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"We are very pleased with the solid improvement in the Fund's financial results for the third quarter. A significant drop in attrition in our Rentals business occurred after our sustained customer communications and marketing programs," said
--------------------------------------------------------------------------- Consolidated Financial Three months ended Nine months ended Highlights Sept. 30, Sept. 30, (Cdn. $000s) 2010 2009 2010 2009 --------------------------------------------------------------------------- Total revenues $ 49,676 $ 46,121 $ 150,249 $ 143,519 Earnings before interest, tax and amortization (EBITDA)(1) 33,222 24,023 103,921 94,028 Adjusted EBITDA(1) 38,978 38,421 120,588 116,941 Net earnings 1,296 (6,004) 3,575 5,819 --------------------------------------------------------------------------- Operating Cash Flow(1) 30,733 29,481 93,746 92,099 Cash flow from operating activities 36,651 32,639 93,112 99,726 Capital expenditures (excluding acquisitions and Sub-metering) (16,532) (18,064) (51,911) (53,949) --------------------------------------------------------------------------- Distributable Cash(2) 15,369 12,409 44,764 40,779 Distributions declared $ (8,867) $ (13,322) $ (25,194) $ (45,265) Payout Ratio(2) 57.7% 107.4% 56.3% 111.0% ---------------------------------------------------------------------------
Financial and Operating Highlights
-- Attrition decreased to 1.8% in the third quarter of 2010 from 2.3% in
the third quarter of 2009, a decrease of approximately 25% in part due
to customer communications and marketing programs delivered by the Fund
and Direct Energy Marketing Limited ("Direct Energy"). This trend
accelerated in October with attrition falling by more than 35% compared
to October 2009 .
-- With the acquisition of Enbridge Electric Connections Inc. (now EnerCare
Connections Inc. ) on October 1, 2010 the Fund more than doubled the
number of billing units in its sub-metering portfolio.
-- Total revenues of $49.7 million increased by 8% over the third quarter
of 2009.
-- EBITDA(1) increased by 38% to $33.2 million and Adjusted EBITDA(1)
increased by 1% to $39.0 million . Distributable Cash increased by 24%
and the Payout Ratio(2) improved to 58% compared to 107% in the third
quarter of 2009.
Third Quarter 2010 Financial Results
Attrition decreased by approximately 25% from 2.3% of the portfolio in the third quarter of 2009 to 1.8% in the third quarter of 2010. The total asset portfolio declined by 1.0% in the third quarter of 2010 compared to a decline of 1.7% in the third quarter of 2009.
Total revenues of
Adjusted EBITDA increased by
Cost of sales and SG&A expenses for the Rentals business and the corporate segment totalled
Sub-metering cost of sales and SG&A expenses of
Interest expense payable in cash increased by
Net earnings of
The Payout Ratio, after capital expenditures (excluding acquisitions and Sub-metering capital investment) was approximately 58% for the third quarter of 2010 compared to 107% for the same period in 2009. In 2010, the Payout Ratios improved as a result of the reduction in distributions announced in
On
The Fund is integrating its sub-metering businesses, with full consolidation and impact on expenses expected by mid-2011.
Outlook
Continued Effort in Reducing Rental Attrition
While the Fund is pleased to see continued progress in attrition levels, we will continue to counter customer loss aggressively. In the third quarter, the Fund resumed a heavy radio and newspaper media campaign that will continue into the fourth quarter. The print media campaign has been expanded to be longer in duration than previous campaigns and now extends to non-English publications.
Introduction of a Venting Rental Program
Since the inception of a regulatory change on plastic venting (S636 standard), customers have been required to upgrade their venting system upon replacement of their power vented water heater. Recently, the Fund, in conjunction with Direct Energy, introduced a "venting rental program" whereby for a monthly rental charge the customer can elect to rent their new venting as opposed to paying for the upgrade upfront.
The Fund believes this program supports greater customer satisfaction and potentially retention.
Favourable Sub-metering Regulations Published
The Energy Consumer Protection Act, 2010 and related regulations (the "Legislation") come into force on
The Legislation comes at a time of heightened concern about energy conservation and rising energy costs. Implementing sub-metering allows residents to manage their electricity consumption and helps landlords control their costs. With electricity rate increases implemented and announced in
The Fund's sub-metering subsidiaries,
During the third quarter, the Fund entered into a sub-metering agreement in respect of a newly acquired property with O'Shanter Developments, a large
Conversion to a Corporation
On
The dividend level of
The Fund estimates that EnerCare will pay approximately
Rebranding
The "Consumers' Waterheater" brand was appropriate when the Fund was created and clearly communicated to the market the nature of our business. The acquisition of direct customers and introduction of new products other than water heaters coupled with our move into sub-metering have added new dimensions to our business. We have become more "consumer facing" and now have many thousands of direct customer relationships and interactions.
On
-- enhance sales and marketing performance for customer acquisition and
retention;
-- paint a clearer picture of the nature of our business and future
opportunities to investors; and
-- increase employee engagement.
Financial Statements and Management's Discussion and Analysis ("MD&A")
The Fund's financial statements and MD&A for the third quarter of 2010 are available on SEDAR at www.sedar.com or on the Fund's investor relations website at www.cwif.ca.
Conference Call and Webcast
Management will host a conference call and live audio webcast to discuss the Fund's performance for the third quarter of 2010 on
The call can be accessed as follows:
Toll free: 1.800.814.4859 Local: 416.644.3414 Webcast: www.cwif.ca
The audio webcast will be archived at www.cwif.ca. A taped rebroadcast will be available until midnight on
About
The Fund owns a portfolio of approximately 1.3 million installed water heaters and other assets, rented primarily to residential customers in
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 businesses is available at www.stratacon.ca and at www.enercareconnections.com.
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. The words "will", "should", "expects", "believes", "intends", "estimates" and similar expressions are often intended to identify forward-looking information, although not all forward-looking information contains these identifying words. 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. All forward-looking information in this news release is made as of the date of this news release. 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. In addition to the statements included under "Outlook" in this news release regarding certain risks and uncertainties relating to certain specific forward-looking information contained herein, a thorough discussion in respect of the material risks relating to the business and structure of the Fund can be found in the Fund's current annual information form and management's discussion and analysis, which are available on SEDAR at www.sedar.com.
(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.
Contacts:The Consumers' Waterheater Income Fund Chris Cawston CFO 905.695.7793 or 1.800.781.2943 ccawston@cwif.ca
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