Environmental Power Corporation Reports Second Quarter Results.PORTSMOUTH, N.H. -- Environmental Power Corporation (OTC OTC See: Over-the-counter. OTC See over-the-counter market (OTC). : POWR POWR Psychoacoustically Optimized Wordlength Reduction (dithering-filter used in digital audio productions) POWR Pennsylvania Organization for Watersheds and Rivers, Inc. ) ("EPC (1) (Entertainment PC) See HTPC. (2) (Electronic Product Code) A standard code for RFID tags administered by EPCglobal Inc. (www.epcglobalinc.org). " or "the Company"), an industry leader in the development of alternative and renewable clean energy systems, today announced financial results for the three- and six-month periods ended June 30, 2004 (see attached tables). Power Generation Revenues At present, all of EPC's revenues are generated through a 22-year leasehold interest held by its Buzzard buzzard, common name for hawks of the genus Buteo and the genus Pernis, or honey buzzard, of the Old World family Accipitridae. Honey buzzards feed on insects, wasp and bumblebee larvae, and small reptiles. Power Corporation subsidiary in the Scrubgrass electric power plant located in Venango County, PA. This 83 MW facility cleanly clean·ly adj. clean·li·er, clean·li·est Habitually and carefully neat and clean. See Synonyms at clean. adv. In a clean manner. clean burns more than 600,000 tons of waste coal annually from active and abandoned area mine waste dumps DUMPS a lethal inherited disorder of Holstein cattle that causes infertility. The name is an acronym of Deficiency of Uridine MonoPhosphate S . Power generation revenues for the three months ended June 30, 2004 decreased to $11.6 million from $12.6 million in the same period last year, due primarily to a 58% reduction in accrued power generation revenues resulting from the non-cash FASB FASB See: Financial Accounting Standards Board FASB See Financial Accounting Standards Board (FASB). 13 adjustment made equally to revenue and lease expense, netting to zero at pre-tax income. Actual billed power generation revenues for the quarter decreased by approximately $200,000. This decrease was mainly the result of an extended planned outage out·age n. 1. A quantity or portion of something lacking after delivery or storage. 2. A temporary suspension of operation, especially of electric power. discussed below. Total costs and expenses increased 27% to $17.9 million for the three months ended June 30, 2004 from $14.1 million for the three months ended June 30, 2003. The increase is attributable to $2.2 million of variable non-cash compensation expense related to the vesting Vesting The process by which employees accrue non-forfeitable rights over employer contributions that are made to the employee's qualified retirement plan account. Notes: of performance-based options granted to certain members of management, versus no such expense in the comparable prior year period. Under Accounting Principles Board The Accounting Principles Board (APB) is the former authoritative body of the American Institute of Certified Public Accountants (AICPA). It was created by the American Institute of Certified Public Accountants in 1959 and issued pronouncements on accounting principles until 1973, Opinion Number 25, the Company is required to apply variable stock-based compensation accounting for these options at the end of each reporting period until these options are exercised, cancelled or expired. The expense associated with these options is dependent upon the closing Common Stock price at the end of each reporting period. The increase is also the result of a 14% increase in operating costs operating costs npl → gastos mpl operacionales at Buzzard, due primarily to increased major maintenance expense discussed below and fuel expenses driven by contract escalations and changes in fuel mix and to increased planned outage expenditures. Historically, we have had a planned outage for major maintenance and facility upgrades in the second quarter of each year. This spring we extended the major maintenance period by three days and spent an additional $1 million for the purchase and installation of new equipment. Going forward, this additional expenditure should allow Scrubgrass to perform major maintenance once every 18 months as opposed to once every 12 months. As a result of the foregoing factors, the net loss for the second quarter of 2004 was $6.1 million, or $.20 per share, versus a net loss of $803,000, or $.04 per share, for the same period last year. Jeff Macartney, Chief Financial Officer, stated, "Buzzard