ENERGY TRUST / Superior Propane Income Fund Distribution Notice and
Fourth Quarter Release
TSE SYMBOL: SPF.UN
FEBRUARY 24, 1998
CALGARY, ALBERTA--
1997 DISTRIBUTIONS EXCEED FORECAST BY 8 PERCENT
HIGHLIGHTS
- First quarter distribution of $0.44 per trust unit including
$0.17 related to 1997 results.
- Distribution payable on April 15, 1998 to unitholders of record
on March 31, 1998.
- Total distributions pertaining to 1997 results of $1.24 per
trust unit exceed IPO forecast of $1.15 per trust unit.
- Superior's distributable cash flow for 1997 of $57.4 million, 6
percent above IPO forecast cash flow of $53.6 million.
- 1997 propane margins 8 percent higher than 1996 levels.
/T/
Three months ended Twelve months ended
December 31 December 31
Proforma (x) Proforma (x)
1997 1996 1997
--------------------------------------------------------------
FINANCIAL (thousands of
dollars except per
unit amounts)
Cash generated from
operations before
changes in net working
capital 15,014 11,423 45,533
Less:
Capital expenditures (5,858) (5,294) (7,745)
------ ------ ------
Distributable cash flow 9,156 6,169 37,788
Distributable cash per
average trust unit
outstanding 0.22 0.27 1.24
Distributions per
trust unit 0.27 0.25 1.10
Trust units outstanding 41,167 22,849 41,167
Average trust units
outstanding 41,167 22,849 30,490
OPERATING
Volume of propane sold
(millions of litres) 402 465 1,435
Average propane sales
margin (cents per litre)12.58 11.64 12.59
/T/
(x) See accompanying notes for basis of proforma presentation.
1998 FIRST QUARTER DISTRIBUTION NOTICE
The trustees of the Superior Propane Income Fund (the "Fund")
declared a cash distribution for the first quarter of 1998 of
$0.44 (forty-four cents) per trust unit, payable on April 15, 1998
to unitholders of record at the close of business on March 31,
1998. This amount includes a distribution of $0.17 per trust unit
which represents the remaining net undistributable cash flow
earned by Superior Propane Inc. ("Superior") in 1997 after payment
of interest on the Shareholder Notes held by the Fund, which
provide the Fund's base quarterly distributions. The remaining
$0.27 of the distribution relates to first quarter 1998 interest
earned on the Shareholder Notes held by the Fund. Distributions
declared by the Fund with respect to the 1997 operating results of
Superior amounted to $1.24 per trust unit, compared to $1.15 per
trust unit forecast in the Fund's initial public offering ("IPO")
prospectus.
The following summarizes the designation for tax purposes of the
first quarter 1998 distribution payable on April 15, 1998 and the
distributions paid in the previous three quarters:
/T/
Total
1st 4th 3rd 2nd distributions
Qtr.(x) Qtr. Qtr. Qtr. relating to 1997
1998 1997 1997 1997 operations
------ ---- ---- ---- ----------------
Return of
capital $ 0.2058 $ 0.02 $ 0.02 $ 0.03 $ 0.2758
Dividend 0.0755 0.0755
Other income 0.1587 0.25 0.25 0.23 0.8887
------ ---- ---- ---- ------
Total $ 0.44 $ 0.27 $ 0.27 $ 0.26 $ 1.24
------ ---- ---- ---- ------
------ ---- ---- ---- ------
/T/
(x) The 1st quarter 1998 distribution includes $0.17 per trust
unit on account of previously undistributed 1997 net cash flow.
FINANCIAL AND OPERATING RESULTS:
YEAR-END
For 1997, the Fund generated distributable cash flow of $37.8
million, or $1.24 per trust unit, which is 8 percent higher than
the $1.15 per trust unit forecast in the Fund's IPO prospectus.
As detailed in the above table, and consistent with the Fund's
distribution policy, the Fund will have fully distributed the 1997
distributable cash flow with the first quarter 1998 distribution.
Gross profit reached $209.5 million in 1997, exceeding the $204.1
million in the IPO forecast as improved sales margins, tight cost
control and lower capital expenditures more than offset the impact
of lower than forecast auto propane sales volumes. As illustrated
by the following charts, gross profit generated by region and by
market segment was comparable to the prior year and reflects the
diversity and stability of Superior's operations.
