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OAK BROOK, IL, Nov. 6, 2012 /PRNewswire/ - Primary Energy Recycling Corporation
(the "Company" or "Primary Energy") (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 three and nine months ended
September 30, 2012.
Financial Results
(in 000's of US$)
Three Months Ended September 30,
Nine Months Ended September 30,
2012
2011
2012
2011
Revenues
$
13,660
$
13,808
$
40,447
$
39,903
Operations and maintenance expense
4,422
3,159
12,798
10,025
Operating income (loss)
1,193
3,479
(1,883)
4,974
Net (loss) income and comprehensive (loss) income
(213)
428
(5,114)
(2,512)
EBITDA (1)
7,498
9,738
17,022
27,444
Adjusted EBITDA (2)
9,149
10,138
27,377
28,544
Net cash provided by operating activities
5,409
7,012
12,054
23,610
Free Cash Flow (3)
1,255
6,716
332
19,186
Cash and cash equivalents
30,281
21,605
-
-
Credit facility debt balance
83,156
50,626
-
-
Third Quarter Highlights
Implemented a new dividend policy to pay a US$0.20 per share annual
dividend, payable quarterly. A quarterly dividend payment of US$0.05
was declared with a record date of November 15, 2012 and a payment date
of November 30, 2012;
Average availability of facility operations was strong at 99.1%;
Portside's boiler turn down project is substantially complete and
operating as expected. The Portside condensing economizer is on
schedule and on budget;
North Lake's upgrades are substantially complete and on budget.
Performance testing and final check out of all systems is expected to
be completed in the fourth quarter of 2012.
Contract renewal discussions with the site host for Cokenergy continued.
The current contract expires in October of 2013;
Harbor Coal volumes remain below normal due to low cost natural gas.
"The announcement of our new dividend policy improved the liquidity of
the Company's shares," said John Prunkl, President and Chief Executive
Officer of Primary Energy. "The transition to self-management has gone
smoothly, and the corporate costs are about the same as the costs
experienced under the prior third party manager arrangement. For the
short term, the renewal of the Cokenergy contract remains our primary
focus."
Operational Highlights
Q3 2012
Q3 2011
Total Gross Electric Production Megawatt Hours (MWh) (4)
354,942
375,406
Total Thermal Energy Delivered (MMBtu) (5)
996,276
971,103
Harbor Coal Utilization (%) (6)
68.4%
89.9%
Third Quarter 2012 Financial Results
The Company's revenue of $13.7 million in the third quarter of 2012
decreased $0.1 million, or 1.1%, compared with revenue of $13.8 million
for the third quarter of 2011. The North Lake facility had reduced host
operations during the third quarter of 2012 compared to the third
quarter of 2011 which had a negative impact on Energy Service revenue
of $0.2 million. This decrease was partially offset by increased
revenue at the Portside facility associated with increased operating
levels at the host site.
The Company's revenue of $40.4 million in the first nine months of 2012
increased $0.5 million, or 1.4%, compared with revenue of $39.9 million
for the first nine months of 2011. Revenue increased at the North Lake
and Ironside facilities as a result of increased host operations in the
current year.
Operations and maintenance expense for the third quarter of 2012 was
$4.4 million compared to $3.2 million for the third quarter of 2011, an
increase of $1.2 million or 40%. The Company incurred periodic costs
during the third quarter of 2012 comprised of $1.2 million for boiler
retubing work and $0.2 million for ductwork repairs compared to
periodic costs for the third quarter of 2011 totaling $0.4 million for
boiler retubing work. In addition, the Company incurred $0.2 million of
additional general operations and maintenance expenses during the
quarter.
Operations and maintenance expense for the first nine months of 2012 was
$12.8 million compared to $10.0 million for the first nine months of
2011, an increase of $2.8 million or 27.7%. The Company incurred
periodic costs for the first nine months of 2012 comprised of $3.3
million for boiler retubing work and $0.6 million for ductwork repairs
compared to periodic costs for the first nine months of 2011 totaling
$1.1 million for boiler retubing work.
Equity in earnings of the Harbor Coal joint venture for the third
quarter of 2012 was $0.5 million compared to $1.0 million for the third
quarter of 2011, a decrease of $0.5 million. Equity in earnings of the
Harbor Coal joint venture for the first nine months of 2012 was $1.8
million compared to $3.1 million for the first nine months of 2011, a
decrease of $1.3 million. The decreases noted are the result of
reduced pulverized coal deliveries in favor of natural gas injection
due to its low cost.
