Canadian Equipment Rental Fund Limited Partnership Announces September 30, 2011 Results

TSX Venture Symbol: CFL

CALGARY, Nov. 28, 2011 /CNW/ - Mr. Wayne Wadley, President of CERF GP Corp., the general partner (the "General Partner") of Canadian Equipment Rental Fund Limited Partnership ("CERF LP" or the "Partnership"), is pleased to announce the results for the three and nine months ended September 30, 2011.

Full details of the Partnership's results, in the form of the unaudited condensed interim consolidated financial statements and notes thereto for the three and nine months ended September 30, 2011 and Management's Discussion and Analysis of the results dated November 23, 2011 are available on SEDAR at www.sedar.com and on the Partnership's website at www.cerfcorp.com.

Highlights of the three and nine months ended September 30, 2011 were:

  • Revenues increased 77% to $17,688,218 for the nine months ended September 30, 2011 from $10,013,343 for the nine months ended September 30, 2010.

  • Net income increased to $1,157,866 for the nine months ended September 30, 2011 compared to a loss of $(292,609) for the same period in 2010. Net income in 2011 was reduced by a onetime charge of $193,838 related to the cost of converting to a public corporation on October 1, 2011.

  • EBITDA increased 63% to $5,128,492 for the nine months ended September 30, 2011 compared to $3,139,869 for the same period in 2010.

  • Acquisition of Maplethorpe Contractors Ltd. ("MCL"), a private integrated waste management company, was completed on April 29, 2011. The acquisition of MCL is considered to be immediately accretive to the Partnership's operations and significant synergies are expected to be realized in the future. Since the acquisition on April 29, 2011 MCL has contributed sales revenues of $4,772,539 and net income of $787,438 to the consolidated results.

  • Revenues, excluding revenues contributed by MCL, for the quarter ended September 30, 2011 increased 20% when compared to revenue for the same quarter of 2010.

  • Net income per limited partnership unit was $0.04 for the quarter, in comparison to the 2010 third quarter net loss per unit of $(0.03).

  • The Partnership distributed $0.06 per unit for the quarter to unit holders of record as at September 30, 2011. Total distributions for the nine months amount to $0.18 per unit.

On September 29, 2011, the Limited Partnership Unitholders approved a plan of arrangement agreement, (the "Arrangement") among CERF LP, the General Partner, and CERF Incorporated ("CERF Inc."), a wholly owned subsidiary of CERF LP, under Section 193 of the Business Corporations Act (Alberta).  The Arrangement resulted in the conversion of CERF LP from a limited partnership to a taxable Canadian corporation, namely CERF Inc.  The Arrangement became effective on October 1, 2011.

The Arrangement resulted in CERF Inc. carrying on the businesses presently carried on by CERF LP. The Board of Directors of CERF Inc. is comprised of the previous members of the Board of Directors of the General Partner and the management of CERF Inc. is comprised of the management of the General Partner and the subsidiaries of CERF LP.

The Board of Directors anticipates that there will be no change in distribution policy as a result of completion of the Arrangement and that CERF Inc. will declare cash dividends on a quarterly basis substantially in the same manner as distributions have previously been made by CERF LP prior to the completion of the Arrangement. CERF Inc. expects to designate any dividends paid as "eligible dividends" for Canadian federal income tax purposes, which are anticipated to qualify for the enhanced federal dividend tax credit in Canada.

Unitholders received one common share of CERF Inc. in exchange for each unit held as of October 1, 2011. The Arrangement did not result in any benefits for, or change of control, termination or other payments being made to, any officers, directors or employees of CERF LP or any of its subsidiaries or of the General Partner.

The exchange of units for common shares is expected to have occurred on a tax deferred rollover basis for Unitholders. This information is not intended to be, and should not be construed as, tax advice and Unitholders should consult with financial advisors, legal counsel or accountants regarding the tax consequences of the exchange.

The Board of Directors believes that the Arrangement enabled CERF Inc. to pursue its current strategic plan for the benefit of shareholders. Given the federal government changes to tax legislation regarding SIFTs which, for CERF LP, have been effective since January 1, 2011, resulting in the diminished value of the publicly traded limited partnership structure since that time, the Board of Directors believes that the best opportunity for creating value was to move to a corporate structure effective on October 1, 2011, allowing CERF LP, to thereafter continue as a dividend paying public corporation.

