BFI Canada Income Fund
TSX : BFC.UN

BFI Canada Income Fund

August 04, 2005 10:34 ET

BFI Canada Income Fund Announces Second Quarter Results And An 8.1% Increase In Future Distributions

TORONTO, ONTARIO--(CCNMatthews - Aug. 4, 2005) - BFI Canada Income Fund (the "Fund") (TSX:BFC.UN) today announced its financial results for the three and six months ended June 30, 2005 and an 8.1% increase in future monthly distributions.

Financial highlights for the three and six months ended

(in thousands of Canadian dollars, unless otherwise stated)

- Based on IESI's results from operations for the three and six months ended June 30, 2005, management is confident that IESI is on track to deliver the 12.0% 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 266.0% and 250.5%, respectively, over the comparative three months ended June 30, 2004, primarily on account of the Ridge landfill and IESI acquisitions completed in January 2005, and the Complete Disposal Services Ltd. ("CDS") acquisition completed in November 2004.

- Revenues and EBITDA(A) increased 244.2% and 220.2%, respectively, over the comparative six months ended June 30, 2004, primarily on account of the acquisitions identified above for the three months ended June 30, 2005, coupled with the Twin Oaks Environmental Ltd. ("Twin Oaks") acquisition completed in April 2004.

- Excluding acquisitions, revenues and EBITDA(A) increased 7.6% and 11.1% and 8.2% and 10.5%, respectively, over the comparative three and six months ended June 30, 2004. Volume and price growth were the primary reasons for the increases over the comparative three and six months ended June 30, 2004.

- IESI's revenues and U.S.-EBITDA(A), excluding the effect of foreign currency translation, for the three and six months ended June 30, 2005 increased 8.3% and 7.1% and 7.7% and 6.1%, respectively, over the comparative three and six months ended June 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 six months ended June 30, 2004. IESI experienced 7.5% and 5.7% organic revenue growth for the three and six months ended June 30, 2005, respectively.

- Free cash flow available for distribution(B) for the three and six months ended June 30, 2005 totalled $33,176 and $57,359, and is $24,639 and $37,908 higher than the comparative three and six month periods ended June 30, 2004, respectively. The principal reasons for the increase are acquisitions completed during the last twelve months which contributed to a 250.5% and 220.2% increases in EBITDA(A), respectively, partially offset by higher interest expense attributable to higher debt outstanding, higher maintenance capital expenditures to sustain a larger business base, and 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 and six months ended June 30, 2005 amounted to $0.51 and $0.94 and is $0.19 and $0.21 higher than the comparative three and six month periods ended June 30, 2004, respectively.

- Aggregate distributions declared on weighted average trust units and participating preferred shares outstanding, but excluding distributions on weighted average subscription receipts, totalled $25,702 and $47,700 for the three and six months ended June 30, 2005, representing a payout ratio of 77.5% and 83.2% of free cash flow available for distribution(B), respectively. Including distributions paid on weighted average subscription receipts outstanding, amounting to $1,175 for the period from January 1 to 20, 2005 while offering proceeds were held in escrow, aggregate distributions declared totalled $25,702 and $48,875 representing a payout ratio of 77.5% and 85.2 % for the three and six months ended June 30, 2005, respectively.

Other highlights

- The Fund completed the acquisitions 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.

- IESI completed three "tuck-in" acquisitions for the period January 21, 2005 to June 30, 2005 (the "IESI stub period").

- Annual per unit distributions were increased 12.0% from $1.4025 to $1.5708 effective February 2005 in anticipation of IESI's financial performance post-acquisition by the Fund consistent with management's expectations.

- Based on the strong year-to-date performance by the Fund, and an expected continuation of this performance, the trustees of the Fund have approved an 8.1% increase to future distributions from an annual rate of $1.5708 per trust unit to $1.698 per trust unit annually effective for the distribution payable on September 15, 2005 to unitholders of record on August 31, 2005. Accordingly, 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.

