Primary Energy Reports First Quarter 2012 Results
OAK BROOK, IL, May 1, 2012 /PRNewswire/ - Primary Energy Recycling Corporation (the "Company" or "Primary Energy") (TSX: PRI), a clean energy company that generates revenue from capturing and recycling recoverable heat and byproduct fuels from industrial processes, today announced its financial and operational results for the first quarter ended March 31, 2012.
| Financial Results | ||||||
| (in 000's of US$) | ||||||
| Q1 2012 | Q1 2011 | |||||
| Revenues | $ | 14,222 | $ | 12,782 | ||
| Operations and maintenance expense | 4,211 | 2,743 | ||||
| Operating income | 2,309 | 101 | ||||
| Net income (loss) and comprehensive income (loss) | 552 | (2,258) | ||||
| EBITDA (1) | 8,588 | 9,168 | ||||
| Adjusted EBITDA (2) | 9,681 | 9,168 | ||||
| Net cash provided by operating activities | 7,388 | 9,707 | ||||
| Free Cash Flow (3) | 5,696 | 9,113 | ||||
| Cash and cash equivalents | 20,144 | 24,585 | ||||
| Credit facility debt balance | 36,416 | 64,135 |
First Quarter Highlights
- Paid down the Company's outstanding secured term loan by $6.4 million in the first quarter of 2012 to a balance of $36.4 million;
- Increased revenues by 11.3% compared to the same period a year ago primarily due to increased operating levels at North Lake and Ironside;
- Announced that the Company entered into an agreement with Atlantic Power Corporation to purchase the common membership interests in Primary Energy Recycling Holdings LLC not currently held by the Company. The two companies also announced their intention to terminate their management agreement. The combined price for purchasing the minority interest and paying the management agreement termination fee is US$30.1 million. The transaction remains subject to pricing adjustment or termination under certain circumstances. The agreement is contingent on Primary Energy securing acceptable financing;
- The Company is actively engaged in refinancing efforts with closing targeted by the end of May;
- Engaged in preliminary contract renegotiation discussions with the site host for Cokenergy. The current contract expires in the third quarter of 2013;
- Facility availability averaged 99.3% for the quarter with none of the facilities experiencing any significant unplanned outages during the quarter. Production of electricity during the first quarter of 2012 was at the best first quarter level since 2007.
"Overall, our energy recycling and combined heat and power assets performed very well in the first quarter," said John Prunkl, President and Chief Executive Officer of Primary Energy. "Our current focus is the debt refinancing. While terms have not been finalized, the Company currently anticipates moving forward with a senior credit loan with a revolver. We anticipate that the new loan will close in May 2012."
| Operational Highlights | ||||
| Q1 2012 | Q1 2011 | |||
| Total Gross Electric Production Megawatt Hours (MWh) (4) | 337,129 | 247,606 | ||
| Total Thermal Energy Delivered (MMBtu) (5) | 1,483,105 | 1,431,963 | ||
| Harbor Coal Utilization (%) (6) | 76.7% | 90.2% |
First Quarter 2012 Financial Results
The Company's revenue of $14.2 million in the first quarter of 2012 increased $1.4 million, or 11.3%, compared with revenue of $12.8 million for the first quarter of 2011. The North Lake facility was out of service during the first quarter of 2011 due to a planned upgrade and overhaul but was fully operational during the first quarter of 2012 which had a positive impact on variable Energy Service revenue of $1.3 million. In addition, Energy Service revenue was positively impacted by increased host operating levels at Ironside.
Operations and maintenance expense for the first quarter of 2012 was $4.2 million compared to $2.7 million for the first quarter of 2011, an increase of $1.5 million or 53.5%. The increase is primarily due to periodic costs totaling $1.1 million.
Operating income for the first quarter of 2012 was $2.3 million compared to $0.1 million for the first quarter of 2011, an improvement of $2.2 million.
