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Press release from CNW Group

CERF INCORPORATED Announces Solid Revenue Growth for the Third Quarter of 2012

Thursday, November 29, 2012

CERF INCORPORATED Announces Solid Revenue Growth for the Third Quarter of 201206:44 EST Thursday, November 29, 2012TSX Venture Symbol: CFLCALGARY, Nov. 28, 2012 /CNW/ - Mr. Wayne Wadley, President of CERF Incorporated (the "Company" or "CERF Inc."), is pleased to announce the results for the three and nine months ended September 30, 2012.Full details of the Company's results, in the form of the unaudited condensed consolidated interim financial statements and notes thereto for the three and nine months ended September 30, 2012 and Management's Discussion and Analysis of the results dated November 27, 2012 are available on SEDAR at and on the Company's website at of Third Quarter and Year to Date Consolidated Financial Results:         In C$,000'sexcept percentages and per shares dataQ32012Q32011$change% YTD 2012YTD2011$change%         Revenue7,7597,01074911%22,51817,6884,47027%Direct Expenses6,5195,4641,05519%18,81413,5365,27839%Gross Margin %16%22% (6)%16%23% (7)%Net Income (Loss)(625)388(1,013)(261)%(407)1,158(1,565)(135)%Adjusted EBITDA1,3942,157(763)(35)%4,5895,497(908)(17)%Adjusted Free Cash Flow1,12399313013%1,2221,937(715)(37)%Trailing 12 Month(T12M)payout ratio 73%69%      T12M dividend per share$0.24$0.24      Highlights of the quarter include:Revenue increased 11% to $7,759,456 for the three months ended September 30, 2012 versus the corresponding period in 2011 and 27% to $22,517,927 for the nine months ended September 30, 2012 versus the corresponding period in 2011;Equipment Rental Business revenue increased 6% for Q3 2012, to $3,893,636, versus the corresponding period in 2011, being 50% of total revenue for the quarter and 54% for the year to date or $12,224,700, versus the corresponding period in 2011 being 67% of total revenue for the nine months ended September 30, 2011;Waste Management Business revenue increased 15% for Q3 2012 to $3,865,820, versus the corresponding period in 2011, being 50% of revenue for the quarter and 46% for the year to date or $10,293,227 of the $22,517,927 total revenue, versus the corresponding period in 2011 being 33% of total revenue for the nine months to date;The integration of the acquisition of The Bin Company (described below), in the Company's Waste Management Business segment, is proceeding well;Just subsequent to the quarter's end, on October 4, 2012 the Company acquired TRAC Energy Services Ltd. ("TRAC") in its Equipment Rental Business 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 and generates approximately $4.5 million in EBITDA on an annual basis;The Company paid dividends of $0.06 per share to shareholders in the third quarter of 2012 for a total of $0.24 for the trailing 12 months ended September 30, 2012; andAdjusted free cash flow continues to be strong generating $3,184,000 for the trailing 12 months ended September 30, 2012 compared to $2,939,000 for the trailing 12 months ended September 30, 2011.Mr. Wadley makes the following statements:Growth Strategy Strong Organic Growth Drivers"The Company is pleased to be in the "sweet spot" of North America in terms of the strong secular growth trends driving the Alberta economy and in turn the Company's Equipment Rental Business and Waste Management Business.  For example, according to the Conference Board of Canada's Fall Outlook, Edmonton had a real GDP growth of 6.3 per cent in 2011, and it is forecasted to grow at 4.6% in 2012, the highest growth rate of any city in Canada.  Calgary is second with an expected growth of 3.8 per cent in 2012.  And, Edmonton and Calgary are expected to be the fastest growing economies in Canada over the next four years."Construction and the oil sands have put Edmonton's growth at the top of the country and are driving the economy.  Approximately 97% of Alberta's oil is found in the greater Edmonton service area where both our Equipment Rental Business and Waste Management Business are located."According to the Centre for Municipal Studies, Alberta energy-related investments are expected to stay vibrant throughout the next four years, there are about $29-billion worth of projects underway in the province and nearly $86-billion worth being proposed for the future""Management believes all of the above are long term growth trends which continue to drive the Company's organic growth despite short term bouts of uncertainty which can lead to temporarily disruptions."Active Acquisition Program"Our strategy is to grow the Company organically and by acquisition.  We have defined acquisition criteria which we follow that we believe will build value for shareholders.  We have been busy executing and integrating acquisitions.  And, we continue to look for new opportunities.""On October 4, 2012, in our Equipment Rental Business Segment, we announced that we had completed the acquisition of TRAC Energy Services Ltd.. TRAC provides rental equipment to the drilling and service sectors in the oil and gas industry.  