In addition, the Board of Directors believes that the Arrangement provides a number of compelling and strategic benefits including, among other things, the expectation that a conversion to a public corporation would:

  • remove CERF LP from any uncertainty that exists today in the publicly traded partnership marketplace;

  • remove the restrictions on non-resident ownership applicable to "Canadian partnerships" (as defined in the Income Tax Act (Canada)), which may provide CERF Inc. greater access to capital and improved liquidity;

  • permit CERF Inc.'s financial and operational performance to be more easily valued relative to its corporate peers;

  • position CERF Inc. to invest in and structure attractive opportunities for growth and expansion;

  • provide for the payment of dividends to shareholders of CERF Inc. with a view to sustainability while at the same time delivering strong returns through capital appreciation; and

  • be accomplished, from a Canadian federal income tax perspective, on a tax deferred rollover basis for Unitholders.

Mr. Wadley makes the following statements:

"The quarter ended September 30, 2011 resulted in record breaking revenues exceeding $7,000,000.  This represents an increase of 114% from the same period last year and an increase of 77% over the corresponding nine month period in prior year.  The increase in revenue was due in part to the fact that it was the first full quarter that Maplethorpe Contractors Ltd.'s ("MCL") results were reported in the consolidated results of the Partnership.

Rental operations revenue from 4-Way saw an increase of 20% for Q3 year over year and a 26% increase for the nine months compared to last year.  The increased activity that started in late 2010 in the construction, housing and infrastructure sectors continued throughout 2011.   We see that trend continuing for the foreseeable future.

The wet weather conditions in May and June gave way to more seasonably drier conditions throughout the quarter which led to a very busy period for MCL as contractors and remediation companies trying to catch up on the backlog of Q2 projects brought increased volumes of waste material to the MCL operated facilities.  The MCL acquisition is performing well and is doing what we expected of them.  MCL management has identified many strategic opportunities.  We are looking forward to growing that segment of our business.

Smart-Way continues to grow both in the Edmonton and Calgary markets as demand for their innovative products and services are being embraced by more and more contractors. For the nine months ended September 30, 2011, revenue from Smart-Way was $1,082,000, an increase of 78% over the same period in 2010.

We continue to work on the integration strategies of our three operating companies as each organization becomes more familiar with the strengths and expertise of their respective sister companies and how they can use those strengths to better service and supply our customers."

CERF LP is an Alberta limited partnership engaged in the rental, sale and service of industrial and construction equipment and provides waste management and environmental services.  CERF LP converted to a public corporation on October 1, 2011 which trades on the TSX Venture Exchange under the symbol "CFL" and currently has 9,530,906 shares issued and outstanding.

Forward-Looking Statements

Certain information contained herein relating to, but not limited to, CERF LP and its businesses, the anticipated completion of the Arrangement and the statements of Mr. Wadley, constitutes forward-looking information under applicable securities laws. All statements, other than statements of historical fact, which address activities, events or developments that CERF LP expects or anticipates may or will occur in the future, are forward-looking information. Forward-looking information typically contains statements with words such as "may", "estimate", "anticipate", "believe", "expect", 'plan", "intend", "target", "project", 'forecast" or similar words suggesting future outcomes or outlook. Forward-looking statements in this news release include, but are not limited to, statements with respect to the Arrangement including, but not limited to, the timing and completion of the Arrangement, the anticipated benefits of the Arrangement, the receipt of the necessary consents and approvals for the Arrangement to proceed, and the anticipated Canadian federal tax treatment of dividends declared and paid on the Common Shares. The risks and uncertainties that may affect the forward-looking statements in this news release include, but are not limited to, the following factors:  CERF LP's ability to successfully obtain the regulatory, stock exchange, court and any other third party approvals necessary to complete the Arrangement; the failure to complete the Arrangement and the resulting continued application of the SIFT legislation to CERF LP; the failure to realize the anticipated benefits of the Arrangement; and changes in Canadian federal tax laws. Additional information on risks, uncertainties and factors that could affect CERF LP's operations or financial results is included in its filings with the securities commissions or similar authorities in the provinces of British Columbia, Alberta and Ontario, as may be updated from time to time. Many of the risks described in such filings will also be applicable to CERF Inc. following completion of the Arrangement. Readers are also cautioned that such additional information is not exhaustive. The impact of any one risk, uncertainty or factor on a particular forward-looking statement is not determinable with certainty as these factors are independent and management's future course of action would depend on its assessment of all information at that time.

