Badger Income Fund is pleased to announce its results for the year and three months ended December 31, 2006. The following financial measures do not have any standardized meaning prescribed by Canadian generally accepted accounting principles and may not be comparable to similar measures as presented by other funds or entities:
(1) Earnings before interest, taxes, depreciation and amortization is a measure of the Fund's operating profitability and is therefore useful to management and investors. EBITDA provides an indication of the results generated by the Fund's principal business activities prior to how these activities are financed, assets are amortized or how the results are taxed in various jurisdictions. EBITDA is calculated from the Consolidated Statements of Earnings and Retained Earnings as gross margin, less selling, general and administrative costs and foreign exchange loss (gain).
(2) Funds generated from operations is used to assist management and investors in analyzing operating performance and leverage. It is not intended to represent operating cash flow or operating profits for the period nor should it be viewed as an alternative to cash flow from operating activities, net earnings or other measures of financial performance calculated in accordance with GAAP. Funds generated from operations are calculated from the Consolidated Statements of Cash Flows and is defined as cash provided by operating activities before changes in non-cash working capital.
(3) Maintenance capital expenditures is defined as the amount incurred during the period to keep the daylighting fleet at the same number of units, plus any other capital expenditures required to maintain the existing business. It also includes any costs incurred to enhance the operational life of a daylighting unit. This amount will fluctuate from period-to-period depending on the number of units retired from the fleet. During the three-month period ended December 31, 2006 Badger added 13 units to the fleet and did not remove any from service. As a result, all of the units added during the three months ended December 31, 2006 represent growth capital expenditures, while none of the units represent maintenance capital expenditures. Included in growth capital expenditures is approximately $3.7 million worth of cabs and chassis acquired prior to the end of December. During the year ended December 31, 2006 Badger added 54 units to the fleet, of which 10 are reflected as maintenance capital expenditures. The economic life of a Badger hydrovac is approximately 10 years. The average age of the fleet is approximately four and a half years.
(4) Cash available for growth and distribution is used by management to supplement cash flow as a measure of operating performance and leverage. The objective of this measure is to calculate the amount which is available for distribution to unitholders. It is defined as funds generated from operations, less required debt repayments and maintenance capital expenditures, plus any proceeds received on the disposal of assets.
Highlights for the year are as follows:
- The Fund generated improved operating and financial results for the twelve month period ended December 31, 2006 versus the twelve month period ended December 31, 2005. Revenues increased to $98.4 million in 2006 from $83.3 million in 2005, while EBITDA increased to $28.9 million in 2006 compared to $24.8 million in 2005.
- Cash available for growth and distributions increased 16 percent to $25.3 million compared to $21.8 million in 2005. The Fund increased distributions during 2006 to $1.260 per unit on an annualized basis, versus $1.176 per unit on an annualized basis at year-end 2005.
- The Fund put in place a $20 million extendable, revolving credit facility, which replaced the existing $12 million demand operating facility. The facility was used to repay existing demand operating line advances and will assist in financing Badger's capital expenditure program as well as general corporate activities.
- The Fund added 54 new hydrovac units in 2006 and removed 10 from service, exiting the year at 285 hydrovac units. Of the total, 198 units are operating in Canada and 87 in the United States. The growth in hydrovac units was financed from cash generated from operations and existing credit facilities.
- On October 31, 2006 the federal Minister of Finance announced a new tax plan that will affect the future level of taxation of income trusts and corporations. One element of the proposed plan is a tax on non-capital distributions from publicly-traded income trusts, which would make their income tax treatment more like corporations. For existing publicly-traded income trusts, the federal government has proposed a four-year transitional delay in implementing the new rules. The application of the proposed new tax plan would reduce the tax efficiency of publicly-traded income trusts such as Badger. Since the announcement, the federal government has clarified certain matters related to growth and conversion guidelines for income trusts. Badger will continue to monitor these proposed changes to ensure its structure protects the long-term interest of its unitholders. The proposed new tax measures will require in-depth review, examination and assessment pending enactment into tax law. -- www.cnxmarketlink.com
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