BFI Canada Income Fund
TSX : BFC.UN

BFI Canada Income Fund

August 07, 2008 17:00 ET

BFI Canada Income Fund Announces Results for the Three and Six Months Ended June 30, 2008

TORONTO, ONTARIO--(Marketwire - Aug. 7, 2008) - BFI Canada Income Fund (the "Fund")(TSX:BFC.UN) reported strong financial results for the three and six months ended June 30, 2008. All amounts are in thousands of Canadian dollars, unless otherwise stated.

Management Commentary

"Our commitment to obtaining attractive returns on our invested capital has resulted in another quarter of consistent performance," said Keith Carrigan, Vice Chairman and Chief Executive Officer. "Consolidated revenues in the second quarter and year to date grew 31.6% and 32.7% respectively, excluding the impact of foreign currency translation. Our second quarter and year to date organic revenue, which excludes acquisitions, fuel and environmental surcharges, and foreign currency translation, grew by 11.1% and 12.2% in Canada, and 6.2% and 6.2% in the U.S. EBITDA(A) increased 9.5% in the quarter and 11.5% year to date, resulting in an increase in free cash flow available for distribution of 5.2% in the quarter and 12.2% year to date."

Mr. Carrigan continued, "We continued to deliver revenue and EBITDA(A) growth in each of our three regions, driven by our strategies for organic improvement and expansion through acquisition. We are especially pleased with the results we achieved in our U.S. south and Canadian segments and we expect this strong performance to continue for the balance of the year. Our growth in the U.S. northeast segment was tempered by the effects of economic softness in the region and the high cost of diesel fuel which is more difficult to offset in this segment. In addition, we experienced a delay in landfill volumes at some sites during the quarter but expect to receive these volumes during the balance of this year. Overall, we remain confident that our market-focused approach will enable us to continue to grow through the current economic cycle, positioning us to achieve our annual performance objectives."

Financial Highlights for the Three and Six Months Ended June 30, 2008

- Total consolidated revenues increased 24.3% and 22.6% to $280.3 million and $524.6 million.

- Total consolidated revenue growth, excluding the impact of foreign currency translation, was 31.6% and 32.7%.

- Total EBITDA(A) increased 9.5% and 11.5% to $78.2 million and $145.1 million.

- Total EBITDA(A) growth, excluding the impact of foreign currency translation, was 15.1% and 19.6%.

- Free cash flow available for distribution(B) increased to $41.8 million and $81.8 million or 5.2% and 12.2%.

- The Fund's payout ratio was 74.7% and 76.4%.

- The Fund's payout ratio excluding the effects of the foreign currency hedge was 74.7% and 77.1%.

Other Highlights for the Three and Six Months Ended June 30, 2008

- Effective July 30, 2008, the Fund increased and amended its Canadian long-term debt facility.

- Effective August 6, 2008, the Fund extended and amended its U. S. long-term debt facility.

- Effective August 1, 2008, the Fund fixed the interest rate on U. S. $45,000 of variable rate demand solid waste disposal revenue bonds ("IRBs").

- For the six months ended, the Fund completed four acquisitions comprised of three "tuck-in's", one in each of the Canadian, U. S. south and U. S. northeast segments, and one new market entry in the U. S. northeast.

- DBRS re-affirmed their rating of BBB(low)on the Fund's Canadian senior secured series A and B debentures.

- Standard & Poor's re-affirmed their rating of BB on the Fund's U. S. term loan and revolving credit facility.

- The Trustees continue to actively work with management to review the Fund's corporate structure in response to changes to the taxation of income trusts and its related impact on the Fund's continuous improvement and growth strategy.



