2013-WaterFurnace-Annual-Report

Transcription

always
WaterFurnace Renewable Energy, Inc.
2013 ANNUAL REPORT
Nature fuels our product,
passion fuels our success.
When unhindered by
its surroundings, innovation
knows no bounds.
3 day
19.6 %
lead times
growth
WaterFurnace has the
industry’s shortest lead
time for all residential and
select commercial units.
Compound growth rate
in cash and short term
investments 2005 to 2013.
10.8 %
growth
Compound annual growth
rate in dividend payments
per share 2005 to 2013.
$65k
saved
WaterFurnace corporate
headquarters saved over
$65,000 in 2013 and over
$1.44 million since 1991 by
using its very own pond
loop and equipment.
Anywhere power is a problem,
WaterFurnace can be part
of the solution
5000
more fans
310%
increase
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2013 Annual Report
47k
cars off
the road
WaterFurnace units sold
in 2013 represents the
environmental equivalent
of taking 47,000 cars of
off the road forever.
Increased fans
WaterFurnace gained an additonal 5,000 Facebook fans and
increased Twitter followers by 310% in 2013. This represents
the largest HVAC community on social networks.
Contents
6 To our shareholders
7 Four cornerstones
8 The company
10 R edefining the boundaries
of comfort and efficiency
13 Winning the respect
of the industry
14 Winning the hearts of homeowners
16 Looking back at 2013
23 Financials
24 Management’s discussion
and analysis
36
37
38
Management’s responsibility
for financial information
Independent auditor’s report
Consolidated financial
statements
42 Notes to the consolidated
financial statements
70
Corporate information
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2013 Annual Report
to our
shareholders
At WaterFurnace,
we’ve always believed
that our technology
can truly help society
by reducing energy
usage, alleviating
power constraints and conserving
resources—both environmental and
financial. It’s a passion that fuels us to
push forward each and every day.
Since 2008, WaterFurnace has patiently weathered
an economic environment that dampened the growth of
the geothermal industry. As I reported last year, we used
that time to improve our internal processes, expand our
products and strengthen the business in anticipation of
the eventual rebound. These improvements allowed us
not only to grow our cash reserves but also to increase
dividends during the recession. I believe this period will
be looked back on as a pivotal point for the company.
Now, a number of factors are aligning that leave
me hugely enthusiastic about the landscape ahead.
In the fourth quarter of 2013, the economy finally
began to turn the corner. The nation witnessed an
uptick in consumer confidence, a slow rebound in new
construction and a strengthening home market.
Energy efficiency is no longer just a noble
concept. It’s become part of our nation’s culture.
Building owners are recognizing the value of lower
operating and maintenance costs. Homeowners are
embracing increased comfort and freedom from
the increasingly volatile price of fossil fuels like
natural gas, fuel oil and propane. At the same time,
electric utilities are beginning to understand the
wisdom in promoting a solution that slashes peak
demand, reduces the requirements for costly new
infrastructure and creates a year-round customer.
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2013 Annual Report
Internally, we continued our transformation from
a geothermal heat pump manufacturer to a global
provider of energy efficient solutions. We maintained
our investments in the commercial business with new
product development and new agreements to expand
our offerings. Internationally, the China JV outperformed
our expectations and, more importantly, taught us that
complementary commercial products are synergistic
with geothermal products. We’ll take the lessons learned
in China and use them to improve our business in North
America. We’ll also continue to expand infrastructure on
both continents.
Residentially, we solidified our place as the leader
in geothermal market share. We also maintained a
focus on our four cornerstones strategy: home energy
management, net zero buildings, advanced zoning and
variable speed compressor technology. Additionally, we
found success with new OEM partnerships that have the
potential to raise sales and awareness of the technology
to new heights.
The business decisions and preparation we’ve made
over the past few years have left us in a great position
to take advantage of the tailwinds ahead. That’s why we
chose the theme “Water always wins” for this report and
also for 2014.
In addition to powering our geothermal heat pumps and
being in our name, the saying is an apropos analogy to
our business. Water can be held back for only so long.
When forces become great enough to slow its progress,
water is patient and waits. It adapts to the environment
around it, but when the opportunity inevitably presents
itself, water will go around (or through) any obstacle—
building momentum as it goes.
Water always wins.
Tom Huntington
President & CEO
four
cornerstones
1 2
3 4
1
2
3
4
Home energy
management
Advanced
zoning systems
Net zero
homes
Variable capacity
technology
Our Symphony line of energy
management and energy
monitoring products reveal
precisely where electricity is
being used and empowers
homeowners to make lifestyle
changes to reduce its usage.
WaterFurnace is the only
geothermal manufacturer to
offer homeowners a zoning
solution, the IntelliZone2. This
system can provide precise
control of temperatures in up
to six individual areas when
installed with our variable
capacity 7 Series unit. Zoning
provides the highest level of
comfort and energy savings.
Net zero homes produce
as much energy as they
consume on an annual basis.
WaterFurnace geothermal
heat pumps are perfect for
use in buildings looking
to reduce consumption to
net zero. Our IntelliStart/
SureStart products and our
7 Series units carry soft start
components that make them
ideal for use with generators,
photovoltaic and wind
technologies.
Variable capacity technology
is the next revolution in heat
pump technology. It allows a
system to operate at exactly
the level needed rather than
at the one or two speeds
found in most heat pumps.
This provides unmatched
comfort and savings. Our
groundbreaking 7 Series is
the geothermal industry’s
first unit to carry a variable
capacity compressor and is
mated to a variable speed
loop pump and a variable
speed blower motor.
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2013 Annual Report
the
company
WaterFurnace Renewable Energy (The Company)
is the Canada-based parent company supported
by a growing number of brands
WaterFurnace International
GeoStar
Hyper Engineering
Headquartered in Fort Wayne,
Indiana, WaterFurnace has been
raising the standard on innovation
and efficiency since its inception
in 1983. To date, over 373,000
WaterFurnace units have been
installed across all 50 states
and countries around the world.
Although we earned a reputation as
a leader in geothermal heat pumps,
we’ve worked in recent years to
innovate new technologies, integrate
key trends and grow our core
business to represent a portfolio of
clean and sustainable solutions.
GeoStar represents the same
quality and efficiencies that
consumers have come to associate
with WaterFurnace, but is
offered exclusively through the
Distribution channel. Balancing
cost and comfort, GeoStar offers
an impressive product selection
and represents a practical choice
for those looking for a geothermal
system. WaterFurnace Renewable
Energy is fully committed to
GeoStar as an equal brand, as
evidenced by its growth in sales
and infrastructure over the past
year. Visit geostar-geo.com for
more information.
Australia-based Hyper Engineering
designs and manufactures a unique
line of software-driven soft starters
for the air conditioning industry.
With approximately 90 versions
to suit most brands, the product
reduces the inrush current electric
motors use at start up. This extends
the life of equipment, but more
importantly, improves local electric
power quality and eliminates
annoying light flicker.
While the company built a name in
the residential market, we’ve been
making significant strides in the
commercial and international realms.
With a robust line of products, topnotch training, and growing global
recognition, WaterFurnace has
found increasing success despite the
economic climate. To find out more,
visit waterfurnace.com.
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2013 Annual Report
The potential markets for Hyper
Engineering’s products are large
and WaterFurnace plans to expand
the global marketing and sales of
this technology.
WFI
WRE’s joint venture in China,
WaterFurnace Shenglong HVACR
Climate Solutions, Ltd. (WaterFurnace
Shenglong) manufactures and distributes
both geothermal and traditional
heating, ventilation, air conditioning and
refrigeration products under the WFI
brand name. WFI equipment will be
distributed to international markets, but
its primary focus will be for sales in the
People’s Republic of China.
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2013 Annual Report
redefining
the boundaries of
comfort and efficiency
No matter what climate you live in, the temperature
throughout the year varies. For some climates, that
means blazing summers to frigid winters. While air
temperatures also vary greatly from day to night
or winter to summer, the temperature just below
the earth’s surface stays an average 55°-70°F all
year-round. A geothermal heat pump taps into that
renewable solar energy stored in the ground to
provide savings up to 70% on utility bills. Using a
series of underground pipes, it exchanges heat with
the earth instead of outdoor air. The result is the most
comfortable and cost effective way to heat your home
available today.
an ordinary heat pump is forced to collect heat from
frigid winter air, making it least efficient when you
need it to be the most efficient. And unlike a furnace,
our units don’t create heat through combustion. They
simply collect and move it.
Although a geothermal heat pump operates similarly
to a standard heat pump, it exchanges heat with the
ground instead of the outdoor air. In the summer, as
outdoor temperatures rise, a geothermal heat pump
collects the unwanted heat in your home and moves
it to the cooler 55° earth. Meanwhile, ordinary heat
pumps and air conditioners are forced to dump that
heat outside into the hot summer air that’s already
saturated with heat and is less willing to accept more.
That makes ordinary cooling systems less efficient
when you need them to be the most efficient. In the
winter, as outdoor temperatures fall, a geothermal heat
pump draws from an underground reservoir of heat,
concentrates it, and moves it to your home. Meanwhile,
Loops
Geothermal heating and cooling is extremely energyefficient and cost effective, but they also provide an
unmatched level of comfort. Since the system keeps
the temperature so consistent, the unit can run at a
much lower speed providing precise distribution and
quiet operation.
The heart of the geothermal system and its biggest
advantage over ordinary heating and cooling
technologies is the earth loop. The loop transfers heat to
and from the ground, eliminating the need for fossil fuels.
It ensures a clean, quiet, and safe method of comfort. The
type of loop to use, closed loop or open loop, depends
on factors such as the terrain, cost of trenching or drilling,
availability of quality ground water, and available space.
Closed loops are buried in the earth or submerged in a
lake or pond and transfer heat by circulating a solution of
water and environmentally friendly loop fluid. Open loops
use ground water pumped from a well as a heat source.
WaterFurnace units sold in 2013
represent the environmental equivalent
of planting 22.3 million trees.
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2013 Annual Report
1 2
3 4
1
2
3
4
Open Loop
Horizontal Loop
Pond Loop
Vertical Loop
In ideal conditions, an
open loop application can be
the most economical type of
geothermal system. These
use groundwater from a well
as a direct energy source.
Often used when adequate
land surface is available.
Depending on geothermal
system needs and space
available, pipes are placed in
trenches that range in length
from 100 to 400 feet.
Very economical to install
when a large body of water
is available for use by the
geothermal heating and
cooling system. Coils of
pipe are simply placed on
the bottom of the pond
or lake to capture the
geothermal energy.
The ideal choice for a
geothermal heat pump
when available land surface
is limited. Well drilling
equipment is used to bore
small-diameter holes from
100 to 400 feet deep.
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2013 Annual Report
2014 AHR EXPO
®
WINNER
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2013 Annual Report
SI LV E R
Many product lines achieved the ENERGY STAR Most Efficient
2013 designation including the 7 Series, 5 Series, and Synergy3D.
This designation identifies and advances the most efficient
products among those that qualify for ENERGY STAR in
particular product categories.
WaterFurnace also took
home the Silver award
in the light commercial
category, proving that
WaterFurnace is not only
a name that’s well-known
in the residential sector. As
the highest efficiency two
stage commercial unit, the
Envision2 Compact also
boasts a very compact
footprint that’s perfect for
any commercial application.
winning
the respect of
the industry
At WaterFurnace, we strive to make products that
delight not only the homeowners who use them, but
also the contractors and trade professionals who
install them—which isn’t always easy. The industry is
filled with thousands of new products each year from
companies that are household names.
That’s why it’s always special when WaterFurnace
products win accolades from across the industry.
Recently, we released some of the most energy
efficient and technologically advanced products
we’ve ever engineered—and the industry really took
notice. Here are a few of the highlights:
The 7 Series caused quite a stir when it was released.
It was the first variable capacity geothermal heat
pump available to homeowners and represented
efficiencies more than twice as high as any air
conditioner or heat pump, a third higher than any
other geothermal system, and carried monitoring,
communication and diagnostic features the industry
still hasn’t matched.
Despite this, it was flattering to learn we’d won a Gold
in the Dealer Design Awards from The ACHR NEWS.
The awards program, organized by BNP Media and The
ACHR NEWS, is judged by a panel of active HVACR
contractors based on criteria like ease of installation,
maintenance, service, overall design, uniqueness,
and impact on the HVACR industry. Additionally, our
Envision2 Compact won the Silver award in the light
commercial category.
