Primary Energy Reports First Quarter 2013 Results

OAK BROOK, IL, May 13, 2013 /CNW/ - 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 unaudited financial and operational results for the first quarter ended March 31, 2013.

Financial Results
(in 000's of US$)
		Three Months Ended March 31,
		2013			2012
Revenues	$	14,675		$	14,222
Operations and maintenance expense		5,070			4,211
Operating income		1,220			2,309
Net (loss) income and comprehensive (loss) income		(109)			552
EBITDA (1)		7,622			8,588
Adjusted EBITDA (2)		9,897			9,783
Net cash provided by operating activities		7,015			7,388
Free Cash Flow (3)		3,869			5,696
Cash and cash equivalents		29,326			20,144
Credit facility debt balance		77,469			36,416

 

First Quarter Highlights

• Reported strong electric availability of 98.9% for its projects;

• Contract renegotiation discussions continued to progress with the site host for Cokenergy. Management anticipates an agreement should be reached before the current contract expires in October 2013;

• During the quarter ending March 31, 2013, the Company declared and paid a dividend of $0.05 per Common Share;

• On May 1, 2013, the Company declared a $0.05 per Common Share dividend for payment on May 31, 2013;

• Subsequent to quarter end, announced the appointment of Mr. Brian P. Greene to the Company's Board of Directors.

"Our projects performed well during the quarter, which resulted in solid financial results," said John Prunkl, President and Chief Executive Officer of Primary Energy. "One of the Company's host clients experienced furnace-related challenges that reduced North Lake and Harbor Coal revenue towards the end of the first quarter. Operational challenges for this host's furnace have continued into the second quarter. From a capital markets perspective, we are pleased that Brian P. Greene has agreed to join the Board of Directors. Brian is a long-time shareholder with a strong energy market background and will be a valuable team member as we continue building the Company."

Operational Highlights
		Three Months Ending March 31,
		2013		2012
Total Gross Electric Production Megawatt Hours (MWh) (4)		384,360		337,129
Total Thermal Energy Delivered (MMBtu) (5)		1,188,324		1,483,105
Harbor Coal Utilization (%) (6)		67.4%		76.7%

 

First Quarter 2013 Financial Results

The Company's revenue of $14.7 million for the first quarter of 2013 increased $0.5 million, or 3.2%, compared with revenue of $14.2 million for the first quarter of 2012. Revenue at the Portside facility increased by $0.8 million during the quarter due to additional revenue provided by the condensing economizer and boiler turndown projects. This increase was offset by decreased revenue of $0.3 million at the North Lake facility. North Lake production was higher for the quarter but was not sufficient to offset the impact of the new lower pricing formula which started January 1, 2013.

Operations and maintenance expense for the first quarter of 2013 was $5.1 million compared to $4.2 million for the first quarter of 2012, an increase of $0.9 million or 20.4%. The Company incurred periodic costs during the first quarter of 2013 comprised of $1.7 million for boiler retubing work, $0.4 million for an emergency boiler repair and $0.1 million for ductwork repairs compared to periodic costs for the first quarter of 2012 totaling $1.0 million for boiler retubing work and $0.1 million for ductwork repairs. In addition, for the first quarter of 2013 the Company had increased operations and maintenance expenses related to general maintenance of $0.2 million.  These increased operational and maintenance expenses were offset by reductions in air filtration and bag house expenditures of $0.2 million, environmental control systems repairs of $0.1 million and boiler repair work of $0.1 million. 

General and administrative and employee benefits expense for the first quarter of 2013 was $3.5 million compared to $3.2 million for the first quarter of 2012, an increase of $0.3 million or 10.4%. The increase is due to additional compensation cost, other general and administrative expenses and plant and liability insurance offset by reduced accrued property taxes.

Equity in earnings of the Harbor Coal joint venture for the first quarter of 2013 was $0.5 million compared to $0.7 million for the first quarter of 2012, a decrease of $0.2 million. The decrease is the result of reduced revenue based on increased natural gas injection due to its low cost and reduced coal through-put for the current quarter.

Operating income for the first quarter of 2013 was $1.2 million compared to $2.3 million for the first quarter of 2012, a decrease of $1.1 million.  The decrease was primarily due to the result of the net effect of the items discussed above.

Net loss and comprehensive loss for the first quarter of 2013 was $0.1 million compared to net income and comprehensive income of $0.6 million for the first quarter of 2012, a decrease of $0.7 million.  The decrease was primarily due to the result of the net effect of the items discussed above.

Conference Call and Webcast
Management will host a conference call to discuss the second quarter results on Tuesday, May 14, 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 [phone] or [phone].