Management Commentary

"Financial and operating results were strong for the first and second quarters of 2005," said Keith Carrigan, President and Chief Executive Officer of BFI Canada. "By sharing best practices, working collaboratively with dedicated management teams in our newly acquired businesses, and applying our market-focused strategies, we've been able to achieve solid growth in our business segments. While contributions made by IESI, the Ridge landfill, and CDS have had a significant impact on our comparative financial and operating results year to date, organic growth in the Fund's base business have also contributed to our period over period improvements. Our organic improvement is the result of hard work and disciplined performance by our employees who continue to drive results and set new benchmarks. In total, our strong performance and generation of free cash flow available for distribution(B) supports the trustees' decision to increase our future distributions to trust unit holders, and accordingly participating preferred shareholders, 8.1% annually resulting in a new monthly distribution rate of $0.1415 per trust unit and participating preferred share."

Mr. Carrigan said he was particularly pleased with the speed with which "newly acquired businesses have contributed to the overall results of the Fund. Strong results posted by the Fund is a positive indication of how well our business model works across our expanded platform. And even though our geography has expanded, there is unity of purpose across our platforms and this is something we intend to sustain and build on. In total, the exchange of best business practices is delivering exactly the kind of incremental benefits we had envisioned."

Looking Forward

The Fund's outlook has not changed since its report for the three months ended March 31, 2005. 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 maintaining a payout ratio below 90% for 2005.

"Our operating agenda for the second half of the year is aggressive and focused on sustained improvement," said Mr. Carrigan. "Beyond our primary financial objective of growing free cash flow, we're also committed to our traditional goals of improving return on capital and achieving operational efficiencies. We believe that by continuing to pay attention to the basics of our business, we will realize the full benefits of our position as one of North America's largest non-hazardous solid waste management companies."



Three months ended Six months ended
June 30 June 30
(in thousands, except per ------------------------------------------
weighted average trust ------------------------------------------
unit and participating 2005 2004(1) 2005 2004(1)
preferred share and ------------------------------------------
subscription receipt (un- (un- (un- (un-
amounts) audited) audited) audited) audited)

Revenues $ 180,775 $ 49,386 $ 315,193 $ 91,561
Operating expenses 99,376 25,306 175,487 46,758
Selling, general and
administration expenses 21,881 7,026 40,113 13,615
---------------------------------------------------------------------
Income before the following 59,518 17,054 99,593 31,188
Amortization 39,984 11,564 69,992 22,130
Interest on long-term debt 7,031 1,280 12,306 2,456
Financing costs - 748 36,710 748
Net gain on sale of
capital assets - - - (24)
Loss (gain) on derivative
financial instruments 3,580 (1,550) (1,113) (1,550)
Foreign exchange (gain)
loss (2,351) - 974 -
Other expenses 537 - 1,611 -
---------------------------------------------------------------------
Income (loss) before
income taxes and
non-controlling interest 10,737 5,012 (20,887) 7,428
Income tax expense (recovery) 99 (796) (19,852) (1,742)
Non-controlling interest 2,882 - (329) -
---------------------------------------------------------------------
Net income (loss) $ 7,756 $ 5,808 $ (706) $ 9,170
---------------------------------------------------------------------
---------------------------------------------------------------------

Net income (loss) per
weighted average trust
unit, basic & diluted $ 0.16 $ 0.22 $ (0.02) $ 0.35

Weighted average number
of trust units outstanding 47,675 26,500 44,425 26,500
Weighted average number
of participating preferred
shares outstanding 17,716 - 16,668 -
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Weighted average number
of trust units and
participating preferred
shares outstanding 65,391 26,500 61,093 26,500
---------------------------------------------------------------------
Aggregate number of trust
units and participating
preferred shares
outstanding 65,391 26,500 65,391 26,500
---------------------------------------------------------------------
---------------------------------------------------------------------