Interest expense for the first quarter of 2012 was $1.2 million compared to $1.8 million for the first quarter of 2011, a decrease of $0.6 million. This decrease is primarily due to the reduced level of debt outstanding under the Company's credit facility.
Net income and comprehensive income for the first quarter of 2012 was $0.6 million compared to a net loss and comprehensive loss of $2.3 million for the first quarter of 2011, an improvement of $2.9 million.
Conference Call and Webcast
Management will host a conference call to discuss the first quarter results on Wednesday, May 2, 2012 at 10 am (ET). Following management's presentation, there will be a question and answer session. To participate in the conference call, please dial (888) 231-8191 or (647) 427-7450.
A digital conference call replay will be available until midnight on May 9, 2012 (ET) by calling (855) 859-2056 or (416) 849-0833. Please enter the passcode 69171019 when instructed. A webcast replay will be available for 90 days by accessing a link through the Events section at www.primaryenergyrecycling.com
Forward-Looking Statements
When used in this news release, the words "intend", "likely", "anticipate", "expect", "project", "believe", "estimate", "forecast", "outlook" and similar expressions, are intended to identify forward-looking statements, including statements regarding maintenance and capital expenditures and the acquisition of the minority interest in PERH and the termination of Primary Energy's management agreement. Such statements are subject to certain risks, uncertainties and assumptions pertaining, but not limited, to recovery in the steel industry, continued strong performance from the mills we serve consistent with historical patterns, timely renewal of contracts at the Company's facilities, no protracted outages (planned or unplanned) for any of our facilities, operating and maintenance costs and general and administrative costs being similar to recent years except as described in this press release, regulatory parameters, weather and economic conditions and other factors discussed in the Company's public filings available on SEDAR at www.sedar.com. Additional risks and uncertainties not currently known or that are currently deemed to be immaterial may also materially and adversely affect the Company's business operations and outlook. Any of the matters highlighted in the Company's risk factor disclosure could have a material adverse effect on the Company's results of operations, business prospects and outlook, financial condition or cash flow, in which case, the market price or value of the Company's Common Shares could be adversely affected. These forward-looking statements are made as of the date of this press release and the Company assumes no obligation to update or revise them to reflect new events or circumstances, except as required by applicable securities laws.
About Primary Energy Recycling Corporation
Primary Energy Recycling Corporation owns a majority interest in Primary Energy Recycling Holdings LLC ("PERH"). PERH, headquartered in Oak Brook, Illinois, indirectly owns and operates four recycled energy projects and a 50 per cent interest in a pulverized coal facility (collectively, the "Projects"). The Projects have a combined electrical generating capacity of 283 megawatts and a combined steam generating capacity of 1.8M lbs/hour. PERH creates value for its customers by recycling recoverable heat and byproduct fuels from industrial and electric generation processes and converting it into reliable and economical electricity and thermal energy for resale back to its customers. For more information, please see www.primaryenergyrecycling.com.
1As used herein, EBITDA means earnings before interest, taxes, depreciation and amortization and certain other adjustments. EBITDA is reconciled to net income (loss) and comprehensive income (loss) in the table below. EBITDA is not a recognized measure under IFRS and does not have a standardized meaning prescribed by IFRS. Therefore, EBITDA may not be comparable to similar measures presented by other companies.
2As used herein, references to Adjusted EBITDA are to EBITDA as adjusted for certain non-recurring adjustments for major maintenance/outage work expenses that represent recorded expenses based on specific circumstances and are not expected to be part of the Company's ongoing business activity. Adjusted EBITDA is not a recognized measure under IFRS and does not have a standardized meaning prescribed by IFRS. Therefore, Adjusted EBITDA may not be comparable to similar measures presented by other companies.
3As used herein, Free Cash Flow means net cash provided by operating activities as adjusted for capital expenditures. Free Cash Flow is not a recognized measure under IFRS and does not have a standardized meaning prescribed by IFRS. Therefore, Free Cash Flow may not be comparable to similar measures presented by other companies.
