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Press release from Filing Services Canada

Badger Daylighting Ltd. Announces Results for the Year Ended December 31, 2013

Monday, March 17, 2014

Badger Daylighting Ltd. Announces Results for the Year Ended December 31, 2013

08:00 EDT Monday, March 17, 2014

FSC / Press Release

Badger Daylighting Ltd. Announces Results for the Year Ended December 31, 2013

Calgary, Alberta CANADA, March 17, 2014 /FSC/ - Badger Daylighting Ltd. (BAD - TSX), is pleased to announce its results for the year and three months ended December 31, 2013.

Management's Discussion and Analysis

The following Management's Discussion and Analysis (MD&A) should be read in conjunction with the audited consolidated financial statements and related notes of Badger Daylighting Ltd. (the "Company" or "Badger") for the year ended December 31, 2013. The audited consolidated financial statements were prepared in accordance with International Financial Reporting Standards (IFRS). Readers should also refer to the Annual Information Form for the year ended December 31, 2013, which along with further information relating to Badger may be found on SEDAR at www.sedar.com.

All current and comparative share capital and net profit per share amounts have been retroactively adjusted for the three for one stock split that occurred January 24, 2014.

This MD&A has been prepared taking into consideration information available to March 14, 2014.

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION AND STATEMENTS

Certain statements and information contained in this MD&A and other continuous disclosure documents of the Company referenced herein, including statements related to the Company's capital expenditures, projected growth, view and outlook toward margins, cash dividends, 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 Company 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 discussion reflecting the Company's belief that:

* Internal preparations for anticipated growth in 2014 will be completed;

* As long as overall activity in the economy and the oil and natural gas industry remains essentially constant, Badger will be able to continue to grow the business in 2014;

* Badger in 2014 can further develop the organization to position itself to be able to handle the planned future growth;

* The new locations opened in the United States will provide an increased contribution to cash flows from operations and net profit during 2014;

* The current business development initiative will provide Badger with the additional new customers necessary to grow the business in 2014 and the future;

* Eastern Canada will continue with steady growth in 2014, driven by activity in the utility and construction segments;

* There will be an increase in Western Canada revenue during 2014 due to anticipated project volume and spending in the oil and natural gas sector;

* An increase in Company capital will be required to finance the anticipated capital expenditure program; and,

* That the extendable revolving credit facility will be renewed and fully available during 2014 for an additional 364-day period.

The forward-looking statements rely on certain expected economic conditions and overall demand for Badger's services and are based on certain assumptions. The assumptions used to generate forward- looking statements are, among other things, that:

* Badger has the ability to achieve its revenue, net profit and cash flow forecasts for 2014;

* There will be long-term demand for hydrovac services from oil refineries, petro-chemical plants, power plants and other large industrial facilities throughout North America;

* Badger will maintain relationships with current customers and develop successful relationships with new customers;

* The Company 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: price 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; extreme or unsettled weather patterns; and fluctuations in foreign exchange or interest rates.

Readers are cautioned that the foregoing factors are not exhaustive. Additional information on these and other factors that could affect the Company'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 Company's website. The forward-looking statements and information contained in this MD&A are expressly qualified by this cautionary statement. The Company 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-IFRS FINANCIAL MEASURES

This MD&A contains references to certain financial measures, including some that do not have any standardized meaning prescribed by IFRS 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 dividends" 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 of cash available for growth and/or dividends to shareholders. 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 and is a measure of the Company's operating profitability and is therefore useful to management and investors. EBITDA provides an indication of the results generated by the Company's principal business activities prior to how these activities are financed, assets are amortized or the results are taxed in various jurisdictions. EBITDA is calculated from the consolidated statement of comprehensive income as gross profit less selling, general and administrative costs and deferred unit plan costs. "Adjusted EBITDA" is EBITDA prior to recognizing deferred unit costs. They are calculated as follows:

-***-

 Three months ended Year ended
December 31, December 31,
---------------------------------------------------- ---------------------------
$000's 2013 2012 2013 2012
---------------------- -------------- -------------- ------------ --------------
Gross profit
30,650 22,087 109,883 75,555
Selling, general and
administrative costs (5,112) (3,400) (15,714) (11,741)
Deferred unit plan (3,386) (653) (10,010) (2,320)
---------------------- -------------- -------------- ------------ --------------
EBITDA 22,152 18,034 84,159 61,494
Deferred unit plan 3,386 653 10,010 2,320
---------------------- -------------- -------------- ------------ --------------
Adjusted EBITDA 25,538 18,687 94,169 63,814
====================== ============== ============== ============ ==============

-****-

"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 profit or other measures of financial performance calculated in accordance with IFRS. Funds generated from operations are derived from the consolidated statement of cash flows and is calculated as follows:

-***-

 Three months ended Year ended
December 31, December 31,
----------------------------------------------------------- --------------------
$000's 2013 2012 2013 2012
-------------------------------------- ---------- --------- ---------- ---------
Cash provided by operating activities 21,844 13,193 58,403 46,201
Add (deduct):
Net change in non-cash working capital
relating to operating activities (2,870) 2,428 11,419 4,655
Equity-settled share plan settled in
cash - - 1,513 655
-------------------------------------- ---------- --------- ---------- ---------
Funds generated from operations 18,974 15,621 71,335 51,511
====================================== ========== ========= ========== =========

-****-

"Growth capital expenditures" are capital expenditures intended to improve Badger's efficiency,
productivity or overall capacity and thereby allow Badger to expand overall activity and/or access new markets. They generally represent any net additions to the daylighting fleet. Growth capital expenditures exclude acquisitions.

"Maintenance capital expenditures" are any amounts incurred during a reporting period to keep the Company's daylighting fleet at the same number of units (including costs incurred to extend the operational life of a daylighting unit), plus any other capital expenditures required to maintain the capacities of the existing business. 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 cash equivalents.

Cash available for growth and dividends, EBITDA, Adjusted EBITDA, funded debt, funds generated from operations, growth capital expenditures, maintenance capital expenditures and net debt throughout this document have the meanings set out above.

-***-

FINANCIAL HIGHLIGHTS
($ thousands, except per share and total shares outstanding information)

 Three months Three months Year Year
ended ended ended ended
December 31, December 31, December 31, December 31,
2013 2012 2013 2012
--------------------------------------------------------------------------------
Revenues 94,240 69,249 324,594 239,228

EBITDA 22,152 18,034 84,159 61,494

Adjusted EBITDA 25,538 18,687 94,169 63,814

Profit before tax 14,143 12,841 57,827 42,008

Income tax expense
Current 3,528 2,546 12,735 7,945
Deferred (618) 2,407 4,729 6,013

Net profit 11,233 7,888 40,363 28,050

Profit per share -
diluted ($) 0.30 0.21 1.09 0.80

Funds generated
from operations 18,974 15,621 71,335 51,511

Funds generated
from operations
per share - diluted ($) 0.51 0.42 1.93 1.47

Maintenance capital
expenditures 2,420 1,089 8,035 3,670

Required long-term
debt repayments - - - -

Cash available for
growth and
dividends 16,711 14,611 63,725 48,053

Dividends declared 3,333 3,267 13,323 12,058

Growth capital
expenditures 16,733 13,768 62,444 50,423

Total shares outstanding
(end of the period) 37,033,893 36,979,893 37,033,893 36,979,893

-****-

OVERVIEW
Highlights for the year ended December 31, 2013:

* Revenues increased by 36 percent to $324.6 million in 2013 from $239.2 million in 2012, while Adjusted EBITDA increased by 48 percent to $94.2 million in 2013 from $63.8 million in 2012.

* Adjusted EBITDA margins were 29 percent in 2013 compared to 27 percent in 2012.

* Cash available for growth and dividends increased by 33 percent to $63.7 million in 2013 from $48.1 million in 2012, due to increased funds generated from operations and no required debt repayments.

* Profit per share was $1.09 for 2013 versus $0.80 per share for 2012.

* In 2013, Badger made capital expenditures of $70.5 million on property, plant and equipment, consisting of $62.4 million in growth capital expenditures and $8.0 million in maintenance capital expenditures.

* Net debt increased to $73.7 million at December 31, 2013 from $27.3 million at December 31, 2012.

* Subsequent to year-end on January 24, 2014 the Company closed a private placement of senior secured notes, which rank pari passu with the senior credit facilities, have a principal amount of US $75 million, an interest rate of 4.83 percent per annum and mature in 2022. Amortized repayment of the notes begins in 2020.

* The Company renewed its extendable revolving credit facility in May 2013. The principal amount was increased from $55 million to $70 million. During the year the principal amount was increased further to $100 million. In connection with obtaining the senior secured note financing in January 2014 the principal amount was reduced to $75 million.

* The Company added 175 new hydrovac units (41 units in the first quarter, 43 units in the second quarter, 45 units in the third quarter and 46 units in the fourth quarter) and removed 14 from service, exiting the year with 791 hydrovac units. Of the total, 356 units were operating in Canada and 435 in the United States at year-end. At December 31, 2012, Badger had 307 units in Canada and 323 in the United States for a total of 630 units. The new units were financed from cash generated from operations and existing credit facilities.

* Effective November 1, 2013, Badger acquired the business and operating assets of Fieldtek Holdings Ltd. ("Fieldtek") for cash consideration of $19.1 million. Fieldtek provides general vacuum truck and auxiliary services to the oil and natural gas industry, focusing primarily on production tank cleaning and removal of waste oil and sand. Based in Lloydminster, Alberta, Fieldtek has 55 employees and operates 50 pieces of equipment including semi vacuum trucks and trailers, pressure trucks and steamer combo units. Fieldtek also has 19 lease operator units that work exclusively for Fieldtek.

Selected Annual Financial Information

-***-

-------------------------------- ------------------------------------------
Year ended December 31,
------------------------------------------
($ thousands except per share 2013 2012 2011
amounts)
-------------------------------- ------------ --------------- -------------
Revenues 324,594 239,228 194,178
-------------------------------- ------------ --------------- -------------
Net profit 40,363 28,050 25,803
-------------------------------- ------------ --------------- -------------
Net profit per share - basic (2) 1.09 0.80 0.80
-------------------------------- ------------ --------------- -------------
Net profit per share - diluted (2) 1.09 0.80 0.79
-------------------------------- ------------ --------------- -------------
Total assets (end of year) 333,898 225,582 183,867
-------------------------------- ------------ --------------- -------------
Total long-term debt (1) (end of 82,319 29,773 46,554
year)
-------------------------------- ------------ --------------- -------------
Dividends declared 13,323 12,058 11,030
-------------------------------- ------------ --------------- -------------
-****-

(1) Includes the current portion of long-term debt.

(2) All per share amounts have been adjusted for the three for one share split that occurred on January 24, 2014.

OUTLOOK

Badger is satisfied with the business growth, financial results, improvements in operational efficiencies, development of the customer base and organizational development the Company achieved in 2013. The fourth quarter of 2013 provided some additional challenges due to adverse weather and timing of holiday's, which Badger was able to overcome. The weather-related challenges continued in the first quarter of 2014. As always, Badger's focus is on immediately working on items that it believes will contribute to long-term success. Given the current and forecast favorable economic conditions in North America and reasonable activity levels in the oil and natural gas industry, Badger expects to continue achieving profitable growth for the foreseeable future. It should be noted that Badger's internal target is to increase the revenue of the United States business to a level double that of the Canadian business. This is a big challenge given that Canada continues to have good growth prospects.

Major initiatives for 2014 are as follows:

1. Continued focus on building the organization by adding and developing personnel who have the attitude and skills necessary to meet the requirements created by Badger's planned growth. This is by far the biggest challenge for Badger. Currently Badger has a very strong, motivated group of people. The Company needs to continuously add to the group to meet its objectives.

2. Increase the efficiency and extent of the business development group in order to further expand Badger's customer base throughout the United States and Canada.

3. Focus on what has made Badger successful: having the best trucks with the best operators, providing good value for customers. Transferring this formula to new areas requires ensuring that these personnel are well trained and that Badger becomes quickly established in the new area.