Although CERF LP believes that the expectations conveyed by the forward-looking information are reasonable based on information available on the date of preparation, no assurances can be given as to future results, levels of activity and achievements. Undue reliance should not be placed on the information contained herein, as actual results achieved will vary from the information provided herein and the variations may be material.  CERF LP makes no representation that actual results achieved will be the same in whole or in part as those set out in the forward-looking information. Furthermore, the forward-looking statements contained herein are made as of the date hereof and CERF LP does not undertake any obligation to update publicly or to revise any forward-looking information, whether as a result of new information, future events or otherwise. Any forward-looking information contained herein is expressly qualified by this cautionary statement.


Summarized financial results for the three and nine months ended September 30, 2011 follow:

CANADIAN EQUIPMENT RENTAL FUND LIMITED PARTNERSHIP
Condensed Interim Consolidated Statements of Financial Position
Unaudited, in Canadian dollars
  September 30, 2011    December 31, 2010
Assets    
Current assets    
Cash $   1,349,559 $     5,011,552
Accounts receivable 5,367,564 3,972,819
Inventory 920,164 713,026
Prepaid expenses and deposits 231,938 224,351
  7,869,225 9,921,748
     
Non-current assets    
Loan receivable 716,160
Property and equipment 21,729,322 15,802,840
Intangibles 2,045,016
Goodwill 1,676,206 203,477
Deferred income taxes 155,394
  26,166,704 16,161,711
Total assets $   34,035,929 $    26,083,459
     
Liabilities and Partners' Equity    
Current liabilities:    
Bank indebtedness $   1,372,016 $                 —
Accounts payable and accrued liabilities 2,760,767 2,297,724
Distributions payable 571,854 366,987
Income taxes payable 582,137
Note payable 300,000 300,000
Current portion of long-term debt 3,355,254 1,714,645
Current portion of finance leases 368,556 106,685
  9,310,584 4,786,041
     
Non-current liabilities:    
Long-term debt 4,711,407 4,154,666
Obligation under finance leases 4,595,202 4,324,074
Deferred income taxes 604,693
  9,911,302 8,478,740
     
Partners' equity    
Limited partnership units 17,201,490 14,765,518
Unit purchase loans receivable (309,532) (374,535)
Contributed surplus 544,882 548,802
Deficit (2,622,797) (2,121,107)
  14,814,043 12,818,678
     
     
   

CANADIAN EQUIPMENT RENTAL FUND LIMITED PARTNERSHIP
Statements of Condensed Interim Consolidated Comprehensive Income
Unaudited, in Canadian dollars
           
    Three months ended
September 30
Nine months ended
September 30
  2011 2010 2011 2010
Revenues        
  Equipment rental $  2,509,475 $  2,157,700 $  8,005,509   $  6,681,293
  Waste management 3,349,513 231,630 5,854,701 608,031
  Sales of equipment, fuel and parts 865,355 632,987 2,978,294 1,989,330
  Service and other 285,962 253,022 849,714 734,689
    7,010,305 3,275,339 17,688,218 10,013,343
Direct expenses        
  Direct operating costs 3,589,688 1,468,697 8,464,746 4,393,198
  Depreciation of operating and rental        
     equipment 1,092,193 794,370 2,613,046 2,430,506
  Cost of sales of equipment, fuel and parts 666,652 465,368 2,342,068 1,454,356
    5,348,533 2,728,435 13,419,860 8,278,061
    1,661,772 546,904 4,268,358 1,735,282
Operating expenses        
  General and administrative 792,831 372,598 1,584,931 1,036,478
  Depreciation of general property and         
     equipment 85,739 89,874 252,536 251,396
  Amortization of intangible assets 103,683 - 172,016 -
  Business acquisition 46,805 - 174,187 -
    1,029,058 462,472 2,183,670 1,287,874
Other expenses        
  Finance costs 267,636 241,366 703,629 738,802
           
Income (loss) before income taxes 365,078 (156,934) 1,381,059 (291,395)
         
Income taxes (recovery) (22,510) 1,264 223,193 1,214
           
Net income and comprehensive income (loss) for the period $  387,588 $ (158,198) $  1,157,866 $   (292,609)
           
Net income (loss) per unit        
  Basic $  0.04 $  (0.03) $  0.13 $  (0.05)
  Diluted $  0.04 $  (0.03) $  0.13 $  (0.05)

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.

For further information:

Wayne Wadley, President and CEO at (403) 850-4095 or by email at wwadley@cerfcorp.com or Ken Stephens CFO at (403) 281-1042, by fax at (403) 238-2720 or by email at kstephens@cerfcorp.com.