TORONTO, ONTARIO -- (MARKET WIRE) -- 02/26/09 --
BFI Canada Ltd. (the "Company") (TSX: BFC) reported financial results for the three months and year ended December 31, 2008. All amounts are in thousands of Canadian dollars, with the exception of per share or trust unit and participating preferred share ("PPS") amounts, unless otherwise stated.
Management Commentary
"Our performance in the fourth quarter and the year continued to be strong despite the challenging economic climate and the sudden decline in recycling commodity prices," said Keith Carrigan, Vice Chairman and Chief Executive Officer. "Revenues in the quarter grew 19.1% to $298.9 million, and in 2008 we reached a financial milestone, with revenues in excess of $1.1 billion, an increase of 21.8% over the prior year. Organic Canadian and U.S. segment revenues, which exclude acquisitions and fuel and environmental surcharges, increased 5.9% and declined 4.0% quarter over quarter, respectively, and grew 9.7% and 2.4% year over year, respectively."
"Our financial performance reflects our ability to adjust quickly to the environment that we faced," Mr. Carrigan continued. "EBITDA reached $83.2 million in the quarter, and $310.2 million dollars in 2008, reflecting comparative increases of a 19.9% and 12.6%, respectively. In the quarter and the year, before the impact of foreign currency translation, EBITDA(A) increased 5.9% and 13.0%, respectively. Free cash flow(B), which includes all capital and landfill expenditures, increased comparatively by 318.9% and 54.1% to $22.5 million and $102.5 million, respectively."
"In 2009, we will adhere to the pragmatic and disciplined principles that have resulted in revenue, earnings and cash flow growth each year since our founding," Mr. Carrigan added. "With our expected deleveraged balance sheet and positive free cash flow(B) position, we are poised to focus our efforts on our existing business and future opportunities."
Financial Highlights for the Three Months and Year Ended December 31, 2008
- Revenues increased 19.1% and 21.8% to $298.9 million and $1.1 billion.
- Revenue growth, before the impact of foreign currency translation, was 3.2% and 22.3%.
- EBITDA(A) increased 19.9% and 12.6% to $83.2 million and $310.2 million.
- EBITDA(A) growth, before the impact of foreign currency translation, was 5.9% and 13.0%.
- Free cash flow(B) increased to $22.5 million and $102.5 million or 318.9% and 54.1%.
- For the quarter and year, core price increased 4.0% and 4.1% in Canada and 2.0% and 3.3% in the U.S.
- For the quarter and year, volumes increased 2.5% and 5.3% in Canada and decreased (4.6%) and (0.9%) in the U.S.
- In Canada, lower recycling commodity prices resulted in a revenue decline of (0.6%) in the quarter, compared to a 0.4% increase for the year, and decreased (1.4%) in the quarter and were unchanged in the year, in the U.S.
Other Highlights for the Three Months and Year Ended December 31, 2008
- Effective February 12, 2009, the Company announced the issuance of 8,500 common shares for gross proceeds of $80,750. The underwriters have an option to purchase up to an additional 1,275 common shares on the same terms and conditions, which if exercised brings the total gross proceeds to $92,863. The Company intends to repay a portion of outstanding borrowings on its U.S. long-term debt facility.
- Effective August 18, 2008, the Company's predecessor reduced its distribution per trust unit from $1.818 to $0.50 per annum. commencing with the distribution payable to holders of record on December 31, 2008.
- Effective September 25, 2008, the Company announced a special quarterly dividend payable in four equal amounts of $0.125 per share commencing on March 31, 2009.
- Effective October 1, 2008, the Company amended its Canadian and U.S. long-term debt facilities to reflect the change in its organizational structure.
- Effective July 30, 2008, the Company increased and amended its Canadian long-term debt facility.
- Effective August 6, 2008, the Company extended and amended its U.S. long-term debt facility.
- Effective August 1, 2008, the Company fixed the interest rate on U.S. $45,000 of variable rate demand solid waste disposal revenue bonds ("IRBs").
- For the year ended December 31, 2008, the Company completed eight acquisitions, comprised of seven "tuck-ins" and one new market.