Expenses of $142.2 million exceeded the IPO forecast by $4.8
million due to higher equipment maintenance costs and payments
under an employee profit sharing plan which was introduced in
1997.
Capital expenditures of $7.7 million were $4.3 million lower than
the IPO forecast. This was due to the careful review of all 1997
capital expenditures to ensure their contribution to long-term
value, and a focus on improving the productivity of existing
assets.
FOURTH QUARTER
During the fourth quarter of 1997 the Fund's 90 percent ownership
of Superior generated distributable cash flow of $9.2 million
($0.22 per trust unit), compared to $6.2 million ($0.27 per trust
unit) in 1996 when the Fund's ownership was 50 percent.
Propane sales volumes were 402 million litres in the fourth
quarter of 1997, down 14 percent from the same period last year.
The fourth quarter of 1996 was an unusually strong quarter due to
strong crop drying demand and the onset of an early winter, while
1997 was a normal season with lower auto propane sales. Gross
profit was $58 million in the fourth quarter of 1997, down from
$62 million for the fourth quarter last year due to the lower
sales volumes. Operating and administrative expenses were $38.3
million, a reduction of $6 million from the comparable period last
year, reflecting the benefit of cost reduction initiatives
undertaken in 1996. Capital expenditures of $5.9 million for the
quarter compare to $5.3 million for the same period last year.
Capital expenditures are seasonally weighted toward the fourth
quarter as Superior's truck fleet and delivery cylinders are
renewed in this period in preparation for the winter heating
season.
/T/
--------------------------------------------------------
ANNUAL GROSS PROFIT BY REGION
--------------------------------------------------------
1996 1997
---- ----
Atlantic Canada 11 percent 12 percent
Quebec 14 percent 15 percent
Ontario 41 percent 39 percent
Sask./Man. 7 percent 7 percent
Alberta 12 percent 13 percent
B.C./Yukon 15 percent 14 percent
--------------------------------------------------------
--------------------------------------------------------
ANNUAL GROSS PROFIT BY MARKET SEGMENT
--------------------------------------------------------
1996 1997
---- ----
Residential 24 percent 23 percent
Commercial 19 percent 20 percent
Industrial 25 percent 27 percent
Agricultural 6 percent 4 percent
Automotive 14 percent 13 percent
Other 12 percent 13 percent
--------------------------------------------------------
SUPERIOR PROPANE INCOME FUND
Consolidated Statement of Earnings
--------------------------------------------------------------
(unaudited, thousands of dollars)
Three months ended Twelve months ended
December 31 December 31
Proforma(x) Proforma(x)
1997 1996 1996 1997 1997
Revenues $ 137,912 $ $ 182,108 $ 174,761 $ 506,092
Cost of products
sold 79,767 119,958 99,627 296,616
------- ------ ------- ------ -------
Gross profit 58,145 62,150 75,134 209,476
------- ------ ------- ------ -------
Expenses
Operating and
administration 38,310 114 44,363 50,863 142,625
Depreciation and
amortization 9,380 7,649 12,627 32,714
Interest 464 394 581 1,600
Income taxes of
Superior 757 316 356 (1,800)
Non-controlling
interest in
Superior 1,324 5,644 1,639 15,786
------ ------- ------- ------ -------
50,235 114 58,366 66,066 190,925
------ ------- ------- ------ -------
Earnings from
investment in
Superior
Income on 13 Percent
Shareholder Notes 5,828 16,660
Equity loss on
Common Shares (1,930) (7,177)
------ ------ ------- ------ -------
3,898 9,483
------ ------ ------- ------ -------
Net income before
distributions to
unitholders $ 7,910 $ 3,784 $ 3,784 $ 18,551 $ 18,551
------ ------ ------ ------- -------
------ ------ ------ ------- -------
Consolidated Balance Sheet
--------------------------------------------------------------
(unaudited, thousands of dollars)
Proforma(x)
Dec. 31, Dec. 31, Dec. 31,
1997 1996 1996
-------- -------- -----------
Assets
Net working capital $ 30,574 $ 5,709 $ 9,786
Investment in Superior 232,292
Capital assets
and goodwill 513,258 361,727
-------- -------- --------
$ 543,832 $ 238,001 $ 371,513
-------- -------- --------
-------- -------- --------
Liabilities and
Unitholders' Equity
Bank indebtedness $ 14,022 $ (5) $ (76)
Distributions payable
to unitholders 11,115 5,712 5,712
Distributions payable to
non-controlling interest 1,262 100 6,127
-------- -------- --------
26,399 5,807 11,763
Deferred income taxes 31,397 33,797
Non-controlling interest
in Superior 18,090 93,923
Unitholders' equity 467,946 232,194 232,030
-------- -------- --------
$ 543,832 $ 238,001 $ 371,513
-------- -------- --------
-------- -------- --------
(x) See accompanying notes for a basis of proforma
presentation.
