Aug. 11, 2010 (Filing Services Canada) -- Badger Income Fund (BAD.UN - TSX), (the "Fund" or "Badger") is pleased to announce its financial and operating results for the three-month and six-month periods ended June 30, 2010. Revenues of $29.4 million for the three months ended June 30, 2010 were virtually unchanged from $29.5 million for the three months ended June 30, 2009. Canadian revenues increased by 4 percent period-over-period while United States revenues decreased by 6 percent (removing the effect of the change in the foreign exchange rate, United States revenues increased by 7 percent period-over-period). The Fund's quarterly EBITDA and funds generated from operations increased slightly from the same period in 2009. Badger's EBITDA increased to $6.6 million for the three months ended June 30, 2010 from $6.5 million in the same quarter of 2009, while funds generated from operations increased to $6.6 million from $6.4 million in the comparable quarter of 2009.
Badger had 407 daylighting units at the end of the second quarter of 2010, unchanged from the end of 2009, reflecting the addition of eight daylighting units to the fleet to date in 2010 and the retirement of eight units. Of the total, 227 units were operating in Canada and 180 in the United States at quarter-end.
Management's Discussion and Analysis
The following Management's Discussion and Analysis (MD&A) should be read in conjunction with the attached unaudited interim consolidated financial statements of Badger. Readers should also refer to the audited consolidated financial statements and MD&A included in Badger's 2009 Annual Report. Additional information is also available on the Fund's website (www.badgerinc.com) and all previous public filings, including the Fund's Annual Information Form, may be found on SEDAR at www.sedar.com.
Revenue and expense variance analysis in the MD&A focuses primarily on the year-over-year changes during the second quarter. Year-over-year variances for the six months ended June 30, 2010 and 2009 are explained by the same general factors which contributed to the second quarter variance, unless otherwise indicated.
This MD&A has been prepared taking into consideration information available to August 10, 2010.
Cautionary Statement Regarding Forward-Looking Information and Statements
Certain statements and information contained in this MD&A and other continuous disclosure documents of the Fund referenced herein, including statements related to the Fund's capital expenditures, projected growth, view and outlook toward margins, cash distributions, customer pricing, future market opportunities and statements, and information that contain words such as "could", "should", "can", "anticipate", "expect", "believe", "will", "may" and similar expressions relating to matters that are not historical facts, constitute "forward-looking information" within the meaning of applicable Canadian securities legislation. These statements and information involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements and information. The Fund believes the expectations reflected in such forward-looking statements and information are reasonable, but no assurance can be given that these expectations will prove to be correct. Such forward-looking statements and information included in this MD&A should not be unduly relied upon. These forward-looking statements and information speak only as of the date of this MD&A.
In particular, forward-looking information and statements include expectations and/or beliefs that:
* Economic and business conditions in the second half of the year will be significantly improved over the first half of the year;
* Badger's customers will increase their levels of activity;
* The addition of locations in the United States east will develop more market opportunities for Badger;
* Investments made in the United States west will provide a return during the remainder of 2010;
* The Fund's conversion to a corporate structure will take place during the remainder of 2010;
* Following conversion, Badger as a corporation will remit a dividend between 75 percent and 100 percent of the current level of the Fund's annual distribution ($1.26 per unit);
* Badger will invest $2.3 million in a facility during the remainder of 2010. This capital expenditure is expected to be paid for with mortgage financing, the existing extendable revolving credit facility and cash flow from operating activities; and
* The Fund will remove approximately 20 hydrovac units from its fleet in 2010.
The forward-looking statements rely on certain expected economic conditions and a certain assumed level of overall demand for Badger's services and are based on certain assumptions. The assumptions used to generate forward-looking statements are that, among other things:
* Badger has the ability to achieve its internal revenue, net earnings and cash flow forecasts for 2010;
* There will be long-term demand for hydrovac services provided in support of oil refineries, petro-chemical plants, power plants and other large industrial facilities throughout North America;
* Over the short term, there will be increased variability in recurring industrial maintenance and production support services;
* Badger will maintain relationships with current customers and develop successful relationships with new customers;
* The Fund will collect customer obligations in a timely manner; and
* Badger will execute its growth strategy.
Risk factors and other uncertainties that could cause actual results to differ materially from those anticipated in such forward-looking statements include, but are not limited to: supply-demand fluctuations for oil and natural gas and related products and services; political and economic conditions; industry competition; Badger's ability to attract and retain key personnel; the availability of future debt and equity financing; changes in laws or regulations, including taxation and environmental regulations; and fluctuations in foreign exchange or interest rates.
Readers are cautioned that the foregoing lists of factors are not exhaustive. Additional information on these and other factors that could affect the Fund's operations and financial results is included in reports on file with securities regulatory authorities in Canada and may be accessed through the SEDAR website (www.sedar.com) or at the Fund's website. The forward-looking statements and information contained in this MD&A are expressly qualified by this cautionary statement. The Fund does not undertake any obligation to publicly update or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.
Non-GAAP Financial Measures
This MD&A contains references to certain financial measures, including some that do not have any standardized meaning prescribed by Canadian generally accepted accounting principles (GAAP) and that may not be comparable to similar measures presented by other corporations or entities. These financial measures are identified and defined below:
"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 as well as to expand the daylighting fleet or make acquisitions. 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.
"EBITDA" is earnings before interest, taxes, depreciation and amortization (EBITDA). It 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 Comprehensive Income and Retained Earnings as gross margin less selling, general and administrative costs and foreign exchange loss (gain). It is derived as follows:
Three months ended June 30, Six months ended June 30,
($)
2010 2009 2010 2009
Net earnings and comprehensive
income 2,430,962 2,926,670 5,973,769 8,600,000
Add (deduct):
Income taxes 568,122 101,100 1,264,232 2,115,395
Interest - long-term 226,635 230,769 441,226 568,712
Gain on sale of property, plant and
equipment (22,299) (30,074) (106,536) (122,519)
Amortization 3,418,885 3,224,145 6,722,984 6,605,114
-------------------------------------------------------------------------
6,622,305 6,452,610 14,295,675 17,766,702
"Funded debt" is a measure of Badger's long-term debt position. Funded debt is long-term debt.
