Superior Plus Corp. Announces Strong Fourth Quarter and Full Year Results and Introduces 2020 Adjusted EBITDA Guidance

TORONTO--(BUSINESS WIRE)--Superior Plus Corp. (“Superior”) (TSX:SPB) announced today the financial and operating results for the fourth quarter ended December 31, 2019. Unless otherwise expressed, all financial figures are expressed in Canadian dollars.

Superior achieved Adjusted EBITDA of $524.5 million, which was near the top end of 2019 Adjusted EBITDA Guidance.

“We achieved strong results in the fourth quarter as a result of improved average margins in our Energy Distribution businesses, as well as, great execution on the realization of synergies related to the acquisition of NGL Propane LLC,” said Luc Desjardins, President and Chief Executive Officer. “Our average margins in the Canadian and U.S. propane distribution businesses were higher than the prior year quarter primarily due to the continued strength in the wholesale propane fundamentals and our efforts related to sales and marketing and pricing initiatives. We made additional progress on the realization of synergies in the fourth quarter and we still expect to exit 2020 with US $24 million in run-rate synergies.”

Business and Financial Highlights

• Superior achieved fourth quarter Adjusted EBITDA of $176.7 million, a $23.7 million or 15% increase compared to the prior year quarter primarily due to higher EBITDA from operations partially offset by higher corporate and administrative costs and modestly higher realized losses on foreign exchange hedging contracts. The adoption of IFRS 16 resulted in a $11.0 million increase in Adjusted EBITDA for the fourth quarter on a consolidated basis.
• EBITDA from Operations during the fourth quarter was $187.8 million, a $25.5 million or a 16% increase from the prior year quarter primarily due to results from Canadian propane distribution (“Canadian Propane”), U.S. propane distribution (“U.S. Propane”) and, to a lesser extent, Specialty Chemicals. Please see below for further discussion on the fourth quarter EBITDA from Operations by business.
• EBITDA from Operations during 2019 was $562.1 million, a $159.3 million or 40% increase compared to 2018 primarily due to higher results from U.S. Propane, Canadian Propane and to a lesser extent Specialty Chemicals. U.S. Propane EBITDA from operations increased $106.7 million primarily due to the contribution from NGL Propane LLC (“NGL”) and tuck-in acquisitions, and realized synergies. Canadian Propane EBITDA from operations increased $38.3 million primarily due to improved wholesale market fundamentals and Superior’s ability to capitalize on those opportunities, the contribution from the United Pacific Energy (“UPE”) acquisition and, to a lesser extent, realized synergies from Canwest and the impact of adopting IFRS 16, partially offset by lower sales volumes in Western Canada and the impact of divestitures in the prior year. Specialty Chemicals EBITDA from operations increased $14.3 million primarily due to the impact of adopting IFRS 16 and higher average sodium chlorate selling prices and sales volumes, partially offset by lower chlor-alkali sales volumes and average sales prices, and higher operating expenses.
• Adjusted EBITDA during 2019 was $524.5 million, a $150.2 million or 40% increase from 2018, and near the top end of the Adjusted EBITDA guidance range of $490.0 million to $530.0 million primarily due to higher EBITDA from operations, partially offset by higher corporate costs and realized losses on foreign currency hedging contracts. Superior’s realized losses on foreign currency hedging contracts increased by $3.6 million primarily due to the impact of a weaker Canadian dollar compared to the average hedge rate. Corporate operating and administrative costs increased $5.5 million primarily due to higher incentive plan costs related to share price appreciation. The adoption of IFRS 16 resulted in a $38.8 million increase in Adjusted EBITDA for 2019 on a consolidated basis.
• AOCF before transaction and other costs during the fourth quarter was $145.0 million, a $12.3 million or 9% increase compared to the prior year quarter primarily due to higher Adjusted EBITDA, partially offset by higher interest and cash tax expenses. AOCF before transaction and other costs per share was $0.83, $0.07 or 9% higher than the prior year quarter due to the increase in AOCF before transaction and other costs.
• AOCF before transaction and other costs during 2019 was $406.2 million, an increase of $103.9 million or 34% primarily due to higher Adjusted EBITDA discussed above, partially offset by higher interest expense and cash income taxes. AOCF per share before transaction and other costs during 2019 was $2.32, an increase of $0.41 or 21% from 2018 primarily due to higher AOCF, partially offset by higher weighted average shares outstanding.
• Superior had net earnings of $74.6 million in the fourth quarter, compared to a net loss of $48.3 million in the prior year quarter primarily due to the unrealized loss on derivative financial instruments in the fourth quarter of 2018 compared to a gain in 2019, an increase in gross profit and a decrease in selling, distribution and administrative (“SD&A”) costs, partially offset by an increase in income tax expense.
• Superior had net earnings of $142.6 million in 2019 compared to a net loss of $34.0 million in the prior year due primarily to unrealized gains on derivative instruments recorded in the current period compared to unrealized losses on derivative instruments in the prior year and the impact of the NGL, UPE and other tuck-in acquisitions. Revenue increased $115.2 million from the prior year primarily due to the contribution from NGL, and gross profit increased $264.8 million primarily due to higher revenues related to NGL and the impact from wholesale propane fundamentals. SD&A costs increased $148.0 million primarily due to the incremental expenses from the NGL acquisition, an impairment charge in Specialty Chemicals related to the closure of the Saskatoon sodium chlorate facility and higher depreciation costs related to the adoption of IFRS 16. Other income or loss which includes unrealized and realized gains on derivative financial instruments of $17.2 million for the year ended December 31, 2019 compared to a loss of $91.9 million in the prior year due primarily to changes in market prices of commodities, timing of maturities of underlying financial instruments and foreign exchange rates relative to amounts hedged. For additional details, refer to Note 16 of the 2019 audited consolidated financial statements.