4Total Gross Electric Production means the aggregate amount of electricity produced by all of the Company's facilities during the period. The amount is gross generation and is not reduced by internal electric usage of the facilities' auxiliary equipment. The unit of measure is megawatt hours (MWh). Due to the fixed and variable nature of customer contracts, MWh production cannot be directly tied to financial performance.
5Total Thermal Energy Delivered means the aggregate amount of heat energy contained in the steam and heated water delivered to customers by all of the Company's facilities during the period. The unit of measure is million of British Thermal Units (MMBTU). Due to the fixed and variable nature of customer contracts, MMBTU production cannot be directly tied to financial performance.
6Harbor Coal Utilization is a factor that incorporates the production level of a blast furnace and the amount of coal utilization per unit of blast furnace production as compared to a reference blast furnace production level and coal utilization rate per unit of blast furnace production. The measurement unit is a ratio expressed as a percentage.
Management believes that EBITDA, Adjusted EBITDA, Free Cash Flow, Total Gross Electric Production, Total Thermal Energy Delivered and Harbor Coal Utilization provide useful supplemental information regarding the performance of the Company, facilitate comparisons of historical periods and are indicative of the Company's operating results. Note however, that these items are performance measures only, and do not provide any measure of the Company's cash flow or liquidity, and are not a substitute for IFRS financial measures.
Non-IFRS Measures
The Company reports its financial results in accordance with IFRS. The Company's management also evaluates and makes operating decisions using various other measures. Three such measures are EBITDA, Adjusted EBITDA and Free Cash Flow, which are non-IFRS financial measures. We believe these measures provide useful supplemental information regarding the performance of Company's business.
| Reconcilation of Net Income (Loss) and Comprehensive Income (Loss) | ||||||||||
| to Adjusted EBITDA | ||||||||||
| (in 000's of US$) | Three Months Ended March 31, | |||||||||
| 2012 | 2011 | |||||||||
| Net income (loss) and comprehensive income (loss) | $ | 552 | $ | (2,258) | ||||||
| Depreciation and amortization | 5,270 | 7,558 | ||||||||
| Depreciation and amortization included in equity in | ||||||||||
| earnings of Harbor Coal joint venture | 1,009 | 1,009 | ||||||||
| Interest expense | 1,181 | 1,843 | ||||||||
| Realized and unrealized loss on derivative contracts | - | 4 | ||||||||
| Loss on derecognition | - | 500 | ||||||||
| Income tax expense | 576 | 512 | ||||||||
| EBITDA | $ | 8,588 | $ | 9,168 | ||||||
| Adjustments to EBITDA: | ||||||||||
| Major maintenance (1) | 1,093 | - | ||||||||
| Adjusted EBITDA | $ | 9,681 | $ | 9,168 | ||||||
1) Represents nonrecurring major maintenance expenditures for such things as boiler retubing work and related other maintenance expenditures and ductwork repairs.
