TORONTO, ONTARIO--(CCNMatthews - Aug. 7, 2007) - BFI Canada Income Fund (the "Fund") (TSX:BFC.UN) today reported strong financial results for the three and six months ended June 30, 2007. All amounts are in thousands of Canadian dollars, unless otherwise stated. Management Commentary "We are very pleased with the strong results of our second quarter which were driven by our organic growth initiatives as well as our acquisition strategy," said Keith Carrigan, Vice Chairman and Chief Executive Officer. "We continue to find opportunities to build value within our operations. Our second quarter and year to date organic revenue, which excludes acquisitions, fuel and environmental surcharges, and foreign currency translation, grew by 15.6% and 12.8% in Canada, and 8.5% and 6.6% in the U.S. Our success in identifying and integrating strategic acquisitions contributed to our consolidated revenue performance and we invested in several more tuck-in acquisitions in the second quarter. Our growth strategy resulted in a 17.7% increase in EBITDA(A) in the quarter and a 17.0% increase year to date, while free cash flow available for distribution increased 19.6% in the quarter and 14.2% year to date." Mr. Carrigan continued, "Our results demonstrate that the most effective way to continue creating value for our investors is through a disciplined program of internal investment coupled with investment in acquisitions. However, we believe that our ability to raise debt and equity in the capital markets may be limited given the tax and investment climate for income trusts. Therefore, at this time, my fellow Trustees and I have decided not to increase our distributions to unitholders, keeping the Fund's annual distributions unchanged at $1.818 per trust unit. We plan to direct the Fund's increasing cash resources towards investments in growth that we expect will generate an attractive return on capital." "We have identified several acquisition opportunities that may be available to us and it is important that we be in a position to pursue them in the near term and execute our growth strategies going forward. We must ensure that the Fund's structure does not hinder or impede our progress. The Fund's Trustees are actively working with management to review the corporate structure with a committed goal of enhancing total return for our investors." Financial Highlights for the Three and Six Months Ended June 30, 2007 - Total consolidated revenues increased 17.1% and 15.2% to $225.5 million and $427.8 million. - Total consolidated revenue growth, excluding the impact of foreign currency translation, was 18.5% and 15.4%. - Total EBITDA growth, excluding the impact of foreign currency translation, was 18.9% and 17.2%. - Free cash flow available for distribution(B) increased to $39.8 million and $72.9 million or 19.6% and 14.2%. - The Fund's payout ratio was 78.4% and 83.5%. - The Fund's payout ratio excluding the effects of the foreign currency hedge was 81.2% and 85.7%. Other Highlights for the Three and Six Months Ended June 30, 2007 - The Trustees have elected to maintain current annualized distributions at a rate of $1.818 per trust unit and participating preferred share ("PPS") in light of the uncertainty in the capital markets to raise equity and debt. The Fund has identified several acquisition opportunities that may be available and it is important that it be in a position to pursue them in the near term and execute its growth strategies going forward. The Trustees are actively working with management to review the Fund's corporate structure in light of changes to the taxation of income trusts as it relates to the Fund's continuous improvement and growth strategy. - Effective April 5, 2007, the Fund closed a 3,100 trust unit offering at $26.10 per trust unit. In addition, the underwriters exercised their over-allotment option to acquire an additional 465 trust units. The Fund applied the net proceeds from the offering, approximately $87,600, against advances from its U.S. revolving credit facility. - Effective March 21, 2007, the Fund entered into a Second Amending Agreement to its Fourth Amended and Restated Credit Agreement. The second amendment increases the total committed Canadian segment credit to $150,000 from $80,000 and the total available credit from this facility, subject to lender consent, to $200,000 from $120,000. The maturity date was extended to May 30, 2011 from June 30, 2010, and the maturity date remains subject to one year extensions. - Effective March 28, 2007, the Fund entered into a new 15 year agreement for variable rate demand solid waste disposal revenue bonds ("IRBs") in the state of Texas. The IRBs are made available, to a maximum of U.S. $24,000 and are available to fund a portion of landfill construction activities, and equipment, vehicle, and container expenditures in the Fund's Texas operations. The IRBs bear interest at a discount to LIBOR. A portion of the Fund's drawings under this facility was used to repay the Fund's U.S. revolving credit facility with the balance used to finance landfill construction activities, and equipment, vehicle, and container expenditures. At June 30, 2007, approximately U.S. $4,700 was restricted for the purpose of financing future activities and expenditures. - For the three months ended June 30, 2007, the Fund completed one new market acquisition, acquiring various integrated waste collection assets in Louisiana, and completed three and seven "tuck-in" acquisitions for the three and six months ended June 30, 2007, respectively. Aggregate cash consideration was approximately $30,700 and $35,000, respectively. Summarized Financial Highlights
Three months Six months
ended ended
June 30, June 30,
2007 2007
