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

• Q2 2022 Adjusted EBITDA¹ was $25.6 million and consistent with management expectations
• Superior is confirming its 2022 Adjusted EBITDA guidance range of $425 million to $465 million
• Approximately $496 million spent on acquisitions closed in 2022, including the ~$302 million acquisition of Kamps Propane and Kiva Energy Inc.
• Superior’s Leverage Ratio¹ was 3.7x as of June 30, 2022, which is within the targeted Leverage Ratio range of 3.5x to 4.0x
• Superior’s business segments achieved increased sales volumes and average margins compared to the prior year quarter:
  • Q2 2022 U.S. Propane Distribution sales volumes of 242 million litres, a 14% increase from 2021
  • Q2 2022 Canadian Propane Distribution sales volumes of 226 million litres, a 5% increase from 2021
  • Q2 2022 Wholesale Propane Distribution third-party sales volumes of 303 million litres, a 72% increase from 2021
  • Q2 2022 U.S. Propane Distribution average margins of 46.0 cents per litre, a 24% increase from 2021
  • Q2 2022 Canadian Propane Distribution average margins of 28.6 cents per litre, a 5% increase from 2021
• Q2 2022 Net loss from continuing operations of $85.0 million compared to $36.1 million in 2021 primarily due to an unrealized loss on derivatives and foreign currency translation of borrowings compared to an unrealized gain in the prior year quarter associated with changes in the market price of commodities, timing of maturities of underlying financial instruments and changes in foreign exchange rates relative to amounts hedged

¹ Adjusted EBITDA and Leverage Ratio are not standardized measures under International Financial Report Standards (“IFRS”). See “Non-GAAP Financial Measures and Reconciliations” section below.

In announcing these results, Luc Desjardins, President and Chief Executive Officer said, “We are pleased to report another quarter of increased sales volumes and average margins, as well as confirming our 2022 Adjusted EBITDA guidance range. The increase in our sales volumes is a testament to our growth through acquisition strategy and provides an indication commercial demand in Canada is recovering as we emerge from the pandemic. Our higher average margins demonstrate our ability to effectively manage gross margins as we face increased wholesale commodity costs, fuel costs, labour costs and other costs impacted by inflation.”

Mr. Desjardins continued, “We have made great progress on our Superior Way Forward initiatives, deploying over $800 million on acquisitions in the past 18 months. Through our Superior Way operating platform and our significant experience in integrating acquired businesses, we expect to meet or exceed our synergy targets for our recent acquisitions as well. Following the end of the second quarter, we entered into an agreement with InEnTec Inc. for the supply of low carbon, renewable dimethyl ether that we can offer to our customers as a transportation fuel option that can reduce their carbon footprint. This exciting new partnership and the agreement with Charbone Hydrogen demonstrate our ability to access and provide innovative low carbon energy solutions for our customers in the future.”

Financial Highlights:

• Net loss from continuing operations of $85.0 million in the second quarter increased $48.9 million over the second quarter of 2021 primarily due to a loss on derivatives and foreign currency translation of borrowings compared to a gain in the prior year quarter, higher selling, distribution and administration costs (“SD&A”) and income tax expense, partially offset by higher gross profit and lower finance expense.
• Superior achieved second quarter Adjusted EBITDA of $25.6 million, a $6.0 million or 19% decrease over the prior year quarter primarily due to the impact of the Canadian Employment Wage Subsidy received in the prior year quarter and lower realized gains on foreign exchange hedging contracts, partially offset by lower corporate costs², modestly higher Adjusted EBITDA in U.S. retail propane distribution (“U.S. Propane”) and Wholesale propane distribution (“Wholesale Propane”).
• Adjusted Operating Cash Flow (“AOCF”) before transaction and other costs² during the second quarter was $5.6 million, a $3.4 million or 38% decrease compared to the prior year quarter primarily due to lower Adjusted EBITDA, partially offset by lower interest expense and current income tax expense. AOCF before transaction and other costs per share was $0.02, a decrease of $0.02 per share or 50% due primarily to the decrease in AOCF before transaction and other costs and higher weighted average shares outstanding. The weighted average shares outstanding increased because 25.7 million shares were issued in a bought-deal equity offering that closed on April 6, 2022.
• Superior’s Leverage Ratio for the trailing twelve months ended June 30, 2022, was 3.7x, which is within Superior’s target range of 3.5x to 4.0x.
• Superior is confirming its previously disclosed Adjusted EBITDA guidance range of $425 million to $465 million. Average weather for the remainder of 2022 is anticipated to be consistent with the five-year average for the U.S. and Canada.

