OAK BROOK, IL, Oct. 28 /CNW/ - Primary Energy Recycling Corporation (TSX: PRI.UN) (the "Company" or "PERC") today announces its financial results for the three and nine months ended September 30, 2009. All amounts are in U.S. dollars unless otherwise indicated.
- Third quarter results strongly rebound from second quarter
- Company has secured commitments to borrow up to $105 million senior
- Loan receives preliminary ratings of BB+ from S&P and Ba1 from Moodys
- $50 million fully backstopped Rights Offering initiated
- Closing of new debt financing and Rights Offering expected mid
- Net proceeds of the new debt financing and Rights Offering will be
utilized to repay the Company's current senior term loan
- For the three months ended September 30, 2009 revenue was $14.4
million and operating income was $1.3 million. For the nine months
ended September 30, 2009 revenue was $42.1 million and operating
income was $0.4 million.
The steel industry continues to recover from the economic downturn. US steel production industry wide is operating at slightly over 60% capacity versus a capacity of less than 40% earlier in the year. The mills the Company operates in are some of the best performing mills in the country and historically recover faster than the industry as a whole.
The new credit facility provides commitments to borrow up to $105 million of loans, subject to satisfaction of customary conditions, in a single borrowing concurrent with the closing of the Company's previously announced rights offering. Credit Suisse Securities (USA) LLC acted as sole lead arranger for the loan. The intended use of the net proceeds of the new credit facility, together with the rights offering proceeds of $50 million, after deducting transaction costs and expenses, is to repay in full the outstanding loans under the existing $131 million term loan facility. The new credit facility lenders are predominantly made up of lenders in the existing $131 million credit facility. The S&P's preliminary rating of BB+ and Moody's preliminary rating of Ba1 were an important aspect in completing the new credit facility and shows reasonable confidence in the underlying credit.
"The strong third quarter results confirm the Company's business strategy of investing in top tier mills. It is encouraging to see the steel industry continuing to recover and moving towards normal operations. Securing the new credit facility well in advance of our schedule with the support of existing lenders was a huge boost to getting us towards the restructuring finish line. We anticipate closing the rights offering and the new loan in mid-November," said John Prunkl, President and Chief Executive Officer of the Company. "The next priority for the Company will be to work on contract renewals, particularly for the North Lake facility. The near completion of restructuring is great news for the Company and its investors."
The Company's revenue of $14.4 million in the third quarter of 2009 decreased $1.2 million, or 7.4%, compared with revenue of $15.6 million for the third quarter of 2008. Revenue was $42.1 million in the first nine months of 2009, a decrease of $5.3 million, or 11.2%, when compared to revenue of $47.4 million for the first nine months of 2008. These decreases reflect a decline in the variable portion of Energy Service revenue as market conditions in the steel industry impacted steel production of the Company's site hosts during both periods.
Operating and maintenance expense for the third quarter of 2009 was $2.5 million compared to $3.0 million for the third quarter of 2008, a decrease of $0.5 million or 15.3%. Operating and maintenance expense for the first nine months of 2009 was $8.1 million compared to $8.5 million for the first nine months of 2008, a decrease of $0.4 million or 4.5%. The decreases were primarily due to reduced operating expenses at the Harbor Coal facility which are offset on a year to date basis by additional expenses incurred for boiler repairs and steam turbine maintenance earlier in the year.
General and administrative expense for the third quarter of 2009 was $2.2 million compared to $3.0 million for the third quarter of 2008, a decrease of $0.8 million or 26.8%. The decrease is primarily due to reductions in property taxes of $2.1 million based upon reductions in tax rates and board compensation fees of $0.1 million offset by additional professional fees of $1.1 million incurred related to business restructuring activities and increased payroll cost of approximately $0.3 million related to retention compensation. General and administrative expense for the first nine months of 2009 was $8.2 million compared to $8.8 million for the first nine months of 2008, a decrease of $0.6 million or 6.4%. The decrease is primarily due to reductions in property taxes of $2.2 million and board compensation fees of $0.1 million offset by additional professional fees of $1.4 million incurred related to business restructuring activities and increased payroll cost of approximately $0.3 million.
Operating income for the third quarter of 2009 was $1.3 million compared to $1.2 million for the third quarter of 2008, an increase of $0.1 million. Operating income for the first nine months of 2009 was $0.4 million compared to $4.7 million for the first nine months of 2008, a decrease of $4.3 million.
For both the three and nine month periods ended September 30, 2009, the Recapitalization resulted in the amount of the Company's outstanding debt being reduced by $89.1 million, the value of the Company's subordinated notes that were converted into common shares of the Company. The fair value of the common shares issued on conversion of the subordinated notes was $53.1 million. The difference between the amount of notes retired (net of unamortized deferred financing fees of $3.5 million) and the fair value of the common shares issued on conversion of the notes was recorded as a $32.6 million gain upon cancellation of debt. This gain was the largest single contributor to net income for the third quarter of 2009 of $21.0 million, compared to a net loss of $4.5 million for the third quarter of 2008, an increase of $25.5 million, and to net income for the first nine months of 2009 of $10.5 million, compared to a net loss of $14.1 million for the first nine months of 2008, an increase of $24.6 million.
Michel Lavigne, Chairman of the Board of Directors of the Company said "I am very pleased with progress that is being made with the financial restructuring. The subordinated debt conversion and loan extension was key. I believe it instilled confidence in the lender and investor communities that we are capable of executing a complex plan. With the new senior debt commitments and the fully backstopped rights offering, the Company is well situated to begin working towards restoring shareholder value. Going forward, we intend to bring the same energy and innovation to rewarding investors as we did to the restructuring with the goal of being just as successful."
The Company's full financial statements and Management's Discussion and Analysis are available at www.sedar.com or the Company's website at www.primaryenergy.com.
Conference Call and Webcast
Management will also host a conference call to further discuss the third quarter results on Thursday October 29, 2009 at 11:00 a.m. (ET). Following management's presentation, there will be a question and answer session. To participate in the conference call, please dial 416-644-3422 or 1-800-814-3911. A conference call replay will be available until 12 a.m. on November 5, 2009. The replay can be accessed by dialing 416-644-3422 or 1-866-250-4877 and entering passcode 4175079 followed by the number sign. A webcast replay will also be available for 90 days by accessing a link through the Investor Information section at www.primaryenergy.com.
When used in this news release, the words "anticipate", "expect", "project", "believe", "estimate", "forecast" and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks, uncertainties and assumptions pertaining, but not limited, to the completion of the rights offering, the refinancing of the term loan, operating performance, regulatory parameters, weather and economic conditions and the factors discussed in the Company's public filings available on SEDAR at www.sedar.com. 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 owns a majority interest in Primary Energy Recycling Holdings LLC ("PERH"). PERH, headquartered in Oak Brook, Illinois, indirectly owns and operates four recycled energy projects and a 50 per cent 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 1.8 MMlbs/hour. PERH 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 its customers' use. For more information, please see www.primaryenergy.com.
SOURCE Primary Energy Recycling Corporation
For further information: For further information: V. Michael Alverson, Chief Financial Officer, (630) 371-0639, email@example.com