TORONTO, ONTARIO--(Marketwired - May 12, 2014) - EnerCare Inc. ("EnerCare") (TSX:ECI), one of Canada's leading providers of energy conservation products and services, today reported its financial results for the first quarter ended March 31, 2014.
Q1 2014 Financial Highlights
Quarter ended March 31, 2014 versus quarter ended March 31, 2013
(in thousands of Canadian dollars except per unit amounts)1
- Total revenues increased by 11% to $82,225
- Attrition in the rentals portfolio decreased by 18%
- EBITDA2 increased by 3% to $39,605
- Payout Ratio - Maintenance2 improves to 46%
- Sales activities were strong with 7,000 contracted sub-metering units
Sales activities were strong during the quarter with 7,000 contracted Sub-metering units "The year is off to a good start with robust sales activity in both rentals and sub-metering," said John Macdonald, President and CEO. "We made great progress toward our priorities for the year, including accelerating top line growth, improving productivity and increasing EBITDA."
Outlook
The forward-looking statements contained in this section are not historical facts but, rather, reflect EnerCare's current expectations regarding future results or events and are based on information currently available to management. Certain material factors and assumptions were applied in providing these forward-looking statements. See "Forward-looking Information" in this news release.
EnerCare continued to experience improved customer retention during the first quarter of 2014. Overall, we are encouraged by the positive trend we have seen over the past seven quarters. EnerCare believes that the Stronger Protection for Ontario Consumers Act, 2013 ("Bill 55") is a strong enhancement in consumer protection that will provide necessary protection for its customers and greatly assist with EnerCare's continued efforts to combat attrition. Going forward we continue to believe that the factors that have led to the decline in attrition over the last five years, including improving consumer awareness, as well as the new Enbridge open bill access agreement and Bill 55, will create a more favourable environment for further improvement in customer retention. We will continue to explore new initiatives and modifications of existing programs, as well as enhanced customer product offerings and service programs.
Our key priorities and initiatives for the rentals business in 2014 are to grow revenue in excess of annual rate increases, increase the number of unit additions, continue to improve attrition and as a result, increase Adjusted EBITDA2.
In respect of sub-metering, our priorities in 2014 are to grow the business by increasing new contract sales, improving productivity and operation efficiencies and enhancing our customer value proposition through outstanding customer service. We believe initiatives such as our LEAN program, e-billing and "whole building" solution should augment our growth. We are pleased with the improved sales activity experienced in the past two quarters with 7,000 units contracted in this most recent quarter.
1 Unless otherwise noted, amounts are reported in thousands, except customers, units, shares and per share amounts and percentages. Dollar amounts are expressed in Canadian currency.
2 EBITDA, Adjusted EBITDA, and Payout Ratio - Maintenance, are non-IFRS financial measures. Refer to the Non-IFRS Financial and Performance Measures section in the MD&A.
Results of Operations
Earnings Statement
| |
Three months ended March 31, |
|
| (000's) |
2014 |
|
2013 |
|
| Revenues: |
|
|
|
|
| |
Rentals |
$48,636 |
|
$ 47,082 |
|
| |
Sub-metering |
33,552 |
|
26,960 |
|
| |
Investment income |
37 |
|
268 |
|
| Total revenues |
$82,225 |
|
$ 74,310 |
|
| Commodity charges |
28,359 |
|
22,151 |
|
| SG&A expenses: |
|
|
|
|
| |
Rentals |
3,450 |
|
3,817 |
|
| |
Sub-metering |
3,731 |
|
3,284 |
|
| |
Corporate |
4,039 |
|
3,361 |
|
| Total SG&A expenses |
11,220 |
|
10,462 |
|
| Amortization expense |
24,506 |
|
24,356 |
|
| Loss on disposal of equipment |
3,004 |
|
2,892 |
|
| Interest expense: |
|
|
|
|
| |
Interest expense payable in cash |
5,808 |
|
8,294 |
|
| |
Make-whole payment on early redemption of debt |
- |
|
13,754 |
|
| |
Non-cash interest expense |
164 |
|
4,925 |
|
| Total interest expense |
5,972 |
|
26,973 |
|
| Total expenses |
73,061 |
|
86,834 |
|
| Other income |
408 |
|
- |
|
| Earnings/(loss) before income taxes |
9,572 |
|
(12,524 |
) |
| Current tax (expense) |
(6,079 |
) |
(5,588 |
) |
| Deferred income tax recovery |
3,521 |
|
7,724 |
|
| Net earnings/(loss) |
$ 7,014 |
|
$(10,388 |
) |
| EBITDA |
$39,605 |
|
$ 38,537 |
|
| Adjusted EBITDA2 |
$43,017 |
|
$ 41,429 |
|
Revenues
Total revenues of $82,225 for the first quarter of 2014 increased by $7,915 or 11% compared to the same period in 2013. Rentals revenues increased by $1,554 to $48,636 in the first quarter of 2014 compared to the same period in 2013, primarily due to a rental rate increase implemented in January 2014, improved billing completeness and changes in asset mix, partially offset by fewer installed assets. Sub-metering revenues in the first quarter of 2014 were $33,552, an increase of $6,592 or 24% over the comparable period in 2013, primarily as a result of increased billable units and the associated commodity charges. Sub-metering revenue includes total pass through energy charges of $28,359 in the first quarter of 2014, an increase of $6,208 over the same period in 2013.