• Net cash flows from operating activities in the fourth quarter were $108.3 million, a $66.7 million increase from the prior year fourth quarter primarily due to the positive change in non-cash operating working capital and to a lesser extent the impact of positive net earnings net of non-cash adjustments. Net cash flows from operating activities in 2019 were $423.2 million, a $160.2 million increase from 2018 due primarily to the impact of positive net earnings net of non-cash adjustments and to a lesser extent positive change in non-cash operating working capital, partially offset by higher interest and income taxes paid.
• In the fourth quarter, U.S. Propane achieved approximately US $4.6 million in synergies related to the NGL Propane acquisition, bringing the year-to-date total to US $16.7 million. Superior still expects to achieve US $24 million of run-rate synergies exiting 2020.
• Superior’s businesses generate significant cash flows that are used for capital expenditures, acquisitions or to repay debt. During the year, Superior generated $406.2 million in AOCF before transaction and other costs. Transaction and other costs were $29.9 million for 2019. After lease repayments and maintenance capital, Superior had $273.5 million available for dividends, non-recurring capital expenditures, acquisitions and debt reduction. After dividends and non-recurring capital expenditures, Superior had $80.1 million available for debt reduction and acquisitions. Superior acquired $69.2 million in retail propane distribution assets during 2019 using the cash available after capital expenditures, lease repayments and dividends.
• Canadian Propane EBITDA from operations for the fourth quarter was $75.6 million, an increase of $17.8 million or 31% compared to the prior year quarter primarily due to higher adjusted gross profit and the impact of adopting IFRS 16, partially offset by modestly higher operating expenses. Adjusted gross profit increased $19.0 million primarily due to higher average unit margins, partially offset by modestly lower sales volumes. Average margin per litre in the fourth quarter was 18.1 cents per litre, a 19% increase from the prior year quarter, primarily due to benefits from improved wholesale propane market fundamentals and margin management initiatives in a low wholesale propane price environment. Total sales volumes of 753 million litres were 12 million litres or 2% lower than the prior year quarter due to a decrease in wholesale, oilfield and commercial volumes. Average weather across Canada for fourth quarter of 2019, as measured by degree days, was 2% warmer than the prior year and 2% colder than the five-year average.
• U.S. Propane EBITDA from operations for the fourth quarter was $78.2 million, an increase of $7.0 million or 10% compared to the prior year quarter primarily due to higher adjusted gross profit, partially offset by modestly higher operating expenses. Adjusted gross profit increased $8.9 million primarily due to higher average unit margins and higher other services gross profit, partially offset by the impact of a stronger Canadian dollar on the translation of U.S. denominated gross profit and lower sales volumes. Average sales margin for U.S. Propane was 38.9 cents per litre in the fourth quarter, an increase of 14% compared to the prior year quarter primarily due to sales and marketing initiatives, including fixed-price offerings and maintaining price in a declining price environment. Total fourth quarter sales volumes decreased 30 million litres or 8% primarily due to lower residential, commercial and wholesale volumes. U.S. Propane residential sales volumes decreased by 15 million litres or 5% from the prior year quarter as a result of warmer weather, partially offset by contribution from tuck-in acquisitions. Average weather across markets where U.S. propane operates was 3% warmer for the fourth quarter of 2019 compared to the prior year quarter and 7% colder than the five-year average. U.S. Propane commercial sales volumes decreased by 4 million litres or 4% due to competitive pressures on the low-margin distillate business. U.S. Propane wholesale sales volumes decreased by 11 million litres or 55% due to competitive pressures in the wholesale distillates and propane markets. Other services gross profit increased by $1.4 million compared to the prior year quarter due to the incremental service revenue from tuck-in acquisitions. Operating expenses increased modestly due to the impact of tuck-in acquisitions, partially offset by realized synergies.
• Specialty Chemicals EBITDA from operations for the fourth quarter was $34.0 million, an increase of $0.7 million or 2% compared to the prior year quarter primarily due to the impact of IFRS 16 and higher sodium chlorate gross profit, partially offset by lower chlor-alkali gross profit. The adoption of IFRS 16 resulted in a $7.3 million increase in fourth quarter EBITDA from operations compared to the prior year quarter. Sodium chlorate gross profit increased primarily due to higher sales volumes and sales price. Sales volumes increased for sodium chlorate due to higher market share and average selling prices increased primarily due to higher contract pricing. Chlor-alkali gross profit decreased primarily due to lower sales volumes and sales prices for hydrochloric acid and caustic soda. Hydrochloric acid average selling prices and sales volumes were lower due to softness in oil and gas markets, creating excess supply and competition for volumes. Caustic soda sales prices were lower due to competitive pressures and North American supply dynamics. Operating expenses decreased $5.6 million primarily due to the impact of IFRS 16.