4. Further develop Badger's administration system replacing paper with electronic forms, which can capture, transfer and process the necessary information more efficiently and effectively.

5. Grow the fleet as required to meet customer demand and keep utilization at a comfortable level. The current build is approximately one new truck every business day. Badger expects to retire 20 to 30 trucks in 2014.

Regional Comments

The United States business performed very well in 2013. All areas of the organization from the field to administration were able to handle the growth, improve operations and provide a good financial return. The challenge in 2014 remains the same. All areas require more people in order to continue supporting growth plans and take advantage of this large market's potential. The Company expects most revenue growth in 2014 will be from existing locations. Badger anticipates adding 12 locations during 2014.

Although the market in Canada is more mature and has more hydrovac competition than in the United States, Badger's Canadian operations have grown at an impressive rate. As in 2013, in 2014 the organization in Canada will add key employees and areas to continue this growth. Focusing on improving operations to enhance customer value is also an imperative for 2014. Structural changes made in Ontario in 2013 should have a positive impact in 2014. In Western Canada, the northern operations are a bigger part of the business and there are opportunities to do more.

Overall 2013 was a good year for Badger as its operating results met the Company's expectations, improved its capacity to grow further and generated good financial results. The Company's long-term focus has not changed. It is to build the organization for future growth, grow the customer base, add more hydrovac units, improve operational efficiencies and further streamline the administrative processes. Given a continued reasonable economy and equivalent overall activity in the oil and natural gas industry Badger has the opportunity and plans to continue its profitable growth.

OVERALL PERFORMANCE FOR THE YEAR ENDED DECEMBER 31, 2013 COMPARED TO THE YEAR ENDED DECEMBER 31, 2012

Results of Operations

Revenues

Revenues were $324.6 million for the year ended December 31, 2013 compared to $239.2 million for the year ended December 31, 2012. The increase is attributable to the following:

* Canadian revenues increased by 31 percent from $129.3 million in 2012 to $169.7 million in 2013. Western Canada revenue increased due to a favorable market for Badger, strong business development effort and good operational performance. Eastern Canada revenue increased due to a growing market, reasonable weather conditions and positive results due to additions to the organization and structural changes made in 2013; and

* United States revenue grew from $110.0 million in 2012 to $154.9 million in 2013. Removing the effect of foreign exchange rate changes, revenues increased by 37 percent year-over-year. The increase is due to the addition of new areas in 2012 and 2013, improvements in results from underperforming areas, enhanced business development efforts that succeeded in generating more work and organizational improvements.

Badger's average revenue per truck per month was $34,600 for 2013 versus $32,900 for 2012.

Direct Costs

Direct costs for 2013 were $214.7 million compared to $163.7 million for 2012. The increase of 31 percent is less than the 36 percent increase in revenues and is due to achieving increased gross profit margins in the United States, discussed below.

Gross Profit

The gross profit percentage was 33.9 percent for 2013 compared to 31.6 percent in 2012. The Canadian gross profit percentage decreased marginally from 36.4 percent for 2012 to 35.7 percent for 2013 due to weather-related challenges and changes in the type of work (projects versus regular work). United States gross profit percentage increased from 25.9 percent in 2012 to 31.8 percent in 2013 due to greater operational efficiencies, organizational improvements and maturing of the business.

Depreciation of Property, Plant and Equipment
Depreciation of property, plant and equipment was $24.2 million in 2013 or $5.8 million higher than the $18.4 million incurred in 2012 due to having more hydrovac units in the fleet.

Finance Cost

Finance cost was $1.6 million in 2013 versus $1.2 million in 2012. The higher financing cost was due to having higher average debt year-over-year.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by 33.8 percent to $15.7 million in 2013 from $11.7 million in 2012. The main reasons for the increase were an increase in personnel salary costs resulting from the growth in Badger's business and increases in employee bonuses due to the good financial results. As a percentage of revenues, selling, general and administrative expenses decreased slightly to 4.8 percent for 2013 from 4.9 percent for 2012.

Deferred Unit Costs

Deferred unit costs represent executive, director and employee incentive compensation. They increased from $2.3 million in 2012 to $10.0 million in 2013 due principally to the increase in Badger's share price.

Income Taxes

The effective tax rate was 30 percent for 2013 versus 33 percent for 2012.

Exchange Differences on Translation of Foreign Operations

The exchange rate differences result from converting the balance sheet and profit statement related to the United States operations into Canadian currency.

Liquidity and Dividends

Funds generated from operations increased to $71.3 million in 2013 from $51.5 million in 2012 due primarily to increased revenues and EBITDA. The Company uses its cash to pay dividends to shareholders, build additional hydrovac units, invest in maintenance capital expenditures and repay long-term debt.

The Company had working capital of $61.8 million at December 31, 2013, compared to $43.9 million at December 31, 2012 due to the increase in trade and other receivables.

The following table outlines the cash available to fund growth and pay dividends to shareholders in 2013 and 2012:

-***-

 Year ended Year ended
($ thousands) December 31, 2013 December 31, 2012
--------------------------------------------------------------------------------
Funds generated from operations 71,335 51,511
Add: proceeds from sale of
property, plant
and equipment 425 212
Deduct: required repayments
of long-term debt - -
Deduct: maintenance
capital expenditures (8,035) (3,670)
--------------------------------------------------------------------------------
Cash available for
growth capital expenditures
and dividends 63,725 48,053
--------------------------------------------------------------------------------
Growth capital expenditures 62,444 50,423
--------------------------------------------------------------------------------
Dividends declared 13,323 12,058
--------------------------------------------------------------------------------

-****-
In determining cash available for dividends, the Company excludes non-cash working capital
changes for the year as well as growth capital expenditures. Changes in non-cash working capital items are 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 periods. Growth capital expenditures are excluded so as to include only the maintenance capital expenditures required to sustain the existing asset base.

The following table outlines the excess of cash provided by operating activities and net profit over dividends declared during the years ended December 31, 2013 and 2012:

-***-

 Year ended Year ended
($ thousands) December 31, 2013 December 31, 2012

Cash provided by operating activities 58,403 46,201
Net profit 40,363 28,050
Dividends declared 13,323 12,058
Excess of cash provided by operating
activities over dividends declared 45,080 34,143
Excess of net profit over
dividends declared 27,040 15,992

-****-

The Company pays cash dividends monthly to its shareholders. They may be reduced, increased or
suspended by the Board of Directors depending on the operations of Badger and the performance of its assets. The actual cash flow available for dividends to shareholders of Badger is a function of numerous factors, including: the Company'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 the number of shares outstanding.

The Company maintains a strong balance sheet. 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, proceeds received from equity financings or cash retained from operating activities. The majority of the cash provided by operating activities during 2013 and 2012 was used to finance growth capital expenditures and to pay dividends to shareholders.

If maintenance capital expenditures increase in future periods, the Company's cash available for growth capital expenditures and dividends will be reduced. 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 years. As a result, Badger is incurring relatively low levels of maintenance capital expenditures. Over time, Badger would expect to incur annual maintenance capital expenditures approximately equalling the year's depreciation expense. Badger estimates it will remove approximately 20 to 30 hydrovac units from the fleet in 2014. Badger expects that cash provided by operations and cash available for growth capital expenditures and dividends will be sufficient to fund its future maintenance capital expenditures.

Badger is restricted from declaring dividends if it is in breach of the covenants under its credit facilities. As at the date of this MD&A the Company is in compliance with all debt covenants and is able to fully utilize its credit facilities as well as declare dividends. Badger does not have a credit rating.

Capital Resources

Investing

In 2013 the Company spent $70.4 million on property, plant and equipment compared to $54.1 million in 2012. During 2012 the Company's capital program consisted of the addition of 131 new hydrovac units compared to a capital program consisting of 175 new hydrovac units built in 2013. The costs to build a hydrovac unit remained consistent with the average for 2012.

Maintenance capital expenditures are incurred during a period to keep the hydrovac fleet at the same number of units plus any other capital expenditures required to maintain the business. This amount will fluctuate from period-to-period depending on the number of units retired from the fleet. During the year ended December 31, 2013 Badger added 175 units to the fleet, of which 14 have been reflected as maintenance capital expenditures. Total maintenance capital expenditures for the year were $8.0 million, which includes $3.3 million spent on the construction of facilities and other equipment.

Financing

In May 2013 the Company's extendable revolving credit facility was renewed with the principal amount increased from $55 million to $70 million at Badger's request. During the year the principal amount was further increased to $100 million. Subsequent to year end, in connection with obtaining the senior secured note financing referred to below the principal was reduced to $75 million. The facility was used and will continue to be used to help finance Badger's capital expenditure program and support corporate activities. The facility has no required principal repayments. It expires on June 22, 2014 and is renewable by mutual agreement of the Company and the lender 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 1.25 percent plus 0 to 1.25 percent depending on Badger's funded- debt-to-EBITDA ratio.

On January 24, 2014 the Company closed a private placement of senior secured notes. The notes, which rank pari passu with the senior credit facilities, have a principal amount of US $75 million, an interest rate of 4.83% per annum and mature January 24, 2022. Amortizing principal payments of US $25 million are due under the notes on January 24, 2020, January 24, 2021 and January 24, 2022. Interest will be paid semi-annually in arrears. Proceeds were used to repay a portion of the outstanding debt under the Company's extendable revolving credit facility and for ongoing capital expenditures and general corporate purposes.

The Company's net debt increased by 170 percent during 2013. As at December 31, 2013 Badger's cash and cash equivalents were $8.6 million, resulting in net debt of $73.7 million versus net debt of $27.3 million at December 31, 2012. The main reasons for the increase were the capital expenditures incurred during 2013, the acquisition of Fieldtek and the increase in working capital due to the increase in trade and other receivables.

At December 31, 2013 the Company had a long-term debt-to-equity ratio of 0.48:1 and a long-term debt-to-trailing-funds-generated-from-operations ratio of 1.15:1. Management believes that the Company's healthy balance sheet, combined with funds generated from operations, will provide sufficient capital to fund ongoing operations, pay dividends to shareholders, finance future capital expenditures and execute its strategic plan for the foreseeable future. Based on the expected capital required to fund the anticipated 2014 capital expenditure program, additional financing may be required. This could be comprised of additional debt, equity or a combination thereof. The Company has a $75 million extendable, revolving facility to fund working capital requirements and finance capital expenditures. The Company had a cash and cash equivalents balance of $8.6 million at December 31, 2013. The Company's practice is to utilize an appropriate mix of debt and equity to finance its maintenance capital expenditures and growth initiatives.

As of December 31, 2013 and the date of the MD&A 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 December 31, 2013 December 31, 2012 Threshold
--------------------- ------------------- ------------------- ------------------

Funded Debt(1)
to EBITDA(2) 0.88:1 0.44:1 2.25:1 maximum
Fixed Charge
Coverage(3) 3.44:1 4.58:1 1.00:1 minimum

--------------------- ------------------- ------------------- ------------------

-****-

1 Funded debt is long-term debt less cash and cash equivalents.

2 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 Company's actual EBITDA for the trailing 12 months.

3 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 dividends.

Contractual Obligations and Committed Capital Investment

The Company intends to meet its contractual obligations through funds generated by operating activities. The Company's contractual obligations for the next five years relating to repayment of long-term debt (assuming the extendable revolving credit facility is not renewed on June 22, 2014) and lease payments for shop and office premises are as follows:

-***-

($000s) Total 2014 2015-2018 Thereafter
-------------------------------------------------------------------------------- 

Long-term debt 82,319 - 82,319 -
Shop and office leases 6,734 2,575 4,159 -
--------------------------------------------------------------------------------
Total contractual obligations 89,053 2,575 86,478 -
--------------------------------------------------------------------------------

-****-

In addition to the contractual obligations above, at year-end 2013 the Company had committed
to certain capital expenditures totalling approximately $34.7 million. They will be financed with existing credit facilities and funds generated from operations. There are no set terms for remitting payment for these financial commitments.