² Corporate costs and AOCF before transaction and other costs are not standardized measures under International Financial Report Standards (“IFRS”). See “Non-GAAP Financial Measures and Reconciliations” section below.

Retirement of Luc Desjardins

Luc Desjardins is expected to retire as President and Chief Executive Officer and as a member of the Board of Directors of Superior (the “Board”), effective as of July 31, 2023, in order to provide sufficient time for a successor to be selected and to ensure an effective and smooth transition.

Mr. David Smith, Chair of the Board, commented “On behalf of the Board, I would like to thank Luc for his passion and dedicated service to Superior for 11 years as President and CEO. He has been integral in growing Superior’s propane distribution business in North America and completing Superior’s transition from a conglomerate to a pure-play North American energy distribution business. Because of his exceptional leadership, Superior is in the enviable position of having seasoned executives in key roles as well as a dedicated workforce and is positioned well for the future. We wish him well in his next endeavors.”

“I am grateful for the opportunity to lead Superior during the past 11 years and I am confident that the business and the team we have built at Superior is well positioned to continue to succeed following my retirement,” remarked Luc Desjardins.

The Board has appointed a succession committee to conduct the search for a new CEO and address an orderly transition. In the interim, Mr. Desjardins will continue to execute on Superior’s Superior Way Forward growth strategy and will transition activities to his successor at the appropriate time.

Divisional Financial Highlights:

To align with strategic initiatives and provide greater visibility into its operations, Superior made enhancements to its reporting disclosures. The Adjusted EBITDA and the results of the Canadian Propane and Wholesale Propane lines of business are now separately disclosed. For comparative purposes, prior period information has been restated and reclassified to conform to the presentation used in the current period

• U.S. Propane Adjusted EBITDA of $16.2 million, increased $2.2 million or 16% from the prior year’s quarter primarily due to the contribution from acquisitions completed in the last twelve months and higher average margins, partially offset by higher operating expenses. As measured by degree days, the average weather days, across markets where U.S. propane operates for the second quarter of 2022 was 3% colder than the prior year quarter and 5% colder than the five-year average.
• Canadian retail propane distribution (“Canadian Propane”) Adjusted EBITDA of $13.3 million, decreased $8.0 million or 38% from the prior year’s quarter primarily due to higher operating costs, partially offset by higher sales volumes associated with improved commercial customer demand and colder weather and higher average margins. As measured by degree days, the average weather across Canada for the second quarter of 2022 was 11% colder than the prior year and 3% colder than the five-year average.
• Wholesale Propane Adjusted EBITDA of $1.8 million, increased $0.1 million or 6% from the prior year’s quarter primarily due to the contribution from the Kiva acquisition, partially offset by weaker wholesale propane fundamentals.
• Corporate costs for the second quarter of 2022 were $6.0 million, a $2.2 million decrease compared to the prior year’s quarter due to lower long-term incentive plan costs related to share price decline in the current quarter. In the second quarter of 2022, Superior realized gains on foreign currency hedging contracts of $0.3 million, a decrease of $2.5 million compared to the prior year’s quarter due to the average hedge rate of the foreign exchange contracts and the strengthening of the Canadian dollar.

