CERF INCORPORATED Announces Strong Results for the Fourth Quarter and Year Ended December 31, 2012

TSX Venture Symbol: CFL

CALGARY, April 25, 2013 /CNW/ - Mr. Wayne Wadley, President of CERF Incorporated (the "Company" or "CERF Inc."), is pleased to announce the results for the fourth quarter and year ended December 31, 2012.

Full details of the Company's results, in the form of the audited consolidated financial statements and notes thereto for the year ended December 31, 2012 and Management's Discussion and Analysis of the results dated April 24, 2013 are available on SEDAR at www.sedar.com and on the Company's website at www.cerfcorp.com.

Summary of fourth Quarter and Year to Date Consolidated Financial Results:

In C$,000's
except
percentages	Q4	Q4	$	%	YTD	YTD	$	%
and per shares
data	2012	2011	change		2012	2011	change
Revenue	11,252	8,922	2,330	26%	33,770	26,610	7,160	27%
Direct Expenses	6,647	5,772	875	15%	26,882	19,802	5,278	39%
Gross Margin %	41%	36%		5%	20%	26%		(6)%
Net Income	669	340	329	97%	262	1,497	(1,235)	(83)%
Adjusted EBITDA	3,372	2,478	894	36%	7,960	7,973	(13)	(0.2)%
Adjusted Free Cash Flow	1,937	2,051	(114)	(6)%	3,214	4,260	(1,046)	(25)%
Trailing 12 Month (T12M) payout ratio	76%	53%
T12M dividend per share	$0.24	$0.24

Selected Highlights of the fourth quarter (Q4) and year ending 2012 include:

• Revenue increased 26% to $11,252,000 for Q4 2012 versus the corresponding period in 2011 and 27% to $33,770,000 for the year ended December 31, 2012 versus 2011;
• Equipment Rental Segment revenue increased 38% in Q4 2012, to $7,100,000, versus $5,138,000 in the same period in 2011, and increased 14% for the year ended 2012  to $19,325,000, versus $16,961,000 for the year ended 2011.  Equipment Rental Segment Revenue was 57% of revenue for the year ended 2012;
• Construction Equipment Rental revenue increased 15% (organically, by $529,000) in the fourth quarter versus the same period in 2011 and increased 5% (organically by $778,000) in the year ended 2012 versus the same period in 2011;
• On October 3, 2012 the Company acquired TRAC Energy Services Ltd. ("TRAC") in its Equipment Rental Segment, which provides rental equipment to the drilling and service sectors in the oil and gas industry and is described in more detail below.  The acquisition allows the Company to participate more directly in Alberta's strong oil and gas industry.  TRAC added $1,480,000 of revenue in the fourth quarter and $747,000 of EBITDA.
• Waste Management Segment revenue increased 9% (by $358,000) for Q4 2012 to $4,152,000, versus the corresponding period in 2011, and increased 50% for the year ended 2012 to $14,450,000 versus 2011 due in part to the acquisition of MCL in Q2 2011.  The Waste Management Segment was 43% of revenue for the year ended 2012;
• Adjusted EBITDA increased 36% to $3,372,000 for the fourth quarter of 2012 versus $2,478,000 for the same period in 2011 reflecting the strong EBITDA impact of the TRAC acquisition made October 3, 2012, just three days into Q4.  Further, EBITDA per share in Q4 2012 was $0.29 versus $0.29 in Q4 2011, despite the fact that the Company issued an additional 2,027,729 common shares to acquire TRAC, being a 21% increase in shares outstanding.  EBITDA for the year ended 2012 decreased 0.2% to $7,960,000 versus 2011;
• Net income increased 97% to $669,000 for the fourth quarter of 2012 versus $340,000 for the same period in 2011;
• The Company paid dividends of $0.06 per share to shareholders in the fourth quarter of 2012 for a total of $0.24 for the year; and
• Adjusted free cash flow continues to be strong generating $1,937,000 for the fourth quarter 2012 compared to $2,051,000 for fourth quarter 2011.

