The Consumers’ Waterheater Income Fund Reports Results for the First Quarter of 2010

TORONTO, ONTARIO–(Marketwire – April 29, 2010) – The Consumers' Waterheater Income Fund ("Fund") (TSX:CWI.UN) today reported its financial results for the first quarter ended March 31, 2010.

"We are pleased with the progress we have made in the first quarter of 2010, following a challenging 2009," said John Macdonald, President and CEO. "In Rentals, attrition has declined, but it remains a challenge requiring our utmost focus. In Sub-metering, the re-consent program has exceeded targets. The majority of customers affected by the Ontario Energy Board's August 2009 Decision and Order have again elected to conserve through sub-metering".

Consolidated Financial Highlights (Cdn. $000's)Three months ended March 31, 
2010< /strong>  2009 
Total revenues$49,123  $49,190 
Earnings before interest, tax and amortization ("EBITDA")(1) 34,998   35,647 
Adjusted EBITDA(1) 39,991   39,081 
Net (loss)/earnings (67)  4,267 
Operating cash flow(1) 30,466   32,024 
Cash flow from operating activities 26,619   33,027 
Capital expenditures (excluding Sub-metering)      17,905   18,151 
Distributable Cash(2) 13,489   14,712 
Distributions$8,023  $15,971 
Payout Ratio(2) 60%  109%

Financial and Operating Highlights

  • The Payout Ratio improved to 60% from 109% in the first quarter of 2009.
  • Total revenues of $49.1 million were consistent with the first quarter of 2009.
  • The net loss of $0.1 million in the first quarter of 2010 was down from net earnings of $4.3 million reported in the first quarter of 2009, due mainly to higher interest costs on debt refinanced in 2009.
  • EBITDA in the quarter fell 1.8% to $35.0 million due to an increase in loss on disposal of Rentals assets. Adjusted EBITDA increased 2.3% to $40.0 million from $39.1 million.
  • In February 2010, the Fund refinanced its 5.245% Secured Notes with three-year, 5.25% 2010 Senior Unsecured Notes.
  • Attrition in the Rentals business dropped sequentially for the third consecutive quarter, in part due to seasonality and customer communications and marketing programs delivered by the Fund and Direct Energy.
  • Re-consents have been obtained from the majority of the Fund's customers affected by the Ontario Energy Board's Decision and Order, with over 89% of landlords and 60% of Sub-metering customers agreeing to re-start.

First Quarter 2010 Financial Results

Revenues of $49.1 million for the first quarter of 2010 were consistent with the same period of 2009. Rentals revenues increased by $0.8 million over the first quarter 2009 to $46.5 million, due to higher rental rates and additions offset by the impact of attrition (terminations and buy-outs). Sub-metering revenue s were $2.7 million for the 2010 first quarter, a decrease of $0.7 million, due to fewer billing units.

Adjusted EBITDA increased by $0.9 million in the first quarter of 2010 to $40.0 million. The improvement was driven primarily by lower operating costs in the Sub-metering business and increased contribution from the Rentals business. EBITDA of $35.0 million in the 2010 first quarter declined by $0.6 million from the same period in 2009 due to the $1.6 million increase in loss on disposal of Rentals assets offset by the impacts described for Adjusted EBITDA. 

Cost of sales and SG&A of $9.1 million in the first quarter of 2010, declined by $0.9 million from 2009. The Rentals business and corporate segment cost of sales and SG&A totaled $5.8 million in the first quarter of 2010, an increase of $0.4 million over the same period in 2009. In 2010, the net increased expense comprised approximately $0.5 million in support towards DE's marketing and customer communications programs, $0.2 million capital taxes, and $0.1 million in compensation for additional staffing, partially offset by decreases of $0.5 million for claims. Sub-metering cost of sales and SG&A expenses decreased by $1.3 million in the first quarter of 2010 over the same period in 2009, primarily as a result of reductions of approximately $0.7 million in bad debts and $0.6 million in commodity charges.

Interest expense increased by $3.8 million in the first quarter of 2010 to $12.1 million. Interest expense payable in cash increased by $2.4 million as a result of the higher interest rate on the Trust's 2009 Notes compared with previous variable rate financing used in 2009, and to $0.7 million of fees paid in 2010, to draw on the 2009 Bridge. In the first quarter of both 2010 and 2009, the Fund used proceeds from the issuance of long-term debt to retire bridge facilities resulting in the write-off of unamortized amounts during the period. Higher other comprehensi ve income and financing costs of $1.1 million for 2010 reflect the full impact of deferred financing transaction costs related to the 2009 Notes, hedge loss amortization and to a lesser extent the 2010 Notes.

The Payout Ratio, after maintenance capital expenditures (which exclude Sub-metering capital investments), was 60% for the 2010 first quarter compared to 109% for the same period in 2009. Distributable Cash decreased by $1.2 million over the year, primarily due to approximately $2.4 million in higher cash interest expense offset by lower cost of sales and, SG&A of $0.9 million. The Payout Ratio improved as a result of the distributions reduction implemented in September 2009.


  • New initiatives aimed at reducing rental water heater Attrition are being launched in the second quarter of 2010.
  • Enrollments in customer loyalty program launched in the fourth quarter of 2009 will continue in the second quarter of 2010.
  • The focus of our Sub-metering restart activities will shift to ensuring that tenants are enrolled on turnover.
  • The announcement of higher power costs in Ontario in conjunction with the conservation benefits of Sub-metering is expected to create a favourable environment for Sub-metering sales, although no assurances can be given in that regard.
  • The Fund intends to bring forward a proposal to its Unitholders to convert to a corporation in the fourth quarter of 2010, particulars of which will be provided to Unitholders in the notice of meeting and management information circular for the special meeting of Unitholders that will consider the matter.

Financial Statements and MD&A

The Fund's financial statements and management's discussion and analysis for the first quarter of 2010 are a vailable at or on the Fund's investor relations website at

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 2010 on Friday, April 30, 2010 at 8:30 a.m. (ET). Messrs. John Macdonald, President & CEO and Steve Bower, CFO, will be on the call.

The call can be accessed as follows:
  Toll Free:1.877.974.0445

The audio webcast will be archived at A taped rebroadcast will be available until midnight on May 7, 2010. The rebroadcast can be accessed by dialing 1.877.289.8525 or 416.640.1917 and entering the pass code 4281839#.

About The Consumers' Waterheater Income Fund

The Fund owns a portfolio of approximately 1.3 million installed water heaters and other assets, rented primarily to residential customers in Ontario. The Fund also owns Stratacon, a leading "smart" Sub-metering business, with metering contracts for condominium and apartment suites in Ontario, Alberta and elsewhere in Canada.

Additional information regarding the Fund, including its current Annual Information Form, and its wholly-owned subsidiary, The Consumers' Waterheater Operating Trust, is available on SEDAR at

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 any 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 prescr ibed 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.

For further information: The Consumers’ Waterheater Income Fund
Steve Bower
905.695.7793 or 1.800.781.2943
[email protected]