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BFI Canada first quarter results

BFI Canada Income Fund has announced its financial results for the three months ended March 31, 2005.


BFI Canada Income Fund has announced its financial results for the three months ended March 31, 2005.

Based on IESI’s results from operations for the three months ended March 31, 2005, management is confident that IESI is on track to deliver the 12 per cent accretion to free cash flow available for distribution(B) per weighted average trust unit and participating preferred share announced during the marketing of the fund’s subscription receipts offering that closed into escrow on January 5, 2005.

Revenues and EBITDA(A) increased 218.7 per cent and 183.5 per cent, respectively, over the comparative three months ended March 31, 2004, primarily on account of the Ridge landfill and IESI Corporation ("IESI") acquisitions completed in January 2005, and the Twin Oaks Environmental Ltd. ("Twin Oaks") and Complete Disposal Services Ltd. ("CDS") acquisitions completed in April and November 2004, respectively.

Excluding acquisitions, revenues and EBITDA(A) increased 8.8 per cent and 9.4 per cent, respectively, over the comparative three months ended March 31, 2004. Volume and price growth were the primary reasons for the increase over the comparative three months ended March 31, 2004.

IESI’s revenues and U.S. EBITDA(A), excluding the effect of foreign currency translation, for the three months ended March 31, 2005 increased 7.1 per cent and 4.8 per cent, respectively, over the comparative three month period ended March 31, 2004. Acquisitions, new contracts, volume and price growth, partially offset by higher fuel and insurance costs, were the primary reasons for the increase over the comparative three months ended March 31, 2004.

Excluding acquisitions, the fund and IESI experienced a combined 5.4 per cent organic revenue growth rate for the three months ended March 31, 2005.

Free cash flow available for distribution(B) for the three months ended March 31, 2005 totaled $24,183 and is $13,270 higher than the comparative three month period ended March 31, 2004. The principal reason for the increase is acquisitions completed during the last twelve months which contributed to a 183.5 per cent increase in EBITDA(A), partially offset by higher interest expense attributable to higher debt outstanding, higher maintenance capital expenditures to sustain a larger business base, and accrued withholding taxes on interest and dividends paid from IESI to 4264126 Canada Limited, a subsidiary of the fund.

Free cash flow available for distribution(B) per weighted average trust unit and participating preferred share for the three months ended March 31, 2005 amounted to $0.43 and is $0.02 higher than the comparative three month period ended March 31, 2004. The timing of maintenance capital expenditures are not consistent for the three months ended March 31, 2005 as compared to the three months ended March 31, 2004. Maintenance capital expenditures for the three months ended March 31, 2005, as a percentage of EBITDA(A), equals 20.7 per cent versus 7.8 per cent for the comparable three months ended March 31, 2004. Free cash flow available for distribution(B) per weighted average trust unit and participating preferred share, excluding maintenance capital expenditures, amounted to $0.57 for the three months ended March 31, 2005 versus $0.45 for the comparative three months ended March 31, 2004.

Aggregate distributions declared on weighted average trust units and participating preferred shares totaled $21,998 for the three months ended March 31, 2005, representing a payout ratio of 91.0 per cent of free cash flow available for distribution(B) on weighted average trust units and participating preferred shares outstanding. Including distributions made on weighted average subscription receipts outstanding equal to $1,175 for the period from January 1 to 20, 2005 while offering proceeds were held in escrow, aggregate distributions declared totaled $23,173 for the three months ended March 31, 2005.

Other highlights

The fund completed the acquisition of the Ridge landfill near Chatham, Ontario and IESI of Fort Worth, Texas in January 2005. Concurrent with the closing of the IESI acquisition, the fund completed a $374,000 offering of trust units to finance a portion of these acquisitions, and entered into an amended and restated $80,000 revolving credit facility through BFI Canada Holdings Inc. ("Holdings") and a United States ("U.S.") $385,000 credit facility through IESI.

The Ridge landfill has been successfully integrated with the fund’s operations and the fund has been internalizing waste from its south-western Ontario operations into the Ridge landfill since January 4, 2005.

IESI completed three "tuck-in" acquisitions for the period January 21, 2005 to March 31, 2005 (the "IESI stub period").

Management commentary

"Based on the revenue and cash flow contributions delivered by IESI and the Ridge landfill and organic price and volume increases, we’re off to a good start this year," said Keith Carrigan, president and chief executive officer of BFI Canada.

"Revenue growth in Canada was a full 29 per cent, due primarily to new contributions from the Ridge landfill as well as acquisitions made last year in the Toronto and Hamilton markets. Organic price and volume growth in our base Canadian business also contributed to revenue growth in the fund’s Canadian segment.

"In the U.S., our IESI south and northeast business segments delivered a 7.1 per cent period-over-period increase in revenue and a 4.8 per cent increase in EBITDA(A), largely on the strength of market-focused pricing and volume strategies and "tuck-in" acquisitions.

"There is room for improvement in all of our segments and we will continue to employ local, market-focused strategies, and our acquisition strategy to grow the business and the success of all business segments."

Carrigan said the integration of IESI and the Ridge landfill is progressing well and the exchange of best business practices is "delivering exactly the kind of incremental benefits we had envisioned. This is a period of significant development for our business and we are making the most of our opportunities as one of North America’s largest non-hazardous solid waste management companies."

Looking forward

The fund’s outlook has not changed since its last quarterly report. The fund expects revenue and cash flows to advance on the strength of the contributions made by newly acquired businesses, complemented by organic growth through its market-focused strategies. It also anticipates achieving a payout ratio below 90 per cent for 2005.

"We intend to make the most of our new platforms while also driving continuous improvement across all operations," said Carrigan. "Our operating agenda for 2005 will allow us to capitalize on the expertise, capabilities and best practices of our expanded team. We are well positioned to achieve our vision and aggressive goals for the year."

For further information, contact BFI Canada Income Fund:

Joseph D. Quarin, chief financial officer, at 416-401-7722 or joe.quarin@bficanada.com

or

Anne MacMicken, manager, investor and employee relations, at 416-401-7729 or anne.macmicken@bficanada.com


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