CERF Incorporated

CERF Incorporated

November 27, 2015 06:00 ET

CERF Incorporated Announces 2015 Third Quarter Results

CALGARY, ALBERTA--(Marketwired - Nov. 27, 2015) - CERF Incorporated (the "Company" or "CERF") (TSX VENTURE:CFL) today announced its financial and operating results for the three and nine months ended September 30, 2015.

"The third quarter of 2015 was again characterized by its challenging market conditions. However, we continue to believe that our diversified businesses, cost management strategies and strong balance sheet will enable CERF to mitigate the effects of a protracted economic downturn," said Wayne Wadley, President and CEO of CERF. "Over the past nine months, we have undertaken cost reduction initiatives which included reducing personnel in our Energy Services Division by 47%. We will continue to review the cost side of our business and focus on initiatives that allow us to maintain flexibility in the current environment."

During the quarter, significant decreases in industry activity resulting from the decline in oil and natural gas prices and its impact on CERF's oilfield rentals business resulted in a one-time impairment provision of $12.5 million on goodwill and intangibles. Net loss for the quarter was $12.6 million compared to a net profit of $1.3 million for the similar quarter in 2014. Excluding the goodwill impairment charge, the net loss for the quarter was $92,000.

Amounts in the following tables are presented in thousands of dollars, except for per share amounts and percentages.
Three months ended Sept. 30 Nine months ended Sept. 30
(in $ 000s) 2015 2014 2015 2014
Revenue 10,686 15,006 37,638 37,446
Gross margin 1,951 4,649 6,527 11,302
Adjusted EBIT1 200 2,797 1,225 6,367
Net (loss) income (12,639 ) 1,293 (13,362 ) 3,038
Net income [loss] per share
Basic (0.35 ) 0.05 (0.37 ) 0.16
Diluted (0.35 ) 0.05 (0.37 ) 0.16
Adjusted EBITDA2 2,954 5,038 9,743 11,667
Dividends declared 727 2,130 5,080 4,152
1,2 See Financial Measures Reconciliations on page 6 of CERF's third quarter 2015 MD&A and see accompanying notes to CERF's third quarter 2015 Condensed Consolidated Interim Financial Statements.


  • Revenues for the third quarter of 2015 increased by $1.4 million or 15% from the previous quarter ended June 30, 2015. However, when compared to the third quarter of 2014, revenues decreased by $4.3 million or 29%. The decrease is primarily the result of declines in the Oilfield Rentals segment and to a lesser extent the Industrial Rentals segment.
  • Adjusted EBITDA increased by approximately $1.7 million over the preceding quarter, but was down $2.1 million or 41% when compared to the third quarter of 2014.
  • As at September 30, 2015 CERF's net debt of $30.6 million representing a 1.8 times net debt to trailing twelve month Adjusted EBITDA.


Industrials Division - Waste Management & Industrial Rentals Segments

Waste Management Segment: 39% of CERF Q3 revenue

  • Waste Management Segment reported revenues of $4.2 million, an increase of 8% or $0.3 million compared to the same quarter in 2014. A 34% increase in collections revenues was offset by a 7% decrease in facilities revenues resulting from lower volumes of non-hazardous soils.

Industrial Rentals Segment: 33% of CERF Q3 revenue

  • Industrial Rentals Segment reported revenues of $3.5 million, a decline of 30% or $1.5 million compared to the same quarter in 2014. The decrease in rental revenues was primarily the result of reduced pricing due to increased competition in the Edmonton market.

Energy Services Division: 28% of CERF Q3 revenue

  • TRAC's reported revenues of $3.0 million declined 51% or $3.1 million compared to the same quarter of 2014. Significantly lower revenues resulted from the continuing low oil and gas price environment that has resulted in a 52% decrease in drilling rig utilization that negatively impacts TRAC's utilization and day rates.
  • Management continued to actively manage costs during the third quarter in response to lower activity levels including a 50% reduction in staff, reduced labor hours, overtime, R&M and discretionary spending.


Over the past twelve months, the oil and gas industry has faced substantial changes in light of the severe decline in crude oil prices. Service providers with good assets, diversified business models and conservative balance sheets are best positioned to manage through this ongoing uncertainty, and CERF is one of those companies.

