TSX Venture Symbol: CFL.UN
CALGARY, Aug. 26, 2011 /PRNewswire/ - 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 six months ended June 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 six months ended June 30, 2011 and Management's Discussion and Analysis of the results dated August 25, 2011 are available on SEDAR at www.sedar.com and on the Partnership's website www.cerflp.com.
Highlights of the three months ended June 30, 2011 were:
- 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 $1,904,638 and net income of $267,567 to
the consolidated results.
- Revenues, excluding revenues contributed by MCL, for the quarter ended
June 30, 2011 increased 29% when compared to revenue for the same
quarter of 2010.
- EBITDA for the quarter increased 144% to $1,606,000 compared to $657,000in the three months ended June 30, 2010.
- Net income per limited partnership unit was $0.03 for the quarter, in
comparison to the 2010 second quarter net loss per unit of $(0.10).
- The Partnership distributed $0.06 per unit to unit holders of record as at June 30, 2011.
On August 25, 2011, the Board of Directors of the General Partner approved the entering into an arrangement agreement, expected to be executed on or about August 30, 2011 (the "Arrangement Agreement") among CERF LP, the General Partner, and CERF Incorporated ("CERF Inc."), a wholly owned subsidiary of CERF LP, relating to a proposed arrangement (the "Arrangement") under Section 193 of the Business Corporations Act (Alberta) involving CERF LP, the General Partner, CERF Inc. and the holders (the "Unitholders") of limited partnership units of CERF LP (the "Units"). The Arrangement will result in the conversion of CERF LP from a limited partnership to a taxable Canadian corporation, namely CERF Inc. The Arrangement is expected to become effective on October 1, 2011 (the "Effective Date"). CERF LP intends to seek approval of the Arrangement and other matters from Unitholders at a special meeting of Unitholders expected to be scheduled for September 29, 2011 (the "Meeting").
The Arrangement must be approved by a majority of not less than 66?% of the votes cast by Unitholders, other than CERF LP, the General Partner or any of their respective affiliates, voting in person or by proxy at the Meeting. Completion of the Arrangement is also expected to be subject to the satisfaction or waiver of certain conditions to be set out in the Arrangement Agreement including, among other things, the approval of the Court of Queen's Bench of Alberta and receipt of all requisite regulatory approvals and material third party consents and approvals.
The TSX Venture Exchange (the "TSXV") has conditionally approved, among other things, the listing of the common shares of CERF Inc. ("Common Shares") issuable pursuant to the Arrangement for the issued and outstanding Units. The listing of the Common Shares on the TSXV is subject to CERF Inc. fulfilling all of the listing requirements of the TSXV.
If approved, the Arrangement will result in CERF Inc. carrying on the businesses presently carried on by CERF LP. Following the completion of the Arrangement, the Board of Directors of CERF Inc. will be comprised of the current members of the Board of Directors of the General Partner and the management of CERF Inc. will be comprised of the current management of the General Partner and the subsidiaries of CERF LP.
CERF LP currently anticipates that there will be no change in its distribution policy following the 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.
Pursuant to the Arrangement, Unitholders will receive one Common Share of CERF Inc. in exchange for each Unit held as of the effective time of the Arrangement. If the Arrangement is approved by Unitholders at the Meeting, it is expected that the effective date of the Arrangement will be October 1, 2011. Upon completion of the Arrangement, Unitholders will own all of the issued and outstanding Common Shares and CERF Inc. will own all of the issued and outstanding Units and carry on the businesses presently carried on by CERF LP. The Arrangement will 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 occur 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 will enable CERF LP to pursue its current strategic plan for the benefit of Unitholders. 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 is to move to a corporate structure effective on or about 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 June 30, 2011 incorporates the financial performance of Maplethorpe Contractors Ltd. ("MCL") with the results of the Partnership. MCL represents a step change for the organization adding approximately $1,900,000 in revenue since closing the acquisition. It should also be noted that MCL's performance is only for 2 of the 3 months of Q2 due to the closing date of the transaction being April 29th, 2011.
Revenues for the quarter increased 95% from the same period last year and increased 58% for the corresponding six month periods. Rental and disposal operations from 4-Way and Smart-Way independently also saw an increase in revenues of 29% for Q2 and 30% for the six months compared to last year. EBITDA increased markedly to $1,606,000 for Q2 (up 144% from $657,000 for the second quarter of 2010) and $3,340,000 for the six month period (up 54% from $2,169,000 in 2010).
Although, the unseasonably wet weather in May and June has proved a challenge for MCL they were able to maintain operations and remain open and fully operational throughout heavy and consistent periods of rain. Despite the weather conditions, MCL has serviced all of its clients, completed and made good progress on special construction projects which are still forecasted to come in on budget and on time.
4-Way is experiencing increased activity levels in all sectors, from new equipment sales to demand for more rentals, stemming from heightened economic activity in the Edmonton area but also from the expansion in the oil sands and construction of oil up-graders. Although Q2 saw a 29% increase in revenues, it was tempered by wet weather that delayed some of the summer projects into the fall. This backlog is expected to put even further demand on our very busy rental fleet. Indications from home builders are that they are expecting more activity as we approach 2012 which bodes well for continued rental equipment demand.
Smart-Way continues to make inroads into the Calgary market with its innovative specialty products and services. Equipment has been added to that market to service new contracts. Home builders, general contractors and product suppliers continue to embrace Smart-Way's solutions for waste management. Smart-Way continues to work with 4-Way and other complementary businesses in order to provide single source solutions for their customers. The Edmonton market has been very busy for Smart-Way with near full utilization for their roll-off bin services. Smart-Way enjoys some competitive advantages from the new relationship with MCL, which allows Smart-Way accesses to new disposal and recycling facilities available through MCL."