Financial Overview
	Three Months Ended				Twelve Months Ended
	December 31				December 31
(millions of dollars, except per share amounts)		2019		2018		2019		2018
Revenue		821.0		889.2		2,852.9		2,737.7
Gross Profit		366.0		323.5		1,213.0		948.2
Net earnings (loss)		74.6		(48.3)		142.6		(34.0)
Net earnings (loss) per share, basic and diluted ^(1)	$	0.43	$	(0.28)	$	0.82	$	(0.22)
EBITDA from operations ^(2)		187.8		162.3		562.1		402.8
Adjusted EBITDA ^(2)		176.7		153.0		524.5		374.3
Cash flows from operating activities		108.3		41.6		423.2		263.0
Cash flows from operating activities per share – basic and diluted ^(1)	$	0.62	$	0.24	$	2.42	$	1.66
AOCF before transaction and other costs ^(2)(3)		145.0		132.7		406.2		302.3
AOCF before transaction and other costs per share – basic and diluted ^(1)(2)(3)	$	0.83	$	0.76	$	$2.32	$	1.91
AOCF ^(2)		139.4		125.2		$376.3		262.8
AOCF per share– basic and diluted ^(1)(2)	$	0.80	$	0.72	$	2.15	$	1.66
Cash dividends declared		31.5		31.5		125.9		114.4
Cash dividends declared per share	$	0.18	$	0.18	$	0.72	$	0.72

⁽¹⁾ _{The weighted average number of shares outstanding for the three months and full year ended December 31, 2019 is 174.9 million (December 31, 2018 – 158.1 million). There were no dilutive instruments with respect to AOCF and AOCF before transaction and other costs per share for the three months and full year ended December 31, 2019 and 2018.}
⁽²⁾ _{EBITDA from operations, Adjusted EBITDA, AOCF before transaction and other costs, and AOCF are Non-GAAP measures. See “Non- GAAP Financial Measures”.}
⁽³⁾ _{Transaction and other costs for the three months and full year ended December 31, 2019 and 2018 are related to acquisition activity and the integration of acquisitions. See “Transaction and Other Costs” for further details.}

