CERF Incorporated

TSX VENTURE : CFL


CERF Incorporated

August 18, 2014 06:30 ET

CERF Incorporated Announces 2014 Second Quarter Results

CERF Reports Revenue of $10 million, Adjusted EBITDA(1) of $2.6 million and Net Income of $257 thousand for Q2 2014

CALGARY, ALBERTA--(Marketwired - Aug. 18, 2014) - Mr. Wayne Wadley, President of CERF Incorporated (the "Company" or "CERF")(TSX VENTURE:CFL), is pleased to announce financial and operating results for the Company for the three months ended June 30, 2014.

"On the whole, CERF delivered a strong second quarter, increasing net income by more than $390 thousand, Adjusted EBITDA by 46%, and again reported revenues in excess of $10 million," stated Wayne Wadley, President and CEO. "Despite several construction related project delays that impacted our 4-Way business, we are very pleased to announce the eighth consecutive quarter in which CERF has delivered results exceeding those reported a year earlier."

Full details of the Company's financial results, in the form of the unaudited, condensed, consolidated interim financial statements and notes for the three months ended June 30, 2014 and Management's Discussion and Analysis of the results are available on SEDAR at www.sedar.com and on the Company's website at www.cerfcorp.com.

Selected Q2 2014 Financial Highlights:

  • Net income increased to $257,000 or $0.02 per basic share in the quarter versus a net loss of $134,000 or ($0.01) per share during the prior year's quarter;
  • Adjusted EBITDA increased 46% to $2,602,000 for the quarter ended June 30, 2014, compared to $1,784,000 for Q2 2013.
  • EBITDA per basic share, increased 7% to $0.16 in the second quarter versus $0.15 in 2013;
  • The Company paid dividends of $0.06 per share to shareholders in Q2 2014 while maintaining the annualized payout ratio to 65% from an annualized payout ratio of 89% as at Q1 2013; and
  • During the second quarter, 252,900 warrants were executed resulting in proceeds of $796,000 and the exercise of 177,685 agent options resulted in proceeds of another $478,000.

Corporate Highlights:

CORPORATE

  • As at August 13, 2014, 2,264,636 warrants have been exercised for total proceeds of $7.1 million and 245,006 agent options have been exercised for proceeds of $662,000.

EQUIPMENT RENTAL, SALES AND SERVICE ACQUISITIONS

  • On May 28, 2014, CERF enhanced its capability to provide equipment used in directional drilling applications with the acquisition of the business and assets of Empire Tool Inc. ("Empire"), a privately owned oilfield service and rental business for $9.2 million or approximately 3.3 times Empire's 2013 adjusted and normalized EBITDA.
  • On June 26, 2014, CERF announced the proposed strategic business combination with Winalta Inc. ("Winalta")(TSXV:WTA), a publically traded oilfield accommodation rentals business. With an implied purchase price of approximately $65 million including net debt, CERF is acquiring Winalta at approximately 4.8 times EV / 2014E EBITDA creating some of the following benefits:
    • increased EBITDA margins;
    • reduced cash flow volatility due to the contract backed nature of Winalta's business;
    • expanded geographic positioning;
    • a more diverse suite of rental assets; and
    • greater overall market penetration amongst E&P clients.

"The additions of Empire and Winalta greatly enhance our size and scope in the oilfield rental and services space," stated Mr. Wadley. "Both acquisitions complement and significantly grow our equipment fleet, enabling us to service a much broader customer base. Subject to shareholder approval on August 27, 2014, we look forward to welcoming the entire Winalta team to join us in continuing to expand our business and add value for our shareholders."

WASTE MANAGEMENT

  • Margins for MCL were $1,208,000, an increase of 770% when compared those delivered in the prior year's quarter. Improvements are a result of increased impacted soil volumes, operational productivity and the positive result of initiatives to improve the quality of revenue and reduce expenses which were implemented in the previous quarter.

