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CERF Incorporated Announces 2014 Second Quarter Results

CERF Reports Revenue of $10 million, Adjusted EBITDA(1) of $2.6 million and Net Income of $257 thousand for Q2 2014

CALGARY, ALBERTA -- (Marketwired) -- 08/18/14 -- Mr. Wayne Wadley, President of CERF Incorporated (the "Company" or "CERF")(TSX VENTURE:CFL), is pleased to announce financial and operating results for the Company for the three months ended June 30, 2014.

"On the whole, CERF delivered a strong second quarter, increasing net income by more than $390 thousand, Adjusted EBITDA by 46%, and again reported revenues in excess of $10 million," stated Wayne Wadley, President and CEO. "Despite several construction related project delays that impacted our 4-Way business, we are very pleased to announce the eighth consecutive quarter in which CERF has delivered results exceeding those reported a year earlier."

Full details of the Company's financial results, in the form of the unaudited, condensed, consolidated interim financial statements and notes for the three months ended June 30, 2014 and Management's Discussion and Analysis of the results are available on SEDAR at www.sedar.com and on the Company's website at www.cerfcorp.com.

Selected Q2 2014 Financial Highlights:

--  Net income increased to $257,000 or $0.02 per basic share in the quarter
    versus a net loss of $134,000 or ($0.01) per share during the prior
    year's quarter; 
--  Adjusted EBITDA increased 46% to $2,602,000 for the quarter ended June
    30, 2014, compared to $1,784,000 for Q2 2013. 
--  EBITDA per basic share, increased 7% to $0.16 in the second quarter
    versus $0.15 in 2013; 
--  The Company paid dividends of $0.06 per share to shareholders in Q2 2014
    while maintaining the annualized payout ratio to 65% from an annualized
    payout ratio of 89% as at Q1 2013; and 
--  During the second quarter, 252,900 warrants were executed resulting in
    proceeds of $796,000 and the exercise of 177,685 agent options resulted
    in proceeds of another $478,000.

Corporate Highlights:


--  As at August 13, 2014, 2,264,636 warrants have been exercised for total
    proceeds of $7.1 million and 245,006 agent options have been exercised
    for proceeds of $662,000.


--  On May 28, 2014, CERF enhanced its capability to provide equipment used
    in directional drilling applications with the acquisition of the
    business and assets of Empire Tool Inc. ("Empire"), a privately owned
    oilfield service and rental business for $9.2 million or approximately
    3.3 times Empire's 2013 adjusted and normalized EBITDA. 
--  On June 26, 2014, CERF announced the proposed strategic business
    combination with Winalta Inc. ("Winalta")(TSXV:WTA), a publically traded
    oilfield accommodation rentals business. With an implied purchase price
    of approximately $65 million including net debt, CERF is acquiring
    Winalta at approximately 4.8 times EV / 2014E EBITDA creating some of
    the following benefits: 
    --  increased EBITDA margins; 
    --  reduced cash flow volatility due to the contract backed nature of
        Winalta's business; 
    --  expanded geographic positioning; 
    --  a more diverse suite of rental assets; and 
    --  greater overall market penetration amongst E&P clients.

"The additions of Empire and Winalta greatly enhance our size and scope in the oilfield rental and services space," stated Mr. Wadley. "Both acquisitions complement and significantly grow our equipment fleet, enabling us to service a much broader customer base. Subject to shareholder approval on August 27, 2014, we look forward to welcoming the entire Winalta team to join us in continuing to expand our business and add value for our shareholders."


--  Margins for MCL were $1,208,000, an increase of 770% when compared those
    delivered in the prior year's quarter. Improvements are a result of
    increased impacted soil volumes, operational productivity and the
    positive result of initiatives to improve the quality of revenue and
    reduce expenses which were implemented in the previous quarter. 

