WaterFurnace Renewable Energy : 2nd Quarter Results

As the severe winter of 2013 - 2014 finally subsided, the Company saw improved second quarter sales. Gross sales from the Direct to Dealer channel, the Company's most profitable area, rose 38.3% year over year and sharply contrasted a first quarter decline of 20.0% year over year. Year to date Direct to Dealer gross sales increased 5.5% over prior year. The Company's North American commercial gross sales increased 32.0% in the second quarter versus the same period last year. Year to date, North American commercial gross sales have increased 23.9 % over the same period last year. Overall, year to date total gross sales have increased 9.4% over last year. It is believed the national advertising campaign that took place in the first quarter had a significant contribution to the sales increases achieved in Q2.
Gross profit as a percent of sales increased from 36.1% in Q2 2013 to 39.9% in Q2 2014 due to increased series 7 sales growth, a more favorable sales mix between Direct to Dealer and Commercial sales and continued cost containment. A price increase implemented late in Q1 of 2014 also had a positive impact on gross profit.
Operating expenses in Q2 2014 were up 44.5% versus the same period in 2013 which included $1.5million in transaction expenses associated with the sale of the Company to NIBE Industrier AB. Without the added transaction expenses, operating expenses were in line with historical expense levels and expectations.
The Company achieved record net income, adjusted for transaction costs, and record gross margin dollars and percent to sales for the quarter.
"After the first quarter of this year I stated the Company was 'extremely optimistic.' I'm pleased that the second quarter results indicate our optimism was justified." said Tom Huntington, WaterFurnace President and CEO. "The entire organization did a superior job during a very busy quarter where non-operational activities could have led us to take our eye off the ball. We remained focused and I'm very proud of the efforts of all our employees."
The Company's Chairman of the Board, Tim Shields, stated, "The efforts of the management team to focus on a number of diverse and important strategic tasks; while simultaneously delivering solid performance results in the second quarter was exceptional."
The Company has suspended future dividends pending the completion of the proposed transaction pursuant to the arrangement agreement (the "Arrangement Agreement") entered into with NIBE Industrier AB (publ) ("NIBE") which was announced on June 23, 2014.
The second quarter report to shareholders is available at www.waterfurnace.com and filed on SEDAR at
www.sedar.com.
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Three months ended June 30, Six months ended June 30,

Earnings per share U.S.$

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Prepared using International Financial Reporting Standards
(Audited-Thousands of U.S. $)
June 30, December 31,
2014 2013
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Current assets
Cash and cash equivalents $ 11,975 $ 17,451
Short-term investments 10,260 10,250
Receivables 18,126 17,112
Inventory 10,778 9,541
Prepaids and deposits 693 575
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Total current assets 51,832 54,929
Property, plant and equipment 6,248 6,317
Intangible assets 4,382 1,325
Goodwill 244 -- Long-term investments 433 433
Investment in joint venture 2,803 3,049
Deferred compensation 1,511 -- Deferred tax assets 13,681 11,890
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Current liabilities
Payables and accruals $ 9,012 $ 8,266
Income taxes payable 1,406 671
Provision for warranty claims - current portion 4,827 4,534
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Total current liabilities 15,245 13,471
Deferred compensation -- 472
Contingent liability 1,910 -- Provision for warranty claims 22,854 21,456
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Total Liabilities 40,009 35,399
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Share capital 20,235 19,763
Foreign exchange translation adjustment (105) (70) Retained earnings 20,995 22,851
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Forward-Looking Information Cautionary Notice
Certain statements in this release constitute forward-looking statements within the meaning of applicable Canadian securities laws. Readers are cautioned not to place undue reliance on such statements. Investors should not rely solely on this information to make investment decisions. These statements are subject to certain assumptions, risks and uncertainties. In addition, WaterFurnace's sales are related to the cost and stability of electricity, fuel oil, propane and natural gas. Federal, state and provincial building codes and energy incentives can also impact sales. WaterFurnace is subject to standard risks associated with most companies, such as normal competitive pressures. These and other risks could cause WaterFurnace's actual results, performance, achievements and developments to differ materially from the results, performance, achievements or developments expressed or implied by such forward-looking statements. Other risk factors can be found in WaterFurnace's Annual Information Form and other public documents filed by WaterFurnace with Canadian securities regulatory authorities. WaterFurnace assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as
expressly required by law.

WaterFurnace Renewable Energy, Inc. is traded in both Canadian dollars and U.S. dollars on the Toronto Stock
Exchange under the symbol WFI for Canadian dollars and WFI.U for U.S. dollars.
WaterFurnace designs, manufactures and distributes geothermal heat pumps. The geothermal units use the renewable solar energy stored just below the surface of the earth to dramatically reduce the energy consumed by buildings for heating, cooling and hot water.
Additional information about the Company and its products is available on the Company's website:
www.waterfurnace.com. Or call (260) 478-5667 and ask for investor relations.
WaterFurnace Renewable Energy, Inc.
9000 Conservation Way
Fort Wayne, Indiana 46809-9794 (260) 478-5667
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