Management Commentary

Our performance in the fourth quarter and the year continued to be strong despite the challenging economic climate and the sudden decline in recycling commodity prices, said Keith Carrigan, vice chairman and chief executive officer. Revenues in the quarter grew 19.1% to $298.9 million, and in 2008 we reached a financial milestone, with revenues in excess of $1.1 billion, an increase of 21.8% over the prior year. Organic Canadian and US segment revenues, which exclude acquisitions and fuel and environmental surcharges, increased 5.9% and declined 4.0% quarter over quarter, respectively, and grew 9.7% and 2.4% year over year, respectively.

Our financial performance reflects our ability to adjust quickly to the environment that we faced, Carrigan continued. EBITDA reached $83.2 million in the quarter and $310.2 million dollars in 2008, reflecting comparative increases of a 19.9% and 12.6%, respectively. In the quarter and the year, before the impact of foreign currency translation, EBITDA increased 5.9% and 13.0%, respectively. Free cash flow, which includes all capital and landfill expenditures, increased comparatively by 318.9% and 54.1% to $22.5 million and $102.5 million, respectively.

In 2009, we will adhere to the pragmatic and disciplined principles that have resulted in revenue, earnings and cash flow growth each year since our founding, Carrigan added. With our expected deleveraged balance sheet and positive free cash flow position, we are poised to focus our efforts on our existing business and future opportunities.

Financial Highlights for the Three Months and Year Ended December 31, 2008

Revenues increased 19.1% to CAD298.9 million.

Revenue growth, before the impact of foreign currency translation, was 3.2% and 22.3%.

EBITDA increased 19.9% and 12.6% to CAD83.2 million and CAD310.2 million.

EBITDA growth, before the impact of foreign currency translation, was 5.9% and 13.0%.

Free cash flow increased to CAD22.5 million and CAD102.5 million or 318.9% and 54.1%.

For the quarter and year, core price increased 4.0% and 4.1% in Canada and 2.0% and 3.3% in the US.

For the quarter and year, volumes increased 2.5% and 5.3% in Canada and decreased (4.6%) and (0.9%) in the US.

In Canada, lower recycling commodity prices resulted in a revenue decline of (0.6%) in the quarter, compared to a 0.4% increase for the year, and decreased (1.4%) in the quarter and were unchanged in the year, in the US.

Other Highlights for the Three Months and Year Ended December 31, 2008

Effective February 12, 2009, the company announced the issuance of 8,500 common shares for gross proceeds of CAD80,750. The underwriters have an option to purchase up to an additional 1,275 common shares on the same terms and conditions, which if exercised bring the total gross proceeds to CAD92,863. The company intends to repay a portion of outstanding borrowings on its US. long-term debt facility.

Effective August 18, 2008, the company’s predecessor reduced its distribution per trust unit from CAD1.818 to CAD0.50 per annum. commencing with the distribution payable to holders of record on December 31, 2008.

Effective September 25, 2008, the company announced a special quarterly dividend payable in four equal amounts of CAD0.125 per share commencing on March 31, 2009.

Effective October 1, 2008, the company amended its Canadian and US long-term debt facilities to reflect the change in its organizational structure.

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

Effective August 6, 2008, the company extended and amended its US long-term debt facility.

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

For the year ended December 31, 2008, the company completed eight acquisitions, comprised of seven tuck-ins and one new market.

Revenues – Three months and year ended December 31

The increase in revenues for the three months ended is due in part to organic Canadian segment growth as a result of both volume and pricing growth, partially offset by a marginal decline in recycling commodity prices. Organically, the company’s US segment declined period over period. The change is due in large part to a decline in volumes and commodity recycling prices, partially offset by a marginal increase in pricing in other areas of the business. Translating the company’s US segment results to Canadian dollars is a significant component of the quarter over quarter increase. Acquisitions and fuel and environmental surcharges account for the balance of the change.

The increase in revenues for the year ended is due in part to organic Canadian and US segment growth coupled with acquisitions. The company’s US northeast segment continued to experience the impact of an overall economic slowdown. Falling commodity prices also impacted organic revenue growth, and the impact was most notable in the company’s US northeast segment.

Operating expenses – Three months and year ended December 31

Higher total disposal and labour costs are attributable to higher collected waste volumes in the company’s Canadian segment and higher costs to service new and existing customers, contracts, and acquisitions for the three months and year ended. The balance of the changes are due principally to higher vehicle operating costs and repairs and maintenance expense due largely to the higher cost of fuel and an increase in the company’s fleet of service vehicles required to service new and acquired customers, and new contracts. The impact of higher fuel costs was most pronounced in the US northeast segment, and more specifically at the Seneca Meadows landfill. The consumption of fuel, coupled with the absorption of fuel price increases charged by third party haulers of waste to the landfill, were absorbed by the company as result of operating conditions in this market. Translating the company’s US segment results to Canadian dollars is a significant component of the quarter over quarter increase.

SG&A expenses – Three months and year ended December 31

Higher total salaries are the primary reasons for the comparative increases due in large part to acquisitions and organic growth. Compensation expense to retain certain executive employees, recorded in the company’s Canadian segment, also contributed to the increase in salaries. Higher facility and office costs, as a result of acquisition and organic growth, and higher professional fees and corporate development costs are the primary reasons for the balance of the changes. Translating the company’s US segment results to Canadian dollars is a significant component of the quarter over quarter increase.

BFI Canada is a full-service waste management company providing non-hazardous solid waste collection and disposal services.