Maintenance capital and
landfill expenditures $ 15,835 $ 6,260 $ 24,135 $ 7,365
Growth capital and
landfill expenditures 17,162 2,276 25,825 3,627
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Total capital and
landfill expenditures $ 32,997 $ 8,536 $ 49,960 $ 10,992
---------------------------------------------------------------------
---------------------------------------------------------------------

Free cash flow available
for distribution(B) $ 33,176 $ 8,537 $ 57,359 $ 19,450

Free cash flow available
for distribution(B) per
weighted average trust
unit and participating
preferred share $ 0.51 $ 0.32 $ 0.94 $ 0.73

Aggregate distributions
declared on weighted
average trust units $ 18,739 $ 8,446 $ 34,363 $ 16,892
Aggregate distributions
declared on weighted
average subscription
receipts - - 1,175 -
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Aggregate distributions
declared on weighted
average trust units and
subscription receipts 18,739 8,446 35,538 16,892
---------------------------------------------------------------------
Distributions
attributable to
participating preferred
shareholders 6,963 - 13,337 -
---------------------------------------------------------------------
Aggregate distributions
declared $ 25,702 $ 8,446 $ 48,875 $ 16,892
---------------------------------------------------------------------
---------------------------------------------------------------------

Aggregate distributions
declared per weighted
average trust units and
participating preferred
shares $ 0.39 $ 0.32 $ 0.78 $ 0.64

Aggregate distributions
declared per weighted
average trust units,
participating preferred
shares, and subscription
receipts $ 0.39 $ 0.32 $ 0.80 $ 0.64


Notes:

(1) The Fund acquired IESI effective January 21, 2005. Accordingly, the operating results for the three and six months ended June 30, 2004 do not include the results of operations for IESI.

Operating highlights

(all amounts are in thousands of Canadian dollars, except per trust unit and participating preferred share amounts)

Revenues of $180,755 were $131,389 or 266.0% higher than the comparative three months ended June 30, 2004. The Canadian segment contributed approximately $14,700 to the period-over-period increase, including approximately $11,000 from the CDS and Ridge landfill acquisitions completed during the year ended December 31, 2004 and January 2005, respectively. The balance of the Canadian segment increase relates to price increases and organic growth, including higher volumes of accepted waste entering BFI Canada-owned landfills. The acquisition of IESI added an additional approximately $116,700 for the three months ended June 30, 2005 comprised of contributions from the U.S. south and U.S. northeast segments totalling approximately $62,800 and $53,900, respectively.

Revenues of $315,193 were $223,632 or 244.2% higher than the comparative six months ended June 30, 2004. The Canadian segment contributed approximately $26,800 to the period-over-period increase, including approximately $19,400 from the Twin Oaks acquisition completed in April 2004, and the CDS and Ridge landfill acquisitions completed during the year ended December 31, 2004 and January 2005, respectively. The balance of the Canadian segment increase relates to price increases and organic growth, including higher volumes of accepted waste entering BFI Canada-owned landfills. The acquisition of IESI added an additional approximately $196,800 for the IESI stub period comprised of contributions from the U.S. south and U.S. northeast segments totalling approximately $107,900 and $88,900, respectively.

Operating expenses of $99,376 were $74,070 higher than the comparative three months ended June 30, 2004. Strategic acquisitions in the Canadian segment, identified above, contributed approximately $5,000 to the total Canadian segment increase of approximately $6,200. The balance of the increase in Canadian segment operating expense is a function of higher disposal and labour expenditures, related principally to the collection and acceptance of additional volumes of waste, landfill royalty costs related to the Lachenaie north expansion, and higher costs to service new and existing customers. Year-to-date fuel surcharges in the Canadian segment have offset increasing fuel costs at levels commensurate with 2004. The balance of the operating expense increase for the three months ended June 30, 2005 of approximately $67,900 relates to the consolidation of IESI's operations with those of the Fund, comprised of operating expenses for the U.S. south and U.S. northeast segments totalling approximately $42,800 and $25,100, respectively.

