BFI Canada Income Fund (TSX:BFC.UN) has announced its financial results for the three and nine months ended September 30, 2005.
“This was another solid quarter for the Fund as we benefited from strong organic growth in both our Canadian and U.S. markets,” said Keith Carrigan, President and Chief Executive Officer. “We are delighted by the contributions IESI is making to our business and the progress we have made as a result of sharing best practices and intensifying our focus, business-wide, on operational improvement.
“Our Canadian operations, inclusive of acquisitions, have contributed more EBITDA(A) in the first nine months of 2005 than they did in all of 2004. The acquisitions of the Ridge landfill and CDS played a major role in this growth, but so too has the successful application of our market focused volume and pricing strategies.
“In total, the asset combinations we’ve acquired and developed over the past several years are delivering. This is underscored by the fact that the Fund has maintained a payout ratio of 84.1 per cent for the nine months ended September 30, 2005, while increasing annualized per trust unit distributions to $1.698 versus $1.4025 as at September 30, 2004.”
The Fund’s outlook has not changed since its report for the six months ended June 30, 2005. The Fund expects revenue and cash flows to advance on the strength of contributions made by newly acquired businesses, complemented by organic growth. It also anticipates maintaining a payout ratio of less than 90 per cent for year ended December 31, 2005 and meeting its maintenance capital expenditure targets established for its Canadian and U.S. operations.
“Its business as usual for us, which in the fourth quarter means an ongoing commitment to business improvement in each of our 56 markets,” said Mr. Carrigan. “Going forward, new market and landfill development will be a continued focus of the Fund as it looks for ways to expand the business, increase customer density in strategic markets, and increase internalization. On balance, we remain optimistic about our opportunities and prospects for the future and our ability to meet our primary objective of increasing free cash flow available for distribution.”
Financial highlights for the three and nine months ended (in thousands of Canadian dollars, except per trust unit and participating preferred share amounts, unless otherwise stated):
– Revenues and EBITDA(A) increased 273.6% and 240.8%, respectively, over the comparative three months ended September 30, 2004, primarily on account of the Ridge landfill and IESI corporation (“IESI”) acquisitions completed in January 2005, and the Complete Disposal Services Ltd. (“CDS”) acquisition completed in November 2004.
– Revenues and EBITDA(A) increased 254.6% and 226.8%, respectively, over the comparative nine months ended September 30, 2004, primarily on account of the acquisitions identified above for the three months ended September 30, 2005.
– Excluding acquisitions, revenues and EBITDA(A) increased 15.2% and 13.4% and 12.3% and 12.0%, respectively, over the comparative three and nine months ended September 30, 2004. Volume and price growth were the primary reasons for the increases over the comparative three and nine months ended September 30, 2004.
– IESI’s revenues and U.S.-EBITDA(A), excluding the effect of foreign currency translation, for the three and nine months ended September 30, 2005 increased 9.3% and 7.0% and 8.3% and 6.7%, respectively, over the comparative three and nine months ended September 30, 2004. Acquisitions, new contracts, volume and price growth, partially offset by higher fuel and insurance costs, were the primary reasons for the increases over the comparative three and nine months ended September 30, 2004. IESI experienced 6.8% and 6.2% organic revenue growth for the three and nine months ended September 30, 2005, respectively.
– Free cash flow available for distribution(B) for the three and nine months ended September 30, 2005 totalled $32,951 and $90,310, and is $21,270 and $59,179 higher than the comparative three and nine month periods ended September 30, 2004, respectively. The principal reasons for the increase are acquisitions completed during the last twelve months which contributed to 240.8% and 226.8% increases in EBITDA(A), respectively, partially offset by higher interest expense attributable to higher debt outstanding, higher maintenance capital and landfill expenditures to sustain a larger business base, and withholding taxes on interest and dividends paid from IESI.
– Free cash flow available for distribution(B) per weighted average trust unit and participating preferred share for the three and nine months ended September 30, 2005 amounted to $0.50 and $1.44 and is $0.06 and $0.27 higher than the comparative three and nine month periods ended September 30, 2004, respectively.
– Aggregate distributions declared on weighted average trust units and participating preferred shares outstanding, including distributions on weighted average subscription receipts, totalled $27,101 and $75,976 for the three and nine months ended September 30, 2005, representing a payout ratio of 82.2% and 84.1% of free cash flow available for distribution(B), respectively. Distributions paid on weighted average subscription receipts outstanding amounted to $1,175 for the period from January 1 to 20, 2005 while offering
proceeds were held in escrow.
– Based on IESI’s results from operations for the three and nine months ended September 30, 2005, management is confident that IESI is on track to deliver the 12.0% accretion to free cash flow available for distribution 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.
– 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 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 southwestern Ontario operations into the Ridge landfill since January 4, 2005.
– Annual per trust unit distributions were increased 12% from $1.4025 to $1.5708 effective February 2005 in anticipation of IESI’s financial performance post-acquisition and increased an additional 8.1% to $1.698 per trust unit annually effective for the distribution payable on September 15, 2005 to unitholders of record on August 31, 2005. Distributions payable to holders of participating preferred shares increased by an amount equal to the increase in per trust unit distributions payable to unitholders of the Fund.
– IESI completed five “tuck-in” acquisitions, for aggregate consideration totalling $13,701, for the period January 21, 2005 to September 30, 2005 (the “IESI stub period”).
– On October 20, 2005, IESI entered into an agreement for variable rate demand solid waste disposal revenue bonds (“IRB”). The IRB’s are made available, to a maximum of U.S. $45,000, to fund a portion of the Seneca Meadows landfill construction, and equipment expenditures. The IRB’s bear interest at a discount to LIBOR. A portion of IESI’s U.S. $20,000 IRB’s drawings on October 20, 2005 have been used to repay its revolving credit facility.
– Holdings series A and B senior secured debentures received a reaffirmed rating of “BBB” low stable from Dominion Bond Rating Service.
Thomas J. Cowee, Chief Financial Officer
Anne MacMicken, Manager, Investor and Employee Relations