The decrease in revenues is due primarily to reduced production activity in the current economy, which has resulted in a surplus of electricity generation in the energy markets, and therefore lower electricity prices.
The company revised its revenue recognition procedure at the beginning of 2008. The change necessitated the inclusion of a fourth month of revenue, or an extra $1.7 million to the first quarter 2008 revenues. On a pro forma basis, comparing the three months of 2009 versus the same three months of 2008, revenue in the 2009 three month period was $1.2 million versus $5.7 million in the first three months of 2008.
“Moderate temperatures in PJM and lower overall economic activity have resulted in low electricity prices in the last few months, providing a limited number of opportunities for our customers to shift or reduce load in response to prices,” noted Randy Reed, EnergyConnect’s chief financial officer.
Included in the loss for the three months ended March 29, 2008, is an operating loss of $175,000 from the company’s discontinued subsidiary, Christenson Electric.
Operating expenses for the three months ended April 4, 2009 were $2,571,000, compared to $3,102,000 in the three months ended March 29, 2008. The decrease of $531,000 between quarters was primarily due to a reduction in headcount taken over the last two quarters. Also included in the current quarter are charges for non-recurring financing, restructuring and consulting fees. These charges totaled about $259,000 during the quarter.
With respect to the balance sheet, quarter ending unrestricted cash was $724,000 compared to $410,000 at January 3, 2009. This increase of $314,000 is the result of draws under the Company’s new debt facility opened in the first quarter. Accounts receivable and accounts payable decreased by $2,107,000 and $2,560,000, respectively, due to receipts under the PJM ILR capacity program, and payment of those related obligations. Long term debt increased by $2,168,000, net of a debt discount of $332,000. The debt discount was generated by a beneficial conversion feature contained in the $5 million debt agreement the Company signed during the quarter.
Commenting on the first quarter results, Kevin Evans, EnergyConnect’s chief executive officer, said, “I’m encouraged that in spite of this difficult market, we’ve met the following objectives I set for the Company in the first quarter. We increased our callable MWs by 40% to 250 MW, secured $5 million of financing and restructured the business with a new management team. Most importantly, we are on track to reach our financial objective of an operating profit excluding non-cash items, and the timely introduction of new technologies that will enable the market development of price responsive load management.”