TRAC has been in business for over eight years and we are pleased that the same management and staff that has made this company successful over that time period has all stayed on under the CERF umbrella.  They continue to expand their customer base, and products and services amoung intermediate and large Canadian oil and gas producers.  Over the past four years, TRAC has experienced a 24% compound annual growth rate despite the downturn in 2008-09.  They have also expanded both their EBITDA and earnings margins over that same period.  In the 12 month period ended May 31, 2012 TRAC produced adjusted EBITDA margins of approximately 55% and generated approximately $4.5 million in adjusted EBITDA.  Some of TRAC's rental equipment is similar to what we have and we will look at ways to extract synergies/efficiencies regarding fleet utilization and marketing.  In the short time since we completed the acquisition, we have been happy with the financial results of TRAC and the integration of TRAC operations with CERF is going according to plan.  We are pleased now to be able to participate more directly in Alberta's strong oil and gas industry."On April 20, 2012, our Waste Management Business Segment acquired the business and key operating assets of The Bin Company.  The Bin Company's business involves waste collection, reduction and disposal in and around the Edmonton area, Alberta market.  The Bin Company's operations are integrating well into our existing Waste Management operations in the Edmonton area.  The acquisition is accelerating our push to increase penetration in the homeowner and retail markets with its innovative products such as the BinBag® which complements our EZ-Bag®.Investments in Growth Result in Higher Direct and Operating Expenses"The Company has been busy making investments in infrastructure, IT networking capabilities, new rental equipment and hiring salespeople and others to build out our growth capabilities, as part of our strategy to grow both organically and by acquisition.  For example, in our Waste Management Business, we built a real time dispatching, tracking and reporting system that improves our value proposition to customers and drove increased revenue this quarter.  In our Equipment Rental Business, we added 4 new salespeople and invested $4,178,722 in new rental equipment in the first nine months of 2012.  More generally, we upgraded our IT network and IT human resources.  Although these investments/expenses were incurred this year and some will continue to be incurred, the returns on these investments we expect will come in the coming quarters in the form of higher revenue and gross margin. For example, in our Equipment Rental Business as the winter months approach demand for rental equipment is expected to be strong. Unfortunately, our investments in Q3 in the form of Direct and Operating Expenses were not rewarded with corresponding revenue/gross margin increases in the quarter."Outlook - Equipment Rental Business Segment"Currently, activity levels are high as the weather turned cold quickly in the Edmonton market and created significant demand for our large sized heater fleet.  Much of this equipment is scheduled to be rented for most of the winter. Historically the Equipment Rental Business rents certain equipment, specifically designed and required for the cold weather construction, in the winter months. As a result the Equipment Rental Business' revenues and cash flows are greater in the first and fourth quarters of the year than they are in the summer months. "Outlook - Waste Management Business Segment"We continue to manage our facilities contracts and despite the colder weather, we are still seeing activity in our landfilling of non-hazardous impacted soils and special waste.  Shortly, we expect to complete construction of an organics and wet wastes transfer floor facility at our managed Leduc Regional Landfill and are already accepting material at this location.  We also secured fall and winter work for the special projects construction team this together with three new landfill cells that will be built at the Leduc and Aspen facilities that will fully commit this team for the 2013 season. Historically the Waste management segment experiences its peak revenue and cash flow in the second and third quarters of the year, the forth and first quarters of the year are slow as a result of the cold weather creating difficult operating conditions.""During the quarter, we were awarded a five year extension on a waste transfer facility management contract with a 28% increase in revenue starting December 2012.""In early October, the Company operated Leduc & District Regional Waste Management Facility ("LDRWMF") won the top award for Site Excellence for our Material Recovery Facility ("MRF") from the Alberta Recycling Management Authority.  The MRF won the award for its efforts in electronic recycling, paint and household hazardous waste recycling and tire recycling.  This award encompasses several criteria including cleanliness, safety for residents and user friendliness, signage, accessibility and usage.  Under contract, the Company provides all of the equipment and manpower necessary to run the LDRWMF.  CERF also manages under contract, five other facilities similar in size or smaller in the central Alberta area.  