Primary Energy Reports Stronger Second Quarter Results
OAK BROOK, IL, July 28 /PRNewswire-FirstCall/ - Primary Energy Recycling Corporation (TSX: PRI), (the "Company") a clean energy company that generates revenue from capturing and recycling waste energy from industrial processes, today announced its financial and operational results for the second quarter ended June 30, 2010.
Financial Highlights
-------------------------------------------------------------------------
(in 000's 6-Month 6-Month
of US$) Q2 2010 Q2 2009 Change 2010 2009 Change
-------------------------------------------------------------------------
Revenue $ 15,461 $ 12,978 +19.1% $ 30,802 $ 27,684 +11.3%
-------------------------------------------------------------------------
Operations
and
maintenance
expense $ 4,323 $ 2,932 +47.5% $ 6,948 $ 5,555 +25.1%
-------------------------------------------------------------------------
Operating
income
(loss) $ 99 $ (1,310) +$1,409 $ 1,783 $ (885) +$2,668
-------------------------------------------------------------------------
Net loss
and
comprehensive
loss $ (2,069) $ (5,383) +$3,314 $ (2,764) $ (10,519) +$7,755
-------------------------------------------------------------------------
(1)Adjusted
EBITDA $ 9,672 $ 7,891 +22.6% $ 19,828 $ 17,817 +11.3%
-------------------------------------------------------------------------
Net cash
provided
by operating
activities $ 6,295 $ 4,267 +47.5% $ 15,515 $ 4,999 +210.4%
-------------------------------------------------------------------------
(2)Adjusted
PERC Cash
Flow $ 9,672 $ 7,891 +22.6% $ 19,828 $ 17,817 +11.3%
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Cash &
cash
equiva-
lents $ 22,508 $ 6,636 +239.2% - - -
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Credit
facility
debt $ 87,950 $ 131,000 -32.9% - - -
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Second Quarter Highlights
- 19.1% increase in revenue for the second quarter of 2010 compared to
the same period last year;
- $3.3 million improvement in net loss for the second quarter of 2010
compared to the same period last year;
- 22.6% increase in Adjusted EBITDA in the second quarter versus the
same period in 2009;
- Electricity produced by all of the Company's facilities during the
second quarter of 2010 was 15.0% greater than the same period last
year;
- Made positive progress on contract renewal discussions with the host
client at the North Lake project;
- Operations and maintenance expenses were higher in the quarter
primarily due to the previously announced overhaul and long-term
maintenance work being performed at Portside and Cokenergy; and
- Subsequent to the end of the quarter, North Lake experienced a 14-day
unplanned outage. The unit is now back in service.
"We had a strong quarter from a financial and operational perspective," said John Prunkl, President and Chief Executive Officer of the Company. "The steel industry continued its recovery in the second quarter, which was reflected in our financial statements. Primary Energy's financial momentum continues to accelerate via stronger operating performance and paying down our senior credit facility. In addition, this quarter we are introducing both Financial and Operational Highlights as a part of our commitment to making our performance more transparent to investors."
Operational Highlights
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6-Month 6-Month
Q2 2010 Q2 2009 Change 2010 2009 Change
-------------------------------------------------------------------------
(3)Total
Gross
Electric
Production
Megawatt
Hours (MWh) 290,512 252,519 +15.0% 546,242 505,687 +8.0%
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(4)Total
Thermal
Energy
Delivered
(MMBtu) 1,149,423 1,102,064 +4.3% 2,849,222 2,841,366 +0.28%
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(5)Harbor
Coal
Utilization(%) 88.3% 49.6% +38.7% 86.1% 58.8% +27.3%
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Second Quarter and Year to Date Financial Results
In the second quarter of 2010, the Company earned revenue of $15.5 million, an increase of $2.5 million, or 19.1%, compared with revenue of $13.0 million for the second quarter of 2009. For the first six months of 2010, the Company earned revenue of $30.8 million, an increase of $3.1 million, or 11.3%, compared with revenue of $27.7 million for the same period in 2009. The increase in revenue for the three and six month periods is primarily due to the variable portion of the Company's Energy Service revenue. Market conditions in the steel industry improved in the second quarter of 2010 versus the same period in 2009 and resulted in increased steel production and product utilization at the Company's site hosts.
