FirstService Reports Strong Fourth Quarter Results Colliers International Posts Record Growth in Revenue and EBITDA Operating highlights: Three months ended Year ended December 31 December 31 2012 2011 2012 2011 Revenues (millions) $632.5 $594.9 $2,305.5 $2,224.2 Adjusted EBITDA (millions) (note 1) 54.9 44.5 155.7 161.6 Adjusted EPS (note 2) 0.68 0.52 1.62 1.81 TORONTO, Feb. 13, 2013 (GLOBE NEWSWIRE) -- FirstService Corporation (TSX:FSV)(Nasdaq:FSRV)(TSX:FSV.PR.U) today reported results for its fourth quarter and year ended December 31, 2012. All amounts are in US dollars. Revenues for the fourth quarter were $632.5 million, a 6% increase relative to the same quarter in the prior year, Adjusted EBITDA (note 1) was $54.9 million, up 23%, and Adjusted EPS (note 2) was $0.68, up 31% from the prior year quarter. GAAP EPS was $0.14 per share in the quarter, compared to $2.01 for the same quarter a year ago. The GAAP EPS for the prior year quarter was significantly impacted by the reversal of a deferred income tax valuation allowance amounting to $1.80 per share; excluding this, GAAP EPS would have been $0.21. For the year ended December 31, 2012, revenues were $2.31 billion, a 4% increase relative to the prior year, while Adjusted EBITDA was $155.7 million, down 4% from the prior year. Adjusted EPS was $1.62, down 10% versus the prior year. GAAP EPS for the year was a loss of $0.12, compared to $2.03 in the prior year. The GAAP EPS reported in the prior year was significantly impacted by the reversal of a deferred income tax valuation allowance amounting to $1.46 per share; excluding this, GAAP EPS would have been $0.57. "FirstService reported strong fourth quarter results, with revenues for the full year hitting a record of $2.3 billion on the basis of strong performances from each of Colliers International, FirstService Residential and FS Brands," said Jay S. Hennick, Founder and Chief Executive Officer of FirstService. "Unfortunately, earnings declined from the previous year as results from Field Asset Services, our property preservation and distressed asset management operation, fell off significantly due to challenging market conditions. Strong results from Field Asset Services during the recent financial crisis together with solid results from FirstService Residential and FS Brands allowed us to strategically invest in our Colliers International commercial real estate business at the right time in the cycle and those investments are beginning to pay off handsomely for FirstService shareholders," he concluded. About FirstService Corporation FirstService Corporation is a global leader in the rapidly growing real estate services sector, one of the largest markets in the world. As one of the largest property managers in the world, FirstService manages more than 2.5 billion square feet of residential and commercial properties through its three industry-leading service platforms: Colliers International, one of the largest global players in commercial real estate services; FirstService Residential, North America's largest manager of residential communities; and the Property Services division, one of North America's largest providers of essential property services delivered through company-owned operations, franchise systems and contractor networks. FirstService generates over US$2.3 billion in annual revenues and has more than 23,000 employees worldwide. More information about FirstService is available at www.firstservice.com Segmented Fourth Quarter Results Commercial Real Estate Services revenues totalled $369.9 million for the fourth quarter, up 23% relative to the prior year quarter. Revenue growth was comprised of 10% internal growth measured in local currencies, a 1% favourable impact from foreign currency translation and 12% growth from recent acquisitions. Internal growth was led by the Americas and Asia Pacific regions, both of which had solid year over year growth in brokerage, property management and project management activity. Adjusted EBITDA was $42.8 million, up 46% versus the prior year quarter. The Adjusted EBITDA margin was 11.6%, up 190 basis points over the