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TheStreet Open House

FirstService Reports Strong Fourth Quarter Results

Stocks in this article: FSRV

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 December 31 Twelve months ended 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 December 31 Twelve months ended December 31
  2012  2011  2012  2011 
         
Net earnings (loss) attributable to common shareholders  $ 4,294  $ 65,595  $ (3,753)  $ 64,139
Non-controlling interest redemption increment  7,290  1,246  21,131  12,941
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 allowance  --   (63,193)  --   (49,745)
Non-controlling interest on adjustments  (283)  3,630  (1,368)  1,850
Adjusted net earnings  $ 20,589  $ 15,813  $ 49,326  $ 55,352
         
         
(in US$) Three months ended December 31 Twelve months ended December 31
  2012  2011  2012  2011 
         
         
Diluted net earnings (loss) per common share  $ 0.14  $ 2.01  $ (0.12)  $ 2.03
Non-controlling interest redemption increment  0.24  0.04  0.69  0.42
Acquisition-related items  0.09  0.05  0.51  0.14
Amortization of intangible assets, net of tax  0.10  0.09  0.38  0.41
Stock-based compensation expense, net of tax  0.11  0.01  0.16  0.05
Impairment loss on equity investment  --   0.10  --   0.10
Reorganization charge, net of tax  --   0.02  --   0.12
Deferred income tax asset valuation allowance  --   (1.80)  --   (1.46)
Adjusted net earnings per common share  $ 0.68  $ 0.52  $ 1.62  $ 1.81
 
 
FIRSTSERVICE CORPORATION
Condensed Consolidated Statements of Earnings (Loss)
(in thousands of US dollars, except per share amounts)
     
  Three months ended December 31 Twelve months 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 administrative expenses  171,966 153,076 639,278 634,321
Depreciation  11,409 8,121 34,812 30,661
Amortization of intangible assets  4,658 4,597 18,690 20,265
Acquisition-related items (1)  2,856 1,701 16,326 4,649
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 share of earnings   3,676  9,026  13,952  14,692
Non-controlling interest redemption increment   7,290  1,246  21,131  12,941
Net earnings attributable to Company   6,582  68,055  5,850  74,110
Preferred share dividends   2,288  2,460  9,603  9,971
Net earnings (loss) attributable to common shareholders  $ 4,294  $ 65,595  $ (3,753)  $ 64,139
         
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 (4)   $ 0.68  $ 0.52  $ 1.62  $ 1.81
         
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 debentures  337,205 316,415
Total debt, net of cash  305,521 295,616
Total debt excluding convertible debentures, net of cash   228,521 218,616
 
 
Consolidated Statements of Cash Flows
(in thousands of US dollars)
     
  Three months ended December 31 Twelve months ended 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 liabilities   50,595  27,225  22,154  (17,566)
Net cash provided by operating activities   84,147  57,562  102,991  80,214
         
Investing activities         
Acquisition of businesses, net of cash acquired   (4,774)  (911)  (19,153)  (22,975)
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 activities   (25,428)  (11,949)  (61,854)  (58,846)
         
Financing activities         
Increase in long-term debt, net   (19,447)  3,525  19,235  73,962
Purchases of non-controlling interests (net)   (2,265)  (20,161)  (6,432)  (55,607)
Dividends paid to preferred shareholders   (2,288)  (2,460)  (9,603)  (9,971)
Other financing activities   (10,853)  (4,885)  (35,339)  (30,639)
Net cash used in financing activities   (34,853)  (23,981)  (32,139)  (22,255)
         
Effect of exchange rate changes on cash   497  (1,517)  1,887  (1,673)
         
Increase (decrease) in cash and cash equivalents   24,363  20,115  10,885  (2,560)
         
Cash and cash equivalents, beginning of period   84,321  77,684  97,799  100,359
         
Cash and cash equivalents, end of period   $ 108,684  $ 97,799  $ 108,684  $ 97,799
 
 
Segmented Revenues, Adjusted EBITDA and Operating Earnings
(in thousands of US dollars)
           
(unaudited) Commercial Real Estate Services Residential Property Management Property Services Corporate Consolidated
           
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 Real Estate Services Residential Property Management Property Services Corporate Consolidated
           
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

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