SHARE CAPITAL

Shareholders' capital increased from $80.6 million at December 31, 2012 to $80.9 million at December 31, 2013 due to certain employees exercising their options. Shares outstanding at December 31, 2013 were 12,344,631.

During January 2014 the Company completed a split of all of the issued and outstanding common shares on a basis of three common shares for every one existing common share held. As a result there were 37,033,893 shares outstanding at March 14, 2014.

OFF-BALANCE-SHEET ARRANGEMENTS

At December 31, 2013 and 2012, the Company had no material off-balance-sheet arrangements.

TRANSACTIONS WITH RELATED PARTIES

Shea Nerland Calnan LLP provides legal services to Badger at market rates. David Calnan, a Director and the Corporate Secretary of the Company, is a partner in this law firm and is involved in providing and managing Badger's legal services. The total cost of these legal services in 2013 was $197,000 compared to $201,000 in 2012.

SELECTED QUARTERLY FINANCIAL INFORMATION

-***-

---------------------------------------------------------------------------
($ thousands except per
share amounts) Quarter Ended
---------------------------------------------------------------------------
2013
---------------------------------------------------------------------------
Dec. 31 Sept. 30 June 30 Mar. 31
---------------------------------------------------------------------------
Revenues ($) 94,240 87,542 73,658 69,154
---------------------------------------------------------------------------
Net profit ($) 11,233 11,774 9,371 7,985
---------------------------------------------------------------------------
Net profit per share - 0.30 0.32 0.25 0.22
basic ($) (1)
---------------------------------------------------------------------------
Net profit per share - 0.30 0.32 0.25 0.22
diluted ($) (1)
---------------------------------------------------------------------------

($ thousands except per
share amounts) Quarter Ended
---------------------------------------------------------------------------
2012
---------------------------------------------------------------------------
Dec. 31 Sept. 30 June 30 Mar. 31
---------------------------------------------------------------------------
Revenues ($) 69,249 61,961 53,984 54,034
---------------------------------------------------------------------------
Net profit ($) 7,888 7,902 6,145 6,115
---------------------------------------------------------------------------
Net profit per share - 0.21 0.21 0.19 0.19
basic ($) (1)
---------------------------------------------------------------------------
Net profit per share - 0.21 0.21 0.19 0.19
diluted ($) (1)
---------------------------------------------------------------------------

-****-

(1) All per share amounts have been adjusted for the three for one share split that occurred January 24, 2014.

FOURTH QUARTER HIGHLIGHTS

* As a result of increased activity in Canada and the United States, revenue increased to $94.2 million in the three months ended December 31, 2013 from $69.2 million in the three months ended December 31, 2012. Canadian revenues increased by 35 percent from $37.5 million in the fourth quarter of 2012 to $50.7 million in the fourth quarter of 2013, due to a general increase in demand for hydrovac services in Western Canada and work generated by an increased focus on business development. Badger's United States revenue increased to $43.5 million from $31.7 million quarter-over-quarter. Removing the effect of the change in the foreign exchange rate, United States revenues increased by 30 percent in the fourth quarter of 2013 over the last quarter of 2012. This was due to additional operating locations and results from investments in business development.

* Adjusted EBITDA margins were 27 percent in the fourth quarter of 2013, unchanged from the fourth quarter of 2012.

* With the increase in revenues, profit before tax increased by 10 percent in the fourth quarter of 2013 over the same period in 2012.

* Profit per share for the fourth quarter of 2013 was $0.30 per share versus $0.21 per share for the fourth quarter of 2012.

* Average revenue per truck per month was $35,600 in the fourth quarter of 2013 compared to $35,100 per month for the same period in 2012.

* The Company added 46 hydrovac units to the fleet and removed three from service.

ACCOUNTING STANDARDS PENDING ADOPTION

The following are the IFRS pronouncements which have been issued but are not yet effective as at December 31, 2013. The pronouncements may, however, have a future impact on the measurement and/or presentation of the Company's consolidated financial statements. The pronouncements are as follows:

i) IFRS 9, 'Financial Instruments' was issued in November 2009 as the first step in its project to replace IAS 39 'Financial Instruments: Recognition and Measurement'. IFRS 9 introduces new requirements for classifying and measuring financial instruments. While early adoption is permitted the new standard has been deferred by the IASB until the issue date of the completed version of IFRS 9 is known. The IASB intends to expand IFRS 9 during the intervening period to add new requirements for classifying and measuring financial liabilities, de-recognition of financial instruments, impairment and hedge accounting. The Company is assessing the impact of this standard on the consolidated financial statements.

CRITICAL ACCOUNTING ESTIMATES

Management is responsible for applying judgement in preparing accounting estimates. Certain estimates and related disclosure included in the financial statements are particularly sensitive because of their significance to the financial statements and the possibility that future events affecting them may differ significantly from management's current judgements. An accounting estimate is considered critical only if it requires the Company to make assumptions about matters that are highly uncertain at the time the accounting estimate is made, and if different estimates the Company could have used would have a material impact on Badger's financial condition, changes in financial condition or results of operations.

While there are several estimates and assumptions made by management in the preparation of financial statements in accordance with IFRS, the following critical accounting estimates have been identified by management:

Depreciation of the hydrovac units

This accounting estimate has the greatest effect on the Company's financial results. It is carried out on the basis of the units' estimated useful lives. The Company currently depreciates them over 10 years based on current knowledge and working experience. There is a certain amount of business risk that newer technology or some other unforeseen circumstance could lower this life expectancy. A change in the remaining life of the hydrovac units or the expected residual value would affect the depreciation rate used to depreciate the hydrovac units and thus affect depreciation expense as reported in the Company's consolidated statement of comprehensive income. These changes are reported prospectively when they occur.

Tax pools and their recoverability

Badger has estimated its tax pools for the income tax provision. The actual tax pools the Company may be able to use could be materially different in the future.

Intangible assets

Intangible assets consist of service rights acquired from Badger's operating partners, customer relationships, trade name and non-compete agreements. The initial valuation of intangibles at the closing date of any acquisition requires judgement and estimates by management with respect to identification, valuation and determining the expected periods of benefit. Valuations are based on discounted expected future cash flows and other financial tools and models and are amortized over their expected periods of benefit or not amortized if it is determined the intangible asset has an indefinite life. Intangible assets are reviewed annually with respect to their useful lives or more frequently if events or changes in circumstances indicate that the assets might be impaired. Impairment exists when the carrying amount of the intangible asset exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell calculation is based on available data from binding sales transactions in an arm's-length transaction of similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash flow model. The cash flows are derived from the projections for the next five years and do not include restructuring activities that the Company is not yet committed to or significant future investments that will enhance the asset's performance. When an impairment loss reverses, the carrying amount of the intangible asset is increased to the revised estimate of the recoverable amount but not beyond the carrying amount that would have been determined had no impairment loss been recognized.

Goodwill

Goodwill is the amount that results when the cost of acquired assets exceeds their fair value at the date of acquisition. Goodwill is recorded at cost, is not amortized and is tested at least annually for impairment. The impairment test includes the application of a fair value test, with an impairment loss recognized when the carrying amount of goodwill exceeds its estimated fair value. Impairment provisions are not reversed if there is a subsequent increase in the fair value of goodwill.

Impairment of long-lived assets

The carrying value of long-lived assets, which include property, plant and equipment and intangible assets, is assessed for indications of impairment when events or circumstances indicate that the carrying amounts may not be recoverable from estimated cash flows. Estimating future cash flows requires assumptions about future business conditions and technological developments. Significant, unanticipated changes to these assumptions could require a provision for impairment in the future.

Collectability of trade and other receivables

The Company estimates the collectability of its trade and other receivables. The Company continually reviews the balances and makes an allowance when a receivable is deemed uncollectable. The actual collectability of trade and other receivables could differ materially from the estimate.

FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

Fair values

The Company's financial instruments recognized on the consolidated statements of financial position consist of cash and cash equivalents, trade and other receivables, trade and other payables, deferred unit plan liability, dividends payable and long-term debt. The fair values of these recognized financial instruments, excluding long-term debt, approximate their carrying value due to their short-term maturity. The carrying value of the long-term debt approximates fair value because the long-term facilities have a floating interest rate.

Credit risk

Credit risk arises when a failure by counter parties to discharge their obligations could reduce the amount of future cash flows from financial assets on hand at the balance sheet date. A substantial portion of the Company's trade receivables is with customers in the petroleum and utility industries and is subject to normal industry credit risks. The Company manages its exposure to credit risk through standard credit-granting procedures and short payment terms. The Company attempts to monitor financial conditions of its customers and the industries in which they operate.

Liquidity risk

Liquidity risk is the risk that, as a result of operational liquidity requirements, the Company will not have sufficient funds to settle an obligation on the due date and will be forced to sell financial assets at a price less than what they are worth, or will be unable to settle or recover a financial asset.

The Company's operating cash requirements are continuously monitored by management. As factors impacting cash requirements change, liquidity risks may necessitate the Company raising capital by issuing equity or obtaining additional debt financing. The Company also mitigates liquidity risk by maintaining an insurance program to minimize exposure to insurable losses.

At December 31, 2013, the Company had available $16.3 million of authorized borrowing capacity on the extendable revolving facility and $8.6 million of cash and cash equivalents. The credit facility has no required principal repayment. The credit facility expires June 22, 2014 and is renewable by mutual agreement of the Company and the lender for an additional 364-day period. If not renewed, interest is payable monthly on the facility for 364 days after which the entire amount is to be repaid. The Company believes it has sufficient funding through operations and the use of this facility to meet foreseeable financial obligations.

Market risk

The significant market risks affecting the financial instruments held by the Company are those related to interest rates and foreign currency exchange rates, as follows:

Interest rate risk

The Company is exposed to interest rate risk in relation to interest expense on its long-term debt. Interest is calculated at prime. The prime interest rate is subject to change. A sensitivity analysis would indicate that net profit for the year ended December 31, 2013 would have been affected by approximately $0.4 million if the average interest rate changed by 1 percentage point. The Company does not use interest rate hedges or fixed interest rate contracts to manage its exposure to interest rate fluctuations.

Foreign exchange risk

The Company has United States operations and its Canadian operations purchase certain products in United States dollars. As a result, fluctuations in the value of the Canadian dollar relative to the United States dollar can result in foreign exchange gains and losses. A sensitivity analysis would indicate that a 10 percent strengthening in the Canadian dollar against the United States dollar would decrease profit before tax by approximately $3.1 million, while a 10 percent weakening of the Canadian dollar against the United States dollar would increase profit before tax by approximately $3.1 million. The Company does not have any agreements to fix the exchange rate of the Canadian dollar to the United States dollar.

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 filings are being prepared; and (ii) material information required to be disclosed in the annual 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, 2013 and as a result of identifying the material weakness outlined below have concluded the disclosure controls and procedures are not fully 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 IFRS. Further, using the criteria established in "Internal Control - Integrated Framework" published by the Committee of Sponsoring Organizations of the Treadway Commission (1992 Framework), 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, 2013 and as a result of identifying the material weakness outlined below have concluded the internal controls over financial reporting are not fully 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 of 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 consolidated financial statements and disclosure 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 year ended December 31, 2013 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 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
(Reference is also made to Badger's Annual Information Form.)

Reliance on the oil and natural gas sector

The oil and natural gas sector accounts for approximately 55 percent of the Company's revenues. The petroleum service industry, in which Badger participates, relies heavily on the volume of capital expenditures made by oil and natural gas explorers and producers. These spending decisions are based on several factors including, but not limited to: hydrocarbon prices, production levels of current reserves, fiscal regimes in operating areas, technology-driven exploration and extraction methodologies, and access to capital, all of which can vary greatly. To minimize the impact of the oil and natural gas industry's cycles, the Company also focuses on generating revenue from the utility and general contracting market segments.