Later in the year, we learned that the 7 Series had
also won The 2014 AHR Expo Innovation Award for
heating. The Innovation Awards recognize products
that best help HVACR practitioners provide safer,
healthier, more efficient, and more comfortable
environments.
All of these awards were special since WaterFurnace
competed head-to-head against other truly impressive
technologies (including other variable speed systems)
from the biggest names in the industry, and because they
were chosen by real contractors and trade professionals.
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2013 Annual Report
Learn more about these homes at
waterfurnace.com/spotlights
Take a look at the first net-zero residential development in the
country. Imagine an entire community so efficient they are
selling electricity back to the power grid. Geothermal heating
and cooling played a pivotal role in achieving net-zero status.
Learn more at waterfurnace.com/spotlights
Alan and Cathy Blum updated their 1867 Wisconsin farm home
without intruding on its historic charm. Improvements include energy
efficient windows and insulation allowing them to capitalize on an
advanced variable capacity 7 Series geothermal system.
Take a look at the first net zero residential development in the country.
Imagine an entire community so efficient they are selling electricity
back to the power grid. Geothermal heating and cooling played a
pivotal role in achieving net zero status.
winning
the hearts of
homeowners
Geothermal owners have proven to be some of
the most engaged advocates in the industry, and
WaterFurnace fans are the best of the best. Whether
it’s on social media, testimonials on our website,
or just word-of-mouth, our WaterFurnace owners
are champions of the brand and love to talk about
their system. In fact, our research has found that the
majority of WaterFurnace owners actually show their
systems to friends and family.
That’s one reason the WaterFurnace Facebook page
has become the largest HVAC community on the social
media site. Are you so excited by your current heating
and cooling system that you’d show it off? How many
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2013 Annual Report
of your friends post pictures of themselves with their
HVAC unit? Ours do.
WaterFurnace is leveraging this resource by providing
homeowners the means to spread the word about
geothermal. We developed a program to periodically
give away t-shirts, stickers and other WaterFurnace
branded materials on our Facebook page. This
encourages fans to generate word-of-mouth buzz.
To further identify and encourage loyal customers,
WaterFurnace is also developing an Owner’s Club
where we’ll send out gifts, filter reminders, and other
fun tips for their unit.
Our new WaterFurnace cut our utility bill
in half. I am much more comfortable than
with our old conventional heat pump.
-Anita C.
We still are delighted not to have a boiler
in the basement, along with a huge oil
tank, and the local oil company stopping
by the house to sell a contract.
-Rick H.
It’s amazing how
different my house
feels now—it’s never
been so comfortable!
-Lindsay M.
WaterFurnace has happy
homeowners spread all
across North America and all
around the world. They love
the comfort and savings they
experience with our equipment,
and they’re definitely not quiet
about it! Here’s what just a few
of them have to say-
I’m not just a user of geothermal,
I’ve become an advocate.
-Joe P.
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2013 Annual Report
looking
back at 2013
2013 was a year full of milestones and
successes. Over the next few pages you’ll find
some of the more noteworthy events.
Perfect Choice Savings Event
ENERGY STAR Most Efficient 2013
After the continued success of the Perfect
Choice Savings Event, WaterFurnace
decided to extend the promotion through
2013. Each of the three promotional
packages was tailored to fit homeowner
needs and featured the 7 Series 700A11 or
the 5 Series 500A11 as well as advanced
controls and accessories. Thousands of
homeowners benefited from an instant
rebate while hundreds of WaterFurnace
dealers benefited from increased sales.
The program was a great success.
Many product lines achieved the
ENERGY STAR Most Efficient 2013
designation including the 7 Series,
5 Series, and Synergy3D. This
designation identifies and advances
the most efficient products among
those that qualify for ENERGY STAR
in particular product categories.
A Continued Focus on Utilities
In 2013 some electric providers started to
test an exciting new business model where
the utility pays for the underground piping
of a geothermal system in exchange for a
monthly fee from the homeowner. Loop lease
programs could save homeowners thousands
of dollars on installation costs and may
actually make geothermal systems cheaper
than installing a high efficiency air source
heat pump. The electric utility benefits from a
steady revenue stream from a technology that
slashes peak demand and reduces the need for
costly infrastructure upgrades. Central Rural
Electric in Stillwater, OK and Ozarks Electric
in Fayetteville, AR both started loop field
programs based on WaterFurnace input.
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2013 Annual Report
Non-Pressurized Flow Center
A Non-Pressurized Flow Center was launched
in 2013 and is yet another option available in
designing a system that best fits a customer’s
needs. It’s been engineered to work with a
number of different pumps, in a variety of
different installations, and also works natively
with the WaterFurnace Aurora controls
platform. WaterFurnace’s non-pressurized
option comes with many unique features
and is one-of-a kind in the industry.
IntelliStart 3-Phase
WaterFurnace announced that the
IntelliStart soft start component is
now available for 3-phase water to
water units. Reducing compressor
amps and starting current by up
to 40%, IntelliStart eliminates light
flicker, quiets compressor startup,
and extends compressor life.
Aston Series Now With Aurora Controls
The GeoStar Aston Series was updated to include
the new Aurora family of communicating controls.
The Aston comes standard with the Aurora Base
Control board and has the option to upgrade to the
Aurora Expansion Board (AXB). AXB controls add
features like variable speed pump control and energy
monitoring. The Aurora Interface Diagnostic Tool
allows technicians to service and diagnose many
aspects of the unit without ever having to open it.
Aston Compact
GeoStar launched their highest efficiency
two stage commercial unit, now in a
compact footprint that’s perfect for
geothermal or water source installations.
The Aston Compact carries many of our
advanced features, including the Aurora
generation of communicating controls
and hot gas bypass and reheat.
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2013 Annual Report
The ACHR NEWS
WaterFurnace eBook Released
WaterFurnace collaborated with
The ACHR NEWS on a geothermal
ebook highlighting revolutionary
and groundbreaking products from
WaterFurnace and GeoStar. Included
in this book are informative articles
on tax credits, utility rebates, variable
capacity equipment, and how
geothermal opened doors for a
dealer as well as a distributor.
GeoTank and GeoStore Promo
A promotion on the Geothermal Storage
Tank offered dealers and distributors
special pricing on the product as well as
a $25 gift card for each tank purchased.
The promotion was very successful and
resulted in escalated GeoTank sales.
Geothermal Definition Law Signed
Arbor Base
Great efficiency and an incredibly small
footprint was achieved with the GeoStar
Arbor Base unit, launched in 2013. A true
value product, the Arbor Base boasts an
impressive list of value-added features and
is available in a wide range of capacities for
any water source or geothermal application.
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2013 Annual Report
Illinois Governor Pat Quinn signed SB
1603 into law. The legislation amends
prior definitions of energy efficiency by
tying it to reductions in thermal energy
use. The law states, “Energy Efficiency
also includes measures that reduce the
total Btus of electricity and natural gas
needed to meet the end use or uses.” By
encompassing GHPs, for the first time in
Illinois, they are officially recognized as
energy efficient technology by the state.
Wounded Warrior Donation
Wounded Warrior Scott Schroeder
is one of the many brave men
and women who have sacrificed
themselves to protect our freedoms.
While serving in Afganistan,
Schroeder lost both legs and
most of the use of his right arm.
WaterFurnace seized an opportunity
to thank Schroeder for his service by
discounting a geothermal heat pump
for his new family home. We’re
proud to have been able to provide
the comfort of radiant floor heating
to such an amazing soldier.
Supplier Golf Outing $25K Donation to the USO
Once again, WaterFurnace proudly donated
proceeds raised during our annual Supplier Golf
Outing to the United Service Organization (USO)
of Indiana. Vendors, WaterFurnace employees, USO
members, and Indiana Air National Guard members
joined together for a day of camaraderie and golf
for a deserving organization.
Aluminum Air Coils Offered
In Commercial Products
Over the past year, WaterFurnace
has introduced all-aluminum air
coils in its commercial product
line. The Versatec Base as well
as the Versatec Ultra are now
offering all-aluminum air coils
as standard. Aluminum air
coils are as durable as previous
components and provide superior
corrosion resistance without
sacrificing performance.
Envision Single and
Dual Hydronic Cabinet Update
Both the Envision NSW single hydronic and
the NDW dual hydronic units underwent a
cabinet upgrade to bring them in line with
the rest of our residential product family.
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2013 Annual Report
7 Series Wins Prestigious
AHR Innovation Award
WaterFurnace was honored to
receive another industry award
for our groundbreaking 7 Series
variable capacity geothermal
heat pump – the 2014 AHR Expo
Innovation Award in the heating
category. The 7 Series leads the
industry in performance at 41 EER
and 5.3 COP, boasts industryleading communicating controls,
and a sophisticated zoning
system. WaterFurnace competed
against other amazing products
from the biggest names in the
HVAC industry, so this win is
something to brag about.
Low Sill – New Cabinet Sizes
CLW Chiller
Two new capacities were announced for the
Envision Low Sill Console product line, the 015
and 018. The Low Sill Console is the perfect
fit for any ductless application and provides
efficient operation in a compact cabinet.
The CLW chiller was an impressive addition to our
commercial line for 2013. Available in 60-140 tons,
the CLW is unique in its ability to continuously
monitor and optimize system performance using
a combination of hardware and software options.
Available as either a water-cooled chiller or as a
reversible option, the CLW units can be combined to
create larger central chiller plants. The unique quad
scroll refrigeration circuit design leads the industry
in increased energy efficiency, service redundancy,
and turndown capacity control.
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2013 Annual Report
Sonny Hampton Receives Top Honors For Best Trainer
WaterFurnace Director of Training, Sonny Hampton,
received top honors from The ACHR NEWS with the
“Best Trainer” award. This accolade is presented each
year to honor the industry’s top HVAC instructors
and trainers for their excellence in educating industry
professionals and their contributions to maintaining
high standards for the industry. With a career spanning
nearly three decades, Sonny is well respected
throughout the geothermal industry. Everyone who
has taken one of Sonny’s courses states that his unique
communication style allows him to translate complex
technical concepts and applications into simple and
practical information for students at every level of
experience. WaterFurnace is proud to have him at the
helm of our amazing training department.
Marketing Team Wins 2 Ad Honors
WaterFurnace was honored with two
more advertising awards for the work
from our in-house marketing team.
We received a Gold Ad Honor for our
GeoStart tradeshow display and a Silver
Ad Honor for our 5 Series Indoor Split
product installation photography.
Arbor Series Condo
GeoStar received an addition to its
commercial product line this year in the
Arbor Series Condo unit. Like the name
suggests, this system is perfect for use
in apartments and condominiums. It’s
compact, value-based, and offers higher
efficiency at an affordable price.
looking
forward
The business decisions and preparation we’ve
made over the past few years have left us
in a great position to take advantage of the
landscape ahead. We’re building momentum
and are hugely enthusiastic about 2014.
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2013 Annual Report
WaterFurnace
Renewable Energy, Inc.
financials
24Management’s discussion and analysis
42Notes to the consolidated financial statements
24 Company overview
42 (1) Nature of operations
25 Overall performance
42 (2) General information
27 Outlook
28 Discussion of selected annual information
43 (3) Summary of significant
accounting policies
29 Summary of quarterly results
29 Capital resources and liquidity
29 Financial instruments and credit risk
30 Contractual obligations
30 Critical accounting estimates
31 Share capital
32 Joint venture
33 Related party transactions
52 (4) Financial instruments disclosure
and presentation
54 (5) Capital disclosures
54 (6) Inventory
55 (7) Property, plant and equipment
56 (8) Intangible assets
56 (9) Long-term investments
56 (10) Bank arrangements
33 Compensation of key
management personnel
57 (11) Joint venture
60 (12) Finance leases
33 Companies controlled by
subsidiary director
60 (13) Provisions and contingencies
61 (14) Share capital
33 401(k) pension plan
61 (15) Commitments
34 Deferred compensation plan
62 (16) Supplementary cash flow information
35 Disclosure controls and procedures
63 (17) Geographical information
35 Internal controls over financial reporting
64 (18) Related party transactions
66 (19) Significant expenses
67 (20) Income taxes
68 (21) Earnings per share
69 (22) Dividends
69 (23) Subsequent event
36Management’s responsibility
for financial information
37 Independent auditor’s report
38Consolidated financial statements
38 Statements of comprehensive income
39 Statements of financial position
40 Statements of changes in equity
41 Statements of cash flows
69 (24) Authorization for issuance
of consolidated financial statements
70
Corporate information
23
2013 Annual Report
Management’s Discussion and Analysis
Completed on March 11, 2014
(figures in thousands of U.S. dollars, unless otherwise noted)
Reference notice
This Management Discussion and Analysis should be read in conjunction with WaterFurnace Renewable Energy, Inc.’s
(“the Company”) 2013 Consolidated Financial Statements and accompanying notes. These documents along with the
additional information about the Company, including the Annual Report and Annual Information Form, are available on
SEDAR at www.sedar.com.