CERF LP is an Alberta limited partnership engaged in the rental, sale and service of industrial and construction equipment. CERF LP trades on the TSX Venture Exchange under the symbol "CFL.UN" and currently has 9,530,906 units 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 six months ended June 30, 2011 follow:
CANADIAN EQUIPMENT RENTAL FUND LIMITED PARTNERSHIP
Condensed Interim Consolidated Statements of Financial Position
Unaudited, in Canadian dollars
| June 30, | December 31, | ||||||
| 2011 | 2010 | ||||||
| Assets | |||||||
| Current assets | |||||||
| Cash | $ 606,242 | $ 5,011,552 | |||||
| Accounts receivable | 5,152,838 | 3,972,819 | |||||
| Inventory | 829,427 | 713,026 | |||||
| Prepaid expenses and deposits | 288,020 | 224,351 | |||||
| 6,876,527 | 9,921,748 | ||||||
| Non-current assets | |||||||
| Loan receivable | 765,928 | - | |||||
| Property and equipment | 20,975,062 | 15,802,840 | |||||
| Intangibles | 2,122,857 | - | |||||
| Goodwill | 1,676,207 | 203,477 | |||||
| Deferred income taxes | - | 155,394 | |||||
| 25,540,054 | 16,161,711 | ||||||
| Total assets | $ 32,416,581 | $ 26,083,459 | |||||
| Liabilities and Partners' Equity | |||||||
| Current liabilities: | |||||||
| Bank indebtedness | $ 979,643 | $ - | |||||
| Accounts payable and accrued liabilities | 2,647,183 | 2,297,724 | |||||
| Distributions payable | 571,854 | 366,987 | |||||
| Income taxes payable | 499,475 | - | |||||
| Note payable | 300,000 | 300,000 | |||||
| Current portion of long-term debt | 2,968,413 | 1,714,645 | |||||
| Current portion of finance leases | 374,325 | 106,685 | |||||
| 8,340,893 | 4,786,041 | ||||||
| Non-current liabilities: | |||||||
| Long-term debt | 3,786,459 | 4,154,666 | |||||
| Obligation under finance leases | 4,583,453 | 4,324,074 | |||||
| Deferred income taxes | 709,866 | - | |||||
| 9,079,778 | 8,478,740 | ||||||
| Partners' equity | |||||||
| Limited partnership units | 17,201,490 | 14,765,518 | |||||
| Unit purchase loans receivable | (309,532) | (374,535) | |||||
| Contributed surplus | 543,263 | 548,802 | |||||
| Deficit | (2,439,311) | (2,121,107) | |||||
| 14,995,910 | 12,818,678 | ||||||
| Subsequent event | |||||||
| Total liabilities and partners' equity | $ 32,416,581 | $ 26,083,459 | |||||
CANADIAN EQUIPMENT RENTAL FUND LIMITED PARTNERSHIP
Statements of Condensed Interim Consolidated Comprehensive Income
Unaudited, in Canadian dollars
| Three months ended June 30 | Six months ended June 30 | ||||||||
| 2011 | 2010 | 2011 | 2010 | ||||||
| Revenues | |||||||||
| Equipment rental | $ 2,407,469 | $ 1,960,343 | $ 5,496,034 | $ 4,523,593 | |||||
| Waste management | 2,258,910 | 206,175 | 2,505,188 | 376,401 | |||||
| Sales of equipment, fuel and parts | 678,264 | 457,647 | 2,112,939 | 1,356,343 | |||||
| Service and other | 262,111 | 246,759 | 563,752 | 481,667 | |||||
| 5,606,754 | 2,870,924 | 10,677,913 | 6,738,004 | ||||||
| Direct expenses | |||||||||
| Direct operating costs | 3,051,816 | 1,504,138 | 4,875,058 | 2,924,502 | |||||
| Depreciation of operating and rental equipment | 855,863 | 929,834 | 1,520,853 | 1,636,136 | |||||
| Cost of sales of equipment, fuel and parts | 539,669 | 332,516 | 1,675,416 | 988,988 | |||||
| 4,447,348 | 2,766,488 | 8,071,327 | 5,549,626 | ||||||
| 1,159,406 | 104,436 | 2,606,586 | 1,188,378 | ||||||
| Operating expenses | |||||||||
| General and administrative | 411,760 | 381,177 | 792,100 | 663,881 | |||||
| Depreciation of general property and equipment | 76,301 | 70,218 | 166,797 | 161,522 | |||||
| Amortization of intangible assets | 68,333 | - | 68,333 | - | |||||
| Business acquisition | 38,312 | - | 127,382 | - | |||||
| 594,706 | 451,395 | 1,154,612 | 825,403 | ||||||
| Other expenses | |||||||||
| Finance costs | 237,214 | 293,823 | 435,993 | 497,436 | |||||
| Income (loss) before income taxes | 327,486 | (640,782) | 1,015,981 | (134,461) | |||||
| Income taxes | 48,324 | (44,115) | 245,703 | (50) | |||||
| Net income and comprehensive income | |||||||||
| (loss) for the period | 279,162 | $ (596,667) | $770,278 | $ (134,411) | |||||
| Net income per unit | |||||||||
| Basic | $ 0.03 | $ (0.10) | $ 0.09 | $ (0.02) | |||||
| Diluted | $ 0.03 | $ (0.10) | $ 0.09 | $ (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 Canadian Equipment Rental Fund Limited Partnership