Competition

The Company operates in a highly competitive environment for hydrovac services in Canada and the United States. In order to remain the leading provider of hydrovac services in these regions, Badger continually enhances its safety and operational procedures to ensure that they meet or exceed customer expectations. Badger also has the in-house capabilities necessary to continuously improve its daylighting units so that they remain the most productive and efficient hydrovacs in the business. There can be no assurance that Badger's competitors will not achieve greater market acceptance due to pricing, efficiency, safety or other factors.

United States operations

Badger also faces risks associated with doing business in the United States. The Company has made a significant investment in the United States to develop the hydrovac market. The growth rate of the United States market is very hard to predict. The United States has been undergoing significant economic difficulties and the outlook is further complicated by substantial changes to various laws, policies and regulations that have a real or apprehended effect on business operating conditions, approval or delay of potential new projects that could require Badger's services, current rates of capital investment and the general level of confidence about future economic conditions among businesses and organizations that will be required to make decisions about future capital investment.

Safety

Badger is exposed to liabilities that are unique to the services that it provides. Such liabilities may relate to an accident or incident involving one of Badger's hydrovacs or damage to equipment or property caused by one of the hydrovacs, and could involve significant potential claims or injuries to employees or third parties. The amount of Badger's insurance coverage may not be adequate to cover potential claims or liabilities and Badger may be forced to bear substantial costs as a result of one or more accidents. Substantial claims resulting from an accident in excess of its related insurance coverage would harm Badger's financial condition and operating results. Moreover, any accident or incident involving Badger, even if Badger is fully insured or not held liable, could damage Badger's reputation among customers and the public, thereby making it more difficult for Badger to compete effectively, and could significantly affect the future cost and availability of insurance. Due to the magnitude of insurance premiums, Badger decided to self-insure against the physical damage it could incur on the hydrovac units. This decision will be re-evaluated periodically as circumstances change.

Safety is one of the Company's on-going concerns. Badger has implemented programs to ensure its operations meet or exceed current hydrovac safety standards. The Company also employs safety advisors in each region who are responsible for maintaining and developing the Company's safety policies. These regional safety advisors monitor the Company's operations to ensure they are operating in compliance with such policies.

Depreciation of daylighting units

The Company depreciates the hydrovac units over 10 years, a policy that is based on its current knowledge and operating experience. There is a certain amount of business risk that newer technology or some other unforeseen circumstance could lower this life expectancy.

Dependence on key personnel

Badger's success depends on the services of key senior management members. The experience and talents of these individuals will be a significant factor in Badger's continued success and growth. The loss of one or more of these individuals could have a material adverse effect on Badger's operations and business prospects. Management and the Board of Directors are focused on succession planning and contingency planning with respect to key senior management personnel.

Availability of labour and equipment

While Badger has historically been able to source the labour and equipment required to run its business, there can be no assurances it will be able to do so in the future.

Reliance on key suppliers

Badger has established relationships with key suppliers. There can be no assurance that current sources of equipment, parts, components or relationships with key suppliers will be maintained. If these are not maintained, Badger's ability to manufacture its hydrovac units may be impaired.

Fluctuations in weather and seasonality

Badger's operating results have been, and are expected to remain, subject to quarterly and other fluctuations due to a variety of factors including changes in weather conditions and seasonality. For example, in Western Canada Badger's results may be negatively affected if there is an extended spring break-up period since oil and natural gas industry sites may be inaccessible during such periods. In Eastern Canada, Badger has in the past experienced increased use of its equipment during cold winters, thus improving the results of its operations during such times. The Company may then experience a slow period during spring thaw.

In the Western United States, Badger has from time-to-time been restricted by the imposition of government regulations from conducting its work in environmentally sensitive areas during the winter mating seasons of certain mammals and birds. This has had a negative effect on Badger's results. As such, changes in the weather and seasonality may, depending on the location and nature of the event, have either a positive or negative effect on Badger's operating and financial results.

Fluctuations in the economy and political landscape

Operations could be adversely affected by a general economic downturn, changes in the political landscape or limitations on spending.

Compliance with government regulations

While Badger believes it is in compliance with all applicable government standards and regulations, there can be no assurance that all of Badger's business will be able to continue to comply with all applicable standards and regulations.

Environmental risk

As the owner and lessor of real property, Badger is subject to various federal, provincial and municipal laws relating to environmental matters. Such laws provide that Badger could be liable for the costs of removal and remediation of certain hazardous substances or wastes released or deposited on or in its properties or disposed at other locations. The failure to remove or remediate such substances, if any, could adversely affect Badger's ability to sell such real property or borrow using such real property as collateral and could also result in claims against Badger.

Litigation

Legal proceedings may arise from time to time in the course of Badger's business. All industries, including the hydrovac industry, are subject to legal claims, with and without merit. Such legal claims may be brought against Badger or one or more of its subsidiaries in the future from time to time. Defense and settlement costs of legal claims can be substantial, even with respect to claims without merit. Due to the inherent uncertainty of the litigation process, such process could divert management time and effort and the resolution of any particular legal proceeding to which Badger may become subject could have a material effect on Badger's financial position and results of operations.

Income tax matters

Badger and its subsidiaries are subject to federal, provincial and state income taxes in Canada and the United States, as applicable. Although Badger is of the view that it and its subsidiaries are in full compliance with all applicable legal requirements relating to federal, provincial and state legislation on income tax, sales tax, goods and services tax, excise tax and all other direct or indirect taxes including business tax, real estate tax, municipal and other taxes, there can be no assurance that Badger and its subsidiaries will not be subject to assessment, reassessment, audit, investigation, inquiry or judicial or administrative proceedings under any such laws. As taxing regimes change their tax basis and rates, or initiate reviews of prior tax returns, Badger's liability to income tax may increase and Badger could be exposed to increased costs of taxation, which could, among other things, reduce the amount of funds available to distribute to shareholders or otherwise have a material adverse effect on Badger's business, results of operations or financial condition.

Badger 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. The Company'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.

The Toronto Stock Exchange has neither approved nor disapproved the information contained herein.

For more information regarding this press release, please contact:

Tor Wilson
President and CEO

Greg Kelly, CA
Vice President Finance and CFO

1000, 635 - 8th Avenue SW
Calgary, Alberta T2P 3M3
Telephone 403-264-8500
Fax 403-228-9773

Badger Daylighting Ltd.
Consolidated Financial Statements
For the year ended December 31, 2013

Independent Auditor's Report

To the Shareholders of Badger Daylighting Ltd.

We have audited the accompanying consolidated financial statements of Badger Daylighting Ltd., which comprise the consolidated statements of financial position as at December 31, 2013 and 2012 and the consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, and a summary of significant accounting policies and other explanatory information.

Management's responsibility for the consolidated financial statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Badger Daylighting Ltd. as at December 31, 2013 and 2012 and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards.

Calgary, Canada
March 14, 2014
Chartered Accountants

BADGER DAYLIGHTING LTD.
Consolidated Statement of Financial Position
(Expressed in thousands of Canadian Dollars)

-***-

 2013 2012
As at December 31 Notes $ $
--------------------------------------------- ------- ------------ -------------

ASSETS
Current Assets
Cash and cash equivalents 7 8,623 2,460
Trade and other receivables 8 92,115 63,570
Prepaid expenses 1,459 1,346
Inventories 9 3,300 2,087
------------ -------------
105,497 69,463
------------ -------------
Non-current Assets
Property, plant and equipment 10 211,614 149,568
Goodwill and intangible assets 11 16,787 6,551
------------ -------------
228,401 156,119
------------ -------------
Total Assets 333,898 225,582
------------ -------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Trade and other payables 12 23,657 17,076
Deferred unit plan liability 17 13,933 3,923
Income taxes payable 4,952 3,421
Dividends payable 14 1,111 1,109
------------ -------------
43,653 25,529
------------ -------------
Non-current Liabilities
Long-term debt 15 82,319 29,773
Deferred income tax 13 36,857 30,572
------------ -------------
119,176 60,345
------------ -------------

Shareholders' Equity
Shareholders' capital 1, 16 80,944 80,640
Contributed surplus 16 548 2,061
Accumulated other comprehensive income (loss) 16 3,291 (2,239)
Retained earnings 86,286 59,246
------------ -------------
171,069 139,708
------------ -------------
Total Liabilities and Shareholders' Equity 333,898 225,582
------------ -------------

Commitments and contingencies 25

-****-

The accompanying notes are an integral part of these consolidated financial statements.
These consolidated financial statements were approved by the Board on March 14, 2014 and were signed on its behalf.

Signed: Glen D. Roane
Director

Signed: David M. Calnan
Director

BADGER DAYLIGHTING LTD.
Consolidated Statement of Comprehensive Income
(Expressed in thousands of Canadian Dollars)

-***-

 2013 2012
For the year ended December 31 Notes $ $
--------------------------------------------- ------- ------------ -------------

Revenues 18 324,594 239,228
Direct costs 19 214,711 163,673
------------ -------------
Gross profit 109,883 75,555

Depreciation of property, plant and equipment 10 24,183 18,365
Amortization of intangible assets 11 213 49
Selling, general and administrative 19 15,714 11,741
Deferred unit plan 17 10,010 2,320
------------ -------------
Operating profit 59,763 43,080

Loss (gain) on sale of property, plant and
equipment 291 (175
Finance cost 1,645 1,247
------------ -------------
Profit before tax 57,827 42,008

Income tax expense 13 17,464 13,958
------------ -------------
Net profit for the year 40,363 28,050

Items that may be reclassified
subsequently to profit or loss
Exchange differences on translation
of foreign operations 5,530 (1,235
------------ -------------
Total comprehensive income for the year
attributable to shareholders of
the Corporation 45,893 26,815
------------ -------------

Earnings per share
Basic 1, 20 1.09 0.80
Diluted 1, 20 1.09 0.80

-****-

The accompanying notes are an integral part of these consolidated financial statements.

BADGER DAYLIGHTING LTD.
Consolidated Statement of Changes in Equity
(Expressed in thousands of Canadian Dollars)

-***-

 Shareholders' Contributed
capital surplus
For the year ended Notes $ $
------------------------------------ ------- ------------- -------------- 

As at December 31, 2011 44,473 2,658
Net profit for the year - -
Other comprehensive income (loss)
for the year - -
Share-based payment transactions 16, 17 - 58
Share options exercised 16, 17 205 -
Options surrendered for cash 16, 17 - (655)
Shares issued pursuant to equity
financing 16 35,962 -
Dividends 14 - -
------------- --------------
As at December 31, 2012 80,640 2,061 

Net profit for the year - -
Other comprehensive income (loss)
for the year - -
Share options exercised 16, 17 304 -
Options surrendered for cash 16, 17 - (1,513)
Dividends 14 - -
------------- --------------
As at December 31, 2013 80,944 548
------------- -------------- 

 Accumulated
other
comprehensive Retained
income (loss) earnings Total equity
For the year ended $ $ $
------------------------------------ -------------- ------------- --------------

As at December 31, 2011 (1,004) 43,254 89,381
Net profit for the year - 28,050 28,050
Other comprehensive income (loss)
for the year (1,235) - (1,235)
Share-based payment transactions - - 58
Share options exercised - - 205
Options surrendered for cash - - (655)
Shares issued pursuant to equity
financing - - 35,962
Dividends - (12,058) (12,058)
-------------- ------------- --------------
As at December 31, 2012 (2,239) 59,246 139,708

Net profit for the year - 40,363 40,363
Other comprehensive income (loss)
for the year 5,530 - 5,530
Share options exercised - - 304
Options surrendered for cash - - (1,513)
Dividends - (13,323) (13,323)
-------------- ------------- --------------
As at December 31, 2013 3,291 86,286 171,069
-------------- ------------- --------------

-****-

The accompanying notes are an integral part of these consolidated financial statements.