"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 is derived from the Consolidated Statements of Cash Flows and is calculated as follows:
Three months ended June 30, Six months ended June 30,
($) 2010 2009 2010 2009
Cash provided by operating
activities 4,467,980 13,145,382 14,122,079 20,242,960
Add (deduct):
Net change in non-cash
working capital relating to
operating activities 2,149,127 (6,780,497) (654,484) (3,644,451)
-------------------------------------------------------------------------
6,617,107 6,364,885 13,467,595 16,598,509
"Growth capital expenditures" are capital expenditures that are intended to improve Badger's efficiency, productivity or overall capacity and thereby to allow Badger to access new markets. They generally represent any net additions to the daylighting fleet. Growth capital expenditures exclude acquisitions made during the period.
"Maintenance capital expenditures" are any amounts incurred during a reporting period to keep the Fund's daylighting fleet at the same number of units, plus any other capital expenditures required to maintain the capacities of the existing business. They also include any costs incurred to extend the operational life of a daylighting unit. This amount will fluctuate from period-to-period depending on the number of units retired from the fleet.
"Net debt" is funded debt less cash and short-term deposits.
The terms cash available for growth and distribution, EBITDA, funded debt, funds generated from operations, growth capital expenditures, maintenance capital expenditures and net debt used throughout this document have the meanings set out above.
Financial Highlights
($ thousands, except per unit and total units outstanding information)
Three months Three months Six months Six months
ended ended, ended ended,
June 30, June 30, June 30, June 30,
2010 2009 2010 2009
-------------------------------------------------------------------------
Revenues 29,374 29,459 59,708 66,843
EBITDA 6,622 6,453 14,296 17,767
Earnings before income taxes 2,999 3,028 7,238 10,715
Taxes
Current 344 248 770 1,020
Future 224 (147) 494 1,095
Net earnings 2,431 2,927 5,974 8,600
Net earnings per unit
- diluted ($) 0.22 0.27 0.55 0.80
Funds generated from
operations 6,617 6,365 13,468 16,599
Funds generated from
operations 0.61 0.59 1.24 1.54
per unit - diluted ($)
Maintenance capital
expenditures 1,974 2,105 3,664 4,589
Required long-term debt
repayments 81 108 162 217
Cash available for growth
and distribution 4,657 4,505 9,931 12,934
Cash distributions declared 3,405 3,404 6,809 6,805
Growth capital expenditures 7 - 917 -
Total units outstanding 10,807,411 10,808,503 10,807,411 10,808,503
Overview and Outlook
Late in the second quarter of 2010 Badger began to see strengthening in its market and work opportunities compared to activity in late 2009 and early 2010. During the economic slowdown of 2009, Badger's revenue was affected by reduced project work in all areas, which lowered revenue per truck per month. As predicted, Badger is starting to see more opportunities to generate increased revenue in the last six months of 2010.
Activity and results in Eastern Canada and the United States east during the second quarter remained fairly stable when compared to last year's results. The United States east experienced a major drop in large project revenue during the first six months of the year; however, there has been a general increase in hydrovac revenue excluding project work. As discussed previously, large project work provides great revenue but can fluctuate from quarter to quarter depending on number, size and stage of projects. Efforts have been underway to increase the customer base in the United States east to provide a larger number of customers and more stable revenue. Badger has added a couple of locations in the United States east which should develop more future market opportunities for Badger. This is part of an ongoing strategy to grow the Fund's United States business.
Western Canada initially started back to work after spring breakup with good work prospects ahead. Due to the heavy and in some regions unprecedented amounts of rain in the quarter, a lot of work was postponed until the work areas dried out. Now that the weather has improved, activity levels have increased.
The United States west also began to see business increase in the latter part of the second quarter. Activity in the oil and natural gas industry that Badger is involved in has shown some improvement.
Badger believes the second half of the year will be significantly improved over the first half. The customers Badger serves typically start increasing their activity levels slowly after a recession. Badger previously forecast that it would not be until the second half of the year that it would experience better levels of activity, and it appears that this forecast will be fairly accurate. Badger has taken the intervening period to open some new locations, add some key personnel and ensure its operations are ready for increased activity.
During the three-month period ended June 30, 2010 Badger added four new hydrovac units and removed four from service, exiting the quarter with 407 hydrovac units. These are considered to be maintenance capital expenditures as there were no net additions to the daylighting fleet during the second quarter of 2010. The new units were financed from cash generated from operations.
With the federal legislation dealing with income trusts coming into force in 2011, on March 19, 2010 Badger announced its intention to convert to a dividend-paying corporation before the end of 2010. The conversion to a corporation was approved at the annual and special meeting of unitholders on June 29, 2010. The Board of Directors will make the final decision on the level and timing of the dividend at the time of conversion. The basic plan is to have a dividend of a gross magnitude between 75 percent and 100 percent of the current level of the Fund's annual distribution, which is $1.26 per unit. More will be known by the end of 2010 and details will be announced in due course.
Badger expects to invest a further $2.3 million in a facility during the remainder of 2010. Badger normally prefers to lease this type of facility for its operating centres but in this case it made more sense to own it. This capital expenditure will be funded by a combination of a mortgage financing, the extendable revolving credit facility and cash flow from operating activities.
Results of Operations
Revenues
Revenues of $29.4 million for the three months ended June 30, 2010 were virtually unchanged from the $29.5 million generated during the comparable period in 2009. The slight decrease is attributable to the following:
. Canadian revenues increased by 4 percent from $16.9 million in the second quarter of 2009 to $17.6 million in the second quarter of 2010. Western Canada hydrovac revenue increased by 5 percent due to a general increase in demand for hydrovac services in various areas due to moderately increased activity in the oil and natural gas industry. Eastern Canada revenue increased by 6 percent quarter-over-quarter due to an increase in some project work; and
. United States revenues decreased from $12.5 million for the three months ended June 30, 2009 to $11.8 million for the three months ended June 30, 2010. Removing the effect of the change in the foreign exchange rate, revenues increased by 7 percent. The increase is primarily due to more work in the United States east. The United States west saw a decrease in revenue due to less work in the oil and natural gas sector.
Badger's average revenue per truck per month during the three months ended June 30, 2010 was $21,000 versus $21,100 for the three months ended June 30, 2009.
Included in revenues is $259,000 of truck placement and franchise fees for the three months ended June 30, 2010, versus $536,000 for the three months ended June 30, 2009.
Direct Costs
Direct costs for the quarter ended June 30, 2010 were $19.5 million compared to $19.7 million for the quarter ended June 30, 2009. This decrease of 1 percent is greater than the decrease in revenues due to increased efficiency and better cost control in the Western Canada operations.