| Reconcilation of Net Cash Provided By Operating Activities | |||||||||||
| to Free Cash Flow | |||||||||||
| (in 000's of US$) | Three Months Ended March 31, | ||||||||||
| 2012 | 2011 | ||||||||||
| Net cash provided by operating activities | $ | 7,388 | $ | 9,707 | |||||||
| Less: Capital expenditures | (1,692) | (594) | |||||||||
| Free Cash Flow | $ | 5,696 | $ | 9,113 | |||||||
| Primary Energy Recycling Corporation | ||||||||||||
| CONSOLIDATED STATEMENTS OF FINANCIAL POSITION | ||||||||||||
| (In thousands of U.S. dollars) | ||||||||||||
| ASSETS | March 31, 2012 | December 31, 2011 | ||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | $ | 20,144 | $ | 20,567 | ||||||||
| Accounts receivable | 8,029 | 8,115 | ||||||||||
| Inventory, net | 992 | 987 | ||||||||||
| Tax receivable | 654 | 565 | ||||||||||
| Prepaid expenses | 481 | 632 | ||||||||||
| Total current assets | 30,300 | 30,866 | ||||||||||
| Non-current assets: | ||||||||||||
| Property, plant and equipment, net | 179,697 | 180,844 | ||||||||||
| Intangible assets, net | 21,554 | 24,632 | ||||||||||
| Restricted cash | 1,624 | 1,930 | ||||||||||
| Deferred tax asset, net | 1,952 | 2,519 | ||||||||||
| Investment in Harbor Coal joint venture | 61,917 | 63,190 | ||||||||||
| Other non-current assets | 654 | 159 | ||||||||||
| Total assets | $ | 297,698 | $ | 304,140 | ||||||||
| LIABILITIES AND EQUITY | ||||||||||||
| Current liabilities: | ||||||||||||
| Accounts payable | $ | 1,149 | $ | 1,115 | ||||||||
| Short-term debt | 31,563 | 27,304 | ||||||||||
| Due to affiliates | 356 | 333 | ||||||||||
| Accrued property taxes | 2,416 | 1,963 | ||||||||||
| Accrued expenses | 4,315 | 5,503 | ||||||||||
| Total current liabilities | 39,799 | 36,218 | ||||||||||
| Non-current liabilities: | ||||||||||||
| Long-term debt | 3,895 | 14,134 | ||||||||||
| Asset retirement obligations | 3,903 | 4,239 | ||||||||||
| Total liabilities | 47,597 | 54,591 | ||||||||||
| Equity | ||||||||||||
| Equity attributable to equity owners of the Company | ||||||||||||
| Common stock: no par value, unlimited shares authorized; | ||||||||||||
| 44,706,186 issued and outstanding | 274,479 | 274,479 | ||||||||||
| Contributed surplus | 3,316 | 3,316 | ||||||||||
| Accumulated shareholders' deficit | (106,784) | (107,748) | ||||||||||
| Total equity attributable to equity owners of the Company | 171,011 | 170,047 | ||||||||||
| Non-controlling interest | 79,090 | 79,502 | ||||||||||
| Total equity | 250,101 | 249,549 | ||||||||||
| Total liabilities and equity | $ | 297,698 | $ | 304,140 | ||||||||
| Primary Energy Recycling Corporation | ||||||||||
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||||||||
| (In thousands of U.S. dollars, except share and per share amounts) | ||||||||||
| Three Months Ended March 31, | ||||||||||
| 2012 | 2011 | |||||||||
| Revenue: | ||||||||||
| Capacity | $ | 9,018 | $ | 9,018 | ||||||
| Energy service | 5,204 | 3,764 | ||||||||
| 14,222 | 12,782 | |||||||||
| Expenses: | ||||||||||
| Operations and maintenance | 4,211 | 2,743 | ||||||||
| General and administrative | 2,482 | 2,331 | ||||||||
| Employee benefits | 663 | 560 | ||||||||
| Depreciation and amortization | 5,270 | 7,558 | ||||||||
| Loss on derecognition | - | 500 | ||||||||
| Total operating expenses | 12,626 | 13,692 | ||||||||
| Equity in earnings of Harbor Coal joint venture | 713 | 1,011 | ||||||||
| Operating income | 2,309 | 101 | ||||||||
| Other expense | ||||||||||
| Interest expense | (1,181) | (1,843) | ||||||||
| Realized and unrealized loss on derivative | ||||||||||
| contracts | - | (4) | ||||||||
| Income (loss) before income taxes | 1,128 | (1,746) | ||||||||
| Income tax expense | (576) | (512) | ||||||||
| Net income (loss) and comprehensive income (loss) | $ | 552 | $ | (2,258) | ||||||