Caution regarding forward-looking statements
There are comments in this report that are forward-looking statements. “Forward-looking statements” include statements
regarding the Company’s expectations, hopes, intentions or strategies regarding the future. These statements reflect the
Company’s current expectations. They are subject to a number of risks and uncertainties, including, but not limited to,
changes in the general market conditions. In light of the many risks and uncertainties, readers should understand that the
Company cannot offer assurance that the forward-looking statements contained in this analysis will be realized.
Company overview
The Company is incorporated under the laws of Canada. All of the following subsidiaries are wholly owned by the
Company. Its US subsidiary companies, WaterFurnace International, Inc. (WaterFurnace) and LoopMaster International,
Inc. are Indiana corporations. Its Australian subsidiary companies, Hyper Engineering Pty. Ltd. (Hyper Engineering) and
WaterFurnace International Asia Pacific Pty. Ltd. (WaterFurnace Asia Pacific) are incorporated in New South Wales.
WaterFurnace International Hong Kong Ltd. (WaterFurnace Hong Kong) and Hyper Technology and Trading Company,
Ltd. (Hyper Technology and Trading) are incorporated under the laws of Hong Kong. WaterFurnace Hong Kong’s
investment in its Chinese joint venture with Shenglong Group, Ltd., WaterFurnace Shenglong HVACR Climate Solutions,
Ltd. (WaterFurnace Shenglong) is incorporated under the laws of the People’s Republic of China.
WaterFurnace designs, develops, manufactures and distributes geothermal water source heating, cooling, hot water and
control systems for residential, commercial and institutional buildings. Geothermal heat pumps use the renewable solar
energy stored just below the surface of the earth to dramatically reduce the energy consumed by homes and buildings for
space conditioning and domestic hot water.
LoopMaster International, Inc. operations ceased in 2011. The Company, as part of its investment in GI Energy (formally
known as GI Endurant, LLC) in 2012, has given a non-exclusive license to GI Energy to utilize the LoopMaster name as part
of its operations.
Hyper Engineering designs, develops and builds devices that limit the inrush current that electric motors draw upon start up.
WaterFurnace Asia Pacific holds Hyper Engineering intellectual property in Australia.
WaterFurnace Hong Kong is a holding and general trade company. It holds the Company’s 49% interest in a Chinese joint
venture company WaterFurnace Shenglong. In July 2013, WaterFurnace Hong Kong incorporated a subsidiary in Hong
Kong, Hyper Technology and Trading. Hyper Technology and Trading is responsible for all international distribution and
sourcing outside the U.S. and Canada.
24
2013 Annual Report
(figures in thousands of U.S. dollars except share data, unless otherwise noted)
Overall performance in 2013
In 2013 the Company significantly increased gross margins by 2.2 percentage points representing a change from 35.7%
in 2012 to 37.9% in 2013. Sales of the Company’s new 7 Series Variable Capacity product, cost reduction efforts and
stronger residential sales mix all contributed to the margin growth in 2013.
Year over year sales were down 0.8%. During 2013 the Company exited the manufacturing of pool heaters, which
led to a reduction in revenue of $2.3 million in 2013 compared to 2012. After adjusting for the lost revenue on pool
heaters, revenue grew 1.1% on core sales channels. While the Company’s commercial sales channels declined 3.8% in
2013, direct to dealer sales rose 3.1%, Canadian distributor sales rose 12.0%, Hyper Engineering sales rose 16.1% and
international sales rose 100.7% compared to 2012. Reductions in spending on governmental infrastructure and schools
contributed to the reduction in commercial sales in 2013.
2013 income before interest, joint venture operations and income taxes was up by 22.2% over 2012. The increased
income was primarily attributable to reduced selling, general and administrative expenses, increased gross margins
and a stronger sales mix of residential products.
The Company’s joint venture in China, WaterFurnace Shenglong outperformed the Company’s expectations by posting
a modest profit in 2013. Revenue met expectations and the development of new products will help grow future
revenue.
Total comprehensive income for 2013 was up 35.5% as compared with 2012 and earnings per share increased from
$0.82 in 2012 to $1.12 in 2013. Operating expenses were down $1.6 million, over 2012. The main drivers in reduced
operating expenses were in sales and marketing, Q4 2012 headcount reductions, and fewer expenses related to
business development efforts in 2013, namely the cost in 2012 to form and start up the joint venture operations in
China.
Sales in the U.S. were down 1.7% in 2013 versus prior year. The slow economic performance of the U.S. economy,
slow new housing completions and low consumer confidence continued to be a drag on the geothermal segment
of the industry until the fourth quarter of the year. The Company was pleased with the growth in direct to dealer
sales, Canadian distributor sales and the growth in international sales. The Company saw the benefits of new home
construction in the fourth quarter of 2013.
Total sales to Canada were down 0.3% for 2013; however, the Company’s Canadian distributors experienced a 10.0%
revenue growth in 2013.
International sales, which exclude Canada, were 3.7% of total sales in 2013 compared with 2.9% in 2012. While Europe
continues to be a slightly weaker market than in the past, sales in Asian markets and new opportunities in Russia have
opened up new revenue sources. Synergies with the joint venture in China have helped the Company’s international
sales over the past year.
Commercial sales dropped 3.8% in 2013 versus 2012. Although the Company continued to expand its channels, add
new customers and introduce new products, the headwind of a weak economy and reduced governmental spending
led to the reduction in sales year over year. Commercial products are sold through a variety of channels that includes
commercial sales representatives, direct to dealer, distributors and OEM’s. The Company continued its investment in
research and development with significant focus on commercial products. The Company continues to benefit from its
commercial OEM relationships.
25
2013 Annual Report
Overall performance in 2013 (continuted)
Cash flows
Year ended December 31
2013
2012
Cash increase from operating activities
$
18,980
$
16,611
Net increase in cash and cash equivalents
$
5,523
$
282
Cash flow from operations for the year ended December 31, 2013 was $19.0 million versus $16.6 million for the year ended
December 2012. Cash and cash equivalents increased by $5.5 million during 2013 after paying $12.7 million in dividends.
In 2012, cash and cash equivalents increased $282 thousand after paying $12.5 million in dividends.
26
2013 Annual Report
Outlook
The company maintains an optimistic outlook for 2014 while recognizing the possibility of volatility on a quarter to quarter
basis. The fourth quarter of 2013 saw increased economic growth as an uptick in consumer confidence led to increased
spending. Consumers continue to remain upbeat in the new year, and the economy should maintain a slow but steady
recovery. Additionally, year over year housing increases were extremely encouraging.
For 2014, we believe new housing starts will be approximately 1.1 million, up from the $923 thousand in 2013. Increasing
home values and stock market gains have lifted personal wealth, and consumers have demonstrated a growing appetite to
take on more debt, all of which bodes well for the coming year.
The 30% federal tax credit for the installation of geothermal heat pump systems will continue to stimulate sales until
at least 2016. While the tax credit will provide benefits to the industry, volatility in the fossil fuel markets will offer the
Company an even larger opportunity for growth.
Natural gas prices will continue to see escalations as adoption in the power and transportation industries drive new
demand. More importantly, the recent unusually cold winter and pipeline distribution issues led to depleted reserves and
spiking prices for LP gas nationwide. Propane experienced shortages, rationing, and residential prices in the Midwest
rising from $2.08 per gallon (gal) in December to $4.20/gal by the end of January. Although rates have begun to soften,
the intense media coverage has left fossil fuel users looking for heating alternatives.
To leverage this situation, the Company will make significant investments in marketing and advertising in the first quarter
of 2014 to increase awareness and generate sales among these homeowners. WaterFurnace will continue to monitor
results and, if successful, will extend investments into the second quarter. We will focus on strategies that provide
targeted delivery to key demographic segments along with programs that generate broad national reach with a cost
effective delivery.
Utilities continue to provide partnership opportunities. Geothermal heat pumps offer electric providers a way to reduce
peak demand, create a year-round customer, and gain an additional source of revenue through loop leasing and on-bill
financing programs. These models remove much of the financial burden from homeowners and allow them to adopt
geothermal for roughly the same cost as an air source heat pump. These programs, while still in their infancy, are an
important developing trend that can positively affect the geothermal heat pump industry.
With approximately 2 million aging water source heat pump units nearing the end of their serviceable life, the
commercial market will continue to capture the Company’s focus. The Company’s JV operations in China will focus on
developing a wider array of commercial products to capture the growth in the China HVAC market, which is more than
double that of the North American market. Traditional forms of commercial HVAC will be offered as a complement to
the JV’s commercial geothermal heat pump offerings as a means to build stronger channel relationships.
Selected annual information
2013
2012
2011
Sales
$
118,776
$
119,697
$
137,590
Net income
13,782
10,060
13,904
Earnings per share
1.12
0.82
1.14
Total assets
77,943
70,365
68,566
Dividends per share
0.99
0.96
0.90
Weighted average common shares issued and outstanding
12,328,150
12,238,946
12,189,087
Weighted average diluted shares
12,328,150
12,238,946
12,189,087
27
2013 Annual Report
Discussion of selected annual information
SALES: Consolidated sales decreased 0.8% for the year. Sales in the U.S. were down 1.7% while sales outside the U.S.
were up 5.5%.
INCOME: Consolidated net income for the year was up $3.7 million versus 2012. The Company was able to increase
gross margin from 35.7% in 2012 to 37.9% in 2013.
ASSETS: Shareholder equity increased by $1.7 million or 4.3% for the year. Cash and cash equivalents increased $5.5
million or 46.3% year over year. Receivables increased by $1.1 million. Receivables are collected within industry norms
and inventory turns are better than industry averages. Inventory decreased $1.0 million for the year. Payables and
accruals increased $2.2 million from year-end 2012.
DIVIDENDS: During 2013 the Company paid a total of $12.7 million in dividends, which included
$487 thousand for withholding tax on intercorporate dividends and $12.2 million to shareholders ($0.99 per share).
Dividends paid per share (U.S. dollars)
2013
March 1
$
0.24
June 3
0.25
September 4
0.25
December 2
0.25
0.99
28
2013 Annual Report
$
Summary of quarterly results (unaudited)
2013 Quarters ended
March 31
June 30
September 30
December 31
Sales
$
29,152
$
25,532
$
30,322
$
33,770
Net income
2,333
2,178
4,341
4,930
Earnings per share
0.19
0.18
0.35
0.40
2012 Quarters ended
March 31
Sales
$
Net income
Earnings per share
2011 Quarters ended
27,641
June 30
$
Net income
Earnings per share
December 31
$
28,198
$
29,483
$
34,375
857
2,206
2,878
4,119
0.07
0.18
0.24
0.33
March 31
Sales
September 30
28,737
June 30
September 30
December 31
$
33,755
$
35,957
$
39,141
487
3,391
4,630
5,396
0.04
0.28
0.38
0.44
Seasonality plays a role in quarterly sales and profitability. The first quarter is historically the lowest quarter for sales and
profitability due to the decreased ability to install loops in northern climates during that period. Sales and profitability
historically have improved in the second quarter and are highest in the third and fourth quarters.
Capital resources and liquidity
The Company expects to fund investments and capital expenditures from available cash. The Company has $27.7 million
in cash, cash equivalents and short-term investments after paying $12.7 million in dividends during the fiscal year of 2013.
In addition, the Company has an unsecured $3.0 million bank line of credit which was unused at March 11, 2014. Accounts
receivable days sales outstanding are at levels normal for the Company’s industry. Accounts payable are paid within terms
and discounts are taken when available. The Company is not aware of any legal proceedings or other issues that would
have a significant impact on the financial condition of the Company.