Operating expenses of $175,487 were $128,729 higher than the comparative six months ended June 30, 2004. Strategic acquisitions in the Canadian segment, identified above, coupled with the Fund's acquisition of Twin Oaks in April 2004, contributed approximately $9,300 to the total Canadian segment increase of approximately $12,200. The balance of the increase in Canadian segment operating expense is a function of higher disposal and labour expenditures, related principally to the collection and acceptance of additional volumes of waste, landfill royalty costs related to the Lachenaie north expansion, and higher costs to service new and existing customers. Year-to-date fuel surcharges in the Canadian segment have offset increasing fuel costs at levels commensurate with 2004. The balance of the second quarter operating expense increase of approximately $116,500 relates to the consolidation of IESI's operations with those of the Fund for the IESI stub period, comprised of operating expenses for the U.S. south and U.S. northeast segments totalling approximately $73,900 and $42,600, respectively.

Selling, general and administration ("SG&A") expenses of $21,881 were $14,855 higher than the comparative three months ended June 30, 2004. The Canadian segment increase of approximately $1,400 is principally attributable to the CDS and Ridge landfill acquisitions. The balance of the increase totalling approximately $13,500 is attributable to the consolidation of IESI for the three months ended June 30, 2005 comprised of SG&A expenses for the U.S. south and U.S. northeast segments totalling approximately $7,600 and $5,900, respectively.

Selling, general and administration ("SG&A") expenses of $40,113 were $26,498 higher than the comparative six month period ended June 30, 2004. The Canadian segment increase of approximately $2,700 is attributable to the Twin Oaks, CDS and Ridge landfill acquisitions. The balance of the increase totalling approximately $23,800 is attributable to the consolidation of IESI for the IESI stub period comprised of SG&A expenses for the U.S. south and U.S. northeast segments totalling approximately $13,700 and $10,100, respectively.

EBITDA(A) of $59,518 was $42,464 or 249.0% higher than the comparative three months ended June 30, 2004. The Canadian segment contributed approximately $7,100 to the increase on account of contributions from strategic acquisitions, price and volume growth, including an increase in accepted waste at BFI Canada-owned landfills, partially offset by higher disposal and labour expenditures and landfill royalty costs related to the Lachenaie north expansion. The remainder of the variance relates to IESI's operating results for the three months ended June 30, 2005, which contributed approximately $35,300 to the increase comprised of EBITDA(A) for the U.S. south and U.S. northeast segments totalling approximately $12,200 and $23,100, respectively.

EBITDA(A) of $99,593 was $68,405 or 219.3% higher than the comparative six months ended June 30, 2004. The Canadian segment contributed approximately $11,900 to the increase on account of contributions from strategic acquisitions, and price and volume growth, including an increase in accepted waste at BFI Canada-owned landfills, partially offset by higher disposal and labour expenditures and landfill royalty costs related to the Lachenaie north expansion. The remainder of the variance relates to IESI's operating results for the IESI stub period, which contributed approximately $56,500 to the increase comprised of EBITDA(A) for the U.S. south and U.S. northeast segments totalling approximately $20,200 and $36,300, respectively.

Free cash flow available for distribution(B) totalled $33,176 and $57,359 for the three and six months ended June 30, 2005, respectively, versus $8,537 and $19,450 for the comparative periods ended June 30, 2004. The approximately $24,600 and $37,900 increases are due in large part to EBITDA(A) contributions from the Fund's acquisitions of IESI and the Ridge landfill effective January 2005 and CDS effective November 2004, for the three months ended June 30, 2005, and the Fund's acquisitions as explained for the three months ended June 30, 2005, plus the Fund's acquisition of Twin Oaks in April 2004, for the six months ended June 30, 2005, respectively. EBITDA(A) contributions from the Fund's acquisitions for the three and six months ended June 30, 2005 have been partially offset by higher interest on long-term debt attributable to higher outstanding indebtedness, higher maintenance capital expenditures to sustain a larger business base, and withholdings taxes on interest and dividends paid by IESI to 4264126 Canada Limited.

