Rentals Retention Improves 10% and Payout Ratio Improves to 57%
TORONTO, ONTARIO–(Marketwire – May 9, 2011) – EnerCare Inc. ("EnerCare") (TSX:ECI) today reported its financial results for the first quarter ended March 31, 2011. "In the first quarter of 2011, EnerCare achieved growth across each of its lines of business, with total revenues increasing 25% over 2010," said John Macdonald, President and CEO. "Customer retention in our Rentals business improved by 10% compared to the same period last year. In Sub-metering, we posted a 442% increase in revenues, reflecting the new regulatory regime and the added value from our strategic investment in EnerCare Connections."
Financial and Operating Summary2
Amounts herein are in thousands of Canadian dollars.
- Total revenues of $61,412 increased by 25% over 2010. Revenues in the Rentals business increased 1% or $431 to $46,895, primarily as a result of the impact of the 2011 rental rate increase offset by change in overall assets. Sub-metering revenues increased to $14,405 from $2,657, primarily due to the inclusion of EnerCare Connections Inc. ("ECI").
- EBITDA increased by 4% to $36,227 in 2011. Adjusted EBITDA1 increased by 2% to $40,867 driven principally by higher net revenues, lower interest expense and reduced loss on disposal of equipment due to reduced unit exchanges in the Rentals business.
- Net losses were $1,061 in 2011, approximately $1,214 lower than 2010. Operating results improved by $4,127 in 2011 compared to 2010 primarily due to increased revenues offset by a $3,757 reduction in income tax recoveries and increased expenses.
- The Payout Ratio3 improved to 57% in 201 1 from 59% in 2010, primarily as a result lower capital expenditures related to exchanged assets offset by current taxes. EnerCare's Payout Ratio improved even though EnerCare became a taxable entity.
- Attrition in Rentals decreased by 2,000 units or 10% in 2011. Portfolio additions remain strong while unit exchanges declined by 3,000 to 14,000 resulting in both a lower loss on disposal and capital expenditure for the first quarter of 2011.
|Three months ended March 31,2|
|Total SG&A expenses||9,840||7,509|
|Loss on disposal of equipment||4,640||4,993|
|Total operating expenses||62,004||53,842|
|Loss before income taxes||(592||)||(4,719||)|
|Current tax (expense)||(1,584||)||–|
|Deferred income tax recovery||1,115||4,872|
First Quarter 2011 Financial Results
Total revenues of $61,412 for the first quarter of 2011 increased by approximately $12,289 or 25% compared to the same period in 2010. Rentals revenues increased by $431 to $46,895 in the first quarter of 2011, primarily due to rental rate increases implemented in January 2011 offset by the change in outstanding units over the past 12 months. Sub-metering revenues in the first quarter of 2011 were $14,405, an increase of approximately $11,748 as a result of increased billing units with the acquisition of Enbridge Electric Connections Inc. in the fourth quarter of 2010. Revenue increases include pass through commodity charges which contributed $8,972 or 18% to the overall improvement.
Investment income increased by $110 in the first quarter of 2011 to $112 as a result of improved investment rates and larger investment balances during the period.
Selling, General and Administrative Expenses
Total SG&A expenses were $9,840 in the first quarter of 2011, an increase of approximately $2,331 or 31% over the same period in 2010. The expense increase is a result of the inclusion of the ECI business, which accounted for approximately $1,518 of the amount, followed by increased net costs of approximately $813 in respect of long term compensation, professional fees including legal, audit, investor relations and listing fees and selling and office expenses. The 2010 amount for the period included approximately $300 in respect of capital taxes that were not incurred in 2011.
Amortization expense decreased by $1,366 to $26,240 in the first quarter 2011, primarily due to the expiration of the intangible assets related to the former shareholders of Stratacon Inc., a smaller portfolio base and a change in the estimated useful lives of sub-meters that occurred in the fourth quarter 2010.
Interest expense payable in cash decreased nominally to $9,366 i n the first quarter of 2011 over the same period in 2010. The decrease is primarily related to interest rate differences between the 2009 bridge and 2009 revolver compared to the impact of the 2010 Notes. The amortization of bridge fees relates to the 2009 bridge that was repaid when the 2010 Notes were issued in March 2010. Amortization of OCI and financing costs increased modestly as a result of the full period impact of the 2010 Notes and the Convertible Debentures.
Loss on Disposal of Equipment
In the first quarter of 2011, EnerCare reported a loss on disposal of equipment of $4,640, representing a decrease of approximately $353 or 7%. The loss on disposal amount is influenced by the number of assets retired, changes in the retirement asset mix and the age of the assets retired. The primary reason for the decreased expense relates to the lower unit Attrition and exchange activity in the Rentals business in the first quarter of 2011 when compared to 2010.