Financial instruments and credit risk
The Company’s estimate of the fair value of cash and cash equivalents, short-term investments, receivables, and payables
and accruals approximates the carrying value due to the short-term nature of these instruments. The Company’s
estimate of the fair value of long term investments is evaluated quarterly. The carrying value of finance lease obligations
approximates their fair value as their interest rates approximate current market interest rates. The risk with the Company’s
short-term investments is minimal as they are invested in money market funds. The Company’s exposure to credit risk is
primarily limited to accounts receivable.
29
2013 Annual Report
Financial instruments and credit risk (continued)
The Company makes provisions for possible doubtful accounts as required. The Company is not currently exposed
to interest rate risks from bank loans and long-term debt. The Company is only exposed to interest rate risks from
investment of cash and cash equivalents and short-term investments.
The Company investment policy calls for investments to have maturities of less than one year unless approved by the
Board of Directors, with slight or no risk of losing the invested principal and access to the principal amount prior to
maturity. All investments made must have a high-grade rating and no investments outside the U.S. are allowed without
approval from the Board of Directors.
Contractual obligations
Finance leases
Operating leases
Other payments
Total
Minimum due within one year
$
37
$
471
$
2,269
$
2,777
Minimum due one to five years
—
—
6,000
6,000
$
37
$
471
$
8,269
$
8,777
The Company’s contractual obligations consist of agreements to lease certain facilities, operational and administrative
equipment, purchase commitments and other services.
In addition, the Company has a deferred compensation plan, detailed in Note 18 of the financial statements, with
amounts that are subject to vesting over three to five years or upon normal retirement, defined in the deferred
compensation plan as age 60.
Critical accounting estimates
The largest accounting estimate is the Provision for Warranty Claims on products sold by the Company. The actual future
costs to fulfill warranty expenses are unknown. The method used to establish the provision is to track the actual historical
cost per unit covered and multiply it by the number of units still covered under the warranty policy to establish the total
estimated liability, which is then reduced to its present value with a discount rate calculated using a corporate AA bond
index. The cost of labor on outstanding warranties is fixed, but the price of components can increase. A major assumption
underlying the estimate is that failure rates will remain relatively the same in the future as they have in the past. The
provision increased $3.2 million during the fiscal year 2013.
Deferred tax benefits related to temporary differences between the tax assets and liabilities related to the warranty
reserve, deferred compensation and other compensation amounts are recorded based on management’s assessment of
the Company’s ability to realize these benefits. Realization of the Company’s deferred tax assets is largely dependent
upon its achievement of projected future taxable income.
Another significant estimate is the determination of the provision for doubtful accounts which is based on payment
history and any current events that may have an impact on collection.
Management also estimates inventory obsolescence by analyzing average monthly demand by part versus quantities
held in inventory.
For further details on the Company’s accounting policies regarding significant judgement and estimation uncertainty,
refer to Note 3(s) and 3(t).
30
2013 Annual Report
Off-balance sheet arrangements
The Company has no off-balance sheet arrangements.
Share capital
Company shares issued
Year Ended December 31, 2013
Number of shares
Year ended December 31, 2012
Price per share
Share capital
Number of shares
Price per share
Share capital
Issued to Company’s deferred compensation plan trust
March 27 (January 13)
22,053
$
15.75
$ 347
26,773
$
18.48
$ 495
May 30 (June 1)
22,201
$
18.79
$ 417
14,445
$
16.38
236
56,104
$
13.59
763
97,322
(December 5)
44,254
$ 764
$ 1,494
Subsequent to year end 2013, the Company issued 20,248 shares to the deferred compensation plan on January 10, 2014
at a price per share of $23.32.
Shares approved by shareholders for issuance to deferred compensation plan trust
Shares
Approved
250,000
Issued in 2010
3,235
Issued in 2011
23,760
Issued in 2012
97,322
Issued in 2013
44,254
Total issued
168,571
Approved, remaining
81,429
An unlimited number of common shares without par value are authorized. As of March 11, 2014, there were
12,362,718 common shares issued and outstanding.
31
2013 Annual Report
Joint venture
In July 2012, the Company set up a new wholly owned Hong Kong subsidiary, WaterFurnace Hong Kong. It is a holding
and general trade company.
On July 27, 2012, the Company signed a joint venture agreement with Chinese company Ningbo Shenglong Group Co.,
Ltd. (Shenglong) to form WaterFurnace Shenglong HVACR Climate Solutions, Ltd. (WaterFurnace Shenglong), also a
Chinese company.
Under the terms of the agreement, the total investment of both parties will be $8.0 million, of which the Company
will contribute $3.9 million. In 2012, $2.9 million was paid and the balance of $1.0 million is due by September 4,
2014. WaterFurnace Shenglong began operations on November 5, 2012. Effective December 2013, the WaterFurnace
Shenglong Board of Directors approved a reduction in registered capital of $2.0 million, therefore the $1.0 million will
no longer be due September 4, 2014.
WaterFurnace Hong Kong owns 49% of the venture with Shenglong owning 51%. Management has assessed the
arrangement and has determined there is joint control and therefore it is considered a joint venture to be accounted
for using the equity method. Accordingly, the investment is being recorded at cost and adjusted for the change in the
Company’s portion of the net assets and the profit and loss of the joint venture.
WaterFurnace Shenglong’s primary focus will be geothermal heat pump technologies, although traditional HVACR
designs are being explored to complement its geothermal offerings. These products are expected to provide
WaterFurnace Shenglong’s entry into other Asian territories and eventually markets worldwide. Shenglong’s expertise
in manufacturing and distribution for the Asian market combined with WaterFurnace’s expertise in energy-efficient
technologies and engineering will position WaterFurnace Shenglong to take advantage of the rapidly increasing
HVACR opportunities.
Management believes that the increased global footprint and ability to bring focus to the Chinese market bodes well
for the Company. Not only does this venture provide new sourcing and distribution opportunities, it also brings the
enormous growth potential of the Chinese market to the Company and its shareholders.
32
2013 Annual Report
Related party transactions
The Company’s related parties are limited to Board members, key management personnel, and companies controlled
by a subsidiary director, employees for whom the 401(k) pension plan and the deferred compensation plan applies and
transactions with the joint venture.
Compensation of key management personnel
Director compensation
December 31, 2013
December 31, 2012
$
309
$
350
Executive senior staff salaries and short-term benefits 2,299
1,462
Executive senior staff post employment benefits
615
1,107
$
3,223
$
2,919
“Executive senior staff post employment benefits” includes vesting of deferred compensation which vests as defined
under the deferred compensation plan later within this section. In 2012 one of the members reached age 60 and therefore
is fully vested, and any of his future amounts will vest immediately.
Companies controlled by subsidiary director
Consultation agreement fees
$
28
$
70
Lease agreement expenses
18
34
$
46
$
104
The agreements above are transactions in the normal course of the operations. Effective May 9, 2013, no companies were
controlled by a subsidiary director.
401(k) pension plan
Company match 401(k) pension plan expenses
$
497
$
517
The Company provides a 401(k) pension plan for employees. Employees can elect to contribute up to 80% of their gross
earnings. The Company matches 100% of the first 4% of compensation contributed by employees. All Company matches
vest immediately.
Joint venture transaction
For the years ended December 31, 2013 and 2012, the Company billed the joint venture $75 thousand and $33 thousand,
respectively, for services provided.
33
2013 Annual Report
Deferred compensation plan
The Company has established an executive nonqualified deferred compensation plan (“the plan”) for certain management
employees. These employees can elect to defer a portion of their earnings, and these amounts vest immediately. At the
Company’s discretion, additional amounts may be awarded to the employees’ accounts. These additional amounts are
subject to vesting over three to five years or at age 60 as per the deferred compensation plan.
The plan, approved by the Board of Directors, allowed participants to choose from a number of selected mutual funds as
“notional investments” for the participants and Company contributions prior to June 8, 2009. Effective June 8, 2009, the
plan was amended by the Board to require that all future Company contributions be notionally invested in WaterFurnace
Renewable Energy, Inc. stock. The participants continue to have the choice of a number of selected mutual funds for the
notional investments for their contributions.
The earnings deferred by the participants plus amounts to be contributed by the Company are then tracked by the
plan’s financial institution sponsor as if those amounts were actually invested in the notional fund options. The liability is
adjusted based on changes to the value of the offsetting notional investments with the changes in the market value of the
calculated liability charged or credited to deferred compensation plan expense.
2013
2012
Plan Assets
Mutual funds
$
667
$
1,043
Life insurance policies
1,946
1,693
Company stock
2,127
1,231
4,740
3,967
Plan liabilities
(5,212)
(4,247)
Plan net liability
$
(472)
$
(280)
Unvested additional awards balances not reflected in plan liabilities
$
253
$
356
Deferred compensation plan expenses
$
857
$
945
Deferred compensation awarded during the year
$
536
$
665
34
2013 Annual Report
Deferred compensation plan (continued)
The plan is a contractual obligation by the Company to pay the plan participants in the future and is comprised primarily
of amounts to be paid post employment, but also includes amounts designated by the participants as in-service and
education amounts that can be distributed during the participant’s term of employment according to payment terms
designated by the participant.
The plan is not required to be funded, but the Company has established a trust to which the Company may contribute
funds which can only be used to satisfy the compensation liability. The plan assets consist of mutual funds whose
value is tied to the market performance of the investment options, flexible premium variable life insurance policies and
WaterFurnace Renewable Energy, Inc. stock. These assets are recorded at market value and have been netted with the
offsetting liability on the basis that the assets are only available for funding of the plan liability.
Company shares issued to fund deferred compensation plan
Number of shares
Price per share
Share capital
Number of shares
Price per share
Share capital
Issued to Company’s deferred compensation plan trust
22,053
$
15.75
$ 347
26,773
$
18.48
$ 495
May 30 (June 1)
22,201
$
18.79
$ 417
14,445
$
16.38
236
56,104
$
13.59
763
97,322
(December 5)
44,254
$ 764
$ 1,494
Disclosure controls and procedures
The Company’s disclosure controls and procedures are designed to provide reasonable assurance that all relevant
information is gathered and reported to senior management, including the Chief Executive Officer (CEO) and the Chief
Financial Officer (CFO), on a timely basis so that appropriate decisions can be made regarding public disclosure. As of
December 31, 2013, the CEO and the CFO have evaluated the effectiveness of the Company’s disclosure controls and
procedures as defined in Multilateral Instrument 52-109 of the Canadian Securities Administrators and have concluded
that such disclosure controls and procedures are effective. There have been no changes in the Company’s internal control
over financial reporting that occurred during the period beginning on January 1, 2013 and ending on December 31, 2013
that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial
reporting.
Internal controls over financial reporting
It is the opinion of the Company’s CEO and CFO that the Company’s internal controls over financial reporting provide a
reasonable level of assurance that fiscal reporting will be free of material errors or misstatements. The Company maintains
a system of internal controls that are monitored by senior management and tested on a quarterly basis. As of the end of
the most recent quarter, internal control monitoring and testing has not produced any areas of concern for management.
A set of control systems, no matter how well conceived or operated, can only provide reasonable, not absolute, assurance
that the objectives of the control system will be met.
35
2013 Annual Report
Management’s Responsibility For Financial Information
Management’s report to the shareholders
The accompanying consolidated financial statements of WaterFurnace Renewable Energy, Inc. and all other information
presented in this annual report are the responsibility of management. The financial statements have been prepared in
accordance with International Financial Reporting Standards (“IFRS”). Financial and operating information presented in this
report is consistent with the information contained in the financial statements.
Management of the Company develops and maintains systems of internal controls to provide reasonable assurance that
assets are safeguarded from loss or unauthorized use and that the financial records can be relied upon for the preparation of
financial statements. The Board of Directors, through its audit committee, oversees this management responsibility. The audit
committee meets periodically with management and the external auditors to satisfy itself as to the adequacy of these systems
and the effectiveness of the financial reporting process.
The shareholders’ auditors, Grant Thornton LLP, Chartered Accountants, have full access to all Company financial records as
well as to the audit committee.
Thomas F. Huntington
President & Chief Executive Officer
36
2013 Annual Report
Fred Andriano
Secretary, Treasurer & Chief Financial Officer
Independent Auditor’s Report
To the Shareholders of WaterFurnace Renewable Energy, Inc.
We have audited the accompanying consolidated financial statements of WaterFurnace Renewable Energy, Inc., which
comprise the consolidated statements of financial position as at December 31, 2013 and December 31, 2012, and the
consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, and a
summary of significant accounting policies and other explanatory information.
