Operating highlights:
| Three months ended | Year ended | |||
| December 31 | December 31 | |||
| 2010 | 2009 | 2010 | 2009 | |
| Revenues (millions) | $ 552.1 | $ 465.8 | $ 1,986.3 | $ 1,703.2 |
| Adjusted EBITDA (millions) (note 1) | 37.0 | 36.0 | 147.3 | 133.1 |
| Adjusted EPS (note 2) | 0.37 | 0.27 | 1.61 | 1.42 |
TORONTO, Feb. 16, 2011 (GLOBE NEWSWIRE) -- FirstService Corporation (TSX:FSV) (Nasdaq:FSRV) preferred shares – (TSX:FSV.PR.U) today reported results for its fourth quarter and year ended December 31, 2010. All amounts are in US dollars.
Revenues for the fourth quarter were $552.1 million, a 19% increase relative to the same quarter in the prior year, Adjusted EBITDA (note 1) was $37.0 million, versus $36.0 million and Adjusted EPS (note 2) was $0.37, up 37% versus $0.27 reported in the prior year quarter. GAAP EPS from continuing operations was a loss of $0.12 per share in the quarter, compared to a loss of $0.40 for the same quarter a year ago.
For the year ended December 31, 2010, revenues were $1.986 billion, a 17% increase relative to the prior year, while Adjusted EBITDA was $147.3 million, up 11%, and Adjusted EPS was $1.61, up 13%. The Company's 29.6% equity investment in Colliers UK, which is not included in consolidated revenues or Adjusted EBITDA, negatively impacted results by $0.12 per share as it restructured its operations; excluding this loss, full year Adjusted EPS would have been $1.73 per share, up 22% versus the prior year. GAAP EPS from continuing operations for the year was $0.11, compared to a loss of $1.85 in the prior year.
"FirstService delivered solid fourth quarter and annual results for the year ended December 31, 2010," said Jay S. Hennick, Founder and Chief Executive Officer of FirstService. "Colliers International reported strong revenue growth across all service lines, while FirstService Residential and Property Services continued to deliver solid results considering the challenging, but improving, economic conditions in the US," he added.
About FirstService Corporation
FirstService Corporation is a global diversified leader in the rapidly growing real estate services sector, providing services in commercial real estate, residential property management and property services. Industry-leading service platforms include Colliers International, the third largest global player in commercial real estate services; FirstService Residential Management, the largest manager of residential communities in North America; and TFC, North America's largest provider of property services through franchise and contractor networks.
FirstService generates about US$2 billion in annual revenues and has more than 20,000 employees worldwide. More information about FirstService is available at www.firstservice.com.
Segmented Quarterly Results
Commercial Real Estate Services revenues totalled $268.0 million for the fourth quarter, up 30% relative to the prior year quarter. Revenue growth was comprised of 20% internal growth measured in local currencies, a 4% favourable impact from foreign currency translation and 6% growth from recent acquisitions. Internal growth was primarily driven by year over year revenue increases in the Americas and Asia Pacific regions. Adjusted EBITDA was $16.8 million, up 38% from $12.1 million reported in the prior year quarter. Fourth quarter results were negatively impacted by $1.0 million in Colliers International global re-branding costs.
Residential Property Management revenues were $164.4 million for the fourth quarter, up 5% relative to the prior year quarter. Revenue growth was comprised of 1% internal growth from property management contract wins and 4% from recent acquisitions. Adjusted EBITDA for the quarter was $11.5 million versus $14.9 million in the prior year period, impacted by a reduction in higher-margin ancillary service revenues in the current quarter and a surge in collections revenues and profits experienced in the prior year period.
Property Services revenues totalled $119.6 million, up 15% from $103.8 million in the prior year period, attributable primarily to foreclosure services growth, with franchised services also reporting more modest quarter-over-quarter growth. Adjusted EBITDA for the fourth quarter was $15.9 million, up 44% versus $11.1 million in the prior year quarter, primarily due to improved profitability in the franchise group relative to the prior year period.
Corporate costs were $7.9 million in the fourth quarter, relative to $2.8 million in the prior year period. The current quarter's results were impacted by higher performance-based executive compensation accruals and foreign currency translation of Canadian dollar-denominated expenses.
Segmented Annual Results
Commercial Real Estate Services annual revenues for 2010 totalled $861.9 million, up 38% relative to the prior year. Revenue growth was comprised of 26% internal growth measured in local currencies, a 6% favourable impact from foreign currency translation and 6% growth from recent acquisitions. Adjusted EBITDA for 2010 was $39.5 million, up from $6.4 million reported in the prior year. Annual results for 2010 were negatively impacted by $2.7 million in Colliers International global re-branding costs, which are expected to continue through the first half of 2011. In 2009, the Company incurred $13.5 million of cost containment expense to reduce its headcount and office footprint; these costs were excluded from Adjusted EBITDA to provide a more meaningful indication of ongoing results from operations.