Gross Margin
Gross margin was 33.7 percent for the quarter ended June 30, 2010, an increase from 33.0 percent for the quarter ended June 30, 2009. The Canadian gross margin percentage increased from 32.5 percent for the three months ended June 30, 2009 to 34.7 percent for the three months ended June 30, 2010 due to better cost control in certain Western Canada corporate locations. United States gross margin decreased from 33.6 percent for the three months ended June 30, 2009 to 32.2 percent for the three months ended June 30, 2010 due to lower revenue in the United States west along with reduced project work in the United States east. Badger believes investments made in start-up areas in the United States west will provide returns during the remainder of 2010.
Amortization
Amortization was $3.4 million for the three months ended June 30, 2010, slightly higher than the $3.2 million for the three months ended June 30, 2009. Included in this figure is approximately $49,000 related to amortization of intangible assets with a limited life.
Interest Expense
Interest expense was $227,000 for the quarter ended June 30, 2010 versus $231,000 for the quarter ended June 30, 2009. The lower interest expense was mainly due to having a lower average debt balance quarter-over-quarter.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were higher at $3.5 million for the quarter ended June 30, 2010 compared to $3.2 million for the quarter ended June 30, 2009. As a percentage of revenues, selling, general and administrative expenses were 12.0 percent for the second quarter of 2010 versus 11.0 percent for the second quarter of 2009. In May, 2010, a judgment of approximately $0.8 million was rendered against Badger for damages as well as prejudgment interest and costs. This amount was expensed in the second quarter of 2010. The Fund has appealed the decision. Excluding this charge selling, general and administrative expenses would have been $2.7 million or 9.3 percent of revenue. The reduction in selling, general and administrative expenses excluding the $0.8 million charge was achieved even though the Fund incurred costs related to the pending conversion to a corporate structure and also had added professional fees associated with the ongoing conversion to International Financial Reporting Standards (IFRS).
Foreign Exchange Loss (Gain)
The foreign exchange loss or gain results from converting the balance sheet and earnings statement related to the United States operations into Canadian currency.
Income Taxes
The effective tax rate for the six months ended June 30, 2010 was 17 percent versus 20 percent for the six months ended June 30, 2009. The decrease was due to generating lower earnings in the United States, which are taxed at a higher rate.
In general, the low effective tax rate is due to the trust structure, which results in tax-deductible distributions being made to unitholders.
Liquidity and Distributions
Funds generated from operations increased to $6.6 million for the quarter ended June 30, 2010 from $6.4 million for the comparable period in 2009 due primarily to increased United States EBITDA margins. The Fund uses its cash to make distributions to unitholders, build additional hydrovac units, invest in maintenance and growth capital expenditures and repay long-term debt.
The Fund had working capital of $30.0 million at June 30, 2010 versus $26.6 million at December 31, 2009. The increase was due to the cash flow from operations exceeding capital expenditures and distributions to unitholders.
The following table outlines the cash available to fund growth and pay distributions to unitholders for the three and six months ended June 30, 2010:
($) Three Six
months ended months ended
June 30, 2010 June 30, 2010
Cash provided by operating activities 4,467,980 14,122,079
Add (deduct): net change in non-cash
working capital 2,149,127 (654,484)
---------------------------------
Funds generated from operations 6,617,107 13,467,595
Add: proceeds on disposal of property, plant
and equipment 94,947 289,104
Deduct: required repayments of
long-term debt (80,918) (161,861)
Deduct: maintenance capital expenditures (1,974,207) (3,664,093)
---------------------------------
Cash available for growth capital expenditures
and distributions 4,656,929 9,930,745
=================================
Growth capital expenditures 7,015 916,817
=================================
Cash distributions declared 3,404,563 6,809,241
=================================
In determining cash available for distributions the Fund excludes non-cash working capital changes for the period as well as growth capital expenditures. Changes in non-cash working capital items have been excluded so as to remove the effects of timing differences in cash receipts and disbursements, which generally reverse themselves and can vary significantly between fiscal quarters. Growth capital expenditures have been excluded so as to include only the maintenance capital expenditures required for the sustainability of the existing asset base.
The following table outlines the excess or shortfall of cash provided by operating activities and net earnings over cash distributions declared during the six months ended June 30, 2010 and 2009 and the year ended December 31, 2009:
($) Six months Six months Year
ended ended ended
June 30, June 30, December 31,
2010 2009 2009
Cash provided by operating activities 14,122,079 20,242,960 33,775,825
Net earnings 5,973,769 8,600,000 19,653,128
Cash distributions declared 6,809,241 6,804,840 13,614,197
Excess of cash provided by operating
activities over cash
distributions declared 7,312,838 13,438,120 20,161,628
Excess (shortfall) of net earnings over cash
distributions declared (835,472) 1,795,160 6,038,931
Net earnings of $6.0 million include significant non-cash amortization which for the six months ended June 30, 2010 was $6.7 million, which did not impact cash flow. Management does not consider the excess of cash distributions declared over net earnings for the six months ended June 30, 2010 to be an economic return of capital. Instead the excess is considered a function of the timing of cash flows versus accounting income.
The Fund makes regular monthly cash distributions to its unitholders. These cash distributions may be reduced, increased or suspended entirely by the trustees depending on the operations of Badger and the performance of its assets. The actual cash flow available for distribution to holders of Fund units is a function of numerous factors, including: the Fund's financial performance; debt covenants and obligations; working capital requirements; maintenance and growth capital expenditure requirements for the purchase of property, plant and equipment; and number of units outstanding.
The Fund maintains a strong balance sheet and has sufficient debt facilities to manage short-term funding needs as well as planned equipment additions. The debt management strategy includes retaining sufficient funds from available distributable cash to finance maintenance capital expenditures as well as working capital needs. Growth capital expenditures will generally be financed through existing debt facilities or cash retained from operating activities. The majority of the cash provided by operating activities was used to finance maintenance and growth capital expenditures and to pay distributions to unitholders.
If maintenance capital expenditures increase in future periods, the Fund's cash available for growth capital expenditures and distributions will be correspondingly reduced, other factors remaining equal. Due to Badger's growth rate in recent years, the majority of the hydrovac units are relatively new, with an average age of approximately four-and-a-half years. As a result, Badger is currently experiencing relatively low levels of maintenance capital expenditures. Over time, Badger would expect to incur annual maintenance capital expenditures in an amount that approximates the amortization expense reported in the year. Badger estimates it will remove approximately 20 hydrovac units from the fleet in 2010. Badger expects that cash provided by operations and cash available for growth capital expenditures and distributions will be sufficient to fund its maintenance capital expenditures in the future.
