CERF INCORPORATED Announces Strong Results for the Second Quarter of 2013

TSX Venture Symbol: CFL

CALGARY, Aug. 28, 2013 /CNW/ - Mr. Wayne Wadley, President of CERF Incorporated (the "Company" or "CERF"), is pleased to announce the results for the second quarter of 2013.

Full details of the Company's results, in the form of the unaudited condensed consolidated financial statements and notes thereto for the three and six months ended June 30, 2013 and Management's Discussion and Analysis of the results dated August 27, 2013 are available on SEDAR at www.sedar.com and on the Company's website at www.cerfcorp.com.

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

In C$,000's except percentages and per shares data				Q2 2013		Q2 2012		$ change		%		YTD 2013		YTD 2012		$ change		%
Revenue				10,065		7,549		2,516		33%		21,538		14,758		6,780		46%
Direct Expenses				8,301		6,283		2,018		32%		16,094		12,022		4,072		34%
Gross Margin %				17%		17%				0%		25%		26%		18%		7%
Net Income				(134)		63		(197)		(313)%		976		218		758		348%
Adjusted EBITDA				1,784		1,570		214		14%		5,785		3,195		2,590		81%
Adjusted Free Cash Flow				2,762		549		2,213		403%		1,799		(83)		1,822		2,195%
Trailing 12 Month (T12M) payout ratio				53%		76%
T12M dividend per share				$0.24		$0.24

Selected Highlights:

• Revenue increased 33% to $10,065,000 for Q2 2013 versus the corresponding period in 2012 and 46% to $21,538,000 for H1 2013 versus the corresponding six months in 2012;
  
  
• Equipment Rental Segment revenue increased by $1,894,000 or 52% for Q2 2013 and by $5,821,000 or 70% in the first 6 months of 2013 to $14,152,000, versus $8,331,000 in 2012.
  
  
• 4-Way Equipment Rentals Corp. ("4-Way"), consisting of construction and industrial rentals, continued to perform well, contributing $520,000 or 18% in additional revenue for the quarter compared to Q2 2012.  For the six months ended June 30, 2013, 4-Way revenue increased by $1,671,000, a 20% increase versus the same six month period in 2012.  A colder spring in Alberta (as compared to 2012) helped extend the demand for heaters and the generators to run those heaters well into the second quarter of 2013.
  
  
• The acquisition of Trac Energy Services Ltd. ("TRAC") in October of 2012, which provides rental equipment to the drilling and service sectors of the oil and natural gas industry, added revenue of $1,447,000 to the Equipment Rental Segment in Q2 2013, with a total of $4,150,000 in revenue for the first half of 2013.
  
  
• Equipment Rental Segment revenue accounted for 66% of total revenue for the first half of 2013 versus 56% in the first half of 2012. This was due in part to the acquisition of. TRAC;
  
  
• Waste Management Segment revenue increased 15% in Q2 2013 and 16% for the first half of 2013, versus the corresponding periods in 2012;
  
  
• Adjusted EBITDA increased 14% to $1,784,000 for the second quarter of 2013 versus $1,570,000 for the same period in 2012 reflecting the strong EBITDA impact of the TRAC acquisition had on the quarter as well as the strong organic growth in construction rentals.  Further, EBITDA per share in Q2 2013 was $0.16 unchanged from 2012, despite the fact that the Company issued an additional 2,027,729 common shares to acquire TRAC, being a 21% increase in shares outstanding;
  
  
• Net income increased 348% to $976,000 for the six months ended June 30, 2013 or an earnings per share of $0.08 versus net income of $218,000 for the first six months of 2012 or an earnings per share of $0.02; and
  
  
• The Company paid dividends of $0.06 per share to shareholders in each of the first two quarters of 2013 for a total of $0.24 for the trailing twelve months.
  
  
• On July 25, 2013 the Company closed its Canadian equity financing of 4,259,260 units of CERF ("Units"), which included the exercise in full of the over-allotment option to purchase 555,556 Units, at a price of $2.70 per Unit, for gross proceeds of approximately $11.5 million.  Each Unit is comprised of one common share of CERF (a "Common Share") and one common share purchase warrant exercisable for one Common Share for a period of 18 months following the closing of the Offering, at an exercise price of $3.15 per share, subject to accelerated expiry in certain circumstances at the discretion of the Company.
  
  
• Subsequent to the closing of the Canadian financing the Company repaid non-revolving term loans of $9,359,385 and revolving loans in the amount of $1,385,365 from the net proceeds of the offering.
  
  
• On August 21, 2013 the Company closed its U.S. private placement financing of 129,000 Units at a price of $2.70 per Unit, for gross proceeds of $348,300, and together with CERF's offering of Units in Canada that closed on July 25, 2013, the Company has raised a total of approximately $11.85 million.

