.2
–
548.0
(1) Superior redeemed $50.0 million of the 5.85% October 2015 convertible unsecured subordinated debentures, on January 3, 2013.
(2) Superior redeemed the remaining $25.0 million 5.85% October 2015 convertible unsecured subordinated debentures, on April 9, 2013.
(3) Superior redeemed the full $68.9 million 7.50% December 2014 convertible unsecured subordinated debentures, on September 3, 2013.
(4) Superior issued the 6.00% unsecured subordinated debentures due June 2019 on July 22, 2013.
98
SUPERIOR PLUS CORP.
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. Superior also has a cash conversion put option
which allows Superior to settle any conversion of debentures in cash, in lieu of delivering common shares
to the debenture holders of the October 2016, June 2018 and June 2019 convertible debentures. The cash
conversion put option has been classified as an embedded derivative and measured at fair value through net
earnings (FVTNE) (see Note 21 for further details).
20. Employee Future Benefits
The most recent actuarial valuations of plan assets and the present value of the defined benefit obligation
were carried out on December 31, 2013 by Aon Hewitt Associates LLC. The present value of the defined
benefit obligation, and the related current service cost and past service cost, were measured using the
projected unit credit method.
The principal assumptions used for the purpose of the actuarial valuation were as follows:
Discount rate
Expected rate of compensation increase
Mortality rate
Defined Benefit Plans
Other Benefit Plans
2013
3.75%
3.00%
10.00%
2012
4.25%
3.25%
2013
3.75%
3.00%
2012
4.25%
3.25%
10.00%
10.00%
10.00%
Energy Services and Specialty Chemicals have defined benefit and defined contribution pension plans
covering most employees. The benefits provided under defined benefit pension plans are based on
the individual employee’s years of service and the highest average earnings for a specified number of
consecutive years. Information about Superior’s defined benefit and other post-retirement benefit plans as at
December 31, 2013 and December 31, 2012 in aggregate is as follows:
Recognized Net (Asset) Liability Arising from Defined Benefit Obligation
Energy Services’
Pension Benefit Plans
Specialty Chemicals’
Pension Benefit Plans
Other
Benefit Plans
Balance as at December 31, 2012
Present value of defined benefit obligations
Fair value of plan assets
Net liability arising from defined benefit obligation
Balance as at December 31, 2013
Present value of defined benefit obligations
Fair value of plan assets
Net (asset) liability arising from defined benefit obligation
49.3
(42.4)
6.9
44.5
(46.3)
(1.8)
108.3
(82.1)
26.2
105.5
(99.4)
6.1
24.6
–
24.6
22.8
–
22.8
99
2013 Annual Report
Movements in defined benefit obligations and plan assets:
Energy Services’
Pension Benefit Plans
Specialty Chemicals’
Pension Benefit Plans
Other
Benefit Plans
2013
2012 (1)
2013
2012 (1)
2013
2012 (1)
Movement in the present value of the
defined benefit obligation during the year:
Benefit obligation at January 1
Current service cost
Interest cost
Contributions by the plan participants
Actuarial (gains) losses
Past service cost
Benefits paid
Benefit obligation as at December 31
Movement in the fair value of the
plan assets during the year:
Fair value of plan assets at January 1
Expected return on plan assets
Contributions by the employer
Contributions by plan participants
Benefits paid
Partial plan wind-up surplus withdrawal
Administration expenses
Payment from defined benefit
surplus to defined contribution plan
Fair value of plan assets as at December 31
Funded status – plan surplus (deficit)
Net asset (obligation) arising from defined
benefit obligation
Impact of adopting IAS 19 –
Employee Benefits, amendments
Current portion of net benefit obligation
recorded in trade and other payables
Non-current net benefit asset
(obligation) (2013 – $23.3 million;
2012 – $54.0 million)
49.3
–
1.9
–
(2.0)
–
(4.7)
44.5
42.4
6.8
3.0
–
(4.7)
(0.8)
(0.3)
(0.1)
46.3
1.8
48.6
0.1
2.0
–
1.9
0.7
108.3
96.3
2.7
4.1
0.1
(6.7)
0.3
2.3
4.1
0.1
8.9
–
(4.0)
(3.3)
(3.4)
49.3
105.5
108.3
39.1
4.8
3.0
–
(4.0)
–
(0.4)
(0.1)
42.4
(6.9)
82.1
13.6
7.2
0.1
(3.3)
–
(0.3)
–
99.4
(6.1)
70.6
8.4
6.6
0.1
(3.4)
–
(0.2)
–
82.1
24.6
0.3
0.7
–
33.6
0.1
1.3
–
(1.6)
(9.4)
–
(1.2)
22.8
–
–
1.2
–
(1.2)
–
–
–
–
–
(1.0)
24.6
–
–
1.0
–
(1.0)
–
–
–
–
(26.2)
(22.8)
(24.6)
1.8
(6.9)
(6.1)
(26.2)
(22.8)
(24.6)
–
–
–
–
–
–
–
(0.1)
(3.4)
(3.3)
(0.4)
(0.3)
1.8
(6.9)
(2.7)
(22.9)
(22.4)
(24.2)
(1) December 31, 2012 has been restated for the impact of IAS 19 – Employee Benefits, amendments effective January 1, 2013. Refer to Note 2.
The accrued net pension asset related to the Energy Services’ pension benefit plan on December 31, 2013
was $1.8 million (December 31, 2012 – obligation of $6.9 million), and the expense for 2013 was $0.8 million
(December 31, 2012 – $1.7 million). The accrued net benefit obligation related to the Specialty Chemicals
pension benefit plan on December 31, 2013 was $6.1 million (December 31, 2012 – $26.2 million), and the
expense for 2013 was $4.2 million (December 31, 2012 – $3.5 million).
100
SUPERIOR PLUS CORP.
The accrued net benefit obligation related to the total other benefit plans of Energy Services and Specialty
Chemicals on December 31, 2013 was $22.8 million (December 31, 2012 – $24.6 million), and the expense for
2013 was $1.1 million (December 31, 2012 – $1.5 million).
Amounts recognized in net earnings in respect of these defined benefit plans are as follows for the years
ended December 31:
Service Cost:
Current service cost
Past service cost
Net interest expense
Components of defined benefit costs recognized in net earnings
2013
2012 (1)
3.1
0.3
2.7
6.1
2.6
0.7
3.4
6.7
(1) December 31, 2012 has been restated for the impact of adopting IAS 19 – Employee Benefits, amendments effective January 1, 2013. Refer to Note 2.
The service cost and the net interest expense related to Energy Services and Specialty Chemicals on
December 31, 2013 was $6.1 million (December 31, 2012 – $6.7 million) and is included in selling, distribution
and administrative costs.
The remeasurement of the net defined benefit liability is included in other comprehensive loss. The amount
recognized in accumulated other comprehensive loss in respect of these benefit plans are as follows:
Actuarial defined benefit gains (before income taxes)
Cumulative actuarial losses (before income taxes)
2013
26.4
(7.7)
2012 (1)
7.2
(34.1)
(1) December 31, 2012 has been restated for the impact of adopting IAS 19 – Employee Benefits, amendments effective January 1, 2013. Refer to Note 2.
Remeasurement on the net defined benefit obligation:
Cumulative actuarial losses, beginning of the year
Actuarial asset experience gain
Actuarial (loss) gain arising from changes in demographic assumptions
Actuarial gain (loss) arising from changes in financial assumptions
Actuarial (loss) gain arising from changes in experience adjustments
Cumulative actuarial losses, end of the year
2013
(34.1)
15.9
(4.4)
15.6
(0.7)
(7.7)
2012 (1)
(41.4)
9.2
6.3
(9.8)
1.6
(34.1)
(1) December 31, 2012 has been restated for the impact of adopting IAS 19 – Employee Benefits, amendments effective January 1, 2013. Refer to Note 2.
Significant actuarial assumptions for the determination of the accrued defined benefit obligation are
discount rate, compensation increase, mortality scale and trend rate. The sensitivity analyses below have
been determined based on reasonably possible changes of the respective assumptions occurring as at
December 31, 2013, while holding all other assumptions constant.
101
2013 Annual Report
Discount Rate
A 1% change in the discount rate would result in a change to the accrued defined benefit obligation
related to Energy Services of $4.8 million (December 31, 2012 – $5.3 million) and change to the current
service expense of $0.1 million (December 31, 2012 – $nil). A 1% change in the discount rate would result
in a change to the accrued defined benefit obligation related to Specialty Chemicals of $17.0 million
(December 31, 2012 – $18.0 million) and change to the current service expense of $1.0 million
(December 31, 2012 – $0.8 million).
Compensation Increase
A 1% change in the salary would result in a change to the accrued defined benefit obligation related to
Energy Services of $nil (December 31, 2012 – $nil) and change to the current service expense of $nil
(December 31, 2012 – $nil). A 1% change in salary would result in a change to the accrued defined benefit
obligation related to Specialty Chemicals of $3.1 million (December 31, 2012 – $3.9 million) and change to the
current service expense of $0.3 million (December 31, 2012 – $0.4 million).