Summarized Financial Highlights

Three months Six months
ended ended
June 30, 2008 June 30, 2008
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Revenues June 30, 2007 $ 225,515 $ 427,815
Organic growth and acquisitions
(includes fuel and environmental
surcharges) 71,235 139,735
Foreign currency exchange impact (16,488) (42,941)
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Revenues June 30, 2008 $ 280,262 $ 524,609
% Revenue growth before foreign
currency exchange impact 31.6% 32.7%
Total revenue growth % 24.3% 22.6%

EBITDA(A) June 30, 2007 $ 71,434 $ 130,106
Organic growth and acquisitions 10,815 25,458
Foreign currency exchange impact (4,004) (10,461)
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EBITDA(A) June 30, 2008 $ 78,245 $ 145,103
% EBITDA(A) growth before foreign
currency exchange impact 15.1% 19.6%
Total EBITDA(A) growth % 9.5% 11.5%

Free cash flow available for
distribution(B) June 30, 2007 $ 39,767 $ 72,857
Organic growth and acquisitions 3,763 13,697
Foreign currency exchange impact (1,705) (4,789)
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Free cash flow available for
distribution(B) June 30, 2008 $ 41,825 $ 81,765
% Free cash flow available for
distribution(B) growth before foreign
currency exchange impact 9.5% 18.8%
Total free cash flow available for
distribution(B) growth % 5.2% 12.2%

Free cash flow available for
distribution(B) without hedge $ 41,825 $ 80,962
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Distributions and dividends declared $ 31,227 $ 62,454
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Payout ratio with foreign
currency hedge 74.7% 76.4%
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Payout ratio without foreign
currency hedge 74.7% 77.1%
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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.



Financial Highlights
(in thousands, except per weighted average trust unit and participating
preferred share ("PPS"))

Three months ended Six months ended
June 30 June 30
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2008 2007 2008 2007
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(unaudited) (unaudited) (unaudited) (unaudited)
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Operating results
Revenues $ 280,262 $ 225,515 $ 524,609 $ 427,815
Operating expenses 170,351 127,888 317,499 244,518
Selling, general and
administration
expenses ("SG&A") 31,666 26,193 62,007 53,191
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EBITDA(A) 78,245 71,434 145,103 130,106
Amortization 45,736 41,372 88,313 79,290
Interest on long-term debt 12,695 8,471 26,069 18,365
Financing costs 930 - 930 864
Net gain on sale of capital
assets (127) (1,026) (87) (1,234)
Net (gain) loss on financial
instruments (5,497) (3,061) 3,550 (1,206)
Net foreign exchange loss
(gain) - 13,483 (624) 15,104
Other expenses 26 - 57 5
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Income before income taxes
and non-controlling interest 24,482 12,195 26,895 18,918
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Income tax payable
(recovery) 6,522 5,161 (1,539) (631)
Non-controlling interest 2,911 1,174 4,609 3,324
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Net income $ 15,049 $ 5,860 $ 23,825 $ 16,225
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Net income per weighted
average trust unit,
basic & diluted $ 0.26 $ 0.10 $ 0.41 $ 0.29

Trust units and PPSs
outstanding
Weighted average number of
trust units outstanding 57,568 57,350 57,568 55,557
Weighted average number of
PPSs outstanding 11,138 11,160 11,138 11,328
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Weighted average number of
trust units and
PPSs outstanding 68,706 68,510 68,706 66,885
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Aggregate number of trust
units and PPSs outstanding 68,706 68,706 68,706 65,141
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Maintenance and growth
expenditures
Maintenance expenditures $ 18,696 $ 18,056 $ 29,542 $ 30,411
Growth capital and landfill
expenditures
("growth expenditures") 15,857 23,332 28,287 33,516
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Total maintenance and growth
expenditures $ 34,553 $ 41,388 $ 57,829 $ 63,927
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Operating and free cash flow
Cash generated from
operating activities $ 55,001 $ 53,806 $ 97,935 $ 82,261
Free cash flow available for
distribution(B) $ 41,825 $ 39,767 $ 81,765 $ 72,857
Free cash flow available for
distribution(B) per weighted
average trust unit and PPS $ 0.61 $ 0.58 $ 1.19 $ 1.09

Distributions
Distributions declared,
trust units $ 26,165 $ 26,016 $ 52,329 $ 50,569
Dividends declared, PPSs 5,062 5,211 10,125 10,303
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Total distributions and
dividends declared $ 31,227 $ 31,227 $ 62,454 $ 60,872
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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. 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:



2008 2007
------------------------------- --------------------------------
Consolidated Consolidated Consolidated Consolidated
Balance Statement of Balance Statement of
Sheet Operations and Sheet Operations and
Comprehensive Comprehensive
Income (Loss) Income (Loss)
------------------------------- --------------------------------
Cumulative Cumulative
Current Average average Current Average average
------------------------------- --------------------------------
December 31 $ 0.988 $ 0.982 $ 1.074
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
------------------------------- --------------------------------


Readers are reminded that a significant portion of the Fund's financial results originate in the U.S. The impact of foreign currency exchange on the Fund's consolidated results is included in the Fund's MD&A for the three and six months ended June 30, 2008.