continues to operate on plan and remains an important platform as we ramp up Ramp Up To increase a company's operations in anticipation of increased demand. Notes: A company might 'ramp up' operations if they just signed a contract creating substantially more demand for their product. See also: Demand, Economies of Scale the growth of our Microgy Cogeneration Systems, Inc. ('Microgy') subsidiary. Although higher equipment costs impacted second quarter results, we view these expenditures as an investment in our future growth and a reflection of our commitment to the people of Pennsylvania. The installation of this new equipment contributed to Buzzard setting a record for generating capacity in July 2004 of 100.71%." He continued, "Barring any unforeseen circumstances, we expect to return to profitability in the third quarter of 2004. We also expect that power generating revenues for all of this year will exceed the $53.3 million reported in 2003." Microgy Cogeneration Systems, Inc. Microgy develops and sells anaerobic anaerobic /an·aer·o·bic/ (an?ah-ro´bik) 1. lacking molecular oxygen. 2. growing, living, or occurring in the absence of molecular oxygen; pertaining to an anaerobe. digester di·gest·er n. 1. One that makes a digest. 2. Chemistry A vessel in which substances are softened or decomposed, usually for further processing. Noun 1. ("AD") systems that extract methane gas from farm animal wastes to generate electricity or thermal energy thermal energy Internal energy of a system in thermodynamic equilibrium (see thermodynamics) by virtue of its temperature. A hot body has more thermal energy than a similar cold body, but a large tub of cold water may have more thermal energy than a cup of boiling . Microgy has a current product backlog of $12 million, a portion of which should be realized as revenue before the end of 2004. Kam Tejwani, President and Chief Executive Officer of EPC, commented, "During the second quarter, we moved into the execution stage at Microgy by commencing construction on three (3) AD systems on dairy farms in Wisconsin under our previously announced agreement with Dairyland Power Cooperative. More recently, we signed a contract with De Snayer Dairy to construct an AD system to provide thermal energy to an animal feed processing facility under our previously announced agreement with The Scoular Company. This latest agreement is especially exciting, as it showcases the flexibility of our technology, through its ability to capture and utilize biogas bi·o·gas n. A mixture of methane and carbon dioxide produced by bacterial degradation of organic matter and used as a fuel. biogas Noun gaseous fuel produced by the fermentation of organic waste to generate thermal energy, as opposed to generating electricity." Mr. Tejwani concluded, "During the second quarter of 2004, we also successfully completed a private placement that raised more than $5.6 million in gross proceeds that will support our growth plan. As a result, our balance sheet at June 30, 2004 reflects cash and equivalents of $3.9 million, restricted cash of $2.7 million and working capital of $4.9 million. We look forward to the future with confidence." ABOUT ENVIRONMENTAL POWER CORPORATION Environmental Power Corporation (OTCBB OTCBB See OTC Bulletin Board (OTCBB). : POWR) is a leader in resource management and energy production technologies that serve multiple socially responsible markets. Its wholly-owned subsidiary, Microgy Cogeneration Systems, Inc., owns a license to a proprietary technology to convert manure and food industry wastes into biogas, providing a waste management solution with the potential to pay for itself by producing renewable energy Renewable energy utilizes natural resources such as sunlight, wind, tides and geothermal heat, which are naturally replenished. Renewable energy technologies range from solar power, wind power, and hydroelectricity to biomass and biofuels for transportation. and other residual products a by product, as cotton waste from a cotton mill, coke and coal tar from gas works, etc. See also: Residual valuable to farmers and growers. For more information visit the Company's web site at www.environmentalpower.com. CAUTIONARY STATEMENT The Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995 (the "Act") provides a "safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " for forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . Certain statements contained in this press release such as statements concerning planned projects, statements regarding sales pipeline, backlog and