Investment income decreased by $231 to $37 in the first quarter of 2014. The change in investment income was primarily attributable to higher investment balances in the first quarter of 2013 related to the issuance of the $225,000 4.6% 2013-1 Senior Unsecured Notes ("2013 Notes") of EnerCare Solutions Inc. ("EnerCare Solutions") approximately 30 days prior to the redemption of the $270,000 6.75% Series 2009-2 Senior Notes ("2009-2 Notes").
Selling, General & Administrative Expenses
Total SG&A expenses were $11,220 in the first quarter of 2014, an increase of $758 or 7% compared to the same period in 2013. Sub-metering SG&A expenses were $3,731 or $447 greater in the first quarter of 2014 compared to the same period in 2013, primarily as a result of increased wages and benefits of $500 and professional fees of $100, partially offset by reductions in selling expenses and bad debts of $100. Rentals and corporate expenses of $7,489 increased by $311 over 2013, primarily from increases of approximately $500 in wages and benefits, $200 in professional fees, $100 on account of billing and servicing costs and $100 in bad debts and claims, partially offset by reductions of $600 in selling expenses.
Amortization Expense
Amortization expense increased by $150 or 1% to $24,506 in the first quarter of 2014, primarily due to an increasing capital asset base from asset mix changes in the rentals portfolio and increased sub-metering capital investments, which are amortized over a shorter life than the rentals business.
Loss on Disposal of Equipment
EnerCare reported a loss on disposal of equipment of $3,004 in the first quarter of 2014, an increase of $112 or 4% over the same period in 2013. The loss on disposal amount is influenced by the number of assets retired, proceeds on disposal of equipment, changes in the retirement asset mix and the age of the assets retired.
Interest Expense
| |
Three months ended March 31, |
| (000's) |
2014 |
2013 |
| Interest expense payable in cash |
$5,808 |
$8,294 |
| Make-whole payment on early redemption of debt |
- |
13,754 |
| Non-cash items: Amortization of OCI and financing costs |
164 |
4,925 |
| Interest expense |
$5,972 |
$26,973 |
Interest expense payable in cash decreased by $2,486 to $5,808 in the first quarter of 2014 compared to the same period in 2013. The decrease is primarily related to the conversion of convertible debentures to shares and reduction in interest rates with the early redemption in 2013 of the 2009-2 Notes associated with the issuance of the 2013 Notes. The make-whole payment of $13,754 was incurred upon the early redemption of the 2009-2 Notes and the drawdown of the $60,000 single draw, variable rate, interest only, open loan. Amortization of other comprehensive income ("OCI") and financing costs for 2013 include the previously unamortized costs associated with the 2009-2 Notes and $4,023 of accumulated OCI which was fully reclassified to earnings in 2013.
Other Income
During the first quarter of 2014, EnerCare realized a settlement of $408 from Direct Energy Marketing Limited on account of the reclassification of certain water heaters under the Co-ownership Agreement to EnerCare's owned portfolio, originally associated with the Toronto Hydro Energy Services Inc. portfolio acquisition.
Income Taxes
EnerCare reported a current tax expense of $6,079 in the first quarter of 2014, an increase of $491 over the same period in 2013, primarily as a result of higher taxable income. The deferred income tax recovery of $3,521 for the first quarter of 2014 was $4,203 lower than the deferred tax recoveries of $7,724 recorded in 2013, primarily as a result of temporary difference reversals in the rentals and sub-metering businesses, including the impact of the 2013 make-whole payment.