Operating Highlights

Three months ended June 30 Six months ended June 30
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2008 2007 Change 2008 2007 Change
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Revenues $ 280,262 $ 225,515 $ 54,747 $ 524,609 $ 427,815 $ 96,794
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Canada $ 100,754 $ 86,019 $ 14,735 $ 186,522 $ 159,374 $ 27,148
U.S. south $ 88,234 $ 80,398 $ 7,836 $ 168,050 $ 154,933 $ 13,117
U.S.
northeast $ 91,274 $ 59,098 $ 32,176 $ 170,037 $ 113,508 $ 56,529

Operating
expenses $ 170,351 $ 127,888 $ 42,463 $ 317,499 $ 244,518 $ 72,981
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Canada $ 54,740 $ 45,054 $ 9,686 $ 101,284 $ 82,721 $ 18,563
U.S. south $ 56,337 $ 52,226 $ 4,111 $ 107,739 $ 100,781 $ 6,958
U.S.
northeast $ 59,274 $ 30,608 $ 28,666 $ 108,476 $ 61,016 $ 47,460

SG&A $ 31,666 $ 26,193 $ 5,473 $ 62,007 $ 53,191 $ 8,816
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Canada $ 11,428 $ 9,308 $ 2,120 $ 22,498 $ 19,790 $ 2,708
U.S. south $ 11,008 $ 10,394 $ 614 $ 21,415 $ 20,473 $ 942
U.S.
northeast $ 9,230 $ 6,491 $ 2,739 $ 18,094 $ 12,928 $ 5,166

EBITDA(A) $ 78,245 $ 71,434 $ 6,811 $ 145,103 $ 130,106 $ 14,997
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Canada $ 34,586 $ 31,657 $ 2,929 $ 62,740 $ 56,863 $ 5,877
U.S. south $ 20,889 $ 17,778 $ 3,111 $ 38,896 $ 33,679 $ 5,217
U.S.
northeast $ 22,770 $ 21,999 $ 771 $ 43,467 $ 39,564 $ 3,903


The discussions to follow are in addition to the impact of foreign currency exchange fluctuations which are detailed in the Fund's MD&A for the three and six months ended June 30, 2008.

Revenues - Three and six months ended June 30

The increase in consolidated revenues for the three and six month periods ended is due in part to organic Canadian and U.S. segment growth. Organic growth excludes the impact of fuel and environmental surcharges, acquisitions, and foreign currency translation. Acquisitions and fuel and environmental surcharges were the primary contributors to the balance of the change. In addition, the Fund's U.S. northeast segment continues to experience the impact of an overall economic slowdown, which in combination with increasing fuel costs, is affecting both volumes and pricing.

Operating expenses - Three and six months ended June 30

Higher total disposal and labour costs are attributable to higher internally collected waste volumes and higher costs to service new and existing customers, contracts, and acquisitions for the three and six months ended. The balance of the change for both periods is due principally to higher vehicle operating costs, including but not limited to fuel and lubricants. The impact of increasing fuel prices is most pronounced for the Seneca Meadows landfill. Fuel and lubricants consumed to operate the landfill, together with fuel price increases charged by third party carriers of waste to the landfill, are being absorbed by the Fund, which is a direct result of current market operating conditions.

Selling, general and administration expenses - Three and six months ended June 30

Higher salary expense is due principally to acquisition and organic growth and is the primary reason for the comparative increases. Higher facility, office, and travel expenditures, as a result of acquisition and organic growth, coupled with higher professional fees, are the primary reasons for the balance of the changes.