prior year period. Residential Property Management revenues totalled $206.6 million for the fourth quarter, up 10% relative to the prior year quarter. Revenue growth was comprised of 9% internal growth from new property management contract wins and 1% from recent acquisitions. Adjusted EBITDA was $11.8 million, down 2% versus the prior year period. Property Services revenues totalled $56.0 million, down 48% from the prior year period. Adjusted EBITDA for the quarter was $3.2 million, down $6.5 million or 67% versus the prior year quarter. The reductions in revenues and Adjusted EBITDA were attributable to a significant decline in property preservation and distressed asset management volumes. Corporate costs were $2.8 million in the fourth quarter, relative to $6.5 million in the prior year period, primarily as a result of the elimination of performance-based compensation costs in accordance with the Company's performance-based executive compensation plan. Segmented Full Year Results Commercial Real Estate Services annual revenues for 2012 totalled $1.17 billion, up 18% relative to the prior year. Revenue growth was comprised of 9% internal growth measured in local currencies, a 1% unfavourable impact from foreign currency translation and 10% growth from recent acquisitions. Adjusted EBITDA for 2012 was $78.9 million, up 52% versus the prior year. The Adjusted EBITDA margin increased 150 basis points relative to the prior year, primarily due to increased broker productivity in the Americas region and improved back-office efficiencies. Full year Residential Property Management revenues were $839.2 million, up 10% relative to 2011.Revenue growth was comprised of 7% internal growth from new property management contact wins, while acquisitions accounted for 3% of revenue growth. Adjusted EBITDA was $64.3 million, up 3% versus the prior year. Property Services revenues for the full year totalled $295.7 million, down 37% versus the prior year. Adjusted EBITDA for the year was $24.0 million, down $37.7 million or 61% relative to the prior year, as a result of a significant decline in volumes in the property preservation and distressed asset management operations as well as one-time costs incurred to downsize and align the cost structure to current revenue run rates. Corporate costs were $11.6 million for the full year, relative to $14.4 million in the prior year. The current year's results were positively impacted by the elimination of performance-based executive compensation costs in accordance with the Company's performance-based executive compensation plan. Stock Repurchases During the fourth quarter of 2012, the Company purchased 35,000 Subordinate Voting Shares and 146,000 Preferred Shares on the open market under its Normal Course Issuer Bid ("NCIB") at an average price of $28.66 per share and $25.23 per share, respectively. The Company is authorized to repurchase up to an additional 2,515,000 Subordinate Voting Shares and 500 Preferred Shares under its NCIB, which expires on June 6, 2013. Conference Call FirstService will be holding a conference call on Wednesday, February 13, 2013 at 11:00 a.m. Eastern Time to discuss results for the fourth quarter.The call will be simultaneously web cast and can be accessed live or after the call at www.firstservice.com in the "Investors / Newsroom" section. Forward-looking Statements This press release includes or may include forward-looking statements.Forward-looking statements include the Company's financial performance outlook and statements regarding goals, beliefs, strategies, objectives, plans or current expectations.These statements involve known and unknown risks, uncertainties and other factors which may cause the actual results to be materially different from any future results, performance or achievements contemplated in the forward-looking statements.Such factors include: (i) general economic and business conditions, which will, among other things, impact demand for the Company's services and the cost of providing services; (ii) the ability of the Company to implement its business strategy, including the Company's ability to