Free cash flow available for distribution(B) per weighted average trust unit and participating preferred share for the three and six months ended June 30, 2005 amounted to $0.51 and $0.94 and is $0.19 and $0.21 higher, respectively, than the comparative three and six months ended June 30, 2004. Contributions to free cash flow available for distribution(B) from strategic acquisitions and base business growth are the primary contributors to the increases over the comparative three and six months ended June 30, 2004.

The Fund paid cash distributions to trust unitholders and participating preferred shareholders for the three months ending and IESI stub period, totalling $0.39 and $0.78, respectively, per weighted average trust unit and participating preferred share. The Fund declared a distribution payable to unitholders of record on June 30, 2005, payable July 15, 2005, of $0.1309 per trust unit and accordingly participating preferred share. In January 2005, the Fund increased its current distribution rate by 12.0% to an annualized rate of $1.5708 per trust unit and participating preferred share beginning with the distribution payable on March 15, 2005 to trust unitholders and participating preferred shareholders of record on February 28, 2005.

(A) All references to "EBITDA" in this press release are to "income before the following" on the consolidated statement of operations. "Income before the following" excludes some or all of the following: "amortization, interest on long-term debt, financing costs, net (gain) loss on sale of capital and landfill assets, loss (gain) on derivative financial instruments, foreign exchange (gain) loss, write-off of deferred financing costs, gain on settlement of bond forward contracts, 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, loss (gain) on derivative financial instruments, foreign exchange (gain) loss, and future income taxes) or non-operating (in the case of interest on long-term debt, net (gain) loss on sale of capital and landfill assets, certain financing costs, other expenses, gain on settlement of bond forward contracts, current income taxes, and non-controlling interest). EBITDA is a useful financial and operating metric for investors 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 is a function of the Fund's treasury/financing activities and represents a different class of expense than those included in EBITDA.

Net (gain) loss on sale of capital and landfill assets - the net (gain) loss on sale of capital and landfill assets has no impact on the determination of free cash flow available for distribution(B), because the proceeds were either reinvested in other capital assets or used to repay the Fund's revolving credit facility.

Loss (gain) on derivative financial instruments - as non-cash items, losses or gains on derivative financial instruments have no impact on the determination of free cash flow available for distribution(B).

Foreign exchange (gain) loss - as a non-cash item, 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).

Gain on settlement of bond forward contracts - the gain on settlement of bond forward contracts is a treasury/financing activity and represents a different class of revenue than the components of EBITDA.

Other expenses - other expenses represent amounts paid to management of the Fund on the closing the IESI acquisition 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 participating preferred share holdings. Accordingly, non-controlling interest represents a different class of expense than those included in EBITDA.

All references to "U.S.-EBITDA" in this press release are to "income before the following" on the consolidated statements of operations for IESI. "Income before the following" excludes some or all of the following: "amortization, interest on long-term debt, financing costs, loss (gain) on derivative financial instruments, transaction expenses, other expenses, and income taxes". U.S.-EBITDA is a term 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. U.S.-EBITDA is a measure of 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, loss (gain) on derivative financial instruments, and future income taxes) or non-operating (in the case of interest on long-term debt, certain financing costs, transaction expenses, other expenses, and current income taxes). U.S.-EBITDA is a useful financial and operating metric for investors as it permits investors to compare operating performance across periods. The underlying reasons for exclusion of each item are as follows:

Amortization - amortization includes various fair value adjustments occurring on acquisition. Amortization is therefore not comparative between periods.

Interest on long-term debt - interest on long-term debt is a function of the debt/equity mix and interest rates. On the closing of the Fund's acquisition of IESI, IESI's underlying debt structure has changed and results in interest on long-term debt not being comparable.

Financing costs - financing costs is a function of treasury/financing activities. On closing of the Fund's acquisition of IESI, IESI incurred fees in connection with the extinguishment of long-term debt and results in financing costs not being comparable.

