CERF Incorporated Announces 2014 Second Quarter Results

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.