Mortality Scale
A 10% change in the mortality scale would result in a change to the accrued defined benefit obligation
related to Energy Services of $2.0 million (December 31, 2012 – $2.5 million) and change to the
current service expense of $0.1 million (December 31, 2012 – $0.1 million). A 10% change in the mortality
scale would result in a change to the accrued defined benefit obligation related to Specialty Chemicals of
$2.3 million (December 31, 2012 – $3.1 million) and change to the current service expense of $0.2 million
(December 31, 2012 – $0.2 million)
Trend Rate
A 1% change in the trend rate would result in a change to the accrued defined benefit obligation related
to Energy Services of $0.8 million (December 31, 2012 – $0.8 million) and a change to the current service
expense of $nil (December 31, 2012 – $nil). A 1% change in the trend rate would result in a change to the
accrued defined benefit obligation liability related to Specialty Chemicals of $0.7 million (December 31, 2012
– $0.8 million) and a change to the current service expense of $nil (December 31, 2012 – $nil).
The sensitivity presented above may not be representative of the actual change in the accrued defined
benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as
some of the assumptions may be correlated.
The present value of the defined benefit obligation has been calculated using the projected unit credit as at
December 31, 2013, which is the same as that applied in calculating the accrued defined benefit obligation
recognized in the consolidated balance sheets.
102
SUPERIOR PLUS CORP. There was no change in the methods and assumptions used in preparing the sensitivity analysis from
prior years.
The average duration of the net benefit obligation related to Energy Services is 7.9 years (December 31, 2012
– 8.1 years) and Specialty Chemicals is 13.5 years (December 31, 2012 – 14.0 years).
As at December 31, 2013 Superior expects to make a contribution of $9.2 million (December 31, 2012 – $10.3
million) to the defined benefit plans during 2014.
Major categories of plan assets as a percentage of the fair value of total defined benefit plan assets:
Equities
Bonds
Other assets
Energy Services’
Pension Benefit Plans
Specialty Chemicals’
Benefit Benefit Plans
64.6%
28.4%
7.0%
49.1%
50.9%
nil%
The actual return on Energy Services and Specialty Chemicals plan assets in 2013 was 16.1% and 12.9%,
respectively (2012 – Energy Services – 11.1% and Specialty Chemicals – 11.4%).
As at December 31, 2013, the asset-matching strategic choices that are formulated in the actuarial and
technical policy of the total defined benefit plan assets are:
Equities
Bonds
Other assets
Energy Services’
Pension Benefit Plans
Specialty Chemicals’
Pension Benefit Plans
Other
Benefit Plans
55.0%
40.0%
5.0%
60.0%
40.0%
nil%
25.0%
75.0%
nil%
103
2013 Annual Report
21. Financial Instruments
IFRS requires disclosure around fair value and specifies a hierarchy of valuation techniques based on whether
the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market
data obtained from independent sources, while unobservable inputs reflect Superior’s market assumptions.
These two types of input create the following fair-value hierarchy:
• Level 1 — Quoted prices in active markets for identical instruments.
• Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar
instruments in markets that are not active; and model-derived valuations in which all significant inputs and
value drivers are observable in active markets.
• Level 3 — Valuations derived from valuation techniques in which one or more significant inputs or
significant value drivers are unobservable.
The fair value of a financial instrument is the consideration 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 (Level 1). Where bid and ask prices are
unavailable, Superior uses the closing price of the instrument’s most recent transaction. 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
(Level 2). Superior uses internally developed methodologies and unobservable inputs to determine the fair
value of some financial instruments when required (Level 3).
Fair values determined using valuation models require 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 forecast commodity price curves, interest
rate yield curves, currency rates, and price and rate volatilities as applicable.
In August 2012, Specialty Chemicals received a payment of $15.8 million from TransCanada Energy Ltd., a
subsidiary of TransCanada Corporation, in connection with the arbitration ruling related to the Sundance Power
Purchase Agreement (PPA) between TransAlta Corporation and TransCanada Corporation. The payment
resulted from the electrical sales agreement (ESA) between TransCanada Corporation and Superior whereby
TransCanada Corporation supplies Superior with fixed-priced energy from the PPA. A one-time gain of
$12.5 million, representing the payment, net of certain settlement costs, was recorded in cost of goods sold.
This settlement relates to Specialty Chemicals’ fixed-price electricity purchase agreement, which expires in
2017. Specialty Chemicals has begun to receive electricity production from the PPA as the Sundance units
have partially started and therefore, are participating in accordance with the ESA’s terms.
With respect to the valuation of Specialty Chemicals’ fixed-price electricity agreement, the valuation of this
agreement 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 this agreement. A $1/MWh change
in the forecast price of electricity would result in a change in the fair value of this agreement of $0.9 million,
with a corresponding impact to net earnings before income taxes.
104
SUPERIOR PLUS CORP. No changes in valuation techniques were made by Superior during the period ended December 31, 2013 and
no financial instruments have been reclassified between the different fair value input levels.
All financial and non-financial derivatives are designated as held-for-trading upon their initial recognition.
Effective
Rate
Fair Value
Input
Level
Asset (Liability)
Dec. 31,
2013
Dec. 31,
2012
CDN
$4.22/GJ
Level 1
(12.7)
(42.2)
Description
Notional (1)
Term
Natural gas financial
swaps – AECO
Foreign currency forward
contracts, net sale
22.42 GJ (2) 2014-2018
US$569.4 (3) 2014-2017
1.03
Level 1
29.2
10.7
Foreign currency forward contracts,
balance sheet-related
Interest rate swaps – CDN$
US$27.0 (3)
2014
$200.0 (3) 2014-2017
Equity derivative contracts
Debenture-embedded derivative
$7.6 (3) 2014-2015
$255.0 (3) 2014-2018
1.01
Level 1
Six-month BA
rate plus 2.65%
Level 2
$11.43/share
Level 2
1.6
6.2
1.5
0.2
9.4
0.5
–
Level 3
(26.9)
(19.8)
Energy Services’ butane
wholesale purchase and
sale contracts, net sale
Energy Services’ propane
wholesale purchase and
sale contracts, net sale
Energy Services’ electricity swaps
Energy Services’ heating oil
purchase and sale contracts
Specialty Chemicals’ fixed-price
electricity purchase agreements
1.55 USG (4) 2014-2015
$1.36/USG
Level 2
–
(0.2)
6.33 USG (4)
2014
0.89MWh (5) 2014-2018
$1.20/USG
Level 2
$39.17/MWh
Level 2
12.6 Gallons (4)
2014 US$3.38 /Gallon
Level 2
29-45 MW (6) 2014-2017
$37-$59/MWh
Level 3
1.9
(6.1)
0.2
1.9
0.7
(10.3)
(0.2)
1.6
(1) Notional values as at December 31, 2013.
(2) Millions of gigajoules (GJ) purchased.
(3) Millions of dollars.
(4) Millions of United States gallons purchased.
(5) Millions of megawatt hours (MWh).
(6) Megawatts (MW) on a 24/7 continual basis per year purchased.
105
2013 Annual Report
All financial and non-financial derivatives are designated as held-for-trading upon their initial recognition.
Current
Assets
Long-term
Assets
Current
Liabilities
Long-term
Liabilities
Description
Natural gas financial swaps – AECO
Energy Services’ electricity swaps
Foreign currency forward contracts, net sale
Foreign currency forward contracts, balance sheet-related
Interest rate swaps
Equity derivative contracts
Debenture-embedded derivative
1.1
0.4
0.4
1.6
2.6
1.5
–
Energy Services’ propane wholesale purchase and sale contracts 4.8
Energy Services’ heating oil purchase and sale contracts
0.3
Specialty Chemicals’ fixed-price electricity purchase agreements 1.0
As at December 31, 2013
13.7
–
–
–
–
3.7
–
–
–
–
0.9
4.6
8.8
3.3
9.9
–
0.1
–
–
2.9
0.1
–
5.0
3.2
19.7
–
–
–
26.9
–
–
–
25.1
54.8
Current
Assets
Long-term
Assets
Current
Liabilities
Long-term
Liabilities
–
–
10.3
0.1
2.5
0.5
–
2.8
0.1
0.3
–
16.6
–
–
4.2
0.2
6.9
–
–
–
–
–
1.6
12.9
27.6
6.0
–
–
–
–
–
2.1
0.3
0.5
–
36.5
14.6
4.3
3.8
0.1
–
–
19.8
–
–
–
–
42.6
Description
Natural gas financial swaps – AECO
Energy Services’ electricity swaps
Foreign currency forward contracts, net sale
Foreign currency forward contracts, balance sheet-related
Interest rate swaps
Equity derivative contracts
Debenture-embedded derivative
Energy Services’ propane wholesale purchase and sale contracts
Energy Services’ butane wholesale purchase and sale contracts
Energy Services’ heating oil purchase and sale contracts
Specialty Chemicals’ fixed-price electricity purchase agreements
As at December 31, 2012
106
SUPERIOR PLUS CORP.