I would personally like to congratulate the staff at the LDRWMF for their creative efforts in diverting material away from landfill.""During the quarter, we were awarded a five year extension on a waste transfer facility management contract with a 28% increase in revenue starting December 2012. I am pleased with the long term contract extension and perceive it to be a vote of confidence in our management performance""We continue to grow our business platform and have just recently launched a new website promoting various E-Z Bag® products.  This information can be found at"About CERF IncorporatedCERF is engaged in the equipment rental business (the "Equipment Rental Business") and the waste management business (the "Waste Management Business").  The Equipment Rental Business 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 Business consists of landfill management (currently we manage 6 landfill sites in central Alberta), waste facility design and construction services, recycling management and collection services, and waste collection systems design consulting services.CERF Incorporated trades on the TSX Venture Exchange under the symbol "CFL" and currently has 11,671,096 shares issued and outstanding.Forward-Looking StatementsCertain 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" 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 the Alberta and Edmonton area economy, of TRAC  revenues and earnings, realizing synergies between TRAC and the Company in fleet utilization and marketing, that recent cold weather in the Edmonton area will result in a seasonal increase in demand for rental equipment that will remain high throughout Q4 2012 and Q1 2013 and that construction of the three new landfill cells will be completed in 2013,  which 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 risk 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 November 28, 2012 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.Summarized financial results for the three and nine months ended September 30, 2012 follow:     CERF INCORPORATEDCondensed Consolidated Interim Statements of Financial PositionUnaudited; In Canadian dollars      September 30, 2012December 31, 2011Assets  Current assets   Cash—    3,206,281 Accounts receivable5,511,6445,900,994 Inventory1,243,862848,403 Income taxes recoverable433,608— Prepaid expenses and deposits276,694216,326  7,465,80810,172,004    Non-current assets   Loan receivable509,827665,674 Property and equipment24,668,55022,269,785 Intangibles and goodwill3,320,5343,599,104  28,498,91126,534,563Total assets35,964,71936,706,567   Liabilities and Shareholders' Equity  Current liabilities:   Bank indebtedness3,118,767      — Accounts payable and accrued liabilities3,597,5583,755,002 Dividends payable578,602579,915 Income taxes payable—65,463 Current portion of long-term debt2,012,0344,151,093 Current portion of finance leases356,628593,750  9,663,5899,145,223    Non-current liabilities:   Long-term debt8,493,2827,151,519 Obligation under finance leases4,661,6004,874,181 Deferred income taxes320,252623,822  13,475,13412,649,522    Shareholders' equity   Share capital17,649,04817,701,144 Share purchase loans receivable(202,836)(309,532) Contributed surplus386,401382,615 Deficit(5,006,617)(2,862,405)  12,825,99614,911,822Total liabilities and shareholders' equity 35,964,71936,706,567             CERF INCORPORATED Condensed Consolidated Interim Statements of Comprehensive IncomeUnaudited; In Canadian dollars       Three months ended Sept 30Nine months ended Sept 30 2012201120122011Revenues     Equipment rental2,847,7242,509,4758,631,9898,005,509 Waste management3,865,8203,349,51310,293,2275,854,701 Sales of equipment, fuel and parts719,965865,3552,689,1162,978,294 Service and other325,947285,962903,595849,714  7,759,4567,010,30522,517,92717,688,218Direct expenses     Direct operating costs4,818,2933,705,94413,641,6338,581,002 Cost of sales of equipment, fuel and parts522,485666,6522,052,5182,342,068 Depreciation of equipment1,178,1931,092,1933,120,0372,613,046  6,518,9715,464,78918,814,18813,536,116 Gross margin1,240,4851,545,5163,703,7394,152,102Operating expenses     General and administrative1,025,637676,5752,238,9841,468,675 Depreciation of other property and  equipment96,40085,739275,929252,536 Amortization of intangible assets130,517103,683402,093172,016 Impairment of goodwill203,477—203,477— Business acquisition expenses173,06346,805191,026174,187  1,629,094912,8023,311,5092,067,414Other expenses     Finance costs296,247267,636835,363703,629      (Loss) Income before income taxes(684,856)365,078(443,133)1,381,059      Income taxes (recovery)     Current40,39882,663267,588589,599 Deferred(100,064)(105,173)(303,570)(366,406) (59,666)(22,510)(35,982)223,193      Net (loss) income and comprehensive     (loss) income for the period(625,190)387,588(407,151)1,157,866            Net (loss) income per share     Basic(0.06)0.04(0.04)0.13 Diluted(0.06)0.04(0.04)0.13Neither 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 (403) 850-4095 or by email at or Ken Stephens CFO at (403) 281-1042, by fax at (403) 238-2720 or by email at