Management’s responsibility for the financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in
accordance with International Financial Reporting Standards, and for such internal control as management determines
is necessary to enable the preparation of consolidated financial statements that are free from material misstatement,
whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted
our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply
with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks
of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the
consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our
audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial
position of WaterFurnace Renewable Energy, Inc. as at December 31, 2013 and December 31, 2012, and its financial
performance and its cash flows for the years ended December 31, 2013 and December 31, 2012 in accordance with
International Financial Reporting Standards.
Toronto, Canada
March 11, 2014
Chartered Professional Accountants
Licensed Public Accountants
37
2013 Annual Report
Consolidated Financial Statements
Statements of comprehensive income
2013
2012
Sales (Note 17)
$
118,776
$
119,697
Cost of sales
73,752
76,967
45,024
42,730
Operating expenses (Note 19)
22,561
24,164
Research and development expenses (Note 19)
2,297
2,070
20,166
16,496
Share of income (loss) from joint venture (Note 11)
106
(28)
Finance income (expense)
394
(893)
Income before income taxes
20,666
15,575
6,884
5,515
13,782
10,060
(107)
31
Other comprehensive (loss) income
(107)
31
Total comprehensive income
$
Weighted average number of shares
outstanding (Note 21)
Earnings per share on net income
$
Gross profit
Income before interest and income taxes
Income tax expense (Note 20)
Net income
Unrealized (loss) gain on translation of foreign
operations (net of tax)
The accompanying notes are an integral part of these consolidated financial statements.
38
2013 Annual Report
13,675
12,328,150
1.12
$
$
10,091
12,238,946
0.82
Statements of financial position
ASSETS
Current assets
December 31, 2013
December 31, 2012
Cash and cash equivalents
$
17,451
$
11,928
Short-term investments
10,250
10,232
Receivables (Note 4)
17,112
16,045
Inventory (Note 6)
9,541
10,539
Prepaids and deposits
575
513
Total current assets
54,929
49,257
Property, plant and equipment (Note 7)
6,317
6,536
Intangible assets (Note 8)
1,325
1,519
Long-term investment (Note 9)
433
285
Investment in Joint Venture (Note 11)
3,049
2,923
Deferred tax assets (Note 20)
11,890
9,845
$
77,943
$
70,365
Payables and accruals (Note 4)
$
8,266
$
6,053
Income taxes payable
671
377
Provision for warranty claims - current portion (Note 13)
4,534
3,884
Total current liabilities
13,471
10,314
Finance leases (Note 12)
—
38
Deferred compensation (Note 18)
472
280
Provision for warranty claims (Note 13)
21,456
18,938
35,399
29,570
Share capital (Note 14)
19,763
18,999
Foreign exchange translation adjustment
(70)
37
Retained earnings
22,851
21,759
Total Shareholders’ Equity
42,544
40,795
Total Liabilities & Shareholders’ Equity
$
77,943
$
70,365
TOTAL ASSETS
LIABILITIES
Current liabilities
TOTAL LIABILITIES
SHAREHOLDERS’ EQUITY
Contingencies (Note 13)
Commitments (Note 15)
The accompanying notes are an integral part of these consolidated financial statements
39
2013 Annual Report
Statements of changes in equity
Balance, January 1, 2013
Share capital
$
Retained earnings
37
$
764
—
—
764
—
—
(12,690)
(12,690)
764
—
(12,690)
(11,926)
Net income
—
—
13,782
13,782
Unrealized loss on translation of foreign operations
—
(164)
—
(164)
Income tax expense relating to components of other
comprehensive income
—
57
—
57
Total comprehensive income (loss)
—
(107)
13,782
13,675
Balance, December 31, 2013
$
$
(70)
$
22,851
$
42,544
Payment of dividends (Note 22)
Transactions with shareholders
19,763
Share capital
$
Foreign exchange
translation adjustment
21,759
Total equity
$
Shares issued to fund deferred compensation plan (Note 18) 18,999
Foreign exchange
translation adjustment
$
Retained earnings
17,505
$
6
$
1,494
—
—
—
1,494
Net income
—
Unrealized gain on translation of foreign operations
Income tax expense relating to components of other
comprehensive income
Total equity
$
41,670
—
1,494
(12,460)
(12,460)
—
(12,460)
(10,966)
—
10,060
10,060
—
40
—
40
—
(9)
—
(9)
—
31
10,060
10,091
$
$
37
$
21,759
$
40,795
Shares issued to fund deferred compensation plan (Note 18) Payment of dividends (Note 22)
Transactions with shareholders
18,999
40
2013 Annual Report
24,159
40,795
Statements of cash flows
Year ended December 31,
Increase (decrease) in cash and cash equivalents
2013
2012
OPERATING
Net income
$
13,782
$
10,060
Depreciation and amortization
1,125
1,141
Increase in long-term investment (Note 9)
(148)
—
Share of (gain) loss from joint venture (Note 11)
(126)
17
Gain on disposal of property, plant and equipment
—
(35)
License revenue
—
(130)
Deferred taxes (Note 20)
(2,045)
(2,159)
3,168
956
(107)
2,375
18,980
4,444
1,025
31
2,217
16,611
Add back non-cash items:
Change in provision for warranty claims
Change in deferred compensation
Change in foreign exchange translation adjustment
Change in non-cash working capital (Note 16)
Cash increase from operating activities
FINANCING
Principal payments for finance leases
Payment of dividends (Note 22)
Cash decrease from financing activities
(37)
(12,690)
(12,727)
(36)
(12,460)
(12,496)
(18)
—
—
(51)
(75)
(2,940)
(772)
5
(3,833)
$
282
11,646
11,928
INVESTING
Net investment in short-term investments
Purchase of long-term investment
Investment in joint venture
Purchase of property, plant and equipment
Proceeds on disposal of property, plant and equipment
Cash decrease from investing activities
(712)
—
(730)
Net increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
$
5,523
11,928
17,451
41
2013 Annual Report
Notes to the Consolidated Financial Statements
1. Nature of operations
The Company is incorporated under the laws of Canada. All of the following subsidiaries are wholly owned by the
Company. Its US subsidiary companies, WaterFurnace International, Inc. (WaterFurnace) and LoopMaster International,
Inc. are Indiana corporations. Its Australian subsidiary companies, Hyper Engineering Pty. Ltd. (Hyper Engineering) and
WaterFurnace International Asia Pacific Pty. Ltd. (WaterFurnace Asia Pacific) are incorporated in New South Wales.
WaterFurnace International Hong Kong Ltd. (WaterFurnace Hong Kong) and Hyper Technology and Trading Company,
Ltd. (Hyper Technology and Trading) are incorporated under the laws of Hong Kong. WaterFurnace Hong Kong’s
investment in its Chinese joint venture with Shenglong Group, Ltd., WaterFurnace Shenglong HVACR Climate Solutions,
Ltd. (WaterFurnace Shenglong) is incorporated under the laws of the People’s Republic of China.
WaterFurnace designs, develops, manufactures and distributes geothermal water source heating, cooling, hot water and
control systems for residential, commercial and institutional buildings. Geothermal heat pumps use the renewable solar
energy stored just below the surface of the earth to dramatically reduce the energy consumed by homes and buildings
for space conditioning and domestic hot water.
LoopMaster International, Inc. operations ceased in 2011. The Company, as part of its investment in GI Energy (formally
known as GI Endurant, LLC) in 2012, has given a non-exclusive license to GI Energy to utilize the LoopMaster name as
part of its operations.
Hyper Engineering designs, develops and builds devices that limit the inrush current that electric motors draw upon start up.
WaterFurnace Asia Pacific acted as WaterFurnace’s international sourcing agent and as its international sales distributor
for all sales outside the U.S. and Canada through September 30, 2012.
WaterFurnace Hong Kong is a holding and general trade company. It holds the Company’s 49% interest in a Chinese joint
venture company WaterFurnace Shenglong. In July 2013, WaterFurnace Hong Kong incorporated a subsidiary in Hong
Kong, Hyper Technology and Trading. Hyper Technology and Trading is responsible for all international distribution and
sourcing outside the U.S. and Canada.
2. General information
The Company’s common shares (“Common Shares”) are traded in Canadian dollars on the Toronto Stock Exchange
(“TSX”) under the symbol “WFI.” The Company’s common shares are also traded on the TSX in U.S. dollars under
the symbol “WFI.U.”
The Company’s corporate office is at 9000 Conservation Way, Fort Wayne, Indiana 46809-9794 U.S.A.
The Company’s registered office is at 3400 One First Canadian Place, Toronto, Ontario, Canada, M5X 1A4.
42
2013 Annual Report
3. Summary of significant accounting policies
(a) Basis of preparation
These consolidated financial statements of the Company and its subsidiaries were prepared in accordance with International
Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Boards (“IASB”).
The policies set out below were consistently applied to all the periods presented unless otherwise noted.
The consolidated financial statements are presented in United States (U.S.) dollars and all values are rounded to
thousands except when otherwise indicated.
(b) Basis of consolidation
The consolidated financial statements include the financial statements of the parent company (the Company) and all
its wholly owned subsidiary companies which include the following: WaterFurnace International, Inc. and LoopMaster
International, Inc. which are U.S. corporations; WaterFurnace Asia-Pacific and Hyper Engineering Pty. Ltd. which are
Australian corporations; and WaterFurnace Hong Kong and Hyper Technology and Trading which are Hong Kong
corporations. The financial statements of subsidiaries are included in the consolidated financial statements from the date
that control commences until the date control ceases. Control exists when the Company has the power to govern the
financial and operating policies of an entity so as to obtain benefits from its activities.
All transactions and balances between the Company and its subsidiaries are eliminated on consolidation, including
unrealized gains and losses on transactions between the subsidiaries and the parent company.
(c) Business combinations
Business combinations are accounted for using the acquisition method. The consideration transferred by the Company
to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair values of assets transferred, liabilities
incurred and the equity interests issued by the Company, which includes the fair value of any asset or liability arising from
a contingent consideration arrangement. Acquisition costs are expensed as incurred.
The Company recognizes identifiable assets acquired and liabilities assumed in a business combination regardless of
whether they have been previously recognized in the acquiree’s financial statements. Assets acquired and liabilities
assumed are measured at their acquisition-date fair values. The excess between the acquisition-date fair values of net
assets acquired and the consideration paid is recorded as a bargain purchase amount in the statement of comprehensive
income. Conversely, to the extent that the consideration paid exceeds the fair value of the net identifiable assets,
goodwill is recognized.
43
2013 Annual Report
3. Summary of significant accounting policies (continued)
(d) Foreign currency translation
The Company’s consolidated financial statements are presented in U.S. dollars, which is the Company’s functional
currency and the currency of the primary economic environment in which the Company operates. Each entity within
the Company determines its own functional currency and items included in the financial statements of each entity are
measured using that functional currency. Transactions in foreign currencies are recorded at the functional currency rate
prevailing at the date of each transaction. Monetary assets and liabilities denominated in foreign currencies are translated
at the exchange rate prevailing at the date of the statement of financial position. All gains and losses on translation are
included in profit or loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are
translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in
a foreign currency are translated using the exchange rates at the date when the fair value was determined.
The assets and liabilities of foreign operations are translated into U.S. dollars at the rate of exchange prevailing at the
statement of financial position date and their operating results are translated at exchange rates prevailing at the date of
the transaction. The exchange differences arising on the translation are recognized directly in a separate component of
equity. On disposal of a foreign operation, the deferred cumulative amount recognized in equity relating to the particular
foreign operation is recognized in net income.
(e) Revenue recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the
revenue can be reliably measured. Revenue is measured at the fair value of the consideration received, excluding discounts,
rebates and sales taxes or duty. The following specific recognition criteria must also be met before revenue is recognized:
Sale of goods
Generally, the Company records equipment sales at time of shipment. Specifically, the Company records equipment
sales when the Company has transferred to the buyer the significant risks and rewards of ownership of the goods
supplied on shipment from the Company’s premises.
Interest and investment income
Interest income and expenses are reported on an accrual basis using the effective interest method. Dividend income
is recognized at the time the right to receive payment is established.
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2013 Annual Report
(f) Intangible assets
Intangible assets include acquired intellectual property comprised of product designs and computer code that qualifies
for recognition as an intangible asset in a business combination. They are accounted for using the cost model whereby
capitalized costs are amortized on a straight-line basis over the estimated useful lives of the assets, as these assets are
considered finite. Residual values and useful lives are reviewed annually. A useful life of seven years has been applied to
product designs and ten years to computer code. Amortization is included within “Depreciation and amortization.”