--------------------------------------------------------------------------- --------------------------------------------------------------------------- Revenues June 30, 2006 $ 192,655 $ 371,519 Organic growth and acquisitions (includes fuel and environmental surcharges) 35,589 57,143
Foreign currency exchange impact (2,729) (847)
---------------------------------------------------------------------------
Revenues June 30, 2007 $ 225,515 $ 427,815 %Revenue growth before foreign currency exchange impact 18.5% 15.4%
Total revenue growth % 17.1% 15.2%
EBITDA(A) June 30, 2006 $ 60,676 $ 111,227
Organic growth and acquisitions 11,478 19,110
Foreign currency exchange impact (720) (231)
---------------------------------------------------------------------------
EBITDA(A) June 30, 2007 $ 71,434 $ 130,106 %EBITDA(A) growth before foreign currency exchange impact 18.9% 17.2%
Total EBITDA(A) growth % 17.7% 17.0% Free cash flow available for distribution(B) June 30, 2006 $ 33,293 $ 63,885
Organic growth and acquisitions 6,854 9,147
Foreign currency exchange impact (337) (103) --------------------------------------------------------------------------- Free cash flow available for distribution(B) June 30, 2007 $ 39,810 $ 72,929 %Free cash flow available for distribution(B) growth before foreign currency exchange impact 20.6% 14.3% Total free cash flow available for distribution(B) growth % 19.6% 14.2% Free cash flow available for distribution(B) without hedge $ 38,439 $ 70,999
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Aggregate distributions declared $ 31,227 $ 60,872
---------------------------------------------------------------------------
Payout ratio with foreign currency hedge 78.4% 83.5%
---------------------------------------------------------------------------
Payout ratio without foreign currency hedge 81.2% 85.7%
--------------------------------------------------------------------------- Foreign Currency Hedge A significant portion of the Fund's operating results, maintenance capital and landfill expenditures ("maintenance expenditures"), interest on long-term debt, and cash income taxes reported in Canadian dollars, originate in the U.S. Operating expenses, maintenance expenditures, interest on long-term debt, and cash income taxes originating in the U.S. are settled in U.S. dollars generated from U.S. operations which results in a natural cash flow hedge. A portion of the resultant free cash flow available for distribution(B) is hedged by three single rate hedge agreements through February 2008 to purchase 4,500 Canadian dollars monthly at an average foreign currency exchange rate of approximately $1.222.
Financial Highlights
(in thousands, except per weighted average trust unit and PPS)
Three months ended Six months ended
June 30 June 30
---------------------------------------------------------------------------
2007 2006 2007 2006
---------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)
---------------------------------------------------------------------------
Revenues $ 225,515 $ 192,655 $ 427,815 $ 371,519
Operating expenses 127,888 108,761 244,518 212,442
Selling, general and
administration
expenses ("SG&A") 26,193 23,218 53,191 47,850--------------------------------------------------------------------------- Income before the
following 71,434 60,676 130,106 111,227
Amortization 41,372 36,971 79,290 72,244
Interest on long-term debt 8,471 8,203 18,365 16,229
Financing costs - - 864 79
Net gain on sale of
capital assets (1,026) (301) (1,234) (355)
Net gain on financial
instruments (6,158) (4,110) (4,718) (3,799)
Net foreign exchange loss 13,483 7,599 15,104 6,860
Other expenses - 52 5 159 --------------------------------------------------------------------------- Income before income taxes and non-controlling interest 15,292 12,262 22,430 19,810
Income tax expense 6,164 3,237 521 4,774
Non-controlling interest 1,523 1,835 3,718 2,918
---------------------------------------------------------------------------
Net income $ 7,605 $ 7,190 $ 18,191 $ 12,118
--------------------------------------------------------------------------- ---------------------------------------------------------------------------
Net income per weighted
average trust unit,
basic & diluted $ 0.13 $ 0.13 $ 0.33 $ 0.23
Weighted average number
of trust units outstanding 57,350 53,616 55,557 53,393
Weighted average number
of PPSs outstanding 11,160 11,775 11,328 11,998 --------------------------------------------------------------------------- Weighted average number of trust units and PPSs outstanding 68,510 65,391 66,885 65,391 --------------------------------------------------------------------------- Aggregate number of trust units and PPSs outstanding 68,706 65,391 68,706 65,391
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Maintenance expenditures $ 18,013$ 17,118$ 30,339$ 26,817
Growth capital and landfill expenditures ("growth expenditures") 23,332 22,708 33,516 38,149
---------------------------------------------------------------------------
Total maintenance and growth expenditures $ 41,345$ 39,826$ 63,855$ 64,966
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Free cash flow available
for distribution(B) $ 39,810 $ 33,293 $ 72,929 $ 63,885
Free cash flow available
for distribution(B) per
weighted average
trust unit and PPS $ 0.58 $ 0.51 $ 1.09 $ 0.98
Aggregate distributions
declared on weighted
average trust units $ 26,016 $ 22,775 $ 50,569 $ 45,550
Distributions attributable to non-controlling interest 5,211 5,002 10,303 10,004
---------------------------------------------------------------------------
Aggregate distributions declared $ 31,227 $ 27,777 $ 60,872 $ 55,554 --------------------------------------------------------------------------- ---------------------------------------------------------------------------