Operating and maintenance expense for the second quarter of 2010 was $4.3 million compared to $2.9 million for the second quarter of 2009, an increase of $1.4 million or 47.5%. For the first six months of 2010, operating and maintenance expense was $6.9 million compared to $5.6 million for the same period in 2009. The increase in expenses for both the three and six month periods is largely due to additional maintenance costs incurred for scheduled boiler repairs and bag house component replacements to enhance efficiency that did not occur in 2009 and a scheduled steam turbine overhaul. The company previously announced it was planning to spend $2.1 million in additional scheduled outage and major maintenance work in 2010.
General and administrative expense for the second quarter of 2010 was $2.6 million compared to $2.8 million for the second quarter of 2009, a decrease of $0.2 million or 8.9%. The decrease is primarily due to reductions in accrued property taxes of $0.4 million based upon reductions in tax rates. These decreases were offset by increased payroll cost of approximately $0.1 million related to employee compensation and professional fees of $0.1 million. For the first six months of 2010, general and administrative expense was $5.2 million compared to $6.0 million for the same period in the prior year. The decrease is primarily due to reductions in accrued property taxes of $0.8 million due to reductions in tax rates and reduced professional fees of $0.2 million. These decreases were offset by increased payroll costs of $0.2 million.
Operating income for the second quarter of 2010 was $0.1 million compared to an operating loss of $1.3 million for the second quarter of 2009, an improvement of $1.4 million. Operating loss for the first six months of 2010 was $1.8 million compared to an operating loss of $0.9 million for the same period in 2009, an improvement of $2.7 million. The improvements noted are driven by the net effect of the items discussed above.
Interest expense for the second quarter of 2010 was $2.5 million compared to $4.7 million for the second quarter of 2009, a decrease of $2.2 million. Interest expense for the first six months of 2010 was $5.3 million compared to $9.3 million for the same period in 2009. The decreases noted are primarily due to the reduced level of debt outstanding in the respective periods.
Net loss for the second quarter of 2010 was $2.1 million compared to $5.4 million for the second quarter of 2009, an improvement of $3.3 million. Net loss for the first six months of 2010 was $2.8 million compared to $10.5 million for the same period in 2009, an improvement of $7.7 million.
At the end of the second quarter, the Company had cash and cash equivalents of $22.5 million and an outstanding loan balance of $88.0 million. Since November 2009, $17.0 million or 16% has been paid down on the senior credit facility.
The Company's full financial statements and Management's Discussion and Analysis are available at www.sedar.com or the Company's website at www.primaryenergy.com.
Conference Call and Webcast
Management will host a conference call to discuss the first quarter results on Thursday, July 29, 2010 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 August 5, 2010 (ET) by calling (800) 642-1687 or (416) 849-0833. Please enter the pass code 87568440 when instructed. A webcast replay will be available for 90 days by accessing a link through the Investor Information section at www.primaryenergyrecycling.com.
Forward-Looking Statements
When used in this news release, the words "anticipate", "expect", "project", "believe", "estimate", "forecast" and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks, uncertainties and assumptions pertaining, but not limited, to operating performance, regulatory parameters, and weather and economic conditions and the factors discussed in the Company's public filings available on SEDAR at www.sedar.com. 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 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.
Footnotes
The Company reports its financial results in accordance with generally accepted accounting principles in Canada ("GAAP"). The Company's management also evaluates and makes operating decisions using various other measures. Two such measures are Adjusted EBITDA and Adjusted PERC Cash Flow, which are non-GAAP financial measures. We believe these measures provide useful supplemental information regarding the performance of Company's business.
(1) Adjusted EBITDA Definition: As used herein Adjusted EBITDA means
earnings before interest, taxes, depreciation and amortization plus
adding back ARO accretion and certain one time adjustments including
major maintenance/outage work expenses, general and administrative
expense ('G&A") adjustments, and property tax adjustments. The
Adjusted EBITDA is reconciled to net loss on the table below.
Adjusted EBITDA is not a recognized measure under GAAP and does not
have standardized meanings prescribed by GAAP. Therefore, Adjusted
EBITDA may not be comparable to similar measures presented by other
companies.