Net Earnings
Net earnings in the first quarter of 2014 were $7,014, or $17,402 higher than in the same period in 2013 as previously described.
EBITDA and Adjusted EBITDA
The following table summarizes comparative quarterly results for the last eight quarters, and reconciles net earnings, an IFRS measure, to EBITDA and Adjusted EBITDA.
| (000's) |
Q1/14 |
|
Q4/13 |
|
Q3/13 |
|
Q2/13 |
|
Q1/13 |
|
Q4/12 |
|
Q3/12 |
|
Q2/12 |
|
| Net earnings/(loss) |
$ 7,014 |
|
$ 4,793 |
|
$ 6,931 |
|
$ 7,482 |
|
$(10,388 |
) |
$(2,096 |
) |
$ 2,154 |
|
$ (3,064 |
) |
| Deferred tax (recovery)/expense |
(3,521 |
) |
(3,552 |
) |
(3,134 |
) |
(3,640 |
) |
(7,724 |
) |
(4,155 |
) |
(2,668 |
) |
1,766 |
|
| Current tax expense |
6,079 |
|
6,148 |
|
5,525 |
|
4,591 |
|
5,588 |
|
5,217 |
|
3,902 |
|
2,118 |
|
| Amortization expense |
24,506 |
|
25,792 |
|
25,228 |
|
24,344 |
|
24,356 |
|
25,175 |
|
25,407 |
|
25,166 |
|
| Interest expense |
5,972 |
|
6,002 |
|
6,022 |
|
5,976 |
|
26,973 |
|
11,937 |
|
9,035 |
|
9,457 |
|
| Other (income)/expense |
(408 |
) |
(769 |
) |
(2,000 |
) |
(1,678 |
) |
- |
|
362 |
|
(855 |
) |
- |
|
| Investment (income) |
(37 |
) |
(35 |
) |
(21 |
) |
(49 |
) |
(268 |
) |
(180 |
) |
(16 |
) |
(76 |
) |
| EBITDA |
39,605 |
|
38,379 |
|
38,551 |
|
37,026 |
|
38,537 |
|
36,260 |
|
36,959 |
|
35,367 |
|
| Add: Loss on disposal of equipment |
3,004 |
|
2,666 |
|
2,633 |
|
3,449 |
|
2,892 |
|
3,523 |
|
3,397 |
|
4,113 |
|
| Add: Other income/(expense) |
408 |
|
769 |
|
2,000 |
|
1,678 |
|
- |
|
(362 |
) |
855 |
|
- |
|
| Adjusted EBITDA(1) |
$43,017 |
|
$41,814 |
|
$43,184 |
|
$42,153 |
|
$41,429 |
|
$39,421 |
|
$41,211 |
|
$39,480 |
|
(1) Historical Adjusted EBITDA has been conformed to the current presentation which includes other income and expense.
Financial Statements and Management's Discussion and Analysis
EnerCare's financial statements and management's discussion and analysis for the first quarter of 2014 are available on SEDAR at www.sedar.com or on EnerCare's investor relations website at http://www.enercareinc.com.
Conference Call and Webcast
Management will host a conference call and live audio webcast to discuss EnerCare's financial results for the first quarter ended March 31, 2014 later this morning, at 10:00 a.m. (ET). John Macdonald, President and CEO, and Evelyn Sutherland, CFO, will be on the call. Details of the call and webcast are as follows:
| Date: |
Monday, May 12, 2014 |
| |
|
| Time: |
10:00 a.m. - 11:00 a.m. (ET) |
| |
|
| By telephone: |
647.788.4922 or 1.877.223.4471 |
| |
Please allow 10 minutes to be connected to the conference call. |
| |
|
| Webcast: |
http://www.gowebcasting.com/5121 |
| |
Note: this is a listen-only audio webcast. Media Player or Real Player is required to listen to the broadcast. |
| |
|
| Replay: |
An archived audio webcast will be available at: http://www.enercareinc.com/ for one year following the original broadcast. |
| |
|
| Note: |
A slide presentation intended for simultaneous viewing with the conference call will be available the morning of May 12, 2014 at: http://www.enercareinc.com/. |
About EnerCare
EnerCare owns a portfolio of approximately 1.1 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 investor relations website at www.enercareinc.com or at www.enercare.ca.
Forward-looking Information
Certain statements in this news release are forward-looking statements, which reflect management's expectation regarding EnerCare's and EnerCare Solutions' 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, EnerCare and EnerCare Solutions 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, neither EnerCare nor EnerCare Solutions 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.