Aggregate distributions
declared per weighted
average trust unit
and PPS $ 0.46 $ 0.42 $ 0.91 $ 0.85
Management's Discussion
(all amounts are in thousands, except per trust unit, PPS, and foreign currency exchange rate amounts) Foreign Currency Exchange Rates The Fund reports its financial results in Canadian dollars, and consequently changes in the foreign currency exchange rate between Canada and the U.S. impacts the translated value of the Fund's U.S. operating results to Canadian dollars. The U.S. segments financial position and operating results have been translated to Canadian dollars applying the following U.S. to Canadian dollar foreign exchange rates:
2007
--------------------------------------------------
--------------------------------------------------
Current Average Cumulative average
--------------------------------------------------
--------------------------------------------------
March 31 $ 1.153 $ 1.172 $ 1.172
June 30 $ 1.063 $ 1.098 $ 1.135
2006
--------------------------------------------------
--------------------------------------------------
Current Average Cumulative average
--------------------------------------------------
--------------------------------------------------
March 31 $ 1.167 $ 1.155 $ 1.155
June 30 $ 1.115 $ 1.122 $ 1.138
The impact of changes in the foreign currency exchange rate on the Fund's
consolidated financial results is included in the Fund's MD&A for the three
and six months ended June 30, 2007. Operating Highlights
Three months ended June 30
---------------------------------------------------------------------------
2007 2006 $ Change
---------------------------------------------------------------------------
Revenues $ 225,515 $ 192,655 $ 32,860
---------------------------------------------------------------------------Canada $ 86,019 $ 72,329 $ 13,690
U.S. south $ 80,398 $ 66,021 $ 14,377
U.S. northeast $ 59,098 $ 54,305 $ 4,793
Operating expenses $ 127,888 $ 108,761 $ 19,127 --------------------------------------------------------------------------- Canada $ 45,054 $ 36,398 $ 8,656
U.S. south $ 52,226 $ 44,362 $ 7,864
U.S. northeast $ 30,608 $ 28,001 $ 2,607
SG&A $ 26,193 $ 23,218 $ 2,975 --------------------------------------------------------------------------- Canada $ 9,308 $ 8,970 $ 338
U.S. south $ 10,394 $ 8,538 $ 1,856
U.S. northeast $ 6,491 $ 5,710 $ 781
EBITDA(A) $ 71,434 $ 60,676 $ 10,758 --------------------------------------------------------------------------- Canada $ 31,657 $ 26,961 $ 4,696
U.S. south $ 17,778 $ 13,121 $ 4,657
U.S. northeast $ 21,999 $ 20,594 $ 1,405
Operating Highlights
Six months ended June 30---------------------------------------------------------------------------
2007 2006 $ Change
---------------------------------------------------------------------------
Revenues $ 427,815 $ 371,519 $ 56,296
---------------------------------------------------------------------------Canada $ 159,374 $ 136,806 $ 22,568
U.S. south $ 154,933 $ 129,841 $ 25,092
U.S. northeast $ 113,508 $ 104,872 $ 8,636
Operating expenses $ 244,518 $ 212,442 $ 32,076
--------------------------------------------------------------------------- Canada $ 82,721 $ 69,280 $ 13,441
U.S. south $ 100,781 $ 87,701 $ 13,080
U.S. northeast $ 61,016 $ 55,461 $ 5,555
SG&A $ 53,191 $ 47,850 $ 5,341 --------------------------------------------------------------------------- Canada $ 19,790 $ 18,371 $ 1,419
U.S. south $ 20,473 $ 17,603 $ 2,870
U.S. northeast $ 12,928 $ 11,876 $ 1,052
EBITDA(A) $ 130,106 $ 111,227 $ 18,879 --------------------------------------------------------------------------- Canada $ 56,863 $ 49,155 $ 7,708
U.S. south $ 33,679 $ 24,537 $ 9,142
U.S. northeast $ 39,564 $ 37,535 $ 2,029
The discussions to follow are in addition to the impact of foreign currency exchange fluctuations as detailed in the Fund's MD&A for the three and six months ended June 30, 2007. Revenues - Three and six months ended June 30 The increase in consolidated revenues is due in part to solid organic Canadian and U.S. segment growth, where organic growth excludes the impact of fuel and environmental surcharges, acquisitions, and foreign currency translation, coupled with growth through acquisition. The period over period impact of foreign currency translation was partially offset by higher commodity prices. Operating expenses - Three and six months ended June 30 Higher total disposal and labour costs are attributable to higher collected waste volumes and higher costs to service new and existing customers, contracts, and acquisitions. The balance of the changes is due principally to higher vehicle operating costs and repairs and maintenance expense for the same reasons outlined above. Selling, general and administration expenses - Three and six months ended June 30
Higher total salaries, including long-term incentive plan ("LTIP") accruals, are the primary cause of the period over period increases. Organic and acquisition growth, coupled with additional sales efforts are the primary reasons for the increase in total salaries. Free Cash Flow Available for Distribution(B) Free cash flow available for distribution(B) totalled $39,810 and $72,929 for the three and six months ended June 30, 2007 versus $33,293 and $63,885 for the comparative periods, respectively. Free cash flow available for distribution(B) per weighted average trust unit and PPS for the three and six months ended June 30, 2007 amounted to $0.58 and $1.09 and is $0.07 and $0.11 higher than the comparative periods, respectively. Free Cash Flow Available for Distribution(B) - Cash Flow Approach
---------------------------------------------------------------------------
Three months ended June 30 Six months ended June 30
---------------------------------------------------------------------------
