PRIMARY ENERGY RECYCLING CORPORATION 
By OAK BROOK, IL, Oct. 29, 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 three and nine months ended September 30, 2013.
Financial
Results
(in 000's of
US$)
Three Months Ended Nine Months Ended September
September 30, 30,
2013 2012 2013 2012
Revenues $ 14,050 $ 13,660 $ 42,296 $ 40,447
Operations and 5,081 4,422 14,602 12,798
maintenance
expense
Operating (101) 1,193 1,108 (1,883)
(loss) income
Net loss and (729) (213) (1,731) (5,114)
comprehensive
loss
EBITDA (1) 6,212 7,498 20,314 17,022
Adjusted 8,164 9,149 26,106 27,377
EBITDA (2)
Net cash 7,885 5,409 19,002 12,054
provided by
operating
activities
Free Cash Flow 5,319 1,225 12,090 332
(3)
Cash and cash 28,217 30,281 - -
equivalents
Credit 72,609 83,156 - -
facility debt
balance
Third Quarter Review
-- Portside continued to perform as expected by generating $0.5
million of additional revenue in the third quarter of 2013
compared to the third quarter of 2012;
-- Reported improved operations at North Lake and Harbor Coal
compared to the second quarter of 2013 due to stronger customer
blast furnace availability. However, compared to the third
quarter of 2012, Harbor Coal produced lower operational
results;
-- Completed Ironside's forced turbine outage. The turbine should
be back in service by early November 2013;
-- Continued to work through the re-negotiation process for the
Cokenergy agreements. The Company intends to provide an update
as further developments occur;
-- Subsequent to quarter end, on October 29, 2013, declared a
$0.05 per Common Share dividend for payment on November 29,
2013 to shareholders of record on November 15, 2013.
"We experienced improved host operations during the third quarter, which resulted in increased production when compared to the second quarter of 2013," said John Prunkl, President and Chief Executive Officer of Primary Energy. "The Company had positive contributions from Cokenergy, North Lake and Portside during the reporting period. The repair of the Ironside turbine is almost complete and it will be back in service shortly. Portside successfully completed its planned October 2013 turbine overhaul and is back in service."
Operational
Highlights
Three Months Ending Nine Months Ending
September 30, September 30,
2013 2012 2013 2012
Total Gross Electric 367,674 354,942 1,056,813 1,005,093
Production Megawatt Hours
(MWh) (4)
Total Thermal 594,696 996,276 3,425,833
Energy 2,701,275
Delivered
(MMBtu) (5)
Harbor Coal 54.5% 68.4% 71.1%
Utilization 54.9%
(%) (6)
Third Quarter 2013 Financial Results
The Company's revenue of $14.1 million for the third quarter of 2013 increased $0.4 million, or 2.9%, compared with revenue of $13.7 million for the third quarter of 2012. Revenue at the Portside facility increased by $0.5 million during the third quarter of 2013 due to fuel cost savings of $0.4 million generated from the condensing economizer and boiler turndown capability and $0.1 million related to increased host operating levels. Revenue at the Ironside facility was impacted by a net decrease of $0.1 million due to an unplanned outage starting in May of 2013.
The Company's revenue of $42.3 million for the first nine months of 2013 increased $1.9 million, or 4.6%, compared with revenue of $40.4 million for the first nine months of 2012. Revenue at the Portside facility increased by $1.8 million during 2013 primarily due to fuel cost savings of $1.6 million generated from the condensing economizer and boiler turndown capability and $0.2 million related to increased host operating levels. Revenue at the North Lake facility increased by $0.5 million primarily due to being fully operational for the first nine months in 2013 compared to only eight months of operation in 2012. Revenue at the Ironside facility was impacted by a net decrease of $0.3 million due to an unplanned outage starting in May of 2013 and a decrease of $0.1 million due to reduced host operating levels.
Operations and maintenance expense for the third quarter of 2013 was $5.1 million compared to $4.4 million for the third quarter of 2012, an increase of $0.7 million or 14.9%. Operations and maintenance expense for the first nine months of 2013 was $14.6 million compared to $12.8 million for the first nine months of 2012, an increase of $1.8 million or 14.1%. The Company incurred periodic costs for the first nine months of 2013 comprised of $4.7 million for boiler retubing work, $0.6 million for an emergency boiler repair and $0.1 million for ductwork repairs compared to periodic costs for the first nine months of 2012 of $3.3 million for boiler retubing work and $0.6 million for ductwork repairs.