Segmented Information

		Three Months Ended			Twelve Months Ended
		December 31			December 31
(millions of dollars)			2019	2018		2019	2018
EBITDA from operations^(1)
	Canadian Propane Distribution		75.6	57.8		200.8	162.5
	U.S. Propane Distribution		78.2	71.2		209.4	102.7
	Specialty Chemicals		34.0	33.3		151.9	137.6
			187.8	162.3		562.1	402.8

⁽¹⁾ _{See “Non-GAAP Financial Measures”.}

Specialty Chemicals Process

On January 28, 2020, Superior announced the completion of the strategic review process and potential sale of the Specialty Chemicals business. The sales process attracted significant interest from a number of buyers, but did not result in a transaction that was in Superior’s best interests to complete at this time.

Business Development and Acquisition Update

• On October 1, 2019, Superior acquired the propane distribution assets of an independent propane distributor in North Carolina for total consideration of US $1.2 million (CDN $1.5 million). The purchase price was paid primarily with cash from Superior’s credit facility, as well as deferred payments.
• On October 9, 2019, Superior acquired the propane distribution assets of an independent propane distributor in New Brunswick for total consideration of $5.6 million, excluding taxes. The purchase price was paid with cash from Superior’s credit facility.
• On December 13, 2019, Superior acquired the propane distribution assets of an independent propane distributor in Delaware and Maryland for total consideration of US $12.1 million (CDN $15.7 million). The purchase price was paid with cash from Superior’s credit facility.
• On January 9, 2020, Superior acquired the propane distribution assets of an independent propane distributor in California for total consideration of US $21.8 million (CDN $28.5 million). The purchase price was paid with cash from Superior’s credit facility and deferred payments.
• In the ten months ended January 31, 2020, Superior completed six retail propane distribution acquisitions for total consideration of $97.7 million.

Dividend Reinvestment Program

On January 28, 2020, Superior announced it was reinstating its Dividend Reinvestment Program (the “DRIP”), commencing with the February 2020 dividend, which is expected to be paid on or about March 13, 2020. Proceeds from the DRIP will be used for debt reduction and general corporate purposes, which includes funding retail propane distribution acquisitions. The DRIP will provide Superior’s shareholders with the opportunity to reinvest their cash dividend in Superior at a 4% discount to the market price of Superior’s common shares. Further information on Superior's DRIP can be found in the Investor Relations section of Superior's website at www.superiorplus.com.

2020 Adjusted EBITDA Guidance

Superior is introducing its 2020 Adjusted EBITDA guidance range of $475 million to $515 million. Based on the midpoint of the 2020 Adjusted EBITDA guidance range, this is a 6% decrease compared to the full year 2019 Adjusted EBITDA of $524.5 million, and a 3% decrease from the midpoint of the 2019 Adjusted EBITDA guidance range, which assumed normal wholesale propane market fundamentals.

Compared to the midpoint of the 2019 Adjusted EBITDA guidance, U.S. Propane EBITDA from operations is expected to increase, and Canadian Propane and Specialty Chemicals EBITDA from operations are expected to decrease. U.S. Propane EBITDA from operations is expected to increase due to the contribution from tuck-in acquisitions completed in 2019, an increase in realized synergies related to NGL and operational improvements. Canadian Propane EBITDA from operations is expected to decrease primarily due to lower sales volumes, partially offset by modestly higher average margins and operating cost reductions. Sales volumes are expected to decrease related to a decline in oilfield and, to a lesser extent, industrial business in Western Canada, partially offset by organic growth in Central Canada. Specialty Chemicals EBITDA from operations is expected to decrease due to chlor-alkali market weakness.