Operating income for the third quarter of 2012 was $1.2 million compared
to $3.5 million for the third quarter of 2011, a decrease of $2.3
million. Operating loss for the first nine months of 2012 was $1.9
million compared to operating income of $5.0 million for the first nine
months of 2011, a decrease of $6.9 million. The largest driver
impacting year to date results was the $6.0 million fee paid to
terminate the Management Agreement at time of the buy-out of the
non-controlling interest.
Net loss and comprehensive loss for the third quarter of 2012 was $0.2
million compared to net income and comprehensive income of $0.4 million
for the third quarter of 2011, a decrease of $0.6 million. Net loss
and comprehensive loss for the first nine months of 2012 was $5.1
million compared to $2.5 million for the first nine months of 2011, an
increase of $2.6 million.
Conference Call and Webcast
Management will host a conference call to discuss the third quarter
results on Wednesday, November 7, 2012 at 9:00 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
November 21, 2012 (ET) by calling (855) 859-2056 or (416) 849-0833.
Please enter the passcode 38427835 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 "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 283
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, management agreement termination fee 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 the Company's business.
Reconcilation of Net (Loss) Income and Comprehensive (Loss) Income
to Adjusted EBITDA
(in 000's of US$)
Three Months Ended September 30,
Nine Months Ended September 30,
2012
2011
2012
2011
Net (loss) income and comprehensive (loss) income
$
(213)
$
428
$
(5,114)
$
(2,512)
Adjustment to net (loss) income and comprehensive (loss) income:
Depreciation and amortization
5,296
5,250
15,832
18,943
Depreciation and amortization included in equity in
earnings of Harbor Coal joint venture
1,009
1,009
3,027
3,027
Interest expense
1,525
1,518
4,240
5,053
Deferred finance fees expensed upon extinguishment of debt
-
-
765
-
Realized and unrealized loss on derivative contracts
292
-
572
4
Loss on derecognition
-
-
46
500
Income tax (benefit) expense
(411)
1,533
(2,346)
2,429
EBITDA
$
7,498
$
9,738
$
17,022
$
27,444
Adjustments to EBITDA:
Major maintenance (1)
1,471
400
3,957
1,100
Management agreement termination fee
-
-
6,000
-
Professional fees related to the buyout of the non-controlling interest
101
-
293
-
Non-cash stock based compensation
79
-
105
-
Adjusted EBITDA
$
9,149
$
10,138
$
27,377
$
28,544
1) Represents nonrecurring major maintenance expenditures for such
items as boiler retubing work and related other 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 September 30,
Nine Months Ended September 30,
2012
2011
2012
2011
Net cash provided by operating activities
$
5,409
$
7,012
$
12,054
$
23,610
Less: Capital expenditures
(4,184)
(296)
(11,722)
(4,424)
Free Cash Flow
$
1,225
$
6,716
$
332
$
19,186
Primary Energy Recycling Corporation
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(In thousands of U.S. dollars)
ASSETS
September 30, 2012
December 31, 2011
Current assets:
Cash and cash equivalents
$
30,281
$
20,567
Accounts receivable
8,646
8,115
Inventory, net
1,224
987
Tax receivable
651
565
Prepaid expenses
1,176
632
Other current assets
414
-
Total current assets
42,392
30,866
Non-current assets:
Property, plant and equipment, net
187,568
180,844
Intangible assets, net
15,399
24,632
Restricted cash
3,445
1,930
Deferred tax asset, net
-
2,519
Investment in Harbor Coal joint venture
59,707
63,190
Other non-current assets
92
159
Total assets
$
308,603
$
304,140
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$
1,680
$
1,115
Short-term debt
9,569
27,304
Due to affiliates
-
333
Accrued property taxes
1,338
1,963
Accrued expenses
6,854
5,503
Total current liabilities
19,441
36,218
Non-current liabilities:
Long-term debt
69,160
14,134
Deferred income tax liability, net
14,738
-
Interest rate swap
184
-
Asset retirement obligations
4,451
4,239
Total liabilities
107,974
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
37,217
3,316