Strategic Developments and Acquisition Update

• On April 1, 2022, Superior acquired the assets of Heartland Industries for an aggregate purchase price of approximately US$7.1 million (C$8.9 million) before adjustments for working capital.
• On April 6, 2022, Superior closed its previously announced bought deal equity offering and issued 25,670,300 common shares (“Shares”) for $11.20 per Share (the “Offering Price”), for aggregate gross proceeds of approximately $288 million (the “Offering”). Superior used the net proceeds of the Offering to reduce existing indebtedness under the revolving credit facility.
• On May 5, 2022, Superior finalized the definitive agreement with the Charbone Corporation to distribute green hydrogen to commercial and industrial customers in Quebec.
• On May 19, 2022, Superior acquired the retail propane distribution assets of DT Denton Gas Co. Inc. (“Denton Gas”) a retail propane distributor in South Carolina for an aggregate purchase price of approximately US$1.8 million (C$2.3 million) before adjustments for working capital.
• On June 1, 2022, Superior completed the acquisition of Quarles Petroleum Delivered Fuels Business. The US $143.1 million (C$181.1 million) asset purchase price (before working capital adjustments) was paid with funds drawn from Superior’s existing credit facility.
• On June 6, 2022, Superior amended the syndicated credit facility and extended the maturity to June 6, 2027. There were no changes to the total commitments available under the credit facility ($750 million), accordion capacity ($300 million) or the financial covenants.
• On June 16, 2022, Superior published its second Sustainability Report (the “Sustainability Report”), highlighting Superior’s performance for the year ended December 31, 2021. Superior’s Sustainability Report included improved disclosures from the inaugural report released in 2021.
• On August 2, 2022, Superior entered into a master offtake agreement (the “MOA”) with InEnTec Inc. (“InEnTec”) for InEnTec to supply Superior with low carbon intensity, clean burning, renewable dimethyl ether (“rDME”) to be used as a transportation fuel, significantly reducing the carbon footprint from traditionally sourced fossil fuels. The MOA provides Superior with access to rDME supply for retail and wholesale customers in the U.S. and a long-term relationship with InEntec, a leader in low emission gasification systems that produce green energy products from organic waste.

Debt and Leverage Update

Superior is focused on managing both Total Net Debt and its Leverage Ratio. Superior’s Leverage Ratio on June 30, 2022 was 3.7x, a decrease from 4.0x on March 31, 2022, primarily due to the decrease in Total Net Debt and an increase in Pro Forma Adjusted EBITDA. Total Net Debt decreased as the net proceeds from the Offering were used to repay debt under the credit facility, partially offset by the acquisition of the Quarles Delivered Fuels business. Pro Forma Adjusted EBITDA increased due to the pro forma contribution from acquisitions completed in the past nine months and higher Adjusted EBITDA in the first six months of 2022 compared to 2021.

MD&A and Financial Statements

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

2022 Second Quarter Conference Call

Superior will conduct a conference call and webcast for investors, analysts, brokers and media representatives to discuss the Second Quarter Results at 10:30 a.m. EDT on Wednesday, August 10, 2022. To participate in the call, register through the following link: Register Here. 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 and Reconciliation

Throughout this news release, Superior has identified specific terms that it uses that are not standardized measures under International Financial Reporting Standards (“Non-GAAP Financial Measures”) and, therefore may not be comparable to similar financial measures disclosed by other issuers. Reconciliations of these Non-GAAP Financial Measures to the most directly comparable financial measures in Superior’s annual financial statements are provided below. Certain additional disclosures for these Non-GAAP Financial Measures, including an explanation of the composition of these financial measures, how they provide helpful information to an investor, and any additional purposes management uses for them, are incorporated by reference from the “Non-GAAP Financial Measures and Reconciliations” section in Superior’s Second Quarter 2022 MD&A dated August 9, 2022, available on www.sedar.com.