Loss (gain) on derivative financial instruments - losses or gains on derivative financial instruments are a function of treasury/financing activities. On the closing of the Fund's acquisition of IESI, IESI entered into various foreign currency exchange derivative financial instruments to hedge its Canadian dollar obligations and as such (gains) losses on derivative financial instruments are not a function of operations.

Transaction expenses - transaction expenses represent amounts paid to various advisors in respect of the Fund's acquisition of IESI and are not considered an expense indicative of continuing operations. Accordingly, transaction expenses represent a different class of expense than those included in U.S.-EBITDA.

Other expenses - other expenses represent amounts paid to management on the closing the IESI acquisition and are not considered an expense indicative of continuing operations. Accordingly, other expenses represent a different class of expense than those included in U.S.-EBITDA.

Income taxes - income taxes are a function of tax laws and rates and are affected by matters which are separate from daily operations.

EBITDA and U.S.-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 statements of operations beginning with "income before the following" and ending with "net income". US-EBITDA is presented herein for information purposes only and is not presented in the consolidated statements of operations.

(B) The Fund has adopted a measurement called free cash flow available for distribution to supplement net income 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 trust unitholders and participating preferred shareholders. Participating preferred share holdings are presented as non-controlling interest in the consolidated financial statements of the Fund, however management of the Fund have elected to include the shareholdings of the participating preferred shareholders in the calculation of free cash flow available for distribution as participating preferred shares receive distributions that are economically equivalent to those received by trust unitholders and participating preferred shares are exchangeable on a one-to-one basis for trust units of the Fund. Free cash flow available for distribution is calculated as EBITDA(A) less amortization of capitalized landfill asset closure and post-closure costs, interest on long-term debt, current income taxes, other expenses, maintenance capital expenditures and the effect of the foreign currency hedge to support current period Canadian dollar distributions. Additionally, the Fund's gain on settlement of two bond forward contracts on June 25, 2004 will be amortized to free cash flow available for distribution over the underlying terms of the senior secured debentures. Free cash flow available for distribution is not necessarily indicative of cash available to fund cash needs and should not be considered as an alternative to cash flow as a measure of liquidity. All references in this press release to "free cash flow available for distribution" have the meaning set out in this note.

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, 2004. 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 collection and disposal services for municipal, commercial, industrial and residential customers in five provinces and nine states in the United States ("U.S."). The Fund serves approximately one million customers with vertically integrated collection and disposal assets. The Fund's Canadian segment operates under the BFI Canada brand and is one of Canada's largest full-service waste management companies providing integrated non-hazardous solid waste collection and landfill disposal services in the provinces of British Columbia, Alberta, Manitoba, Ontario and Quebec. The Canadian segment operates one and owns and operates four landfills, carries on solid waste collection operations in 19 markets and operates four transfer collection stations, seven material recovery facilities ("MRFs") and one landfill gas to energy facility. The Fund's U.S. operations provide integrated non-hazardous solid waste collection and landfill disposal services in two geographic regions as follows: the south, consisting of various service areas in Texas, Louisiana, Oklahoma, Arkansas and Missouri, and the northeast, consisting of various service areas in New York, New Jersey, Pennsylvania and Maryland. The U.S. south and northeast segments operate in 35 markets, and include 41 collection operations, 23 transfer stations, 17 landfills and seven recycling facilities. 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 Thursday, August 4, 2005 at 4:30 pm (ET) to discuss results for the three and six months ended June 30, 2005. To access the call, participants should dial 800-814-4859, at approximately 4:20 pm (ET). The conference call will also be Webcast live at www.bficanada.com or www.ccnmatthews.com and subsequently archived on the BFI Canada site.

A rebroadcast of the call will be available until midnight on Thursday, August 11, 2005. To access the rebroadcast, dial 877-289-8525 and quote the reservation number 21132584#.



