CALGARY, ALBERTA--(Marketwired - April 28, 2016) - CERF Incorporated (the "Company" or "CERF") (TSX VENTURE:CFL) today announced its financial and operating results for the year ended December 31, 2015 and the three months ended December 31, 2015.
YEAR END FINANCIAL HIGHLIGHTS
Amounts in the following tables are presented in thousands of dollars, except for per share amounts and percentages.
Twelve months ended | Three months ended | |||||||
December 31 | December 31 | |||||||
(in $ 000s) | 2015 | 2014 | 2015 | 2014 | ||||
Revenue | 46,467 | 57,967 | 8,829 | 20,522 | ||||
Gross margin | 6,248 | 17,395 | (278 | ) | 6,360 | |||
Adjusted EBIT1 | (1,437 | ) | 10,505 | (2,663 | ) | 4,138 | ||
Net (loss) income | (30,052 | ) | 5,073 | (16,889 | ) | 2,036 | ||
Net (loss) income per share | ||||||||
Basic | ($0.83 | ) | $0.22 | ($0.46 | ) | $0.06 | ||
Diluted | ($0.83 | ) | $0.22 | ($0.46 | ) | $0.06 | ||
Adjusted EBITDA2 | 9,780 | 18,527 | 37 | 6,861 | ||||
Dividends paid per share | $0.16 | $0.24 | $0.02 | $0.06 |
1,2 | See Financial Measures Reconciliations below |
RECENT DEVELOPMENTS
Subsequent to the year ended December 31, 2015, management has made significant changes and delivered the following to both adapt to current market conditions and to best position the company for future growth.
SELECT FINANCIAL RESULTS
SELECT OPERATING RESULTS
Industrials Division - Waste Management & Equipment Rentals Segments
Waste Management Segment - 29% of CERF 2015 revenue
Industrial Rentals Segment - 33% of CERF 2015 revenue
Energy Services Division - 38% of CERF 2015 revenue
OUTLOOK
The uncertain and challenging economic environment experienced in 2015 due to the decline and instability of commodity prices continues into 2016 and currently shows no sign of reversing. This environment has caused CERF's customers to reduce their 2016 capital expenditure programs and delay investment decisions which have directly impacted the utilization and day rates of equipment in CERF's Oilfield Rentals and Industrial Rentals segments.
In response to this reality, management continues to actively manage costs and refine the strategy to ensure maximum equipment utilization. Specifically, commencing in the fourth quarter of 2015 and throughout 2016, management has reduced headcount, including many senior positions, reduced labor hours, consolidated operating facilities and made reductions in discretionary spending to align the cost structure to the level of activity currently experienced. Management expects activity levels for oilfield rentals to remain low until such time that commodity prices stabilize at a level that results in increased producer spending.
CERF's operational performance, service quality and best-in-class equipment rental fleet are instrumental to maintain and grow its market share. Management believes the meaningful actions taken in the fourth quarter of 2015 and the first quarter of 2016 have positioned the company to weather the current oilfield services downturn and maintain the Company's strong customer base and reputation.
The Waste Management segment continues to provide steady cash flows from its several government-owned waste facility contracts. The economic downturn however has had a negative impact, albeit minimal, on disposal volumes for both municipal waste and soil tonnage levels. The volume decrease is being closely monitored by management to ensure progressive measures are taken to mitigate any potential profit erosion. Management had expected a modest decline in commercial and new residential collections given the current economic environment, but the addition of a major collections contract in the first quarter of 2016 and earlier than anticipated spring conditions have resulted in increased volumes to offset these reductions.
With a largely new management team in place, the Company is expanding its market reach and customer base from beyond its traditional energy services and general commercial customers to new industry segments including industrial facilities and pipeline construction. This will lead to more diversity in its revenue streams and increase the utilization of existing rental equipment by penetrating new market segments that are less affected by the current economic downturn.
SELECTED QUARTERLY FINANCIAL INFORMATION
Dec | Sept | June | Mar | Dec | Sept | June | Mar | ||||||||||
31 | 30 | 30 | 31 | 31 | 30 | 30 | 31 | ||||||||||
(in $ 000s) | 2015 | 2015 | 2015 | 2015 | 2014 | 2014 | 2014 | 2014 | |||||||||
Revenue | 8,829 | 10,686 | 9,292 | 17,660 | 20,522 | 15,006 | 10,014 | 12,424 | |||||||||
Net income (loss) | (16,689 | ) | (12,639 | ) | (1,966 | ) | 1,242 | 2,036 | 1,293 | 257 | 1,488 | ||||||
Adjusted EBITDA1 | 37 | 2,954 | 1,255 | 5,534 | 6,861 | 5,039 | 2,602 | 4,026 | |||||||||
Adjusted EBITDA per share | |||||||||||||||||
- basic1 ($) | 0.00 | 0.08 | 0.03 | 0.15 | 0.19 | 0.20 | 0.16 | 0.25 | |||||||||
Net income (loss) per share | |||||||||||||||||
Basic ($) | (0.46 | ) | (0.35 | ) | (0.05 | ) | 0.03 | 0.06 | 0.05 | 0.02 | 0.09 | ||||||
Diluted ($) | (0.46 | ) | (0.35 | ) | (0.05 | ) | 0.03 | 0.06 | 0.05 | 0.02 | 0.09 | ||||||
Dividend per share ($) | 0.02 | 0.02 | 0.06 | 0.06 | 0.06 | 0.06 | 0.06 | 0.06 | |||||||||
Dividend declared | 728 | 727 | 2,178 | 2,175 | 2,173 | 2,130 | 1,055 | 968 | |||||||||
Annualized payout ratio1 | -119 | % | 55 | % | 53 | % | 65 | % | 72 | % | 76 | % | 65 | % | 44 | % |
LIQUIDITY AND CAPITAL RESOURCES
On April 28, 2016, the Company's Syndicated Bank Credit Facility was amended under the Third Amending Agreement to amend the Debt to EBITDA and Interest Coverage ratios as follows.