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- ------------------
2010 2009 2010 2009
------ ------ ------ ------
Reconciliation of Net Loss to
Adjusted EBITDA
Net Loss ($2,069) ($5,383) ($2,764) ($10,519)
Adjustment to net loss
Depreciation and amortization $8,428 $8,489 $16,856 $16,978
Interest expense $2,520 $4,714 $5,283 $9,276
Realized and unrealized loss
(gain) on derivative contracts $29 ($5,196) $176 ($3,100)
Realized and unrealized loss
(gain) on foreign currency
translation - $6,712 - $4,037
Income tax expense (benefit) $703 ($2,033) $1,069 $533
Non-controlling preferred
interest - $381 - $733
Non-controlling common interest ($1,084) ($505) ($1,981) ($1,845)
-------- -------- -------- --------
EBITDA $8,527 $7,179 $18,639 $16,093
Adjustments to EBITDA
ARO accretion $45 $62 $89 $124
Major maint/outage work $1,100 $200 $1,100 $400
G&A Adjustments - - - $300
Property tax adjustments - $450 - $900
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Adjusted EBITDA $9,672 $7,891 $19,828 $17,817
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(2) Adjusted PERC Cash Flow Definition: As used herein, Adjusted PERC
Cash Flow means Net Cash Provided by Operating Activities less Non-
Cash Interest Expense plus Interest Expense plus Capital Expenditures
plus changes in working capital plus one time specified adjustments,
including adding back major maintenance/outage work expenses, G&A one
time adjustments, and annualized property tax adjustments. These
amounts, except the specified adjustments, are derived from those
reflected in the income statement and statement of cash flows of
publicly filed financial statements. The specified adjustments are
reconciled on the table below. Adjusted PERC Cash Flow is not a
recognized measure under GAAP and does not have standardized meanings
prescribed by GAAP. Therefore, Adjusted PERC Cash Flow may not be
comparable to similar measures presented by other companies.
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- ------------------
2010 2009 2010 2009
------ ------ ------ ------
Net Cash Provided by
Operating Activities $6,295 $4,267 $15,515 $4,999
- Less: Non-Cash Interest Expense $968 $678 $2,031 $1,143
+ Plus: Interest Expense $2,520 $4,714 $5,283 $9,276
+ Plus: Changes in Working Capital $725 ($1,062) ($39) $3,085
-------- -------- -------- --------
Subtotal $8,572 $7,241 $18,728 $16,217
Adjustments
+ Plus: Major Maint/Outage Work $1,100 $200 $1,100 $400
+ Plus: G&A Adjustments - - - $300
+ Plus: Annualized Prop.
Tax Adj.(1) - $450 - $900
-------- -------- -------- --------
Total Adjustments $1,100 $650 $1,100 $1,600
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Adjusted PERC Cash Flow $9,672 $7,891 $19,828 $17,817
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(3) Total 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.
(4) Total 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.
(5) Harbor 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 Adjusted EBITDA, Adjusted PERC 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 historic periods and are indicative of the Company's operating results. Note however, 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 GAAP financial measures.
Primary Energy Recycling Corporation
CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. dollars)
(Unaudited)
June 30, December 31,
ASSETS 2010 2009
------------------------------------------- -------------- --------------
Current assets:
Cash and cash equivalents $ 22,508 $ 24,536
Accounts receivable 9,678 9,532
Spare parts inventory 976 991
Current portion of future tax asset 765 1,003
Other current assets 1,028 833
------------- -------------
Total current assets 34,955 36,895
Non-current assets:
Property, plant and equipment 214,613 219,377
Contract rights 88,859 100,964
Restricted cash 3,609 3,729
Interest rate cap contract 10 186
Other non-current assets 8 34
------------- -------------
Total assets $ 342,054 $ 361,185
------------- -------------
------------- -------------
LIABILITIES, NON-CONTROLLING INTEREST
AND SHAREHOLDERS' EQUITY
-------------------------------------
Current liabilities:
Accounts payable $ 461 $ 253
Short-term debt 36,714 28,341
Due to affiliates 151 478
Accrued property taxes 2,178 2,520
Accrued expenses 2,828 2,631
------------- -------------
Total current liabilities 42,332 34,223
Non-current liabilities:
Long-term debt 46,472 69,887
Net long-term portion of future tax
liability 15,511 14,680
Asset retirement obligation 2,515 2,426
-------------- ------------
Total liabilities 106,830 121,216
Commitments and contingencies
Non-controlling common interest 83,944 85,925
Shareholders' equity:
Common stock 274,479 274,479
Accumulated shareholders' deficit (123,199) (120,435)
---------------------------
Total shareholders' equity 151,280 154,044
---------------------------
Total liabilities, non-controlling
interest and shareholders' equity $ 342,054 $ 361,185
------------- -------------
------------- -------------
Primary Energy Recycling Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS AND