Summarized Financial Highlights
Three months
ended Year ended
December 31, December 31,
2008 2008
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Revenues December 31, 2007 $ 251,029 $ 917,357
Organic growth and acquisitions (includes
fuel and environmental surcharges) 8,039 204,410
Foreign currency exchange impact 39,806 (4,737)
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Revenues December 31, 2008 $ 298,874 $ 1,117,030
% Revenue growth before foreign currency
exchange impact 3.2% 22.3%
Revenue growth % 19.1% 21.8%
EBITDA(A) December 31, 2007 $ 69,361 $ 275,535
Organic growth and acquisitions 4,086 35,821
Foreign currency exchange impact 9,705 (1,157)
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EBITDA(A) December 31, 2008 $ 83,152 $ 310,199
% EBITDA(A) growth before foreign currency
exchange impact 5.9% 13.0%
EBITDA(A) growth % 19.9% 12.6%
Free cash flow(B) December 31, 2007 $ 5,372 $ 66,468
Organic growth and acquisitions 16,374 36,186
Foreign currency exchange impact 758 (203)
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Free cash flow(B) December 31, 2008 $ 22,504 $ 102,451
% Free cash flow(B) growth before foreign
currency exchange impact 304.8% 54.4%
Free cash flow(B) growth % 318.9% 54.1%
Dividends and distributions declared $ 23,682 $ 117,362
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Financial Highlights
(in thousands, except per weighted average share or trust unit and PPS)
Three months ended Year ended
December 31 December 31
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2008 2007 2008 2007
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(unaudited) (unaudited)
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Operating results
Revenues $ 298,874 $ 251,029 $ 1,117,030 $ 917,357
Operating expenses 178,471 151,356 671,996 531,614
Selling, general and
administration
expenses ("SG&A") 37,251 30,312 134,835 110,208
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Income before the following
("EBITDA(A)") 83,152 69,361 310,199 275,535
Amortization 41,988 40,226 178,703 161,006
Interest on long-term debt 13,939 13,824 53,737 42,964
Financing costs 311 - 3,503 7,192
Net gain on sale of capital
assets (562) (91) (920) (1,434)
Net foreign exchange (gain)
loss (25) (1,131) (653) 13,671
Net loss on financial
instruments 6,970 7,666 10,660 9,384
Conversion costs 1,090 - 3,347 -
Other expenses 41 43 131 48
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Income before income taxes
and non-controlling interest 19,400 8,824 61,691 42,704
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Net income tax expense 6,499 2,950 6,060 4,697
Non-controlling interest 2,092 952 9,018 6,320
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Net income $ 10,809 $ 4,922 $ 46,613 $ 31,687
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Net income per weighted
average share or trust
unit, basic & diluted $ 0.19 $ 0.09 $ 0.81 $ 0.56
Share or trust units and
PPSs outstanding
Weighted average number of
shares or trust units
outstanding 57,504 57,562 57,496 56,564
Weighted average number of
PPSs outstanding 11,137 11,144 11,137 11,239
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Weighted average number of
shares or trust units
and PPSs outstanding 68,641 68,706 68,633 67,803
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Aggregate number of shares
or trust units and PPSs
outstanding 68,706 68,706 68,706 68,706
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Replacement and growth
expenditures
Replacement capital and
landfill expenditures
("replacement
expenditures") $ 24,630 $ 32,756 $ 89,509 $ 93,838
Growth capital and landfill
expenditures ("growth
expenditures) 21,190 15,015 58,481 60,031
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Total replacement and growth
expenditures $ 45,820 $ 47,771 $ 147,990 $ 153,869
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Operating and free cash
flow(B)
Cash generated from
operating activities $ 62,606 $ 78,794 $ 229,921 $ 217,415
Free cash flow(B) $ 22,504 $ 5,372 $ 102,451 $ 66,468
Free cash flow(B) per
weighted average share
or trust unit and PPS $ 0.33 $ 0.08 $ 1.49 $ 0.98
Dividends and distributions
Dividends and distributions
declared, per share or
trust unit $ 19,842 $ 26,165 $ 98,336 $ 102,888
Dividends declared, PPSs 3,840 5,062 19,026 20,438
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Total dividends and
distributions declared $ 23,682 $ 31,227 $ 117,362 $ 123,326
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Total dividends or
distributions declared
per weighted
average share or trust
unit and PPS $ 0.35 $ 0.45 $ 1.71 $ 1.82
Management's Discussion
(all amounts are in thousands, except per share or trust unit, PPS, and foreign currency exchange rate amounts, unless otherwise stated)
Foreign Currency Exchange Rates
The Company reports its financial results in Canadian dollars. Consequently changes in the foreign currency exchange rate between Canada and the U.S. impacts the translated value of the Company'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:
2008 2007
---------------------------- -----------------------------
---------------------------- -----------------------------
Consolidated Consolidated
Consoli- Statement of Consoli- Statement of
dated Operations and dated Operations and
Balance Comprehensive Balance Comprehensive
Sheet Income (Loss) Sheet Income (Loss)
---------------------------- -----------------------------
---------------------------- -----------------------------
Cumula- Cumula-
tive tive
Current Average average Current Average average
---------------------------- -----------------------------
---------------------------- -----------------------------
March 31 $ 1.028 $ 1.004 $ 1.004 $ 1.153 $ 1.172 $ 1.172
June 30 $ 1.019 $ 1.010 $ 1.007 $ 1.063 $ 1.098 $ 1.135
September 30 $ 1.060 $ 1.041 $ 1.018 $ 0.996 $ 1.045 $ 1.105
December 31 $ 1.225 $ 1.212 $ 1.067 $ 0.988 $ 0.982 $ 1.074
Readers are reminded that a significant portion of the Company's financial results originate in the U.S. The impact of foreign currency exchange on the Company's consolidated results is included in the Company's MD&A for the year ended December 31, 2008.