General and administrative expense totaled $2.1 million for the third quarter of 2013 and was flat when compared to the third quarter of 2012. General and administrative expense for the first nine months of 2013 was $6.0 million compared to $6.7 million for the first nine months of 2012, a decrease of $0.7 million or 9.9%. The Company did not incur management fees for the first nine months of 2013 resulting in a net cost savings totaling $1.1 million when compared to the same period in 2012. In addition, the Company had reduced professional fees of $0.1 million compared to the prior nine month period offset by increased plant and liability insurance expenses of $0.2 million, IT expenses of $0.1 million, other general and administrative expenses of $0.1 million and accrued property taxes of $0.1 million.
Employee benefits expense for the third quarter of 2013 was $1.9 million compared to $1.2 million for the third quarter of 2012, an increase of $0.7 million. The increase is due to an additional payroll cost of $0.2 million, $0.1 million related to dividends paid on stock options and $0.4 million of stock based compensation inclusive of a one-time board compensation award. Employee benefits expense for the first nine months of 2013 was $5.0 million compared to $2.7 million for the first nine months of 2012, an increase of $2.3 million. The increase is due to additional compensation cost of $1.1 million primarily associated with transferred employees hired by the Company upon termination of the Management Agreement, $0.4 million related to dividends paid on stock options, $0.4 million of cost recovery provided to the Company under the Management Agreement in the first nine months of 2012 that did not recur in the first nine months of 2013 and $0.4 million of stock based compensation inclusive of a one-time board compensation award. Prior to June 1, 2012, the transferred employees were employees of the Company's former manager who previously provided operational and administrative services to the Company under the Management Agreement. For the first nine months of 2012, management fees incurred by the Company of $1.1 million were recorded as general and administrative expenses.
On a combined basis, general and administrative expense and employee benefits expense for the third quarter of 2013 was $4.0 million compared to $3.3 million for the third quarter of 2012, an increase of $0.7 million. The increase in expenses is comprised of $0.4 million of stock based compensation inclusive of a one-time board compensation award, $0.2 million of payroll cost related to new employees, $0.2 million of consulting fees and 0.1 million related to dividends paid on stock options. The increase in expenses was offset by reduced professional fees of $0.1 million and other general and administrative expenses of $0.1 million.
On a combined basis, general and administrative expense and employee benefits expense for the first nine months of 2013 was $11.0 million compared to $9.4 million for the first nine months of 2012, an increase of $1.6 million. The increase in expenses is comprised of $0.4 million related to dividends paid on stock options, $0.4 million of stock based compensation inclusive of a one-time board compensation award, $0.2 million of plant compensation expense, $0.2 million of corporate compensation expense, $0.2 million of plant and liability insurance, $0.1 million of IT expenses, $0.1 million of other general and administrative expenses and $0.1 million of accrued property taxes. The increase in expenses was offset by reduced professional fees of $0.1 million.
Equity in earnings of the Harbor Coal joint venture for the third quarter of 2013 was $0.2 million compared to $0.5 million for the third quarter of 2012, a decrease of $0.3 million. Equity in earnings of the Harbor Coal joint venture for the first nine months of 2013 was $0.7 million compared to $1.8 million for the first nine months of 2012, a decrease of $1.1 million. The decrease is the result of reduced revenue based on increased natural gas injection and reductions to coal through-put for the current year as well as reduced blast furnace operation that began in the second quarter of 2013.
Operating loss for the third quarter of 2013 was $0.1 million compared to operating income of $1.2 million for the third quarter of 2012, a decrease of $1.3 million. The decrease was the result of the net effect of the items discussed above.
Operating income for the first nine months of 2013 was $1.1 million compared to an operating loss of $1.9 million for the first nine months of 2012, an increase of $3.0 million. The increase was the result of the net effect of the items discussed above.
Net loss and comprehensive loss for the third quarter of 2013 was $0.7 million compared to $0.2 million for the third quarter of 2012, an increase of $0.5 million. The increase was the result of the net effect of the items discussed above.
Net loss and comprehensive loss for the first nine months of 2013 was $1.7 million compared to $5.1 million for the first nine months of 2012, a decrease of $3.4 million. The decrease was the result of the net effect of the items discussed above.
Conference Call and Webcast
Management will host a conference call to discuss the third quarter results on Wednesday, October 30, 2013 at 10 am ET. The telephone numbers for the conference call are: (888) 231-8191 or (647) 427-7450.