Free Cash Flow Available for Distribution(B)

Free cash flow available for distribution(B) totalled $41,825 and $81,765 for the three and six months ended June 30, 2008 versus $39,767 and $72,857 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, 2008 amounted to $0.61 and $1.19 and is $0.03 and $0.10 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
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2008 2007 Change 2008 2007 Change
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Cash
generated
from
operating
activities
(per
statement
of cash
flows) $ 55,001 $53,806 $ 1,195 $ 97,935 $ 82,261 $ 15,674
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Operating
Write-off of
deferred
costs (191) (33) (158) (919) (68) (851)
Changes in
non-cash
working
capital items 7,145 6,074 1,071 17,724 24,538 (6,814)
Net change in
landfill
closure
and post-
closure costs (2,420) (2,614) 194 (4,654) (5,169) 515
Maintenance
expenditures (18,696) (18,056) (640) (29,542) (30,411) 869

Financing
Amortization
of gain on
settlement of
bond forward
contracts 56 56 - 112 112 -
Financing costs 930 - 930 930 864 66
Effect of
foreign
currency
hedges to
support
Canadian
dollar
distributions - 1,371 (1,371) 803 1,930 (1,127)
Realized
foreign
exchange gain - (837) 837 (624) (1,200) 576
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Free cash flow
available for
distribution
(B) $ 41,825 $ 39,767 $ 2,058 $ 81,765 $ 72,857 $ 8,908
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Free Cash Flow Available for Distribution(B) - Operations Approach

Three months ended June 30 Six months ended June 30
2008 2007 Change 2008 2007 Change
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EBITDA(A) $ 78,245 $ 71,434 $ 6,811 $ 145,103 $ 130,106 $ 14,997
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Amortization of
capitalized
landfill asset
closure and
post-closure
costs, including
revisions to
estimated cash
flows not
recorded
to operating
expense (2,017) (2,623) 606 (3,715) (4,903) 1,188

Interest
on long-term
debt (12,695) (8,471) (4,224) (26,069) (18,365) (7,704)

Management
transaction
bonuses
(other
expenses) (26) - (26) (57) (5) (52)

Current
income
taxes (3,042) (3,944) 902 (4,870) (5,607) 737

Maintenance
expenditures (18,696) (18,056) (640) (29,542) (30,411) 869

Effect of
foreign
currency
hedges to
support
Canadian
dollar
distributions - 1,371 (1,371) 803 1,930 (1,127)

Amortization
of gain
on settlement
of bond
forward
contracts 56 56 - 112 112 -
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Free cash
flow
available
for
distribution
(B) $ 41,825 $ 39,767 $ 2,058 $ 81,765 $ 72,857 $ 8,908
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Maintenance and Growth Expenditures

Three months ended June 30 Six months ended June 30
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2008 2007 Change 2008 2007 Change
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Total $ 34,553 $ 41,388 $ (6,835) $ 57,829 $ 63,927 $ (6,098)
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Maintenance:
Canada $ 6,367 $ 4,940 $ 1,427 $ 9,731 $ 10,036 $ (305)
U.S. 12,329 13,116 (787) 19,811 20,375 (564)
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Total
maintenance $ 18,696 $ 18,056 $ 640 $ 29,542 $ 30,411 $ (869)
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Growth:
Canada $ 4,988 $ 8,459 $ (3,471) $ 10,805 $ 11,738 $ (933)
U.S. 10,869 14,873 (4,004) 17,482 21,778 (4,296)
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Total growth $ 15,857 $ 23,332 $ (7,475) $ 28,287 $ 33,516 $ (5,229)
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Maintenance and growth expenditures include amounts accrued for capital and landfill assets received but for which payment remains outstanding.

Maintenance Expenditures

Three and six months ended June 30, 2008

For the three months ended, the Canadian segment increase is largely attributable to the timing of vehicle purchases. The timing of vehicle purchases is the primary cause of the Canadian segment decline for the six months ended, partially offset by investments in computer equipment. The U.S. segment declines are due in large part to foreign currency exchange fluctuations. The comparative strength of the Canadian dollar, relative to the U.S. dollar, has resulted in a decline in U.S. segment maintenance expenditures for the three and six months ended, respectively. These declines were partially offset by higher maintenance expenditures to support a larger business base, which is the result of organic and acquisition growth, and increasing costs to purchase maintenance capital.