2007 2006 Change 2007 2006 Change
--------------------------------------------------------------------------- Cash generated
from operating
activities
(per statement of cash flows) $ 53,806$ 51,658$ 2,148$ 82,261$ 75,599$ 6,662
---------------------------------------------------------------------------
Operating
---------------------------------------------------------------------------
Changes in non-cash working capital items 6,074 (4,751) 10,825 24,538 10,301 14,237
---------------------------------------------------------------------------
Net change in landfill closure and post-closure costs (2,614) 3,374 (5,988) (5,169) 4,450 (9,619)
---------------------------------------------------------------------------
Maintenance expenditures (18,013) (17,118) (895) (30,339) (26,817) (3,522)
---------------------------------------------------------------------------
Financing
---------------------------------------------------------------------------
Amortization of gain on settlement of bond forward contracts 56 56 - 112 112 - --------------------------------------------------------------------------- Financing and deferred costs (net of non-cash portion) (33) (292) 259 796 (327) 1,123 --------------------------------------------------------------------------- Effect of
foreign currency
hedges to support
Canadian dollar distributions 1,371 1,103 268 1,930 1,851 79
---------------------------------------------------------------------------
Realized foreign exchange gain (837) (737) (100) (1,200) (1,284) 84
---------------------------------------------------------------------------
Free cash flow available for distribution(B) $ 39,810$ 33,293$ 6,517$ 72,929$ 63,885$ 9,044
---------------------------------------------------------------------------
--------------------------------------------------------------------------- Free Cash Flow Available for Distribution(B) - Operations Approach
---------------------------------------------------------------------------
Three months ended June 30 Six months ended June 30
---------------------------------------------------------------------------
2007 2006 Change 2007 2006 Change
--------------------------------------------------------------------------- EBITDA(A) $ 71,434$ 60,676$ 10,758$ 130,106$ 111,227$ 18,879
--------------------------------------------------------------------------- --------------------------------------------------------------------------- Amortization
of capitalized
landfill asset
closure and
post-closure
costs, net of
revisions to
estimated cash flows (2,623) (1,842) (781) (4,903) (3,314) (1,589)
---------------------------------------------------------------------------
Interest on long-term debt (8,471) (8,203) (268) (18,365) (16,229) (2,136)
---------------------------------------------------------------------------
Management transaction bonuses (other expenses) - (52) 52 (5) (159) 154 --------------------------------------------------------------------------- Current income taxes (3,944) (1,327) (2,617) (5,607) (2,786) (2,821) --------------------------------------------------------------------------- Maintenance expenditures (18,013) (17,118) (895) (30,339) (26,817) (3,522)
---------------------------------------------------------------------------
Effect of foreign
currency hedges
to support
Canadian dollar
distributions 1,371 1,103 268 1,930 1,851 79
---------------------------------------------------------------------------
Amortization of gain on settlement of bond forward contracts 56 56 - 112 112 -
--------------------------------------------------------------------------- Free cash flow available for distribution(B) $ 39,810$ 33,293$ 6,517$ 72,929$ 63,885$ 9,044
---------------------------------------------------------------------------
--------------------------------------------------------------------------- Maintenance and Growth Expenditures ---------------------------------------------------------------------------
Three months ended June 30 Six months ended June 30
---------------------------------------------------------------------------
2007 2006 Change 2007 2006 Change
--------------------------------------------------------------------------- Total $ 41,345$ 39,826$ 1,519$ 63,855$ 64,966 $ (1,111)
---------------------------------------------------------------------------
--------------------------------------------------------------------------- --------------------------------------------------------------------------- Maintenance: --------------------------------------------------------------------------- Canada$ 4,897$ 5,195 $ (298) $ 9,964$ 8,634$ 1,330
---------------------------------------------------------------------------
U.S. 13,116 11,923 1,193 20,375 18,183 2,192
--------------------------------------------------------------------------- Total maintenance $ 18,013$ 17,118$ 895$ 30,339$ 26,817$ 3,522
---------------------------------------------------------------------------
--------------------------------------------------------------------------- --------------------------------------------------------------------------- Growth: --------------------------------------------------------------------------- Canada$ 8,459$ 7,073$ 1,386$ 11,738$ 14,770 $ (3,032)
---------------------------------------------------------------------------
U.S. 14,873 15,635 (762) 21,778 23,379 (1,601)
--------------------------------------------------------------------------- Total growth $ 23,332$ 22,708$ 624$ 33,516$ 38,149 $ (4,633)
---------------------------------------------------------------------------