BFI CANADA INCOME FUND
Consolidated Balance Sheets
June 30, 2005 (unaudited) and December 31, 2004
(in thousands of dollars)
---------------------------------------------------------------------
June 30, December 31,
2005 2004
-------------------------------
ASSETS

CURRENT
Cash and cash equivalents $ 13,994 $ 13,282
Accounts receivable 88,650 33,348
Other receivables 1,433 1,403
Prepaid expenses 10,406 2,568
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114,483 50,601

OTHER RECEIVABLES 2,258 3,028
FUNDED LANDFILL POST-CLOSURE COSTS 1,040 570
INTANGIBLES 95,101 72,856
GOODWILL 492,543 50,889
DEFERRED COSTS 5,299 12,159
DEFERRED FINANCING COSTS 6,126 1,860
CAPITAL ASSETS 297,225 95,325
LANDFILL ASSETS 771,682 110,382
FUTURE INCOME TAX ASSETS 850 -
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$ 1,786,607 $ 397,670
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LIABILITIES

CURRENT
Accounts payable $ 45,970 $ 23,206
Accrued charges 36,308 7,501
Distribution payable 8,560 3,097
Income taxes payable 1,096 636
Deferred revenues 15,519 6,623
Current portion of long-term debt 35,711 22,224
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143,164 63,287

LONG-TERM DEBT 395,830 105,240
LANDFILL CLOSURE AND POST-CLOSURE COSTS 76,315 6,143
OTHER LIABILITIES 1,043 -
FUTURE INCOME TAX LIABILITIES 42,039 13,907
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658,391 188,577
---------------------------------------------------------------------

NON-CONTROLLING INTEREST 398,103 -
UNITHOLDERS' EQUITY 730,113 209,093
---------------------------------------------------------------------
$ 1,786,607 $ 397,670
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BFI CANADA INCOME FUND
Consolidated Statements of Operations
For the period ended June 30, 2005 (unaudited - in thousands of
dollars, except net income(loss) per trust unit amounts)
---------------------------------------------------------------------
Three months ended Six months ended
----------------------------------------
2005 2004 2005 2004
----------------------------------------

REVENUES $ 180,775 $ 49,386 $ 315,193 $ 91,561
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EXPENSES
OPERATING 99,376 25,306 175,487 46,758
SELLING, GENERAL AND
ADMINISTRATION 21,881 7,026 40,113 13,615
---------------------------------------------------------------------
INCOME BEFORE THE FOLLOWING 59,518 17,054 99,593 31,188
AMORTIZATION 39,984 11,564 69,992 22,130
INTEREST ON LONG-TERM DEBT 7,031 1,280 12,306 2,456
FINANCING COSTS - 748 36,710 748
NET GAIN ON SALE OF CAPITAL
ASSETS - - - (24)
LOSS (GAIN) ON DERIVATIVE
FINANCIAL INSTRUMENTS 3,580 (1,550) (1,113) (1,550)
FOREIGN EXCHANGE (GAIN) LOSS (2,351) - 974 -
OTHER EXPENSES 537 - 1,611 -
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INCOME (LOSS) BEFORE INCOME
TAXES AND
NON-CONTROLLING INTEREST 10,737 5,012 (20,887) 7,428

INCOME TAX EXPENSE (RECOVERY)
Current 1,321 105 1,695 210
Future (1,222) (901) (21,547) (1,952)
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99 (796) (19,852) (1,742)
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INCOME (LOSS) BEFORE
NON-CONTROLLING INTEREST 10,638 5,808 (1,035) 9,170

NON-CONTROLLING INTEREST 2,882 - (329) -
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NET INCOME (LOSS) $ 7,756 $ 5,808 $ (706) $ 9,170
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Net income (loss) per trust
unit, basic and fully diluted $ 0.16 $ 0.22 $ (0.02) $ 0.35

Weighted average number of
trust units outstanding
(thousands), basic 47,675 26,500 44,425 26,500

Weighted average number of
trust units outstanding
(thousands), fully diluted 65,391 26,500 61,093 26,500