BADGER DAYLIGHTING LTD.
Consolidated Statement of Cash Flows
(Expressed in thousands of Canadian Dollars)

-***-

 2013 2012
For the year ended December 31 Notes $ $
----------------------------------------------------------- ---------- ---------

Operating activities
Net profit for the year 40,363 28,050
Non-cash adjustments to reconcile profit from
operations to net cash
flows:
Depreciation of property, plant and equipment 10 24,183 18,365
Amortization of intangible assets 11 213 49
Deferred income tax 13 4,729 6,013
Share-based payment transaction expense 16, 17 - 58
Equity-settled share plan settled in cash 16, 17 (1,513) (655)
Loss (gain) on sale of property plant and
equipment 291 (175)
Unrealized foreign exchange (gain) loss on
deferred tax 1,556 (849)
---------- ---------
69,822 50,856
Net change in non-cash working capital relating to
operating activities (11,419) (4,655)
---------- ---------
Net cash flows from operating activities 58,403 46,201
---------- ---------

Investing activities
Purchase of property, plant and equipment 10 (70,479) (54,093)
Purchase of intangible assets 11 (2,555) -
Proceeds from sale of property, plant and
equipment 425 212
Business combination 6 (19,160) -
---------- ---------
Net cash flows used in investing activities (91,769) (53,881)
---------- ---------

Financing activities
Proceeds from issuance of shares, net of issuance
costs 16 - 35,962
Proceeds received on the exercise of share options 16 304 205
Proceeds from long-term debt 52,546 -
Repayment of long-term debt - (16,782)
Dividends paid to owners 14 (13,321) (11,867)
---------- ---------
Net cash flows from financing activities 39,529 7,518
---------- ---------

Net increase (decrease) in cash and cash
equivalents 6,163 (162)
Cash and cash equivalents, beginning of year 7 2,460 2,622
---------- ---------
Cash and cash equivalents, end of year 7 8,623 2,460
---------- ---------

Supplemental cash flow information:
Interest paid 1,645 1,247
---------- ---------
Income tax paid 10,869 9,711
---------- ---------

-****-

The accompanying notes are an integral part of these consolidated financial statements.

BADGER DAYLIGHTING LTD.
Notes to the Consolidated Financial Statements
For the year ended December 31, 2013
(Expressed in thousands of Canadian Dollars unless stated otherwise)

1 Incorporation and Operations

Badger Daylighting Ltd. and its subsidiaries (together "Badger" or the "Corporation") provide non-destructive excavating services to the utility, transportation, industrial, engineering, construction and petroleum industries in Canada and the United States. Badger is a publicly traded corporation. The address of the registered office is 1000, 635 - 8th Avenue SW, Calgary, Alberta T2P 3M3. The consolidated financial statements of the Corporation were authorised for issue by the Board of Directors on March 14, 2014.

All current and comparative share capital and profit per share amounts have been adjusted to reflect the three-for-one share split that was completed in January 2014.

2 Basis of Preparation

Statement of compliance

These consolidated financial statements of the Corporation are prepared in accordance with International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board ("IASB").

Basis of measurement

These consolidated financial statements have been prepared under the historical cost convention.

Functional and presentation currency

These consolidated financial statements are presented in Canadian dollars, which is the Corporation's functional currency.

3 Significant Accounting Judgements, Estimates and Assumptions

The preparation of these consolidated financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Estimates and judgments are continuously evaluated and are based on management's experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. However, actual outcomes can differ from those estimates.

The key sources of estimation uncertainty that have a significant risk of causing material adjustment to the amounts recognized in the consolidated financial statements are:

Impairment of non-financial assets

Impairment exists when the carrying value of an asset or cash generating unit ("CGU") exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell calculation is based on available data from binding sales transactions in an arm's length transaction of similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash flow model. The cash flows are derived from the projection for the next five years and do not include restructuring activities that the Corporation is not yet committed to or significant future investments that will enhance the asset's performance of the CGU being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash inflows and the growth rate used for extrapolation purposes.

Taxes

Provisions for taxes are made using the best estimate of the amount expected to be paid based on a qualitative assessment of all relevant factors. The Corporation reviews the adequacy of these provisions at the end of the reporting period. However, it is possible that at some future date an additional liability could result from audits by tax authorities of the respective jurisdictions in which it operates. Where the final outcome of these tax-related matters is different from the amounts that were initially recorded, such differences will affect the tax provisions in the period in which such determination is made.

Useful lives of property, plant and equipment

The Corporation estimates the useful lives of property, plant and equipment based on the period over which the assets are expected to be available for use. The estimated useful lives of property, plant and equipment are reviewed periodically and are updated if expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence and legal or other limits on the use of the relevant assets. In addition, the estimation of the useful lives of property, plant and equipment are based on internal technical evaluation and experience with similar assets. It is possible, however, that future results of operations could be materially affected by changes in the estimates brought about by changes in factors mentioned above. The amounts and timing of recorded expenses for any period would be affected by changes in these factors and circumstances. A reduction in the estimated useful lives of the property, plant and equipment would increase the recorded expenses and decrease the non-current assets.

Business combinations

In a business combination, the Corporation may acquire assets and assume certain liabilities of an acquired entity. Estimates are made as to the fair value of property, plant and equipment, intangible assets, and goodwill, among other items. In certain circumstances, such as the valuation of property, plant and equipment and intangible assets acquired, the Corporation relies on independent third-party valuators. The determination of these fair values involves a variety of assumptions, including revenue growth rates, expected operating income, discount rates, and earnings multiples. For further information on business acquisitions, see Note 6.

Allowance for doubtful debts

The Corporation makes allowance for doubtful debts based on an assessment of the recoverability of receivables. Allowances are applied to receivables where events or changes in circumstances indicate that the carrying amounts may not be recoverable. Management specifically analysed historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in customer payment terms when making a judgement to evaluate the adequacy of the allowance of doubtful debts of receivables. Where the expectation is different from the original estimate, such difference will impact the carrying value of receivables.

4 Summary of Significant Accounting Policies

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below.

A) Basis of consolidation

The consolidated financial statements include the accounts of Badger Daylighting Ltd. and its subsidiaries, all of which are wholly owned. Subsidiaries are consolidated from the date of acquisition, being the date on which the Corporation obtains control, and continue to be consolidated until the date that such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the parent, using consistent accounting policies. All intra-company balances, income and expenses, unrealized gains and losses and dividends resulting from intra-company transactions are eliminated in full.

B) Cash and cash equivalents

Cash and cash equivalents include cash at banks and on hand and short-term investments with original maturities of three months or less and are recorded at cost, which approximates fair market value.

C) Inventories

Inventories are valued at the lower of cost and net realizable value, with cost being defined to include laid-down cost for materials on a weighted average basis.

D) Leases

Leases in terms of which the Corporation assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability, so as to achieve a constant rate of interest on the balance of the liability. Finance charges are recognized in the consolidated statement of comprehensive income. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.

Other leases are operating leases and the leased assets are not recognized in the Corporation's consolidated statement of financial position. Operating lease payments are recognized as a direct cost in the consolidated statement of comprehensive income.

E) Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and/or accumulated impairment losses if any. Such cost includes the cost of replacing part of the plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met. Repair and maintenance costs are recognized in the consolidated statement of comprehensive income as incurred.
Depreciation is calculated on a straight-line basis to recognize the cost less estimated residual value over the estimated useful life of the assets as follows:

-***-

Land improvements 50%
Buildings 5%
Shoring equipment 10%
Shop and office equipment 10%-25%
Truck and trailers 8%-15%

-****-

E) Property, plant and equipment (continued)

Depreciation of equipment under construction is not recorded until such time as the asset is available for use, i.e. when it is in the location and condition necessary for it to be capable of operating in the manner intended by management.

The assets' residual values, useful lives and methods of depreciation are reviewed at each financial year end and adjusted prospectively, if appropriate.

Gains or losses arising from derecogniton of an item of property, plant and equipment are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the consolidated statement of comprehensive income when the asset is derecognized.

F) Intangible assets
Intangible assets represent service rights acquired, customer relationships, trade name and non-compete agreements. Intangible assets acquired separately are measured on initial recognition at cost. The cost of an intangible asset acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses.

The useful lives of intangible assets are assessed as either finite or indefinite. Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortization period or method, as appropriate, and are treated as changes in accounting estimates.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the consolidated statement of comprehensive income when the asset is derecognized.

A summary of the policies applied to the Corporation's intangible assets is as follows:

-***-

 Service rights Other intangibles
--------------------------------------------------------------------
Useful lives Indefinite 5 years
Amortization method No amortization Straight-line

-****-

G) Impairment of non-financial assets excluding goodwill

At the end of each reporting period, the Corporation reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Corporation estimates the recoverable amount of the CGU to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual CGU's, or otherwise they are allocated to the smallest group of CGU's for which a reasonable and consistent allocation basis can be identified.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the carrying amount of the asset or CGU is reduced to its recoverable amount. An impairment loss is recognized immediately in the consolidated statement of comprehensive income.

Where an impairment loss subsequently reverses, the carrying amount of the asset or CGU is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset or CGU in prior years. A reversal of an impairment loss is recognized immediately in the consolidated statement of comprehensive income.

H) Provisions

A provision is recognized if, as a result of a past event, the Corporation has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.

I) Goodwill

Goodwill represents the excess of the purchase price over the fair value of net assets acquired and liabilities assumed in a business combination. Goodwill is not amortized but is reviewed for impairment at least annually. For the purpose of impairment testing, goodwill is allocated to each of the Corporation's CGU's expected to benefit from the synergies of the combination. CGU's to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the CGU may be impaired. If the recoverable amount of the CGU is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognized for goodwill is not reversed in a subsequent period.

J) Taxes

Tax expense comprises current and deferred tax. Tax is recognized in the consolidated statement of comprehensive income except to the extent it relates to items recognized directly in equity.

Current income tax

Current tax expense is based on the results for the period as adjusted for items that are not taxable or not deductible. Current tax is calculated using tax rates and laws that were enacted or substantively enacted at the end of the reporting period. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. Provisions are established where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred tax

Deferred tax is recognized, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated statement of financial position. Deferred tax is calculated using tax rates and laws that have been enacted or substantively enacted at the end of the reporting period, and which are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.

Deferred tax assets:

* are recognized to the extent it is probable that taxable profits will be available against which the deductible temporary differences can be utilized; and

* are reviewed at the end of the reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax liabilities:

* are generally recognized for all taxable temporary differences;

* are recognized for taxable temporary differences arising on investments in subsidiaries except where the reversal of the temporary difference can be controlled and it is probable that the difference will not reverse in the foreseeable future; and

* are not recognized on temporary differences that arise from goodwill which is not deductible for tax purposes.

Deferred tax assets and liabilities are not recognized in respect of temporary differences that arise on initial recognition of assets and liabilities acquired other than in a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit.

K) Revenue recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Corporation and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable, excluding discounts, rebates, sales taxes or duty. The Corporation assesses its revenue arrangements against specific criteria in order to determine if it is acting as principal or agent. The Corporation has concluded that it is acting as a principal in all of its revenue arrangements. The following specific recognition criteria must also be met before revenue is recognized:

Rendering of services

The Corporation recognizes revenue from services when the services are provided.

Truck placement fees

Truck placement fees are recognized when the truck is delivered to the operating partner.

L) Share-based payment

The Corporation operates a number of equity-settled and cash-settled share-based compensation plans under which it receives services from employees as consideration for equity instruments of the Corporation or cash payments.

Equity-settled awards

The Corporation uses the Black-Scholes pricing model to estimate the fair value of equity-settled awards at the grant date. The expense is recognized over the vesting period, which is the period over which all of the specified vesting conditions are satisfied. For awards with graded vesting, the fair value of each tranche is recognized over its respective vesting period.

No expense is recognized for awards that do not ultimately vest, except for equity-settled awards where vesting is conditional upon a market or non-vesting condition, which are treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.

Cash-settled awards

The Corporation uses the market price of its shares to estimate the fair value of cash-settled awards. Fair value is established initially at the grant date and the obligation is revalued each reporting period until the awards are settled with any changes in the obligation recognized in the consolidated statement of comprehensive income.