--------------------------------------------------------------------------- Maintenance and growth expenditures include amounts accrued in respect of capital and landfill assets received for which payment of such amounts remains outstanding at the end of any period or year. Maintenance Expenditures For the three months ended June 30, the Canadian segment decline is due in large part to the timing of expenditure and is not attributable to one specific or collective group of expenditure(s) or asset class. The U.S. segment increase is due principally to a larger business base, which is the result of solid organic and acquisition growth, and increasing costs to purchase maintenance capital. For the six months ended June 30, the Canadian and U.S. segment increases are due principally to vehicle expenditures. The primary reasons for the increases are consistent with those outlined above for the U.S, segment. Maintenance expenditures are generally concentrated in the first three quarters of each year, which may result in the declaration and payment of distributions that are in excess of free cash flow available for distribution(B) for these quarters. For fiscal 2007, the Fund is again targeting an annual payout ratio which is less than 90.0%, consistent with the Fund's historical cumulative payout ratio of 84.1% from its inception to June 30, 2007. Growth Expenditures The Canadian segment increase in growth expenditures for the three months ended June 30 is due largely to landfill cell construction, principally at the Fund's Lachenaie landfill. Lower landfill cell construction, due principally to timing period over period, is the primary reason for the decline in U.S. segment growth expenditures for the three months ended June 30. Canadian segment residential contract wins which commenced in the six months ended June 30, 2006 were not repeated in 2007 resulting in a decline in period over period growth expenditures. Lower organic growth coupled with the timing of landfill cell construction expenditures is the primary reason for the U.S. decline in growth expenditures period over period. Growth expenditures represent capital and landfill assets additions required to meet the demands of acquired or organic growth or expenditures that specifically benefits a future period or periods. For 2007, management expects to incur growth expenditures to develop landfill airspace capacity that will benefit a future period or periods and to grow the Fund's collection operations.
Distributions
The following table summarizes various details of the Fund's 2007 and 2006 distributions: ---------------------------------------------------------------------------
Six months ended June 30
--------------------------------------------------------------------------- Monthly Annual Percentage
distribution distribution Total increase
per trust per trust distributions in total
unit and unit and declared distributions
Period PPS PPS--------------------------------------------------------------------------- 2007 January-June $ 0.1515$ 1.8180$ 60,872 9.6 %
---------------------------------------------------------------------------
---------------------------------------------------------------------------
2006 January-June $ 0.1415$ 1.6980$ 55,554
---------------------------------------------------------------------------
--------------------------------------------------------------------------- Long-term debt Summarized details of the Fund's long-term debt facilities are as follows:
Letters of credit
(not reported as
long-term debt
Facility on the Current
Available drawn at Consolidated available
lending June 30, 2007 Balance Sheets) capacity---------------------------------------------------------------------------
Canadian long-term debt
facilities - stated
in Canadian dollars
Senior secured
debentures,
series A $ 47,000 $ 47,000 $ - $ -
Senior secured
debentures,
series B $ 58,000 $ 58,000 $ - $ -
Revolving
credit facility $ 150,000 $ 61,500 $ 22,735 $ 65,765
U.S. long-term debt facilities - stated in U.S. dollars
Term loan $ 195,000 $ 195,000 $ - $ -
Revolving
credit facility $ 255,000 $ 28,500 $ 158,998 $ 67,502
IRBs $ 104,000 $ 96,500 $ - $ 7,500
Both the Canadian and U.S. long-term debt facilities have an accordion feature which can increase the available capacity of the Canadian revolving credit facility from $150,000 to $200,000 and can increase the available capacity of the U.S term loan and revolving credit facility from U.S. $385,000, in aggregate, to U.S. $550,000, in aggregate, subject to certain restrictions. In 2006, the Fund exercised a portion of its U.S. accordion feature which increased the available lending to U.S. $450,000, in aggregate. Definitions of EBITDA and free cash flow available for distribution (A) All references to "EBITDA" in this press release are to "income before the following" on the consolidated statement of operations and comprehensive loss. "Income before the following" excludes some or all of the following: "amortization, interest on long-term debt, financing costs, net gain or loss on sale of capital and landfill assets, net gain or loss on financial instruments, net foreign exchange gain or loss, write-off of deferred financing costs, other expenses, income taxes, and non-controlling interest". 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 items as detailed above. These items are viewed by management as either non-cash (in the case of amortization, certain financing costs, write-off of deferred financing costs, net gain or loss on financial instruments, net foreign exchange gain or loss, and future income taxes) or non-operating (in the case of interest on long-term debt, net gain or loss on sale of capital and landfill assets, certain financing costs, other expenses, current income taxes, and non-controlling interest). 