Primary Energy Reports Fourth Quarter and Fiscal 2012 Results
OAK BROOK, IL, March 6, 2013 /PRNewswire/ - Primary Energy Recycling Corporation (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 fourth quarter and year ended December 31, 2012.
| Financial Results | |||||||||||||
| (in 000's of US$) | |||||||||||||
| Three Months Ended December 31, | For the Years Ended December 31, | ||||||||||||
| 2012 | 2011 | 2012 | 2011 | ||||||||||
| Revenues | $ | 13,852 | $ | 13,841 | $ | 54,299 | $ | 53,744 | |||||
| Operations and maintenance expense | 4,709 | 5,291 | 17,507 | 15,316 | |||||||||
| Operating income (loss) | 976 | 1,292 | (907) | 6,266 | |||||||||
| Net income (loss) and comprehensive income (loss) | 12,399 | 22 | 7,285 | (2,490) | |||||||||
| EBITDA (1) | 7,206 | 7,528 | 24,228 | 34,972 | |||||||||
| Adjusted EBITDA (2) | 8,835 | 10,277 | 36,212 | 38,821 | |||||||||
| Net cash provided by operating activities | 7,487 | 8,719 | 19,541 | 32,329 | |||||||||
| Free Cash Flow (3) | 5,253 | 6,647 | 5,585 | 25,833 | |||||||||
| Cash and cash equivalents | 30,101 | 20,567 | - | - | |||||||||
| Credit facility debt balance | 80,048 | 42,773 | - | - | |||||||||
Fourth Quarter Highlights
- Contract renegotiation discussions are moving forward with the site host for Cokenergy. Management anticipates an agreement should be reached before the current contract expires in October of 2013.
- Subsequent to year end, the Company announced a favorable determination from the IRS regarding the Company's 2009 corporate income tax filing. This outcome allows the Company to record a previously unrecognized net operating loss (NOL) carryfoward of US$32.6 million for a total NOL carryforward balance of approximately $79.4 million, which is estimated to provide the Company with a tax shield extension to 2018-2019.
- The Company paid its first quarterly dividend of $0.05 per Common Share during the fourth quarter of 2012. In the first quarter of 2013, the Company paid a quarterly dividend of a US$0.05 Common Share.
- For the year ended December 31, 2012, the Company recorded an increase in cash and cash equivalents of $9.5 million. As of December 31, 2012, the Company's cash balance was $30.1 million and unrestricted cash available for corporate purposes for the year ended December 31, 2012 was $21.9 million. The Company paid down $3.1 million in debt during the quarter.
- North Lake demonstrated performance in excess of 90 MW upgrade target during the fourth quarter. Management is anticipating final performance tests in the first quarter of 2013. The North Lake Project was completed on budget.
- The implementation of the Portside upgrades were completed on time and on-budget and subsequent to year end successfully passed its performance test.
- Harbor Coal volumes remain below normal due to low cost natural gas. For 2013, management expects coal volumes similar to 2012.
- Subsequent to year end, Chief Financial Officer Mike Alverson announced his retirement. Chief Accounting Officer Joe Powell was promoted to Chief Financial Officer and Christopher Fanella rejoined the team as Chief Commercial Officer.
"In the fourth quarter of 2012, we continued to follow a disciplined and patient approach to building a strong company with predictable financial results," said John Prunkl, President and Chief Executive Officer of Primary Energy. "As we look ahead to the remainder of 2013, we believe this disciplined approach will serve us well as our discussions around the renewal of the Cokenergy contract gain momentum."
| Operational Highlights | ||||||||
| Three Months Ending December 31, | For the Years Ending December 31, | |||||||
| 2012 | 2011 | 2012 | 2011 | |||||
| Total Gross Electric Production Megawatt Hours (MWh) (4) | 335,418 | 348,029 | 1,340,511 | 1,298,867 | ||||
| Total Thermal Energy Delivered (MMBtu) (5) | 1,164,314 | 1,351,913 | 4,590,147 | 4,909,966 | ||||
| Harbor Coal Utilization (%) (6) | 63.9% | 87.9% | 69.3% | 90.4% | ||||
Fourth Quarter and 2012 Financial Results
The Company's revenue of $13.8 million in the fourth quarter of 2012 was flat when compared to the fourth quarter of 2011. The Company's revenue of $54.3 million in 2012 increased $0.6 million, or 1.0%, compared with revenue of $53.7 million in 2011. Revenue increased at the North Lake and Ironside facilities as a result of increased host operations during 2012.
Operations and maintenance expense for the fourth quarter of 2012 was $4.7 million compared to $5.3 million for the fourth quarter of 2011, a decrease of $0.6 million or 11.0% primarily due to a one-time charge incurred in the fourth quarter of 2011 of $1.2 million related to site host maintenance costs offset by additional repair work of $0.6 million in the fourth quarter of 2012.