Operating Highlights
Three months ended December 31 Year ended December 31
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2008 2007 Change 2008 2007 Change
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Revenues $ 298,874 $ 251,029 $ 47,845 $1,117,030 $ 917,357 $ 199,673
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Canada $ 99,557 $ 89,418 $ 10,139 $ 391,078 $ 336,527 $ 54,551
U.S. south $ 101,394 $ 77,479 $ 23,915 $ 360,828 $ 314,690 $ 46,138
U.S.
northeast $ 97,923 $ 84,132 $ 13,791 $ 365,124 $ 266,140 $ 98,984
Operating
expenses $ 178,471 $ 151,356 $ 27,115 $ 671,996 $ 531,614 $ 140,382
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Canada $ 51,833 $ 46,562 $ 5,271 $ 209,229 $ 175,305 $ 33,924
U.S. south $ 62,189 $ 51,805 $ 10,384 $ 228,354 $ 204,323 $ 24,031
U.S.
northeast $ 64,449 $ 52,989 $ 11,460 $ 234,413 $ 151,986 $ 82,427
SG&A $ 37,251 $ 30,312 $ 6,939 $ 134,835 $ 110,208 $ 24,627
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Canada $ 13,308 $ 11,888 $ 1,420 $ 48,806 $ 41,504 $ 7,302
U.S. south $ 13,161 $ 9,783 $ 3,378 $ 46,181 $ 40,743 $ 5,438
U.S.
northeast $ 10,782 $ 8,641 $ 2,141 $ 39,848 $ 27,961 $ 11,887
EBITDA(A) $ 83,152 $ 69,361 $ 13,791 $ 310,199 $ 275,535 $ 34,664
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Canada $ 34,416 $ 30,968 $ 3,448 $ 133,043 $ 119,718 $ 13,325
U.S. south $ 26,044 $ 15,891 $ 10,153 $ 86,293 $ 69,624 $ 16,669
U.S.
northeast $ 22,692 $ 22,502 $ 190 $ 90,863 $ 86,193 $ 4,670
The discussions to follow are in addition to the impact of foreign currency exchange fluctuations which are detailed in the Company's MD&A for year ended December 31, 2008.
Revenues - Three months and year ended December 31
The increase in revenues for the three months ended is due in part to organic Canadian segment growth as a result of both volume and pricing growth, partially offset by a marginal decline in recycling commodity prices. Organically, the Company's U.S. segment declined period over period. The change is due in large part to a decline in volumes and commodity recycling prices, partially offset by a marginal increase in pricing in other areas of the business. Translating the Company's U.S. segment results to Canadian dollars is a significant component of the quarter over quarter increase. Acquisitions and fuel and environmental surcharges account for the balance of the change.
The increase in revenues for the year ended is due in part to organic Canadian and U.S. segment growth coupled with acquisitions. The Company's U.S. northeast segment continued to experience the impact of an overall economic slowdown. Falling commodity prices also impacted organic revenue growth, and the impact was most notable in the Company's U.S. northeast segment.
Operating expenses - Three months and year ended December 31
Higher total disposal and labour costs are attributable to higher collected waste volumes in the Company's Canadian segment and higher costs to service new and existing customers, contracts, and acquisitions for the three months and year ended. The balance of the changes are due principally to higher vehicle operating costs and repairs and maintenance expense due largely to the higher cost of fuel and an increase in the Company's fleet of service vehicles required to service new and acquired customers, and new contracts. The impact of higher fuel costs was most pronounced in the U.S. northeast segment, and more specifically at the Seneca Meadows landfill. The consumption of fuel, coupled with the absorption of fuel price increases charged by third party haulers of waste to the landfill, were absorbed by the Company as result of operating conditions in this market. Translating the Company's U.S. segment results to Canadian dollars is a significant component of the quarter over quarter increase.
SG&A expenses - Three months and year ended December 31
Higher total salaries are the primary reasons for the comparative increases due in large part to acquisitions and organic growth. Compensation expense to retain certain executive employees, recorded in the Company's Canadian segment, also contributed to the increase in salaries. Higher facility and office costs, as a result of acquisition and organic growth, and higher professional fees and corporate development costs are the primary reasons for the balance of the changes. Translating the Company's U.S. segment results to Canadian dollars is a significant component of the quarter over quarter increase.
Free cash flow (B)
Purpose and objective
The purpose of presenting this non-GAAP measure is to align the Company's disclosure with disclosures presented by other U.S. based companies in the waste industry. Investors and analysts use this calculation as a measure of a company's valuation and liquidity. Management uses this non-GAAP measure to assess its performance relative to other U.S. based companies, to assess its primary sources and uses of cash flow, and to assess its ability to sustain its dividend policy.
Free cash flow (B) - cash flow approach
Three months ended December 31 Year ended December 31
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2008 2007 Change 2008 2007 Change
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Cash
generated
from
operating
activities
(per
statement
of cash
flows) $ 62,606 $ 78,794 $ (16,188) $ 229,921 $ 217,415 $ 12,506
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Operating
Changes in
non-cash
working
capital
items 4,298 (24,533) 28,831 16,113 (6,177) 22,290
Capital and
landfill
asset
purchases (45,820) (47,771) 1,951 (147,990) (155,869) 7,879
Other expenses 41 43 (2) 131 48 83
Financing
Share or trust
unit based
compensation 297 - 297 (675) - (675)
Financing and
deferred
costs (net
of non-cash
portion) 17 (30) 47 2,257 7,063 (4,806)
Conversion
costs 1,090 - 1,090 3,347 - 3,347
Net realized
foreign
exchange
(gain) loss (25) (1,131) 1,106 (653) 3,988 (4,641)
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Free cash
flow(B) $ 22,504 $ 5,372 $ 17,132 $ 102,451 $ 66,468 $ 35,983
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Free cash flow (B) - EBITDA approach
The Board of Directors and management of the Company typically calculate free cash flow(B) using an operations approach. Management views EBITDA(A) as a proxy for cash derived from operations.