Growth Expenditures

Three and six months ended June 30, 2008

Canadian segment residential contract wins which commenced in the three and six months ended in 2007 exceeded those that commenced in 2008 resulting in a decrease in comparative growth expenditures. Foreign currency fluctuations, the timing of landfill expenditures, and a decline in growth expenditures related to municipal contract wins in prior periods, are the primary contributors to the U.S. segment decline in growth expenditures.

Distributions

The following table summarizes various details of the Fund's 2008 and 2007 distributions:



Six months ended June 30
---------------------------------------------------------------------------
Monthly Annual Total Percentage
distribution distribution trust unit increase in
per trust unit per trust distributions total
and PPS unit and PPS and PPS distrib-
dividend dividend dividends utions
declared and PPS
Period dividends
---------------------------------------------------------------------------

2008 January-June $ 0.1515 $ 1.8180 $ 62,454 2.6%
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2007 January-June $ 0.1515 $ 1.8180 $ 60,872
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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 on the
Facility drawn Consolidated Current
Available at June 30, Balance available
lending 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 $ 150,000 $ 105,500 $ 24,964 $ 19,536

U.S. long-term debt
facilities - stated in
U.S. dollars
Term loan $ 195,000 $ 195,000 $ - $ -
Revolving credit
facility $ 575,000 $ 380,500 $ 170,076 $ 24,424
IRBs $ 104,000 $ 104,000 $ - $ -


Effective July 30, 2008, the Fund entered into a Third Amending Agreement to its Fourth Amended and Restated Credit Agreement. The Third Amending Agreement increases the Canadian revolving credit facility commitment from $150,000 to $305,000 and decreases 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.

Effective August 6, 2008, the Fund 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.

Effective August 1, 2008, the Fund 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 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 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 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 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 management, the Fund's Trustees, and its lenders, 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 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 proceeds from the sale were either reinvested in other capital or landfill 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 account of certain acquisitions 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.

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 Fund has adopted a measurement called "free cash flow available for distribution" to supplement net income (loss) 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 unitholders and non-controlling interest. PPS holdings are presented as non-controlling interest in the consolidated financial statements; however, management of the Fund has elected to include the shareholdings of the non-controlling interest in the calculation of free cash flow available for distribution as PPSs are entitled to dividends that are economically equivalent to the distributions received by unitholders and PPSs 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.

(C) Excess free cash flow available for distribution represents the result of free cash flow available for distribution(B) less distributions and dividends declared.

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, 2007. 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 ("waste") collection and disposal services to commercial, industrial, municipal and residential customers in five Canadian provinces and ten states in the United States ("U.S."). The Fund provides service to over 1.8 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 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 Fund'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, and Maryland. This segment provides service to 39 U.S. markets and operates 17 landfills, 31 transfer collection stations, 10 MRFs, and one transportation operation. 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, 2008 at 8:30 am (EDT) to discuss results for the three and six months ended June 30, 2008. To access the call, participants should dial 416-644-3428 or 1-800-588-4490 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 2008. To access the rebroadcast, dial 416-640-1917 or 1-877-289-8525 and quote the reservation number 21278080#.



BFI CANADA INCOME FUND
Consolidated Balance Sheets
June 30, 2008 (unaudited) and December 31, 2007 (in thousands of dollars)
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June 30, December 31,
2008 2007
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ASSETS

CURRENT
Cash and cash equivalents $ 14,242 $ 13,359
Accounts receivable 128,296 115,851
Other receivables 297 457
Income taxes recoverable 2,629 -
Prepaid expenses 18,522 15,001
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163,986 144,668

OTHER RECEIVABLES 620 761

FUNDED LANDFILL POST-CLOSURE COSTS 6,751 5,976

INTANGIBLES 138,532 144,686

GOODWILL 643,584 616,534

DEFERRED COSTS 8,300 7,306

CAPITAL ASSETS 431,623 404,900

LANDFILL ASSETS 648,535 644,711

OTHER ASSETS - 1,670

FUTURE INCOME TAX ASSETS 1,180 -
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$ 2,043,111 $ 1,971,212
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LIABILITIES

CURRENT
Accounts payable $ 58,805 $ 66,815
Accrued charges 63,335 75,355
Distribution and dividend payable 10,409 10,409
Income taxes payable 905 2,515
Deferred revenues 12,722 12,018
Current portion of long-term debt 47,000 -
Landfill closure and post-closure costs 2,330 2,900
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195,506 170,012

