BFI Canada Posts Results for the Second Quarter - Will Increase Distribution by 7%

Date: August 8, 2006

Source: BFI Canada Income Fund

BFI Canada Income Fund (TSX: BFC.UN) today reported strong continuing financial results for the three and six months ended June 30, 2006. The Fund also announced a 7.1% increase in distributions, effective with the September 15th, 2006 payment. The Fund's 2006 financial results include a full year to date contribution from IESI Corporation ("IESI") which was acquired by the Fund on January 21, 2005. Accordingly, the comparable six month period ended June 30, 2005 excludes IESI's financial results for the period from January 1 to January 20, 2005.

Management Commentary

"The Fund's financial performance reflects strong evidence that our market-focused strategies are sound and working well," said Keith Carrigan, Vice Chairman and Chief Executive Officer. "The result is strong organic revenue growth improvements in Canada and the U.S. of 10.0% and 11.2% for the second quarter and 12.8% and 15.5% year to date, respectively. Our second quarter and year to date Canadian and U.S. EBITDA(A) grew by 11.5% and 4.6% and 14.0% and 7.9%, respectively. My fellow trustees and I have decided to share this positive performance with unitholders in the form of an increase in distributions. Inclusive of the increased distribution and excluding the foreign currency hedge benefit that we currently enjoy, I am confident that our estimated 2006 annual payout ratio will be below 90.0%, based on current foreign currency exchange rates. I believe the time is right to increase our distributions given current and future business conditions, which clearly supports a continued positive outlook and has set the stage for us to build additional value through our continuous improvement strategies."

Financial Highlights

  • Revenues for three and six months ended June 30, 2006 increased, when compared to a year ago, by 6.0% to $192.7 million, and 17.3% to $371.5 million, respectively. Excluding the impact of foreign currency exchange fluctuations and the impact of consolidating IESI's financial results for an additional 20 days in the six months ended June 30, 2006, consolidated revenues increased 13.2% and 16.7% for the three and six months ended June 30, 2006, respectively.

  • Free cash flow available for distribution increased to $33.3 million in the second quarter and grew 11.4% to $63.9 million on a six month basis compared to a year ago.

  • The Fund's payout ratio of 83.4% in the second quarter and 87.0% in the first half of 2006 is in line with management's annual payout ratio target of sub 90.0%.

Distribution Increase

Based on the Fund's performance and consideration of the current foreign currency exchange rates, trustees of the Fund have approved a 7.1% increase to future distributions from an annual rate of $1.698 per trust unit to $1.818 per trust unit effective for the distribution payable on September 15, 2006 to unitholders of record on August 31, 2006. Future distributions payable to holders of participating preferred shares will increase by an amount equal to the future increase in per unit distributions payable to trust unitholders of the Fund.

Other Highlights for the Three and Six Months Ended June 30, 2006
(in thousands of Canadian dollars, unless otherwise stated)

  • The Fund completed three "tuck-in" acquisitions for aggregate cash consideration, including payments in respect of contingent consideration, totalling approximately $1,300 and $3,700 for the three and six months ended June 30, 2006, respectively.

  • IESI drew U.S. $17,000 of variable rate solid waste disposal revenue bonds ("IRB"). A portion of the IRB proceeds was used to repay IESI's revolving credit facility with the balance used to finance construction activities at the Seneca Meadows landfill.
    o Effective February 10, 2006, BFI Canada Holdings Inc. ("Holdings") entered into a Fourth Amended and Restated Credit Agreement. The amended and restated credit agreement increases the total available credit under the facility, subject to lender consent, from $80,000 to $120,000 and matures, subject to one year extensions, on June 30, 2010. Borrowing rates under the Fourth Amended and Restated Credit Agreement are more favourable than the predecessor credit agreement.

  • IESI amended its Amended and Restated Revolving Credit and Term Loan Agreement, effective March 10, 2006. The amendments increased the total available credit under the facility, subject to lender consent, from U.S. $500,000 to U.S. $550,000 and borrowing rates under the amended credit agreement are more favorable than the predecessor credit agreement.

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