Revenues Increase 18%, EBITDA Improves 7%
Monthly Dividend to Increase to $0.056 per Share
TORONTO, ONTARIO--(Marketwire - Feb. 23, 2012) - EnerCare Inc. ("EnerCare") (TSX:ECI), one of Canada's leading providers of energy conservation products and services, today reported its financial results for the fourth quarter and year ended December 31, 2011.
Fiscal 2011 Highlights - Year ended December 31, 2011 versus year ended December 31, 2010
(in thousands of Cdn $)(1)
- Total revenues of $244,501 increased by 18%
- EBITDA(2) increased by 7%
- Attrition in Rentals decreased by 8,000 units or 10% in 2011
- The Payout Ratio(3) decreased to 55% in 2011 from 62% in 2010
- Announces intention to increase its monthly dividend to $0.056 per share
"In 2011, EnerCare continued to deliver strong financial and operational results, achieving solid business performance that reflects the fundamental strength of the Company and enhances its potential for future growth over the long term," said John Macdonald, President and CEO. "Record annual revenues of $244.5 million exceeded last year's record by 18%, and EBITDA grew by 7% over 2010. In the Rentals business, sustained sales and marketing initiatives significantly increased customer retention levels, and in Sub-metering, sales increased more than 600% over 2010."
EnerCare intends to increase its monthly dividend to $0.056 per share effective in respect of the dividend payable to shareholders as of the record date in March 2012, for payment in April 2012.
"We are pleased that our performance allows us to further increase our dividend," said John Macdonald. "The increase reflects our confidence in the strength and momentum of our business".
RESULTS OF OPERATIONS
|Consolidated Financial Highlights||2011||2010||2009|
|Earnings/(loss) before income taxes||178||(16,487||)||(30,621||)|
|Current tax expense||(5,708||)||-||-|
|Income tax recovery||9,513||18,208||52,224|
|Per Share information|
|Shareholder distributions declared||$||0.65||$||0.65||$||1.08|
|Cash provided by operating activities||127,918||120,356||126,648|
Financial Results for 2011
Total revenues of $244,501 for 2011 increased by $37,083 or 18% compared to the same period in 2010. Rentals revenues decreased by $1,050 to $186,524 in 2011, primarily due to changes in installed assets, partially offset by rental rate increases implemented in January 2011. Sub-metering revenues in 2011 were $57,383, an increase of $37,740 or 192%, as a result of increased billing units in our legacy Sub-metering business, Stratacon Inc. (now EnerCare Connections Inc. ("ECI")), combined with the inclusion of Enbridge Electric Connections Inc.'s ("EECI", now ECI) unit portfolio. Revenue increases include pass through energy charges of $41,941, an increase of $28,446 over 2010.
Investment income increased by $393 in 2011 to $594 compared to $201 in 2010, primarily as a result of larger investment balances during 2011.
Selling, General & Administrative Expenses
Total SG&A expenses were $38,438 in 2011, compared to $37,704 in 2010, an increase of $734 or 2%. The expense increase in the Sub-metering segment of $1,396 to $10,530 in 2011 is the result of the full year impact of the inclusion of EECI, offset by reductions in wages and benefits, office expenses and billing and servicing costs primarily due to the integration of the two Sub-metering companies. Rentals and corporate expenses of $27,908 were $662 lower than the same period in 2010. The net decreases in expense is as a result of a reduction in bad debt and claims of $4,491, professional fees of $1,088, and billing, servicing and inventory management charges of $856, partially offset by an increase of $2,855 in selling and office expenses and $2,918 in wages and benefits.
Amortization expense decreased by $4,370 or 4% to $104,703 in 2011, primarily due to a smaller installed asset base in the Rentals portfolio, partially offset by increased Sub-metering capital investments, which are being amortized over a shorter life than the Rentals business.
Interest expense payable in cash decreased by $461 to $36,807 in 2011, over the same period in 2010. The decrease in 2011 is primarily related to the conversion of $9,522 principal amount of convertible debentures during, the period. The amortization of bridge fees related to the 2009 bridge that was repaid when the $240,000 5.25% senior unsecured notes due March 15, 2013 (the "2010 Notes") were issued in March 2010. Amortization of other comprehensive income and financing costs for 2011 are modestly higher than 2010 as a result of the full year impact of other comprehensive income and convertible debentures in 2011.