Badger is restricted from declaring distributions and distributing cash if it is in breach of the covenants under its credit facilities. As at the date of this MD&A the Fund is in compliance with all debt covenants and is able to fully utilize all existing credit facilities. Badger does not have a stability rating.
Capital Resources
Investing
The Fund spent $2.0 million on property, plant and equipment for the three months ended June 30, 2010 compared to $2.1 million for the three months ended June 30, 2009. The Fund added four new hydrovac units and incurred construction costs of $0.6 million during the three months ended June 30, 2010. The costs to build a hydrovac unit in the first six months of 2010 increased by approximately 7 percent over fiscal 2009, mainly due to the reduced build rate resulting in fixed overhead costs being allocated to fewer units.
Maintenance capital expenditures are incurred during a period to keep the hydrovac fleet at the same number of units, which applied to all of the units that joined the fleet in the three-month and six-month periods ended June 30, 2010, plus any other capital expenditures required to maintain the existing business. As a result $2.0 million of second-quarter 2010 capital expenditures has been classified as maintenance capital expenditures, with only a minor amount being classified as growth capital expenditures, and $3.7 million of capital expenditures for the six months ended June 30, 2010 has been classified as maintenance capital expenditures, with $0.9 million being classified as growth capital expenditures.
Financing
In June 2010, the Fund's extendable revolving credit facility was renewed. The principal amount remains unchanged at $40 million, of which $29.9 million was drawn at June 30, 2010. The facility has been used and will continue to be used to assist in financing Badger's capital expenditure program and general corporate activities. The facility has no required principal repayments. It expires on June 25, 2011 and is renewable at Badger's option for an additional 364-day period. If not renewed, interest is payable on the facility for 364 days, after which the entire amount must be repaid. The facility bears interest at the bank's prime rate or bankers' acceptance rate plus 1.5 percent plus 0 to 1 percent depending on Badger's funded-debt-to-EBITDA ratio.
The Fund continues to reduce its net debt outstanding. As at June 30, 2010 Badger's cash and short-term deposits were $11.5 million resulting in net debt of $21.7 million versus net debt of $24.8 million at December 31, 2009. The decrease in net debt was the result of cash flow generated from operations and proceeds received on the disposal of property, plant and equipment.
Management believes that the Fund's healthy balance sheet combined with funds generated from operations will provide sufficient capital to fund ongoing operations, make distributions to unitholders, finance future capital expenditures and execute its strategic plan for the foreseeable future. The Fund's practice is to utilize an appropriate mix of debt and equity to finance its maintenance capital expenditures and growth initiatives.
Badger is in compliance with all financial covenants under the credit facility agreement. Financial performance relative to the financial ratio covenants under the extendable revolving credit facility is reflected in the table below:
Ratio June 30, 2010 December 31, 2009 Threshold
------------------------------------------------------------------------
Current(1) 3.68:1 3.01:1 1.20:1 minimum
Funded Debt(2) to EBITDA(3) 0.65:1 0.87:1 2.00:1 maximum
Fixed Charge Coverage(4) 2.20:1 2.49:1 1.00:1 minimum
Distribution(5) 0.72:1 0.65:1 1.00:1 maximum
------------------------------------------------------------------------
1 Current ratio means the ratio of the consolidated current assets to
consolidated net current liabilities (excluding the current portion of long-term debt).
2 Funded debt is long-term debt less cash and short-term deposits.
3 Funded debt to EBITDA means the ratio of consolidated funded debt to the aggregated EBITDA for the trailing 12 months. EBITDA is defined as the trailing 12 months of EBITDA for the Fund.
4 Fixed charge coverage ratio means the trailing 12-month EBITDA less unfinanced capital expenditures and cash taxes, plus the unused portion of the extendable revolving credit facility, to the sum of the aggregate of scheduled long-term debt principal payments, interest and distributions.
5 Distribution ratio means distributions for the trailing 12-month period to the sum of funds generated from operations less scheduled long-term debt principal payments and maintenance capital expenditures.
In addition to the above the Fund had committed to certain capital expenditures totalling approximately $1.2 million. These capital expenditures will be financed with existing credit facilities and funds generated from operations. There are no set terms for remitting payment for these financial commitments.
Unitholders' Capital
There were 1,092 Units cancelled during the first six months of 2010. Units outstanding at June 30, 2010 were 10,807,411. There was no change to this balance as of August 10, 2010.
Selected Quarterly Financial Information
Quarter Ended
2010
($) June 30 Mar. 31
-------------------------------------------------------
Revenues 29,374,171 30,333,959
Net earnings 2,430,962 3,542,807
Net earnings per unit - basic 0.22 0.33
Net earnings per unit - diluted 0.22 0.33
2009
($) Dec. 31 Sept. 30 June 30 Mar. 31
-------------------------------------------------------------------------
Revenues 33,123,204 35,004,725 29,459,240 37,383,305
Net earnings 6,257,324 4,795,804 2,926,670 5,673,330
Net earnings per unit - basic 0.58 0.44 0.27 0.53
Net earnings per unit - diluted 0.58 0.44 0.27 0.53
2008
($) Dec. 31 Sept. 30
--------------------------------------------------------
Revenues 40,471,059 39,957,349
Net earnings 2,732,192 6,960,013
Net earnings per unit - basic 0.25 0.64
Net earnings per unit - diluted 0.25 0.64
Changes in Accounting Policies
In January 2009, the Canadian Institute of Chartered Accountants (CICA) issued Handbook Section 1582 "Business Combinations" to replace Section 1581. Prospective application of the standard is effective January 1, 2011, with early adoption permitted. This new standard effectively harmonizes the business combinations standard under Canadian GAAP with IFRS. The new standard revises guidance on the determination of the carrying amount of the assets acquired and liabilities assumed, goodwill and accounting for non-controlling interests at the time of a business combination. This standard will impact the Fund's consolidated financial statements if the Fund enters a business combination in the future.