Mr. Wadley, President & CEO makes the following comments:

Fourth Quarter and Year End Results

"I am very pleased with Q4 financial results. Both business segments performed well and are poised for further growth.

In 2011/2012, we made significant investments in new rental equipment and corporate infrastructure such as IT, salespeople, and other human resources preparing for a recovery in the Equipment Rental Segment.  We expected this recovery to take hold in early 2012 but it ended up being delayed until Q4 2012.  As a result, financial results for the first nine months of the year did not meet our expectations as increased expenses were not rewarded with higher expected revenue and margins.  In addition, poor weather conditions (early spring and a wet summer) in the first three quarters of 2012 negatively affected results in both segments. However, we have started to hit our stride in Q4."

Q1 2013

"The recovery of our Equipment Rental Segment that began in Q4 has continued into Q1.  We will be reporting our Q1 results at the end of May."

Strong Growth

Macro Trends Driving Growth

"The strong Alberta economy is the wind at our sails helping to drive our growth.  Our growth is also driven by our business strategy, acquisition program and solid execution.

In terms of the Alberta economy, the Alberta Government Department of Finance and Enterprise estimates 3.8% GDP growth for 2013 and a further 3% for 2014.  Growth drivers such as the $29 billion of current oil sands construction projects underway and nearly $86 billion of new projects proposed, substantial government spending and infrastructure projects and strong immigration are propelling our growth directly and indirectly in CERF's two business segments - Equipment Rentals and Waste Management."

Equipment Rental Growth

"Our Equipment Rental Segment, which includes the recent acquisition of TRAC in October 2012, has a young and in-demand fleet of equipment that will serve us well for the next several years.  This is due to the fact we made significant fleet investments to take advantage of growth opportunities.  In our construction rental business (4-Way), we invested nearly $9MM (net of disposals) in the last two years in new construction equipment in response to the growing need for our equipment and services in the industrial, commercial, residential and infrastructure construction markets.  The recovery we have been planning for in construction rentals finally hit its stride in Q4 and is continuing into Q1 2013.

Similarly, in our oilfield rental equipment business, which began with the TRAC acquisition in October 2012, we have added approximately $1.4MM in new equipment to their $10MM of oil field rental equipment to meet increased demand for their oilfield related products and services the benefits of which will be seen in 2013."

Waste Management Growth

"Our Waste Management Segment with its capabilities being waste facilities management (MCL) and waste removal and disposal (Smart-Way) is experiencing continued growth and is adding stability to our business.  In terms of waste facilities management, contract extensions of five and 10 years respectively at two of our waste management facilities are proof of our strong execution and the stability of a key aspect of our business.  In terms of growth in this area, the recent startup of an organics and wet waste transfer floor adds incremental revenue of over $0.5MM per year without much additional cost.  We continue to look at new and creative ways to recycle and reuse municipal, industrial and oilfield waste to better serve our clients and grow our business.

Our waste removal and disposal business generated a 94% increase in revenue in 2012 to total $3.0MM.  This came partly as a result of an acquisition in April 2012 that added just over $1.05MM in assets.  It was also driven by the development of several innovative products aimed at better servicing the disposal and recycling needs of our customers.  The demand for these products continues to grow.  We have now reached critical mass in this division and are driving solid EBITDA margins."

Acquisitions and Investment

"We have successfully integrated the TRAC acquisition since October 2012 and it is performing well.  This is our fourth acquisition.  It was a highly accretive transaction.  Had we acquired TRAC effective January 1, 2012, as at the end of Q3 2012 it would have added $0.21 of EBITDA per share.

The TRAC acquisition cost $17 MM, being 4x trailing 12 month EBITDA plus working capital and other adjustments totaling $2MM, and was financed with $11.7 MM of increased borrowing and the issuance of 2,027,729 common shares.

CERF continues to evaluate potential acquisitions that are strategic and would complement and expand our two business segments.  Transactions that would increase our geographic reach, be accretive and come with strong, incentivized management are preferred targets for us.

Both our Equipment Rental Segment and Waste Management Segment have real and significant organic growth opportunities available to them that we are excited to act upon moving forward."