2013
2012
Realized
Gain (Loss)
Unrealized
Gain (Loss)
Realized
Gain (Loss)
Unrealized
Gain (Loss)
Description
Natural gas financial swaps – AECO
Energy Services’ electricity swaps
Foreign currency forward contracts, net sale
Foreign currency forward contracts, balance sheet-related
Interest rate swaps
Equity derivative contracts
Energy Services’ propane wholesale purchase
and sale contracts
Energy Services’ butane wholesale purchase
and sale contracts
Energy Services’ heating oil purchase and sale contracts
Specialty Chemicals’ fixed-price electricity
purchase agreements
(26.9)
(6.7)
3.9
1.3
2.4
1.5
0.2
–
–
0.2
Total (losses) gains on financial and non-financial derivatives
(24.1)
Foreign currency translation of senior secured notes
Unrealized change in fair value of
debenture-embedded derivative
Total (losses) gains
(0.8)
–
(24.9)
29.5
4.2
(39.5)
1.5
(3.2)
0.8
1.2
0.2
0.4
0.3
(4.6)
(4.1)
3.6
(5.1)
(53.6)
(11.6)
10.1
(0.3)
2.5
–
–
–
(5.9)
(2.0)
(60.8)
–
–
(60.8)
36.7
5.7
7.2
(2.0)
(1.5)
0.5
1.3
(0.4)
0.5
1.6
49.6
1.7
(19.2)
32.1
Realized gains or losses on financial and non-financial derivatives and foreign currency translation gains or
losses on the revaluation of Canadian domiciled US-denominated working capital have been classified on
the statement of net earnings based on the underlying nature of the financial statement line item and/or the
economic exposure being managed.
Offsetting of Financial Instruments
Financial assets and liabilities are offset and the net amount reported on the consolidated balance sheets
where Superior currently has a legally enforceable right to set-off the recognized amounts and there is an
intention to settle on a net basis or realize the asset and settle the liability simultaneously. In the normal
course of business, Superior enters into various master netting agreements or other similar arrangements
that do not meet the criteria for offsetting, however, although still allow for the related amount to be set-off
in certain circumstances, such as bankruptcy or the termination of contracts.
107
2013 Annual Report
Derivative Assets
Amounts Offset
Amounts Not Offset
December 31, 2013
Natural gas financial swaps – AECO (1)
Energy Services’ electricity swaps (1)
Energy Services’ propane purchase
and sale contracts (2) (4)
Energy Services’ heating oil purchase
and sale contracts (2)
Specialty Chemicals’ fixed-price
electricity purchase agreements (3)
Total
Gross
Assets
Gross
Liabilities
Offset
Net
Financial
Amounts Instruments
Cash
Collateral
Pledged
Amounts
Presented
1.2
0.7
1.1
0.3
(0.1)
(0.3)
(0.2)
–
56.1
59.4
(54.2)
(54.8)
1.1
0.4
0.9
0.3
1.9
4.6
–
–
3.9
–
–
3.9
–
–
–
0.4
–
0.4
1.1
0.4
4.8
0.7
1.9
8.9
(1) Subject to an enforceable master netting agreement in the form of an International Swaps and Derivatives Association agreement (“ISDA”).
(2) Regularly settled net in the normal course of business and is considered standardized brokerage accounts. As at December 31, 2013, Energy Services
has pledged cash of $0.4 million under a standardized agreement with respect to open derivative contracts.
(3) Standard terms of the Power Purchase Agreement (“PPA”) allowing net settlement of payments in the normal course of business.
(4) Regularly settled gross in the normal course of business.
Derivative Liabilities
Amounts Offset
Amounts Not Offset
December 31, 2013
Natural gas financial swaps – AECO (1)
Energy Services’ electricity swaps (1)
Energy Services’ propane purchase
and sale contracts (3)
Energy Services’ heating oil purchase
and sale contracts (2)
Total
Gross
Liabilities
14.9
6.9
Gross
Assets
Offset
(1.1)
(0.4)
13.8
6.5
–
–
–
0.2
22.0
(0.1)
(1.6)
0.1
20.4
Net
Financial
Amounts Instruments
Cash
Collateral
Pledged
Amounts
Presented
–
–
2.9
–
2.9
–
–
–
13.8
6.5
2.9
0.1
23.3
(1) Subject to an enforceable master netting agreement in the form of an International Swaps and Derivatives Association agreement (“ISDA”).
(2) Regularly settled net in the normal course of business and are considered standardized brokerage accounts.
(3) Regularly settled gross in the normal course of business.
Derivative Assets
Amounts Offset
Amounts Not Offset
December 31, 2012
Energy Services’ heating oil purchase
and sale contracts (1)
Energy Services’ propane purchase
and sale contracts (2) (3)
Specialty Chemicals’ fixed-price
electricity purchase agreements (2)
Total
Gross
Assets
Gross
Liabilities
Offset
Net
Amounts
Financial
Instruments
Cash
Collateral
Pledged
Amounts
Presented
0.5
(0.2)
0.3
–
–
51.2
51.7
(49.6)
(49.8)
–
1.6
1.9
–
2.8
–
2.8
3.7
–
–
3.7
4.0
2.8
1.6
8.4
(1) Regularly settled net in the normal course of business and is considered standardized brokerage accounts. As at December 31, 2012, Energy Services
has pledged cash of $3.7 million under a standardized agreement with respect to open derivative contracts.
(2) Standard terms of the Power Purchase Agreement (“PPA”) allowing net settlement of payments in the normal course of business.
(3) Regularly settled gross in the normal course of business.
108
SUPERIOR PLUS CORP.
Derivative Liabilities
Amounts Offset
Amounts Not Offset
December 31, 2012
Natural gas financial swaps – AECO (1)
Energy Services’ electricity swaps (1)
Energy Services’ propane purchase
and sale contracts (2) (3)
Energy Services’ heating oil purchase
and sale contracts (2)
Total
Gross
Liabilities
42.6
10.6
Gross
Assets
Offset
(0.4)
(0.3)
42.2
10.3
0.6
(0.2)
0.4
0.7
54.5
(0.2)
(1.1)
0.5
53.4
Net
Amounts
Financial
Instruments
Cash
Collateral
Pledged
Amounts
Presented
–
–
1.7
–
1.7
–
–
–
–
–
42.2
10.3
2.1
0.5
55.1
(1) Subject to an enforceable master netting agreement in the form of an International Swaps and Derivatives Association agreement (“ISDA”).
(2) Regularly settled net in the normal course of business and are considered standardized brokerage accounts.
(3) Regularly settled gross in the normal course of business.
The following summarizes Superior’s classification and measurement of financial assets and liabilities:
Financial Assets
Cash and cash equivalents
Trade and other receivables
Derivative assets
Classification
Measurement
Loans and receivables
Loans and receivables
FVTNE
Amortized cost
Amortized cost
Fair Value
Notes and finance lease receivable
Loans and receivables
Amortized cost
Financial Liabilities
Trade and other payables
Dividends and interest payable
Borrowing
Convertible unsecured subordinated debentures (1)
Derivative liabilities
Other liabilities
Other liabilities
Other liabilities
Other liabilities
FVTNE
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Fair Value
(1) Except for derivatives embedded in the related financial instruments that are classified as FVTNE and measured at fair value.
Non-Derivative Financial Instruments
The fair value of Superior’s cash and cash equivalents, trade and other receivables, notes and finance lease
receivables, trade and other payables, and dividends and interest payable approximates their carrying value
due to the short-term nature of these amounts. The carrying value and the fair value of Superior’s borrowing
and debentures, are provided in Notes 17 and 19.
109
2013 Annual Report
Financial Instruments — Risk Management
Market Risk
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 and, as a result, Superior
does not apply hedge accounting and is required to designate its derivatives and non-financial derivatives
as held-for-trading.
Energy Services enters into natural gas financial swaps to manage its economic exposure of providing fixed
price natural gas to its customers and maintains its historical natural gas swap positions with six other
counterparties. Energy Services monitors its fixed-price natural gas positions on a daily basis to monitor
compliance with established risk management policies. Energy Services maintains a substantially balanced
fixed-price natural gas position in relation to its customer supply commitments.
Energy Services enters into electricity financial swaps with four counterparties to manage the economic
exposure of providing fixed-price electricity to its customers. Energy Services monitors its fixed-price
electricity positions on a daily basis to monitor compliance with established risk management policies.
Energy Services maintains a substantially balanced fixed-price electricity position in relation to its customer
supply commitments.
Specialty Chemicals has entered into a fixed-price electricity purchase agreement to manage the economic
exposure of certain chemical facilities to changes in the market price of electricity, in a market where the
price of electricity is not fixed. The fair value with respect to this agreement is with a single counterparty.
Energy Services 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. Energy
Services monitors its fixed-price propane positions on a daily basis to monitor compliance with established
risk management policies. Energy Services 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
12 counterparties to manage the economic exposure of its operations to movements in foreign currency
exchange rates. Energy Services contracts a portion of its fixed-price natural gas, and propane purchases
and sales in US dollars and enters into forward US dollar purchase contracts to create an effective Canadian
dollar fixed-price purchase cost. Specialty Chemicals enters into US 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 US dollars. Interest expense on Superior’s US dollar debt is also used to
mitigate the impact of foreign exchange fluctuations.