The CICA concurrently issued Section 1601 "Consolidated Financial Statements" and Section 1602 "Non-Controlling Interests" which replaced Section 1600 "Consolidated Financial Statements". Section 1601 provides revised guidance on the preparation of consolidated financial statements and Section 1602 addresses accounting for non-controlling interests in consolidated financial statements subsequent to a business combination. These standards are effective January 1, 2011, unless they are adopted early, at the same time as Section 1582 "Business Combinations". The adoption of these standards is not expected to have any material impact on the Fund's financial statements except if the Fund enters into a business combination in the future.
Convergence with International Financial Reporting Standards
In January 2006, Canada's Accounting Standards Board (AcSB) adopted a strategic plan for the direction of accounting standards in Canada. On February 13, 2008, the AcSB confirmed that effective for interim and annual financial statements related to fiscal years beginning on or after January 1, 2011, International Financial Reporting Standards (IFRS) will replace Canada's current GAAP for all publicly accountable profit-oriented enterprises.
The Fund has developed a conversion plan to complete the transition to IFRS by January 1, 2011 (the "transition date"), including the preparation of required comparative information relating to 2010. As part of the IFRS conversion project, the Fund has engaged external consultants to assist and advise in the Fund's transition to IFRS.
The conversion project consists of three phases:
Phase 1 Preliminary Impact Assessment - This phase involves the high-level identification and assessment of the differences between IFRS and Canadian GAAP that will impact the Fund.
Phase 2 Detailed Evaluation - This phase involves performing a detailed impact assessment of the differences between IFRS and Canadian GAAP, reviewing and approving accounting policy choices, identifying impacts on systems and business processes, preparing position papers for areas of significant judgement, quantifying IFRS conversion adjustments and drafting pro-forma IFRS-compliant consolidated financial statements.
Phase 3 Implementation - This phase involves embedding changes to systems, processes and internal controls, drafting the transitional opening balance sheet and preparing IFRS-compliant consolidated interim and annual consolidated financial statements for the 2011 fiscal year including comparatives.
The Fund completed Phase 1 during the third quarter of 2008 and is currently in Phase 2. Phase 2 will be completed in the third quarter of 2010 at which time the Fund will commence Phase 3.
Based on the work completed to date, the Fund expects the greatest potential impact of IFRS adoption to be within the following areas:
First-time adoption of IFRS ("IFRS 1")
IFRS 1 provides the framework for the first-time adoption of IFRS and outlines that, in general, an entity shall apply the principles under IFRS retrospectively and that adjustments arising on conversion to IFRS shall be recognized directly in retained earnings. However, IFRS 1 also provides a number of optional exemptions from retrospective application of certain IFRS requirements as well as mandatory exceptions which prohibit retrospective application of standards.
The Fund has chosen to apply the following optional exemptions:
Area impacted Impact of applying exemption
Business combinations The Fund is not required to apply IFRS 3 -
Business Combinations to past business
combinations that occurred before the
transition date.
Share-based payments The Fund is not required to apply IFRS 2 -
Share-Based Payment to share-based payment
transactions that had vested at the
transition date.
Foreign exchange The Fund will reclassify transition date
cumulative translation gains or losses from
accumulated other comprehensive income to
retained earnings and apply the requirements
of IAS 21 - The Effects of Changes in
Exchange Rates prospectively from that
date.
Borrowing costs The Fund is only required to apply the
requirements of IAS 23 - Borrowing Costs
prospectively from the transition
date.
Arrangements containing a
lease The Fund will apply the requirements of
IFRIC 4 - Determining whether an Arrangement
contains a Lease prospectively from the
transition date.
Property, plant and equipment
Canadian GAAP requires the Fund to break down its assets into significant components only when practicable. Under IAS 16 - Property, Plant and Equipment, the Fund is explicitly required to allocate the amount initially recognized in respect of an item of PP&E to its significant components and depreciate separately each of these components. Where a significant component has a useful life and depreciation method that is the same as the useful life and depreciation method of another significant component of the same item of PP&E, such components may be grouped together in determining the depreciation charge.
The Fund has performed a detailed analysis which identified the significant components and useful lives of the material items of PP&E. This analysis determined that the useful lives of each significant component of an item of PP&E did not differ materially from the useful lives of other significant components of the same item. The Fund is therefore not expecting any material impact on its consolidated financial statements on adoption of IFRS as a result of this difference.
Impairment of assets
Canadian GAAP impairment testing involves two steps, the first of which compares the asset's carrying value with undiscounted future cash flows to determine whether impairment exists. If the carrying value exceeds the amount recoverable on an undiscounted basis, then the cash flows are discounted to calculate the amount of the impairment and the carrying value is written down to estimated fair value.
PP&E and intangibles, including goodwill, are tested for impairment in accordance with IAS 36 - Impairment of Assets ("IAS 36"). IAS 36 requires that assets, other than goodwill and indefinite-life intangibles, be subjected to an impairment test if there are indicators of impairment. For goodwill and indefinite-life intangibles, IAS 36 requires that the Fund perform impairment tests on an annual basis.
Under IFRS an asset is impaired when the recoverable amount of that asset is less than the carrying amount. If there is any indication that an asset may be impaired, the recoverable amount should be estimated for individual assets. The recoverable amount is defined as the higher of the fair value less costs to sell and the value in use. Fair value less costs to sell is the amount obtainable from the sale of an asset in an arm's-length transaction between knowledgeable and willing parties. The value in use is the present value of the future cash flows (i.e. discounted cash flows) expected to be derived from an asset.
If it is not possible to estimate the recoverable amount for the individual asset other than goodwill, the Fund must determine the recoverable amount for the cash-generating unit (CGU) to which that asset can be allocated. A CGU is the smallest group of assets that generates cash inflows largely independent of other assets or groups of assets. Management is therefore required to determine all of the CGUs of the Fund.
Impairment will be recognized more frequently under IFRS as Canadian GAAP does not require the discounting of cash flows when assessing the recoverability of an asset's carrying value. However, IAS 36 requires the reversal of an impairment loss for an asset, other than goodwill, where there is an indication that circumstances have changed and that the impairment loss no longer exists or may have decreased. This is not allowed under Canadian GAAP.
The Fund, through an analysis of its operations, has identified the appropriate CGUs. The Fund is currently assessing the impact of IAS 36 on its impairment models. This analysis is expected to be completed during the third quarter of 2010.
Financial statement disclosure
The Fund is currently assessing the impact of the IFRS disclosure requirements on its financial statements through the drafting of IFRS compliant consolidated financial statements. This is expected to be completed during the third quarter of 2010.