acquire suitable acquisition candidates on acceptable terms and successfully integrate newly acquired businesses with its existing businesses; (iii) changes in or the failure to comply with government regulations; and (iv) other factors which are described in the Company's filings with applicable Canadian and United States securities regulatory authorities (which factors are adopted herein). Summary financial information is provided in this press release.This press release should be read in conjunction with the Company's consolidated financial statements and MD&A to be made available on SEDAR at www.sedar.com. Notes 1. Reconciliation of net earnings to Adjusted EBITDA: Adjusted EBITDA is defined as net earnings, adjusted to exclude: (i) income tax; (ii) other expense (income); (iii) interest expense; (iv) depreciation and amortization; (v) acquisition-related items; (vi) stock-based compensation expense; and (vii) reorganization charges. The Company uses Adjusted EBITDA to evaluate its own operating performance and its ability to service debt, as well as an integral part of its planning and reporting systems. Additionally, this measure is used in conjunction with discounted cash flow models to determine the Company's overall enterprise valuation and to evaluate acquisition targets. Adjusted EBITDA is presented as a supplemental measure because the Company believes such measure is useful to investors as a reasonable indicator of operating performance because of the low capital intensity of its service operations. The Company believes this measure is a financial metric used by many investors to compare companies, especially in the services industry. This measure is not a recognized measure of financial performance under GAAP in the United States, and should not be considered as a substitute for operating earnings, net earnings or cash flow from operating activities, as determined in accordance with GAAP. The Company's method of calculating Adjusted EBITDA may differ from other issuers and accordingly, this measure may not be comparable to measures used by other issuers. A reconciliation of net earnings to Adjusted EBITDA appears below. (in thousands of US$) Three months ended Twelve months ended December 31 December 31 2012 2011 2012 2011 Net earnings $17,548 $78,327 $40,933 $101,743 Income tax 9,034 (56,329) 20,304 (26,807) Other expense (income) (690) 2,778 (2,441) 6,317 Interest expense, net 5,079 4,056 19,601 16,808 Operating earnings 30,971 28,832 78,397 98,061 Depreciation and amortization 16,067 12,718 53,502 50,926 Acquisition-related items 2,856 1,701 16,326 4,649 Stock-based compensation expense 4,985 349 7,435 2,335 Reorganization charge -- 885 -- 5,590 Adjusted EBITDA $54,879 $44,485 $155,660 $161,561 2. Reconciliation of net earnings (loss) attributable to common shareholders and net earnings (loss) per common share to adjusted net earnings and adjusted net earnings per common share: Adjusted earnings per common share is defined as diluted net earnings (loss) per common share, adjusted for the effect, after income tax, of: (i) the non-controlling interest redemption increment; (ii) acquisition-related items; (iii) amortization of intangible assets recognized in connection with acquisitions; (iv) stock-based compensation expense; (v) impairment loss on equity investments; (vi) reorganization charges; and (vii) deferred income tax asset valuation allowances related to tax loss carry-forwards. The Company believes this measure is useful to investors because it provides a supplemental way to understand the underlying operating performance of the Company and enhances the comparability of operating results from period to period. Adjusted earnings per common share is not a recognized measure of financial performance under GAAP, and should not be considered as a substitute for diluted net earnings per common share, as determined in accordance with GAAP. The Company's method of calculating this non-GAAP measure may differ from other issuers and, accordingly, this measure may not be comparable to measures used by other issuers.A reconciliation of diluted net earnings (loss) per