Superior has interest rate swaps with four counterparties to manage the interest rate mix of its 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 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.
110
SUPERIOR PLUS CORP. Credit Risk
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. Energy Services deals with a large number of small customers, thereby reducing this risk. Specialty
Chemicals, due to the nature of its operations, sells its products to a relatively small number of customers.
Specialty Chemicals mitigates its customer credit risk by actively monitoring the overall credit-worthiness
of its customers. Energy Services has minimal exposure to customer credit risk as local natural gas and
electricity distribution utilities have been mandated, for a nominal fee, to provide Energy Services with
invoicing, collection and the assumption of bad debt risk for residential customers. Energy Services actively
monitors the credit-worthiness of its commercial customers. Overall, Superior’s credit quality is enhanced by
its portfolio of customers which is diversified across geographical (primarily Canada and the United States)
and end-use (primarily commercial, residential and industrial) markets.
Allowances for doubtful accounts and past due receivables are reviewed by Superior at each balance sheet
date. Superior updates its estimate of the allowance for doubtful accounts based on the evaluation of the
recoverability of trade receivables with each customer, taking into account historical collection trends of past
due accounts and current economic conditions. Trade receivables are written-off once it is determined they
are uncollectable.
Pursuant to their respective terms, trade receivables, before deducting an allowance for doubtful accounts,
are aged as follows:
Current
Past due less than 90 days
Past due over 90 days
Trade receivables
2013
317.8
118.0
14.7
450.5
2012
243.1
108.2
11.8
363.1
The current portion of Superior’s trade receivables is neither impaired nor past due and there are no
indications as of the reporting date that the debtors will not make payment.
Superior’s trade receivables are stated after deducting a provision of $7.3 million as at December 31, 2013
(December 31, 2012 – $7.2 million). The movement in the provision for doubtful accounts was as follows:
Allowance for doubtful accounts, beginning of the year
Impairment losses recognized on receivables
Amounts written off during the year as uncollectible
Amounts recovered
Allowance for doubtful accounts, end of the year
2013
(7.2)
(3.6)
3.0
0.5
(7.3)
2012
(20.8)
(3.9)
17.5
–
(7.2)
111
2013 Annual Report
Liquidity Risk
Liquidity risk is the risk that Superior cannot meet a demand for cash or fund an obligation as it comes
due. Liquidity risk also includes the risk of not being able to liquidate assets in a timely manner at a
reasonable price.
To ensure it is able to react to contingencies and investment opportunities quickly, Superior maintains sources
of liquidity at the corporate and subsidiary levels. The main sources of liquidity are cash and other financial
assets, the undrawn committed revolving-term bank credit facility, equity markets and debenture markets.
Superior is subject to the risks associated with debt financing, including the ability to refinance indebtedness
at maturity. Superior believes these risks are mitigated through the use of long-term debt secured by
high-quality assets, maintaining debt levels that in management’s opinion are appropriate, and by diversifying
maturities over an extended period. Superior also seeks to include in its agreements terms that protect it
from liquidity issues of counterparties that might otherwise impact liquidity.
Equity Price Risk
Equity price risk is the risk of volatility in earnings as a result of volatility in Superior’s share price. Superior
has equity price risk exposure to shares that it issues under various forms of share-based compensation
programs which affect earnings when outstanding units are revalued at each reporting period. Superior uses
equity derivatives to manage volatility derived from its share-based compensation program.
As at December 31, 2013, Superior estimates that a 10% increase in its share price would have resulted in a
$0.8 million increase in earnings due to the revaluation of equity derivative contracts.
Superior’s contractual obligations associated with its financial liabilities are as follows:
Borrowing
Convertible unsecured
subordinated debentures
US$ foreign currency forward
sales contracts (US$)
US$ foreign currency forward
purchases contracts (US$)
CDN$ natural gas purchases
CDN$ propane purchases (CDN$)
US$ propane purchases (US$)
Fixed-price electricity purchase commitments
(27.0)
9.6
6.1
1.5
3.7
2014
2015
2016
2017
2019 and
2018 Thereafter
Total
67.0
57.2
439.5
6.5
4.6
3.9
578.7
–
–
72.7
168.6
144.9
83.2
469.4
219.0
186.0
113.4
51.0
–
0.8
0.2
–
–
0.3
–
–
–
0.2
–
–
17.7
17.7
17.7
17.7
–
–
–
–
–
–
–
–
–
–
–
569.4
(27.0)
10.9
6.3
1.5
74.5
Superior’s contractual obligations are considered 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 its revolving term bank
credit facilities and proceeds on the issuance of share capital.
112
SUPERIOR PLUS CORP.
Superior’s financial instruments’ sensitivities to changes in foreign currency exchange rates, interest rates
and various commodity prices and the resulting 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 price of natural gas
Increase (decrease) to net earnings of a $0.04/litre increase in the price of propane
Increase (decrease) to net earnings of a $1.00/KWh increase in the price of electricity
2013
(9.7)
(1.3)
8.7
0.1
1.8
The calculation of Superior’s sensitivity to changes in foreign currency exchange rates, interest rates and
various commodity prices represent 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 affected Superior’s unrealized gain or loss on financial instruments
and would not have had a material impact on Superior’s cash flow from operations.
22. Income Taxes
Consistent with prior-periods, Superior recognizes a provision for income taxes for its subsidiaries that are
subject to current and deferred income taxes, including United States income tax, United States non-resident
withholding tax and Chilean income tax.
Total income taxes are different from the amount computed by applying the corporate Canadian enacted
statutory rate for 2013 of 26.2% (2012 — 26.2%). The reduction in statutory rates reflects previously enacted
federal tax rate reductions. The reasons for these differences are as follows:
Net earnings
Income tax expense
Net earnings of Superior before taxes
Computed income tax expense
Changes in effective foreign tax rates
Changes in future income tax rates
Non-deductible costs and other
Prior-period adjustment
Recognition of previously unrecognized asset
Other
2013
52.7
5.7
58.4
15.3
(1.1)
–
(5.5)
(3.4)
(0.9)
1.3
5.7
2012 (1)
90.0
9.0
99.0
25.9
(2.7)
(4.1)
(6.8)
(4.7)
–
1.4
9.0
(1) The year ended December 31, 2012 has been restated for the impact of adopting IAS 19 – Employee Benefits, amendments effective January 1, 2013.
Refer to Note 2.
113
2013 Annual Report
Income tax expense for the years ended December 31, 2013 and 2012 is comprised of the following:
Current income tax expense
Current income tax charge
Adjustments in respect of previous year
Total current income tax expense
Deferred income tax expense
Relating to origination and reversal of temporary difference
Relating to changes in tax rates or the imposition of new taxes
Adjustments in respect of previous year
Other
Total deferred income tax expense
Total income tax expense
2013
2012
1.0
(0.7)
0.3
8.6
–
(2.7)
(0.5)
5.4
5.7
1.4
(0.3)
1.1
16.9
(4.0)
(4.3)
(0.7)
7.9
9.0
Income tax recognized in other comprehensive income
2013
2012
Deferred tax
Amortization of actuarial losses
Total income tax expense recognized in other comprehensive income
(6.6)
(6.6)
(1.1)
(1.1)
2013
Provisions
Finance leases
Borrowing
Financing fees
Investment tax credits
Non-capital losses
Other
Property, plant and equipment
Reserves and employee benefits
Opening
Balance
5.9
17.0
(0.7)
3.7
111.0
65.9
(2.2)
(98.5)
31.6
Scientific research and development
159.1
Unrealized foreign exchange
gains
Total
7.8
300.6
(Credited)/
Charged to
(Credited)/
Other
Charged to Comprehensive
Loss
Net Earnings
Exchange
Differences
Other
Closing
Balance
(0.9)
7.3
(1.3)
(1.1)
0.9
5.4
0.5
(11.5)
(4.1)
(1.0)
0.9
(4.9)
–
–
–
–
–
–
–
–
(6.7)
–
0.1
(6.6)
0.3
0.7
–
–
–
2.8
–
(4.9)
0.3
–
–
(0.8)
–
–
–
–
–
–
–
–
–
–
–
–
5.3
25.0
(2.0)
2.6
111.9
74.1
(1.7)
(114.9)
21.1
158.1
8.8
288.3
114
SUPERIOR PLUS CORP.
