CALGARY, ALBERTA--(Marketwire - Sept. 20, 2012) - Superior Plus Corp. (TSX:SPB)
Since the beginning of 2010, the Canada Revenue Agency ("CRA") has requested information relating to Superior's conversion transaction which occurred on December 31, 2008 (the "Conversion") and Superior has responded to such requests and engaged in extensive discussions, including detailed settlement discussions, with representatives of the CRA. The CRA has now advised Superior that the CRA believes it does not have authority to settle the matter in this context. If the CRA does not change its current position, the CRA has advised Superior that it should expect that the matter will be directed back to the local tax office which is expected, in the normal course, to issue a proposal letter challenging the tax consequences of the Conversion. During the discussions, the CRA indicated that the general anti-avoidance rule of the Income Tax Act (Canada) is available to the CRA as a basis upon which to challenge the tax consequences of the Conversion.
Based on these developments, unless the CRA subsequently determines it has the authority to settle this matter, Superior expects to receive a proposal letter and thereafter a notice of reassessment challenging the tax consequences of the Conversion. 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 if and when a proposal letter or notice of reassessment is received from the CRA. Superior strongly believes 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.
If Superior receives such a reassessment, in order to appeal it, Superior will be required to make a payment of 50% of the taxes the CRA claims are owed for such years. Based on Superior's 2009, 2010 and 2011 taxation years, that 50% amount is approximately $15 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 issues a similar notice of reassessment for such years and Superior appeals it. If Superior is ultimately successful in defending its position, such payments plus applicable interest, will be refunded to Superior. If the CRA is successful, Superior will be required to pay the balance of the taxes claimed plus applicable interest and penalties.
Superior's 2012 financial outlook as provided at the second quarter of 2012 of adjusted operating cash flow ("AOCF") per share of $1.45 to $1.80 per share is not currently impacted by the potential reassessment as any interim tax payments made by Superior will be recorded to the balance sheet and will not impact either AOCF or net earnings.
Based on the midpoint of Superior's current 2012 financial outlook of AOCF per share of $1.63, if the tax pools from the Conversion were not available to Superior, the impact would be an increase to cash income taxes of approximately $0.20 per share. This equates to a calculated income tax rate of 12% based on the midpoint of Superior's 2012 financial outlook. Superior anticipates that the impact in 2013, if such tax pools were not available, would result in a calculated income tax rate similar to 2012. 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.
Luc Desjardins, President and Chief Executive Officer, stated "We remain highly confident with our position based on the due diligence performed before the transaction was completed and changes to the Income Tax Act subsequent to Superior completing its transaction. Superior will continue to remain focused on improving the day-to-day operations of our businesses to ensure the success of our business transformation project."
Additionally, Superior is pleased to announce that it has received a payment of $15.8 million from TransCanada as a settlement in relation to Superior's Power Purchase Agreement ("PPA") with TransCanada due to the final arbitration settlement between TransCanada and TransAlta. A one-time gain of $12.5 million, representing the gross settlement net of certain settlement costs, will be recognized in the third quarter of 2012.
Superior will be conducting a conference call and webcast for investors, analysts, brokers and media representatives to discuss the contents of this press release at 3:45 p.m. MDT on September 20, 2012. A presentation to assist with the call has been posted on Superior's website at www.superiorplus.com. To participate in the call, dial: (866) 696-5910 and enter pass code 9069405 followed by the # key. An archived recording of the call will be available for replay until midnight, January 3, 2013. To access the recording, dial: (800) 408-3053 and enter pass code 5664915 followed by the # key. Internet users can listen to the call live, or as an archived call, on Superior's website at: www.superiorplus.com.
About the Corporation
Superior consists of three primary operating businesses: Energy Services includes the distribution of propane and distillates, providing fixed-price energy services, and supply portfolio management; Specialty Chemicals includes the manufacture and sale of specialty chemicals; and Construction Products Distribution includes the distribution of specialty construction products.
Forward Looking Information
Certain information included in this Press Release is forward-looking, within the meaning of applicable Canadian securities laws. Much of this information can be identified by looking for words such as "believe", "expects", "expected", "will", "intends", "projects", "anticipates", "estimates", "continues" or similar words. In particular, this press release includes forward looking information pertaining to expected AOCF per share, anticipated taxes, including expected tax consequences of the Conversion, the expected challenge by the CRA of the tax consequences of the Conversion, the expected timing and financial impact of such process, anticipated tax rates and an expected one-time settlement gain. Superior believes the expectations reflected in such forward-looking information are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements should not be unduly relied upon.
Forward-looking information is based on various assumptions. Those assumptions are based on information currently available to Superior, including information obtained from third party industry analysts and other third party sources concerning the historic performance of Superior's businesses, and 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, historical Canadian tax case law and the other assumptions set forth under the "Outlook" sections contained in Superior's 2012 Second Quarter Management's Discussion and Analysis. Readers are cautioned that the preceding list of assumptions is not exhaustive. Forward-looking information is not a guarantee of future performance. By its very nature, forward-looking information involves inherent risks and uncertainties, both general and specific, and risks that predictions, forecasts, projections and other forward-looking information will not be achieved. These risks include the risk that any challenge to the Conversion and the continuation or timing of any such process is outside Superior's control, litigation risk associated with a challenge by the CRA of the conversion transaction and the resulting availability or quantum of Superior's tax basis and additional risks relating to Superior's operational and financial performance which are outlined in Superior's 2012 Second Quarter Management's Discussion and Analysis and Superior's 2011 Annual Information Form both available on at www.sedar.com and from Superior's website at www.superiorplus.com. Such risks and uncertainties may cause Superior's or Superior Plus LP's actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking information. We caution readers not to place undue reliance on this information as a number of important factors could cause the actual results to differ materially from the beliefs, plans, objectives, expectations and anticipations, estimates and intentions expressed in such forward-looking information.
Forward looking information contained in this press release is made as of the date hereof and is subject to change. Superior assumes no obligation to revise or update forward looking information to reflect new circumstances, except as required by law. Forward-looking information is provided for the purposes of providing information about management's current expectations and plans about the future. Reliance on such information may not be appropriate for other purposes, such as making investment decisions. The forward looking information contained in this press release is expressly qualified by this cautionary statement.