Disclosure Controls and Procedures and Internal Control over Financial Reporting
Disclosure controls and procedures
Badger's President and CEO and the VP Finance and CFO have designed, or caused to be designed under their direct supervision, Badger's disclosure controls and procedures (as defined by National Instrument 52-109 - Certification of Disclosure in Issuers' Annual and Interim Filings, adopted by the Canadian Securities Administrators) to provide reasonable assurance that (i) material information relating to Badger, including its consolidated subsidiaries, is made known to them by others within those entities, particularly during the period in which the annual and interim filings are being prepared; and (ii) material information required to be disclosed in the annual and interim filings is recorded, processed, summarized and reported on a timely basis. Further, they have evaluated, or caused to be evaluated under their direct supervision, the effectiveness of Badger's disclosure controls and procedures at December 31, 2009 and as a result of identifying the material weakness outlined below have concluded the disclosure controls and procedures are not effective.
Internal control over financial reporting
Badger's President and CEO and the VP Finance and CFO have also designed, or caused to be designed under their direct supervision, Badger's internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with Canadian GAAP. Further, using the criteria established in Internal Control - Integrated Framework published by the Committee of Sponsoring Organizations of the Treadway Commission, they have evaluated, or caused to be evaluated under their direct supervision, the effectiveness of Badger's internal control over financial reporting at December 31, 2009 and as a result of identifying the material weakness outlined below have concluded the internal controls over financial reporting are not effective.
Material weakness
Badger has identified that it does not have sufficient accounting personnel with the appropriate tax expertise to allow for an effective review over the accuracy of its accounting for income taxes and the determination of the income tax provision. Management and the Board of Directors have determined that it is not economically feasible to maintain such personnel in-house or to engage an external tax consultant to perform an independent review. This material weakness could result in a misstatement in various tax-related accounts that could result in a material misstatement to Badger's annual and interim consolidated financial statements and disclosures that would not be prevented or detected.
Changes in internal control over financial reporting
No changes were made to the design of Badger's internal control over financial reporting during the three months ended June 30, 2010 that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.
Inherent limitations
Notwithstanding the foregoing, because of its inherent limitations a control system can provide only reasonable assurance that the objectives of the control system are met and it may not prevent or detect misstatements. Management's estimates may be incorrect or assumptions about future events may be incorrect, resulting in varying results. In addition, management has attempted to minimize the likelihood of fraud. However, any control system can be circumvented through collusion and illegal acts.
Business Risks
The MD&A for the year ended December 31, 2009, which is included in the Fund's 2009 Annual Report, includes an overview of business risks associated with the Fund. Those business risks remain. The reader is also referred to Badger's 2009 Annual Information Form.
Review of Interim Financial Statements
Under National Instrument 51-102, Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of the interim financial statements, the statements must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor.
The accompanying unaudited interim consolidated financial statements of the Fund have been prepared by Badger Income Fund's management.
The Fund's independent auditor has not performed a review of the accompanying unaudited interim consolidated financial statements in accordance with standards established by the CICA for a review of interim financial statements by an entity's auditor.
BADGER INCOME FUND
Unaudited Consolidated Balance Sheets
June 30, December 31,
2010 2009
$ $
ASSETS
Current
Cash and short-term deposits 11,533,445 7,516,605
Accounts receivable 27,361,731 30,205,878
Inventories 1,789,021 1,792,708
Income taxes receivable 241,481 -
Prepaid expenses 790,191 776,997
----------------------------------
41,715,869 40,292,188
Property, plant and equipment 88,928,794 91,155,437
Intangible assets 4,697,513 4,795,512
Goodwill 1,621,000 1,621,000
----------------------------------
136,963,176 137,864,137
==================================
LIABILITIES AND UNITHOLDERS' EQUITY
Current
Accounts payable and
accrued liabilities 10,211,214 11,364,134
Income taxes payable - 907,377
Distributions payable 1,134,778 1,134,893
Current portion of long-term debt 323,768 323,768
----------------------------------
11,669,760 13,730,172
Long-term debt 32,956,419 31,960,496
Future income taxes 19,784,129 19,280,129
----------------------------------
64,410,308 64,970,797
----------------------------------
Unitholders' equity
Unitholders' capital (note 4(a)) 44,387,955 44,387,955
Contributed surplus (note 4(c)) 4,308,850 3,813,850
Retained earnings 23,856,063 24,691,535
----------------------------------
72,552,868 72,893,340
----------------------------------
136,963,176 137,864,137
----------------------------------
See accompanying notes
BADGER INCOME FUND
Unaudited Consolidated Statements of Earnings and Comprehensive Income and Retained Earnings
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2010 2009 2010 2009
$ $ $ $
-------------------------------------------------------------------------
Revenues 29,374,171 29,459,240 59,708,130 66,842,545
Direct costs 19,480,526 19,743,966 39,126,809 43,281,394
Gross margin 9,893,645 9,715,274 20,581,321 23,561,151
Expenses
Amortization 3,418,885 3,224,145 6,722,984 6,605,114
Gain on sale of property, plant and
Equipment (22,299) (30,074) (106,536) (122,519)
Interest
- long-term 226,635 230,769 441,226 568,712
Selling, general and
Administrative 3,538,323 3,226,340 6,407,268 6,041,155
Foreign exchange
loss (gain) (266,983) 36,324 (121,622) (246,706)
-------------------------------------------------------------------------
6,894,561 6,687,504 13,343,320 12,845,756
-------------------------------------------------------------------------
Earnings before
income taxes 2,999,084 3,027,770 7,238,001 10,715,395
-------------------------------------------------------------------------
Income taxes
Current 344,122 248,280 769,832 1,020,075
Future 224,000 (147,180) 494,400 1,095,320
-------------------------------------------------------------------------
568,122 101,100 1,264,232 2,115,395
