2014

Primary Energy Reports First Quarter 2013 Results

OAK BROOK, IL, May 13, 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 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 (888) 231-8191 or (647) 427-7450.

A digital conference call replay will be available until midnight on May 28, 2013 (ET) by calling (855) 859-2056 or (416) 849-0833. 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



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