Summary of Second Quarter Consolidated Financial Results:

                                          Three months ended June 30,       
(in $,000s except percentages and                                           
 per share data)                         2014      2013  $ Change         % 
Revenue                                10,014    10,065       -51        -1%
Direct Expenses                         7,661     8,301      -640        -8%
Gross margin                            2,353     1,764       589        33%
Net income (loss)                         257      -134       391         - 
Net income (loss) per basic share        0.02     -0.01      0.03         - 
Adjusted EBITDA(1)                      2,602     1,784       818        46%
Adjusted Free Cash Flow                   667      -963     1,630         - 
Annualized payout ratio                    65%       89%      -24%        - 
Dividends per basic share               $0.06     $0.06         -         - 

(1) See Financial Measures Reconciliations on page 4 of CERF's Second Quarter 2014 MD&A

Summarized financial results for the three months ended June 30, 2014 follow:



                                                               December 31, 
                                               June 30, 2014           2013 
Current assetsCash                                         -            557 
  Accounts receivable                                  8,369          8,433 
  Inventory                                            2,261          1,561 
  Income taxes recoverable                                21              - 
  Prepaid expenses and deposits                          519            397 
                                                      11,170         10,948 
Non-current assets                                                          
Long-term receivable                                     122            238 
  Property and equipment                              44,434         36,890 
  Intangibles and goodwill                            14,271         10,714 
                                                      58,827         47,842 
Total assets                                          69,997         58,790 
Liabilities and Shareholders' Equity                                        
Current liabilities:                                                        
  Bank indebtedness                                      957              - 
  Accounts payable and accrued liabilities             4,837          5,339 
  Dividends payable                                    1,055            963 
  Income taxes payable                                     -            559 
  Current portion of long-term debt                    2,700          1,502 
  Current portion of finance leases                      282            314 
                                                       9,831          8,677 
Non-current liabilities:                                                    
  Long-term debt                                      20,475         14,801 
  Obligation under finance leases                      3,980          4,106 
  Deferred income taxes                                2,286          2,115 
                                                      26,741         21,022 
Total liabilities                                     36,572         29,699 
Shareholders' equity                                                        
  Share capital                                       37,510         32,894 
  Warrants                                               787            835 
  Share purchase loans receivable                        (93)          (148)
  Contributed surplus                                    732            744 
  Deficit                                             (5,511)        (5,234)
                                                      33,425         29,091 
Total liabilities and shareholders' equity            69,997         58,790 

See accompanying notes to the Condensed Consolidated Interim Financial Statements



                                   Three months ended      Six months ended 
                                  June 30,   June 30,   June 30,   June 30, 
                                      2014       2013       2014       2013 
Revenues                            10,014     10,065     22,439     21,538 
Direct expenses                                                             
  Direct operating costs             5,166      6,535     10,627     12,026 
  Cost of sales of equipment,                                               
   fuel and parts                      941        471      2,416      1,363 
  Depreciation of equipment          1,554      1,295      2,945      2,705 
                                     7,661      8,301     15,988     16,094 
  Gross margin                       2,353      1,764      6,451      5,444 
Other expenses                                                              
  General and administrative         1,324      1,218      2,808      2,592 
  Depreciation of other property                                            
   and equipment                        42         26         73         53 
  Amortization of intangible                                                
   assets                              235        251        485        502 
  Business acquisition expenses         34          -         34         10 
  Finance costs                        339        446        655        870 
                                     1,974      1,941      4,055      4,027 
Income (loss) before income                                                 
 taxes                                 379       (177)     2,396      1,417 
Income taxes (recovery)                                                     
Current                               (179)       (37)       452        540 
Deferred                               301         (6)       198        (99)
                                       122        (43)       650        441 
Net income (loss) and                                                       
 comprehensive income                                                       
for the period                         257       (134)     1,746        976 
Net income (loss) per share                                                 
  Basic                               0.02      (0.01)      0.11       0.08 
  Diluted                             0.02      (0.01)      0.11       0.08 
Weighted average number of                                                  
 shares outstanding                                                         
  Basic                         16,629,850 11,671,096 16,362,058 11,671,096 
  Diluted                       16,721,603 11,671,096 16,399,818 11,671,096 

See accompanying notes to the Condensed Consolidated Interim Financial Statements

About CERF Incorporated

CERF Incorporated is a Canadian public corporation engaged in the rental, sale and service of industrial and construction equipment and waste management and environmental services. 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 TSXV under the symbol "CFL".

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.

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