TORONTO, ONTARIO, Mar 8, 2004 (CCNMatthews via COMTEX) --
BFI Canada Income Fund (TSX: BFC.UN) (the 'Fund') today announced its financial results for the quarter and year ended December 31, 2003 (the 'quarter'and 'year', respectively). Highlights of the results include the following:
- Revenues and EBITDA(A) increased 9.3% and 9.8%, respectively, over the comparative quarter ended December 31, 2002
- Revenues and EBITDA(A) each increased 11.3% over the comparative year ended December 31, 2002
- Aggregate distributions declared totalled $32.6 million, representing a payout ratio of 88% of free cash flow available for distribution(B)
- Distributions increased 6.25% to an annualized rate of $1.275 per trust unit beginning with the distribution payable on September 15, 2003 to unitholders of record on August 31, 2003
'We are pleased with our financial results for the fourth quarter and year-end. Our continued focus on core operations, in addition to new contract wins and strategic acquisitions have supported our growth in revenues, EBITDA(A) and free cash flow available for distribution(B),'said Keith Carrigan, President and Chief Executive Officer. 'We will continue to manage the Fund with the primary goal of increasing free cash flow available for distribution(B) through growth by strategic acquisition, as well as improving operational efficiencies.'
Quarter ended Year ended
(in millions except for per -----------------------------------
unit amounts) 2003(1) 2002 2003(1) 2002(2)
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Revenues $ 43.4 $ 39.7 $ 167.6 $ 150.6
Operating expenses 23.1 20.9 87.8 79.0
Selling, general and
administration expenses 6.8 6.5 25.5 22.8
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Income before the following 13.5 12.3 54.3 48.8
Amortization 11.0 11.4 41.9 39.4
Interest on long-term debt 1.2 1.1 5.1 7.0
Net gain on sale of capital
and landfill assets (0.8) - (0.5) -
Other expenses - - - 1.5
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Income before income taxes 2.1 (0.2) 7.8 0.9
Income tax recovery (1.7) (0.7) (5.8) (3.9)
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Net income $ 3.8 $ 0.5 $ 13.6 $ 4.8
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Net income per trust unit,
basic &diluted $ 0.14 $ 0.02 $ 0.51 $ 0.18
Number of units outstanding
(thousands) 26,500 26,500 26,500 26,500
Maintenance capital
expenditures $ 4.5 $ 2.1 $ 11.6 $ 11.5
Growth capital expenditures 0.7 4.3 5.4 6.6
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Total capital expenditures $ 5.2 $ 6.4 $ 17.0 $ 18.1
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Free cash flow available for
distribution (3) (B) $ 7.9 $ 8.7 $ 37.2 $ 24.4
Free cash flow available for
distribution (B)
per trust unit (3) $ 0.30 $ 0.33 $ 1.40 $ 0.92
Aggregate distributions
declared (3) $ 8.4 $ 8.0 $ 32.6 $ 21.6
Aggregate distributions
declared per trust unit (3) $ 0.32 $ 0.30 $ 1.23 $ 0.82
Notes:
(1) Effective March 2003, the Canadian Institute of Chartered Accountants issued a new Canadian accounting standard for asset retirement obligations, which requires the recognition of an obligation associated with the retirement of a tangible long-lived asset that an entity is legally obligated to settle. The new standard is effective for fiscal years beginning on or after January 1, 2004 and requires the Fund to retroactively restate all comparative consolidated financial statements. Accordingly, the December 31, 2003 consolidated financial statements will be restated for all future comparative purposes. Adopting the new accounting standard is expected to have a material impact on landfill assets and closure and post-closure costs, however, it will have no impact on free cash flow available for distribution(B).
(2) Operating results for the period from January 1, 2002 to April 24, 2002 are the results of 3743276 Canada Inc., one of the predecessors of BFI Canada Holdings Inc. The Fund indirectly acquired all of the issued and outstanding shares of 3743276 Canada Inc. on April 25, 2002 in connection with the closing of its initial public offering of trust units. For financial reporting purposes the Fund has only consolidated the results of BFI Canada Holdings Inc. with its results since April 25, 2002. Reference is made to the prospectus of the Fund dated April 16, 2002 relating to the initial public offering for a complete description of the transactions effected concurrently with the closing of such offering.
