CORRECTION FROM SOURCE: The Consumers' Waterheater Income Fund Reports Second Quarter 2008 Financial Results

Mon Jul 28, 1:44 AM

TORONTO, ONTARIO--(Marketwire - July 28, 2008) - A correction from source is issued with respect to the release disseminated July 25, 2008 at 6:13 pm EST. The original version included certain editorial errors. The correct and complete version follows:

The Consumers' Waterheater Income Fund (the "Fund") (TSX: CWI-UN.TO), reported increases of 5.5% in total revenues, 3.0% in EBITDA(1) and 13.1% in distributable cash(2) in the second quarter 2008 over the comparable period in 2007. The Fund's net loss, after non-cash future tax expense, was $1.4 million in Q2/08, compared with $23.1 million in Q2/07.

"The Fund continued to execute on its business strategy delivering strong operating and financial results during the second quarter," said John Macdonald, President & CEO. "We are also well positioned to meet our targets for the year through organic growth and selective investments. Our installed base of over 1.4 million units declined by 0.2% or 3,400 units during the quarter, due mainly to increased competition. We have implemented an active program to ensure our customers understand the full value of our rental proposition and service, and at the same time have the right information to make the best decision for their needs when confronted by high-pressure sales tactics of our competitors."

Financial and Operating Highlights

- Revenues increased strongly, up 5.5% from the second quarter of 2007 to $44.3 million

- EBITDA(1) rose $1.1 million or 3.0% to $36.7 million over the same quarter last year

- Net loss amounted to $1.4 million including a $7.2 million future income tax expense

- Distributable cash(2) increased significantly by 13.1% to $18.3 million

- Payout ratio(2) in the second quarter 2008 remained stable compared with the first quarter of 2008 at 87.1%, and improved from 98.5% in the second quarter of 2007

Second Quarter 2008 Financial Results

Total revenues for Q2/08 were $44.3 million, an increase of $2.3 million, or 5.5% from the same quarter last year. The majority of the increase was due to the increase in rental rates implemented in January 2008, with the balance from the water heater portfolio acquisitions completed in 2007.

EBITDA in Q2/08 improved by $1.1 million to $36.7 million or 83% of revenue, compared to $35.6 million and 85%, respectively, in the same period last year. The increase was due to the rise in rental revenues, partially offset by increases in cost of sales and G&A expenses and a loss on disposal of property and equipment.

The Fund incurred a net loss of $1.4 million as compared to $23.1 million in the same period last year. In the Q2/08, the Fund accrued a $7,200 future income tax expense due to the impact of a reorganization of entities, implemented as an initial step in simplifying the corporate structure. 

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Financial Highlights                     Three months           Six months 
(in thousands of dollars,               ended June 30,       ended June 30,
 except per Unit information)        2008        2007      2008       2007
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Total revenues                   $ 44,347  $   42,048  $ 88,559  $  83,490
Earnings before interest, 
 taxes and
 amortization ("EBITDA")(1)        36,706      35,625    73,975     70,530
Earnings before tax                 5,789       3,675    10,686      7,731
Income tax expense                  7,200      26,802     3,514     23,040
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Net (loss)/earnings                (1,411)    (23,127)    7,172    (15,309)
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Per Unit information
 Unitholder distributions
  declared                          $0.32       $0.32     $0.64      $0.64
 Capital expenditures (net)         $0.31       $0.31     $0.62      $0.62
 Net earnings                      ($0.03)     ($0.47)    $0.14     ($0.31)
----------------------------------------------------------------------------
Cash flow from operating
 activities                      $ 37,858  $   39,566  $ 62,561  $  65,027
----------------------------------------------------------------------------
Distributable cash(2)              18,348      16,219    36,620     32,402
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Payout ratio(2)                      87.1%       98.5%     87.2%      97.1%
----------------------------------------------------------------------------

Cash flow from operating activities decreased by $1.7 million, or 4.3%, to $37.9 million from the second quarter of 2007. The decrease was primarily the result of payments made during the period to reduce interest payable.

Distributable cash increased 13.1% to $18.3 million from $16.2 million in Q2/07. The Fund declared $16.0 million in distributions to unitholders, representing a payout ratio of 87.1% for the quarter ended June 30, 2008.

Results for the Six Months Ended June 30, 2008

Total revenues for the six months ended June 30, 2008, were $88.6 million compared to $83.5 million in the same period last year. The increase in revenues was mainly because of the increase in rental rates implemented in January 2008 and the water heater acquisitions completed in 2007.

For the six months ended June 30, 2008, EBITDA was $74.0 million, an increase of $3.5 million, from $70.5 million in the same period last year.

The Fund's net earnings were $7.2 million compared to a net loss of $15.3 million in the same period last year.

Cash from operating activities decreased to $62.6 million for the six months ended June 30, 2008, from $65.0 million in the same period last year. The decrease was primarily the result of interest payment frequency changes on the current short-term debt vs. long-term debt utilized in 2007.

Distributable cash increased to $36.6 million from $32.4 million in the comparable period last year. The Fund declared $31.9 million in distributions to unitholders, corresponding to a payout ratio of 87.2% for the six months ended June 30, 2008.

Financial Statements and MD&A

The Fund's financial statements and management's discussion and analysis for the second quarter of 2008 are available on SEDAR at www.sedar.com or on the Fund's investor relations 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 second quarter of 2008 on Monday, July 28, 2008 at 10:30 a.m. (ET). Messrs. Macdonald and Bower will be on the call. 

The call can be accessed as follows:
         Calling toll free:           +1-800-733-7560
         Or calling:                     416-644-3414
         Joining by webcast:           www.consumerswaterheaters.com

The audio webcast will be archived at www.consumerswaterheaters.com. A taped rebroadcast will be available until midnight on August 4, 2008. The rebroadcast can be accessed by dialing 1-877-289-8525 or 416-640-1917 and entering the pass code 21276470#.

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.

Additional information regarding the Fund, including its current Annual Information Form dated March 28, 2008 is available at www.sedar.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. 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 is a non-GAAP measure, and therefore has no standardized meaning prescribed by GAAP and may not be comparable to similar terms and measures presented by other issuers. This measure comprises net earnings plus income taxes, interest expenses and amortization expense, less interest income.

(2) Distributable cash and payout ratio are non-GAAP measures, do not have standardized meanings prescribed by GAAP and therefore, 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 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 as a measure of the Fund's liquidity and cash flows.

Contacts

Steve Bower
The Consumers' Waterheater Income Fund
CFO
(905) 943-6292
Email: sbower@consumerswaterheaters.com
Website: www.consumerswaterheaters.com