2012
Provisions
Finance leases
Borrowing
Financing fees
Investment tax credits
Non-capital losses
Other
Property, plant and equipment
Reserves and employee benefits
Opening
Balance
5.8
17.5
(5.3)
5.1
113.3
44.7
(2.7)
(80.4)
37.6
Scientific research and development
153.8
Unrealized foreign exchange
gains (losses)
Total
20.2
309.6
(Credited)/
Charged to
(Credited)/
Other
Charged to Comprehensive
Loss
Net Earnings
Exchange
Differences
Other
Closing
Balance
0.1
(4.9)
4.7
(1.6)
(0.7)
22.5
0.5
(15.8)
(4.7)
3.7
(12.4)
(8.6)
–
–
–
–
–
–
–
–
(1.1)
–
–
(1.1)
(0.1)
(0.1)
–
–
–
(1.3)
–
1.8
(0.2)
–
–
0.1
0.1
4.5
(0.1)
0.2
(1.6)
–
–
(4.1)
–
1.6
–
0.6
5.9
17.0
(0.7)
3.7
111.0
65.9
(2.2)
(98.5)
31.6
159.1
7.8
300.6
Deferred taxes reported in the two preceding tables are presented on a functional basis while deferred taxes
reported on the balance sheet are on a legal-entity basis.
The net deferred income tax asset relates to the following tax jurisdictions as at December 31, 2013 and 2012:
Canada
United States
Chile
Total net deferred income tax asset
2013
284.2
7.8
(3.7)
288.3
Superior has available to carry forward the following as at December 31, 2013 and 2012:
Canadian non-capital losses
Canadian scientific research expenditures
Canadian capital losses
United States non-capital losses – federal
United States non-capital losses – state
Chilean non-capital losses
Canadian federal and provincial investment tax credits
2013
115.4
604.6
582.5
119.1
140.5
14.6
163.1
2012
297.3
5.5
(2.2)
300.6
2012
92.5
608.3
607.3
110.1
130.1
20.3
160.0
115
2013 Annual Report
As at December 31, 2013, Superior had non-capital loss carry-forwards available to reduce future years’
taxable income, which expire as follows:
2014
2015
2016
2017
2018
Thereafter
Total
United States
Canada
–
–
–
–
–
–
–
–
–
–
119.1
119.1
115.4
115.4
The Canadian scientific research expenditures, Canadian capital losses and the Chilean non-capital losses
may be carried forward indefinitely. Management believes there will be sufficient taxable profits in the future
to offset these losses.
In Chile, the local tax laws provide that any profits distributed outside of Chile be subject to a 35% tax.
Superior controls whether the profits will be distributed and is satisfied that there will be no liability in the
foreseeable future as there is no plan to repatriate funds from Chile.
As at December 31, 2013, Superior had Canadian federal and provincial investment tax credits available to
reduce future years’ taxable income, which expire as follows:
2014
2015
2016
2017
2018
Thereafter
Total
10.9
5.8
4.5
4.6
–
137.3
163.1
As at December 31 Superior has the following balances in respect of which no deferred tax asset was
recognized:
Canadian non-capital losses
United States non-capital losses – state
Canadian capital losses
Total unrecognized deferred income tax assets
2013
24.6
21.4
582.6
628.6
2012
24.8
20.0
607.3
652.1
Deferred tax assets have not been recognized for the above temporary differences as it is not probable that
the respective entities to which they relate will generate sufficient future taxable income against which to
utilize the temporary differences.
116
SUPERIOR PLUS CORP.
As previously disclosed, on April 2, 2013 Superior received from the Canada Revenue Agency (CRA), Notices
of Reassessment for Superior’s 2009 and 2010 taxation years reflecting the CRA’s intent to challenge the tax
consequences of Superior’s corporate conversion transaction (Conversion) which occurred on December
31, 2008. The CRA’s position is based on the acquisition of control rules, in addition to the general anti-
avoidance rules in the Income Tax Act (Canada).
The table below summarizes Superior’s estimated tax liabilities and payment requirements associated with
the received and anticipated Notices of Reassessment. Upon receipt of the Notices of Reassessment, 50% of
the taxes payable pursuant to such Notices of Reassessment, must be remitted to the CRA.
Taxation Year
2009/2010
2011
2012
2013
2014
Total
Taxes Payable (1)(2)
50% of the
Taxes Payable (1)(2)
$ 13.0
$ 10.0 (3)
$ 10.0 (3)
$ 10.0 (3)
$ 20.0 (3)
$ 63.0
$
$
$
$
6.5
5.0
5.0
5.0
$ 10.0
$ 31.5
Payment Dates
Paid in April 2013
2015
2015
2015
2015
(1) In millions of dollars.
(2) Includes estimated interest and penalties.
(3) Estimated based on Superior’s previously filed tax returns, Superior’s 2013 results and the midpoint of Superior’s 2014 outlook
During 2013, Superior filed a Notice of Objection and a Notice of Appeal with respect to the Notice of
Reassessments received on May 8, 2013. Superior anticipates that if the case proceeds in the Tax Court of
Canada, the case could be heard in the first quarter of 2015, with a decision rendered by the end of fiscal
2015. If a decision of the Tax Court of Canada were to be appealed, the appeal process could reasonably be
expected to take an additional 2 years. If Superior receives a positive decision then any taxes, interest and
penalties paid to the CRA will be refunded plus interest and if Superior is unsuccessful then any remaining
taxes payable plus interest and penalties will have to be remitted.
Superior remains confident in the appropriateness of its tax filing position and the expected tax consequences
of the Conversion and intends to vigorously defend such position and intends to file its future tax returns on
a basis consistent with its view of the outcome of the Conversion.
117
2013 Annual Report
23. Total Equity
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 shareholders’ meetings; 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 is 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 over holders of common shares,
to be paid ratably 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. Superior has no preferred shares outstanding.
Total equity, December 31, 2011
Net earnings
Other comprehensive loss
Option value associated with the redemption of the convertible debentures
Shares issued under Dividend Reinvestment Plan
Dividends declared to shareholders
Total equity, December 31, 2012
Net earnings
Other comprehensive income
Option value associated with the redemption of the convertible debentures
Shares issued under Dividend Reinvestment Plan
Issuance of common shares
Dividends declared to shareholders (2)
Total equity, December 31, 2013
Issued Number
of Common
Shares (Millions)
110.8
–
–
–
2.0
–
Total
Equity (1)
340.9
90.0
(2.7)
(0.8)
14.2
(67.2)
112.8
374.4
–
–
–
0.4
13.0
–
126.2
52.7
46.0
(1.1)
4.9
137.6
(74.3)
540.2
(1) December 31, 2012 has been restated for the impact of a prior-period adjustment. Refer to Note 15.
(2) Dividends to shareholders are declared at the discretion of Superior. During the year ended December 31, 2013, Superior paid dividends of
$73.7 million or $0.60 per share (December 31, 2012 – $67.1 million or $0.60 per share).
118
SUPERIOR PLUS CORP.
Accumulated other comprehensive loss as at December 31, 2013 and 2012 consisted of the following
components:
Accumulated other comprehensive loss before reclassification
Currency translation adjustment
Balance at the beginning of the year
Unrealized foreign currency gains (losses) on translation of foreign operations
Balance at the end of the year
Actuarial defined benefits
Balance at the beginning of the year
Actuarial defined benefit gains
Income tax expense on other comprehensive loss
Balance at the end of the year
Total accumulated other comprehensive loss before reclassification
Amounts reclassified from accumulated other comprehensive loss
Accumulated derivative losses
Balance at the beginning of the year
Reclassification of derivative losses previously deferred (3)
Balance at the end of the year
Total amounts reclassified from accumulated other comprehensive loss
Accumulated other comprehensive loss at the end of the year
2013
2012 (1)(2)
(22.6)
26.6
4.0
(25.3)
26.4
(6.6)
(5.5)
(1.5)
(6.0)
(0.4)
(6.4)
(6.4)
(7.9)
(13.8)
(8.8)
(22.6)
(31.4)
7.2
(1.1)
(25.3)
(47.9)
(6.0)
–
(6.0)
(6.0)
(53.9)
(1) December 31, 2012 has been restated for the impact of adopting IAS 19 – Employee Benefits, amendments effective January 1, 2013. Refer to Note 2.
(2) December 31, 2012 has been restated for the impact of a prior-period adjustment. Refer to Note 15.
(3) The reclassification of derivative losses previously deferred is included in unrealized losses (gains) on derivative financial instruments on the statement
of net earnings.
Other Capital Disclosure
Additional Capital Disclosure
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
its 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), current and long-term debt, convertible debentures and cash and cash equivalents.
Superior manages its capital structure and makes adjustments in light of changes in economic conditions
and the 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, or issue new debt or convertible debentures with different characteristics.
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 its other public reports.
119
2013 Annual Report
Superior is subject to various financial covenants in its credit facility agreements, including senior debt,
total debt to EBITDA ratio and restricted payments tests. which are measured on a quarterly basis. As at
December 31, 2013 and December 31, 2012 Superior was in compliance with all of its financial covenants.
Superior’s financial objectives and strategy related to managing its capital as described above 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.
Non-IFRS Financial Measures Utilized For Bank Covenant Purposes
Compliance EBITDA
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. Compliance EBITDA
is not a defined performance measure under IFRS. Superior’s calculation of compliance EBITDA may differ
from similar calculations used by comparable entities.