(g) Research and development
Research costs, which do not meet the criteria for development costs, are expensed as incurred. Development expenditure
on an individual project is recognized as an intangible asset when the Company can demonstrate:
•
•
•
•
•
the technical feasibility for bringing the product to market;
its intention to use or sell the asset;
that the asset will generate future economic benefits;
the availability of resources to complete the asset; and
the ability to reliably measure the expenditure during development.
Following initial recognition of the development expenditure as an asset, the asset is carried at cost less accumulated
amortization and impairment losses.
(h) Property, plant and equipment
Property, plant and equipment are carried at cost less subsequent depreciation and impairment losses.
Depreciation is recognized on a straight-line basis to write down the cost less estimated residual value of property,
plant and equipment. Construction in progress is not depreciated until the asset is available for use. The periods
generally applicable are the following:
•
•
•
•
Land improvements
Building
Equipment
Equipment under finance lease
7-15 years
40 years
3-7 years
7 years
Estimates of residual value and useful life are reviewed annually.
Gains or losses arising on the disposal of property, plant and equipment are recognized in comprehensive income.
45
2013 Annual Report
(i) Leased assets
When the Company leases an asset, management determines if it should be capitalized as a finance lease. When the
economic ownership of the leased asset is transferred to the Company, and if the Company bears substantially all the
risks and rewards related to that ownership, the lease is considered a finance lease. In that case, the asset is recognized
at the inception of the lease at its fair value or, if lower, at the present value of the lease payments plus incidental
payments, if any. A corresponding amount is recognized as a finance lease liability.
Depreciation methods and useful lives for assets held under finance lease agreements correspond to those applied to
comparable assets which are legally owned by the Company. The corresponding finance lease liability is reduced by lease
payments less finance charges, which are expensed as part of finance expense and are charged to comprehensive income
over the period of the lease.
All other leases are treated as operating leases. Payments on operating lease agreements are recognized as an expense on
a straight-line basis over the lease term. Associated costs, such as maintenance and insurance, are expensed as incurred.
(j) Impairment of intangible assets and property, plant and equipment
At the end of each reporting period an assessment is performed to determine whether there is any indication of
impairment. This is done by grouping assets at the lowest levels for which there are independent cash inflows (cashgenerating units). As a result, some assets are tested individually for impairment and some are tested at the cashgenerating unit level.
An impairment loss is recognized for the amount by which the asset’s or cash-generating unit’s carrying amount exceeds
its recoverable amount, which is the higher of fair value less costs to sell and value-in-use. To determine the value-in-use,
management estimates expected future cash flows from each cash-generating unit and determines a suitable interest
rate for calculation of the present value of those cash flows.
Impairment losses for cash-generating units first reduce the carrying amount of goodwill allocated to that cash-generating
unit and any remaining impairment loss is charged pro rata to the other assets in the unit. Assets are subsequently
reassessed for indications that an impairment loss previously recognized may no longer exist. An impairment loss, with
the exception of goodwill, is reversed if the cash-generating unit’s recoverable amount exceeds its carrying amount in a
subsequent period.
46
2013 Annual Report
(k) Financial instruments
The financial instrument standards require that all financial instruments be classified into one of the following categories:
Financial assets
Financial liabilities
Held for trading
Held for trading
Held to maturity
Other financial liabilities
Available for sale
Loans and receivables
Financial assets and liabilities are initially recognized at fair value with subsequent measurement based on classification.
The classification depends on the purpose for which the financial instruments were acquired, their characteristics and
choice where applicable.
The Company manages financial instruments according to changes in business and economic conditions and classifies
them as follows:
Type of financial instruments
Category
Measurement
Amortized cost using the effective interest method
Short-term investments
Held for trading
Fair value
Long-term investments
Available for sale
Fair value through other comprehensive income
Receivables
Payables and accruals
Finance leases
Changes in the fair value of held for trading instruments are recognized in profit or loss. Transaction costs related to
held for trading instruments are expensed as incurred. Transaction costs related to loans and receivables and other
financial liabilities are capitalized and amortized using the effective interest method.
Changes in the fair value of available for sale instruments are recognized in other comprehensive income. The fair value
for long-term investments will be determined by evaluating the performance of the investment as well as reviewing
future cash flow projections due to the fact that quoted market share prices are not available.
The Company’s estimate of the fair value of cash and cash equivalents, short-term investments, receivables and payables
and accruals approximates the carrying value due to the short-term nature of these instruments. The Company’s
estimate of the fair value of long term investments is evaluated quarterly. The carrying value of finance lease obligations
approximates their fair value as their interest rates approximate current market interest rates.
47
2013 Annual Report
(k) Financial instruments (continued)
The Company assesses the fair value of its financial instruments using the following three-level hierarchy of measurements
which reflects the significance of the inputs:
• Level 1 fair value measurements are derived from quoted prices in active markets for identical assets or liabilities;
•L
evel 2 fair value measurements are derived from inputs other than quoted prices included within Level 1 that
are observable for the asset or liability either directly (i.e., as prices) or indirectly (i.e., derived from prices);
•L
evel 3 fair value measurements are derived from valuation techniques that include inputs for the asset or
liability that are not based on observable market data (unobservable inputs).
Short-term investments include taxable and tax-exempt money market funds with floating interest rates. The change in fair
value is included in interest income. The Company assesses the fair value of short-term investments from Level 1 measurements.
(l) Inventory
Inventories are stated at the lower of cost and net realizable value. Cost includes all expenses directly attributable to the
manufacturing process as well as related production overheads, based on normal operating capacity. Costs of ordinarily
interchangeable items are assigned using the first in, first out method. Net realizable value is the estimated selling price
in the ordinary course of business less any applicable selling expenses.
(m) Income taxes
Income tax expense recognized in profit or loss comprises the sum of deferred tax and current tax not recognized in
other comprehensive income or directly in equity.
Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the
current or prior reporting periods, that are unpaid at the reporting date. Current tax is payable on taxable profit, which
differs from profit or loss in the financial statements. Calculation of current tax is based on tax rates and tax laws that
have been enacted or substantively enacted by the end of the reporting period.
Deferred income taxes are calculated using the liability method on temporary differences between the carrying
amounts of assets and liabilities and their tax bases. Deferred tax on temporary differences associated with investments
in subsidiaries and joint ventures is not provided if reversal of these temporary differences can be controlled by the
Company and it is probable that reversal will not occur in the foreseeable future.
Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their
respective period of realization, provided they are enacted or substantively enacted by the end of the reporting period.
Deferred tax assets are recognized to the extent that it is probable that they will be able to be utilized against future
taxable income. Deferred tax assets and liabilities are offset only when the Company has a right and intention to set off
current tax assets and liabilities from the same taxation authority.
Changes in deferred tax assets or liabilities are recognized as a component of tax income or expense in profit or loss,
except where they relate to items that are recognized in other comprehensive income (such as the revaluation of land)
or directly in equity, in which case the related deferred tax is also recognized in other comprehensive income or equity,
respectively.
48
2013 Annual Report
(n) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid
investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of
changes in value.
(o) Equity
Share capital represents the consideration received for shares that have been issued.
Retained earnings include all current and prior period retained profits.
(p) Employee benefits
The Company provides post employment benefits through a 401(k) defined contribution plan.
A 401(k) defined contribution plan is a pension plan under which the Company pays fixed contributions into an
independent entity. The Company has no legal or constructive obligations to pay further contributions after its payment
of the fixed contribution. Contributions to the plan are recognized as an expense in the period that relevant employee
services are received.
Short-term employee benefits, including holiday entitlement, are current liabilities included in payables and accruals
measured at the undiscounted amount that the Company expects to pay as a result of the unused entitlement.
(q) Provisions, contingent liabilities and contingent assets
General
Provisions are recognized when present obligations as a result of a past event will probably lead to an outflow of economic
resources from the Company and amounts can be estimated reliably. Timing or amount of the outflow may still be uncertain.
A present obligation arises from the presence of a legal or constructive commitment that has resulted from past events, for
example, product warranties granted, or legal disputes. Provisions are not recognized for future operating losses.
Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most
reliable evidence available at the reporting date, including the risks and uncertainties associated with the present
obligation. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement
is determined by considering the class of obligations as a whole. Provisions are discounted to their present values, where
the time value of money is material.
Warranty
A provision for potential warranty claims is provided at the time sales are recognized and adjusted monthly based on
warranty terms and costs incurred compared to total expected costs. The method used to establish the provision is to
track the actual historical costs per unit covered and multiply it by the number of units still covered under the warranty
policy to establish the total estimated liability, which is then reduced to its present value with a corporate AA bond index.
The cost of labor on outstanding warranties is fixed, but the price of components can increase. A major assumption
underlying the estimate is that failure rates will remain relatively the same in the future as they have in the past.
(r) Operating segments
Operating segments are recognized and disclosed when a segment’s revenues, operating profit or identifiable assets
are ten percent or greater of the consolidated Company’s revenues, operating profit or assets.
49
2013 Annual Report
(s) Significant management judgement in applying accounting policies
Deferred tax assets
Deferred tax benefits related to temporary differences between the tax assets and liabilities related to the warranty
reserve, deferred compensation and other compensation amounts are recorded based on management’s assessment
of the Company’s ability to realize these benefits. Realization of the Company’s deferred tax assets is largely
dependent upon its achievement of projected future taxable income.
Research and development costs
Research costs are generally expensed as incurred. As described in Note 3 (g), research costs on an individual project
are only capitalized as an intangible asset if management can determine that they meet the criteria for capitalization.
Leased assets
The Company makes a judgement based on the facts and circumstances of each lease whether those leased assets
are capitalized or reported as an operating lease. If the risks and rewards or the substantial ownership of the asset is
transferred to the Company, it will be a finance lease. The present value of the lease payments is compared to the fair
value of the leased assets and the Company also compares the lease term to the estimated useful life of the leased
asset. The higher the proportion these calculations are, the more likely it will be a finance lease.
Indicators of impairment
The Company uses some judgment in determining impairment of assets but primarily determines whether or not an
asset is impaired by assessing if the asset will continue to add to the profitability of the Company going forward.
(t) Estimation uncertainty
When preparing the financial statements, management undertakes a number of judgements, estimates and assumptions
about recognition and measurement of assets, liabilities, income and expenses.
The actual results are likely to differ from the judgements, estimates and assumptions made by management, and will
seldom equal the estimated results.
Information about the judgements, estimates and assumptions that have the most significant effect on the recognition
and measurement of assets, liabilities, income and expenses is provided below.
Useful lives of depreciable and amortizable assets
Management assigns the period over which to depreciate or amortize the cost of assets based on the expected use
of the assets to the Company. Management reviews the estimated useful lives at each year end.
Inventories
Inventories are measured at the lower of cost and net realizable value. In estimating net realizable values, management
takes into account the most reliable evidence available at the times the estimates are made.
Provision for warranty claims
The largest accounting estimate is the provision for warranty claims on products sold by the Company. The actual
future costs to fulfill warranty expenses are unknown. The method used to establish the provision is to track the
actual historical costs per unit covered and multiply it by the number of units still covered under the warranty policy
to establish the total estimated liability, which is then reduced to its present value with a discount rate. The cost of
labor on outstanding warranties is fixed, but the price of components can increase. A major assumption underlying
the estimate is that failure rates will remain relatively the same in the future as they have in the past.
Allowance for doubtful accounts
A significant estimate is a determination of the provision for doubtful accounts which is estimated by reviewing all
accounts receivable for payment history and any current events that may have an impact on collection.
50
2013 Annual Report
(u) Recent accounting pronouncements
At the date of authorization (see Note 24) of these financial statements, certain new standards, amendments and
interpretations to existing standards have been published but are not yet effective, and have not been adopted early
by the Company. Management anticipates that all of the relevant pronouncements will be adopted by the Company’s
accounting policy for the first period beginning after the effective date of the pronouncement. Information on new
standards, amendments and interpretations that are expected to be relevant, but will not have a material effect to the
Company’s financial statements, are provided below.