(3) Free cash flow available for distribution(B) in aggregate and per trust unit and aggregate distributions declared and per trust unit for the comparative year ended is for the period from April 25, 2002 to December 31, 2002.
Operations highlights
Revenues of $43.4 million for the quarter and $167.6 million for the year increased by 9.3% and 11.3% over the prior quarter and year, respectively. The increase is largely due to increased collection contracts, pricing increases, and strategic acquisitions in the collection segment, and higher waste volumes and the new City of Lethbridge contract which began in the first quarter of 2003 in the landfill segment.
Operating expenses were $23.1 million for the quarter and $87.8 million for the year compared to $20.9 and $79.0 million for the comparative quarter and year, respectively. Higher operating expenses were incurred to service net organic revenue growth, new contracts, recently completed acquisitions, the City of Lethbridge landfill operating contract and to service the increase in volumes of non-hazardous solid waste entering BFI Canada-owned landfills. In addition, the consolidation of Entreprise Sanitaire F.A. Ltee's ('F.A.') collection and transfer station operations for two additional months contributed to the year to date increase.
Selling, general and administration expenses were $6.8 million for the quarter and $25.5 million for the year compared to the comparative quarter and year of $6.5 and $22.8 million, respectively. Higher senior management compensation, the addition of corporate employees, establishing the long term incentive plan ('LTIP') and public company costs in addition to other immaterial variances contributed to the increase. In addition, the consolidation of F.A.'s collection operations for two additional months contributed to the year to date increase.
EBITDA(A) of $13.5 million for the quarter and $54.3 million for the year was $1.2 and $5.5 million higher than the comparative quarter and year of $12.3 and $48.8 million, respectively. Operating the City of Lethbridge landfill and accepting higher volumes of non-hazardous solid waste at BFI Canada-owned landfills, coupled with new collection contracts, organic growth, price increases, and two strategic 'tuck-in'acquisitions, partially offset by the LTIP and repairs and maintenance expenditures incurred at the landfill gas to energy facility, contributed to the quarter and year over year EBITDA(A) improvement.
The Fund paid cash distributions to unitholders of $1.225 per unit for the year ended December 31, 2003 and declared a distribution payable to unitholders of record on December 31, 2003, payable January 15, 2004 of $0.10625 per unit. During the year, the Fund increased its distribution rate by 6.25% to an annualized rate of $1.275 per trust unit beginning with the distribution payable on September 15, 2003 to unitholders of record on August 31, 2003.
Outlook
On February 10, 2004, the Fund received a decree from the Quebec Government issued on February 4, 2004 to expand the Lachenaie landfill site. The decree was issued after a lengthy review process including public consultation and a detailed evaluation by the Ministry of the Environment. The decree approves, subject to several conditions, the expansion design with a total projected capacity of 40.0 million metric tonnes, and limits the approved operating capacity to 6.5 million cubic metres which, depending on the annual volume of nonhazardous solid waste entering the site, should be the equivalent of between 5.0 and 6.5 years of operation. The decree also increases the maximum annual landfill volume from the current 0.97 million metric tonnes to 1.3 million metric tonnes. Future approvals to continue operating the Lachenaie landfill are expected to increase its total operating capacity, and accordingly its operating life, an additional 33 million cubic metres or approximately 35 years based on current disposal volumes and a six day per week operation. Future approvals to expand the Lachenaie landfill are required to complete the filling of the then remaining unfilled airspace capacity. While the granting of any permit is entirely within the discretion of the Quebec Government, management expects to receive the necessary permits prior to the expiry of the then current permit. Although management believes the Fund will be successful in obtaining the required permits, there are no assurances that the relevant approvals will be granted or, if granted, that they will be on the terms applied for by the Fund.
The decree for the expansion is subject to various conditions which impose obligations on the Fund. These conditions are similar to those contained in the current operating permit with the exception of an additional public liaison committee and the manner in which financial guarantees are satisfied for post-closure management.