common share to adjusted earnings per common share appears below. (in thousands of US$) Three months ended Twelve months ended December 31 December 31 2012 2011 2012 2011 Net earnings (loss) attributable to $4,294 $65,595 $(3,753) $64,139 common shareholders Non-controlling interest redemption 7,290 1,246 21,131 12,941 increment Acquisition-related items 2,856 1,701 16,326 4,649 Amortization of intangible assets 4,658 4,597 18,690 20,265 Stock-based compensation expense 4,986 349 7,435 2,335 Impairment loss on equity investment -- 3,092 -- 3,092 Reorganization charge -- 885 -- 5,590 Income tax on adjustments (3,212) (2,089) (9,135) (9,764) Deferred income tax asset valuation -- (63,193) -- (49,745) allowance Non-controlling interest on (283) 3,630 (1,368) 1,850 adjustments Adjusted net earnings $20,589 $15,813 $49,326 $55,352 (in US$) Three months ended Twelve months ended December 31 December 31 2012 2011 2012 2011 Diluted net earnings (loss) per $0.14 $2.01 $(0.12) $2.03 common share Non-controlling interest redemption 0.24 0.04 0.69 0.42 increment Acquisition-related items 0.09 0.05 0.51 0.14 Amortization of intangible assets, 0.10 0.09 0.38 0.41 net of tax Stock-based compensation expense, net 0.11 0.01 0.16 0.05 of tax Impairment loss on equity investment -- 0.10 -- 0.10 Reorganization charge, net of tax -- 0.02 -- 0.12 Deferred income tax asset valuation -- (1.80) -- (1.46) allowance Adjusted net earnings per common $0.68 $0.52 $1.62 $1.81 share FIRSTSERVICE CORPORATION Condensed Consolidated Statements of Earnings (Loss) (in thousands of US dollars, except per share amounts) Three months Twelve months ended December 31 ended December 31 (unaudited) 2012 2011 2012 2011 Revenues $632,534 $594,893 $ 2,305,537 $ 2,224,171 Cost of revenues 410,674 398,566 1,518,034 1,436,214 Selling, general and 171,966 153,076 639,278 634,321 administrative expenses Depreciation 11,409 8,121 34,812 30,661 Amortization of intangible 4,658 4,597 18,690 20,265 assets Acquisition-related items 2,856 1,701 16,326 4,649 (1) Operating earnings 30,971 28,832 78,397 98,061 Interest expense, net 5,079 4,056 19,601 16,808 Other expense (income) (690) 2,778 (2,441) 6,317 Earnings before income tax 26,582 21,998 61,237 74,936 Income tax (2) 9,034 (56,329) 20,304 (26,807) Net earnings 17,548 78,327 40,933 101,743 Non-controlling interest 3,676 9,026 13,952 14,692 share of earnings Non-controlling interest 7,290 1,246 21,131 12,941 redemption increment Net earnings attributable 6,582 68,055 5,850 74,110 to Company Preferred share dividends 2,288 2,460 9,603 9,971 Net earnings (loss) attributable to common $4,294 $65,595 $(3,753) $64,139 shareholders Net earnings (loss) per common share Basic $0.14 $2.19 $(0.12) $2.13 Diluted (3) $0.14 $2.01 $(0.12) $2.03 Adjusted diluted net earnings per common share $0.68 $0.52 $1.62 $1.81 (4) Weighted average common shares (thousands) Basic 30,064 29,941 30,026 30,094 Diluted (5) 30,419 30,298 30,376 30,551 Notes to Condensed Consolidated Statements of Earnings (1) Acquisition-related items include contingent acquisition consideration fair value adjustments, contingent acquisition consideration-related compensation expense, settlements of contingent liabilities of acquired entities initially recognized at the acquisition date and transaction costs. (2) Income tax expense for the three months ended December 31, 2011 includes a $63,193 reversal of valuation allowance related to deferred income tax assets; income tax expense for the year ended December 31, 2011 includes a $49,745 valuation allowance reversal. (3) The calculation of diluted net earnings per common share is impacted by the potentially dilutive effect of convertible debentures, which are convertible into common shares. For the three months ended December 31, 2012, the numerator of the calculation is increased by nil (2011 - $901) and the denominator is increased by nil (2011 - 2,750 shares). For the year ended December 31, 2012, the numerator of the calculation is increased by nil (2011 - $3,604) and the denominator is increased by nil (2011 - 2,750 shares). (4) See definition and reconciliation