The capital structure of Superior and the calculation of its key capital ratios are as follows:
As at December 31
Total shareholders’ equity
Exclude accumulated other comprehensive loss
Shareholders’ equity excluding accumulated other comprehensive loss
Current borrowing (2)
Borrowing (2)
Less: Senior unsecured debentures (4)
Consolidated secured debt
Add: Senior unsecured debentures
Consolidated debt
Current portion of convertible unsecured subordinated debentures (2)
Convertible unsecured subordinated debentures (2)
Total debt
Total capital
2013
540.2
7.9
548.1
67.0
511.7
–
578.7
–
578.7
–
494.5
2012 (1)(3)
374.4
53.9
428.3
59.7
579.9
(150.0)
489.6
150.0
639.6
50.0
491.5
1,073.2
1,621.3
1,181.1
1,609.4
(1) December 31, 2012 has been restated for the impact of a prior-period adjustment. Refer to Note 15.
(2) Borrowing and convertible unsecured subordinated debentures are before deferred issuance costs and option value.
(3) December 31, 2012 has been restated for the impact of adopting IAS 19 – Employee Benefits, amendments effective January 1, 2012. Refer to Note 2.
(4) Superior redeemed all of its outstanding $150.0 million 8.25% senior unsecured debentures due October 27, 2016 in accordance with the indenture
governing the 8.25% Debentures on October 28, 2013.
120
SUPERIOR PLUS CORP. Net earnings
Adjusted for:
Finance expense
Realized gains on derivative financial instruments included in finance expense
Depreciation included in selling, distribution and administrative costs
Depreciation included in cost of sales
(Gains) losses on disposal of assets
Amortization of intangible assets
Impairment of property, plant and equipment, intangible assets, and goodwill
Income tax expense
Unrealized losses (gains) on derivative financial instruments
Pro-forma impact of acquisitions
Compliance EBITDA (1)
2013
52.7
71.8
3.9
42.2
41.3
(2.9)
19.4
15.5
5.7
5.1
8.5
263.2
2012 (2)
90.0
77.6
2.2
42.4
44.9
1.0
23.5
4.7
9.0
(32.1)
–
263.2
(1) EBITDA, as defined by Superior’s revolving-term credit facility, is calculated on a trailing 12-month basis taking into consideration the pro-forma 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.
(2) The year ended December 31, 2012 has been restated for the impact of adopting IAS 19 – Employee Benefits, amendments effective January 1, 2013.
Refer to Note 2.
The capital structure of Superior and the calculation of its key capital ratios are as follows:
Consolidated secured debt to compliance EBITDA
Consolidated debt to compliance EBITDA
Total debt to compliance EBITDA
2013
2.2:1
2.2:1
4.1:1
2012 (1)
1.9:1
2.4:1
4.5:1
(1) The compliance ratios have been restated for the impact of adopting IAS 19 – Employee Benefits, amendments effective January 1, 2013. Refer to
Note 2.
24. Deficit and Dividends
Balance at the beginning of the year
Net earnings
Dividends declared
Balance at the end of the year
2013
2012 (1)(2)
(1,218.2)
(1,241.0)
52.7
(74.3)
90.0
(67.2)
(1,239.8)
(1,218.2)
(1) December 31, 2012 has been restated for the impact of adopting IAS 19 – Employee Benefits, amendments effective January 1, 2013. Refer to Note 2.
(2) December 31, 2012 has been restated for the impact of a prior-period adjustment. Refer to Note 15.
As at December 31, 2013, Superior declared dividends of $6.3 million or $0.05 per share payable on
January 15, 2014 to shareholders of record on December 31, 2013. On January 9, 2014, Superior declared
dividends of $6.3 million or $0.05 per share payable on February 14, 2014. On February 6, 2014, Superior
declared dividends of $6.3 million or $0.05 per share payable on March 14, 2014.
121
2013 Annual Report
25. Supplemental Disclosure of Consolidated Statement of Total
Comprehensive Income
Revenue is recognized at the fair value of consideration received or receivable when the significant risks and
rewards of ownership have been transferred.
Revenues
Revenue from products
Revenue from the rendering of services
Rental revenue
Construction contract revenue
Realized gains on derivative financial instruments
Cost of sales (includes products and services)
Cost of products and services
Depreciation included in cost of sales
Realized losses on derivative financial instruments
Selling, distribution and administrative costs
Other selling, distribution and administrative costs
Restructuring costs
Employee future benefit expense
Employee costs
Depreciation included in selling, distribution and administrative costs
Amortization of intangible assets
Gains (losses) on disposal of assets
Realized gains (losses) on the translation of U.S.
denominated net working capital
Finance expense
Interest on borrowing
Interest on convertible unsecured subordinated debentures
Interest on obligations under finance leases
(Loss) gain on debenture redemptions
Unwinding of discount on debentures, borrowing and
decommissioning liabilities
Realized gains on derivative financial instruments
2013
2012 (1)
3,659.8
3,526.3
63.8
27.3
(0.4)
2.3
59.3
26.1
4.9
7.7
3,752.8
3,624.3
(2,810.8)
(2,662.5)
(41.3)
(31.9)
(44.9)
(70.6)
(2,884.0)
(2,778.0)
(281.6)
(274.5)
(9.5)
(6.2)
(364.9)
(42.2)
(19.4)
2.9
2.9
(718.0)
(27.0)
(31.1)
(3.3)
(5.5)
(8.8)
3.9
(71.8)
(6.6)
(6.8)
(337.4)
(42.4)
(26.8)
(1.0)
(1.6)
(697.1)
(33.1)
(35.8)
(5.0)
0.8
(6.7)
2.2
(77.6)
(1) December 31, 2012 has been restated for the impact of adopting IAS 19 – Employee Benefits, amendments effective January 1, 2013. Refer to Note 2.
122
SUPERIOR PLUS CORP.
26. Net Earnings per Share
Net earnings per share computation, basic
Net earnings for the period
Weighted average shares outstanding (millions)
Net earnings per share, basic
2013
2012 (1)
52.7
123.1
90.0
111.9
$ 0.43
$ 0.80
(1) December 31, 2012 has been restated for the impact of adopting IAS 19 – Employee Benefits, amendments effective January 1, 2013. Refer to Note 2.
Net earnings per share computation, diluted
Net earnings for the period
Weighted average shares outstanding (millions)
Net earnings per share, diluted
2013
2012 (1)
52.1
128.9
90.0
111.9
$ 0.40
$ 0.80
The following potential ordinary shares are anti-dilutive and are therefore excluded from the weighted
average number of ordinary shares for the purposes of diluted earnings per share in each period.
(millions)
Maturity
Note
Convertible Debentures
5.85%
7.50%
5.75%
6.00%
7.50%
Total anti-dilutive instruments
October 2015
December 2014
June 2017
June 2018
October 2016
19
19
19
19
19
2013
–
–
9.1
9.9
6.6
25.6
2012
2.4
5.3
9.1
9.9
6.6
33.3
27. Share-Based Compensation
Restricted and Performance Shares
Under Superior’s long-term incentive program, restricted shares (RSs), performance shares (PSs) and/or
director shares (DSs) can be granted to directors, senior officers and employees of Superior. All three types
of shares entitle the holder to receive cash compensation in relation to the value of a specified number of
underlying notional shares. RSs vest evenly over three years from the grant date, except for RSs issued to
directors which vest three years from the grant date. Payments are made on the anniversaries 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 grant date and their notional value depends on Superior’s performance
as compared to established benchmarks. DSs vest immediately on the grant date and payments are made
to directors once they resign or retire based on the number of notional shares outstanding and the value of
the shares on that date. Employee compensation expense for these plans is charged against net earnings
or loss over the vesting period of the RSs, PSs, and DSs. The amount payable by Superior in respect of RSs,
PSs and DSs changes as a result of dividends and share price movements. The fair value of all the RSs, PSs
and DSs is equal to Superior’s common share market price and the divisional notional share price if related
to a divisional plan. In the event of an employee termination, any unvested shares are forfeited on that date.
123
2013 Annual Report
For the year ended December 31, 2013 total compensation expense related to RSs, PSs and DSs was
$14.8 million (December 31, 2012 — $9.6 million). Payouts during the year ended December 31, 2013
under the long-term incentive plan were completed at a weighted average price of $10.75 per share
(2012 — $8.76 per share) for RSs, $11.28 per share (2012 — $26.03 per share) for PSs and $11.12 per share
(2012 — $8.56 per share) for DSs. For the year ended December 31, 2013 the total carrying amount of the
liability related to RSs, PSs and DSs was $18.9 million (2012 — $9.9 million).
The movement in the number of shares under the long-term incentive program was as follows:
2013
2012 (1)
RSs
PSs
DSs
Total
RSs
PSs
DSs
Total
880,506 1,260,077
281,828 2,422,411 1,255,379
951,751
187,655 2,394,785
−
2,339
−
−
−
−
(192,191)
119,991
48,809
(23,391)
64,178
66,517
817,450
789,202
54,293 1,660,945
Opening number
of shares
Reclassification
Granted
Performance
factor adjustment
−
20,982
−
20,982
−
7,374
−
7,374
Dividends reinvested 36,096
53,879
15,594
105,569
60,017
61,653
19,415
141,085
Forfeited
Payouts
Ending number
of shares
(26,425)
(234,741)
−
(261,166)
(588,652)
(652,512)
−
(1,241,164)
(440,522)
(143,312)
(26,862)
(610,696)
(471,497)
(17,382)
(28,344)
(517,223)
451,994
956,885
334,738 1,743,617
880,506 1,260,077
281,828 2,422,411
(1) The number of shares outstanding in 2012 have been reclassified due to changes made to the divisional long-term incentive grants.