LONG-TERM DEBT 855,639 801,973

LANDFILL CLOSURE AND POST-CLOSURE COSTS 62,796 55,943

OTHER LIABILITIES 6,918 5,056

FUTURE INCOME TAX LIABILITIES 55,674 57,668
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1,176,533 1,090,652
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NON-CONTROLLING INTEREST 245,831 251,371

UNITHOLDERS' EQUITY 620,747 629,189
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$ 2,043,111 $ 1,971,212
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BFI CANADA INCOME FUND
Consolidated Statements of Operations and Comprehensive Income (Loss)
For the periods ended June 30, 2008 and June 30, 2007 (unaudited - in
thousands of dollars, except net income per trust unit amounts)
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Three months ended Six months ended
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2008 2007 2008 2007
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REVENUES $ 280,262 $ 225,515 $ 524,609 $ 427,815

EXPENSES

OPERATING 170,351 127,888 317,499 244,518

SELLING, GENERAL AND
ADMINISTRATION 31,666 26,193 62,007 53,191
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INCOME BEFORE THE FOLLOWING 78,245 71,434 145,103 130,106

AMORTIZATION 45,736 41,372 88,313 79,290

INTEREST ON LONG-TERM DEBT 12,695 8,471 26,069 18,365

FINANCING COSTS 930 - 930 864

NET GAIN ON SALE OF CAPITAL
ASSETS (127) (1,026) (87) (1,234)

NET (GAIN) LOSS ON FINANCIAL
INSTRUMENTS (5,497) (3,061) 3,550 (1,206)

NET FOREIGN EXCHANGE LOSS (GAIN) - 13,483 (624) 15,104

OTHER EXPENSES 26 - 57 5
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INCOME BEFORE INCOME TAXES AND
NON-CONTROLLING INTEREST 24,482 12,195 26,895 18,918
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INCOME TAX EXPENSE (RECOVERY)
Current 3,042 3,944 4,870 5,607
Future 3,480 1,217 (6,409) (6,238)
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6,522 5,161 (1,539) (631)
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INCOME BEFORE NON-CONTROLLING
INTEREST 17,960 7,034 28,434 19,549

NON-CONTROLLING INTEREST 2,911 1,174 4,609 3,324
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NET INCOME 15,049 5,860 23,825 16,225

OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation
adjustment (5,931) (45,435) 20,041 (50,493)
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COMPREHENSIVE INCOME (LOSS) $ 9,118 $ (39,575) $ 43,866 $ (34,268)
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Net income per weighted
average trust unit, basic
& diluted $ 0.26 $ 0.10 $ 0.41 $ 0.29

Weighted average number of
trust units outstanding
(thousands), basic 57,568 57,350 57,568 55,557

Weighted average number of
trust units outstanding
(thousands), diluted 68,706 68,510 68,706 66,885




BFI CANADA INCOME FUND
Consolidated Statements of Cash Flows
For the periods ended June 30, 2008 and June 30, 2007 (unaudited - in
thousands of dollars)
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Three months ended Six months ended
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2008 2007 2008 2007
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NET INFLOW (OUTFLOW) OF CASH
RELATED TO THE FOLLOWING
ACTIVITIES