About CERF Incorporated

CERF is engaged in the equipment rental business (the "Equipment Rental Segment") and the waste management business (the "Waste Management Segment") in Alberta.  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 oil well site equipment.  The Waste Management Segment consists of complete waste facility management (currently we manage 6 landfill sites in central Alberta) with all that entails 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 TSX Venture Exchange under the symbol "CFL" and currently has 11,671,096 shares issued and outstanding and 583,000 options outstanding.

Forward-Looking Statements

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Certain statements included or incorporated by reference in this press release constitute forward looking statements or forward looking information. Forward looking statements or information may contain statements with the words "anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", "budget", "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, such as the continued growth of TRAC  revenues and earnings, realizing synergies between TRAC and 4-Way in fleet utilization and marketing, that recent cold weather in the Edmonton area will result in a seasonal increase in demand for rental equipment will continue throughout Q1 2013 and that the exceptionally wet weather in Q2 and Q3 2012 will not be repeated in 2013.These uncertainties could cause actual results to 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.  Such risks and uncertainties include, but are not limited to:  general economic conditions, industry conditions, weather conditions, commodity prices, currency fluctuations and competition from other equipment rental companies. The forward looking statements or information contained herein 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.

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Summarized financial results for the year ended December 31, 2012 follow:

CERF INCORPORATED
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
IN CANADIAN DOLLARS
		December 31, 2012	December 31, 2011
Assets
Current assets
	Cash	—	3,206,281
	Accounts receivable	7,764,509	5,900,994
	Inventory	1,368,808	848,403
	Income taxes recoverable	590,598	—
	Prepaid expenses and deposits	296,943	216,326
		10,020,858	10,172,004
Non-current assets
Loan receivable		456,330	665,674
	Property and equipment	35,040,778	22,269,785
	Intangibles and goodwill	11,719,090	3,599,104
		47,216,198	26,534,563
Total assets		57,237,056	36,706,567
Liabilities and Shareholders' Equity
Current liabilities:
	Bank indebtedness	1,568,514	—
	Accounts payable and accrued liabilities	5,770,760	3,755,002
	Dividends payable	700,275	579,915
	Income taxes payable	—	65,463
	Current portion of long-term debt	4,429,914	4,151,093
	Current portion of finance leases	451,461	593,750
		12,920,924	9,145,223
Non-current liabilities:
	Long-term debt	19,661,742	7,151,519
	Obligation under finance leases	4,420,161	4,874,181
	Deferred income taxes	2,189,813	623,822
		26,271,716	12,649,522
Shareholders' equity
	Share capital	22,897,190	17,701,144
	Share purchase loans receivable	(202,836)	(309,532)
	Contributed surplus	387,330	382,615
	Deficit	(5,037,268)	(2,862,405)
		18,044,416	14,911,822
Total liabilities and shareholders' equity		57,237,056	36,706,567

CERF INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
IN CANADIAN DOLLARS
		Year ended December 31
		2012	2011
Revenues		33,769,860	26,609,526
Direct expenses
	Direct operating costs	18,783,390	12,283,301
	Cost of sales of equipment, fuel and parts	3,390,458	3,632,542
	Depreciation of equipment	4,707,903	3,885,908
		26,881,751	19,801,751
	Gross margin	6,888,109	6,807,775
Operating expenses
	General and administrative	3,640,856	2,932,977
	Depreciation of other property and  equipment	372,061	334,294
	Amortization of intangible assets	678,151	275,700
	Impairment of goodwill	203,477	—
	Business acquisition expenses	240,724	199,371
		5,135,269	3,742,342
Other expenses
	Finance costs	1,351,449	1,004,070
Income before income taxes		401,391	2,061,363
Income taxes		139,523	563,971
Net income and comprehensive income for the year		261,868	1,497,392
Net income per share
	Basic	$ 0.02	$ 0.17
	Diluted	$ 0.02	$ 0.16

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.

 

SOURCE: CERF Inc.

For further information contact Wayne Wadley, President and CEO at [phone] or by email at [email protected] or Ken Stephens CFO at [phone], by fax at [phone] or by email at [email protected].