Operations and maintenance expense in 2012 was $17.5 million compared to $15.3 million in 2011, an increase of $2.2 million or 14.3%. The Company incurred increased periodic costs for the year ended December 31, 2012 of $5.4 million compared to $3.8 million in 2011 primarily related to retubing and duct work repair work as well as additional general operations and maintenance expenses of $0.6 million.
General and administrative and employee benefits expense for the fourth quarter of 2012 was $3.4 million compared to $3.0 million for the fourth quarter of 2011, an increase of $0.4 million or 12.5%. General and administrative and employee benefits expense in 2012 was $12.8 million compared to $11.6 million in 2011, an increase of $1.2 million or 10.5%. The increases for both the quarter and annual period are primarily due to additional professional fees and other general and administrative expenses ($0.1 million of the expenses for the quarter and $0.4 million for the year are attributed to the buyout of the management agreement and the internalization of management).
Equity in earnings of the Harbor Coal joint venture for the fourth quarter of 2012 was $0.4 million compared to $1.0 million for the fourth quarter of 2011, a decrease of $0.6 million. Equity in earnings of the Harbor Coal joint venture in 2012 was $2.2 million compared to $4.1 million in 2011, a decrease of $1.9 million. The decreases are the result of reduced revenue based on increased injection of low cost natural gas and reduced coal through-put.
Operating income for the fourth quarter of 2012 was $1.0 million compared to $1.3 million for the fourth quarter of 2011, a decrease of $0.3 million. Operating loss in 2012 was $0.9 million compared to operating income of $6.3 million in 2011, a decrease of $7.2 million. The decrease was due in part to the $6.0 million fee payable on termination of the Company's management agreement as well as the additional operating expenses noted above.
Net income and comprehensive income for the fourth quarter of 2012 was $12.4 million compared to $0.02 million for the fourth quarter of 2011, an improvement of $12.4 million primarily due to the recognition of an income tax benefit of $12.8 million associated with the NOL carryforward recorded upon completion of the Company's 2009 tax audit. Net income and comprehensive income for 2012 was $7.3 million compared to a net loss and comprehensive loss of $2.5 million for 2011, an increase of $9.8 million.
Conference Call and Webcast
Management will host a conference call to discuss the second quarter results on Thursday, March 7, 2013 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 March 21, 2013 (ET) by calling (855) 859-2056 or (416) 849-0833. Please enter the passcode 89944765 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. 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, headquartered in Oak Brook, Illinois, owns and operates four recycled energy projects and a 50% interest in a pulverized coal facility (collectively, the "Projects"). The Projects have a combined electrical generating capacity of 293 megawatts and a combined steam generating capacity of 1.8M lbs/hour. Primary Energy Recycling Corporation creates value for its customers by capturing and recycling waste energy 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.primaryenergy.com
1As used herein, EBITDA means earnings before interest, taxes, depreciation and amortization and certain other adjustments. EBITDA is reconciled to net (loss) income and comprehensive (loss) income 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, maintenance services settlement, management agreement termination fee, professional fees and other general and administrative expenses related to the buyout of the non-controlling interest and internalization of management and non-cash stock based compensation 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 reconciled to net income (loss) and comprehensive income (loss) in the table below. 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 December 31, | For the Years Ended December 31, | |||||||||||
| 2012 | 2011 | 2012 | 2011 | ||||||||||
| Net income (loss) and comprehensive income (loss) | $ | 12,399 | $ | 22 | $ | 7,285 | $ | (2,490) | |||||
| Adjustment to net income (loss) and comprehensive income (loss): | |||||||||||||
| Depreciation and amortization | 5,221 | 5,227 | 21,053 | 24,170 | |||||||||
| Depreciation and amortization included in equity in earnings of Harbor Coal joint venture |
1,009 | 1,009 | 4,036 | 4,036 | |||||||||