| Net income (loss) and comprehensive income (loss) attributable to: | ||||||||||
| Owners of the Company | $ | 964 | $ | (1,281) | ||||||
| Non-controlling interest | (412) | (977) | ||||||||
| $ | 552 | $ | (2,258) | |||||||
| Net income (loss) per share attributable | ||||||||||
| to owners of the Company: | ||||||||||
| Weighted average number of shares outstanding - basic | 44,706,186 | 44,706,186 | ||||||||
| Weighted average number of shares outstanding - diluted | 45,304,701 | 44,706,186 | ||||||||
| Basic and diluted net income (loss) per share attributable to owners of the Company | $ | 0.02 | $ | (0.03) | ||||||
| Primary Energy Recycling Corporation | ||||||||||||
| CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | ||||||||||||
| (In thousands of U.S. dollars) | ||||||||||||
| Attributable to equity owners of the Company | ||||||||||||
| Common | Contributed | Accumulated | Non-controlling | Total | ||||||||
| stock | surplus | deficit | Total | interest | equity | |||||||
| Balance - January 1, 2011 | $ | 274,479 | $ | 3,316 | $ | (107,784) | $ | 170,011 | $ | 82,028 | $ | 252,039 |
| Net loss and comprehensive loss | ||||||||||||
| for the three months ended March 31, 2011 | - | - | (1,281) | (1,281) | (977) | (2,258) | ||||||
| Balance - March 31, 2011 | $ | 274,479 | $ | 3,316 | $ | (109,065) | $ | 168,730 | $ | 81,051 | $ | 249,781 |
| Balance - January 1, 2012 | $ | 274,479 | $ | 3,316 | $ | (107,748) | $ | 170,047 | $ | 79,502 | $ | 249,549 |
| Net income and comprehensive income | ||||||||||||
| for the three months ended March 31, 2012 | - | - | 964 | 964 | (412) | 552 | ||||||
| Balance - March 31, 2012 | $ | 274,479 | $ | 3,316 | $ | (106,784) | $ | 171,011 | $ | 79,090 | $ | 250,101 |
| Primary Energy Recycling Corporation | |||||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||
| (In thousands of U.S. dollars) | |||||||||||||
| Three Months Ended March 31, | |||||||||||||
| 2012 | 2011 | ||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||||
| Net income (loss) and comprehensive income (loss) for the period | $ | 552 | $ | (2,258) | |||||||||
| Adjustments for: | |||||||||||||
| Depreciation and amortization | 5,270 | 7,558 | |||||||||||
| Loss on derecognition | - | 500 | |||||||||||
| Realized and unrealized loss on derivative contracts | - | 4 | |||||||||||
| Equity in earnings of Harbor Coal joint venture | (713) | (1,011) | |||||||||||
| Distributions from investment in Harbor Coal joint venture | 1,986 | 1,535 | |||||||||||
| Non-cash interest expense | 481 | 690 | |||||||||||
| Income tax | 567 | 510 | |||||||||||
| 8,143 | 7,528 | ||||||||||||
| Net change in non-cash working capital balances | (755) | 2,179 | |||||||||||
| Net cash provided by operating activities | 7,388 | 9,707 | |||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||||
| Change in restricted cash | 306 | 298 | |||||||||||
| Capital expenditures | (1,692) | (594) | |||||||||||
| Net cash used in investing activities | (1,386) | (296) | |||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||||
| Payments of deferred financing costs | (68) | - | |||||||||||
| Repayment of debt | (6,357) | (7,231) | |||||||||||
| Net cash used in financing activities | (6,425) | (7,231) | |||||||||||
| Net (decrease) increase in cash | (423) | 2,180 | |||||||||||
| Cash and cash equivalents - beginning of period | 20,567 | 22,405 | |||||||||||
| Cash and cash equivalents - end of period | $ | 20,144 | $ | 24,585 | |||||||||
| Supplemental disclosure of cash flow information: | |||||||||||||
| Cash paid during the period for interest | $ | 702 | $ | 1,160 | |||||||||
| Cash paid during the period for income taxes | $ | 38 | $ | - | |||||||||
SOURCE Primary Energy Recycling Corporation
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