Loss on Disposal of Equipment
In 2011, EnerCare reported a loss on disposal of equipment of $19,099, representing a decrease of $2,241 or 11% in relation to 2010. The loss on disposal amount is influenced by the number of assets retired, changes in the retirement asset mix and the age of the assets retired. The primary reason for the decreased expenses relates to the lower attrition and exchange activity in the Rentals business in 2011 when compared to 2010.
An impairment provision of $458 was taken on certain Sub-metering assets during the fourth quarter of 2011. The provision covers assets in work in progress which are no longer proceeding forward under a contract and some equipment which may never become income generating for EnerCare.
Other income for the period was $2,383, primarily related to the reversa l of the contingent consideration of the Stratacon acquisition.
EnerCare reported a current tax expense of $5,708 for 2011 related to the taxable status of the corporation effective January 1, 2011. The deferred income tax recovery of $9,513 for 2011 decreased by $8,695, primarily as a result of temporary difference reversals in the Rentals and Sub-metering businesses.
Financial Results for the Fourth Quarter of 2011
Fourth Quarter Results of Operations
|Total SG&A expenses||10,470||12,692|
|Loss on disposal of equipment||4,880||4,673|
|Impairment of assets||458||-|
|Total operating expenses||62,353||63,591|
|(Loss) before income taxes||(2,365||)||(6,633||)|
|Current tax expense||(765||)||-|
|Income tax recovery||874||3,419|
Total revenues of $59,988 in 2011 increased by $2,819 or 5% compared to 2010. Rentals revenue for the period increased by $987 or 2% primarily due to the January rate increase, partially offset by the impact of net attrition. Sub-metering revenues improved by $1,765 or 15% in 2011, due to increases in the number of billing units and $994 related to increased pass-through commodity changes.
Investment income was $174 or $67 greater than in the same period in 2010 primarily due to higher investment balances.
Selling, General & Administrative Expenses
SG&A expenses decreased by $2,222 or 18% from 2010 to $10,470. Sub-metering costs decreased by $1,207, primarily as a result of cost reductions associated with the integration of operations. Rentals and corporate costs decreased by $1,015 related to reductions in professional fees of $1,217, bad debts and claims of $967 and billing, servicing and inventory management charges of $82, partially offset by an increase in wages and benefits of $1,073 and selling and office expense of $178. The reductions in professional fees are in part due to the charges incurred in 2010 in respect of EnerCare's conversion to a corporation.
Amortization expense of $26,234 was $386 lower than in 2010, primarily the result of cumulative portfolio attrition in the rentals business but offset by additions to amortization caused by the Sub-metering business which amortizes equipment over a shorter period.
In 2011, interest expense of $10,377 was $289 lower than the same period in 2010. The lower convertible debenture balance stemming from the conversion of $2,290 principal amount to shares was the primary contributor to the reduction in interest expense for the period.
Loss on Disposal of Equipment
Loss on disposal of equipment for the period was $4,880, an increase of $207 or 4% over 2010. The net increased loss was primarily the result of asset age and mix as the number of attrition and exchanged assets for the period was the same as that in 2010.
An impairment provision of $458 was taken on certain Sub-metering assets during the fourth quarter of 2011. The provision covers assets in work in progress which are no longer proceeding forward under a contract and some equipment which may never become income generating property for EnerCare.
Losses before income taxes in 2011 we re $4,268 better than 2010, as previously described. Net loss increased by $958 in 2011 primarily as a result of the lower deferred taxes and the recognition of current taxes with the conversion from an income trust to a corporation in 2011.
We believe that the expiry of the Consent Order on February 20, 2012 represents the removal of a significant impediment to our Rentals business's ability to compete in Ontario.
Following the expiry, EnerCare and Direct Energy Marketing Limited ("DE") have initiated a number of changes in the operation of the Rentals business, including:
- New procedures requiring customers to confirm their decision to terminate prior to returning their rental water heater;
- Enhancements to verification procedures at water heater return locations;
- Changes to water heater return locations and operating hours; and
- Introduction of consumer promotional offers.
EnerCare believes that these changes will help to level the playing field for EnerCare and DE in the competitive rental water heater market.
DE and EnerCare have also agreed to a comprehensive plan to introduce changes to the service terms, including the introduction of additional value offerings, for certain customers within the next quarter.
With respect to its Sub-metering business, EnerCare has made significant progress in integrating its two acquisitions. Currently, EnerCare is upgrading and consolidating the billing and customer care systems. The implementation will allow EnerCare to further enhance its client and customer service objectives and deliveries. EnerCare anticipates implementation to be completed by the end of the second quarter of 2012.
