WATERFURNACE RENEWABLE ENERGY, INC. 
By
Deep snows and subzero temperatures halted residential loop installations as well as muted the completion of new homes in the first quarter, with recovery expected throughout the remainder of 2014. Commercial geothermal heat pump industry shipments fared much better during these harsh weather conditions due to industrial sized equipment capable of drilling through frozen ground conditions. This resulted in a Q1 improvement of 8%, with WaterFurnace unit shipments increasing 40%. The water source industry (boiler/tower) systems, which do not require a ground loop, enjoyed a shipment increase of 7% with WaterFurnace unit shipments in this product category increasing 59% on a year over year basis.
Gross profit as a percent of sales increased from 32.7% in Q1 2013 to 33.9% in Q1 2014 primarily due to the productivity improvements completed in 2013.
Propane prices spiked dramatically, providing an opportunity for the Company to launch the most aggressive advertising campaign in Company history. This campaign quadrupled lead generation and doubled website traffic. Additionally, the campaign created a spike in online searches for WaterFurnace and even the term "geothermal heat pump", which bodes well for the remainder of the year. Operating expenses in Q1 2014 were up 12.8% versus the same period in 2013 which was mostly attributed to a $600 thousand national advertising campaign launched during the quarter.
"With the unusual cold and persistent snow of the first quarter behind us, we can now look forward to the rest of the year. We're extremely optimistic," said Tom Huntington, WaterFurnace President and CEO. "New housing starts are occurring, and residential loops are now being installed at a typical pace. Our dealers are very upbeat about this selling season, and we're all looking forward to a more traditional progression for the year."
The Company's Chairman of the Board, Tim Shields, stated, "The first quarter saw a pause in residential installations until the return of good weather. We're looking forward to the rest of 2014 and are confident we'll see significant growth."
The annual 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 Standard Time on Thursday, May 8, 2014. Those interested can listen live or to the recorded version at http://www.newswire.ca/en/webcast/detail/1335797/1476491 or at the Company's website: www.waterfurnace.com.
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Three months ended March 31,
2014 2013
---------------------------------------------------------------------------------------------- -------------- Sales $ 26,719 $ 29,152
Cost of sales 17,660 19,621
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Gross profit 9,059 9,531
Operating expenses | 6,188 | 5,484 |
Research and development expenses | 509 -------------- | 558 -------------- |
Income before interest and income taxes 2,362 3,489
Share of loss from joint venture | (147) | (76) |
Finance income (expense) | 230 -------------- | (73) -------------- |
Income before income taxes 2,445 3,340
Income tax expense 920 1,007
-------------- -------------- Net income 1,525 2,333
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Unrealized loss on translation of foreign operations (net of tax) (56) (18)
Other comprehensive loss (56) (18)
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Total comprehensive income $ 1,469 $ 2,315
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Earnings per share U.S.$ on net income | $ 0.12 | $ 0.19 |
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Prepared using International Financial Reporting Standards
(Audited-Thousands of U.S. $)
March 31, December 31,
2014 2013
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Current assets
Cash and cash equivalents $ 15,484 $ 17,451
Short-term investments 10,255 10,250
Receivables 16,284 17,112
Inventory 10,852 9,541
Prepaids and deposits 778 575
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Total current assets 53,653 54,929
Property, plant and equipment 6,209 6,317
Intangible assets 1,278 1,325
Long-term investments 433 433
Investment in joint venture 2,902 3,049
Deferred tax assets 11,978 11,890
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Liabilities
Current liabilities
Payables and accruals $ 7,431 $ 8,266
Income taxes payable 620 671
Provision for warranty claims - current portion 4,627 4,534
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Total current liabilities 12,678 13,471
Deferred compensation 216 472
Provision for warranty claims 22,209 21,456
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Total Liabilities 35,103 35,399
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Share capital 20,235 19,763
Foreign exchange translation adjustment (126) (70) Retained earnings 21,241 22,851
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Total Liabilities and Shareholders' Equity $ 76,453 $ 77,943
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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.
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.
WaterFurnace Renewable Energy, Inc.
9000 Conservation Way
Fort Wayne, Indiana 46809-9794 (260) 478-5667
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