Adjusted EBITDA and EBITDA
Adjusted EBITDA increased by $876 to $40,867 in the first quarter of 2011. Most of the improvement in Adjusted EBITDA was driven by higher net revenues from the Sub-metering business, which includes the results of ECI. EBITDA of $36,227 for the first quarter of 2011 improved by approximately $1,229 over the comparable period in 2010, due to increased revenue and a reduction in loss on disposal of equipment charges.
EnerCare will continue to execute on its business strategy. EnerCare's financial and operating performance has continued to be strong, including the overall asset base, Payout Ratio, cash balances, and business model.
EnerCare's Rentals business saw significant improvement in Attrition in the last four quarters over comparable periods in the previous year. We are increasing retention spending levels further in 2011 to combat Attrition. A number of new campaigns aimed at consumer education have been deve loped. Some campaigns are already underway, while others will be launched shortly.
The Sub-metering legislation that came into force on January 1, 2011 has significantly increased customer interest in sub-metering. This new legislation and the additional sales resources added during the last six months combined to produce record sales performance in the first quarter of 2011. We are focused on maintaining our strong sales momentum through the balance of 2011.
EnerCare plans to increase efforts to grow its business organically and, depending on opportunities that arise, by selective acquisitions in our current or adjacent markets. Investments will focus on those which have long asset life and long-term customer relationships that will generate positive growth in revenues, earnings and/or cash flows immediately or within an appropriate horizon depending on the stage of the development of the business acquired.
We will continue our efforts to reduce Sub-metering operating and capital costs throughout 2011. These measures include modified processes to get the best of both Sub-metering businesses, elimination of duplicate systems and capitalizing on material sourcing economies of scale.
Financial Statements and MD&A
EnerCare's financial statements and management's discussion and analysis for the first quarter of 2011 are available at www.sedar.com or on EnerCare's investor relations website at http://investors.enercare.ca.
Conference Call and Webcast
Management will host a conference call and live audio webcast to discuss EnerCare's financial results for the first quarter of 2011 on Tuesday, May 10, 2011 at 10:00 a.m. (ET). Messrs. John Macdonald, President and CEO and Chris Cawston, CFO, will be on the call.
Call can be accessed as follows:
The audio webcast will be archived at http://investors.enercare.ca. A taped rebroadcast will be available until midnight on May 17, 2011. The rebroadcast can be accessed by dialing 1.877.289.8525 or 1.416.640.1917 and entering the pass code 4432557#.
EnerCare's results for the first quarter of 2011 are presented in accordance with International Financial Reporting Standards ("IFRS") for the first time, and comparative information in 2010 has been restated accordingly. Details of the adjustments resulting from the conversion to IFRS, including reconciliations to amounts previously recorded for 2010 comparative periods under previous Canadian generally accepted accounting principles, are presented in EnerCare's interim financial statements for the first quarter of 2011.
EnerCare and EnerCare Solutions Inc. own a portfolio of approximately 1.3 million water heaters and other assets, rented primarily to residential customers in Ontario. EnerCare also owns Stratacon Inc. and EnerCare Connections Inc., leading Sub-metering companies, with metering contracts for condominium and apartment suites in Ontario, Alberta and elsewhere in Canada. Additional information regarding EnerCare and EnerCare Solutions is available on SEDAR at www.sedar.com.
Certain statements in this news release are forward-looking statements, which reflect management's expectation regarding EnerCare's and EnerCare Solutions' 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. These factors include risks associated with the failure to realize the anticipated benefits of the Conversion. Although the forward-looking information is based on what management believes to be reasonable assumptions, EnerCare and EnerCare Solutions cannot assure investors that actual results will be consistent with this forward-looking information. Except as required by applicable securities laws, neither EnerCare nor EnerCare Solutions intend and do not assume any obligation to update or revise the forward-looking information, whether as a result of new information, future events or otherwise.
|1||EBITDA and Adjusted EBITDA are Non-GAAP financial measures. Refer to the Non-GAAP Financial and Performance Measures section in the MD&A.|
|2||The consolidated financial statements of EnerCare Inc. are prepared in accordance with IFRS which became effective on January 1, 2011 with retroactive application to January 1, 2010.|
|3||Payout Ratio and Distributable Cash are Non-GAAP financial measures. Refer to the Non-GAAP Financial and Performance Measures section in the MD&A.|
For further information:
1.905.695.7793 or 1.800.781.2943