EnerCare plans to increase efforts to grow its business organically, including through wide r product offerings and geographic expansion, as it did recently with the introduction of a rentals program in New Brunswick. In addition, EnerCare will continue to seek acquisition opportunities in its current or adjacent markets. Investments will focus on those which have long asset life and long-term customer relationships and that will generate positive growth in revenues, earnings and/or cash flows within an appropriate horizon depending on the stage of the development of the business.
EnerCare is examining opportunities to refinance its $270,000 6.75% senior unsecured notes due April 30, 2014 and the 2010 Notes in order to take advantage of the current low interest rate environment. In respect of the $60,000 6.20% senior unsecured notes, EnerCare expects to repay from cash on hand, these notes on or before their maturity on April 30, 2012. EnerCare continues to generate considerable cash flow from operations as a result cash and cash equivalents increased by $22,795 to $75,290 as of December 31, 2011. In addition, EnerCare has an unused revolver of $35,000 available.
EnerCare estimates that it will pay approximately $14,000 to $17,000 in current taxes for the fiscal year ended December 31, 2012. This estimate is based on taxable income comparable to current levels, shielded by unrestricted tax losses and a corporate tax rate of approximately 26.25%. EnerCare's current taxes for 2011 were $5,708. Taxable income is principally impacted by changes in revenue, operating expenses, potential acquisitions or divestitures, appropriate tax planning and capital expenditures through the capital cost allowance deduction.
EnerCare is very pleased with the substantial progress it has made in strengthening its business in 2011 and the resulting improvement in the payout ratio. Based on these and other factors, EnerCare intends to increase its monthly dividend to $0.056 per share, an increase of 1.8%, effective in respect of the dividend payable to shareholders of record on the applicable date in March 2012, which dividend will be paid in April 2012.
As previously announced, EnerCare has set its annual and general and special meetings for April 30, 2012. Jim Pantelidis, Chairman of the board, and management will provide an update to shareholders on EnerCare's achievements in 2011 and strategy.
Financial Statements and Management's Discussion and Analysis
EnerCare's financial statements and management's discussion and analysis for the fourth quarter and year-end of 2011 are available on SEDAR at www.sedar.com or on EnerCare's investor relations website at http://investors.enercare.ca.
Conference Call and Webcast
Management will host a conference call and live audio webcast to discuss EnerCare's financial results for the fourth quarter and year-end of 2011 on Friday, February 24, 2012 at 10:00 a.m. (ET). John Macdonald, President and CEO, and Evelyn Sutherland, CFO, will be on the call.
Call can be accessed as follows:
Toll free: 1.877.974.0445
Via webcast: http://investors.enercare.ca
The audio webcast will be archived at http://investors.enercare.ca. A taped rebroadcast will be available until midnight on March 2, 2012. The rebroadcast can be accessed by dialing 1.877.289.8525 or 1.416.640.1917 and entering the pass code 4507993#.
EnerCare owns a portfolio of approximately 1.2 million installed water heaters and other assets, rented primarily to residential customers in Ontario. EnerCare also owns EnerCare Connections Inc., a leading sub-metering company, with metering contracts for condominium and apartment suites in Ontario, Alberta and elsewhere in Canada.
Additional information regarding EnerCare is available on SEDAR at www.sedar.com or through EnerCare's website at http://investors.enercare.ca. Information on the sub-metering business is also available at www.enercareconnections.com.
Certain statements in this news release are forward-looking statements, which reflect management's expectation regarding EnerCare's and EnerCare Solutions Inc. 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. These factors include risks associated with the failure to realize the anticipated benefits of the Conversion. Although the forward-looking information is based on what management believes to be reasonable assumptions, EnerCare and EnerCare Solutions Inc. cannot assure investors that actual results will be consistent with this forward-looking information. Except as required by applicable securities laws, neither EnerCare nor EnerCare Solutions Inc. intend and do not assume any obligation to update or revise the forward-looking information, whether as a result of new information, future events or otherwise.
|(1)||Unless otherwise noted, amounts are reported in thousands, except customers, units, shares and per share amounts and per centages (except as otherwise noted). Dollar amounts are expressed in Canadian currency.|
|(2)||EBITDA and Adjusted EBITDA are Non-IFRS financial measures. Refer to the Non-IFRS Financial and Performance Measures section in the MD&A.|
|(3)||Payout Ratio and Distributable Cash are Non-IFRS financial measures. Refer to the Non-IFRS Financial and Performance Measures section in the MD&A.|