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 the Fund's debt/equity mix and interest rates; as such, it reflects the treasury/financing activities of the Fund and represents a different class of expense than those included in EBITDA. Financing costs - financing costs are a function of the Fund's treasury/financing activities and represents a different class of expense than those included in EBITDA. Net gain or loss on sale of capital and landfill assets - the net gain or loss 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 either reinvested in other capital assets or used to repay the Fund's revolving credit facility. Net gain or loss on financial instruments - as non-cash items, gains or losses on financial instruments have no impact on the determination of free cash flow available for distribution(B). Net foreign exchange gain or loss - as non-cash items, foreign exchange gains or losses have no impact on the determination of free cash flow available for distribution(B). Write-off of deferred financing costs - as a non-cash item, write-off of deferred financing costs has no impact on the determination of free cash flow available for distribution(B). Other expenses - other expenses represent amounts paid to management of the Fund on the closing of the IESI acquisition and are not considered an expense indicative of continuing operations. Accordingly, other expenses represent a different class of expense than those included in EBITDA. 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. Non-controlling interest - non-controlling interest represents a direct non-controlling equity interest in IESI through PPS holdings. Accordingly, non-controlling interest represents a different class of expense than those included in EBITDA. (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 trust unitholders and participating preferred shareholders. Participating preferred share holdings are presented as non-controlling interest in the consolidated financial statements of the Fund; however, management of the Fund have elected to include the shareholdings of the participating preferred shareholders in the calculation of free cash flow available for distribution as participating preferred shares receive distributions that are economically equivalent to those received by trust unitholders and participating preferred shares are exchangeable on a one-to-one basis for trust units of the Fund. Details of the calculation are included in the "Other Performance Measures --Free cash flow available for distribution(B)" section of the Fund's MD&A. Free cash flow available for distribution is not necessarily indicative of cash available to fund cash needs and should not be considered an alternative to cash flow as a measure of liquidity. All references to "free cash flow available for distribution" in this press release 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 Annual Information Form for the period ended December 31, 2006. 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. The Fund, through its operating subsidiaries, is one of North America's largest full-service waste management companies, providing non-hazardous solid waste collection and disposal services for commercial, industrial, municipal and residential customers in five Canadian provinces and ten states in the United States. The Fund serves over 1.2 million customers with vertically integrated collection and disposal assets. The Fund's Canadian segment operates under the BFI Canada brand and is Canada's second largest full-service waste management company providing integrated non-hazardous solid waste collection and landfill disposal services in the provinces of British Columbia, Alberta, Manitoba, Ontario and Quebec. The Canadian segment operates one and owns and operates four landfills, carries on solid waste collection operations in 19 markets and operates four transfer collection stations, seven material recovery facilities and one landfill gas to energy facility. The Fund's U.S. operations provide integrated non-hazardous solid waste collection and landfill disposal services in two geographic regions: the south, consisting of various service areas in Texas, Louisiana, Oklahoma, Arkansas, Mississippi and Missouri, and the northeast, consisting of various service areas in New York, New Jersey, Pennsylvania and Maryland. The U.S. south and northeast segments operate in 37 markets, and include 44 collection operations, 24 transfer stations, 17 landfills and five material recycling facilities. The Fund's units are listed on the Toronto Stock Exchange under the symbol BFC.UN. For more information on the Fund, visit www.bficanada.com. Management will hold a conference call on August 8, 2007 at 8:30 am (EDT) to discuss results for the three and six months ended June 30, 2007. To access the call, participants should dial 416-644-3420 or 1-800-732-1073 at approximately 8:20 am (EDT). The conference call will also be webcast live at www.bficanada.com and subsequently archived on the BFI Canada website. A rebroadcast of the call will be available until midnight on August 22, 2007. To access the rebroadcast, dial 416-640-1917 or 1-877-289-8525 and quote the reservation number 21241099#.
BFI CANADA INCOME FUND
Consolidated Balance Sheets
June 30, 2007 (unaudited) and December 31, 2006 (in thousands of dollars)
---------------------------------------------------------------------------
June 30, December 31,
2007 2006
--------------------------------------------------------------------------- ASSETS CURRENT Cash and cash equivalents $ 13,009 $ 9,275
Accounts receivable 106,062 102,350
Due from non-controlling interest - 6,638
Other receivables 1,020 1,737
Prepaid expenses 12,731 11,665
---------------------------------------------------------------------------
132,822 131,665
OTHER RECEIVABLES 728 1,517
FUNDED LANDFILL POST-CLOSURE COSTS 5,068 4,142INTANGIBLES 74,588 77,204