As current industry conditions continue, competitors in our Energy Services Division will continue to cut into day rates as they compete to maintain utilization rates. As a result, we anticipate further pricing pressures as we move through the fourth quarter and into the first quarter of 2016. In the near term, we anticipate activity to remain significantly below the fourth quarter of 2014 levels, as customers fulfill their 2015 capital spending commitments and look to trim capital spending further heading into 2016. With our cost reductions, we can continue to be competitive in this sector.

The Industrial Rentals Segment has seen rental revenues flatten, as competition remains strong in the Edmonton market. At 4-Way Equipment Rentals, we are committed to adapting to these pressures without sacrificing our high-quality equipment and industry leading service. During the third quarter, we successfully introduced a new aerial equipment category to our product offering in response to customer demand. Although early, we are already seeing encouraging results from our new initiative. With the winter construction season upon us, our heating equipment is starting to make its way out to job sites. Our larger natural gas/propane heaters are ahead of last year's utilization rate, which bodes well for early season activity. We remain cautiously optimistic regarding commitments made by Alberta's new NDP government to increase infrastructure spending. Increased public works spending can be expected to benefit CERF favorably as rental products are needed by contractors.

The Waste Management Segment continues to operate as expected. Municipal household waste volumes remain constant. Special waste volumes are now trending slightly behind last year's volumes but we are working diligently on securing large placement volumes slated for next year. We continue to peruse new contracted facilities management, contracted commercial, industrial waste and disposal opportunities.

For the past year, we have remained focused on right sizing our business to meet the new realities of the Alberta market place. We intend to continue looking at strategic acquisitions at attractive metrics in the current environment, and to further improve capital efficiencies in our core businesses. CERF intends to do this while maintaining our financial flexibility with room on our balance sheet.

Conference Call

CERF will host a conference call on November 27, 2015 at 8:00 a.m. MDT (10:00 a.m. EDT). To access the conference call by telephone dial toll-free 1-866-223-7781. Callers from the Toronto area should use (416) 340-2216. Please connect approximately 10 minutes prior to the beginning of the call.

The conference call will be available for replay two hours after the call by dialing toll free 1-800-408-3053 and entering passcode 1258192. It will remain available by phone until December 11, 2015. The call will also be available within 24 hours on the Company's website at www.cerfcorp.com.

Full details of the Company's financial results, in the form of the condensed, consolidated interim financial statements and notes for the three and nine months ended September 30, 2105 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.

About CERF Incorporated

CERF is a Canadian public corporation with two primary divisions: industrials and energy services. The Industrials division is engaged in the rental of industrial and construction equipment and waste management. The energy services division is engaged in the rental of surface rentals, downhole equipment and accommodations to the Western Canadian Oil and Gas Industry. CERF has paid consecutive quarterly dividends since 2005 and trades on the TSX Venture Exchange under the symbol "CFL".


Certain statements included or incorporated by reference in this press release constitute forward-looking statements or forward-looking information, including management's assessment of expected activity levels continuing through 2015, and expected decrease in demand for rental equipment over the next year as well as forecasted economic measures for the Province of Alberta and oil and natural gas prices and the effect on drilling programs as a result of the decline in oil prices. Forward-looking statements or information may contain statements with the words "anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", "budget", "should", "project", "would have realized', "may have been" or similar words suggesting future outcomes or expectations. Although the Company believes that the expectations implied in such forward-looking statements or information are reasonable, undue reliance should not be placed on these forward-looking statements because the Company can give no assurance that such statements will prove to be correct. Forward-looking statements or information are based on current expectations, estimates and projections that involve a number of assumptions about the future and uncertainties. These assumptions include that demand for industrial rental equipment, will remain relatively constant or grow marginally through 2015, that the economic downturn caused by the low oil price environment will not affect the performance of the waste management segment, that the Company's proactive cost cutting measures currently being implemented will protect future margins and that the Company's diverse operations will protect against profound down swings in the economic environment. Although management believes these assumptions are reasonable, there can be no assurance that they will be proved to be correct, and actual results will differ materially from those anticipated. For this purpose, any statements herein that are not statements of historical fact may be deemed to be forward-looking statements. The forward-looking statements or information contained in this press release are made as of the date hereof and the Company assumes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new contrary information, future events or any other reason, unless it is required by any applicable securities laws. The forward-looking statements or information contained in this press release are expressly qualified by this cautionary statement.

This press release also makes reference to certain non-IFRS measures, which management believes assists in assessing the Company's financial performance. Readers are directed to the section below entitled "Financial Measures Reconciliations" for an explanation of the non-IFRS measures used.

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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