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

Rental Attrition Drops by More than 30% Compared to 2009

TORONTO, ONTARIO–(Marketwire – Aug . 9, 2010) – The Consumers' Waterheater Income Fund ("Fund") (TSX:CWI.UN) today reported its financial results for the second quarter ended June 30, 2010.

"We are encouraged by progress made in our rentals business during the second quarter, achieving higher revenues and a decreasing customer attrition," said John Macdonald, President and CEO.

Consolidated Financial HighlightsThree months ended June 30, Six months ended June 30, 
(Cdn. $000s)2010 2009 2010 2009 
Total revenues$51,450 $48,208 $100,573 $97,398 
Earnings before interest, tax and amortization (EBITDA)1 35,701  34,358  70,699  70,005 
Adjusted EBITDA1 41,619  39,439  81,610  78,520 
Net earnings 2,346  7,556  2,279  11,823 
Operating Cash Flow1 32,547  30,594  63,013  62,618 
Cash flow from operating activities 29,842  34,060  56,461  67,087 
Capital expenditures (excluding Sub-metering) 17,474  17,734  35,379  35,885 
Distributable Cash2 15,906  13,658  29,395  28,370 
Distributions declared 8,304  15,972  16,327  31,943 
Payout Ratio2 52.2% 116.9% 55.5% 112.6%

Financial and Operating Highlights

  • Attrition decreased to 1.6% in the second quarter of 2010 from 2.4% in the second quarter of 2009, an improvement of more than 30%. The Fund and Direct Energy Marketing Limited ("Direct Energy") continued their customer communications and marketing programs and launched two additional initiatives during the quarter.

  • Total revenues of $51.5 million increased by 6.7% over the second quarter of 2009, driven by increased revenues in the rentals business.

  • EBITDA increased by 3.9% and Adjusted EBITDA increased 5.5% over the second quarter of 2009.

  • The Fund's cash and equivalents increased by $51.7 million during the quarter primarily due to the issue of convertible debentures and Fund units totalling approximately $50 million before expenses.

  • Distributable Cash increased by 16% and the Payout Ratio improved to 52% compared to 117% in the second quarter of 2009.

Second Quarter 2010 Financial Results

Total revenues of $51.5 million in the second quarter of 2010 were $3.2 million greater than in the same period of 2009. Rentals revenues increased by $3.8 million or 8.4% as higher rental rates and asset additions offset the impact of attrition. Sub-metering revenues were $2.3 million for the second quarter of 2010, a decrease of 20% from the same period the previous year, as a result of fewer billing accounts reflecting the impact of requirements to obtain customer re-consents necessitated by the Ontario Energy Board's decision and order of August 2009 and related commodity revenues.

Adjusted EBITDA increased by $2.2 million in the second quarter of 2010 to $41.6 million. The improvement was driven primarily by increased revenues from the rentals business. EBITDA of $35.7 million in the 2010 second quarter increased by $1.3 million or 3.9% from the same period in 2009, due to increased revenue partially offset by an increase in loss on disposal of rentals assets.

Cost of sales and SG&A expenses for the Rentals business and the corporate segment totaled $6.7 million during the second quarter of 2010, an increase of approximately $1.5 million over the same period in 2009. The increase primarily relates to increased marketing programs supplementing Direct Energy's marketing and customer communications programs as well as bad debt and related costs. Bad debt increased by $0.6 million relating primarily to provisions taken for receivables for customers billed by Direct Energy outside the Enbridge Gas Distribution Inc. territory. In addition, the Fund recorded a $0.5 million provision for estimated uncollectable receivables where billing system conversion and other issues have impacted billings and collections. Year to date costs of $12.5 million compared to $10.6 million in the same period in 2009 reflect increases in the areas of marketing and customer communications programs of approximately $1.3 million, $0.6 million in bad debts, $0.5 million for estimated uncollectible receivables and $0.3 million for each of compensation and professional fees, offset by reductions of $0.6 million in capital taxes and $0.5 million in customer claims costs.

Sub-metering cost of sales and SG&A expenses decreased by approximately $0.4 million to $3.1 million in the second quarter of 2010 when compared to the same period in 2009 primarily as a result of approximately $0.2 million in lower commodity charges. Year to date reductions of $1.7 million in 2010 over 2009 from $8.2 million, reflect lower costs of $0.8 million in commodity charges, $0.6 in bad debts and reductions in other expenses, including compensation.

Interest expense payable in cash increased by $0.2 million to $9.1 million in the three months ending June 30, 2010, and $2.6 million to $18.6 million for the year to date over the same periods in 2009. The increases relate to the Fund's refinancing of its debt in 2009 and 2010.

The Payout Ratio, after capital expenditures (which excludes Sub-metering capital investment) was approximately 52% for the second quarter of 2010 compare d to 117% for the same period in 2009. In 2010, the Payout Ratios improved as a result of the reduction in distributions announced in September 2009 and increased Distributable Cash due to improved margins.


Rental attrition decreased by over 30% in the second quarter of 2010 over the comparable period in 2009. While the Fund is pleased by the continued progress in its attrition levels, we will continue to counter customer loss aggressively, including the introduction of new marketing initiatives in the third quarter of 2010.

The implementation of the Harmonized Sales Tax on July 1, 2010 will effectively reduce the Fund's capital expenditures per unit (excluding installation costs) by 8% in Ontario, assuming no changes to supplier pricing.

In the Sub-metering business, the Fund will continue to work with stakeholders in order to obtain a satisfactory regulatory environment for sub-metering to meet the Government of Ontario's announced goal of having a permanent regulatory regime in place for January 1, 2011.

The Fund is pursuing a number of organic growth opportunities and acquisitions in its core business areas which are anticipated to generate positive growth in revenues, EBITDA and cash flows in an appropriate time frame depending on the stage of the business.

The Fund previously announced that it intends to bring forward a proposal to Unitholders to convert to a corporation in the fourth quarter of 2010. The Fund is continuing to work with its financial, tax and legal advisors to determine the best structural alternatives for the Fund and its stakeholders and expects to bring forward particulars of its proposed conversion early in the fourth quarter of 2010 in its management information circular for the Fund's special meeting of Unitholders that will be held to approve the conversion.

Financial Statements and Management's Discussion and Analysis ("MD& amp;A")

The Fund's financial statements and MD&A for the second quarter of 2010 are available on SEDAR 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 second quarter of 2010 on Monday, August 9, 2010 at 10:00 a.m. (ET). Messrs. John Macdonald, President and CEO and Steve Bower, CFO, will be on the call.

The call can be accessed as follows:

Toll free:1.800.814.4859

The audio webcast will be archived at A taped rebroadcast will be available until midnight on August 16, 2010. The rebroadcast can be accessed by dialing 1.877.289.8525 or 416.640.1917 and entering the pass code 4328719#.

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 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 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.

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