The Consumers' Waterheater Income Fund
TSX : CWI.UN

The Consumers' Waterheater Income Fund

February 20, 2008 19:52 ET

The Consumers' Waterheater Income Fund Reports Results for the Fourth Quarter and Full Year 2007

2007 Revenues Grow 7.3%; Distributions Increase by 7.4%

TORONTO, ONTARIO--(Marketwire - Feb. 20, 2008) - The Consumers' Waterheater Income Fund (TSX:CWI.UN) (the "Fund") today reported increases in revenues, cash flows from operating activities and distributions declared for the full year.

Financial and Operating Highlights

(in $ thousands except per Unit amounts and installed base)

- Revenues were 7.3% higher in 2007 than 2006

- Cash flow from operations for 2007 rose 5.5%

- Distributions to Unitholders increased by 7.4% in 2007

- Acquisitions drove 6.6% net growth in the installed base of rental units

- Internalization of the Fund's management team was completed

- $310 million bridge facility used to repay debt due in January 2008



Q4/07 Q4/06 2007 2006
------ ------ -------- --------
Revenues 42,503 39,527 168,128 156,697
Net earnings 26,383 4,708 18,252 45,249
EBITDA(1) 35,322 32,953 141,674 135,924

Earnings per Unit $0.53 $0.10 $0.37 $0.91
Distributions per Unit $0.32 $0.31 $1.28 $1.19

Cash from operating activities 37,417 36,018 126,498 119,864
Capital expenditures 16,663 14,034 64,531 54,402
Acquisitions 1,472 1,650 42,502 1,650

Installed base - end of period 1,421,520 1,332,933



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(1)EBITDA is a non-GAAP measure, and therefore has no standardized
meaning prescribed by GAAP and may not be comparable so similar terms and
measures presented by other issuers. This measure comprises net earnings
plus income taxes, interest expenses and amortization expense, less
interest income.


Reconciliation with net earnings Q4/07 Q4/06 2007 2006
--------- -------- --------- ----------

Net earnings $ 26,383 $ 4,708 $ 18,252 $ 45,249

Amortization expense 25,733 24,428 101,517 97,484

Interest expense 6,891 6,495 27,100 25,777

Interest (income) (345) (566) (1,425) (1,595)

Income tax (recovery) (23,340) (2,339) (3,770) (30,991)
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EBITDA $ 35,322 $ 32,726 $ 141,674 $ 135,924
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"Our solid financial results and strategic acquisitions speak to our strong business fundamentals and our stable customer base," said John Macdonald, President and Chief Executive Officer. "We are well positioned to continue to execute our business strategy. Internalizing our team into the Fund will enable us to actively explore alternatives to grow our portfolio organically and through acquisitions."

Fourth Quarter 2007 Financial Results

Q4/07 revenues of $42.5 million were $3.0 million or 7.5% higher than Q4/06 due to the acquisitions of assets from TH Energy and Festival Hydro, and the 2.5% higher average rental rates.

Cash flow from operating activities increased 3.9% to $37.4 million in Q4/07 over the 2006 period due to the higher revenues, partially offset by increases in operating expenses.

Q4/07 net earnings were $26.4 million, up from $4.7 million in Q4/06. The non-cash income tax recovery amounted to $23.3 million in Q4/07, up from $2.3 million in 2006, due mainly to tax rate reductions implemented in the 2007 period.

Full Year 2007 Financial Results

For the year ended December 31, 2007, revenues grew by 7.3% to $168.1 million. Acquisitions accounted for approximately 4% of the growth, with the balance due to the average 2.5% increase in rental rates effective January 1, 2007. Net earnings after tax dropped to $18.3 million in 2007 compared with $45.2 million in 2006, due mainly to a $27.2 million reduction of non-cash tax recoveries reported in 2007.

Expenses increased by $11.2 million or 7.9%, including increases of $4.0 million in amortization expenses due to the assets acquired and $5.1 million in higher cost of sales and general and administrative ("G&A") expenses. The increased cost of sales and G&A expenses included $2.7 million relating to integration and operation of acquired assets, and to higher legal and other costs incurred during the year.

The tax recovery amounted to $3.8 million in 2007, down $27.2 million from the $31.0 million reported in 2006. In 2007, the Canadian government enacted a tax on specified investment flow-through trusts ("SIFT tax"), effective in 2011 or earlier in certain circumstances. The Fund recorded a $33.1 million future tax expense in 2007 relating to the SIFT tax, resulting in the reduction in the future tax recovery. Distributions to Unitholders are currently taxable in their hands, and not the Fund. Net of distributions, the book losses of the Fund, including amortization expense, were $41.2 million in 2007 and $36.1 million in 2006.

Cash flow from operating activities rose 5.5% to $126.5 million in 2007, driven by the higher revenues. Investments in capital expenditures were $64.5 million in 2007, up 18.6% from the prior year, and acquisitions totaled $42.5 million in 2007. The Fund increased its distributions to Unitholders by $4.4 million or 7.4%.

Recent Developments

Effective January 1, 2008, the Fund implemented an average 3.9% increase in the rental rates of its portfolio of residential water heaters.

The Fund announced a senior secured bridge loan facility ("Bridge") of $310 million in the fourth quarter and drew on the facility in January 2008. The facility provides the Fund with additional flexibility in its refinancing activities. Proceeds from the Bridge were used to repay the $275 million of Series A-1 Secured Notes and funds drawn on a $35 million revolving credit facility.