A digital conference call replay will be available until midnight on November 13, 2013 (ET) by calling (855) 859-2056 or (416) 849-0833. Please enter the password 71653061 when instructed. A webcast replay will be available for 365 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
percent 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 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 and Comprehensive
Loss
to Adjusted
EBITDA
(in 000's of Three Months Ended Nine Months Ended
US$) September 30, September 30,
2013 2012 2013 2012
Net loss and $ (729) (213) $ (1,731) $
comprehensive loss $ (5,114)
Adjustment to net loss
and comprehensive loss:
Depreciation and
amortization 5,304 5,296 16,062 15,832
Depreciation and
amortization included
in equity in
earnings of Harbor 1,009 1,009 3,027
Coal joint venture 3,027
Interest 1,525 3,763 4,240
expense 1,243
Deferred finance fees
expensed upon - - -
extinguishment of
debt 765
Realized and
unrealized loss 178 292 (80)
(gain) on derivative
contracts 572
Loss on
derecognition - - 117 46
Income tax (411) (844) (2,346)
benefit (793)
EBITDA $ 6,212 $ 7,498 $ 20,314 $ 17,022
Adjustments
to EBITDA:
Major
maintenance 1,471 5,358 3,957
(1) 1,699
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 101 293
Stock based
compensation (2) 253 79 434 105
Adjusted $ $ $ $
EBITDA 8,164 9,149 26,106 27,377
1) Represents nonrecurring major maintenance
expenditures for such items as boiler retubing work and
other related maintenance expenditures and ductwork
repairs.
2) The three month and nine month periods of 2013 are
Inclusive of a one-time board compensation award.
Reconcilation of
Net Cash Provided
by Operating
Activities
to
Free
Cash
Flow
(in Three Months Ended
000's of September 30, Nine Months Ended
US$) September 30,
2013 2012 2013 2012
Net cash provided
by operating $ 7,885 19,002
activities $ 5,409 $ $ 12,054
Less: Capital (2,566) (4,184) (6,912)
expenditures (11,722)
Free
Cash $ $ $ $
Flow 5,319 1,225 12,090 332
Primary Energy Recycling Corporation
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(In thousands of U.S. dollars)
ASSETS September 30, 2013 December 31, 2012
Current assets:
Cash and cash equivalents $ 28,217 $ 30,101
Accounts receivable 7,467 8,266
Inventory, net 1,442 1,126
Tax receivable 803 691
Prepaid expenses 1,479 987
Other current assets - 336
Total current assets 39,408 41,507
Non-current assets:
Property, plant and 183,288 185,355
equipment, net
Intangible assets, net 3,213 12,321
Restricted cash 3,275 3,445
Interest rate cap 113 85
Investment in Harbor Coal 55,383 58,600
joint venture
Total assets $ 284,680 $ 301,313
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 1,210 $ 971
Short-term debt 10,248 11,133
Accrued property taxes 1,453 1,725
Accrued expenses 6,002 6,558
Total current liabilities 18,913 20,387
Non-current liabilities:
Long-term debt 59,185 64,913
Deferred income tax 1,009 1,753
liability, net
Interest rate swap 90 155
Asset retirement 2,693 3,063
obligations
Total liabilities 81,890 90,271
Equity
Common stock: no par value,
unlimited shares authorized;
44,706,186 issued and 274,479 274,479
outstanding
Contributed surplus 37,650 37,466
Accumulated shareholders' (109,339) (100,903)
deficit
Total equity 202,790 211,042
Total liabilities and equity $ 284,680 $ 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 September Nine Months Ended September
30, 30,
2013 2012 2013 2012
Revenue:
Capacity $ 9,018 $ 9,018 $ 27,054 $ 27,054
Energy 5,032 4,642 15,242 13,393
service
14,050 13,660 42,296 40,447
Expenses:
Operations and 5,081 4,422 14,602 12,798
maintenance
General and 2,121 2,082 6,041 6,702
administrative
Management
Agreement - - - 6,000
termination fee
Employee 1,871 1,216 5,019 2,731
benefits
Depreciation
and 5,304 5,296 16,062 15,832
amortization
Loss on - - 117 46
derecognition
Total operating 14,377 13,016 41,841 44,109
expenses
Equity in earnings
of Harbor Coal 226 549 653 1,779
joint venture