SUPERIOR PROPANE INCOME FUND
Consolidated Statement of Changes in Financial Position
--------------------------------------------------------------
(unaudited, thousands of dollars)
Three months ended Twelve months ended
December 31 December 31
Proforma(2) Proforma(2)
1997 1996 1996 1997 1997
----------------------- --------------
OPERATING ACTIVITIES
Earnings before
distributions to
unitholders $7,910 $3,784 $3,784 $18,551 $18,551
Items not involving cash:
Equity loss on
Common Shares 1,930 7,962
Depreciation and
amortization 9,380 7,649 12,627 32,714
Non-controlling
interest (62) (183) 35 (3,332)
Deferred income taxes
of Superior (2,214) 173 (2,299) (2,400)
----- ----- ----- ------ -----
Cash generated from
operations before
changes in working
capital 15,014 5,714 11,423 36,876 45,533
Increase in
working capital 10,150 3 30,559 14,971 2,567
------ ----- ------ ------ ------
Cash flow from
operating activities 25,164 5,717 41,982 51,847 48,100
------ ----- ------ ------ ------
INVESTING ACTIVITIES
Purchase of 50 percent
interest in Superior (234,222)(234,222)
Purchase of 40 percent
interest in Superior (252,236)(252,236)
Bank indebtedness acquired
on consolidation of Superior (25,272)(22,708)
Property, plant and
equipment, net (5,858) (5,294) (6,357) (7,745)
------ ----- ------ ------ ------
(5,858)(234,222)(264,788)(281,301)(259,981)
------ ----- ------ ------ ------
FINANCING ACTIVITIES
Issuance of trust units 234,122 234,122 252,236 252,236
Distributions to
unitholders (11,115) (5,712) (5,712)(35,035) (35,035)
Distribution to
non-controlling
interest (1,262) (5,828) (1,674) (19,118)
Promissory note 100 300 (100) (300)
------ ------ ------ ------ ------
(12,377)228,510 222,882 215,427 197,783
------ ------- ------- ------- -------
Change in cash 6,929 5 76 (14,027) (14,098)
Cash (bank indebtedness)
at beginning
of period (20,951) 5 76
------ ------- ------- ------- -------
Cash (bank indebtedness)
at end of period(x)$(14,022) $ 5 $ 76 $(14,022) $(14,022)
------ ------ ------ ------ -------
------ ------ ------ ------ -------
/T/
(x) Bank indebtedness includes cash advances from Norcen.
(1) Acquisition of an additional 40 percent interest in Superior:
On September 5, 1997, the Fund acquired from Norcen an additional
40 percent interest in Superior at a cost of $252.2 million,
bringing the Fund's total interest in Superior to 90 percent.
Prior to that date, the consolidated financial statements include
the Fund's 50 percent interest in Superior using the equity method
of accounting for investments. Subsequent to September 5, 1997,
the Fund's and Superior's financial results have been consolidated
using the purchase method of accounting. Accordingly, the
revenues and expenses for the three months ended December 31,
1997, include the consolidated results of Superior from October 1,
1997. The revenues and expenses for the twelve months ended
December 31, 1997 include the consolidated results of Superior
from September 5, 1997.
(2) Proforma comparative presentation:
Proforma presentation reflects the results of the Fund presented
on a consolidated basis, based on the Fund's actual ownership of
Superior as detailed in Note 1 above. |