The receipt of this decree obligates the Fund to pay a royalty to an annual maximum of $1.5 million to an aggregate maximum of $6.0 million. Management intends to offset the annual royalty expense with increased revenues generated from the expansion site.
In the fourth quarter, the Fund was awarded a contract extension to operate the Lethbridge Regional Landfill, on behalf of the City of Lethbridge, for an initial period of five years with the opportunity for an additional two year extension.
Management is actively reviewing financing alternatives to efficiently finance its future growth initiatives.
Looking ahead, management's principal objective is to increase free cash flow available for distribution(B) by continuing to enhance the Fund's service offerings, improving efficiencies and growing through strategic acquisitions. In this regard, management continuously reviews and evaluates potential strategic acquisitions; especially those that can increase free cash flow and, accordingly, distributions. Future strategic initiatives may be financed with borrowings, the additional issuance of units, from working capital or from cash flow generated from operations.
Management expects that the Fund will be able to progressively increase future distributions as free cash flow available for distribution(B) increases. Increases will be considered by the Trustees as appropriate.
New Accounting Policy
Effective March 2003, the Canadian Institute of Chartered Accountants ('CICA') issued a new Canadian accounting standard for asset retirement obligations, which requires the recognition of an obligation associated with the retirement of a tangible long-lived asset that an entity is legally obligated to settle. The new standard is effective for fiscal years beginning on or after January 1, 2004 and requires the Fund to retroactively restate all comparative consolidated financial statements. Accordingly, the December 31, 2003 consolidated financial statements will be restated for all future comparative purposes. Adopting the new accounting standard is expected to have a material impact on landfill assets and closure and post-closure costs, however, it will have no impact on cash generated from operating activities or free cash flow available for distribution(B).
(A) All references to 'EBITDA'in this press release are to 'income before the following'on the consolidated statement of operations, or more explicitly, to 'income before amortization, interest on long-term debt, net gain on sale of capital and landfill assets, other expenses and income taxes'. EBITDA is a term used by the Fund that does not have a standardized meaning prescribed by Canadian generally accepted accounting principles ('GAAP') and is therefore unlikely to be comparable to similar measures used by other issuers. EBITDA is a measure of the Fund's operating profitability, and by definition, excludes certain expenses (specifically amortization, interest on long-term debt, net gain on sale of capital and landfill assets, other expenses and income taxes). These expenses are viewed by management as either non-cash (in the case of amortization and future income taxes) or non-operating (in the case of interest on long-term debt, net gain on sale of capital and landfill assets, other expenses and current income taxes). EBITDA is a useful financial and operating metric for investors as it represents a starting point in the determination of free cash flow available for distribution(B). The underlying reasons for exclusion of each item are as follows:
Amortization - as a non-cash item amortization has no impact on the determination of free cash flow available for distribution(B).
Interest on long-term debt - interest on long-term debt is a function of an entity's debt/equity mix and interest rates; as such, it reflects the treasury/financing activities of the entity and represents a different class of expense than the components of EBITDA.
Net gain on sale of capital and landfill assets - the net gain on sale of capital and landfill assets has no impact on the determination of free cash flow available for distribution(B) , because the proceeds were used to repay the Fund's revolving loan facility.
Other expenses - other expenses include corporate development and organizational costs, management severance costs, management fees and a special one-time management bonus issued in connection with the closing of the initial public offering. Other expenses were exclusive to 3743276 Canada Inc. and are considered non-operating
Income taxes - income taxes are a function of tax laws and rates and are affected by matters which are separate from the daily operations of the Fund.
EBITDA should not be construed as a measure of income or of cash flows. The reconciling items between EBITDA and net income are detailed in the consolidated statement of operations beginning with 'income before the following'and ending with 'net income'.
