The Consumers' Waterheater Income Fund
TSX : CWI.UN

The Consumers' Waterheater Income Fund

April 30, 2009 15:39 ET

The Consumers' Waterheater Income Fund Reports Results for the First Quarter of 2009

Revenues Grow $5 million, or 11.3%

TORONTO, ONTARIO--(Marketwire - April 30, 2009) - The Consumers' Waterheater Income Fund (the "Fund")(TSX:CWI.UN) today reported growth in total revenues, but declines in EBITDA(1) and net earnings in the first quarter ended March 31, 2009 over the comparable period in 2008.

"During the first quarter of 2009, we saw continued growth in revenues, from both our Rentals business and our Sub-metering business acquired in August 2008," said John Macdonald, President & CEO. "We were also successful in refinancing $330 million of borrowings during the quarter despite incredibly challenging debt markets, which is a testament to the strength of our business. However, the higher interest cost on our debt and other cost increases, including our investment to grow the Sub-metering business, resulted in a drop in earnings and increase in our Payout Ratio2 to 108.6% in the quarter. Despite the exceptionally weak economy, our rentals business performed well."

Financial and Operating Highlights

- Total revenues grew to $49.2 million from $44.2 million in the first quarter of 2008.

- EBITDA in the quarter declined slightly to $35.6 million from $37.3 million during the period ended March 31, 2008, reflecting the $1.2 million investment to grow the Sub-metering business, and a slight decline in the EBITDA from the Rentals business due to higher losses on disposals.

- Operating Cash Flow(1) declined slightly to $32.0 million from $33.2 million for the same period last year.

- The Payout Ratio increased to 108.6% in the first quarter of 2009 due to higher maintenance capital expenditures and the lower Operating Cash Flow.

- The customer attrition rate was 0.9%, in line with the third and fourth quarters of 2008.

- Issued new senior debt of $330 million to retire the bridge loan and terminate the hedge.



---------------------------------------------------------------------------
Financial Highlights Three months ended
(in thousands of dollars, March 31,
except Payout Ratio) 2009 2008
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Total revenues $ 49,190 $ 44,212
Earnings before interest, taxes and
amortization ("EBITDA") 35,647 37,269
Earnings before tax 1,047 4,897
Net earnings 4,267 8,583

Operating Cash Flow 32,024 33,170
Cash from Operating Activities 33,027 24,704
Distributable Cash(2) 14,712 18,082
Payout Ratio 108.6% 88.3%
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First Quarter 2009 Financial Results

Total revenues in the first quarter of 2009 were $49.2 million, an increase of $5.0 million compared same period last year. The growth was due mainly to Sub-metering revenues of $3.4 million and higher rental revenues (including an average rental rate increase on most of the portfolio of 3.9% effective January 2009).

While EBITDA has been stable over the past eight quarters, it decreased by $1.6 million during the first quarter of 2009 compared to the first quarter of 2008, reflecting stronger revenue, offset by higher losses on disposal and cost of sales and general and administrative expenses. The Sub-metering business had ($1.2) million negative EBITDA in the first quarter of 2009 due in part to actions taken in response to the March 24, 2009 Ontario Energy Board ("OEB") Bulletin in respect of Sub-metering.

Earnings before tax and net earnings decreased by $3.9 million and $4.3 million, respectively, in the first quarter of 2009 compared to the same period last year. Earnings before tax decreased in the first quarter of 2009 due to higher interest, amortization, cost of sales and general and administrative expenses, higher interest expense and increases in other expenses for the 2009 period.

Operating Cash Flow was $32.0 million in the first quarter of 2009, representing a decrease of $1.1 million, or 3.4% over the first quarter of 2008. During the first quarter of 2009, increased revenues were offset by greater cash expenses. Cash provided by operating activities grew to $33.0 million in 2009 from $24.7 million in the first quarter of 2008. The cash impact of changes in working capital was driven primarily by the impact of monthly interest payments during the period when the Fund was on the bridge facility.

In the first quarter of 2009 Distributable Cash decreased by $3.4 million to $14.7 million versus $18.1 million from the first quarter ended March 31, 2008 and the Fund's Payout Ratio during the first quarter of 2009 was 108.6% compared to 88.3% in the same period last year. The decrease in Distributable Cash was due mainly to the $2.3 million increase in maintenance capital expenditures, operating losses in the growing Sub-metering business and higher interest expense. These factors are expected to continue in the next several quarters, and in that case, the Payout Ratio will remain at levels higher than experienced in prior years. Management is undertaking a number of initiatives to mitigate these items and improve performance, including its Sub-metering financial results.

Financial Initiatives

In February 2009, the Fund's wholly-owned subsidiary, The Consumers' Waterheater Operating Trust (the "Trust") issued $60 million principal amount of 6.20% Series 2009-1 Senior Notes due April 30, 2012 and $270 million principal amount of 6.75% Series 2009-2 Senior Notes due April 30, 2014. The Trust used the proceeds from the offering to retire the Trust's $310 million Bridge and settle the bond forward transactions.

Financial Statements and MD&A

The Fund's financial statements and management's discussion and analysis for the first quarter 2009 are available at www.sedar.com or on the Fund's investor relations website at www.consumerswaterheaters.com.

Conference Call and Webcast

Management will host a conference call and live audio webcast to discuss the Fund's performance for the first quarter of 2009 on Friday, May 1, 2009 at 8:30 a.m. (EST). John Macdonald, President & CEO and Steve Bower, CFO, will be on the call.



The call can be accessed as follows:

Toll free: +1 800.732.6179
Local: +1 416.644.3417
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 May 8, 2009. The rebroadcast can be accessed by dialing +1 877.289.8525 or +1 416.640.1917 and entering the pass code 21303801#.

About The Consumers' Waterheater Income Fund

The Fund owns a portfolio of approximately 1.4 million installed water heaters and other assets, rented primarily to residential customers in Ontario. The Fund also owns Stratacon Inc., a leading "smart" Sub-metering company, with metering contracts for approximately 47,000 condominium and apartment suites in Alberta, Ontario and elsewhere in Canada.

Additional information regarding the Fund, including its current Annual Information Form is available on SEDAR at www.sedar.com. Additional information on the sub-metering business is available at www.stratacon.ca.

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 is 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.

(1)EBITDA and Operating Cash Flow are non-GAAP measures, do not have standardized meanings prescribed by GAAP and may not be comparable to similar terms and measures presented by other issuers. EBITDA comprises net earnings plus income taxes, interest expenses and amortization expense, less interest income. Operating Cash Flow comprises net earnings adjusted for non-cash credits and charges, and is equal to cash flow from operating activities excluding changes in non-cash working capital.

(2)Distributable Cash and Payout Ratio are non-GAAP measures, do not have standardized meanings prescribed by GAAP and may not be comparable to similar terms and measures presented by other issuers. The Fund believes that Distributable Cash and Payout Ratio as cash flow measures are useful supplemental measures that help readers evaluate the ability of the Fund to generate cash that could be, and is, used for distributions and provides an indication of the amount of cash available for distribution and paid to the Fund's Unitholders. Investors are cautioned, however, that Distributable Cash is not meant to be an alternative to using cash flows from operating, investing and financing activities measures of the Fund's liquidity and cash flows.

Contact Information