The 6% decrease compared to 2019 actual results is primarily due to lower expected EBITDA from operations for Specialty Chemicals and Canadian Propane, partially offset by an increase in expected EBITDA from operations for U.S. Propane. Key assumptions related to the 2020 Adjusted EBITDA guidance are:

• EBITDA from operations for Specialty Chemicals is anticipated to be lower than 2019 due to an expected significant decrease in chlor-alkali gross profit, modest decrease in sodium chlorate gross profit and a modest increase in operating expenses. Chlor-alkali gross profit is anticipated to be lower than 2019 due to continued weakness in hydrochloric acid pricing driven by reduced oil and gas demand, a decrease in caustic potash sales volumes and pricing related to customer mix, and weakness in caustic soda pricing related to supply and demand fundamentals entering 2020 in North American markets. Sodium chlorate gross profit is anticipated to be modestly lower than 2019 as modest improvements in sales prices are expected to be more than offset by modestly lower sales volumes and the impact of a weaker U.S. dollar compared to 2019.
• EBITDA from operations for Canadian Propane is anticipated to be lower than 2019 primarily due to an expected decrease in sales volumes in Western Canada and a decrease in average unit margins. Sales volumes in Western Canada are expected to decrease related to competitive pressures, continued headwinds in oil and gas activity, the assumption of average weather for 2020 and weaker economic activity. Average margins are expected to be modestly lower as wholesale propane and natural gas liquid fundamentals related to basis differentials are not expected to be as strong as they were in 2019.
• EBITDA from operations for U.S. Propane is anticipated to be higher than 2019 primarily due to the incremental contribution from the tuck-in acquisitions completed in 2019 and incremental synergies related to the NGL acquisition.
• Average weather, as measured by degree days for 2020 is anticipated to be consistent with the five-year average for Canada and the U.S.

Debt Update and 2020 Leverage Guidance

Superior remains focused on managing its total debt to Adjusted EBITDA and its Senior Debt to Credit Facility EBITDA leverage ratios. Superior’s total debt as at December 31, 2019 was $1,956.1 million, an increase of $69.8 million from December 31, 2018 primarily due to the addition of lease liabilities related to the adoption of IFRS 16, higher capital spending and the impact of acquisitions financed using debt, partially offset by increased cash flow from operations available for debt reduction. Superior’s debt for credit facility and note indenture covenant calculations (“Senior debt”) excludes the impact of IFRS 16, and was $1,794.7 million as at December 31, 2019, which was an increase of $9.3 million from September 30, 2019 and a decrease of $91.6 million from December 31, 2018. The decrease in Senior debt compared to December 31, 2018 is primarily due to higher cash flow from operations available for debt reduction and lower net working capital requirements, partially offset by tuck-in acquisitions and higher capital spending. Credit Facility EBITDA, which excludes the impact of IFRS 16 for the trailing twelve months ended December 31, 2019 was $489.9 million. See “Non-GAAP Financial Measures” for the definition of Credit Facility EBITDA and “Non-GAAP Financial Measures” in the MD&A for the reconciliation from Adjusted EBITDA. Superior’s Senior Debt to Credit Facility EBITDA ratio as at December 31, 2019 was 3.7x, which was at the lower end of the Senior Debt to Credit Facility EBITDA guidance of 3.6x to 4.0x.

Superior anticipates the total debt to Adjusted EBITDA leverage ratio will be in the range of 3.4x to 3.8x as at December 31, 2020 as cash generated from operations and DRIP proceeds are used to repay debt.

Superior is well within its covenants related the credit facility and the note indentures. Superior also had available liquidity of $249.4 million available under the credit facility as at December 31, 2019.

MD&A and Financial Statements

Superior’s MD&A, the audited Consolidated Financial Statements and the Notes to the Consolidated Financial Statements for the year ended December 31, 2019 provide a detailed explanation of Superior’s operating results. These documents are available online at Superior’s website at www.superiorplus.com under the Investor Relations section and on SEDAR under Superior’s profile at www.sedar.com.

2019 Annual and Fourth Quarter Conference Call

Superior will be conducting a conference call and webcast for investors, analysts, brokers and media representatives to discuss the 2019 Annual and Fourth Quarter Results at 10:30 a.m. EST on Friday, February 21, 2020. To participate in the call, dial: 1-844-389-8661. Internet users can listen to the call live, or as an archived call on Superior’s website at www.superiorplus.com under the Events section.

