The Consumers' Waterheater Income Fund

The Consumers' Waterheater Income Fund

October 26, 2006 18:51 ET

The Consumers' Waterheater Income Fund Announces Increased Revenues and Earnings for the Third Quarter of 2006

TORONTO, ONTARIO--(CCNMatthews - Oct. 26, 2006) - The Consumers' Waterheater Income Fund (TSX:CWI.UN) (the "Fund") today released financial results for the third quarter and nine month period ended September 30, 2006.


- Total revenues in the quarter and the nine month period increased by 4.8% compared to the same periods last year.

- 2006 net earnings increased to $7.9 million in the quarter and $40.5 million in the nine months compared to $5.6 million and $15.8 million in the same periods last year. The significant increase in year-to-date earnings is a result of non-cash benefits arising from future corporate tax rate reductions, higher revenues and lower operating costs. The 41% increase in quarterly earnings is a result of higher revenues offsetting slightly higher operating costs.

- Effective September 2006, the Fund increased monthly unitholder distributions by 4.2% bringing the monthly rate to $0.10250 per unit.

- Portfolio of installed assets continues to increase, but at a lower rate due to lower new home construction completions and increased competition.

- Appointment of John MacDonald as President and CEO of the Fund

- Outlook for the remainder of 2006 is positive.

Robert Huggard, CEO of the Fund's Administrative Agent stated the solid financial results are proof of the Fund's ability to deliver steady, predictable performance and stable cash flows.

Selected Financial and Operating Highlights(1)

Three months ended Nine months ended
September 30 September 30
(Unaudited) (in thousands
dollars, 2006 2005 2006 2005
except unit and per unit
amounts) $ $ $ $
Financial highlights
Total revenue 39,084 37,296 117,170 111,824
Net earnings 7,966 5,569 40,541 15,828
Earnings before interest,
taxes, depreciation and
amortization (EBITDA)(2) 34,513 33,187 104,227 98,294
Cash flow from operating
activities 24,289 23,245 83,846 78,347
Capital expenditures
(net)(3) 11,740 11,912 38,158 36,470
Unitholder distributions
declared 14,813 13,906 43,775 41,392
Total assets 1,050,157 1,093,284 1,050,157 1,093,284
Total debt 500,000 500,000 500,000 500,000
Unitholders' equity 311,891 323,134 311,891 323,134
Average Fund
Units outstanding 49,524,092 49,524,092 49,524,092 49,524,092

Per unit analysis
Net earnings $ 0.161 $ 0.112 $ 0.819 $ 0.320
Cash flow from
operating activities $ 0.490 $ 0.469 $ 1.693 $ 1.582
Capital expenditures $ 0.237 $ 0.241 $ 0.770 $ 0.736
Unitholder distributions
declared $ 0.299 $ 0.281 $ 0.884 $ 0.836

Operating highlights
Asset replacements 12,512 12,679 43,797 42,604
Additions 6,116 7,321 17,915 19,090
Removals 4,878 3,833 15,161 12,377
Assets in service 1,329,710 1,325,528 1,329,710 1,325,528

(1) Financial results have been prepared in accordance with Canadian generally accepted accounting principles (GAAP). Specific accounting policies are disclosed in the Fund's audited annual consolidated financial statements, which are available on SEDAR at

(2) EBITDA is a non-GAAP financial measure, and therefore has no standardized meaning prescribed by GAAP and may not be comparable to similar terms and measures by other similar issuers. EBITDA is intended to provide additional information on the Fund's performance and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. More specific details can be found in the Operating Margins section of the MD&A.

(3) Net of proceeds realized from the disposition of assets.

About The Consumers' Waterheater Income Fund

The Consumers' Waterheater Income Fund indirectly owns a portfolio of approximately 1.3 million installed water heaters and other assets, rented primarily to residential customers in Ontario.

The Fund is an unincorporated open-ended trust established with an unlimited number of trust units under the laws of the Province of Ontario pursuant to a Declaration of Trust dated October 28, 2002.

The Fund commenced operations on December 17, 2002, when it completed its initial public offering ("IPO") of Fund units, the proceeds of which were used to fund the purchase of the rental portfolio from Direct Energy Marketing Limited ("Direct Energy").

Direct Energy continues to provide service support to the rental portfolio and receives 35% of aggregate rental revenues for its co-ownership interest in certain water heater related assets (with the Fund owning and receiving the remaining 65%). As a result, the Fund's exposure to operating risk is significantly reduced. The Fund has no investment interest in Direct Energy's services business or operations. The recent sale of Direct Energy's equity interest in the Fund, will not impact Direct Energy's long term servicing and origination agreements with the Fund which continue to represent a significant component of Direct Energy's home services business in Canada.

Additional information regarding the Fund, including its current Annual Information Form ("AIF") is available on SEDAR at

Certain statements in this News Release are forward-looking statements, which reflect management's expectation regarding the Fund's growth, results of operations and business prospects. Such forward-looking statements reflect management's current beliefs and are based on information available to them. Many factors could cause results to differ materially from the results discussed in the forward-looking statements. Although the forward-looking statements are based on what management believes to be reasonable assumptions, the Fund cannot assure investors that actual results will be consistent with these forward-looking statements. Management is under no obligation (and expressly disclaims any such obligation) to update or revise the forward-looking information, whether as a result of new information, future events or otherwise.

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