Three months ended December 31 Year ended December 31
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2008 2007 Change 2008 2007 Change
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EBITDA(A) $ 83,152 $ 69,361 $ 13,791 $ 310,199 $275,535 $ 34,664
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Capital and
landfill
asset
purchases (45,820) (47,771) 1,951 (147,990) (155,869) 7,879
Landfill
closure and
post-closure
expenditures (1,029) (1,834) 805 (2,158) (4,541) 2,383
Landfill
closure and
post-closure
cost
accretion
expense 843 719 124 3,212 3,086 126
Interest on
long-term
debt (13,939) (13,824) (115) (53,737) (42,964) (10,773)
Current
income tax
expense (703) (1,279) 576 (7,075) (8,779) 1,704
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Free cash
flow(B) $ 22,504 $ 5,372 $ 17,132 $ 102,451 $ 66,468 $ 35,983
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The increase in free cash flow(B), applying the EBITDA(A) approach, is due largely to higher EBITDA(A) contributions, due principally from acquisition and organic growth. Higher interest expense on long-term debt was partially offset by lower capital and landfill asset purchases and lower landfill closure and post-closure expenditures. Lower landfill closure and post-closure expenditures were due in part to lower remediation expenditures at the Company's Seneca Meadows landfill, coupled with variations in the timing of spending in both Canada and the U.S.
Replacement and Growth Expenditures
Capital and landfill purchases characterized as replacement and growth are as follows:
Three months ended December 31 Year ended December 31
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2008 2007 Change 2008 2007 Change
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Replacement $ 24,630 $ 32,756 $ (8,126) $ 89,509 $ 93,838 $ (4,329)
Growth 21,190 15,015 6,175 58,481 62,031 (3,550)
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Total $ 45,820 $ 47,771 $ (1,951) $ 147,990 $155,869 $ (7,879)
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Capital and landfill purchases - replacement
Capital and landfill purchases characterized as replacement expenditures, represent the outlay of monies to sustain current cash flows and are funded from free cash flow(B). Replacement expenditures may include some or all of the following: the replacement of existing capital assets, including vehicles, equipment, containers, compactors, furniture, fixtures and computer equipment. Replacement expenditures also include all landfill construction spending for the Company's operating landfills, which is principally comprised of cell construction.
The comparative decline in replacement expenditures is due largely to a decline in capital assets purchased in the U.S. Lower volumes are the primary reason for the contraction in replacement expenditures.
Capital and landfill purchases - growth
Capital and landfill purchases characterized as growth expenditures, represent the outlay of monies to generate new or future cash flows and are generally funded from free cash flow(B). Growth expenditures may include some or all of the following: vehicles, equipment, containers, compactors, furniture, fixtures and computer equipment to support new contract wins and organic business growth. In addition, landfill expenditures for new or expansion permits, and initial construction expenditures for a new landfill, are also characterized as growth expenditures.
The comparative decline in growth expenditures is due largely to a decline in capital assets purchased in Canada. Contract wins which commenced in 2007 exceeded those commencing in 2008 and is the primary reason for the comparative decline in Canada.
Readers are reminded that revenue, EBITDA(A), and cash flow contributions derived from vehicles, equipment and container growth expenditures will materialize over the assets useful life. The typical pay back period benchmark is three to five years.
Had the Company continued to calculate maintenance and growth expenditures in the same manner as its predecessor, BFI Canada Income Fund (the "Fund"), maintenance and growth expenditures would have been as follows:
Maintenance and Growth Expenditures
Three months ended December 31 Year ended December 31
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2008 2007 Change 2008 2007 Change
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Total $ 53,088 $ 49,873 $ 3,215 $ 159,182 $153,485 $ 5,697
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Maintenance:
Canada $ 4,999 $ 5,784 $ (785) $ 20,812 $ 19,931 $ 881
U.S. 11,761 5,793 5,968 40,353 36,532 3,821
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Total
maintenance $ 16,760 $ 11,577 $ 5,183 $ 61,165 $ 56,463 $ 4,702
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Growth:
Canada $ 18,060 $ 9,231 $ 8,829 $ 34,601 $ 25,467 $ 9,134
U.S. 18,268 29,065 (10,797) 63,416 71,555 (8,139)
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Total growth $ 36,328 $ 38,296 $ (1,968) $ 98,017 $ 97,022 $ 995
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Dividends and Distributions
(all amounts are in thousands, except per share or trust unit and PPS amounts)
2008
The Company's predecessor declared distributions to unitholders of record for the period from January to September 2008. Distributions and dividends declared per trust unit and PPS for this period totalled $93,681, and represented a monthly payout of $0.1515 per trust unit and PPS. Dividends declared per share and PPS for the period October to December 2008 totalled $23,681. Dividends declared for the month of October and November totalled $20,818 and represented a monthly dividend of $0.1515 per share and PPS. Dividends declared in the month of December 2008 totalled $2,863 and represented a monthly dividend of $0.04166 per share and PPS.