Non-GAAP Financial Measures

Throughout the fourth quarter and full year earnings release, Superior has used the following terms that are not defined by International Financial Reporting Standards (“Non-GAAP Financial Measures”), but are used by management to evaluate the performance of Superior and its business: AOCF before and after transaction and other costs, earnings before interest, taxes, depreciation and amortization (“EBITDA”) from operations, Adjusted Gross Profit, Adjusted EBITDA, Senior Debt, Credit Facility EBITDA and Senior Debt to Credit Facility EBITDA leverage ratio. These measures may also be used by investors, financial institutions and credit rating agencies to assess Superior’s performance and ability to service debt. Non-GAAP financial measures do not have standardized meanings prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other companies. Securities regulations require that Non-GAAP financial measures are clearly defined, qualified and reconciled to their most comparable GAAP financial measures. Except as otherwise indicated, these Non-GAAP financial measures are calculated and disclosed on a consistent basis from period to period. Specific items may only be relevant in certain periods. See “Non-GAAP Financial Measures” in the MD&A for a discussion of Non-GAAP financial measures and certain reconciliations to GAAP financial measures.

The intent of Non-GAAP financial measures is to provide additional useful information to investors and analysts, and the measures do not have any standardized meaning under IFRS. The measures should not, therefore, be considered in isolation or used in substitute for measures of performance prepared in accordance with IFRS. Other issuers may calculate Non-GAAP financial measures differently. Investors should be cautioned that AOCF, EBITDA from operations, Adjusted EBITDA and Credit Facility EBITDA should not be construed as alternatives to net earnings, cash flow from operating activities or other measures of financial results determined in accordance with GAAP as an indicator of Superior’s performance. Non-GAAP financial measures are identified and defined as follows:

Adjusted Operating Cash Flow and Adjusted Operating Cash Flow per Share

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 infrequent in nature and could distort the analysis of trends in business performance. Excluding these items does not imply they are non-recurring. AOCF and AOCF per share are presented before and after transaction and other costs.

AOCF per share before transaction and other costs is calculated by dividing AOCF before transaction and other costs by the weighted average number of shares outstanding. AOCF per share is calculated by dividing AOCF by the weighted average number of shares outstanding.

AOCF is a performance measure used by management and investors to evaluate Superior’s ongoing performance of its businesses and ability to generate cash flow. 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. AOCF is also used as one component in determining short-term incentive compensation for certain management employees.

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 Distribution 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. AOCF is reconciled to cash flow from operating activities. Please refer to the Financial Overview section of the MD&A for the reconciliation.

Adjusted Gross Profit

Adjusted gross profit represents revenue less cost of sales adjusted for realized gains and losses on commodity derivative instruments related to risk management. Management uses Adjusted Gross Profit to set margin targets and measure results. Unrealized gains and losses on commodity derivative instruments are excluded because of the accounting mis-match that exists as a result of the customer contract not being included in the determination of the fair value for this risk management activity.

Adjusted EBITDA

Adjusted EBITDA represents earnings before interest, taxes, depreciation, amortization, losses (gains) on disposal of assets, finance expense, restructuring costs, transaction and other costs, and unrealized gains (losses) on derivative financial instruments. Adjusted EBITDA is used by Superior and investors to assess its consolidated results and ability to service debt. Adjusted EBITDA is reconciled to net earnings before income taxes.

EBITDA from operations

EBITDA from operations is defined as Adjusted EBITDA excluding costs that are not considered representative of Superior’s underlying core operating performance, including gains and losses on foreign currency hedging contracts, corporate costs and transaction and other costs. Management uses EBITDA from operations to set targets for Superior (including annual guidance and variable compensation targets). EBITDA from operations is reconciled to net earnings before income taxes. Please refer to the Results of Operating Segments in the MD&A for the reconciliations.

Operating Expenses

Operating expenses include wages and benefits for employees, drivers, service and administrative labour, fleet maintenance and operating costs, freight and distribution expenses excluded from cost of sales, along with the costs associated with owning and maintaining land, buildings and equipment, such as rent, repairs and maintenance, environmental, utilities, insurance and property tax costs. Operating expenses exclude gains or losses on disposal of assets, depreciation and amortization and non-recurring expenses, such as transaction, restructuring and integration costs.