GOODWILL 460,685 481,334
DEFERRED COSTS 5,319 4,051
DEFERRED FINANCING COSTS - 7,015
CAPITAL ASSETS 328,745 322,372
LANDFILL ASSETS 675,278 730,290
OTHER ASSETS 7,791 7,070
FUTURE INCOME TAX ASSETS 4,292 - ---------------------------------------------------------------------------
$ 1,695,316$ 1,766,660--------------------------------------------------------------------------- ---------------------------------------------------------------------------
LIABILITIES
CURRENT
Accounts payable $ 47,845 $ 64,284
Accrued charges 57,468 57,318
Distribution payable 10,409 9,907
Income taxes payable 980 1,280
Deferred revenues 11,154 10,212 Current portion of long-term debt - 50
Landfill closure and post-closure costs 4,545 5,824
---------------------------------------------------------------------------
132,401 148,875
LONG-TERM DEBT 506,788 543,454
LANDFILL CLOSURE AND POST-CLOSURE COSTS 60,148 58,711
OTHER LIABILITIES 9,923 383
FUTURE INCOME TAX LIABILITIES 21,189 31,922
---------------------------------------------------------------------------
730,449 783,345
---------------------------------------------------------------------------
NON-CONTROLLING INTEREST 258,064 282,026
UNITHOLDERS' EQUITY 706,803 701,289
---------------------------------------------------------------------------
$ 1,695,316 $ 1,766,660
--------------------------------------------------------------------------- --------------------------------------------------------------------------- BFI CANADA INCOME FUND
Consolidated Statements of Operations and Comprehensive Loss
For the periods ended June 30, 2007 and June 30, 2006 (unaudited - in
thousands of dollars, except net income per trust unit amounts)
Three months ended Six months ended
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2007 2006 2007 2006
---------------------------------------------------------------------------
REVENUES $ 225,515 $ 192,655 $ 427,815 $ 371,519
---------------------------------------------------------------------------
EXPENSES
OPERATING 127,888 108,761 244,518 212,442
SELLING, GENERAL AND
ADMINISTRATION 26,193 23,218 53,191 47,850 --------------------------------------------------------------------------- INCOME BEFORE THE FOLLOWING 71,434 60,676 130,106 111,227
AMORTIZATION 41,372 36,971 79,290 72,244
INTEREST ON LONG-TERM DEBT 8,471 8,203 18,365 16,229
FINANCING COSTS - - 864 79
NET GAIN ON SALE OF CAPITAL
ASSETS (1,026) (301) (1,234) (355)
NET GAIN ON FINANCIAL
INSTRUMENTS (6,158) (4,110) (4,718) (3,799)
NET FOREIGN EXCHANGE LOSS 13,483 7,599 15,104 6,860
OTHER EXPENSES - 52 5 159 --------------------------------------------------------------------------- INCOME BEFORE INCOME TAXES
AND NON CONTROLLING INTEREST 15,292 12,262 22,430 19,810
INCOME TAX EXPENSE
(RECOVERY)
Current 3,944 1,327 5,607 2,786
Future 2,220 1,910 (5,086) 1,988 ---------------------------------------------------------------------------
6,164 3,237 521 4,774
--------------------------------------------------------------------------- INCOME BEFORE NON- CONTROLLING INTEREST 9,128 9,025 21,909 15,036 NON-CONTROLLING INTEREST 1,523 1,835 3,718 2,918
---------------------------------------------------------------------------
NET INCOME 7,605 7,190 18,191 12,118
--------------------------------------------------------------------------- --------------------------------------------------------------------------- OTHER COMPREHENSIVE LOSS Foreign currency translation adjustment (45,435) (25,068) (50,493) (24,442)
---------------------------------------------------------------------------
COMPREHENSIVE LOSS $ (37,830) $ (17,878) $ (32,302) $ (12,324)
--------------------------------------------------------------------------- ---------------------------------------------------------------------------
Net income per trust unit,
basic and diluted $ 0.13 $ 0.13 $ 0.33 $ 0.23
Weighted average number of
trust units outstanding
(thousands), basic 57,350 53,616 55,557 53,393
Weighted average number of
trust units outstanding
(thousands), diluted 68,510 65,391 66,885 65,391
BFI CANADA INCOME FUND
Consolidated Statements of Cash Flows
For the periods ended June 30, 2007 and June 30, 2006 (unaudited - in
thousands of dollars)
---------------------------------------------------------------------------
Three months ended Six months ended
---------------------------------------------------------------------------
2007 2006 2007 2006
--------------------------------------------------------------------------- NET INFLOW (OUTFLOW) OF
CASH RELATED TO THE
FOLLOWING ACTIVITIES
OPERATING
Net income $ 7,605 $ 7,190 $ 18,191 $ 12,118
Items not affecting cash Amortization of intangibles 5,138 4,803 10,334 9,725 Amortization of deferred
financing costs - 337 - 675
Amortization of capital
assets 15,702 13,719 31,441 27,440
Amortization of landfill
assets 20,532 18,112 37,515 34,404 Write-off of deferred costs (1,026) (301) (1,234) (355) Deferred costs 33 292 68 327
Write-off of deferred
financing costs - - - 79
Accretion of landfill
closure and post-closure
costs 759 713 1,561 1,444
Unrealized foreign
exchange loss 14,320 8,336 16,304 8,144
Future income taxes 2,220 1,910 (5,086) 1,988
Net gain on financial
instruments (6,158) (4,110) (4,718) (3,799)
Non-controlling interest 1,523 1,835 3,718 2,918
Landfill closure and post-closure expenditures (768) (5,929) (1,295) (9,208)
---------------------------------------------------------------------------
59,880 46,907 106,799 85,900
Changes in non-cash working capital items (6,074) 4,751 (24,538) (10,301)
---------------------------------------------------------------------------
Cash generated from operating activities 53,806 51,658 82,261 75,599 --------------------------------------------------------------------------- INVESTING