(B) The Fund has adopted a measurement called free cash flow available for distribution to supplement net income as a measure of operating performance. Free cash flow available for distribution is a term which does not have a standardized meaning prescribed by GAAP and is therefore unlikely to be comparable to similar measures used by other issuers. The objective of presenting this non-GAAP measure is to calculate the amount which is available for distribution to unitholders. Free cash flow available for distribution is calculated as EBITDA(A) less interest on long-term debt, current income taxes and maintenance capital expenditures. Free cash flow available for distribution is not necessarily indicative of cash available to fund cash needs and should not be considered as an alternative to cash flow as a measure of liquidity. All references in this press release to 'free cash flow available for distribution'have the meaning set out in this note.
Forward-looking statements
This document may contain forward-looking statements relating to the Fund's operations or to the environment in which it operates, which are based on the Fund's operations, estimates, forecasts and projections. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict, or are beyond the Fund's control. A number of important factors could cause actual outcomes and results to differ materially from those expressed in these forward-looking statements. These factors include those set forth in the Fund's Initial Annual Information Form for the period ended December 31, 2002. Consequently, readers should not rely on such forward-looking statements. In addition, these forward-looking statements relate to the date on which they are made. Although the forward-looking statements contained herein are based upon what management believes to be reasonable assumptions, the Fund cannot assure unitholders that actual results will be consistent with these forward looking statements, and the Fund disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. --------------------------------------------------------------------
Management will hold a conference call on Tuesday, March 9, 2004 at
8:30 AM (ET). To access the call, participants should dial
1-800-814-3911, at approximately 8:20 AM (ET). The conference call
will also be Webcast live at www.bficanada.com or www.vcall.com and
subsequently archived on the BFI Canada site.
A rebroadcast of the call will be available until midnight on
Tuesday, March 16, 2004. To access the rebroadcast, dial
877-289-8525 and quote the reservation number 21040312#.
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BFI Canada Income Fund, through its subsidiaries, is one of Canada's largest full-service waste management companies, providing non-hazardous solid waste collection and landfill disposal services for commercial, industrial and residential customers in the provinces of British Columbia, Alberta, Manitoba, Ontario and Quebec. Through its wholly-owned subsidiaries, the Fund operates one and owns and operates three landfills, carries on collection operations in 18 markets, and operates two transfer collection stations, seven material recovery collection facilities and one landfill gas-to-energy facility. BFI Canada's business does not include any management, collection or disposal of hazardous or liquid waste. The Fund's units are listed on the Toronto Stock Exchange under the symbol BFC.UN.
To find out more about BFI Canada Income Fund (TSX: BFC.UN), visit our website at www.bficanada.com.
Further information:
The Fund provides a full Management Discussion and Analysis document on its website: www.bficanada.com
BFI CANADA INCOME FUND
Consolidated Balance Sheets
December 31, 2003 and 2002
(in thousands of dollars)
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2003 2002
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ASSETS
CURRENT
Cash and cash equivalents $ 6,704 $ 5,666
Accounts receivable 25,838 24,962
Other receivables 1,203 415
Prepaid expenses 2,081 3,959
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35,826 35,002
OTHER RECEIVABLES 3,284 1,509
INTANGIBLES 66,993 77,805
GOODWILL 49,171 49,171
DEFERRED COSTS 3,069 1,832
DEFERRED FINANCING COSTS 1,176 2,058
CAPITAL ASSETS 84,359 89,665
LANDFILL ASSETS 113,084 122,399
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$356,962 $379,441
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LIABILITIES
CURRENT
Accounts payable $ 11,866 $ 15,410
Accrued charges 5,836 6,076
Distribution payable 2,816 2,650
Income taxes payable 346 157
Deferred revenue 6,400 5,360
Current portion of long-term debt 271 252
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27,535 29,905
LONG-TERM DEBT 81,313 76,985
LANDFILL CLOSURE AND POST-CLOSURE COSTS 8,870 8,013
FUTURE INCOME TAX LIABILITIES 19,036 25,298
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136,754 140,201
