The Consumers' Waterheater Income Fund
TSX : CWI.UN

The Consumers' Waterheater Income Fund

July 29, 2009 20:21 ET

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

TORONTO, ONTARIO--(Marketwire - July 29, 2009) - The Consumers' Waterheater Income Fund ("Fund") (TSX:CWI.UN) today reported growth in total revenues and net earnings, but a decline in EBITDA for the second quarter ended June 30, 2009 over the comparable period in 2008.

"In the second quarter of 2009, the Fund's revenues continued to grow despite adverse market conditions," said John Macdonald, President and CEO. "Our quarterly revenues increased due to growth in the Rentals business and the addition of the Sub-metering businesses. At the same time, we have introduced a number of measures to combat attrition, which rose during the second quarter, with a focus on customer communications and education in our Rentals business. We have also strengthened our leadership team to include experienced executives to lead Sales and Marketing efforts and Sub-metering operations."

Financial and Operating Highlights

- Total revenues grew 8.7% to $48.2 million from $44.3 million in the second quarter of 2008 due to revenues from the Sub-metering business in 2009 and increased revenues from the Rentals business.

- EBITDA in the quarter declined slightly to $34.4 million from $36.7 million during the period ended June 30, 2008. This decline was due in part to higher losses on disposals in the Rentals business. Adjusted EBITDA(1), comprising EBITDA excluding the non-cash loss on disposal of equipment, rose slightly to $39.4 million from $39.3 million in the second quarter of 2008.

- Operating Cash Flow(1) declined 9.3% to $30.6 million from $33.7 million for the same period last year.

- The Payout Ratio(2) increased to 116.9% in the second quarter of 2009. This increase was due to higher interest expense, increased maintenance capital expenditures and losses in the Sub-metering business. The customer attrition rate was 1.6%, up from 0.7% in the 2008 period due to higher losses to competitors.



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Consolidated Financial Three months Six months
Highlights ended June 30, ended June 30,
(Cdn. $000's) 2009 2008 2009 2008
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Total revenues $ 48,208 $ 44,347 $ 97,398 $ 88,559
Earnings before interest,
taxes and
amortization ("EBITDA") 34,358 36,706 70,005 73,975
Adjusted EBITDA 39,439 39,321 78,520 78,749
Earnings before tax (2,141) 5,789 (1,094) 10,686
Income tax (recovery)/expense (9,697) 7,200 (12,917) 3,514
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Net earnings/(loss) 7,556 (1,411) 11,823 7,172
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Total assets 1,027,125 1,008,094 1,027,125 1,008,094
Total debt 611,765 534,176 611,765 534,176
Operating cash flow 30,594 33,741 62,618 66,911
Cash flow from operating
activities 34,060 37,858 67,087 62,561
Distributable Cash(2) $ 13,658 $ 18,317 $ 28,370 $ 36,376
Payout Ratio 116.9% 87.2% 112.6% 87.8%
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Second Quarter 2009 Financial Results

Total revenues in the second quarter of 2009 were $48.2 million, an increase of $3.9 million compared to the same period last year. The growth was due primarily to Sub-metering revenues of $2.9 million and higher Rentals revenues, including an average rental rate increase on most of the portfolio of 3.9% effective January 2009.

While EBITDA has been relatively stable over the past eight quarters, it decreased by $2.3 million during the second quarter of 2009 compared to the corresponding quarter of 2008, reflecting stronger revenue offset by higher losses on disposal, cost of sales and general and administrative expenses. The Sub-metering business had negative EBITDA of $0.6 million in the second quarter of 2009, due in part to actions taken in response to the March 24, 2009 Ontario Energy Board ("OEB") Bulletin regarding the deployment of sub-metering services in the Ontario apartment market.

Earnings before tax and net earnings decreased by $7.9 million and $11.8 million, respectively, in the second quarter of 2009 compared to the same period last year. The decrease in earnings before tax was due to higher interest expense, loss on disposal of equipment, and increased amortization during the quarter ended June 30, 2009.

Operating Cash Flow was $30.6 million in the second quarter of 2009, representing a decrease of $3.1 million or 9.3% compared to the corresponding quarter of 2008. Cash provided by operating activities decreased to $34.1 million in the second quarter of 2009, down from $37.9 million in the period ending June 30, 2008. Despite these declines, management believes that the Fund has sufficient cash flows and cash on hand to meet its obligations, including the working capital requirements of the Sub-metering business.

Distributable Cash decreased by $4.6 million in the second quarter of 2009 to $13.7 million, down from $18.3 million during the quarter ended June 30, 2008. The decrease was due primarily to the higher interest expense after refinancing of $330 million and an increase in capital expenditures of $1.6 million. The Fund's Payout Ratio during the second quarter of 2009 was 116.9% compared to 87.2% over the same period last year.

Executive Appointments

The Fund has recently strengthened its leadership team with two executive appointments. In March 2009, Craig McCandless was named Chief Operating Officer of Stratacon Inc., with responsibility for overseeing the Sub-metering business operations. He brings more than 15 years of experience in the metering industry. In June 2009, Tom Cooper was appointed Vice President, Sales & Marketing of the Fund and its subsidiaries. Mr. Cooper is currently leading the sales and marketing activities of both the Rentals business and the Sub-metering business.

Financial Statements and MD&A

The Fund's financial statements and management's discussion and analysis for the second 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 second quarter of 2009 on Thursday, July 30, 2009 at 10:00 a.m. (ET). John Macdonald, President & CEO and Steve Bower, CFO, will be on the call.



The call can be accessed as follows:
Toll free: +1.800.595.8550
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 August 6, 2009. The rebroadcast can be accessed by dialing +1.877.289.8525 or +1.416.640.1917 and entering the pass code 21310468#.

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 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, Adjusted 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. Adjusted EBITDA comprises EBITDA excluding the non-cash loss on disposal of equipment. 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