Acquisitions (33,148) (1,320) (37,453) (3,678)
Investment in other
receivables - (1,484) (400) (1,484)
Proceeds from other
receivables 1,502 585 1,856 818
Funded landfill
post-closure costs (294) (216) (642) (1,198)
Purchase of capital assets (23,551) (22,967) (40,397) (40,328)
Purchase of landfill
assets (16,073) (16,859) (25,947) (24,638)
Proceeds on sale of
capital assets 1,316 464 1,578 800
Investment in deferred
costs (585) (323) (1,565) (604) --------------------------------------------------------------------------- Cash utilized in investing activities (70,833) (42,120) (102,970) (70,312) --------------------------------------------------------------------------- FINANCING
Payment of deferred
financing costs - (22) - (721)
Proceeds from long-term
debt 65,404 45,819 145,756 81,068
Repayment of long-term
debt (108,017) (28,284) (149,251) (40,984)
Issuance of trust units,
net of issuance costs 87,589 (4) 87,579 (45)
Distributions paid to
unitholders and
participating preferred
shareholders (30,686) (27,777) (60,369) (55,554) --------------------------------------------------------------------------- Cash generated from (utilized in) financing activities 14,290 (10,268) 23,715 (16,236)
---------------------------------------------------------------------------
Effect of foreign exchange
changes on foreign cash
and cash equivalents 590 192 728 223 --------------------------------------------------------------------------- NET CASH (OUTFLOW) INFLOW (2,147) (538) 3,734 (10,726)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD OR YEAR 15,156 3,954 9,275 14,142 --------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 13,009 $ 3,416 $ 13,009 $ 3,416 --------------------------------------------------------------------------- ---------------------------------------------------------------------------
BFI CANADA INCOME FUND
Consolidated Statements of Unitholders' Equity
For the periods ended June 30, 2007 and June 30, 2006 (unaudited - in
thousands of dollars)
---------------------------------------------------------------------------
Three months ended Six months ended
---------------------------------------------------------------------------
2007 2006 2007 2006
---------------------------------------------------------------------------
CONTRIBUTED EQUITY
Trust units, beginning
of period or year $ 916,828 $ 908,209 $ 908,221 $ 891,070
Issuance of trust
units, net of
issuance costs and
related tax effect,
during the period 89,441 (4) 89,431 (45)
Trust units issued on
exchange of
participating
preferred shares,
during the period - 17 8,617 17,197 --------------------------------------------------------------------------- Trust units, end of period $ 1,006,269 $ 908,222 $ 1,006,269 $ 908,222 --------------------------------------------------------------------------- Class A units,
beginning of
period or year $ - $ - $ - $ -
Class A units issued,
during the period - - - - --------------------------------------------------------------------------- Class A units, end of period $ - $ - $ - $ -
---------------------------------------------------------------------------
Treasury units,
beginning of
period or year $ - $ - $ - $ -
Trust units acquired
by the U.S. LTIP,
during the period (1,698) - (1,698) (1,281)
Deferred compensation
obligation, during
the period 1,698 - 1,698 1,281 --------------------------------------------------------------------------- Treasury units, end of period $ - $ - $ - $ - --------------------------------------------------------------------------- TOTAL CONTRIBUTED EQUITY $ 1,006,269 $ 908,222 $ 1,006,269 $ 908,222
---------------------------------------------------------------------------
ACCUMULATED NET INCOME
Accumulated net
income, beginning of
period or year $ 87,870 $ 59,132 $ 86,947 $ 54,204
Net income, during the
period 7,605 7,190 18,191 12,118
Transition adjustment,
during the period - - (9,663) - --------------------------------------------------------------------------- ACCUMULATED NET INCOME, END OF PERIOD $ 95,475$ 66,322$ 95,475$ 66,322
---------------------------------------------------------------------------
---------------------------------------------------------------------------
ACCUMULATED
DISTRIBUTIONS
Accumulated
distributions,
beginning of period
or year $ (285,544) $ (190,045) $ (260,991) $ (167,270)
Distributions declared, during the period (26,016) (22,775) (50,569) (45,550)
---------------------------------------------------------------------------
ACCUMULATED DISTRIBUTIONS, END OF PERIOD $ (311,560) $ (212,820) $ (311,560) $ (212,820)
---------------------------------------------------------------------------
DEFICIT $ (216,085) $ (146,498) $ (216,085) $ (146,498)
---------------------------------------------------------------------------
ACCUMULATED OTHER
COMPREHENSIVE LOSS
Accumulated other
comprehensive loss,
beginning of period
or year $ (37,946) $ (31,841) $ (32,888) $ (32,467)
Foreign currency
translation adjustment, during the period (45,435) (25,068) (50,493) (24,442)
---------------------------------------------------------------------------
ACCUMULATED OTHER COMPREHENSIVE LOSS, END OF PERIOD $ (83,381) $ (56,909) $ (83,381) $ (56,909)
---------------------------------------------------------------------------
UNITHOLDERS' EQUITY $ 706,803$ 704,815$ 706,803$ 704,815
---------------------------------------------------------------------------
---------------------------------------------------------------------------
FOR FURTHER INFORMATION PLEASE CONTACT:
BFI Canada Income Fund
Chaya Cooperberg
Director, Investor Relations and Corporate Communications
(416) 401-7729
Email: chaya.cooperberg@bficanada.com
Website: www.bficanada.com
Source: BFI Canada Income Fund
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