IFRS 9 Financial Instruments (effective from January 1, 2015)
The IASB aims to replace IAS 39, Financial Instruments Recognition and Measurement, in its entirety. The replacement
standard (IFRS 9) is being issued in phases. To date, the chapters dealing with recognition, classification, measurement
and derecognition of financial assets and liabilities have been issued, some of which were just carried forward from IAS
39 unchanged. These chapters are effective for annual periods beginning on or after January 1, 2015. The restatement of
comparative period financial statements will not be required for the initial classifications and measurement requirements,
but will require modified disclosures upon transition.
Management has assessed the impact that these standards or amendments are likely to have on the financial statements
of the Company and has determined that they will not have a material effect.
(v) Joint venture
The joint venture is accounted for using the equity method. The investment is recorded at cost and then adjusted for the
change in the Company’s portion of the net assets and the profit and loss of the joint venture. The profit (loss) from the
joint venture is recorded on the statement of comprehensive income as a separate line item below “Income before interest
and income taxes.” In the notes to the financial statements, the details of the entire joint venture profit (loss) are broken out
in a separate statement. There is also a statement showing details of the joint venture’s total assets, liabilities and equity.
If the joint venture were to experience losses and the Company’s share of those losses were to equal or exceed the
carrying amount of the Company’s investment, then the Company would write its investment in the joint venture down
to zero, but not recognize any further loss. Additional losses beyond the amount of the Company’s investment in the
joint venture would be recorded as a liability to the Company only if the Company had incurred legal or constructive
obligations on behalf of the joint venture. If the joint venture were to begin to report profits again, then the Company
would begin recognizing its share of the profits again only after the Company’s share of the previously unrecognized
losses were recovered.
51
2013 Annual Report
4. Financial instruments disclosure and presentation
Receivables
December 31, 2013
December 31, 2012
Trade receivables - current
$
13,951
$
10,593
Trade receivables - 1 to 89 days past current
3,031
4,856
Trade receivables - 90 plus days past current
748
339
Other receivables
19
856
(637)
(599)
$
17,112
$
16,045
For the year ended December 31, 2012, “Other receivables” included $772 thousand for two notes receivable from
employees for relocation assistance provided by the Company which were secured with assets and have since been paid
in full.
Balance, beginning of year
$
599
$
270
Change in provision
145
441
Net adjustment for finance charges, write-offs and recoveries
(107)
(112)
$
637
$
599
Payables - current
$
3,136
$
2,808
Accruals
5,130
3,245
$
8,266
$
6,053
Balance, end of year
52
2013 Annual Report
4. Financial instruments disclosure and presentation (continued)
Financial risk management
Risks that arise from financial instruments include liquidity risk, credit risk and market risk.
Liquidity risk
Liquidity risk is the risk that the Company will have difficulty meeting obligations associated with its financial liabilities.
The Company manages liquidity risk through cash generated from operations in excess of dividends paid on an annual
basis. Management does not foresee material or significant risk of the Company not meeting its financial obligations.
The Company is able to generate sufficient cash to fund expected growth and development needs. At December 31, 2013,
the Company had $17.5 million ($11.9 million at December 31, 2012) in cash and cash equivalents and $10.3 million ($10.2
million at December 31, 2012) in short-term investments remaining after paying $12.7 million in dividends during the fiscal
year 2013 ($12.5 million in 2012). Accounts payable are paid within terms and discounts are taken when available.
Company policy calls for investments to have maturities of less than one year unless approved by the Board of Directors,
slight or no risk of losing the invested principal and access to the principal amount prior to maturity. All investments must
have a high-grade rating and no investments outside the U.S. are allowed without approval of the Board of Directors.
The long-term investment poses little overall liquidity risk to the Company due to the small size of the investment.
Credit risk
The risk with the Company’s short-term investments is minimal as they are all in money market funds. The Company’s
financial instruments that are exposed to credit risk are primarily accounts receivable. To minimize this credit risk,
the Company has established policies for evaluating customers and extending credit. Accounts receivable days sales
outstanding are at levels normal for the industry.
The Company makes provisions for doubtful accounts as required. Management considers the reasons and history for
each overdue account as well as economic conditions. When appropriate, the Company requires letters of credit, liens,
bonds or personal guarantees from customers.
Market risk
Market risk includes interest rate risk and foreign exchange risk.
Interest rate risk
Interest rate risk is the risk that the value or future cash flows of financial instruments will fluctuate due to changes in
market interest rates. The Company currently is only exposed to interest rate risks from investment of its surplus cash and
does not expect fluctuations in market interest rates to have a material impact on its results of operations. The Company
does not use derivative instruments to reduce its exposure to interest rate risk.
53
2013 Annual Report
4. Financial instruments disclosure and presentation (continued)
Financial risk management (continued)
Foreign exchange risk
Sales and purchases are primarily denominated in U.S. dollars including sales outside of the United States. Foreign
currency adjustments were as follows:
Net loss on foreign currency adjustments
2013
$
18
2012
$
75
5. Capital disclosures
At December 31, 2013, the Company had shareholders’ equity of $42.5 million and no bank loans or long-term
debt other than $472 thousand in deferred compensation plan net liability. For the year ended December 31, 2012,
the Company had $38 thousand under finance leases and $280 thousand in deferred compensation plan net
liability. The Company’s objective when managing capital is to safeguard the entity’s ability to continue as a going
concern and make the Company prosper so that it can provide a fair return for shareholders and benefits for other
stakeholders. The Company sets the amount of capital required and manages the capital structure and makes
adjustments to it in the light of changes in business and economic conditions.
The Company uses forecasted cash flow, projected investment in the growth of the business and capital
expenditure needs to determine the level of dividend payments. The Company targets a minimum value of cash
and cash equivalents and short-term investments that is greater than two times the next estimated dividend
payment. This ratio was over eight to one at December 31, 2013.
6. Inventory
2013
2012
Raw material
$
6,681
$
7,001
Finished goods
2,860
3,538
$
9,541
$
10,539
$
64,378
$
67,996
Inventory included in comprehensive income as cost of sales
Inventories are not pledged as securities for liabilities. Excess or obsolete inventory is reserved for as required.
No inventory write downs have been required.
54
2013 Annual Report
7. Property, plant and equipment
Gross carrying amount
Building and
improvements
Land
Equipment
Equipment
under
finance lease
Construction
in progress
Total
$ 450
$ 4,460
$ 6,732
$ 221
$ 219
$ 12,082
Construction in progress
—
—
—
—
712
712
Placed in operation
—
—
259
—
(259)
—
Disposals
—
—
(9)
—
—
(9)
450
4,460
6,982
221
672
Accumulated depreciation
12,785
—
(811)
(4,588)
(147)
—
(5,546)
Depreciation in cost of sales
—
(90)
(160)
(36)
—
(286)
Depreciation in operating expenses
—
(95)
(550)
—
—
(645)
Disposals
—
—
—
—
9
—
(996)
(5,289)
(183)
—
(6,468)
$ 450
$ 3,464
$ 1,693
$
$ 672
$ 6,317
Net carrying amount, December 31, 2013
Building and
improvements
Land
9
Equipment
38
Equipment
under
finance lease
Construction
in progress
Total
$ 450
$ 4,454
$ 6,105
$ 221
$ 175
$ 11,405
Construction in progress
—
—
—
—
772
772
Placed in operation
—
6
722
—
(728)
—
Disposals
—
—
(95)
—
—
(95)
450
4,460
6,732
221
219
12,082
Accumulated depreciation
—
(626)
(3,906)
(111)
—
(4,643)
Depreciation in cost of sales
—
(90)
(187)
(36)
—
(313)
Depreciation in operating expenses
—
(95)
(539)
—
—
(634)
Disposals
—
—
—
—
44
—
(811)
(4,588)
(147)
—
(5,546)
$ 3,649
$ 2,144
$
$ 219
$ 6,536
Net carrying amount, December 31, 2012
$ 450
44
74
55
2013 Annual Report
8. Intangible assets
Intellectual property
December 31, 2013
December 31, 2012
$
1,810
$
1,810
1,810
1,810
(291)
(97)
Amortization in operating expenses
(194)
(194)
(485)
(291)
$
1,325
$
1,519
Accumulated amortization
Net carrying amount, end of year
9. Long-term investment
On June 29, 2012, the Company purchased a 5% ownership stake in GI Energy (formally known as GI Endurant, LLC).
The Company acquired 500 Class A share units out of 10,000 total and 526 Class B share units out of 10,526 total for
a total consideration of $285 thousand, composed of $80 thousand equipment, $130 thousand trademark license and
$75 thousand cash. Under the agreement, the Company will also supply equipment to GI Energy.
GI Energy is a full service energy firm. It was created from the acquisition of Chicago-based Endurant Energy LLC by
United Kingdom based Geothermal International Ltd. GI Endurant’s core business is built around sustainable distributed
energy and power generation assets. It focuses on combined heat and power (CHP) projects (also known as cogeneration)
that provide clean and reliable electricity, thermal energy and back-up power, as well as ground source heat pump (GSHP)
projects.
10. Bank arrangements
The Company has an unsecured $3.0 million bank line of credit which was unused as of December 31, 2013 and
December 31, 2012.
56
2013 Annual Report
11. Joint venture
On July 27, 2012, the Company signed a joint venture agreement with Chinese company Ningbo Shenglong Group Co., Ltd.
(Shenglong) to form WaterFurnace Shenglong HVACR Climate Solutions, Ltd. (WafterFurnace Shenglong), also a Chinese
company. WaterFurnace Hong Kong owns 49% of the venture with Shenglong owning 51%. Management has assessed the
arrangement and has determined there is joint control and therefore it is considered a joint venture.
Under the terms of the agreement, the total investment of both parties will be $8.0 million, of which the Company
will contribute $3.9 million. In 2012, $2.9 million was paid and the balance of $1.0 million is due by September 4, 2014.
Effective December 2013, the WaterFurnace Shenglong Board of Directors approved a reduction in registered capital of
$2.0 million, therefore the $1.0 million will no longer be due September 4, 2014. There are no contingent liabilities relating
to the Company’s interest in the joint venture and no restrictions on cash. The assets purchased by the joint venture upon
formation which constitute a business, were acquired from Shenglong.
WaterFurnace Shenglong began full operations on November 5, 2012. The joint venture is a private company and therefore
there is no quoted market price. The joint venture is accounted for using the equity method.
2013
2012
$
2,923
$
Share of income (loss)
106
20
$
3,049
$
2,940
(28)
11
2,923
Presented below are the summarized financials for the entire joint venture from the commencement of operations on
November 5, 2012.
Opening net assets
$
5,965
$
6,000
Income (loss) for period
216
(58)
41
24
$
6,222
$
5,966
Our interest in the joint venture at 49%
$
3,049
$
2,923
57
2013 Annual Report
11. Joint venture (continued)
2013
2012
$
9,024
$
1,597
5,872
998
3,152
599
2,790
662
362
(63)
Finance (expense) income
(58)
5
Income before income taxes
304
(58)
88
—
Net income
216
(58)
Unrealized gain on translation of foreign operations
(net of tax)
41
24
Other comprehensive income
41
24
$
257
$
(34)
Sales
Cost of sales
Gross profit
Operating expenses
Income (loss) before interest and income taxes
Income tax expense
For the year ended December 31, 2013, the depreciation included in cost of sales is $79 thousand and the depreciation
and amortization included in operating expenses is $109 thousand.
58
2013 Annual Report
11. Joint venture (continued)
December 31, 2013
December 31, 2012
ASSETS
Current assets
$
2,955
$
2,152
Receivables
1,881
337
Inventory
1,353
1,094
78
20
Total current assets
6,267
3,603
Property, plant and equipment
1,146
944
Intangible assets
2,482
2,510
Total Assets
$
9,895
$
7,057
$
3,453
$
1,074
Income taxes payable
178
9
42
8
3,673
1,091
Share capital
6,000
6,000
Retained earnings (deficit)
222
(34)
Total Shareholders’ Equity
6,222
5,966
Total Liabilities & Shareholders’ Equity
$
9,895
$
7,057
LIABILITIES
Current liabilities
Total current liabilities
SHAREHOLDERS’ EQUITY
59
2013 Annual Report
12. Finance leases
Minimum lease payments due under finance leases
December 31, 2013
December 31, 2012
Current portion in payables and accruals
$
37
$
36
Long-term portion
—
38
$
37
$
74
Due within one year
$
37
$
40
Due one to five years
—
36
Less: imputed interest
—
(2)
$
37
$
74
13. Provisions and contingencies
2013
$
2012
22,822
$
18,378
Increase due to increase in claim rates
1,748
1,554
Increase due to net increase of units exposed
1,497
1,816
Increase due to change in estimated future vendor credits
217
110
(Decrease) increase due to change in discount rate
(294)
964
$
25,990
$
22,822
Current portion
$
4,534
$
3,884
Long-term portion
21,456
18,938
$
25,990
$
22,822
The warranty provision is impacted by fluctuating interest rates, as an example a 25 basis points increase in the rate would
reduce the provision by $294 thousand. The warranty provision is currently discounted at the rate of 1.7% (2012 - 1.5%) for
years one through five and 3.2% (2012 - 2.8%) for years six through 10 using a corporate AA bond index.