Operating (loss) (101) 1,193 1,108 (1,883)
income
Other
expense
Interest (1,243) (1,525) (3,763) (4,240)
expense
Deferred finance
fees expensed
upon - - - (765)
extinguishment of
debt
Realized and
unrealized (loss)
gain on
derivative
(178) (292) 80 (572)
contracts
Loss before (1,522) (624) (2,575) (7,460)
income taxes
Income tax 793 411 844 2,346
benefit
Net loss and $ (729) $ (213) $ (1,731) $ (5,114)
comprehensive loss
Net loss and
comprehensive loss
attributable to:
Owners of the $ (729) $ (213) $ (1,731) $ (3,319)
Company
Non-controlling - - - (1,795)
interest
$ (729) $ (213) $ (1,731) $ (5,114)
Net loss per
share
attributable
to owners of
the Company:
Weighted average
number of shares 44,706,186 44,706,186 44,706,186 44,706,186
outstanding -
basic
Weighted average
number of shares 44,706,186 44,706,186 44,706,186 44,706,186
outstanding -
diluted
Basic and diluted
net loss per share
attributable to $ (0.02) $ (0.00) $ (0.04) $ (0.07)
owners of the
Company
Primary Energy Recycling Corporation
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In thousands of U.S. dollars)
Common Contributed Accumulated Non-controlling Total
stock surplus deficit Total interest equity
Balance - $ 274,479 $ 3,316 $ (107,748) $ 170,047 $ 79,502 $ 249,549
January 1, 2012
Net loss and
comprehensive
loss
for the nine - - (3,319) (3,319) (1,795) (5,114)
months ended
September 30,
2012
Buyout of - 33,796 - 33,796 (77,707) (43,911)
non-controlling
interest
Stock-based - 105 - 105 - 105
compensation
Balance - $ 274,479 $ 37,217 $ (111,067) $ 200,629 $ - $ 200,629
September 30,
2012
Balance - $ 274,479 $ 37,466 $ (100,903) $ 211,042 $ - $ 211,042
January 1, 2013
Net loss and
comprehensive
loss
for the nine - - (1,731) (1,731) - (1,731)
months ended
September 30,
2013
Dividends on - - (6,705) (6,705) - (6,705)
Common Shares
Stock-based - 184 - 184 - 184
compensation
Balance - $ 274,479 $ 37,650 $ (109,339) $ 202,790 $ - $ 202,790
September 30,
2013
Primary Energy Recycling Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
Three Months Ended Nine Months Ended
September 30, September 30,
2013 2012 2013 2012
CASH FLOWS FROM
OPERATING
ACTIVITIES:
Net loss and
comprehensive $ (729) $ (213) $ (1,731) $ (5,114)
loss for the
period
Adjustments
for:
Depreciation
and 5,304 5,296 16,062 15,832
amortization
Loss on - - 117 46
derecognition
Unrealized loss
(gain) on 117 273 (171) 366
derivative
contracts
Deferred
finance fees
expensed upon - - - 765
extinguishment
of debt
Equity in
earnings of (226) (549) (653) (1,779)
Harbor Coal
joint venture
Distributions
from investment 901 1,515 3,869 5,262
in Harbor Coal
joint venture
Non-cash
interest 410 542 1,213 1,681
expense
Non-cash stock
based 54 79 184 105
compensation
Income tax (718) (493) (744) (2,428)
5,113 6,450 18,146 14,736
Net change in
non-cash 2,772 (1,041) 856 (2,682)
working capital
balances
Net cash
provided by 7,885 5,409 19,002 12,054
operating
activities
CASH FLOWS FROM
INVESTING
ACTIVITIES:
Change in - - 170 (1,515)
restricted cash
Capital (2,566) (4,184) (6,912) (11,722)
expenditures
Net cash used
in investing (2,566) (4,184) (6,742) (13,237)
activities
CASH FLOWS FROM
FINANCING
ACTIVITIES:
Proceeds from
issuance of - - - 85,000
debt
Purchase of
non-controlling - - - (24,225)
interest
Payments of
deferred - 2 - (5,261)
financing costs
Repayment of (3,333) (1,844) (7,439) (44,617)
debt
Dividends on (2,235) - (6,705) -
Common Shares
Net cash
(used in)
provided by (5,568) (1,842) (14,144) 10,897
financing
activities
Net (decrease)
increase in (249) (617) (1,884) 9,714
cash
Cash and cash
equivalents - 28,466 30,898 30,101 20,567
beginning of
period
Cash and cash
equivalents - $ 28,217 $ 30,281 $ 28,217 $ 30,281
end of period
Supplemental
disclosure of
cash flow
information:
Cash paid
during the $ 903 $ 972 $ 2,665 $ 2,537
period for
interest
Cash paid
during the $ - $ - $ 12 $ 168
period for
income taxes
SOURCE Primary Energy Recycling Corporation