M) Finance costs

Finance costs comprise interest expense on borrowings. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognized in profit or loss using the effective interest rate method. No borrowing costs were capitalized during the year.

N) Segment reporting

An operating segment is a component of the Corporation that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Corporation's other components. All operating segments' operating results are reviewed regularly by the Corporation's President and CEO to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

O) Business combinations

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured at the fair value of the aggregate consideration transferred, measured at the acquisition date. All acquisition costs are expensed as incurred in selling, general and administrative expenses. Any contingent consideration to be paid is recognized at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration are recognized in accordance with IAS 39, Financial Instruments - Recognition and Measurement.

P) Foreign currency translation

Items included in the financial statements of each consolidated entity are measured using the currency of the primary economic environment in which the entity operates (the "functional currency"). Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities not denominated in the functional currency of an entity are recognized in the consolidated statement of comprehensive income.

Assets and liabilities of entities with functional currencies other than Canadian dollars are translated at the period end rates of exchange, and the results of their operations are translated at average rates of exchange for the period. The resulting translation adjustments are included in the accumulated other comprehensive income (loss) when settlement of which is neither planned nor likely to occur in the foreseeable future.

When settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely to occur in the foreseeable future, foreign exchange gain or losses related to such items are recognized in other comprehensive income, and presented in accumulated other comprehensive income (loss) in equity.

Q) Financial assets

The Corporation classifies its financial assets as loans and receivables. The classification depends on the purpose for which the ?nancial assets were acquired. Management determines the classification of its ?nancial assets at initial recognition.

Loans and receivables are non-derivative ?nancial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. The Corporation's loans and receivables comprise 'trade and other receivables' and cash and cash equivalents in the consolidated statement of financial position.

Loans and receivables are initially recognized at fair value plus transaction costs and subsequently carried at amortized cost using the effective interest rate method.

A provision for impairment of trade receivables is established when there is objective evidence that the Corporation will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganization, and default or delinquency in payments are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of
the asset is reduced through the use of an allowance account, and the amount of the loss is recognized in the consolidated statement of comprehensive income. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables.

Financial assets are de-recognized when the contractual rights to the cash flows from the financial asset expire or when the contractual rights to those assets are transferred.

R) Financial liabilities

The Corporation classi?es its ?nancial liabilities as other financial liabilities. Management determines the classification of its ?nancial liabilities at initial recognition. Other financial liabilities are recognized initially at fair value and subsequently measured at amortized cost using the effective interest rate method.

Other financial liabilities include trade and other payables, deferred unit plan liability, dividends payable and long-term debt. Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers.

Financial liabilities are classified as current liabilities if payment is due within one year or less, if not, they are presented as non-current liabilities.

S) Equity instruments

Equity instruments issued by the Corporation are recorded at the proceeds received net of direct issue costs.

5 Recent accounting pronouncements

The Corporation adopted IFRS 10, 11, 12, 13 and amendments to IAS 1 and IAS 19 on January 1, 2013. There was no material impact to the Corporation's consolidated financial statements as a result of the adoption of those standards.

The Corporation has reviewed new and revised accounting pronouncements that have been issued but are not yet effective and determined that the following may have an impact on the Corporation:

i) IFRS 9, 'Financial Instruments' was issued in November 2009 as the first step in its project to replace IAS 39 'Financial Instruments: Recognition and Measurement'. IFRS 9 introduces new requirements for classifying and measuring financial instruments. While early adoption is permitted, the new standard has been deferred by the IASB until the issue date of the completed version of IFRS 9 is known. The IASB intends to expand IFRS 9 during the intervening period to add new requirements for classifying and measuring financial liabilities, de-recognition of financial instruments, impairment and hedge accounting. The Corporation will assess the impact of this standard in conjunction with the other phases, when the final standard including all phases is issued.

6 Business acquisitions

A) In May 2013, the Corporation acquired the service rights from certain of its Canadian agents for cash consideration of $2,555. The entire purchase price was allocated to intangible assets (service rights).

B) On November 1, 2013, the Corporation acquired the business and operating assets of Fieldtek Holdings Ltd. ("Fieldtek"). Fieldtek is a privately owned company based in Lloydminster, Alberta providing general vacuum truck and auxiliary services to the oil and gas industry, focused primarily on production tank cleaning and removal of waste oil and sand.

The aggregate purchase price of $19,160 was financed with Corporation's extendable revolving credit facility. The goodwill of $1,515 comprises the value of expected synergies arising from the acquisition and other not separately recognized intangibles. Goodwill is allocated entirely to the Canada segment. The fair values of the assets acquired were as follows:

-***-

 $
----------------------------------------------- -------------- -------------
Property, plant and equipment 11,266
Intangible assets 6,379
Goodwill 1,515
-------------
19,160
-------------

-****-

7 Cash and cash equivalents

-***-

 2013 2012
$ $
------------------------------------------------- -------------- ---------------
Cash at banks and on hand 8,524 2,367
Short-term investments 99 93
-------------- ---------------
8,623 2,460
-------------- ---------------

-****-

Cash at banks earn interest at floating rates based on daily bank deposit rates. Short-term investments
are made for varying periods of between one and three months, depending on the immediate cash requirements of the Corporation, and earn interest at the respective short-term investment rates.

8 Trade and other receivables

-***-

 2013 2012
$ $
------------------------------------------------- -------------- ---------------
Trade receivables 90,113 63,163
Other sundry receivables 2,002 407
-------------- ---------------
92,115 63,570
-------------- ---------------

-****-

Trade receivables are non-interest bearing and are generally on 30-90 day terms. The allowance for doubtful debts as at December 31, 2013 is $534 (2012 - $123).

The ageing analysis of trade receivables is as follows:

-***-

 Past due but not impaired
----------- ----------- ------------
Greater than
Total Not past due 31-60 days 61-90 days 90 days
$ $ $ $ $
--------- -------------- ----------- ----------- ------------
December 31, 2013 90,113 45,679 22,211 10,947 11,276
--------- -------------- ----------- ----------- ------------
December 31, 2012 63,163 35,032 16,512 5,897 5,722
--------- -------------- ----------- ----------- ------------

-****-

9 Inventories

-***-

 2013 2012
$ $
-------------------------------------------------- -------------- --------------
Raw materials 3,300 2,087
-------------- --------------

-****-

10 Property, plant and equipment

-***-

 Equipment
Land under
Land improvements Buildings construction
$ $ $ $
--------------------------------- -------- ------------ ----------- ------------
Cost
At December 31, 2011 5,260 147 10,162 4,860
Additions/transfers 35 80 1,918 1,482
Disposals - - - -
Exchange differences (3) - (6) -
-------- ------------ ----------- ------------
At December 31, 2012 5,292 227 12,074 6,342
Additions/transfers 144 371 1,606 696
Business combination - - - -
Disposals - - - -
Exchange differences 15 - 37 -
-------- ------------ ----------- ------------
At December 31, 2013 5,451 598 13,717 7,038
-------- ------------ ----------- ------------

Depreciation
At December 31, 2011 - 29 2,942 -
Depreciation charge for the year - 91 529 -
Disposals - - - -
Exchange differences - - - -
-------- ------------ ----------- ------------
At December 31, 2012 - 120 3,471 -
Depreciation charge for the year - 141 622 -
Disposals - - - -
Exchange differences - - 1 -
-------- ------------ ----------- ------------
At December 31, 2013 - 261 4,094 -
-------- ------------ ----------- ------------

Net book value
At December 31, 2012 5,292 107 8,603 6,342
-------- ------------ ----------- ------------
At December 31, 2013 5,451 337 9,623 7,038
-------- ------------ ----------- ------------

 Shop and
Shoring office Trucks and
equipment equipment trailers Total
$ $ $ $
---------------------------------- ----------- ----------- ----------- ----------
Cost
At December 31, 2011 2,255 559 170,952 194,195
Additions/transfers 120 281 50,177 54,093
Disposals (59) - (1,878) (1,937)
Exchange differences - (4) (1,691) (1,704)
----------- ----------- ----------- ---------
At December 31, 2012 2,316 836 217,560 244,647
Additions/transfers 132 267 67,263 70,479
Business combination - - 11,266 11,266
Disposals (83) (64) (4,708) (4,855)
Exchange differences - 18 7,469 7,539
----------- ----------- ----------- ---------
At December 31, 2013 2,365 1,057 298,850 329,076
----------- ----------- ----------- ---------

Depreciation
At December 31, 2011 1,389 241 74,593 79,194
Depreciation charge for the year 160 105 17,480 18,365
Disposals (35) - (1,865) (1,900)
Exchange differences - (2) (578) (580)
----------- ----------- ----------- ---------
At December 31, 2012 1,514 344 89,630 95,079
Depreciation charge for the year 153 124 23,143 24,183
Disposals (51) (56) (4,033) (4,140)
Exchange differences - 8 2,331 2,340
----------- ----------- ----------- ---------
At December 31, 2013 1,616 420 111,071 117,462
----------- ----------- ----------- ---------

Net book value
At December 31, 2012 802 492 127,930 149,568
----------- ----------- ----------- ---------
At December 31, 2013 749 637 187,779 211,614
----------- ----------- ----------- ---------

-****-

11 Goodwill and intangible assets

-***-

 Service Other
rights intangibles Goodwill Total
$ $ $ $
------------------------------------------- ------- ----------- -------- ------
Cost
At December 31, 2012 4,930 980 1,621 7,531
Additions (see Business acquisitions,
Note 6) 2,555 6,379 1,515 10,449
------- ----------- -------- ------
At December 31, 2013 7,485 7,359 3,136 17,980
------- ----------- -------- ------

Amortization and impairment
At December 31, 2012 - 980 - 980
Amortization for the year - 213 - 213
------- ----------- -------- ------
At December 31, 2013 - 1,193 - 1,19
------- ----------- -------- ------

Net book value
At December 31, 2012 4,930 - 1,621 6,551
------- ----------- -------- ------
At December 31, 2013 7,485 6,166 3,136 16,787
------- ----------- -------- ------

-****-

Impairment testing of goodwill and intangibles with indefinite lives

For impairment testing purposes, goodwill acquired through business combinations and service rights with indefinite lives have been allocated to the Eastern Canada and Western Canada cash-generating units respectively.

The Corporation performed the annual impairment tests of goodwill and service rights at December 31. The recoverable amount of the Eastern Canada and Western Canada cash-generating units have been determined based on a value in use calculation using post-tax cash flow projections from financial budgets approved by senior management, and projected over a five year period based on a growth rate of 4%. The post-tax discount rate applied to cash flow projections is 9.88% (2012 - 11.05%). As a result of this analysis, management did not identify any impairment.

12 Trade and other payables

-***-

 2013 2012
$ $
------------------------------------------------ --------------- --------------
Current
Trade payables 18,738 12,356
Bonuses payable 2,644 2,088
Accrued expenses 2,275 1,873
Other sundry payables - 759
--------------- --------------
23,657 17,076
--------------- --------------

-****-

Trade payables are non-interest bearing and are normally settled on 45 day terms.

13 Income taxes

The major components of income tax expense for the years are as follows:

-***-

 2013 2012
$ $
------------------------------------------------- --------------- --------------
Current income tax 12,735 7,945
Deferred income tax 4,729 6,013
--------------- --------------
Total income tax expense 17,464 13,958
--------------- --------------

-****-

The provision for income taxes, including deferred taxes, reflects an effective income tax rate that differs from the actual combined Canadian federal
and provincial statutory rates of 25.50% (2012 - 25.85%). The Corporation's U.S. subsidiaries are subject to federal and state statutory tax rates of approximately 40% for both 2013 and 2012. The main differences are as follows:

-***-

 2013 2012
$ $
------------------------------------------------- --------------- --------------
Profit before tax 57,827 42,008
--------------- --------------
Income tax expense at the statutory rate 14,746 10,859
Increase (decrease) resulting from:
Losses not previously recognized/not recognized - 650
Tax rates in other jurisdictions 4,453 2,136
Other items (1,735) 313
--------------- --------------
Income tax expense 17,464 13,958
--------------- --------------

-****-

All deferred taxes are classified as non-current, irrespective of the classification of the underlying assets or liabilities to which they relate, or the expected reversal of the temporary difference.
In addition, deferred tax assets and liabilities have been offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity.