Summary of Second Quarter Consolidated Financial Results:

Three months ended June 30,
(in $,000s except percentages and per share data) 2014 2013 $ Change %
Revenue 10,014 10,065 -51 -1 %
Direct Expenses 7,661 8,301 -640 -8 %
Gross margin 2,353 1,764 589 33 %
Net income (loss) 257 -134 391 -
Net income (loss) per basic share 0.02 -0.01 0.03 -
Adjusted EBITDA1 2,602 1,784 818 46 %
Adjusted Free Cash Flow 667 -963 1,630 -
Annualized payout ratio 65 % 89 % -24 % -
Dividends per basic share $0.06 $0.06 - -

1 See Financial Measures Reconciliations on page 4 of CERF's Second Quarter 2014 MD&A

Summarized financial results for the three months ended June 30, 2014 follow:

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION

(Unaudited) IN THOUSANDS OF CANADIAN DOLLARS

June 30, 2014 December 31, 2013
Assets
Current assetsCash - 557
Accounts receivable 8,369 8,433
Inventory 2,261 1,561
Income taxes recoverable 21 -
Prepaid expenses and deposits 519 397
11,170 10,948
Non-current assets
Long-term receivable 122 238
Property and equipment 44,434 36,890
Intangibles and goodwill 14,271 10,714
58,827 47,842
Total assets 69,997 58,790
Liabilities and Shareholders' Equity
Current liabilities:
Bank indebtedness 957 -
Accounts payable and accrued liabilities 4,837 5,339
Dividends payable 1,055 963
Income taxes payable - 559
Current portion of long-term debt 2,700 1,502
Current portion of finance leases 282 314
9,831 8,677
Non-current liabilities:
Long-term debt 20,475 14,801
Obligation under finance leases 3,980 4,106
Deferred income taxes 2,286 2,115
26,741 21,022
Total liabilities 36,572 29,699
Shareholders' equity
Share capital 37,510 32,894
Warrants 787 835
Share purchase loans receivable (93 ) (148 )
Contributed surplus 732 744
Deficit (5,511 ) (5,234 )
33,425 29,091
Total liabilities and shareholders' equity 69,997 58,790

See accompanying notes to the Condensed Consolidated Interim Financial Statements

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Unaudited) IN THOUSANDS OF CANADIAN DOLLARS

Three months ended Six months ended
June 30, 2014 June 30, 2013 June 30,
2014
June 30, 2013
Revenues 10,014 10,065 22,439 21,538
Direct expenses
Direct operating costs 5,166 6,535 10,627 12,026
Cost of sales of equipment, fuel and parts 941 471 2,416 1,363
Depreciation of equipment 1,554 1,295 2,945 2,705
7,661 8,301 15,988 16,094
Gross margin 2,353 1,764 6,451 5,444
Other expenses
General and administrative 1,324 1,218 2,808 2,592
Depreciation of other property and equipment 42 26 73 53
Amortization of intangible assets 235 251 485 502
Business acquisition expenses 34 - 34 10
Finance costs 339 446 655 870
1,974 1,941 4,055 4,027
Income (loss) before income taxes 379 (177 ) 2,396 1,417
Income taxes (recovery)
Current (179 ) (37 ) 452 540
Deferred 301 (6 ) 198 (99 )
122 (43 ) 650 441
Net income (loss) and comprehensive income
for the period 257 (134 ) 1,746 976
Net income (loss) per share
Basic 0.02 (0.01 ) 0.11 0.08
Diluted 0.02 (0.01 ) 0.11 0.08
Weighted average number of shares outstanding
Basic 16,629,850 11,671,096 16,362,058 11,671,096
Diluted 16,721,603 11,671,096 16,399,818 11,671,096

See accompanying notes to the Condensed Consolidated Interim Financial Statements

About CERF Incorporated

CERF Incorporated is a Canadian public corporation engaged in the rental, sale and service of industrial and construction equipment and waste management and environmental services. The Equipment Rental Segment includes the rental of residential, commercial and industrial construction-related equipment, including sales and service of equipment. It also includes the rental and sale of equipment to the drilling and service sectors of the oil and natural gas industry. The Waste Management Segment consists of complete waste facility management (six landfill sites in central Alberta) including waste facility design and construction services, recycling management and collection services, and consulting services. The Waste Management Segment also consists of waste removal and disposal from commercial, industrial and residential customers. CERF Incorporated trades on the TSXV under the symbol "CFL".

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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