Full year Residential Property Management revenues were $662.0 million, up 3% relative to 2009. Internal growth was nominal, but included an increase in contractual management fees offset by a decline in ancillary service revenues. Recent acquisitions accounted for the 3% revenue growth. Adjusted EBITDA was $59.1 million versus $61.0 million in the prior year, and was impacted by the reduction in ancillary service revenues which tend to be at higher margins than contractual management fees.
Property Services revenues for the full year totalled $462.1 million, up 6% from $434.8 million in the prior year, comprised entirely of internal growth in both franchising and foreclosure services. Adjusted EBITDA for the year was $68.2 million, versus $71.5 million in the prior year, primarily due to the foreclosure services operation, which experienced significant operating leverage in early 2009 from a surge of new business as well as additional costs from increases in the scope of client engagements in the current year.
Corporate costs were $22.3 million for the full year, relative to $11.2 million in the prior year. The current year's results were impacted by higher performance-based executive compensation and foreign currency translation of Canadian dollar-denominated expenses. Performance-based compensation was based on growth in full year Adjusted EPS less cost containment expense, which increased 44%.
Deferred Income Tax Asset Valuation Allowance
During the fourth quarter, the Company recorded a decrease in its valuation allowance with respect to deferred income tax assets, which decreased income tax expense by $0.7 million and increased GAAP earnings per share by $0.02. In the prior year quarter, the valuation allowance decreased by $1.2 million, increasing GAAP earnings per share by $0.04. For the full year, the increase to income tax expense and reduction to GAAP earnings per share were $12.6 million and $0.39, respectively (2009 - $17.3 million and $0.54, respectively). The valuation allowance relates to tax loss carry-forwards in the Company's Commercial Real Estate operations, which remain available to offset income tax over the next 17 to 20 years.
Conference Call
FirstService will be holding a conference call on Wednesday, February 16, 2011 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 (loss) from continuing operations to Adjusted EBITDA:
Adjusted EBITDA is defined as net earnings (loss) from continuing operations, adjusted to exclude: (i) income tax; (ii) other expense (income); (iii) interest expense; (iv) depreciation and amortization; (v) goodwill impairment charges; (vi) acquisition-related items; (vii) stock-based compensation expense; and (vii) cost containment expense. Cost containment expense refers to charges in the Commercial Real Estate segment on account of headcount and office footprint reductions; such charges are shown only if material. 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 (loss) from continuing operations to Adjusted EBITDA appears below.
| Three months ended | Twelve months ended | |||
| (in thousands of US$) | December 31 | December 31 | ||
| 2010 | 2009 | 2010 | 2009 | |
| Net earnings (loss) from continuing operations | $ 12,223 | $ 8,711 | $ 47,900 | $ (7,279) |
| Income tax | 5,776 | 7,846 | 29,228 | 39,066 |
| Other expense (income) | (741) | (1,559) | 3,007 | (1,624) |
| Interest expense, net | 4,201 | 3,884 | 17,397 | 12,506 |
| Realized gain on available for sale securities | -- | -- | -- | (4,488) |
| Operating earnings | 21,459 | 18,882 | 97,532 | 38,181 |
| Depreciation and amortization | 12,646 | 10,689 | 47,886 | 46,383 |
| Goodwill impairment charge | -- | -- | -- | 29,583 |
| Acquisition-related items | 2,209 | -- | (871) | -- |
| Stock-based compensation expense | 682 | 728 | 2,761 | 5,424 |
| Cost containment | -- | 5,655 | -- | 13,496 |
| Adjusted EBITDA | $ 36,996 | $ 35,954 | $ 147,308 | $ 133,067 |
2. Reconciliation of net earnings (loss) and net earnings (loss) per common share from continuing operations to adjusted net earnings and adjusted net earnings per common share:
Adjusted diluted net earnings per common share is defined as diluted net earnings (loss) per common share from continuing operations, adjusted for the effect, after income tax, of: (i) the non-controlling interest redemption increment; (ii) amortization expense related to intangible assets recognized in connection with acquisitions; (iii) goodwill impairment charges; (iv) acquisition-related items; (v) stock-based compensation expense; (vi) cost containment expense; (vii) realized gain on available-for-sale securities; and (viii) deferred income tax asset valuation allowances related to tax loss carry-forwards. Cost containment expense refers to charges in the Commercial Real Estate segment on account of headcount and office footprint reductions; such charges are shown only if material. 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 diluted net 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 from continuing operations, 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 net earnings (loss) attributable to common shareholders to adjusted net earnings and of diluted net earnings (loss) per common share from continuing operations to adjusted diluted net earnings per common share appears below.