| Interest expense | 1,450 | 1,241 | 5,690 | 6,294 | |||||||||
| Deferred finance fees expensed upon extinguishment of debt | - | - | 765 | - | |||||||||
| Realized and unrealized (gain) loss on derivative contracts | (18) | - | 554 | 4 | |||||||||
| Loss on derecognition | - | - | 46 | 500 | |||||||||
| Income tax (benefit) expense | (12,855) | 29 | (15,201) | 2,458 | |||||||||
| EBITDA | $ | 7,206 | $ | 7,528 | $ | 24,228 | $ | 34,972 | |||||
| Adjustments to EBITDA: | |||||||||||||
| Major maintenance (1) | 1,475 | 1,500 | 5,432 | 2,600 | |||||||||
| Maintenance services settlement | - | 1,200 | - | 1,200 | |||||||||
| Management Agreement termination fee | - | - | 6,000 | - | |||||||||
| Professional fees and other general and administrative expenses related to the buyout of the non-controlling interest and internalization of management |
76 | 49 | 369 | 49 | |||||||||
| Non-cash stock based compensation | 78 | - | 183 | - | |||||||||
| Adjusted EBITDA | $ | 8,835 | $ | 10,277 | $ | 36,212 | $ | 38,821 | |||||
| 1) Represents nonrecurring major maintenance expenditures for such items as boiler retubing work and other related 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 December 31, | For the Years Ended December 31, | |||||||||||
| 2012 | 2011 | 2012 | 2011 | ||||||||||
| Net cash provided by operating activities | $ | 7,487 | $ | 8,719 | $ | 19,541 | $ | 32,329 | |||||
| Less: Capital expenditures | (2,234) | (2,072) | (13,956) | (6,496) | |||||||||
| Free Cash Flow | $ | 5,253 | $ | 6,647 | $ | 5,585 | $ | 25,833 | |||||
| Primary Energy Recycling Corporation CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (In thousands of U.S. dollars) |
||||||||||||
| ASSETS | December 31, 2012 | December 31, 2011 | ||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | $ | 30,101 | $ | 20,567 | ||||||||
| Accounts receivable | 8,266 | 8,115 | ||||||||||
| Inventory, net | 1,126 | 987 | ||||||||||
| Tax receivable | 691 | 565 | ||||||||||
| Prepaid expenses | 987 | 632 | ||||||||||
| Other current assets | 336 | - | ||||||||||
| Total current assets | 41,507 | 30,866 | ||||||||||
| Non-current assets: | ||||||||||||
| Property, plant and equipment, net | 185,355 | 180,844 | ||||||||||
| Intangible assets, net | 12,321 | 24,632 | ||||||||||
| Restricted cash | 3,445 | 1,930 | ||||||||||
| Deferred tax asset, net | - | 2,519 | ||||||||||
| Investment in Harbor Coal joint venture | 58,600 | 63,190 | ||||||||||
| Other non-current assets | 85 | 159 | ||||||||||
| Total assets | $ | 301,313 | $ | 304,140 | ||||||||
| LIABILITIES AND EQUITY | ||||||||||||
| Current liabilities: | ||||||||||||
| Accounts payable | $ | 971 | $ | 1,115 | ||||||||
| Short-term debt | 11,133 | 27,304 | ||||||||||
| Due to affiliates | - | 333 | ||||||||||
| Accrued property taxes | 1,725 | 1,963 | ||||||||||
| Accrued expenses | 6,558 | 5,503 | ||||||||||
| Total current liabilities | 20,387 | 36,218 | ||||||||||
| Non-current liabilities: | ||||||||||||
| Long-term debt | 64,913 | 14,134 | ||||||||||
| Deferred income tax liability, net | 1,753 | - | ||||||||||
| Interest rate swap | 155 | - | ||||||||||
| Asset retirement obligations | 3,063 | 4,239 | ||||||||||
| Total liabilities | 90,271 | 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 | 37,466 | 3,316 | ||||||||||
| Accumulated shareholders' deficit | (100,903) | (107,748) | ||||||||||
| Total equity attributable to equity owners of the Company | 211,042 | 170,047 | ||||||||||
| Non-controlling interest | - | 79,502 | ||||||||||
| Total equity | 211,042 | 249,549 | ||||||||||
| Total liabilities and equity | $ | 301,313 | $ | 304,140 | ||||||||
| Primary Energy Recycling Corporation CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands of U.S. dollars, except share and per share amounts) |
|||||||
| For the Years Ended December 31, | |||||||
| 2012 | 2011 | ||||||
| Revenue: | |||||||
| Capacity | $ | 36,071 | $ | 36,071 | |||
| Energy service | 18,228 | 17,673 | |||||
| 54,299 | 53,744 | ||||||
| Expenses: | |||||||
| Operations and maintenance | 17,507 | 15,316 | |||||
| General and administrative | 8,778 | 9,299 | |||||
| Management agreement termination fee | 6,000 | - | |||||
| Employee benefits | 4,023 | 2,289 | |||||
| Depreciation and amortization | 21,053 | 24,170 | |||||
| Loss on derecognition | 46 | 500 | |||||
| Total operating expenses | 57,407 | 51,574 | |||||
| Equity in earnings of Harbor Coal joint venture | 2,201 | 4,096 | |||||
| Operating (loss) income | (907) | 6,266 | |||||
| Other expense | |||||||