revenue projections, statements containing the words "expects," "estimates," "anticipates," "believes," "projects" and variations thereof, and other statements contained in this press release regarding matters that are not historical facts are forward-looking statements as such term is defined in the Act. Because such statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, uncertainties involving development stage companies, uncertainties regarding project financing Project financing A form of asset-based financing in which a firm finances a discrete set of assets on a stand-alone basis. , the lack of binding commitments and the need to negotiate and execute definitive agreements for the construction and financing of projects, financing and cash flow requirements and uncertainties, difficulties involved in developing and executing on a business plan, difficulties and uncertainties regarding acquisitions, technological uncertainties, risks relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc managing and integrating acquired businesses, unpredictable developments (including plant outages and repair requirements), the difficulty of estimating construction, development, repair and maintenance costs and timeframes, the uncertainties involved in estimating insurance and implied warranty A promise, arising by operation of law, that something that is sold will be merchantable and fit for the purpose for which it is sold. Every time goods are bought and sold, a sales contract is created: the buyer agrees to pay, and the seller agrees to accept, a certain price recoveries, if any, the inability to predict the course or outcome of any negotiations with parties involved with Environmental Power's or Microgy's projects, uncertainties relating to general economic and industry conditions, the amount and rate of growth in expenses, uncertainties relating to government and regulatory policies, the legal environment, intellectual property issues, the competitive environment in which Environmental Power and Microgy operate and other factors, including those described in the Company's most recent Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. , most recent Quarterly Report on Form 10-Q Form 10-Q See 10-Q. , as well as other filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date that they are made. Environmental Power undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
ENVIRONMENTAL POWER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
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3 Months Ended 6 Months Ended
-------------- --------------
June 30, June 30, June 30, June 30,
2004 2003 2004 2003
-------- -------- -------- --------
POWER GENERATION
REVENUES 11,602,886 12,553,759 25,941,274 27,089,093
COSTS AND EXPENSES:
Operating expenses 9,204,006 8,058,879 15,485,128 13,648,725
Lease expenses 4,816,720 4,643,469 9,613,404 9,683,421
General and
administrative 1,553,759 1,287,695 2,876,424 2,732,801
Non-cash compensation 2,206,487 - 2,438,309 -
Depreciation and
amortization 121,356 123,550 245,345 247,480
17,902,328 14,113,593 30,658,610 26,312,427
OPERATING INCOME (6,299,442)(1,559,834) (4,717,336) 776,666
OTHER INCOME (EXPENSE):
Interest income 10,378 4,816 16,673 7,202
Interest expense (179,085) (22,062) (387,065) (47,424)
Amortization of
deferred gain 77,102 77,103 154,205 154,206
Other income - 3,788 - 7,885
(91,605) 63,645 (216,187) 121,869
INCOME BEFORE INCOME
TAXES (6,391,047)(1,496,189) (4,933,523) 898,535
INCOME TAX EXPENSE (261,062) (694,231) (232,389) 551,026
NET (LOSS) INCOME (6,129,985) (801,958) (4,701,134) 347,509
PREFERRED SECURITIES
DIVIDEND REQUIREMENTS OF
SUBSIDIARY $(1,250) $(1,250) $(2,500) $(2,500)
(LOSS) INCOME AVAILABLE
TO COMMON SHAREHOLDERS (6,131,235) (803,208) (4,703,634) 345,009
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
Basic 30,861,546 21,791,279 28,787,756 21,802,808
Diluted 30,861,546 21,791,279 28,787,756 21,854,584
(LOSS) EARNINGS PER
COMMON SHARE
Basic $(0.20) $(0.04) $(0.16) $0.02
Diluted $(0.20) $(0.04) $(0.16) $0.02
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ENVIRONMENTAL POWER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data)
(unaudited)
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June 30, December 31,
2004 2003
-------- ------------
Current Assets $18,988 $16,742
Total Assets $106,723 $103,154
Current Liabilities $13,339 $12,866
Total Liabilities $97,301 $96,535
Shareholders' Equity $9,422 $6,620
Common Shares Outstanding End of Period 34,008 26,645
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