2009
In conjunction with the Company's conversion from an income trust to a corporation, the Company's expected record and payment dates for its regular dividends in 2009 are as follows:
Expected regular dividend schedule (payable quarterly)
Dividend
amounts
per share
Record date Payment date and PPS
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March 31, 2009 April 15, 2009 $ 0.125
June 30, 2009 July 15, 2009 0.125
September 30, 2009 October 15, 2009 0.125
December 31, 2009 January 15, 2010 0.125
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Total $ 0.500
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In conjunction with the Company's conversion from an income trust to a corporation, the Company's expected record and payment dates for its special dividends, payable only in 2009, are as follows:
Expected special dividend schedule (payable quarterly)
Dividend
amounts
per share
Record date Payment date and PPS
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March 31, 2009 April 15, 2009 $ 0.125
June 30, 2009 July 15, 2009 0.125
September 30, 2009 October 15, 2009 0.125
December 17, 2009 December 31, 2009 0.125
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Total $ 0.500
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Long-term debt
Summarized details of the Company's long-term debt facilities are as
follows:
Letters of
credit (not
reported as
long-term
debt on the
Facility drawn Consolidated Current
Available at December Balance available
lending 31, 2008 Sheets) capacity
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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 $ 305,000 $ 153,500 $ 24,916 $ 126,584
U.S. long-term debt
facilities - stated
in U.S. dollars
Term loan $ 195,000 $ 195,000 $ - $ -
Revolving credit
facility $ 588,500 $ 363,500 $ 128,735 $ 96,265
IRBs $ 104,000 $ 104,000 $ - $ -
Issuance of common shares
Effective February 12, 2009, the Company announced the issuance of 8,500 common shares for gross proceeds of $80,750. The underwriters have an option to purchase up to an additional 1,275 common shares on the same terms and conditions, which if exercised brings the total gross proceeds to $92,863. Net proceeds from the issuance of common shares, assuming the exercise of the underwriter's option, is expected to be approximately $88,600. Translating the net proceeds at a foreign currency exchange rate of $0.80, results in a U.S. revolving facility repayment of U.S. $70,880.
Pro forma long-term debt to EBITDA(A)
The Company's primary objective is to maintain a long-term debt to EBITDA(A) ratio below 2.5 times. Maintaining a lower long-term debt to EBIDTA(A) ratio generally results in the Company enjoying a higher credit rating and better access to long-term debt at a reasonable cost. In calculating long-term debt to EBITDA(A), the Company excludes foreign currency fluctuations as cash from U.S. operations services the Company's U.S. long-term debt facilities and cash from Canadian operations services the Canadian long-term debt facilities. At December 31, 2008, the Company's reported and pro forma long-term debt to EBITDA(A) ratios were as follows:
December 31, 2008
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U.S. (stated
Canada in USD) Total
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Long-term debt to EBITDA(A) ratio
Long-term debt $ 258,500 $ 662,500 $ 921,000
EBITDA(A) $ 133,043 $ 166,019 $ 299,062
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Ratio 3.08
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December 31, 2008 - Pro forma
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U.S. (stated
Canada in USD) Total
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Long-term debt to EBITDA(A) ratio
Long-term debt $ 258,500 $ 591,700 $ 850,200
EBITDA(A) $ 133,043 $ 166,019 $ 299,062
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Ratio 2.84
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Senior secured debentures, series A
The Company plans to draw on its Canadian revolving credit facility to repay its senior secured series A debentures which mature on June 26, 2009.
Canadian revolving credit facility
Effective October 1, 2008, the Company entered into a Fourth Amending Agreement to its Fourth Amended and Restated Credit Agreement. The amending agreement simply recognizes the structural change from an income trust to a corporation and had no impact on committed amounts, maturity dates or pricing.
Effective July 30, 2008, the Company entered into a Third Amending Agreement to its Fourth Amended and Restated Credit Agreement. The Third Amending Agreement increased the Canadian revolving credit facility commitment from $150,000 to $305,000 and decreased the accordion feature from $50,000 to $45,000. In addition, the Third Amending Agreement increases the pricing grid by one quarter of one percent and modifies one financial covenant. All other significant terms remain unchanged.
U.S. term loan and revolving credit facility
Effective October 1, 2008, the Company entered into a Sixth Amending Agreement to its Amended and Restated Revolving Credit and Term Loan Agreement. The amending agreement simply recognizes the structural change from an income trust to a corporation and had no impact on committed amounts, maturity dates or pricing.
Effective August 6, 2008, the Company entered into a Fifth Amendment to its Amended and Restated Revolving Credit and Term Loan Agreement. The Fifth Amendment extends the maturity of the U.S. revolving credit facility to January 21, 2012, increases the U.S. revolving credit facility commitment to U.S. $588,500 from U.S. $575,000, and decreases the accordion feature from U.S. $50,000 to U.S. $36,500. In addition, the Fifth Amendment increases the applicable margin on the pricing grid by one quarter of one percent throughout. All other significant terms remain unchanged.
IRBs
Effective August 1, 2008, the Company remarketed $45,000 of IRBs. The amended and restated IRBs, which originally bore interest at LIBOR less an applicable discount, bear interest at 6.625% for a term of 5 years. In conjunction with the remarketing, S&P re-affirmed IESI's BB long term corporate rating, with an outlook of stable, and issued a new B+ rating on the remarketed IRBs.