| Interest expense | (5,690) | (6,294) | |||||
| Deferred finance fees expensed upon extinguishment of debt | (765) | - | |||||
| Realized and unrealized loss on derivative contracts | (554) | (4) | |||||
| Loss before income taxes | (7,916) | (32) | |||||
| Income tax benefit (expense) | 15,201 | (2,458) | |||||
| Net income (loss) and comprehensive income (loss) | $ | 7,285 | $ | (2,490) | |||
| Net income (loss) and comprehensive income (loss) attributable to: | |||||||
| Owners of the Company | $ | 9,080 | $ | 36 | |||
| Non-controlling interest | (1,795) | (2,526) | |||||
| $ | 7,285 | $ | (2,490) | ||||
| Net income 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 | 45,336,916 | 45,156,680 | |||||
| Basic and diluted net income per share attributable to owners of the Company (Note 13) |
$ | 0.20 | $ | 0.00 | |||
| Primary Energy Recycling Corporation CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In thousands of U.S. dollars) |
||||||||||||||||||
| Attributable to equity owners of the Company | ||||||||||||||||||
| |
Common stock |
Contributed surplus |
Accumulated deficit |
|
Total | Non-controlling interest |
Total equity |
|||||||||||
| Balance - January 1, 2011 | $ | 274,479 | $ | 3,316 | $ | (107,784) | $ | 170,011 | $ | 82,028 | $ | 252,039 | ||||||
| Net income (loss) and comprehensive (income) loss | ||||||||||||||||||
| for the year ended December 31, 2011 | - | - | 36 | 36 | (2,526) | (2,490) | ||||||||||||
| Balance - December 31, 2011 | $ | 274,479 | $ | 3,316 | $ | (107,748) | $ | 170,047 | $ | 79,502 | $ | 249,549 | ||||||
| Balance - January 1, 2012 | $ | 274,479 | $ | 3,316 | $ | (107,748) | $ | 170,047 | $ | 79,502 | $ | 249,549 | ||||||
| Net income (loss) and comprehensive income (loss) | ||||||||||||||||||
| for the year ended December 31, 2012 | - | - | 9,080 | 9,080 | (1,795) | 7,285 | ||||||||||||
| Dividends on Common Shares | - | - | (2,235) | (2,235) | - | (2,235) | ||||||||||||
| Buyout of non-controlling interest | - | 33,967 | - | 33,967 | (77,707) | (43,740) | ||||||||||||
| Stock compensation expense | - | 183 | - | 183 | - | 183 | ||||||||||||
| Balance - December 31, 2012 | $ | 274,479 | $ | 37,466 | $ | (100,903) | $ | 211,042 | $ | - | $ | 211,042 | ||||||
| Primary Energy Recycling Corporation CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands of U.S. dollars) |
|||||||||||
| For the Years Ended December 31, | |||||||||||
| 2012 | 2011 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||
| Net income and comprehensive income for the period | $ | 7,285 | $ | (2,490) | |||||||
| Adjustments for: | |||||||||||
| Depreciation and amortization | 21,053 | 24,170 | |||||||||
| Loss on derecognition | 46 | 500 | |||||||||
| Unrealized loss on derivative contracts | 320 | 4 | |||||||||
| Deferred finance fees expensed upon extinguishment of debt | 765 | - | |||||||||
| Equity in earnings of Harbor Coal joint venture | (2,201) | (4,096) | |||||||||
| Distributions from investment in Harbor Coal joint venture | 6,790 | 7,627 | |||||||||
| Non-cash interest expense | 2,221 | 2,284 | |||||||||
| Non-cash stock based compensation | 183 | - | |||||||||
| Income tax | (15,243) | 2,422 | |||||||||
| 21,219 | 30,421 | ||||||||||
| Net change in non-cash working capital balances | (1,678) | 1,908 | |||||||||
| Net cash provided by operating activities | 19,541 | 32,329 | |||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||
| Change in restricted cash | (1,515) | 1,061 | |||||||||
| Capital expenditures | (13,956) | (6,496) | |||||||||
| Net cash used in investing activities | (15,471) | (5,435) | |||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||
| Proceeds from issuance of debt | 85,000 | - | |||||||||
| Purchase of non-controlling interest | (24,225) | - | |||||||||
| Payments of deferred financing costs | (5,351) | (139) | |||||||||
| Repayment of debt | (47,725) | (28,593) | |||||||||
| Dividends on Common Shares | (2,235) | - | |||||||||
| Net cash provided by (used in) financing activities | 5,464 | (28,732) | |||||||||
| Net increase (decrease) in cash | 9,534 | (1,838) | |||||||||
| Cash and cash equivalents - beginning of period | 20,567 | 22,405 | |||||||||
| Cash and cash equivalents - end of period | $ | 30,101 | $ | 20,567 | |||||||
| Supplemental disclosure of cash flow information: | |||||||||||
| Cash paid during the period for interest | $ | 3,510 | $ | 4,015 | |||||||
| Cash paid during the period for income taxes | $ | 168 | $ | 268 | |||||||
SOURCE Primary Energy Recycling Corporation
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