60
2013 Annual Report
13. Provisions and contingencis (continued)
Contingencies
The Company and its consolidated subsidiaries are defendants in actions brought against them from time to time in
connection with their operations. While it is not possible to estimate the outcome of the various proceedings at this time,
the Company does not believe that it will incur any significant loss or expense.
14. Share capital
Number of shares
Shares issued to fund deferred compensation plan (Note 18)
12,298,216
44,254
12,342,470
Share capital
$
Number of shares
18,999
$
Share capital
12,200,894
764
97,322
19,763
12,298,216
$
17,505
1,494
$
18,999
Unlimited common shares without par value are authorized.
Shares approved by shareholders for issuance to deferred compensation plan trust
Shares
Approved
250,000
Issued in 2010
3,235
Issued in 2011
23,760
Issued in 2012
97,322
Issued in 2013
44,254
Total issued
168,571
Approved, remaining
81,429
15. Commitments
The Company has entered into agreements to lease certain facilities, operational and administrative equipment,
purchase commitments and other services.
Minimum contractual obligations due
Operating leases
Other payments
Total
Minimum due within one year
$
471
$
2,269
$
2,740
Minimum due one to five years
—
6,000
6,000
$
471
$
8,269
$
8,740
61
2013 Annual Report
16. Supplementary cash flow information
Cash increase (decrease) from change in non-cash working capital
2013
2012
Receivables
$
(1,067)
$
4,081
Inventory
998
(1,351)
(62)
751
Payables and accruals other than deferred compensation and finance lease liabilities
2,212
(989)
Income taxes payable/receivable
294
(275)
$
2,375
$
2,217
$
8,486
$
7,749
$
764
$
1,494
Equipment
$
—
$
80
Trademark license
—
130
$
—
$
210
Cash paid for income taxes
Income taxes paid
Non-cash transactions
Shares issued to fund deferred compensation plan
Consideration for long-term investment
62
2013 Annual Report
17. Geographical information
Sales
2013
102,908
2012
United States
$
$
104,650
Canada
11,481
11,521
Other
4,387
3,526
$
118,776
$
119,697
Sales are attributed based on the location of the customer.
Seasonality plays a role in quarterly sales and profitability. The first quarter is historically the lowest quarter for sales and
profitability due to the decreased ability to install loops in northern climates during that period. Sales and profitability
historically have improved in the second quarter and are highest in the third and fourth quarters.
Property, plant and equipment
The majority of property, plant and equipment is located in the United States.
Intangible assets
WaterFurnace Asia Pacific, located in Australia, has the Company’s $1.3 million net carrying amount of intellectual property.
WaterFurnace Hong Kong has an investment in the joint venture located in the People’s Republic of China.
63
2013 Annual Report
18. Related party transactions
The Company’s related parties are limited to Board members, key management personnel, and companies controlled by
a subsidiary director who has agreements with the Company, and employees for whom the 401(k) pension plan and the
deferred compensation plan applies and transactions with the joint venture.
Compensation of key management personnel
December 31, 2013
December 31, 2012
Director compensation
$
309
$
350
Executive senior staff salaries and short-term benefits
2,299
1,462
Executive senior staff post employment benefits
615
1,107
$
3,223
$
2,919
“Executive senior staff post employment benefits” includes vesting of deferred compensation which vests as defined
under the deferred compensation plan later within this section. In 2012 one of the members reached age 60 and therefore
is fully vested, and any of his future amounts will vest immediately.
Companies controlled by subsidiary director
Consultation agreement fees
$
28
$
70
Lease agreement expenses
18
34
$
46
$
104
The agreements above are transactions in the normal course of the operations. Effective May 9, 2013, no companies were
controlled by a subsidiary director.
401(k) pension plan
Company match 401(k) pension plan expenses
$
497
$
517
The Company provides a 401(k) pension plan for employees. Employees can elect to contribute up to 80% of their gross
earnings. The Company matches 100% of the first 4% of compensation contributed by employees. All Company matches
vest immediately.
Joint venture transaction
For the year ended December 31, 2013 and 2012, the Company billed the joint venture $75 thousand and $33 thousand,
respectively, for services provided.
64
2013 Annual Report
18. Related party transactions (continued)
Deferred compensation plan
The Company has established an executive nonqualified deferred compensation plan (“the plan”) for certain management
employees. These employees can elect to defer a portion of their earnings, and these amounts vest immediately. At the
Company’s discretion, additional amounts may be awarded to the employees’ accounts. These additional amounts are
subject to vesting over three to five years or upon normal retirement age, defined in the deferred compensation plan as
age 60.
The plan, approved by the Board of Directors, allowed participants to choose from a number of selected mutual funds as
“notional investments” for the participants and Company contributions prior to June 8, 2009. Effective June 8, 2009, the
plan was amended by the Board to require that all future Company contributions be notionally invested in WaterFurnace
Renewable Energy, Inc. stock. The participants continue to have the choice of a number of selected mutual funds for the
notional investments for their contributions.
The earnings deferred by the participants plus amounts to be contributed by the Company are then tracked by the
plan’s financial institution sponsor as if those amounts were actually invested in the notional fund options. The liability is
adjusted based on changes to the value of the offsetting notional investments with the changes in the market value of
the calculated liability charged or credited to deferred compensation plan expense.
December 31, 2013
December 31, 2012
Plan Assets
Mutual funds
$
667
$
1,043
Life insurance policies
1,946
1,693
Company stock
2,127
1,231
4,740
3,967
Plan liabilities
(5,212)
(4,247)
Plan net liability
$
(472)
$
(280)
Unvested additional awards balances not reflected in
plan liabilities
$
253
$
356
Deferred compensation plan expenses
$
857
$
945
Deferred compensation awarded during the year
$
536
$
665
65
2013 Annual Report
18. Related party transactions (continued)
Deferred compensation plan (continued)
The plan is a contractual obligation by the Company to pay the plan participants in the future and is comprised primarily
of amounts to be paid post employment, but also includes amounts designated by the participants as in-service and
education amounts that can be distributed during the participant’s term of employment according to payment terms
designated by the participant.
The plan is not required to be funded, but the Company has established a trust to which the Company may contribute
funds which can only be used to satisfy the compensation liability. The plan assets consist of mutual funds whose
value is tied to the market performance of the investment options, flexible premium variable life insurance policies and
WaterFurnace Renewable Energy, Inc. stock. These assets are recorded at market value and have been netted with the
offsetting liability on the basis that the assets are only available for funding of the plan liability.
Company shares issued to fund deferred compensation plan
Number of shares
Price per share
Share capital
Number of shares
Price per share
Share capital
22,053
$
15.75
$ 347
26,773
$
18.48
$ 495
May 30 (June 1)
22,201
$
18.79
$ 417
14,445
$
16.38
236
56,104
$
13.59
763
97,322
(December 5)
44,254
$ 764
$ 1,494
19. Significant expenses
Employee compensation expense in operating expenses
2013
2012
Salaries and wages
$
10,382
$
10,925
Benefits
5,118
3,868
$
15,500
$
14,793
Benefits include the Company match expense for the 401(k) plan and deferred compensation expense.
Research and development expenses
Research and development expenses
$
2,647
$
2,454
Research tax credits
(350)
(384)
$
2,297
$
2,070
66
2013 Annual Report
20. Income taxes
Income tax expense - current and deferred portions
2013
2012
Current taxes
$
8,872
$
7,683
Increase in deferred tax assets
(1,988)
(2,168)
$
6,884
$
5,515
$
(57)
$
9
Deferred tax (recovery) expense recognized directly in
other comprehensive income
Income tax expense - significant components
Income tax expense computed at Canadian statutory rate
$
5,257
$
4,138
U.S. taxes different from Canadian statutory rate
1,620
1,321
Manufacturing deduction
(626)
(516)
State tax expense
522
341
Other permanent differences
111
231
$
6,884
$
5,515
Warranty reserve
$
10,068
$
8,841
Deferred compensation and other compensation amounts
2,389
1,966
Inventory reserve
(101)
(103)
Book value of assets in excess of tax value
(1,011)
(1,252)
Other
545
393
The Canadian statutory rate for income taxes remained consistent with 2012 at 26.5%.
Deferred tax assets - significant components
$
11,890
$
9,845
67
2013 Annual Report
21. Earnings per share
Basic and diluted earnings per share (“EPS”) are the same as there are no dilutive securities. EPS was calculated using
“Net income” as the numerator. Shares outstanding are calculated in the following table.
Shares outstanding
2013
2012
Shares outstanding at beginning of year
12,298,216
12,200,894
Shares issued to deferred compensation plan
Shares outstanding at end of year
12,342,470
12,298,216
44,254
97,322
Weighted average shares outstanding
Shares outstanding at beginning of year
12,298,216
12,200,894
Weighted average shares outstanding for
shares issued to deferred compensation plan
Weighted average shares outstanding during the year
12,328,150
68
2013 Annual Report
29,934
38,052
12,238,946
22. Dividends
Dividends paid per share (U.S.$)
Date of payment
Date of record
2013
2012
March 1 (March 1)
February 20 (February 21)
$
0.24
$
0.24
June 3 (June 1)
May 23 (May 18)
0.25
0.24
Sept 4 (Sept 4)
Aug 22 (Aug 22)
0.25
0.24
Dec 2 (Dec 3)
Nov 21 (Nov 22)
0.25
0.24
$
0.99
$
0.96
Dividend payments to shareholders
$
12,203
$
11,746
Withholding tax payment to the Internal Revenue Service on
intercorporate dividends
Total dividends
$
487
12,690
$
714
12,460
The Company paid a dividend on March 3, 2014 of $0.25 per share. The date of record was February 20, 2014.
The total amount paid was $3.2 million with $3.1 million to shareholders and $31 thousand withholding tax
payment to the Internal Revenue Service on intercorporate dividends.
23. Subsequent event
Refer to Note 22 for subsequent dividend.
24. Authorization for issuance of consolidated financial statements
On March 11, 2014, by a board resolution, the directors authorized the issuance of the consolidated financial statements.
On behalf of the Board:
Timothy E. Shields
Chairman
Thomas C. Dawson
Chairman of the Audit Committee
69
2013 Annual Report
Corporate Information
Corporate office
Officers
9000 Conservation Way
Fort Wayne, Indiana 46809-9794 U.S.A.
Telephone: (260) 478-5667
Fax: (260) 747-2828
waterfurnace.com
President and Chief Executive Officer
Timothy E. Shields
Chairman
Independent auditor
Fred Andriano
Secretary, Treasurer and Chief Financial Officer
Grant Thornton LLP
Toronto, Ontario, Canada
Directors
Transfer agent and registrar
Computershare Investor Services Inc.
Toronto, Ontario, Canada
Toll-free number for shareholder inquiries
(800) 564-6253
For quarter and annual reports by mail go to
computershare.com/mailinglist
Trading information
CUSIP 9415EQ108
ISIN CA9415EQ1089
Toronto Stock Exchange
WFI for trading in Canadian dollars
WFI.U for trading in U.S. dollars
President and CEO
Timothy E. Shields 2, 3
Chairman
Thomas C. Dawson, CA
Corporate Director
1, 3
J. David Day, LLB 1, 2, 3
Corporate Director
Charles R. Diltz 1, 2
Sr. Vice President
Comfort Systems USA
1 Member of the Audit Committee
2 Member of the Compensation Committee
3 Member of the Governance and Nominating Committee
70
2013 Annual Report
These pages left intentionally blank
71
2013 Annual Report
These pages left intentionally blank
72
2013 Annual Report
visit us at waterfurnace.com
WaterFurnace is a registered trademark of WaterFurnace International, Inc.

2013-WaterFurnace-Annual-Report

Transcription

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