TORONTO, ONTARIO–(Marketwire – Oct. 27, 2008) – The Consumers' Waterheater Income Fund (the "Fund") (TSX:CWI.UN) today reported total revenue of $45.4 million in the third quarter of 2008, an increase of 7.9% over the same period in 2007. The increase was reported in conjunction with the Fund's financial results for the third quarter ended September 30, 2008. "The value of Stratacon, a leading "smart" sub-metering company was immediately apparent, as it accounted for 37% of our revenue increase during the quarter," said John Macdonald, President and CEO. "Customer response has been encouraging. We have also signed long-term sub-metering contracts with th ree of Canada's leading property owners in October." "The Fund has extended by a full year the existing $310 million bridge financing facility to coincide with the maturity of the Series A-2 Secured Notes in January 2010," he said. "The extension of bridge financing at attractive rates in an unusually turbulent and risk-averse financial market is testament to the strength of our business." Financial Highlights – Acquired Stratacon Inc. ("Stratacon"), a leading "smart" sub-metering company; – Extended the $310M bridge financing to January 2010; – Increased total revenues by 7.9% from the third quarter of 2007 to $45.4 million; – Grew EBITDA(1) by $1.1 million, or 3.1% to $36.9 million, up from the third quarter last year; – Achieved a 15.1% increase to $8.3 million in net earnings in the third quarter of 2008 over the same period in 2007; – Delivered $17.3 million of distributable cash(1), representing a payout ratio(1) of 92.3% for the quarter; and – Acquired 5,935 electric water heaters from Thunder Bay Hydro Energy Services Inc. ("Thunder Bay") for $3.8 million. /T/ —————————————————————————- Financial Highlights Three months ended Nine months ended (in thousands of dollars) Sept. 30, Sept. 30, 2008 2007 2008 2007 —————————————————————————- Total revenues $ 45,447 $ 42,135 $ 134,006 $ 125,625 Earnings before interest, taxes and amortization ("EBITDA")(1) 36,949 35,822 110,924 106,352 Earnings before tax 4,548 3,708 15,234 11,439 Net earnings/(loss) 8,263 7,178 15,435 (8,131) —————————————————————————- Operating cash flow(1) 34,190 31,349 101,345 94,367 Cash from o perating activities 30,964 24,054 93,525 89,081 —————————————————————————- Distributable cash(1) 17,307 16,585 53,927 48,987 Payout ratio(1) 92.3% 96.3% 88.9% 96.8% —————————————————————————- /T/ Third Quarter 2008 Financial Results Total revenues in the third quarter of 2008 were $45.4 million, an increase of $3.3 million, or 7.9% from the same quarter of last year. This was due to growth of $2.1 million in the water heater business and to $1.2 million revenue increase from two months of results from Stratacon's sub-metering business. EBITDA(1) in the third quarter of 2008 improved by $1.1 million to $36.9 million, representing a 3.1% increase over $35.8 million in EBITDA(1) for the same period last year. The increase was due to the rise in revenues for the quarter, offset partially by increases in cost of sales and G&A expenses. Net earnings in the third quarter increased by 15.1% year-over-year to $8.3 million from $7.2 million in 2007. Operating cash flow(1) in the third quarter increased by $2.8 million, or 9.1%, to $34.2 million from $31.3 million in the third quarter of 2007. The increase was primarily the result of higher total revenues and lower interest expenses, offset partially by higher cost of sales and G&A expenses and losses on disposal of property and equipment. Distributable cash(1) increased by $0.7 million in the third quarter, or 4.4% to $17.3 million from $16.5 million in the third quarter of 2007. The increase was due to higher cash from operating activities offset partially by higher capital expenditures. The acquisition of the Thunder Bay water heaters and the sub-metering capital expenditures are considered "growth" investments and hence excluded from the distributable cash and payout ratio. The Fund declared $16 million in distributions to Unithol ders in the third quarter, representing a payout ratio(1) of 92.3%, compared to $16 million and 96.3%, respectively, in the third quarter of 2007. Results for the Nine Months Ended September 30, 2008 Total revenues for the nine months ended September 30, 2008, were $134.0 million compared to $125.6 million in the same period last year. The increase was a result of higher contributions from the water heater business due to a larger portfolio, and rental rate increases averaging 3.9% implemented in January 2008. Year-to-date EBITDA(1) improved by $4.5 million to $110.9 million from $106.4 million in the same period of 2007. The increase reflects an $8.7 million increase in rental revenues as well as increased cost of sales and G&A costs of $1.4 million and $2.8 million higher losses on disposal of property and equipment. Year-to-date net earnings were $15.4 million compared to a net loss of $8.1 million in the same period last year. The 2007 loss included future income tax expenses on the imposition of the SIFT tax. Year-to-date operating cash flow(1) increased to $101.3 million from $94.4 million in the same period last year. The increase was primarily the result of higher total revenues and lower interest expenses, partially offset by higher cost of sales and G&A expenses. Year-to-date distributable cash(1) increased $4.9 million to $53.9 million from the comparable period last year. The Fund declared $47.9 million in distributions to Unitholders for the nine months ended September 30, 2008, corresponding to a payout ratio(1) of 88.9%, down from 96.8% for the nine months ended September 30, 2007. Acquisitions Effective August 1, 2008, the Fund acquired Stratacon. Stratacon is engaged primarily in providing the equipment and services to allow "smart" sub-metering and remote measurement of electricity, heat and water consumption in the individual units of multi-residential and commercial properties. This acquisition marks a strategic diversification from the core water heater rental business and the Fund's first acquisition since Unitholders approved amendments to the Fund's Declaration of Trust in May 2008 to allow for greater operating and investment flexibility. The Fund also acquired 5,935 electric water heaters with the Thunder Bay portfolio in September 2008 for cash consideration of approximately $3.8 million. The rental revenue from the Thunder Bay water heaters is not subject to the Co-ownership Agreement, and the Fund entered into services agreements with local third party contractors in Thunder Bay to provide customer service. Financial Statements and MD&A The Fund's financial statements and management's discussion and analysis for the third quarter of 2008 are available at www.sedar.com or the investor relations section of the Fund's 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 third quarter of 2008 on Monday, October 27, 2008 at 10:00 a.m. (ET). Messrs. Macdonald and Bower will be on the call. /T/ The call can be accessed as follows: Toll free: +1 800 732-9303 Local area: +1 416 644-3415 By webcast: www.consumerswaterheaters.com /T/ The audio webcast will be archived at www.consumerswaterheaters.com. A taped rebroadcast will be available until midnight on November 3, 2008. The rebroadcast can be accessed by dialing 1-877-289-8525 or 416-640-1917 and entering the pass code 21285318#. 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, a leading "smart" sub-metering company, with metering contracts for approximately 35 thousand condominium and apartment suites in Alberta, Ontario and elsewhere in Canada. Additional information regarding the Fund, including i ts 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 any obligation to update or revise the forward-looking information, whether as a result of new information, future events or otherwise. (1)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. 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. 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 co uld 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
CFO
(905) 943-6292
Email: [email protected]
Website: www.consumerswaterheaters.com
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