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

"The macro outlook for CERF is strong.  The economies of Alberta and Western Canada are expected to continue to grow through the remainder of 2013 and 2014 driving increasing demand for our rental equipment and waste services.  Industrial, commercial and residential construction projects continue as planned with new projects announced each week. This has resulted in continued and increasing demand for our construction rental equipment at 4-Way.  The oil and gas sector continues to grow driving demand for our oilfield equipment rentals at TRAC. As the population grows and Governments tighten the regulations over waste disposal, it drives demand for our waste services at MCL.

Our recent equity offering, which resulted in the Company raising approximately $11.85 million, allows us to pay down bank loans which were incurred when we acquired TRAC in the fall of 2012, and will free up cash flow and credit capacity that will allow us to make internal investments in equipment and seek accretive acquisitions for future growth.

We have seen significant organic growth in construction equipment rental and in oilfield equipment rental since entering that industry with the acquisition of TRAC. The funds provided by the equity offering will allow us to take full advantage of the future demand for rental equipment and waste services.

We believe that the Company is now in a very strong position and is poised for continued growth."

About CERF Incorporated

CERF is 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 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 TSX Venture Exchange under the symbol "CFL" and currently has 16,059,356 common shares issued and outstanding.

Forward-Looking Statements

Certain statements included or incorporated by reference in this press release constitute forward-looking statements or forward-looking information, including the President's assessment of expected activity levels throughout 2013 and continuing through 2014, and expected increase in demand for rental equipment over the next year. 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 assumptions include that demand for rental equipment will continue to increase and that revenues and earnings will continue to grow, and that the Company will be able to invest in new equipment and or acquire accretive acquisitions that will add to the Company's future growth and profitability. Although management believes these assumptions are reasonable, there can be no assurance that they will be proved to be correct, and actual results could 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 in the MD&A 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 three and six months ended June 30, 2013 follow:

CERF INCORPORATED

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION (Unaudited) IN THOUSANDS OF CANADIAN DOLLARS
		June 30, 2013			December 31, 2012
Assets
Current assets
	Accounts receivable	7,957			7,765
	Inventory	1,494			1,369
	Income taxes recoverable	—			590
	Prepaid expenses and deposits	478			297
		9,929			10,021
Non-current assets
	Loan receivable	347			456
	Property and equipment	35,650			35,041
	Intangibles and goodwill	11,217			11,719
		47,214			47,216
Total assets		57,143			57,237
Liabilities and Shareholders' Equity
Current liabilities:
	Bank indebtedness	151			1,569
	Accounts payable and accrued liabilities	4,637			5,771
	Dividends payable	700			700
	Income taxes payable	306			—
	Current portion of long-term debt	3,999			4,430
	Current portion of finance leases	341			451
		10,134			12,921
Non-current liabilities:
	Long-term debt	22,768			19,662
	Obligation under finance leases	4,268			4,420
	Deferred income taxes	2,085			2,190
		29,121			26,272
Total liabilities		39,255			39,193
Shareholders' equity
	Share capital	22,882			22,897
	Share purchase loans receivable	(148)			(203)
	Contributed surplus	615			387
	Deficit	(5,461)			(5,037)
		17,888			18,044
Total liabilities and shareholders' equity		57,143			57,237

CERF INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited) IN THOUSANDS OF CANADIAN DOLLARS
				Three months ended				Six months ended
				June 30, 2013	June 30, 2012			June 30, 2013	June 30, 2012
Revenues				10,065	7,549			21,538	14,758
Direct expenses
	Direct operating costs			6,535	4,667			12,026	8,550
	Cost of sales of equipment, fuel and parts			471	605			1,363	1,530
	Depreciation of equipment			1,295	1,080			2,705	2,079
				8,301	6,352			16,094	12,159
	Gross margin			1,764	1,197			5,444	2,599
Operating expenses
	General and administrative			1,218	709			2,592	1,486
	Depreciation of other property and  equipment			26	19			53	42
	Amortization of intangible assets			251	160			502	272
	Business acquisition expenses			—	11			10	18
				1,495	899			3,157	1,818
Other expenses
	Finance costs			446	288			870	539
(Loss) income before income taxes				(177)	10			1,417	242
Income taxes (recovery)
	Current			(37)	91			540	227
	Deferred			(6)	(144)			(99)	(203)
				(43)	(53)			441	24
Net (loss) income and comprehensive income for the period				(134)	63			976	218
Net (loss) income per share
	Basic			(0.01)	0.01			0.08	0.02
	Diluted			(0.01)	0.01			0.08	0.02

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] ext 5, by fax at [phone] or by email at [email protected].