-***-

 As at December Recognized in As at December
31, 2012 profit or loss 31, 2013
$ $ $
---------------- --------------- ---------------
Deferred tax assets
Tax loss carry-forwards 2,424 (2,165) 259
Deferred unit plan 1,000 2,553 3,553
Share issue costs 421 (105) 316
---------------- --------------- ---------------
3,845 283 4,128
---------------- --------------- ---------------

Deferred tax liabilities
Property, plant and equipment 29,827 7,281 37,108
Intangible assets 310 206 516
Partnership income 3,847 (945) 2,902
Reserve 433 26 459
---------------- --------------- ---------------
34,417 6,568 40,985
---------------- --------------- ---------------
Net deferred tax liability 30,572 6,285 36,857
---------------- --------------- ---------------

-****-

14 Dividends payable

During the year ended December 31, 2013, the Corporation paid cash dividends of $13,321 (2012 - $11,867)
(or $1.08 per common share (2012 - $1.025 per common share)) and declared a $1,111 cash dividend (2012 - $1,109) (or $0.09 per common share (2012 - $0.09 per common share)) to its shareholders of record at the close of business on December 31, 2013 to be paid January 15, 2014.

The Corporation declares dividends monthly to its shareholders. Determination of the amount of cash dividends for any period is at the sole discretion of the directors and is based on certain criteria including financial performance as well as the projected liquidity and capital resource position of the Corporation. Dividends are declared to shareholders of the Corporation on the last business day of each month and paid on the 15th day of the month following the declaration (or if such day is not a business day, the next following business day).

15 Long-term debt

-***-

 2013 2012
$ $
-------------------------------------------------------------------------------

Extendable revolving credit facility 82,319 29,773
-------------------------------

-****-

The Corporation has established a $100,000 extendable revolving credit facility (see Note 26).
The purpose of the credit facility is to finance the Corporation's capital expenditure program and for general corporate purposes. The credit facility bears interest, at the Corporation's option, at either the bank's prime rate (December 31, 2013 - 3.00%) or bankers' acceptance rate plus 1.25% (December 31, 2013 - 2.41%). An additional stand-by fee calculated at an annual rate of 0.25% per annum is also required on the unused portion of the credit facility. This fee is expensed as incurred.

The credit facility has no required principal repayment. The credit facility expires on June 22, 2014 and is renewable by mutual agreement of the Corporation and the lender for an additional 364 day period, after which the entire amount must be repaid. If not renewed, interest is payable monthly on the facility for 364 days after which the entire amount is to be repaid.

The extendable revolving credit facility is collateralized by a general security interest over the Corporation's assets, property and undertaking, present and future.

Under the terms of the credit facilities, the Corporation must comply with certain financial and non-financial covenants, as defined by the bank. Throughout 2013, and as at December 31, 2013, the Corporation was in compliance with all of these covenants (see Note 23).
As at December 31, 2013, the Corporation has issued letters of credit in the amount of approximately $1,360. The outstanding letters of credit reduce the amount available under the extendable revolving credit facility.

At December 31, 2013, the Corporation had available $16,321 (December 31, 2012 - $24,592) of undrawn committed borrowing facilities in respect of which all conditions precedent had been met.

16 Shareholders' capital and reserves

A) Authorized shares

An unlimited number of voting common shares are authorized without nominal or par value.

B) Issued and outstanding

-***-

 Amount
Number of Shares $
------------------ ---------
At December 31, 2011 32,440,893 44,473
Shares issued pursuant to equity financing,
net of issuance costs 4,500,000 35,962
Shares issued pursuant to the share option plan 39,000 205
------------------ ---------
At December 31, 2012 36,979,893 80,640
Shares issued pursuant to the share option plan 54,000 304
------------------ ---------
At December 31, 2013 37,033,893 80,944
------------------ ---------

-****-

On June 19, 2012, the Corporation completed an equity financing through the issuance of 4,500,000 common
shares at a price of $8.33 per common share for gross proceeds of $37,500. The Corporation incurred share issue costs of $1,538 (net of income taxes of $526), in connection with the equity financing, including a commission fee paid to the underwriters of $1,687 and professional and miscellaneous fees of $377.

Share amounts have been restated to reflect the impact of the three-for-one common share split completed in January 2014.

C) Accumulated other comprehensive income (loss)

The accumulated other comprehensive income (loss) is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries.

D) Contributed surplus

The contributed surplus reserve is used to recognize the fair value of share options granted to employees, including key management personnel, as part of their remuneration. Refer to Note 17 for further details of these plans.

-***-

 2013 2012
$ $
-------------------------------------------------------------------------

Opening balance 2,061 2,658
Share-based payment transactions - 58
Equity-settled share plan settled in cash (1,513) (655)
-------------------------------
Closing balance 548 2,061
-------------------------------

-****-

17 Share-based payment plans

Share plan (equity-settled)

Under the Share Plan, directors, officers, employees and consultants of the Corporation are eligible to receive share options to acquire ordinary shares of the Corporation, with terms not to exceed 10 years from the date of the grant. The exercise price shall not be less than the closing price of the shares traded on the Toronto Stock Exchange on the first date preceding the date of the grant. Under the Share Plan, vesting periods are determined by the directors of the Corporation at the time of the grant. All share options granted through to December 31, 2013 vest equally over a period of three years from the date of grant. The maximum number of shares to be issued under this plan may not exceed 250,000 shares.

A summary of the share-based payment transactions for the years ended December 31, 2013 and 2012 are as follows:

-***-

 2013 2012
--------------------------------------------------------------------------------
Weighted average Weighted average
Number of exercise price Number of exercise price
options $ options $
--------------------------------------------------------------------------------
Outstanding at
beginning of year 110,375 21.54 187,750 19.00
Share options
exercised (18,000) 16.87 (13,000) 15.78
Options surrendered
for cash (92,375) 22.45 (52,375) 13.69
Forfeited - - (12,000) 22.45
-------------------------------------------------------------
Outstanding at
end of year - - 110,375 21.54
-------------------------------------------------------------

-****-

Pursuant to the share plan the Corporation had 92,375 (2012 - 52,375) vested share options surrendered
by employees in return for a cash settlement of $1,513 (2012 - $655).

Deferred Unit Plan (cash-settled)

The Deferred Unit Plan ("DUP") was established to reward officers and employees. Directors may also participate in the plan whereby they will be paid 60% to 100% of the annual retainer in the form of deferred units. Pursuant to the terms of the DUP, participants are granted deferred units with a value equivalent to the value of a Badger share. Subsequent to the January 2014 three-for-one common share split, each unit under the plan was amended to provide three units, each with a value of one post-split Badger share. The outstanding and exercisable units below have not been adjusted to reflect the change in rights. The ending DUP liability was unchanged. The deferred units granted earn additional deferred units for the dividends that would otherwise have been paid on the deferred units as if they instead had been issued as Badger shares on the date of the grant. The deferred units granted other than to the directors, which vest immediately, vest equally over a period of three years from the date of the grant. Upon vesting, the participant may elect to redeem the deferred units for an equal number of Badger shares or the cash equivalent. The DUP has been accounted for as a cash-settled plan. The compensation expense is based on the estimated fair value of the deferred units outstanding at the end of each quarter and recognized using graded vesting throughout the term of the vesting period, with a corresponding credit to liabilities.

The liability of deferred units outstanding as at December 31, 2013 is $13,933 (2012 - $3,923). The fair value of deferred units exercisable as at December 31, 2013 is $10,799 (2012 - $1,438). Changes in the number of deferred units under the Badger DUP were as follows:

-***-

 Units
--------------------------------------------------------- ----------------

At December 31, 2011 131,178
Granted 48,170
Dividends earned 4,067
Redeemed (5,003)
Forfeited (12,287)
----------------
At December 31, 2012 166,125
Granted 33,850
Dividends earned 4,806
Redeemed (11,334)
Forfeited (4,441)
----------------
At December 31, 2013 189,006
----------------
Exercisable at December 31, 2013 126,673
----------------

-****-

18 Revenues

-***-

 2013 2012
$ $
-------------------------------------------- ---------------- ----------------

Rendering of services 322,654 237,838
Truck placement fees 1,940 1,390
---------------- ----------------
324,594 239,228
---------------- ----------------

-****-

19 Expenses by nature

Direct costs and selling, general and administrative expenses include the following major expenses by nature:

-***-

 2013 2012
$ $
----------------------------------------------- ---------------- ---------------
Wages, salaries and benefits 124,854 90,634
Fees paid to operating partners 50,141 42,441
Fuel 17,311 11,956
Repairs and maintenance 17,973 14,617

-****-

20 Earnings per share

Basic earnings per share ("EPS")

Basic EPS is calculated by dividing profit or loss attributable to ordinary equity holders (the numerator) by the weighted average number of ordinary shares outstanding (the denominator) during the year. The denominator is calculated by adjusting the shares in issue at the beginning of the year by the number of shares bought back or issued during the year, multiplied by a time-weighting factor. Earnings per share and share amounts have been retroactively restated to reflect the three-for-one share split completed in January 2014.

The calculation of basic earnings per share for the year ended December 31, 2013, was based on the profit available to common shareholders of $40,363 (2012 - $28,050), and a weighted average number of common shares outstanding of 37,006,770 (2012 - 34,871,040).

Weighted average number of common shares

-***-

 2013 2012
------------------------------------------------------ ------------ ------------
Issued common shares outstanding, beginning of year 36,979,893 32,440,893
Effect of share options exercised 26,877 32,607
Effect of equity financing - 2,397,540
------------ ------------
Weighted average number of common shares, end of year 37,006,770 34,871,040
------------ ------------

-****-

Diluted EPS

Diluted EPS is calculated by adjusting the earnings and number of shares for the effects of dilutive options and other dilutive potential shares. The effects of anti-dilutive potential shares are ignored in calculating diluted EPS. All options are considered anti-dilutive when the Corporation is in a loss position. Diluted earnings per share and share amounts have been retroactively restated to reflect the three-for-one share split completed in January 2014.

The calculation of diluted earnings per share for the year ended December 31, 2013, was based on a weighted average number of common shares outstanding after adjustment for the effects of all dilutive potential common shares of 37,006,770 (2012 - 34,925,940), calculated as follows:

-***-

 2013 2012
-------------------------------------------------- -------------- --------------
Weighted average number of common shares (basic) 37,006,770 34,871,040
Effect of share options - 54,900
-------------- --------------
Weighted average number of common shares (diluted) 37,006,770 34,925,940
-------------- --------------

-****-

21 Segment reporting

The Corporation operates in two geographic/reportable segments providing non-destructive excavating services in each of these segments. The following is selected information for the years ended December 31, 2013 and 2012 based on these geographic segments.