-------------------------------------------------------------------------
Net earnings and comprehensive income
for the period 2,430,962 2,926,670 5,973,769 8,600,000
Retained earnings, 24,829,664 20,925,379 24,691,535 18,652,604
beginning of period
Cash distributions (3,404,563) (3,404,285) (6,809,241) (6,804,840)
-------------------------------------------------------------------------
Retained earnings, 23,856,063 20,447,764 23,856,063 20,447,764
end of period
=========================================================================
Net earnings
per unit (note 5)
Basic 0.22 0.27 0.55 0.80
-------------------------------------------------------------------------
Diluted 0.22 0.27 0.55 0.80
-------------------------------------------------------------------------
See accompanying notes
BADGER INCOME FUND
Unaudited Consolidated Statements of Cash Flows
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2010 2009 2010 2009
$ $ $ $
Operating activities
Net earnings and
comprehensive income
for the period 2,430,962 2,926,670 5,973,769 8,600,000
Add (deduct) items not
involving cash:
Amortization 3,418,885 3,224,145 6,722,984 6,605,114
Future income
taxes 224,000 (147,180) 494,400 1,095,320
Unit-based
compensation 213,000 355,000 495,000 667,300
Foreign exchange
loss (gain) (266,983) 36,324 (121,622) (246,706)
Unrealized foreign exchange loss
(gain) on future
income taxes 619,542 - 9,600 -
Gain on sale of property,
plant and equipment (22,299) (30,074) (106,536) (122,519)
-------------------------------------------------------------------------
6,617,107 6,364,885 13,467,595 16,598,509
Net change in non-cash
working capital relating to
operating activities (2,149,127) 6,780,497 654,484 3,644,451
-------------------------------------------------------------------------
4,467,980 13,145,382 14,122,079 20,242,960
-------------------------------------------------------------------------
Financing activities
Proceeds from
long-term debt 1,576,220 - 1,157,784 -
Repayment of
long-term debt (80,918) (4,435,299) (161,861)(3,963,398)
Distributions to
unitholders (3,404,678) (3,403,891) (6,809,356)(6,802,975)
-------------------------------------------------------------------------
(1,909,376) (7,839,190) (5,813,433)(10,766,373)
-------------------------------------------------------------------------
Investing activities
Purchase of property,
plant and equipment (1,981,222) (2,650,058) (4,580,910) (8,760,375)
Purchase of service
rights - - - (200,000)
Proceeds on disposal
of property, plant
and equipment 94,947 353,771 289,104 1,142,206
-------------------------------------------------------------------------
(1,886,275) (2,296,287) (4,291,806) (7,818,169)
-------------------------------------------------------------------------
Increase in cash and short-term deposits
during the period 672,329 3,009,905 4,016,840 1,658,418
Cash and short-term deposits,
beginning of period 10,861,116 1,304,657 7,516,605 2,656,144
-------------------------------------------------------------------------
Cash and short-term deposits,
end of period 11,533,445 4,314,562 11,533,445 4,314,562
=========================================================================
See accompanying notes
Notes to the Consolidated Financial Statements
(unaudited)
1. Basis of Presentation and Summary of Significant Accounting Policies
The unaudited interim consolidated financial statements include the accounts of Badger Income Fund ("Badger" or the "Fund") and its wholly-owned subsidiaries and have been prepared by management in accordance with Canadian generally accepted accounting principles (GAAP). These unaudited interim consolidated financial statements for the six and three months ended June 30, 2010 and 2009 have been prepared following the same accounting policies and methods of application as the audited consolidated financial statements of the Fund for the fiscal year ended December 31, 2009, except as noted below in Note 2. The disclosures provided below are incremental to those included in the Fund's annual audited consolidated financial statements. The unaudited interim consolidated financial statements and the related notes should be read in conjunction with the audited consolidated financial statements and the related notes in the Fund's Annual Report for the year ended December 31, 2009.
Accounting measurements at interim dates inherently involve greater reliance on estimates than at year-end and the results of operations for the interim periods shown in these statements are not necessarily indicative of results to be expected for the fiscal year. In the opinion of management, the accompanying unaudited interim consolidated financial statements include all adjustments necessary to present fairly the consolidated results of the Fund's operations and cash flows for the six and three months ended June 30, 2010 and 2009.
2. Changes in Accounting Policies
In January 2009, the Canadian Institute of Chartered Accountants (CICA) issued Handbook Section 1582 "Business Combinations" to replace Section 1581. Prospective application of the standard is effective January 1, 2011, with early adoption permitted. This new standard effectively harmonizes the business combinations standard under Canadian GAAP with International Financial Reporting Standards (IFRS). The new standard revises guidance on the determination of the carrying amount of the assets acquired and liabilities assumed, goodwill and accounting for non-controlling interests at the time of a business combination. This standard will impact the Fund's consolidated financial statements if the Fund enters a business combination in the future.
The CICA concurrently issued Section 1601 "Consolidated Financial Statements" and Section 1602 "Non-Controlling Interests" which replaced Section 1600 "Consolidated Financial Statements". Section 1601 provides revised guidance on the preparation of consolidated financial statements and Section 1602 addresses accounting for non-controlling interests in consolidated financial statements subsequent to a business combination. These standards are effective January 1, 2011, unless they are adopted early, at the same time as Section 1582 "Business Combinations". The adoption of these standards is not expected to have any material impact on the Fund's financial statements unless the Fund enters into a business combination in the future.
3. Future Changes in Accounting Policies
The Fund will be subject to IFRS commencing in 2011. The Fund is assessing the effects conversion to IFRS will have on its financial statements and notes thereto.
4. Unitholders' Equity
(a) Unitholders' Capital
Units Amount ($)
-----------------------------------------
December 31, 2009 10,808,503 44,387,955
Units cancelled 1,092 -
-----------------------------------------
June 30, 2010 10,807,411 44,387,955
=========================================
The Fund declared distributions of $0.105 per unit for each of January through June for a total of $6,809,241.