OPERATING
Net income $ 15,049 $ 5,860 $ 23,825 $ 16,225
Items not affecting cash
Write-off of deferred costs 191 33 919 68
Accretion of landfill closure
and post-closure costs 785 759 1,566 1,561
Amortization of intangibles 8,191 5,138 16,226 10,334
Amortization of capital assets 19,267 15,702 38,564 31,441
Amortization of landfill assets 18,278 20,532 33,523 37,515
Net gain on sale of capital
assets (127) (1,026) (87) (1,234)
Net (gain) loss on financial
instruments (5,497) (3,061) 3,550 (1,206)
Net unrealized foreign
exchange loss - 14,320 - 16,304
Future income taxes 3,480 1,217 (6,409) (6,238)
Non-controlling interest 2,911 1,174 4,609 3,324
Landfill closure and
post-closure expenditures (382) (768) (627) (1,295)
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62,146 59,880 115,659 106,799
Changes in non-cash working
capital items (7,145) (6,074) (17,724) (24,538)
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Cash generated from operating
activities 55,001 53,806 97,935 82,261
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INVESTING
Acquisitions (35,816) (33,148) (54,869) (37,453)
Investment in other receivables - - - (400)
Proceeds from other receivables 232 1,502 301 1,856
Funded landfill post-closure
costs (200) (294) (590) (642)
Purchase of capital assets (24,052) (23,551) (37,589) (40,397)
Purchase of landfill assets (13,332) (16,073) (21,204) (25,947)
Proceeds from the sale of
capital assets 462 1,316 545 1,578
Investment in deferred costs (686) (585) (1,744) (1,565)
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Cash utilized in investing
activities (73,392) (70,833) (115,150) (102,970)
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FINANCING
Proceeds from long-term debt 79,983 65,404 145,200 145,756
Repayment of long-term debt (33,754) (108,017) (64,371) (149,251)
Trust units issued, net of
issue costs (3) 87,589 (3) 87,579
Distributions and dividends
paid to trust unitholders and
participating preferred
shareholders (31,227) (30,686) (62,454) (60,369)
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Cash generated from financing
activities 14,999 14,290 18,372 23,715
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Effect of foreign exchange
changes on foreign cash and
cash equivalents 45 590 (274) 728
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NET CASH (OUTFLOW) INFLOW (3,347) (2,737) 883 3,006

CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD OR YEAR 17,589 15,156 13,359 9,275
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CASH AND CASH EQUIVALENTS, END
OF PERIOD $ 14,242 $ 12,419 $ 14,242 $ 12,281
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BFI CANADA INCOME FUND
Consolidated Statements of Unitholders' Equity, Deficit and Accumulated
Other Comprehensive Loss
For the periods ended June 30, 2008 and June 30, 2007 (unaudited - in
thousands of dollars)

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Three months ended Six months ended
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2008 2007 2008 2007
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CONTRIBUTED EQUITY
Trust units, beginning
of period or year $ 1,006,751 $ 916,828 $ 1,006,751 $ 908,221
Issuance of trust units,
net of issue costs
and related tax effect,
during the period (3) 89,441 (3) 89,431
Trust units issued on
exchange of PPSs, during
the period 24 - 24 8,617
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Trust units, end of
period 1,006,772 1,006,269 1,006,772 1,006,269
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Class A units, beginning
of period or year - - - -

Class A units issued,
during the period - - - -
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Class A units, end of
period - - - -
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Treasury units, beginning
of period or year - - - -
Trust units acquired by
the U.S. LTIP, during the
period - (1,698) (2,004) (1,698)
Deferred compensation
obligation, during the
period - 1,698 2,004 1,698
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Treasury units, end of
period - - - -
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TOTAL CONTRIBUTED EQUITY 1,006,772 1,006,269 1,006,772 1,006,269
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DEFICIT
Accumulated net income,
beginning of period or
year 123,840 93,742 115,064 83,377
Accumulated distributions,
beginning of period or
year (390,043) (285,544) (363,879) (260,991)
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Deficit, beginning of
period or year 266,203 (191,802) 248,815 (177,614)
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Net income, during the
period 15,049 5,860 23,825 16,225
Distributions declared,
during the period (26,165) (26,016) (52,329) (50,569)

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Accumulated net income,
end of period 138,889 99,602 138,889 99,602
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Accumulated distributions,
end of period (416,208) (311,560) (416,208) (311,560)
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DEFICIT, END OF PERIOD (277,319) (211,958) (277,319) (211,958)
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ACCUMULATED OTHER
COMPREHENSIVE LOSS
Accumulated other
comprehensive
loss, beginning
of period or year (102,775) (37,946) (128,747) (32,888)
Foreign currency
translation adjustment,
during the period (5,931) (45,435) 20,041 (50,493)
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ACCUMULATED OTHER
COMPREHENSIVE
LOSS, END OF PERIOD (108,706) (83,381) (108,706) (83,381)
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DEFICIT AND ACCUMULATED
OTHER COMPREHENSIVE LOSS,
END OF PERIOD (386,025) (295,339) (386,025) (295,339)
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UNITHOLDERS' EQUITY $ 620,747 $ 710,930 $ 620,747 $ 710,930
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