Definitions of EBITDA and free cash flow
(A)All references to "EBITDA" in this press release are to "income before the following" on the consolidated statement of operations and comprehensive income (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 foreign exchange gain or loss, net gain or loss on financial instruments, write-off of deferred financing costs, conversion costs, other expenses, income taxes, and non-controlling interest". EBITDA is a term used by the Company 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 Company'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, conversion costs, other expenses, current income taxes, and non-controlling interest). EBITDA is a useful financial and operating metric for management, the Company's Board of Directors, and its lenders, as it represents a starting point in the determination of free cash flow(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(B).
Interest on long-term debt - interest on long-term debt is a function of the Company's debt/equity mix and interest rates; as such, it reflects the treasury/financing activities of the Company and represents a different class of expense than those included in EBITDA.
Financing costs - financing costs are a function of the Company'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 -proceeds from sale of capital and landfill assets are either reinvested in additional or replacement capital or landfill assets or used to repay the Company's revolving credit facility.
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(B).
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(B).
Write-off of deferred financing costs - as a non-cash item, the write-off of deferred financing costs has no impact on the determination of free cash flow(B).
Conversion costs - Conversion costs represent professional fees incurred on the Company's conversion from an income trust to a corporation. Conversion costs represent a different class of expense than those included in EBITDA.
Other expenses - other expenses typically represent amounts paid to certain management of acquired companies who are retained by the Company. These expenses 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 Company.
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.
EBITDA should not be construed as a measure of income or of cash flows. The reconciling items between EBITDA and net income (loss) are detailed in the consolidated statement of operations and comprehensive income (loss) beginning with "income before the following" and ending with "net income (loss)".
(B)The Company has adopted a measurement called "free cash flow" to supplement net income (loss) as a measure of operating performance. Free cash flow is a term which does not have a standardized meaning prescribed by GAAP, is prepared before dividends declared, and is therefore unlikely to be comparable to similar measures used by other issuers. The objective of presenting this non-GAAP measure is to align the Company's disclosure with disclosures presented by other U.S. based companies in the waste industry, to assess the Company's primary sources and uses of cash flow, and to assess the Company's ability to sustain its dividend. All references to "free cash flow" 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 operations of the Company or to the environment in which it operates, which are based on estimates, forecasts and projections. Forward-looking information is not a guarantee of future performance and involves risks and uncertainties that are difficult to predict, or are beyond management's control. A number of factors could cause actual outcomes and results to differ materially from those estimated, forecast or projected. These factors include those set forth in the Fund's Annual Information Form ("AIF") for the year ended December 31, 2007 and the Fund's Management Information Circular dated August 26, 2008. 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 information contained herein is based on what management believes to be reasonable assumptions, users are cautioned that actual results may differ. Management disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise.
The Company, through its operating subsidiaries, is one of North America's largest full-service waste management companies, providing non-hazardous solid waste ("waste") collection and disposal services to commercial, industrial, municipal and residential customers in five Canadian provinces and ten states, and the District of Columbia in the United States ("U.S."). The Company provides service to over 1.8 million customers with vertically integrated collection and disposal assets. The Company's Canadian segment operates under the BFI Canada brand and is Canada's second largest full-service waste management company providing vertically integrated waste collection and disposal services in the provinces of British Columbia, Alberta, Manitoba, Ontario, and Quebec. This segment provides service to 20 Canadian markets and operates five landfills, four transfer collection stations, seven material recovery facilities ("MRFs"), and one landfill gas to energy facility. The Company's U.S. south and northeast segments, collectively the U.S. segment or U.S. segments, operate under the IESI brand and provide vertically integrated waste collection and 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, Maryland., and the District of Columbia. This segment provides service to 40 U.S. markets and operates 17 landfills, 29 transfer collection stations, 11 MRFs, and one transportation operation. The Company's shares are listed on the Toronto Stock Exchange under the symbol BFC. For more information on BFI Canada Ltd., visit www.bficanada.com.
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Management will hold a conference call on Friday, February 27 at 8:30 am
(EDT) to discuss results for the three months and year ended December 31,
2008. To access the call, participants should dial 416-644-3417 or
1-800-732-6179 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 Friday, March
13, 2009. To access the rebroadcast, dial 416-640-1917 or 1-877-289-8525
and quote the reservation number 21295852#.
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BFI CANADA LTD.