(b) Unit Option Plan
A summary of the unit option transactions for the six months ended June 30, 2010 is as follows:
-----------------------------------------------------------------
Weighted
average
exercise price
Units $
-----------------------------------------------------------------
Outstanding at beginning of period 765,500 16.97
Granted - -
Exercised - -
Forfeited/Expired - -
-----------------------------------------------------------------
Outstanding at end of period 765,500 16.97
-----------------------------------------------------------------
-----------------------------------------------------------------------
Options Outstanding Options Exercisable
Weighted Weighted Weighted
average average Number average
Outstanding at remaining exercise exercisable at exercise
Price June 30, 2010 contractual life price June 30, 2010 price
(years)
-----------------------------------------------------------------------
$17.50 160,000 0.9 $17.50 160,000 $17.50
-----------------------------------------------------------------------
$17.45 50,000 1.1 $17.45 50,000 $17.45
-----------------------------------------------------------------------
$16.41 255,000 1.9 $16.41 255,000 $16.41
-----------------------------------------------------------------------
$22.45 116,375 2.9 $22.45 77,583 $22.45
-----------------------------------------------------------------------
$13.69 184,125 3.9 $13.69 61,375 $13.69
-----------------------------------------------------------------------
(c) Contributed Surplus
$
December 31, 2009 3,813,850
Unit-based compensation expense 495,000
June 30, 2010 4,308,850
(d) Performance Trust Units Plan
The Fund has established a Performance Trust Units (PTU) plan to reward officers and employees. The number of fund units earned is dependent upon the achievement of certain financial targets over a three-year period. The PTUs are earned over the same three-year period and vest on the third anniversary of the grant, at which time the holder is entitled to cash equal to the aggregate current market value of the number of fund units subject to the PTUs. Distributions per PTU are added to the entitlement after the PTUs are earned. Compensation expense is based on the estimated fair value of the award determined at the end of each quarter and recognized on a straight-line basis throughout the term of the vesting period, with a corresponding increase to accrued liabilities. The Fund has granted awards pursuant to the plan and recorded $183,000 as compensation expense for the six months ended June 30, 2010 as part of selling, general and administrative expenses.
5. Net Earnings Per Unit
Basic per unit calculations for the six and three months ended June 30, 2010 were based on the weighted average number of units outstanding of 10,808,431 and 10,808,359, respectively. Basic per unit calculations for the six and three months ended June 30, 2009 were based on the weighted average number of units outstanding of 10,799,586 and 10,806,484, respectively. Diluted per unit calculations for the six and three months ended June 30, 2010 were based on the weighted average number of units outstanding of 10,827,738 and 10,827,666, respectively. Diluted per unit calculations for the six and three months ended June 30, 2009 were based on the weighted average number of units outstanding of 10,799,586 and 10,806,484, respectively. The difference between the basic and diluted units was attributable to the dilutive effect of the unit options outstanding.
6. Commitments and Contingencies
In May 2010 a judgment of approximately $0.8 million was rendered against Badger for damages as well as prejudgment interest and costs. This amount was expensed in the second quarter of 2010. The Fund has appealed the decision.
7. Geographically Segmented Information
The Fund operates in two geographic/reportable segments providing daylighting services to each of these segments. The following is selected information for the six-month and three-month periods ended June 30, 2010 and 2009 based on these geographic segments:
Three months ended June 30, 2010
----------------------------------------
Canada ($) U.S. ($) Total ($)
Revenues 17,560,515 11,813,656 29,374,171
Direct costs 11,465,846 8,014,680 19,480,526
Selling, general 2,781,232 757,091 3,538,323
and administrative
EBITDA 3,314,970 3,307,335 6,622,305
Amortization 2,031,952 1,386,933 3,418,885
Earnings before 1,090,215 1,908,869 2,999,084
income taxes
Capital expenditures 1,867,608 113,614 1,981,222
Six months ended June 30, 2010
----------------------------------------
Canada ($) U.S. ($) Total ($)
Revenues 35,276,109 24,432,021 59,708,130
Direct costs 22,595,711 16,531,098 39,126,809
Selling, general 4,911,518 1,495,750 6,407,268
and administrative
EBITDA 7,769,176 6,526,499 14,295,675
Amortization 3,917,154 2,805,830 6,722,984
Earnings before 3,551,459 3,686,542 7,238,001
income taxes
Property, plant 49,026,862 39,901,932 88,928,794
and equipment
Intangible assets 4,697,513 - 4,697,513
Goodwill 1,621,000 - 1,621,000
Total assets 73,427,555 63,535,621 136,963,176
Capital expenditures 4,294,129 286,781 4,580,910
Three months ended June 30, 2009
---------------------------------------------
Canada ($) U.S. ($) Total ($)
Revenues 16,933,325 12,525,915 29,459,240
Direct costs 11,424,452 8,319,514 19,743,966
Selling, general 2,074,377 1,151,963 3,226,340
and administrative
EBITDA 3,333,725 3,118,885 6,452,610
Amortization 1,934,090 1,290,055 3,224,145
Earnings before 1,239,241 1,788,529 3,027,770
income taxes
Capital expenditures 1,870,240 235,018 2,105,258
Six months ended June 30, 2009
---------------------------------------------
Canada ($) U.S. ($) Total ($)
Revenues 37,616,967 29,225,578 66,842,545
Direct costs 24,564,153 18,717,241 43,281,394
Selling, general 3,677,972 2,363,183 6,041,155
and administrative
EBITDA 9,255,238 8,511,464 17,766,702
Amortization 3,886,858 2,718,256 6,605,114
Earnings before 4,960,285 5,755,110 10,715,395
income taxes
Property, plant 55,480,071 39,235,868 94,715,939
and equipment
Intangible assets 4,893,512 - 4,893,512
Goodwill 1,621,000 - 1,621,000
Total assets 80,514,950 55,272,624 135,787,574
Capital expenditures 3,764,838 824,537 4,589,375
Badger Income Fund is an open-ended trust that is North America's largest provider of non-destructive excavating services. Badger traditionally works for contractors and facility owners in the utility and petroleum industries. Badger's key technology is the Badger Hydrovac, which is used primarily for safe digging in congested grounds and challenging conditions. The Badger Hydrovac uses a pressurized water stream to liquefy the soil cover, which is then removed with a powerful vacuum system and deposited into a storage tank. Badger manufactures its truck-mounted hydrovac units.
Badger Income Fund's business model involves the provision of excavating services through two distinct entities: the Operating Partners (franchisees in the United States and agents in Canada), and Badger Corporate. Badger Corporate works with its Operating Partners to provide Hydrovac service to the end user. In this partnership, Badger provides the expertise, the trucks, and North American marketing and administration support. The Operating Partners deliver the service by operating the equipment and developing their local markets. All work is invoiced by Badger and then shared with the Operating Partner based upon a revenue sharing formula. In various locations Badger has established corporate-run operations to market and deliver the service in the local area.
The Toronto Stock Exchange has neither approved nor disapproved the information contained herein.
For more information regarding this press release, please contact:
Tor Wilson Greg Kelly, CA
President and CEO Vice President Finance and CFO
2820, 715 - 5th Avenue SW Telephone 403-264-8500
Calgary, Alberta T2P 2X6 Fax 403-228-9773
Source: Badger Income Fund (TSX - BAD.UN) www.badgerinc.com
Maximum News Dissemination by Filing Services Canada Inc. *
www.usetdas.com