The Fund also entered into an agreement to extend the termination date of existing billing and trust arrangements to March 1, 2008. The extension of the existing trust arrangements enables the Fund to continue with the full confidence and security of the arrangements while the Fund finalizes the new agreements governing almost all of its billing and collections.

Financial Statements and MD&A

The Fund's 2007 annual financial statements and management discussion and analysis are available on the Fund's website www.consumerswaterheaters.com or at www.sedar.com.

Conference Call and Webcast

Management will host a conference call and live audio webcast to discuss the Fund's results on Thursday, February 21, 2008 at 10:00 a.m. eastern time. John Macdonald, President & CEO and Steve Bower, CFO, will be on the call.

The call can be accessed as follows:

Calling toll free: +1.800.733.7560

Calling: +1.416.644.3414

Joining by webcast: www.consumerswaterheaters.com

The audio webcast will be archived at www.consumerswaterheaters.com. A taped rebroadcast will be available until midnight on February 28, 2008. The rebroadcast can be accessed by dialing +1.877.289.8525 or +1.416.640.1917 and entering the code: 21259513#.

About The Consumers' Waterheater Income Fund

The Consumers' Waterheater Income Fund owns a portfolio of approximately 1.4 million installed water heaters and other assets, rented primarily to residential customers in Ontario.

Additional information regarding the Fund, including its current Annual Information Form dated March 19, 2007 is available at www.sedar.com.

Forward-looking Information

Certain statements in this news release are forward-looking statements, which reflect management's expectation regarding the Fund's growth, results of operations, performance, business prospects and opportunities. Such forward-looking information reflects management's current beliefs and are based on information available to them and/or assumptions management believes are reasonable. Many factors could cause results to differ materially from the results discussed in the forward-looking information. Although the forward-looking information is based on what management believes to be reasonable assumptions, the Fund cannot assure investors that actual results will be consistent with this forward-looking information. Except as required by applicable securities laws, the Fund does not intend and does not assume and obligation to update or revise the forward-looking information, whether as a result of new information, future events or otherwise.



The Consumers' Waterheater Income Fund
Consolidated Statements of Earnings


For the years ended December 31,
(in thousands of dollars, except Unit and per
Unit amounts) 2007 2006
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Revenues
Rental revenue $ 166,703 $ 155,102
Investment income 1,425 1,595
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168,128 156,697
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Expenses
Amortization 101,517 97,484
Cost of sales and general and administrative 16,553 11,501
Interest
Short-term 1,323 -
Long-term 25,777 25,777
Loss on disposal of property and equipment 8,476 7,677
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153,646 142,439
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Earnings before income taxes 14,482 14,258
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Income tax recovery
Future (3,674) (30,844)
Large corporations tax (96) (147)
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(3,770) (30,991)
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Net earnings for the year $ 18,252 $ 45,249
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Basic and diluted earnings per Unit $ 0.369 $ 0.914
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The Consumers' Waterheater Income Fund
Consolidated Balance Sheets


As at December 31,
(in thousands of dollars) 2007 2006
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Assets

Current assets
Cash and cash equivalents $ 29,461 $ 39,248
Accounts and other receivables 17,624 16,907
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47,085 56,155

Deferred financing charges - 1,051

Property and equipment 467,772 447,020

Intangible assets 512,890 539,833
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$ 1,027,747 $ 1,044,059
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Liabilities

Current liabilities
Bank Indebtedness $ 30,869 $ -
Accounts payable and accrued liabilities 3,529 1,928
Interest payable 10,614 10,534
Taxes payable 609 755
Distribution payable to unitholders 5,324 5,076
Amounts due to related parties 6,118 6,049
Current portion of long-term debt 275,000 -
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332,063 24,342

Long-term debt 225,000 500,000

Future income taxes 214,710 218,384
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771,773 742,726


Unitholders' equity 255,974 301,333
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$ 1,027,747 $ 1,044,059
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The Consumers' Waterheater Income Fund
Consolidated Statements of Cash Flows


For the years ended December 31,
(in thousands of dollars) 2007 2006
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Cash provided by (used in)

Operating activities
Net earnings for the year $ 18,252 $ 45,249
Items not affecting cash
Amortization 101,517 97,484
Non-cash compensation expense (11) 376
Amortization of deferred financing charges 1,051 1,051
Future income tax recovery (3,674) (30,844)
Loss on disposal of property and equipment 8,476 7,677
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125,611 120,993

Net change in non-cash working capital 887 (1,129)
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Cash from operating activities 126,498 119,864
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Investing activities
Purchase of property and equipment (64,531) (54,402)
Acquisition of PowerStream assets - (1,650)
Acquisition of TH Energy assets (41,030) -
Acquisition of Festival Hydro assets (1,472) -
Proceeds from disposal of property and equipment 3,231 2,920
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Cash invested (103,802) (53,132)
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Financing activities
Distributions to Unitholders (63,144) (58,671)
Proceeds from bank indebtedness 30,869
LTIP - units purchased (208) (292)
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Cash used in financing activities (32,483) (58,963)
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Increase in cash and cash equivalents (9,787) 7,769

Cash and cash equivalents - beginning of year 39,248 31,479
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Cash and cash equivalents - end of year $ 29,461 $ 39,248
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