Superior entered into equity derivative contracts in order to manage the volatility and costs associated with
its share-based compensation plans. As at December 31, 2013, Superior had outstanding notional values of
$7.6 million of equity derivative contracts at an average share price of $11.43. See Note 21 for further details.
28. Supplemental Disclosure of Non-Cash Operating Working Capital Changes
Changes in non-cash working capital
Trade receivables and other
Inventories
Trade and other payables
Purchased working capital
Other
2013
2012
(105.7)
7.4
86.4
(2.0)
14.2
0.3
84.0
(10.6)
25.9
1.1
(15.7)
84.7
124
SUPERIOR PLUS CORP.
29. Commitments
Purchase commitments under long-term natural gas and propane contracts for the next five years and
thereafter are as follows:
2014
2015
2016
2017
2018
2019 and thereafter
(1) Does not include the impact of financial derivatives (See Note 21).
CDN$ (1)
Natural Gas
CDN$
Propane
US$
Propane
US$
Heating oil
9.6
0.8
0.3
0.2
−
−
6.1
0.2
−
−
−
−
1.5
−
−
−
−
−
−
−
−
−
−
−
Superior is similarly committed to long-term natural gas and propane sales contracts to supply customers.
30. Related-Party Transactions and Agreements
Transactions between Superior and its subsidiaries, which are related parties, have been eliminated on
consolidation and are not disclosed in this note.
For the year ended December 31, 2013, Superior incurred $1.0 million (2012 — $0.7 million) in legal fees
respectively, with Norton Rose Canada LLP, a related party with Superior because a member of Superior’s
Board of Directors is a partner at the law firm.
Remuneration of Directors and Other Key Management Personnel
The key management personnel of Superior are comprised of executives of Superior and presidents of
Superior’s business segments.
The remuneration of directors and other members of key management personnel over the past two years is
as follows:
Year ended December 31,
Short-term employee benefits (1)
Post-employment benefits
Other long-term employee benefits
Termination benefits
Share-based payments
2013
5.7
–
0.1
–
3.8
9.6
2012
5.1
0.1
0.1
0.6
3.4
9.3
(1) Short-term employee benefits paid to directors and other members of key management personnel include salaries and bonuses.
125
2013 Annual Report
31. Group Entities
Significant Subsidiaries
Superior Plus LP
Superior Gas Liquids Partnership
619220 Saskatchewan Ltd.
Superior International Inc.
Superior General Partner Inc.
Superior Plus Canada Financing Inc.
Superior Energy Management Operations Inc.
Superior Energy Management Holdings LP
Superior Energy Management Electricity Inc.
Superior Energy Management Electricity LP
Superior Energy Management Gas Holdings LP
6751261 Canada Inc.
Superior Energy Management Gas Inc.
Superior Energy Management Gas LP
Superior Plus US Holdings Inc.
Superior Plus US Financing Inc.
ERCO Worldwide Inc.
ERCO Worldwide (USA) Inc.
Superior Plus Construction Products Corp.
The Winroc Corporation (Midwest)
Superior Plus US Energy Services Inc.
Superior Plus US Capital Corp.
Burnwell Gas of Canada
Commercial E Industrial ERCO (Chile) Limitada
Country of
Incorporation
Ownership
Interest
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
United States
United States
United States
United States
United States
United States
United States
United States
Canada
Chile
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
32. Reportable Segment Information
Superior has adopted IFRS 8 – Operating Segments, which requires operating segments to be identified
on the basis of internal reports about components of the Company that are regularly reviewed by the chief
operating decision-maker in order to allocate resources to the segments and to assess their performance.
Superior operates three distinct reportable operating segments: Energy Services, Specialty Chemicals and
Construction Products Distribution. Energy Services provides distribution, wholesale procurement and
related services in relation to propane, heating oil and other refined fuels, plus fixed-price natural gas and
electricity supply services. Specialty Chemicals is a leading supplier of sodium chlorate and technology to
the pulp and paper industries and is a regional supplier of potassium and chloralkali products in the U.S.
Midwest. Construction Products Distribution is one of the largest distributors of commercial and industrial
insulation in North America and the largest distributor of specialty construction products to the walls and
ceilings industry in Canada. Superior’s corporate office arranges intersegment foreign exchange contracts
from time to time. Realized gains and losses pertaining to intersegment foreign exchange gains and losses
are eliminated under the corporate cost column. All of Superior’s operating segments conduct business with
customers of various sizes and do not rely extensively on any single customer for their revenue stream.
126
SUPERIOR PLUS CORP.
For the year ended December 2013
Revenues
Energy
Services
2,372.9
Cost of sales (includes product & services)
(1,907.7)
Specialty
Chemicals
Construction
Products
Distribution
579.7
(372.1)
207.6
800.2
(604.2)
196.0
Corporate
Total
Consolidated
–
–
–
3,752.8
(2,884.0)
868.8
465.2
Gross Profit
Expenses
Selling, distribution and
administrative costs
Finance expense
Impairment of property, plant,
and equipment, intangible assets
and goodwill
Unrealized gains (losses) on derivative
financial instruments
Net earnings (loss) before income taxes
Income tax expense
Net Earnings (Loss)
For the year ended December 2012
Revenues
Gross Profit
Expenses
Selling, distribution and
administrative costs
Finance expense
Impairment of property, plant,
and equipment, intangible assets
and goodwill
Unrealized gains (losses) on derivative
financial instruments
Net earnings (loss) before income taxes
Income tax expense
Net Earnings (Loss)
Cost of sales (includes product & services)
(1,854.2)
(387.9)
(135.4)
(175.1)
(2.7)
(0.4)
(0.6)
(19.6)
(68.1)
(718.0)
(71.8)
(15.5)
35.4
–
0.3
–
–
(370.7)
(135.5)
(175.7)
72.1
–
72.1
20.3
–
20.3
–
(15.5)
(40.8)
(128.5)
(128.5)
(5.7)
(134.2)
(5.1)
(810.4)
58.4
(5.7)
52.7
Specialty
Chemicals
Construction
Products
Distribution
543.8
(328.8)
215.0
778.9
(595.0)
183.9
Corporate
Total
Consolidated
–
–
–
3,624.3
(2,778.0)
846.3
94.5
–
94.5
Energy
Services
2,301.6
447.4
(370.3)
(4.5)
(141.1)
(0.3)
(169.4)
(0.7)
(16.3)
(72.1)
(697.1)
(77.6)
(4.7)
43.8
(335.7)
111.7
–
111.7
–
1.6
–
–
(139.8)
(170.1)
75.2
–
75.2
13.8
–
13.8
–
(4.7)
(13.3)
(101.7)
(101.7)
(9.0)
(110.7)
32.1
(747.3)
99.0
(9.0)
90.0
127
2013 Annual Report
Net Working Capital, Total Assets, Total Liabilities, Acquisitions and Purchase of Property,
Plant and Equipment
As at December 31, 2013
Net working capital (1)
Total assets
Total liabilities
As at December 31, 2012
Net working capital (1)(2)
Total assets
Total liabilities
For the year ended December 31, 2013
Acquisitions
Purchase of property, plant and equipment
For the year ended December 31, 2012
Acquisitions
Purchase of property, plant and equipment
Energy
Services
Specialty
Chemicals
Construction
Products
Distribution
Corporate
Total
Consolidated
178.7
779.3
317.9
179.5
725.4
303.1
7.6
35.5
5.5
21.9
28.5
651.3
178.0
16.3
585.6
171.7
4.3
40.3
–
20.3
103.1
209.6
96.4
105.5
199.6
84.2
–
2.7
–
1.6
(17.2)
500.9
1,008.6
(22.1)
521.5
1,098.7
–
–
–
–
293.1
2,141.1
1,600.9
279.2
2,032.1
1,657.7
11.9
78.5
5.5
43.8
(1) Net working capital reflects amounts at year end and is comprised of trade and other receivables, prepaid expenses and inventories, less trade and
other accounts payable, deferred revenue and dividends and interest payable.
(2) December 31, 2012 has been restated for the impact of a prior-period adjustment. Refer to Note 15.