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UNITHOLDERS'EQUITY 220,208 239,240
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$356,962 $379,441
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BFI CANADA INCOME FUND
Consolidated Statements of Operations
For the year ended December 31, 2003 and for the period from
April 25, 2002 to December 31, 2002
(in thousands of dollars, except net income per trust unit amounts)
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2003 2002
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REVENUES $167,626 $108,506
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EXPENSES
OPERATING 87,835 56,933
SELLING, GENERAL AND ADMINISTRATION 25,452 16,505
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INCOME BEFORE THE FOLLOWING 54,339 35,068
AMORTIZATION 41,945 30,217
INTEREST ON LONG-TERM DEBT 5,137 3,118
NET GAIN ON SALE OF CAPITAL AND LANDFILL ASSETS (527) -
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INCOME BEFORE INCOME TAXES 7,784 1,733
INCOME TAX EXPENSE (RECOVERY)
Current 450 830
Future (6,262) (4,982)
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(5,812) (4,152)
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NET INCOME $ 13,596 $ 5,885
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Net income per trust unit, basic and diluted $ 0.51 $ 0.22
Weighted average number of units outstanding
(thousands) 26,500 26,500
BFI CANADA INCOME FUND
Consolidated Statements of Cash Flows
For the year ended December 31, 2003 and for the period from
April 25, 2002 to December 31, 2002
(in thousands of dollars)
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2003 2002
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NET INFLOW (OUTFLOW) OF CASH RELATED
TO THE FOLLOWING ACTIVITIES
OPERATING
Net income $ 13,596 $ 5,885
Items not affecting cash
Amortization of intangibles 12,346 8,357
Amortization of deferred financing costs 882 588
Amortization of capital assets 16,622 13,891
Amortization of landfill assets 12,095 7,381
Gain on disposal of capital assets (785) -
Loss on disposal of landfill assets 258 -
Provision for landfill closure and
post-closure costs 3,061 1,899
Future income taxes (6,262) (4,982)
Landfill closure and post-closure expenditures (2,204) (1,826)
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49,609 31,193
Changes in non-cash working capital items (2,226) 2,146
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Cash generated from operating activities 47,383 33,339
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INVESTING
Acquisitions (2,376) (158,660)
Investment in other receivables (2,850) (987)
Proceeds from other receivables 1,089 50
Purchase of capital assets (13,762) (9,497)
Landfill assets (3,233) (3,880)
Proceeds on disposal of capital assets 3,691 -
Proceeds on disposal of landfill assets 195 -
Deferred costs (1,237) (396)
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Cash utilized in investing activities (18,483) (173,370)
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FINANCING
Proceeds from revolving loan 8,650 5,250
Repayments of revolving loan (4,050) -
Issue of trust units - 176,609
Trust units purchased for cancellation - (17,170)
Distributions paid to unitholders (32,462) (18,992)
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Cash (utilized in) generated from financing
activities (27,862) 145,697
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NET CASH INFLOW 1,038 5,666
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 5,666 -
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 6,704 $ 5,666
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SUPPLEMENTAL CASH FLOW INFORMATION:
Cash and cash equivalents are comprised of:
Cash $ 3,864 $ 2,652
Cash equivalents 2,840 3,014
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$ 6,704 $ 5,666
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Cash paid during the period for:
Income taxes $ 1,309 $ 493
Interest $ 5,183 $ 3,410
BFI CANADA INCOME FUND
Consolidated Statements of Unitholders'Equity
For the year ended December 31, 2003 and for the period from
April 25, 2002 to December 31, 2002
(in thousands of dollars)
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2003 2002
-------- --------
BALANCE, BEGINNING OF PERIOD $239,240 $ -
Issue of trust units - 272,167
Cancellation of trust units - (17,507)
Contributed surplus - 337
Net income 13,596 5,885
Distributions (32,628) (21,642)
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BALANCE, END OF PERIOD $220,208 $239,240
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BFI Canada Income Fund Joseph D. Quarin Chief Financial Officer (416) 401-7722 Email: joe.quarin@bficanada.com or Anne MacMicken Manager, Investor and Employee Relations (416) 401-7729 Email: anne.macmicken@bficanada.com
NEWS RELEASE TRANSMITTED BY CCNMatthews Copyright (C) 2004, CCNMatthews. All rights reserved.
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