Total Net Debt to Adjusted EBITDA Leverage Ratio and Pro Forma Adjusted EBITDA

Adjusted EBITDA for the Total Net Debt to Adjusted EBITDA Leverage Ratio is defined as Adjusted EBITDA calculated on a 12-month trailing basis giving pro forma effect to acquisitions and dispositions adjusted to the first day of the calculation period (“Pro Forma Adjusted EBITDA”). Pro Forma Adjusted EBITDA is used by Superior to calculate its Total Net Debt to Adjusted EBITDA Leverage Ratio.

To calculate the Total Net Debt to Adjusted EBITDA Leverage Ratio divide the sum of borrowings before deferred financing fees and lease liabilities by Pro Forma Adjusted EBITDA. The Total Net Debt to Adjusted EBITDA Leverage Ratio is used by Superior and investors to assess its ability to service debt.

Forward-Looking Information

Information included herein is forward-looking information within the meaning of applicable Canadian securities laws. Forward-looking information may include statements regarding the objectives, business strategies to achieve those objectives, expected financial results (including those in the area of risk management), economic or market conditions, and the outlook of or involving Superior, Superior LP and its businesses. Such information is typically identified by words such as “anticipate”, “believe”, “continue”, “estimate”, “expect”, “plan”, “forecast”, “future”, “outlook, “guidance”, “may”, “project”, “should”, “strategy”, “target”, “will” or similar expressions suggesting future outcomes.

Forward-looking information in this document includes: expected 2022 Adjusted EBITDA, expectations related to meet or exceed synergy targets, future supply of rDME blended propane in the U.S., expected timing of the retirement of Superior’s President and CEO and expectations related to our ability to access and provide innovative low carbon energy solutions for our customers in the future.

Forward-looking information is provided to provide information about management’s expectations and plans for the future and may not be appropriate for other purposes. Forward-looking information herein is based on various assumptions, and expectations that Superior believes are reasonable in the circumstances. No assurance can be given that these assumptions and expectations will prove correct. Those assumptions and expectations are based on information currently available to Superior, including information obtained from third-party industry analysts and other third-party sources, and the historic performance of Superior’s businesses and businesses it has acquired. Such assumptions include obtaining the expected synergies from the Kamps and Quarles acquisitions and other acquisitions consistent with historical averages at approximately 25% over the relevant period, no material divestitures, anticipated financial performance, current business and economic trends, the amount of future dividends paid by Superior, business prospects, utilization of tax basis, regulatory developments, currency, exchange and interest rates, future commodity prices relating to the oil and gas industry, future oil rig activity levels, trading data, cost estimates, our ability to obtain financing on acceptable terms, expected net working capital and capital expenditure requirements of Superior or Superior LP, and the assumptions set forth under the “Financial Outlook” sections of our MD&A. The forward-looking information is also subject to the risks and uncertainties set forth below. By its very nature, forward-looking information involves numerous assumptions, risks and uncertainties, both general and specific. Should one or more of these risks and uncertainties materialize or should underlying assumptions prove incorrect, as many important factors are beyond our control, Superior’s or Superior LP’s actual performance and financial results may vary materially from those estimates and intentions contemplated, expressed or implied in the forward-looking information. These risks and uncertainties include incorrect assessments of value when making acquisitions, increases in debt service charges, the loss of key personnel, the anticipated impact of the COVID-19 pandemic and the related public health restrictions, fluctuations in foreign currency and exchange rates, inadequate insurance coverage, liability for cash taxes, counterparty risk, compliance with environmental laws and regulations, reduced customer demand, operational risks involving our facilities, force majeure, labour relations matters, our ability to access external sources of debt and equity capital, and the risks identified in (i) our MD&A under the heading “Risk Factors” and (ii) Superior’s most recent Annual Information Form. The preceding list of assumptions, risks and uncertainties is not exhaustive. When relying on our forward-looking information to make decisions with respect to Superior, investors and others should carefully consider the preceding factors, other uncertainties and potential events. Any forward-looking information is provided as of the date of this document and, except as required by law, neither Superior nor Superior LP undertakes to update or revise such information to reflect new information, subsequent or otherwise. For the reasons set forth above, investors should not place undue reliance on forward-looking information.

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

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