A digital conference call replay will be available until midnight on May 28, 2013 (ET) by calling [phone] or [phone]. Please enter the passcode 44322356 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, 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 298 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, 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 (Loss) Income and Comprehensive (Loss) Income
	to Adjusted EBITDA
(in 000's of US$)				Three Months Ended March 31,
					2013			2012
Net (loss) income and comprehensive (loss) income				$	(109)		$	552
Adjustment to net (loss) income and comprehensive (loss) income:
	Depreciation and amortization				5,393			5,270
	Depreciation and amortization included in equity in
		earnings of Harbor Coal joint venture			1,009			1,009
	Interest expense				1,332			1,181
	Realized and unrealized gain on derivative contracts				(60)			-
	Income tax expense				57			576
EBITDA				$	7,622		$	8,588
Adjustments to EBITDA:
	Major maintenance (1)				2,216			1,093
	Professional fees and other general and administrative expenses related to
		the buyout of the non-controlling interest and internalization of management			-			102
	Non-cash stock based compensation				59			-
Adjusted EBITDA				$	9,897		$	9,783
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 March 31,
					2013			2012
Net cash provided by operating activities				$	7,015		$	7,388
Less: Capital expenditures					(3,146)			(1,692)
Free Cash Flow				$	3,869		$	5,696

Primary Energy Recycling Corporation
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(In thousands of U.S. dollars)
ASSETS									March 31, 2013			December 31, 2012
Current assets:
	Cash and cash equivalents							$	29,326		$	30,101
	Accounts receivable								7,944			8,266
	Inventory, net								1,292			1,126
	Tax receivable								705			691
	Prepaid expenses								469			987
	Other current assets								-			336
Total current assets									39,736			41,507
Non-current assets:
	Property, plant and equipment, net								185,175			185,355
	Intangible assets, net								9,244			12,321
	Restricted cash								3,275			3,445
	Investment in Harbor Coal joint venture								57,640			58,600
	Other non-current assets								69			85
Total assets								$	295,139		$	301,313
LIABILITIES AND EQUITY
Current liabilities:
	Accounts payable							$	808		$	971
	Short-term debt								13,226			11,133
	Accrued property taxes								1,924			1,725
	Accrued expenses								4,939			6,558
Total current liabilities									20,897			20,387
Non-current liabilities:
	Long-term debt								60,535			64,913
	Deferred income tax liability, net								1,643			1,753
	Interest rate swap								125			155
	Asset retirement obligations								3,013			3,063
Total liabilities									86,213			90,271
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									37,694			37,466
Accumulated shareholders' deficit									(103,247)			(100,903)
Total equity attributable to equity owners of the Company									208,926			211,042
Total equity									208,926			211,042
Total liabilities and equity								$	295,139		$	301,313

 

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,
				2013			2012
Revenue:
	Capacity		$	9,018		$	9,018
	Energy service			5,657			5,204
				14,675			14,222
Expenses:
	Operations and maintenance			5,070			4,211
	General and administrative			1,860			2,482
	Employee benefits			1,613			663
	Depreciation and amortization			5,393			5,270
Total operating expenses				13,936			12,626
Equity in earnings of Harbor Coal joint venture				481			713
Operating income				1,220			2,309
Other expense
	Interest expense			(1,332)			(1,181)
	Realized and unrealized gain on derivative
	contracts			60			-
(Loss) income before income taxes				(52)			1,128
Income tax expense				(57)			(576)
Net (loss) income and comprehensive (loss) income			$	(109)		$	552
Net (loss) income and comprehensive (loss) income attributable to:
	Owners of the Company			$ (109)		$	964
	Non-controlling interest			-			(412)
				$ (109)		$	552
Net (loss) 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				44,706,186			45,304,701
Basic and diluted net (loss) income per share attributable to owners of the Company			$	(0.00)		$	0.02

 

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, 2012	$	274,479	$	3,316	$	(107,748)	$	170,047	$	79,502	$	249,549
Net income (loss) and comprehensive (income) loss
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
Balance - January 1, 2013	$	274,479	$	37,466	$	(100,903)	$	211,042	$	-	$	211,042
Net loss and comprehensive loss
for the three months ended March 31, 2013		-		-		(109)		(109)		-		(109)
Dividends on Common Shares		-		-		(2,235)		(2,235)		-		(2,235)
Stock-based compensation, net of tax		-		228		-		228		-		228
Balance - March 31, 2013	$	274,479	$	37,694	$	(103,247)	$	208,926	$	-	$	208,926

 

Primary Energy Recycling Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
									Three Months Ended March 31,
									2013			2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income and comprehensive (loss) income for the period								$	(109)		$	552
Adjustments for:
Depreciation and amortization									5,393			5,270
Unrealized gain on derivative contracts									(90)			-
Equity in earnings of Harbor Coal joint venture									(481)			(713)
Distributions from investment in Harbor Coal joint venture									1,441			1,986
Non-cash interest expense									455			481
Non-cash stock based compensation									59			-
Income tax									59			567
									6,727			8,143
Net change in non-cash working capital balances									288			(755)
	Net cash provided by operating activities								7,015			7,388
CASH FLOWS FROM INVESTING ACTIVITIES:
Change in restricted cash									170			306
Capital expenditures									(3,146)			(1,692)
	Net cash used in investing activities								(2,976)			(1,386)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of deferred financing costs									-			(68)
Repayment of debt									(2,579)			(6,357)
Dividends on Common Shares									(2,235)			-
	Net cash used in financing activities								(4,814)			(6,425)
Net decrease in cash									(775)			(423)
Cash and cash equivalents - beginning of period									30,101			20,567
Cash and cash equivalents - end of period								$	29,326		$	20,144
Supplemental disclosure of cash flow information:
Cash paid during the period for interest								$	867		$	702
Cash paid during the period for income taxes								$	12		$	38

 

  

 

 

 

SOURCE: Primary Energy Recycling Corporation

Chief Commercial Officer
Christopher Fanella
Primary Energy Recycling
630.560.4227 [email protected] 

Media and Investor Relations
Adam Peeler
TMX Equicom
416.815.0700 ext. 225
[email protected]