BFI CANADA INCOME FUND
Consolidated Statements of Cash Flows
For the period ended June 30, 2005
(unaudited - in thousands of dollars)
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Three months ended Six months ended
---------------------------------------
2005 2004 2005 2004
---------------------------------------
NET INFLOW (OUTFLOW) OF CASH
RELATED TO THE FOLLOWING
ACTIVITIES
OPERATING
Net income (loss) $ 7,756 $ 5,808 $ (706) $ 9,170
Items not affecting cash
Amortization of intangibles 5,174 3,240 10,157 6,337
Amortization of deferred
financing costs 374 220 670 440
Amortization of capital assets 15,692 3,930 27,885 7,730
Amortization of landfill assets 18,744 4,174 31,280 7,623
Gain on disposal of capital
assets - - - (24)
Deferred costs 37 287 826 287
Write-off of deferred
financing costs - 748 367 748
Accretion of landfill closure
and post-closure costs 740 51 1,343 100
Unrealized foreign exchange
(gain) loss (2,475) - 850 -
Future income taxes (1,222) (901) (21,547) (1,952)
Loss (gain) on derivative
financial instruments 3,580 - (1,113) -
Non-controlling interest 2,882 - (329) -
Landfill closure and
post-closure expenditures (2,583) (682) (3,706) (758)
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48,699 16,875 45,977 29,701
Changes in non-cash working
capital items 3,480 919 (10,106) (1,494)
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Cash generated from operating
activities 52,179 17,794 35,871 28,207
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INVESTING
Acquisitions - (4,627) (128,475) (4,627)
Investment in other receivables - - - (262)
Proceeds from other receivables 384 247 605 480
Funded landfill post-closure
costs (194) - (410) -
Purchase of capital assets (16,435) (6,266) (24,892) (7,900)
Purchase of landfill assets (16,562) (2,270) (25,068) (3,092)
Proceeds on disposal of
capital assets - 2 - 32
Deferred costs (229) (283) (475) (708)
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Cash utilized in investing
activities (33,036) (13,197) (178,715) (16,077)
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FINANCING
Deferred costs - (164) - (282)
Payment of deferred financing
costs - (1,648) (4,033) (1,648)
Proceeds from term and
revolving loan - 5,800 404,823 5,800
Proceeds from senior secured
debentures - 105,000 - 105,000
Repayment of revolving loan
and acquired long-term debt (2,000) (87,494) (565,493) (87,494)
Issuance of trust units net of
issuance costs - - 351,717 -
Distributions paid to
unitholders and participating
preferred shareholders (25,679) (8,446) (43,433) (16,892)
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Cash (utilized in) generated
from financing activities (27,679) 13,048 143,581 4,484
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Effect of foreign exchange
changes on foreign cash and
cash equivalents (84) - (25) -
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NET CASH (OUTFLOW) INFLOW (8,620) 17,645 712 16,614
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 22,614 5,673 13,282 6,704
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CASH AND CASH EQUIVALENTS, END
OF PERIOD $ 13,994 $ 23,318 $ 13,994 $ 23,318
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BFI CANADA INCOME FUND
Consolidated Statements of Unitholders' Equity
For the period ended June 30, 2005
(unaudited - in thousands of dollars)
---------------------------------------------------------------------
Three months ended Six months ended
-----------------------------------------
2005 2004 2005 2004
-----------------------------------------

BALANCE, BEGINNING OF
PERIOD OR YEAR $ 648,600 $ 219,242 $ 209,093 $224,326
Net income (loss) 7,756 5,808 (706) 9,170
Issuance of trust units,
net of issuance costs and
related tax effect - - 385,719 -
Issuance of trust units
on exchange of
participating preferred
shares 84,073 - 174,079 -
Distributions (18,739) (8,446) (35,538) (16,892)
Cumulative foreign
currency translation
adjustment 8,423 - (2,534) -
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BALANCE, END OF PERIOD $ 730,113 $ 216,604 $ 730,113 $216,604
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