Operating expenses are defined as SD&A expenses adjusted for amortization and depreciation, gains or losses on disposal of assets and transaction, restructuring and other costs.

Non-GAAP Financial Measures Used for bank covenant purposes

Senior Debt

Senior Debt includes total borrowing before deferred financing fees and vehicle lease obligations, and excludes the remaining lease obligations. Senior Debt is used by Superior to calculate its debt covenants and other credit information.

Credit Facility EBITDA

Credit Facility EBITDA is defined as Adjusted EBITDA calculated on a 12-month trailing basis giving pro forma effect to acquisitions and dispositions adjusted to the first day of the calculation period, and excludes the impact from the adoption of IFRS 16 and EBITDA from undesignated subsidiaries. Credit Facility EBITDA is used by Superior to calculate its debt covenants and other credit information. Please refer to Non-GAAP Financial Measures in the MD&A for the reconciliation.

Credit Facility leverage ratio

Credit Facility leverage ratio is defined as Senior Debt divided by Credit Facility EBITDA. Senior Debt to Credit Facility EBITDA is used by Superior for calculation of bank covenants and other credit information.

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”, “estimate”, “expect”, “plan”, “forecast”, “future”, “outlook, “guidance”, “may”, “project”, “should”, “strategy”, “target”, “will” or similar expressions suggesting future outcomes.

Forward-looking information in this document includes: future financial position, consolidated and business segment outlooks, expected Adjusted EBITDA, anticipated impact of IFRS 16 on leverage, expected total debt to Adjusted EBITDA ratio, expected Senior Debt to Credit Facility EBITDA leverage ratio, business strategy and objectives, development plans and programs, organic growth, weather, economic activity in Western Canada, product pricing and sourcing, caustic soda and hydrochloric acid markets, caustic potash customer mix, volumes and pricing, wholesale propane market fundamentals, electricity costs, exchange rates, expected synergies from the acquisition of NGL and other acquisitions, improvements and the timing associated in North American chlor-alkali markets, expected seasonality of demand, and future economic conditions. Forward-looking information in this document includes expected 2020 Adjusted EBITDA, which assumes no material divestitures in 2020.

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 historic 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, utilization of tax basis, regulatory developments, currency, exchange and interest rates, future commodity prices relating to the oil and gas industry, future oil rig activity levels, trading data, cost estimates, our ability to obtain financing on acceptable terms, expected life of facilities and statements regarding net working capital and capital expenditure requirements of Superior or Superior LP, the assumptions set forth under the “Financial Outlook” sections of our MD&A. The forward looking information is also subject to the risks and uncertainties set forth below.

By its very nature, forward-looking information involves numerous assumptions, risks and uncertainties, both general and specific. Should one or more of these risks and uncertainties materialize or should underlying assumptions prove incorrect, as many important factors are beyond our control, Superior’s or Superior LP’s actual performance and financial results may vary materially from those estimates and intentions contemplated, expressed or implied in the forward-looking information. These risks and uncertainties include incorrect assessments of value when making acquisitions, increases in debt service charges, the loss of key personnel, fluctuations in foreign currency and exchange rates, inadequate insurance coverage, liability for cash taxes, counterparty risk, compliance with environmental laws and regulations, reduced customer demand, operational risks involving our facilities, force majeure, labour relations matters, our ability to access external sources of debt and equity capital, and the risks identified in (i) our MD&A under the heading “Risk Factors” and (ii) Superior’s most recent Annual Information Form. The preceding list of assumptions, risks and uncertainties is not exhaustive.

When relying on our forward-looking information to make decisions with respect to Superior, investors and others should carefully consider the preceding factors, other uncertainties and potential events. Any forward-looking information is provided as of the date of this document and, except as required by law, neither Superior nor Superior LP undertakes to update or revise such information to reflect new information, subsequent or otherwise. For the reasons set forth above, investors should not place undue reliance on forward-looking information.

For more information about Superior, visit our website at www.superiorplus.com.