WaterFurnace Renewable Energy, Inc. 1st Quarter Results: Record First Quarter Sales and Increased Dividend


FORT WAYNE, IN, May 8, 2013 /CNW/ - WaterFurnace Renewable Energy, Inc. [WFI:TSX], the leading manufacturer of energy efficient heating and cooling solutions, today reported first quarter financial results. The Company posted record sales revenue for the period at $29.15 million, an increase of 5.5% over the first quarter of 2012.

Sales in the U.S. were up 9.2% in Q1 2013 versus Q1 2012. Canadian sales continued to be affected by the conclusion of the EcoENERGY federal rebate program and Q1 sales were down 16.7% year over year.  International equipment sales, excluding Canada, were down 11.9% for Q1, year over year.

Gross profit as a percentage of sales increased from 28.2% in Q1 2012 to 32.7% in Q1 2013. In the first quarter 2013, net income was $2.3 million, up $1.5 million from Q1 2012.  Earnings per share increased $0.12, from $0.07 in Q1 2012 to $0.19 in Q1 2013. A portion of these increases were due to a refinement in warranty provision methodology which reduced cost of sales for the three months ended March 31, 2013, by $1.2 million with a corresponding decrease in the provision for warranty claims at March 31, 2013. The remainder of 2013 will be impacted conversely by having increased cost of sales and increases in the provision for warranty claims totaling $1.2 million, making the net effect of this refinement on the year nil.  However, even factoring this refinement into the above metrics, the Company still experienced increased gross profit percentages as compared to Q1 2012 and near record net income and earnings per share.

In mid March, rising health care costs, general inflationary pressures and price increases from vendors necessitated the Company to enact a 4% price increase to its customers.  Thanks to cost cutting and efficiency initiatives, the Company had successfully avoided an increase for nearly two years, with the last one occurring on April 4, 2011.

Operating expenses in Q1 2013 were down 6.7% versus the same period in 2012 as the Company continues cost reduction efforts and begins to see the effects of the expense reductions put in place in late 2012. Selling and marketing expenses were also down for the quarter primarily due to timing of advertising programs.

The Company's Joint Venture in China, WaterFurnace Shenglong HVACR Climate Solutions, significantly outperformed expectations in both revenue and profit.  While the transition of the business is progressing as expected, some capital investment spending and engineering expenses have been moved out to Q2 and Q3.  Nonetheless, the Company is pleased with the progress the team in China has achieved.

The Company reached agreement on an additional OEM manufacturing partnership in Q1.  It is expected this agreement will not add significant revenue until late 2013, but will be of growing strategic importance beginning in 2014.

"We are pleased with our consistent residential market share growth, the results from our difficult decisions in 2012 to reduce expenses in a number of areas and the faster than planned startup of our Joint Venture in China" said Tom Huntington, President and CEO of WaterFurnace. "The personnel and initiatives we've put in place over the last few years are beginning to mature just as the housing industry show signs of recovery. Our outlook for the rest of the year remains positive."

The Board of Directors approved a quarterly dividend of $0.25 U.S. per share for shareholders of record date at the close of market on May 23, 2013, with payment on June 3, 2013.

Chairman of the Board Tim Shields added, "The Board is extremely pleased with our first quarter results. The investments we've made in our people, innovation and strategic partnerships have increased the company's potential and shareholder value.  Given this backdrop, it is appropriate to reflect this in our dividend strategy."

The first quarter report to shareholders is available at www.waterfurnace.com and filed on SEDAR at www.sedar.com.

The CEO and CFO will conduct a webcast covering the results of the quarter at 4:00 PM Eastern Daylight Time on May 9, 2013. Those interested can listen live or to the recorded version at http://www.newswire.ca/en/webcast/detail/1156415/1262679 .

  WaterFurnace Renewable Energy, Inc.
Consolidated Statements of Comprehensive Income
Prepared using International Financial Reporting Standards
(Unaudited-Thousands of U.S.$ except per share data)
  Three months ended March 31,
  2013    2012
Sales  $ 29,152    $ 27,641
  Cost of sales  19,621    19,856
Gross profit  9,531    7,785
  Operating expenses  5,484    5,878
  Research and development expenses  558    510
Income before interest and income taxes  3,489    1,397
  Share of loss from joint venture  (76)    --
  Finance income  21    43
  Finance expense  (94)    (325)
Income before income taxes  3,340    1,115
  Income tax expense  1,007    258
Net income  2,333    857
  Unrealized gain on translation of foreign operations (net of tax)  (18)    46
Other comprehensive income  (18)    46
Total comprehensive income  $     2,315    $     903
Earnings per share U.S.$ on net income  $    0.19    $    0.07

  WaterFurnace Renewable Energy, Inc.
Consolidated Statements of Financial Position
Prepared using International Financial Reporting Standards
(Unaudited-Thousands of U.S.$)
  March 31,   December 31,
  2013    2012
Current assets          
  Cash and cash equivalents  $   12,265    $ 11,928
  Short-term investments  10,238    10,232
  Receivables  16,549    16,045
  Inventory  10,267    10,539
  Prepaids and deposits  695    513
Total current assets  50,014    49,257
Property, plant and equipment  6,309    6,536
Intangible assets  1,471    1,519
Long-term investment  285    285
Investment in joint venture  2,836    2,923
Deferred tax assets  10,747    9,845
Total Assets  $ 71,662    $ 70,365
Current liabilities          
  Payables and accruals  $   5,836    $   6,053
  Income taxes payable  1,126    377
  Provision for warranty claims - current portion  3,980    3,884
Total current liabilities  10,942    10,314
Finance leases  26    38
Deferred compensation  81    280
Provision for warranty claims  20,210    18,938
Total Liabilities  31,259    29,570
Shareholders' Equity      
  Share capital  19,346    18,999
  Foreign exchange translation adjustment  19    37
  Retained earnings  21,038    21,759
Total Shareholders' Equity  40,403    40,795
Total Liabilities and Shareholders' Equity  $ 71,662    $ 70,365

Forward-Looking Information Cautionary Notice

Certain statements in this release constitute forward-looking statements within the meaning of applicable Canadian securities laws. Readers are cautioned not to place undue reliance on such statements. Investors should not rely solely on this information to make investment decisions. These statements are subject to certain assumptions, risks and uncertainties. In addition, WaterFurnace's sales are related to the cost and stability of electricity, fuel oil, propane and natural gas. Federal, state and provincial building codes and energy incentives can also impact sales. WaterFurnace is subject to standard risks associated with most companies, such as normal competitive pressures. These and other risks could cause WaterFurnace's actual results, performance, achievements and developments to differ materially from the results, performance, achievements or developments expressed or implied by such forward-looking statements. Other risk factors can be found in WaterFurnace's Annual Information Form and other public documents filed by WaterFurnace with Canadian securities regulatory authorities. WaterFurnace assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by law.

More Information

WaterFurnace Renewable Energy, Inc. is traded in both Canadian dollars and U.S. dollars on the Toronto Stock Exchange under the symbol WFI for Canadian dollars and WFI.U for U.S. dollars.

WaterFurnace designs, manufactures and distributes geothermal heat pumps. The geothermal units use the renewable solar energy stored just below the surface of the earth to dramatically reduce the energy consumed by buildings for heating, cooling and hot water.

Additional information about the Company and its products is available on the Company's website: www.waterfurnace.com. Or call (260) 478-5667 and ask for investor relations.


SOURCE: WaterFurnace Renewable Energy, Inc.

For further information:

WaterFurnace Renewable Energy, Inc.
9000 Conservation Way
Fort Wayne, Indiana  46809-9794
(260) 478-5667

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