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



More by this Source


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

 

PR Newswire Membership

Fill out a PR Newswire membership form or contact us at (888) 776-0942.

Learn about PR Newswire services

Request more information about PR Newswire products and services or call us at (888) 776-0942.