-***-

For the year ended: December 31, 2013
------------------------------------ ----------------------------------------
Canada ($) U.S. ($) Total ($)
------------------------------------ ------------- ------------- ------------
Revenues 169,684 154,910 324,594
Direct costs 109,092 105,619 214,711
Depreciation of property, plant and
equipment 11,409 12,774 24,183
Amortization of intangible assets 213 - 213
Selling, general and administrative 11,315 4,399 15,714
Profit before tax 26,320 31,507 57,827
------------------------------------ ------------- ------------- ------------

For the year ended: December 31, 2012
------------------------------------ ---------------------------------------
Canada ($) U.S. ($) Total ($)
------------------------------------ ------------- ------------ ------------
Revenues 129,270 109,958 239,228
Direct costs 82,193 81,480 163,673
Depreciation of property, plant and
equipment 9,081 9,284 18,365
Amortization of intangible assets 49 - 49
Selling, general and administrative 8,589 3,152 11,741
Profit before tax 26,002 16,006 42,008
------------------------------------ ------------- ------------ ------------

-****-

-***-

For the year ended: December 31, 2013
------------------------------------ ----------------------------------------
Canada ($) U.S. ($) Total ($)
------------------------------------ ------------- ------------- ------------
Additions to non-current assets:
Property, plant and equipment 26,032 44,447 70,479
Intangible assets 2,555 - 2,555
------------------------------------ ------------- ------------- ------------

For the year ended: December 31, 2012
------------------------------------ ---------------------------------------
Canada ($) U.S. ($) Total ($)
------------------------------------ ------------- ------------ ------------
Additions to non-current assets:
Property, plant and equipment 30,095 23,998 54,093
Intangible assets - - -
------------------------------------ ------------- ------------ ------------

-****-

-***-

------------------------------ ---------------- --------------- ---------------
Canada ($) U.S. ($) Total ($)
------------------------------ ---------------- --------------- ---------------
As at December 31, 2013
Property, plant and equipment 103,740 107,874 211,614
Intangible assets 16,787 - 16,787
Total assets 178,703 155,195 333,898

As at December 31, 2012
Property, plant and equipment 77,969 71,599 149,568
Intangible assets 6,551 - 6,551
Total assets 126,316 99,266 225,582
------------------------------ ---------------- --------------- ---------------

-****-

22 Related party disclosure

The consolidated financial statements include the financial statements of Badger Daylighting Ltd. and the subsidiaries listed in the following table:

-***-

 % equity interest
-----------------------
Name Country of Incorporation 2013 2012
---------------------------- --------------------------- ------------ ----------
Badger Daylighting
(Fort McMurray) Inc. Canada 100% 100%
Badger Edmonton Ltd. Canada 100% 100%
Fieldtek Ltd. Canada 100% 100%
Badger ULC Canada 100% 100%
Badger Daylighting USA, Inc. United States of America 100% 100%
Badger Daylighting Corp. United States of America 100% 100%
Badger, LLC United States of America 100% 100%

-****-

Balances and transactions between Badger Daylighting Ltd. and its subsidiaries have been eliminated on consolidation and are not disclosed in this Note.
Details of transactions between the Corporation and other related parties are disclosed below.

Transactions with related parties

During the year ended December 31, 2013, the Corporation was charged $197 (2012 - $201) for professional fees by a partnership in which a director of the Corporation is a partner. These transactions were incurred during the normal course of operations on similar terms and conditions to those entered into with unrelated parties. These transactions are measured at the fair value, which is the amount of consideration established and agreed to by the related parties.

Related party balances

As at December 31, 2013 and December 31, 2012 there were no significant outstanding balances with related parties.

Compensation of key management personnel

The remuneration of directors and other members of key management personnel were as follows:

-***-

 2013 2012
$ $
---------------- ----------------
Compensation, including bonuses 2,251 1,935
Share-based payments 678 679
---------------- ----------------
2,929 2,614
---------------- ----------------

-****-

Key management personnel and director transactions

Key management and directors of the Corporation control 2.8 percent of the voting shares of the Corporation.

23 Capital management

The Corporation's strategy is to carry a capital base to maintain investor, creditor and market confidence and to sustain future development of the business. The Corporation considers the capital structure to consist of net debt and shareholders' equity. The Corporation considers net debt to be total long-term debt less cash and cash equivalents. The Corporation seeks to maintain a balance between the level of net debt and shareholders' equity to facilitate access to capital markets to fund growth and working capital. On a historical basis, it is management's objective and view that the Corporation has maintained a conservative and appropriate ratio of net debt to net debt plus shareholders' equity. The Corporation may occasionally need to increase these levels to facilitate acquisition or expansion activities. This ratio was as follows:

-***-

 2013 2012
$ $
---------------------------------

Long-term debt 82,319 29,773
Cash and cash equivalents (8,623) (2,460)
---------------------------------
Net debt 73,696 27,313
Shareholders' equity 171,069 139,708
---------------------------------
Total capitalization 244,765 167,021
---------------------------------
Net debt to total capitalization (%) 30% 16%
---------------------------------

-****-

The Corporation sets the amounts of its various forms of capital in proportion to risk.
The Corporation manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Corporation may adjust the amount of dividends to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce net debt.

The Corporation is bound by certain financial and non-financial covenants as defined by its bank. If the Corporation is in violation of any of these covenants its ability to pay dividends may be inhibited. The Corporation monitors these covenants to ensure it remains in compliance. The financial covenants are as follows:

-***-

Ratio December 31, 2013 December 31, 2012 Threshold
---------------------- ------------------ ------------------ ----------------
Funded Debt[1]
to EBITDA[2] 0.88:1 0.44:1 2.25:1 maximum
Fixed Charge
Coverage[3] 3.44:1 4.58:1 1.00:1 minimum
---------------------- ------------------ ------------------ ----------------

-****-

[1] Funded Debt is long-term debt, less cash and cash equivalents.

[2] Funded Debt to EBITDA (earnings before interest, taxes, depreciation and amortization) means the ratio of consolidated Funded Debt to the aggregated EBITDA for the trailing twelve-months. Funded Debt is defined as long-term debt including any current portion thereof. EBITDA is defined as the trailing twelve-months of EBITDA for the Corporation.

[3] Fixed Charge Coverage Ratio means, based on the trailing twelve-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 dividends.

Throughout 2013 and as at December 31, 2013 the Corporation was in compliance with all of these covenants.

There were no changes in the Corporation's approach to capital management during the year.

The Corporation's activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk. The Corporation's overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Corporation's financial performance.

Risk management is carried out by senior management, and the Board of Directors.

24 Financial instruments and risk management

Fair values

The Corporation's financial instruments recognized on the consolidated statement of financial position consist of cash and cash equivalents, trade and other receivables, trade and other payables, deferred unit plan liability, dividends payable and long-term debt. The fair values of these recognized financial instruments, excluding long-term debt, approximate their carrying values due to their short-term maturity.

Credit risk

Credit risk arises when a failure by counter parties to discharge their obligations could reduce the amount of future cash inflows from financial assets on hand at the reporting date. A substantial portion of the Corporation's trade receivable balance is with customers in the petroleum and utility industries and is subject to normal industry credit risks. The Corporation manages its exposure to credit risk through standard credit granting procedures and short payment terms. The Corporation attempts to monitor financial conditions of its customers and the industries in which they operate.

Liquidity risk

Liquidity risk is the risk that, as a result of operational liquidity requirements, the Corporation will not have sufficient funds to settle an obligation on the due date and will be forced to sell financial assets at a price which is less than what they are worth, or will be unable to settle or recover a financial asset.

The Corporation's operating cash requirements are continuously monitored by management. As factors impacting cash requirements change, liquidity risks may necessitate the need for the Corporation to raise capital by issuing equity or obtaining additional debt financing. The Corporation also mitigates liquidity risk by maintaining an insurance program to minimize exposure to insurable losses.

At December 31, 2013, the Corporation had available $16,321 of authorized borrowing capacity on the extendable revolving credit facility. The credit facility expires on June 22, 2014 and is renewable by mutual agreement of the Corporation and the lender for an additional 364-day period. If not renewed, interest is payable monthly on the facility for 364 days after which the entire amount is to be repaid. The Corporation believes it has sufficient funding through operations and the use of this facility to meet foreseeable financial obligations.

The table below summarizes the maturity profile of the Corporation's financial liabilities at December 31, 2013 based on contractual undiscounted payments.

-***-

 Less
than 1
year 1 to 2 years 2 to 5 years > 5 years Total
-------- ------------ ------------ --------- -------
As at December 31, 2013
Trade and other payables 23,657 - - - 23,657
Deferred unit plan liability 13,933 - - - 13,933
Long-term debt - 82,319 - - 82,319
-------- ------------ ------------ --------- -------
37,590 82,319 - - 119,909
-------- ------------ ------------ --------- -------

-****-

-***-

 Less
than 1
year 1 to 2 years 2 to 5 years > 5 years Total
-------- ------------ ------------ --------- -------
As at December 31, 2012
Trade and other payables 17,076 - - - 17,076
Deferred unit plan liability 3,923 - - - 3,923
Long-term debt - 29,773 - - 29,773
-------- ------------ ------------ --------- -------
20,999 29,773 - - 50,772
-------- ------------ ------------ --------- -------

-****-

Market risk

The significant market risk exposures affecting the financial instruments held by the Corporation are those related to interest rates and foreign currency exchange rates which are explained as follows:

Interest rate risk

The Corporation is exposed to interest rate risk in relation to interest expense on its long-term debt. Interest is calculated at prime on its borrowing facilities. The prime interest rate is subject to change. A sensitivity analysis would indicate that net profit for the year ended December 31, 2013 would have been affected by approximately $380 if the average interest rate changed by one percent. The Corporation does not currently use interest rate hedges or fixed interest rate contracts to manage the Corporation's exposure to interest rate fluctuations.

Foreign exchange risk

The Corporation has United States operations and Canadian operations which purchase certain products in United States dollars. As a result, fluctuations in the value of the Canadian dollar relative to the United States dollar can result in foreign exchange gains and losses. The Corporation does not currently have any agreements to fix or hedge the exchange rate of the Canadian dollar to the United States dollar.

United States dollar denominated balances, subject to exchange rate fluctuations, were as follows (amounts shown in Canadian dollar equivalent):

-***-

 2013 2012
$ $
---------------- ----------------
Cash and cash equivalents 8,623 2,460
Trade and other receivables 37,399 24,187
Trade and other payables (8,734) (6,093)
Income taxes payable (3,097) (335)
Long-term debt (58,300) (25,500)
---------------- ----------------
(24,109) (5,281)
---------------- ----------------

-****-

The following table demonstrates the Corporation's sensitivity to a 10% increase or decrease in
the Canadian dollar against the foreign exchange rates. The sensitivity analysis includes only foreign currency denominated monetary items and adjusts their translation at the year end for a 10% change in the foreign currency rate (amounts shown in Canadian dollar equivalent).

-***-

 Effect on profit/(loss) Effect on profit/(loss)
before tax before tax
Increase/decrease in foreign 2013 2012
exchange rate $ $
------------------------------------------------------- ------------------------
10% strengthening in the
Canadian dollar against the
US dollar (3,133) (1,365)
10% weakening in the
Canadian dollar
against the US dollar 3,135 1,517

-****-

25 Commitments and contingencies

Legal disputes

The Corporation is not involved in any legal disputes that would generate a material impact to the financial results of the Corporation.

Operating leases

The Corporation has entered into operating leases for shop and office premises.

Future minimum rentals payable under non-cancellable operating leases are as follows:

-***-

 2013 2012
$ $
----------------- -----------------
Within one year 2,575 1,849
After one year but not more than five years 4,159 2,401
----------------- -----------------
Total 6,734 4,250
----------------- -----------------

-****-

Purchase commitments

At December 31, 2013 the Corporation has commitments to purchase approximately $34,735 worth of capital assets and various parts and materials. There are no set terms for remitting payment for these financial obligations.

26 Subsequent events

a) During January 2014 the Corporation completed a split of all of the issued and outstanding common shares on a basis of three common shares for every one existing common share held.

b) On January 24, 2014 Badger closed a private placement of senior secured notes. The notes, which rank pari passu with the extendable revolving credit facility, have a principal amount of US $75,000, and interest rate of 4.83% per annum and mature on January 24, 2022. Amortizing principal repayments of US $25 million are due under the notes on January 24, 2020, January 24, 2021 and January 24, 2022. Interest will be paid semi-annually in arrears.

c) In connection with the senior secured note financing, on January 24, 2014 the Company amended the terms of its extendable revolving credit facility agreement, whereby the principal amount was reduced from $100,000 to $75,000.

To view the press release as a PDF, please click on the following link:
http://www.usetdas.com/pr/badger03172014.pdf

Source: Badger Daylighting Ltd. (TSX - BAD) www.badgerinc.com
Maximum News Dissemination by FSCwire. http://www.fscwire.com

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