Consolidated Balance Sheets
December 31, 2008 and December 31, 2007 (in thousands of dollars)
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December 31, December 31,
2008 2007
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ASSETS
CURRENT
Cash and cash equivalents $ 14,720 $ 13,359
Accounts receivable 131,972 115,851
Other receivables 279 457
Prepaid expenses 23,998 15,001
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170,969 144,668
OTHER RECEIVABLES 482 761
FUNDED LANDFILL POST-CLOSURE COSTS 7,488 5,976
INTANGIBLES 146,827 144,686
GOODWILL 756,597 616,534
DEFERRED COSTS 10,518 7,306
CAPITAL ASSETS 500,401 404,900
LANDFILL ASSETS 747,761 644,711
OTHER ASSETS - 1,670
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$ 2,341,043 $ 1,971,212
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LIABILITIES
CURRENT
Accounts payable $ 66,293 $ 66,815
Accrued charges 67,769 75,355
Dividends payable 2,862 10,409
Income taxes payable 1,699 2,515
Deferred revenues 13,226 12,018
Current portion of long-term debt 47,000 -
Landfill closure and post-closure costs 8,829 2,900
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207,678 170,012
LONG-TERM DEBT 1,022,798 801,973
LANDFILL CLOSURE AND POST-CLOSURE COSTS 62,280 55,943
OTHER LIABILITIES 18,424 5,056
FUTURE INCOME TAX LIABILITIES 69,403 57,668
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1,380,583 1,090,652
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NON-CONTROLLING INTEREST 241,339 251,371
SHAREHOLDERS' OR UNITHOLDERS' EQUITY 719,121 629,189
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$ 2,341,043 $ 1,971,212
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BFI CANADA LTD.
Consolidated Statements of Operations and Comprehensive
Income (Loss)
For the three months (unaudited) and year ended December 31, 2008 and
December 31, 2007 (in thousands of dollars, except net income per share
or trust unit amounts)
----------------------------------------------------------------------------
Three months ended Year ended
December 31 December 31
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2008 2007 2008 2007
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REVENUES $ 298,874 $ 251,029 $ 1,117,030 $ 917,357
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EXPENSES
OPERATING 178,471 151,356 671,996 531,614
SELLING, GENERAL AND
ADMINISTRATION 37,251 30,312 134,835 110,208
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INCOME BEFORE THE FOLLOWING 83,152 69,361 310,199 275,535
AMORTIZATION 41,988 40,226 178,703 161,006
INTEREST ON LONG-TERM DEBT 13,939 13,824 53,737 42,964
FINANCING COSTS 311 - 3,503 7,192
NET GAIN ON SALE OF CAPITAL
ASSETS (562) (91) (920) (1,434)
NET LOSS ON FINANCIAL
INSTRUMENTS 6,970 7,666 10,660 9,384
NET FOREIGN EXCHANGE (GAIN)
LOSS (25) (1,131) (653) 13,671
CONVERSION COSTS 1,090 - 3,347 -
OTHER EXPENSES 41 43 131 48
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INCOME BEFORE INCOME TAXES AND
NON-CONTROLLING INTEREST 19,400 8,824 61,691 42,704
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INCOME TAX EXPENSE (RECOVERY)
Current 703 1,279 7,075 8,779
Future 5,796 1,671 (1,015) (4,082)
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6,499 2,950 6,060 4,697
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INCOME BEFORE NON-CONTROLLING
INTEREST 12,901 5,874 55,631 38,007
NON-CONTROLLING INTEREST 2,092 952 9,018 6,320
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NET INCOME 10,809 4,922 46,613 31,687
OTHER COMPREHENSIVE INCOME
(LOSS)
Foreign currency translation
adjustment 100,843 (3,407) 146,288 (95,859)
Commodity swaps designated as
cash flow hedges,
net of tax (1,344) - (1,344) -
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COMPREHENSIVE INCOME (LOSS) $ 110,308 $ 1,515 $ 191,557 $ (64,172)
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Net income per share or
trust unit, basic
and diluted $ 0.19 $ 0.09 $ 0.81 $ 0.56
Weighted average number
of shares or trust
units outstanding
(thousands), basic 57,504 57,562 57,496 56,564
Weighted average number
of shares or trust
units outstanding
(thousands), diluted 68,641 68,706 68,633 67,803
BFI CANADA LTD.
Consolidated Statements of Cash Flows
For the three months (unaudited) and year ended December 31, 2008 and
December 31, 2007 (in thousands of dollars)
----------------------------------------------------------------------------
Three months ended Year ended
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2008 2007 2008 2007
----------------------------------------------------------------------------
NET INFLOW (OUTFLOW) OF CASH RELATED TO THE FOLLOWING ACTIVITIES
OPERATING
Net income $ 10,809 $ 4,922 $ 46,613 $ 31,687
Items not affecting cash
Share or trust unit based
compensation (297) - 675 -
Write-off of deferred costs 294 30 1,246 129
Accretion of landfill closure
and post-closure costs 843 719 3,212 3,086
Amortization of intangibles 8,939 8,849 33,626 25,443
Amortization of capital assets 22,826 18,299 82,008 66,295
Amortization of landfill
assets 10,223 13,078 63,069 69,268
Net gain on sale of capital
assets (562) (91) (920) (1,434)
Net unrealized foreign
exchange loss - - - 9,683
Future income taxes 5,796 1,671 (1,015) (4,082)
Net loss on financial
instruments 6,970 7,666 10,660 9,384
Non-controlling interest 2,092 952 9,018 6,320
Landfill closure and
post-closure expenditures (1,029) (1,834) (2,158) (4,541)
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66,904 54,261 246,034 211,238
Changes in non-cash working
capital items (4,298) 24,533 (16,113) 6,177
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Cash generated from operating
activities 62,606 78,794 229,921 217,415
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INVESTING
Acquisitions (2,732) (2,708) (60,295) (366,244)
Investment in other
receivables - (210) - (610)
Proceeds from other
receivables 79 432 457 2,596
Funded landfill post-closure
costs (496) (392) (1,654) (1,472)
Purchase of capital assets (25,035) (30,535) (87,577) (96,176)
Purchase of landfill assets (20,785) (17,236) (60,413) (59,693)
Proceeds from the sale of
capital assets 762 144 2,135 1,996
Investment in deferred costs 1,430 1,238 (3,869) (3,385)
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Cash utilized in investing
activities (46,777) (49,267) (211,216) (522,988)
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FINANCING
Proceeds from long-term debt 90,484 48,779 293,905 562,415
Repayment of long-term debt (72,734) (47,184) (180,392) (218,644)
Shares or trust units issued,
net of issue costs - (17) (3) 87,562
Purchase of restricted shares
or trust units - - (3,985) -
Dividends and distributions
paid to share or unitholders
and dividends paid to
participating preferred
shareholders (31,228) (31,227) (124,908) (122,824)
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Cash (utilized in) generated
from financing activities (13,478) (29,649) (15,383) 308,509
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Effect of foreign exchange
changes on foreign cash and
cash equivalents (1,427) 212 (1,961) 1,148
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NET CASH INFLOW 924 90 1,361 4,084
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD OR YEAR 13,796 13,269 13,359 9,275
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CASH AND CASH EQUIVALENTS, END
OF YEAR $ 14,720 $ 13,359 $ 14,720 $ 13,359
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BFI CANADA LTD.