above. (5) Excluding the potentially dilutive effect of convertible debentures (see note 3 above). Condensed Consolidated Balance Sheets (in thousands of US dollars) (unaudited) December 31, 2012 December 31, 2011 Assets Cash and cash equivalents $108,684 $97,799 Restricted cash 3,649 4,493 Accounts receivable 328,455 286,019 Other current assets 51,618 45,366 Deferred income tax 18,135 16,527 Current assets 510,541 450,204 Other non-current assets 20,300 17,028 Deferred income tax 99,464 87,940 Fixed assets 107,011 94,150 Goodwill and intangible assets 580,594 584,396 Total assets $1,317,910 $1,233,718 Liabilities and shareholders' equity Accounts payable and accrued liabilities $401,805 $354,220 Other current liabilities 27,054 23,657 Long-term debt - current 39,038 216,373 Current liabilities 467,897 594,250 Long-term debt - non-current 298,167 100,042 Convertible debentures 77,000 77,000 Other liabilities 48,259 39,243 Deferred income tax 34,683 38,160 Non-controlling interests 151,969 141,404 Shareholders' equity 239,935 243,619 Total liabilities and equity $1,317,910 $1,233,718 Supplemental balance sheet information Total debt $414,205 $393,415 Total debt excluding convertible 337,205 316,415 debentures Total debt, net of cash 305,521 295,616 Total debt excluding convertible 228,521 218,616 debentures, net of cash Consolidated Statements of Cash Flows (in thousands of US dollars) Three months ended Twelve months ended December 31 December 31 (unaudited) 2012 2011 2012 2011 Cash provided by (used in) Operating activities Net earnings $17,548 $78,327 $40,933 $101,743 Items not affecting cash: Depreciation and amortization 16,067 12,718 53,502 50,926 Deferred income tax (1,186) (64,354) (18,660) (64,512) Other 1,123 3,646 5,062 9,623 33,552 30,337 80,837 97,780 Changes in operating assets and 50,595 27,225 22,154 (17,566) liabilities Net cash provided by operating 84,147 57,562 102,991 80,214 activities Investing activities Acquisition of businesses, net of (4,774) (911) (19,153) (22,975) cash acquired Purchases of fixed assets (21,774) (13,360) (44,395) (37,400) Other investing activities 1,120 2,322 1,694 1,529 Net cash used in investing (25,428) (11,949) (61,854) (58,846) activities Financing activities Increase in long-term debt, net (19,447) 3,525 19,235 73,962 Purchases of non-controlling (2,265) (20,161) (6,432) (55,607) interests (net) Dividends paid to preferred (2,288) (2,460) (9,603) (9,971) shareholders Other financing activities (10,853) (4,885) (35,339) (30,639) Net cash used in financing (34,853) (23,981) (32,139) (22,255) activities Effect of exchange rate changes on 497 (1,517) 1,887 (1,673) cash Increase (decrease) in cash and 24,363 20,115 10,885 (2,560) cash equivalents Cash and cash equivalents, 84,321 77,684 97,799 100,359 beginning of period Cash and cash equivalents, end of $108,684 $97,799 $108,684 $97,799 period Segmented Revenues, Adjusted EBITDA and Operating Earnings (in thousands of US dollars) Commercial Residential Property (unaudited) Real Estate Property Services Corporate Consolidated Services Management Three months ended December 31 2012 Revenues $369,873 $206,630 $55,975 $56 $632,534 Adjusted EBITDA 42,754 11,757 3,161 (2,793) 54,879 Operating earnings 28,588 6,526 (620) (3,523) 30,971 2011 Revenues $300,367 $187,883 $106,577 $66 $594,893 Adjusted EBITDA 29,243 12,050 9,704 (6,512) 44,485 Operating earnings 20,400 8,943 6,359 (6,870) 28,832 Commercial Residential Property Real Estate Property Services Corporate Consolidated Services Management Twelve months ended December 31 2012 Revenues $1,170,427 $839,167 $295,725 $218 $2,305,537 Adjusted EBITDA 78,949 64,282 24,046 (11,617) 155,660 Operating earnings 33,796 45,870 13,744 (15,013) 78,397 2011 Revenues $994,579 $760,501 $468,903 $188 $2,224,171 Adjusted EBITDA 51,900 62,320 61,703 (14,362) 161,561 Operating earnings 22,379 47,202 45,421 (16,941) 98,061 CONTACT: Jay S. Hennick Founder & CEO D. Scott Patterson President & COO John B. Friedrichsen Senior Vice President & CFO (416) 960-9500
FirstService Reports Strong Fourth Quarter Results
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