Mar 31 | June 30 | Sept 30 | Dec 31 | Mar 31 | |||||||
Third Amending Agreement | 2016 | 2016 | 2016 | 2016 | 2017 | Thereafter | |||||
Debt/EBITDA | 5.75:1 | 5.50:1 | 5.50:1 | 4.00:1 | 3.50:1 | 3.00:1 | |||||
Interest Coverage | 3.25:1 | 3.25:1 | 2.75:1 | 2.75:1 | 3.50:1 | 3.50:1 |
The Third Amending Agreement includes a $10.0 million reduction in the authorized amount of the total facility from $65.0 million to $55.0 million. The resulting authorized amount is now comprised of a $48.5 million revolving Operating Facility and a $6.5 million revolving Capex Facility.
NON-IFRS MEASURES RECONCILIATION
CERF uses certain measures in this MD&A which do not have any standardized meaning as prescribed by International Financial Reporting Standards ("IFRS"). These measures which are derived from information reported in the consolidated statements of operations and comprehensive income may not be comparable to similar measures presented by other reporting issuers. These measures have been described and presented in this MD&A in order to provide shareholders and potential investors with additional information regarding the Company.
Investors are cautioned that EBITDA, adjusted EBITDA and adjusted EBITDA per share, adjusted free cash flow and payout ratio are not acceptable alternatives to net income or net income per share, a measurement of liquidity, or comparable measures as determined in accordance with IFRS.
EBITDA and Adjusted EBITDA
EBITDA refers to net income before finance costs, income taxes, depreciation, amortization, and gains or losses on disposal of property and equipment. Adjusted EBITDA is calculated as EBITDA before costs associated with business acquisition costs and share based compensation. These measures do not have a standardized definition prescribed by IFRS and therefore may not be comparable to similar captioned terms presented by other issuers.
Management believes that EBITDA and Adjusted EBITDA are useful measures of performance as they eliminate non- recurring items and the impact of finance and tax structure variables that exist between entities. "Adjusted EBITDA per share - basic" refers to Adjusted EBITDA divided by the weighted average basic number of shares outstanding during the relevant periods.
A reconciliation of net income to Adjusted EBITDA is provided below:
Three months ended | Twelve months ended | |||||||
December 31 | December 31 | |||||||
(in $000s) | 2015 | 2014 | 2015 | 2014 | ||||
Net (loss) income | (16,688 | ) | 2036 | (30,052 | ) | 5,073 | ||
Add: | ||||||||
Finance costs | 587 | 600 | 1,881 | 1,875 | ||||
Depreciation | 2,662 | 2,676 | 11,066 | 7,915 | ||||
Amortization of intangible assets & impairment of goodwill | 14,451 | 508 | 28,453 | 1,230 | ||||
Income taxes | (1,028 | ) | 766 | (1,781 | ) | 1,890 | ||
EBITDA | (16 | ) | 6,586 | 9,567 | 17,983 | |||
Add: | ||||||||
Stock based compensation | 38 | 47 | 151 | 107 | ||||
Business acquisition costs | 16 | 228 | 62 | 437 | ||||
Adjusted EBITDA | 38 | 6,861 | 9,780 | 18,527 |
Adjusted EBIT
Adjusted EBIT refers to earnings before interest and finance charges, taxes, amortization and impairment of intangibles and business acquisition costs.
A reconciliation of net income to Adjusted EBIT is provided below:
Three months ended | Twelve months ended | |||||||
December 31 | December 31 | |||||||
(in $000s) | 2015 | 2014 | 2015 | 2014 | ||||
Net (loss) income | (16,688 | ) | 2,036 | (30,052 | ) | 5,073 | ||
Add: | ||||||||
Finance costs | 587 | 600 | 1,881 | 1,875 | ||||
Amortization of intangible assets & impairment of goodwill | 14,451 | 508 | 28,453 | 1,230 | ||||
Income taxes | (1,028 | ) | 766 | (1,781 | ) | 1,890 | ||
Business acquisition costs | 16 | 228 | 62 | 437 | ||||
Adjusted EBIT | (2,662 | ) | 4,138 | (1,437 | ) | 10,505 |
Annualized payout ratio
Annualized payout ratio is a non-IFRS measure and is defined by management as dividends declared in the current and preceding 3 quarters divided by adjusted free cash flow generated in the current and preceding three quarters. Management believes that the payout ratio gives readers an indication of the sustainability of dividends. The payout ratio depends on the adjusted free cash flow and the amount of dividends declared payable.
No Conference Call
No conference call will be held in conjunction with this release. Full details of the Company's financial results, in the form of the condensed, consolidated interim financial statements and notes for the three months and year ended December 31, 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".
FORWARD-LOOKING STATEMENTS
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 activit y levels continuing through 2016, 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 2016, 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.
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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