Consolidated Statements of Shareholders' or Unitholders'
Equity, Deficit and Accumulated Other Comprehensive
Income (Loss)
For the three months (unaudited) and year ended December 31, 2008 and
December 31, 2007 (in thousands of dollars)
----------------------------------------------------------------------------
Three months ended Year ended
----------------------------------------------------------------------------
2008 2007 2008 2007
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CONTRIBUTED EQUITY
Shares or trust units,
beginning of year $ 1,006,772 $1,006,269 $ 1,006,751 $ 908,221
Shares or trust units
issued, net of issue costs
and related tax effect,
during the period or year - (17) (3) 89,414
Shares or trust units
issued on exchange of PPSs,
during the period or year - 499 24 9,116
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Shares or trust units,
end of year 1,006,772 1,006,751 1,006,772 1,006,751
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Restricted shares
or trust units,
beginning of year (3,416) - - -
Restricted shares
or trust units
purchased,
during the year - - (3,985) -
Restricted shares
or trust units
vested, during the year (569) - - -
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Restricted shares
or trust units,
end of year (3,985) - (3,985) -
----------------------------------------------------------------------------
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Treasury shares or units,
beginning of year - - - -
Shares or trust
units acquired
by the U.S. long-term
incentive plan,
during the period or year - - (2,004) (1,698)
Deferred compensation
obligation,
during the period or year - - 2,004 1,698
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----------------------------------------------------------------------------
Treasury shares or units,
end of year - - - -
----------------------------------------------------------------------------
TOTAL CONTRIBUTED EQUITY 1,002,787 1,006,751 1,002,787 1,006,751
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CONTRIBUTED SURPLUS
Contributed surplus,
beginning of year 403 - - -
Restricted shares or
trust units expensed,
during the period or year (297) - 675 -
Restricted shares or trust
units vested,
during the period or year 569 - - -
----------------------------------------------------------------------------
Contributed surplus,
end of year 675 - 675 -
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DEFICIT
Accumulated net income,
beginning of year 150,868 110,142 115,064 83,377
Accumulated distributions,
beginning of year (442,373) (337,714) (363,879) (260,991)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Deficit, beginning of year (291,505) (227,572) (248,815) (177,614)
----------------------------------------------------------------------------
Net income, during the
period or year 10,809 4,922 46,613 31,687
Dividends or distributions
declared, during the period
or year (19,842) (26,165) (98,336) (102,888)
----------------------------------------------------------------------------
Accumulated net income,
end of year 161,677 115,064 161,677 115,064
----------------------------------------------------------------------------
Accumulated dividends
or distributions,
end of year (462,215) (363,879) (462,215) (363,879)
----------------------------------------------------------------------------
DEFICIT, END OF YEAR (300,538) (248,815) (300,538) (248,815)
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ACCUMULATED OTHER
COMPREHENSIVE INCOME
(LOSS)
Accumulated other
comprehensive loss,
beginning of year (83,302) (125,340) (128,747) (32,888)
Other comprehensive income
(loss), during the year 99,499 (3,407) 144,944 (95,859)
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ACCUMULATED OTHER
COMPREHENSIVE INCOME
(LOSS), END OF YEAR 16,197 (128,747) 16,197 (128,747)
DEFICIT AND ACCUMULATED
OTHER COMPREHENSIVE
INCOME (LOSS), END OF YEAR (284,341) (377,562) (284,341) (377,562)
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SHAREHOLDERS' OR
UNITHOLDERS' EQUITY $ 719,121 $ 629,189 $ 719,121 $ 629,189
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Contacts:
BFI Canada Ltd.Chaya Cooperberg
Director, Investor Relations and Corporate Communications
(416) 401-7729
Email: chaya.cooperberg@bficanada.com
Website: www.bficanada.com
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