ACCUMULATED SHAREHOLDERS' DEFICIT
(In thousands of U.S. dollars, except share and per share amounts)
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- ---------------------------
2010 2009 2010 2009
------------- ------------- ------------- -------------
Revenue:
Capacity $ 9,018 $ 9,018 $ 18,036 $ 18,036
Energy service 6,443 3,960 12,766 9,648
------------- ------------- ------------- -------------
15,461 12,978 30,802 27,684
Expenses:
Operations and
maintenance 4,323 2,932 6,948 5,555
General and
administrative 2,611 2,867 5,215 6,036
Depreciation and
amortization 8,428 8,489 16,856 16,978
------------- ------------- ------------- -------------
Operating income 99 (1,310) 1,783 (885)
Other (expense) income
Interest expense (2,520) (4,714) (5,283) (9,276)
Realized and
unrealized (loss)
gain on derivative
contracts (29) 5,196 (176) 3,100
Realized and
unrealized loss
on foreign
currency
translation - (6,712) - (4,037)
------------- ------------- ------------- -------------
Loss before income
taxes and
non-controlling
interest (2,450) (7,540) (3,676) (11,098)
Income tax (expense)
benefit (703) 2,033 (1,069) (533)
------------- ------------- ------------- -------------
Loss before
non-controlling
interest (3,153) (5,507) (4,745) (11,631)
Non-controlling
preferred interest - (381) - (733)
Non-controlling
common interest 1,084 505 1,981 1,845
------------- ------------- ------------- -------------
Net loss and
comprehensive
loss $ (2,069) $ (5,383) $ (2,764) $ (10,519)
Accumulated
shareholders'
deficit -
beginning of
period (121,130) (131,058) (120,435) (123,040)
Adjustment to
opening shareholders'
deficit due to
adoption of new
accounting standard - - - 215
Distributions - (2,205) - (5,302)
------------- ------------- ------------- -------------
Accumulated
shareholders'
deficit- end
of period $ (123,199) $ (138,646) $ (123,199) $ (138,646)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Weighted average
number of shares
outstanding 134,118,561 2,006,159 134,118,561 2,006,159
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Basic and
diluted net loss
per share $ (0.01) $ (2.68) $ (0.02) $ (5.24)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Primary Energy Recycling Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars, except share and per share amounts)
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- ---------------------------
2010 2009 2010 2009
------------- ------------- ------------- -------------
CASH FLOWS FROM
OPERATING
ACTIVITIES:
Net loss and
comprehensive
loss $ (2,069) $ (5,383) $ (2,764) $ (10,519)
Adjustments to
reconcile net
loss to net cash
provided by
operating activities:
Depreciation and
amortization 8,428 8,489 16,856 16,978
Realized and
unrealized loss
(gain) on
derivative
contracts 29 (5,196) 176 (3,100)
Realized and
unrealized loss on
foreign currency
translation - 6,712 - 4,037
Non-cash interest
expense 968 678 2,031 1,143
Non-controlling
preferred
interest - 381 - 733
Non-controlling
common interest (1,084) (505) (1,981) (1,845)
Income tax expense
(benefit) 703 (2,033) 1,069 533
Accretion of asset
retirement
obligations 45 62 89 124
------------- ------------- ------------- -------------
7,020 3,205 15,476 8,084
Net change in
non-cash working
capital balances (725) 1,062 39 (3,085)
------------- ------------- ------------- -------------
Net cash provided
by operating
activities 6,295 4,267 15,515 4,999
------------- ------------- ------------- -------------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Change in
restricted cash 120 - 120 -
Net cash settlement
from derivative
contracts - 674 - (572)
Capital expenditures - (17) - (17)
------------- ------------- ------------- -------------
Net cash provided
by (used in)
investing activities 120 657 120 (589)
------------- ------------- ------------- -------------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Payments of deferred
financing costs - (692) (319) (692)
Payments for stock
issuance costs
associated with
the rights offering - - (285) -
Payments of fees
associated with the
recapitalization - - (9) -
Repayment of debt (6,888) (4,000) (17,050) (4,000)
Distributions on
non-controlling
preferred interest - (375) - (737)
Distributions on
non-controlling
common interest - (674) - (1,325)
Distributions on
Common Shares - (3,391) - (6,540)
------------- ------------- ------------- -------------
Net cash used in
financing
activities (6,888) (9,132) (17,663) (13,294)
------------- ------------- ------------- -------------
Net decrease in cash (473) (4,208) (2,028) (8,884)
Cash and cash
equivalents -
beginning of period 22,981 10,844 24,536 15,520
------------- ------------- ------------- -------------
Cash and cash
equivalents -
end of period $ 22,508 $ 6,636 $ 22,508 $ 6,636
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Supplemental
disclosure of cash
flow information:
Cash paid during
the period for
interest $ 1,558 $ 4,033 $ 3,264 $ 8,370
SOURCE Primary Energy Recycling Corporation
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