33. Geographic Information
Canada
United
States
Revenue for the year ended December 31, 2013
1,413.6
2,248.5
Property, plant and equipment as at December 31, 2013
458.9
374.6
Intangible assets as at December 31, 2013
Goodwill as at December 31, 2013
Total assets as at December 31, 2013
Revenue for the year ended December 31, 2012
Property, plant and equipment as at December 31, 2012
Intangible assets as at December 31, 2012
Goodwill as at December 31, 2012
Total assets as at December 31, 2012
15.2
188.2
1,388.1
1,428.5
460.6
15.8
188.3
1,320.6
3.8
5.5
691.4
2,094.6
324.4
23.8
0.8
645.4
Other
90.7
44.4
–
–
61.6
101.2
44.9
–
–
Total
Consolidated
3,752.8
877.9
19.0
193.7
2,141.1
3,624.3
829.9
39.6
189.1
66.1
2,032.1
128
SUPERIOR PLUS CORP.
SELECTED HISTORICAL INFORMATION(1)(2)
Energy Services
Years Ended December 31
(millions of dollars except where noted)
2013
2012
2011
2010
2009
Canadian Propane Distribution sales volumes
(million of litres sold)
U.S. Refined Fuels sales volumes
(millions of litres sold) (3)
Fixed-price natural gas volumes (millions of GJs sold)
Total Canadian Propane Distribution sales margin
(cents per litre)
Total U.S. Refined Fuels sales margin (cents per litre) (3)
Natural gas sales margin (cents per GJ)
Gross profit
EBITDA from operations
Specialty Chemicals
1,331
1,292
1,305
1,235
1,277
1,633
19
18.8
8.0
59.0
465.2
137.5
1,599
19
18.2
7.7
115.0
447.4
136.4
1,741
21
17.1
7.9
146.9
455.2
133.6
1,702
27
17.5
7.6
91.2
434.9
114.7
153
33
18.5
10.0
90.2
340.2
97.6
Years Ended December 31
(millions of dollars except where noted)
2013
2012
2011
2010
2009
Total chemical sales volume (MT)
Average chemical selling price (dollars per MT)
Gross profit
EBITDA from operations
Construction Products Distribution
(millions of dollars except where noted)
Gross profit (4)
EBITDA from operations (4)
Superior Plus Corp. Consolidated
826
705
251.8
113.7
2013
196.0
33.2
771
703
258.3
125.7
772
685
238.7
115.2
735
655
220.2
101.5
634
720
210.0
93.0
Years Ended December 31
2012
2011
2010
2009
183.9
27.3
174.7
24.2
172.3
26.8
122.3
22.8
Years Ended December 31
(millions of dollars except where noted)
2013
2012
2011
2010
2009
Revenues
Gross profit
EBITDA from operations
Adjusted operating cash flow before restructuring
Adjusted operating cash flow after restructuring
Adjusted operating cash flow per share before restructuring
Adjusted operating cash flow per share after restructuring
Average number of shares outstanding (millions)
Total assets
Senior debt (5)
Total debt (5)
3,752.8
3,624.3
3,925.6
3,537.4
2,246.7
868.8
284.4
207.6
192.3
$ 1.69
$ 1.56
123.1
2,141.1
578.7
1,073.2
846.3
289.4
200.4
190.4
$ 1.79
$ 1.70
111.9
2,032.1
489.6
1,181.1
827.5
273.0
180.4
180.4
$ 1.65
$ 1.65
109.2
2,193.4
612.1
1,353.5
780.6
243.0
162.9
162.9
$ 1.54
$ 1.54
105.6
2,696.9
590.0
1,381.4
653.4
213.4
163.9
163.9
$ 1.80
$ 1.80
91.0
2,274.0
738.1
1,054.8
(1) Certain 2012 financial results have been restated to conform to the current year’s presentation.
(2) Certain 2010 amounts have been restated as a result of the adoption of IFRS.
(3) U.S. Refined Fuels assets were purchased during 2009 and 2010.
(4) Acquisition of Specialty Products and Insulation Inc. was completed during 2009.
(5) Senior debt and total debt are stated before deferred issue costs.
129
2013 Annual Report
Construction Products Distribution
Canadian Operations
4949 – 51 Street SE
Calgary, Alberta T2B 3S7
Toll-free: 1-800-668-1589
Tel: 403-236-5383
Fax: 403-279-0372
U.S. Operations
1650 Manheim Pike, Suite 202
Lancaster, Pennsylvania 17601-3088
Tel: 717-569-3900
Fax: 717-519-4046
Specialty Chemicals
ERCO Worldwide
200, 302 The East Mall
Toronto, Ontario M9B 6C7
Tel: 416-239-7111
Fax: 416-239-0235
BUSINESSES
Energy Services
Canadian Propane Distribution
Superior Propane
1111 – 49 Avenue NE
Calgary, Alberta T2E 8V2
Toll-free: 1-877-873-7467
Tel: 403-730-7500
Fax: 403-730-7512
U.S. Refined Fuels
Superior Energy Services
1870 South Winton Road
Suite 200
Rochester, New York 14618
Toll-free: 1-877-927-6488
Fax: 585-328-7114
Supply Portfolio Management
Superior Gas Liquids
1400, 840 – 7 Avenue SW
Calgary, Alberta T2P 3G2
Toll-free: 1-888-849-3525
Fax: 403-283-6589
Fixed-Price Energy Services
Superior Energy Management
6750 Century Avenue
Suite 400
Mississauga, Ontario L5N 2V8
Toll-free: 1-877-784-4262
Fax: 1-905-542-5935
130
SUPERIOR PLUS CORP. CORPORATE INFORMATION
Board of Directors
Grant D. Billing
Chairman
Calgary, Alberta
Catherine (Kay) M. Best
Calgary, Alberta
Luc Desjardins
President and Chief Executive Officer
Calgary, Alberta
Robert J. Engbloom, Q.C.
Calgary, Alberta
Randall J. Findlay
Calgary, Alberta
Norman R. Gish
Calgary, Alberta
Peter A.W. Green
Lead Director
Campbellville, Ontario
James S.A. MacDonald
Toronto, Ontario
Walentin (Val) Mirosh
Calgary, Alberta
David P. Smith
Toronto, Ontario
Corporate Officers and
Senior Management
Jay Bachman
Vice-President, Investor Relations and Treasurer
Nick Beuglet
Corporate Controller
Wayne M. Bingham
Executive Vice-President
and Chief Financial Officer
Luc Desjardins
President and Chief Executive Officer
Greg L. McCamus
President, Energy Services and Superior Propane
Dave Tims
President, Energy Supply and Oilfield
Paul S. Timmons
President, Specialty Chemicals
Paul J. Vanderberg
President, Construction Products Distribution
Ross Wonnick
Chief Legal Officer and General Counsel
Keith Wrisley
President, U.S. Refined Fuels
131
2013 Annual Report [THIS PAGE LEFT INTENTIONALLY BLANK]
SHAREHoLdER INfoRMATIoN
Superior Plus Corp.
Annual Meeting of Shareholders
Suite 1400, 840 – 7 Avenue SW
calgary, Alberta T2P 3G2
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 600, 530 – 8 Avenue SW
calgary, Alberta T2P 3S8
or:
8th floor, 100 University Avenue
Toronto, ontario M5J 2Y1
Toll free: 1-800-564-6253
Website: www.computershare.com/ca
Auditors
deloitte LLP
chartered Accountants
700, 850 – 2nd Street SW
calgary, Alberta T2P 0R8
The corporation’s Annual Meeting of shareholders
will be held in the Hôtel Le Germain, 899 centre
Street SW, calgary, Alberta, canada on
Wednesday, May 7, 2014 at 2:00 p.m. (MdT).
Toronto Stock Exchange
(TSX) Listings
SPB:
Superior Plus corp. shares
SPB.db.e:
SPB.db.f:
SPB.db.g:
SPB.db.h:
5.75% convertible debentures,
convertible at $19.00 per share
Maturity date: June 30, 2017
6.00% convertible debentures,
convertible at $15.10 per share
Maturity date: June 30, 2018
7.50% convertible debentures,
convertible at $11.35 per share
Maturity date: october 31, 2016
6.00% convertible debentures,
convertible at $16.75 per share
Maturity date: June 30, 2019
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P
Superior Plus Share Price and Volumes – TSX
Quarterly high, low, close and volumes for 2013 and 2012.
The table below sets forth the high and low prices, as well as the volumes, for the shares as traded on
the TSX, on a quarterly basis.
2013
2012
High
Low
Volume
High
Low
Volume
First quarter
$ 11.95
$ 10.20
24,636,063
$ 7.98
$ 5.62
26,769,848
Second quarter
$ 13.15
$ 10.82
29,666,539
$ 7.74
$ 5.96
11,921,806
Third quarter
$ 12.98
$ 10.30
18,075,919
$ 9.67
$ 6.06
15,330,933
Fourth quarter
$ 12.42
$ 10.42
18,363,871
$ 10.50
$ 8.60
13,078,752
Year
$ 13.15
$ 10.20
90,742,392
$ 10.50
$ 5.62
67,101,339
Superior Plus Corp.
Suite 1400, 840 – 7 Avenue SW
calgary, Alberta T2P 3G2
Tel:
fax:
403-218-2970
403-218-2973
Toll-free: 1.866.490-PLUS (7587)
www.superiorplus.com
for more information about Superior Plus corp.
send your enquiries to info@superiorplus.com