Accumulated shareholders' deficit
(111,067)
(107,748)
Total equity attributable to equity owners of the Company
200,629
170,047
Non-controlling interest
-
79,502
Total equity
200,629
249,549
Total liabilities and equity
$
308,603
$
304,140
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 30,
Nine Months Ended September 30,
2012
2011
2012
2011
Revenue:
Capacity
$
9,018
$
9,018
$
27,054
$
27,054
Energy service
4,642
4,790
13,393
12,849
13,660
13,808
40,447
39,903
Expenses:
Operations and maintenance
4,422
3,159
12,798
10,025
General and administrative
2,082
2,438
6,702
6,917
Management agreement termination fee
-
-
6,000
-
Employee benefits
1,216
510
2,731
1,676
Depreciation and amortization
5,296
5,250
15,832
18,943
Loss on derecognition
-
-
46
500
Total operating expenses
13,016
11,357
44,109
38,061
Equity in earnings of Harbor Coal joint venture
549
1,028
1,779
3,132
Operating income (loss)
1,193
3,479
(1,883)
4,974
Other expense
Interest expense
(1,525)
(1,518)
(4,240)
(5,053)
Deferred finance fees expensed upon extinguishment of debt
-
-
(765)
-
Realized and unrealized loss on derivative
contracts
(292)
-
(572)
(4)
(Loss) income before income taxes
(624)
1,961
(7,460)
(83)
Income tax benefit (expense)
411
(1,533)
2,346
(2,429)
Net (loss) income and comprehensive (loss) income
$
(213)
$
428
$
(5,114)
$
(2,512)
Net (loss) income and comprehensive (loss) income attributable to:
Owners of the Company
$
(213)
$
745
$
(3,319)
$
(536)
Non-controlling interest
-
(317)
(1,795)
(1,976)
$
(213)
$
428
$
(5,114)
$
(2,512)
Net (loss) income per share attributable
to owners of the Company:
Weighted average number of shares outstanding - basic
44,706,186
44,706,186
44,706,186
44,706,186
Weighted average number of shares outstanding - diluted
44,706,186
45,128,828
44,706,186
44,706,186
Basic and diluted net (loss) income per share attributable to owners of
the Company
$
(0.00)
$
0.02
$
(0.07)
$
(0.01)
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, 2011
$
274,479
$
3,316
$
(107,784)
$
170,011
$
82,028
$
252,039
Net loss and comprehensive loss
for the nine months ended September 30, 2011
-
-
(536)
(536)
(2,265)
(2,801)
Balance - September 30, 2011
$
274,479
$
3,316
$
(108,320)
$
169,475
$
79,763
$
249,238
Balance - January 1, 2012
$
274,479
$
3,316
$
(107,748)
$
170,047
$
79,502
$
249,549
Net loss and comprehensive loss
for the nine months ended September 30, 2012
-
-
(3,319)
(3,319)
(1,795)
(5,114)
Buyout of non-controlling interest
-
33,796
-
33,796
(77,707)
(43,911)
Stock compensation expense
-
105
-
105
-
105
Balance - September 30, 2012
$
274,479
$
37,217
$
(111,067)
$
200,629
$
-
$
200,629
Primary Energy Recycling Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
Three Months Ended September 30,
Nine Months Ended September 30,
2012
2011
2012
2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income and comprehensive (loss) income for the period
$
(213)
$
428
$
(5,114)
$
(2,512)
Adjustments for:
Depreciation and amortization
5,296
5,250
15,832
18,943
Loss on derecognition
-
-
46
500
Unrealized loss on derivative contracts
273
-
366
4
Deferred finance fees expensed upon extinguishment of debt
-
-
765
-
Equity in earnings of Harbor Coal joint venture
(549)
(1,028)
(1,779)
(3,132)
Distributions from investment in Harbor Coal joint venture
1,515
2,014
5,262
5,561
Non-cash interest expense
542
552
1,681
1,882
Non-cash stock based compensation
79
-
105
-
Income tax
(493)
1,484
(2,428)
2,380
6,450
8,700
14,736
23,626
Net change in non-cash working capital balances
(1,041)
(1,688)
(2,682)
(16)
Net cash provided by operating activities
5,409
7,012
12,054
23,610
CASH FLOWS FROM INVESTING ACTIVITIES:
Change in restricted cash
-
207
(1,515)
754
Capital expenditures
(4,184)
(296)
(11,722)
(4,424)
Net cash used in investing activities
(4,184)
(89)
(13,237)
(3,670)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt
-
-
85,000
-
Purchase of the non-controlling interest
-
-
(24,225)
-
Payments of deferred financing costs
2
-
(5,261)
-
Repayment of debt
(1,844)
(7,777)
(44,617)
(20,740)
Net cash (used in) provided by financing activities
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