| Three months ended | Twelve months ended | |||
| (in thousands of US$) | December 31 | December 31 | ||
| 2010 | 2009 | 2010 | 2009 | |
| Net (loss) earnings attributable to common shareholders | $ (3,675) | $ (9,351) | $ 3,463 | $ (54,955) |
| Non-controlling interest redemption increment | 10,053 | 14,815 | 18,916 | 32,602 |
| Company share of net (earnings) loss from discontinued operations, net of tax | -- | (2,492) | -- | 481 |
| Acquisition-related items | 2,209 | -- | (871) | -- |
| Amortization of intangible assets | 5,087 | 3,348 | 19,606 | 19,550 |
| Goodwill impairment charge | -- | -- | -- | 29,583 |
| Stock-based compensation expense | 682 | 728 | 2,761 | 5,424 |
| Cost containment | -- | 5,655 | -- | 13,496 |
| Realized gain on available-for-sale securities | -- | -- | -- | (4,488) |
| Income tax on adjustments | (2,019) | (3,174) | (7,778) | (11,361) |
| Deferred income tax asset valuation allowance | (672) | (1,232) | 12,590 | 17,289 |
| Non-controlling interest on adjustments | (258) | (354) | 153 | (5,735) |
| Adjusted net earnings | $ 11,407 | $ 7,943 | $ 48,840 | $ 41,886 |
| Three months ended | Twelve months ended | |||
| (in US$) | December 31 | December 31 | ||
| 2010 | 2009 | 2010 | 2009 | |
| Net (loss) earnings per common share from continuing operations | $ (0.12) | $ (0.40) | $ 0.11 | $ (1.85) |
| Non-controlling interest redemption increment | 0.33 | 0.50 | 0.62 | 1.10 |
| Acquisition-related items | 0.07 | -- | 0.03 | -- |
| Amortization of intangible assets, net of tax | 0.10 | 0.07 | 0.40 | 0.39 |
| Goodwill impairment charge | -- | -- | -- | 0.93 |
| Stock-based compensation expense, net of tax | 0.01 | 0.02 | 0.06 | 0.11 |
| Cost containment, net of tax | -- | 0.12 | -- | 0.30 |
| Realized gain on available-for-sale securities | -- | -- | -- | (0.10) |
| Deferred income tax asset valuation allowance | (0.02) | (0.04) | 0.39 | 0.54 |
| Adjusted diluted net earnings per common share | $ 0.37 | $ 0.27 | $ 1.61 | $ 1.42 |
| 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) | 2010 | 2009 | 2010 | 2009 |
| Revenues | $ 552,090 | $ 465,789 | $ 1,986,271 | $ 1,703,222 |
| Cost of revenues | 331,193 | 300,009 | 1,221,323 | 1,062,406 |
| Selling, general and administrative expenses | 184,583 | 136,209 | 620,401 | 526,669 |
| Depreciation | 7,559 | 7,341 | 28,280 | 26,833 |
| Amortization of intangible assets | 5,087 | 3,348 | 19,606 | 19,550 |
| Goodwill impairment charge | -- | -- | -- | 29,583 |
| Acquisition-related items (1) | 2,209 | -- | (871) | -- |
| Operating earnings | 21,459 | 18,882 | 97,532 | 38,181 |
| Interest expense, net | 4,201 | 3,884 | 17,397 | 12,506 |
| Other (income) expense | (741) | (1,559) | 3,007 | (6,112) |
| Earnings before income tax | 17,999 | 16,557 | 77,128 | 31,787 |
| Income tax (2) | 5,776 | 7,846 | 29,228 | 39,066 |
| Net earnings (loss) from continuing operations | 12,223 | 8,711 | 47,900 | (7,279) |
| Discontinued operations, net of income tax (3) | -- | 2,672 | -- | (576) |
| Net earnings (loss) | 12,223 | 11,383 | 47,900 | (7,855) |
| Non-controlling interest share of earnings | 3,320 | 3,394 | 15,420 | 4,397 |
| Non-controlling interest redemption increment | 10,053 | 14,815 | 18,916 | 32,602 |
| Net (loss) earnings attributable to Company | (1,150) | (6,826) | 13,564 | (44,854) |
| Preferred share dividends | 2,525 | 2,525 | 10,101 | 10,101 |
| Net (loss) earnings attributable to common shareholders | $ (3,675) | $ (9,351) | $ 3,463 | $ (54,955) |
| Net (loss) earnings per common share | ||||
| Basic | ||||
| Continuing operations | $ (0.12) | $ (0.40) | $ 0.12 | $ (1.85) |
| Discontinued operations | -- | 0.08 | -- | (0.02) |
| $ (0.12) | $ (0.32) | $ 0.12 | $ (1.87) | |
| Diluted | ||||
| Continuing operations | $ (0.12) | $ (0.40) | $ 0.11 | $ (1.85) |
| Discontinued operations | -- | 0.08 | -- | (0.02) |
| $ (0.12) | $ (0.32) | $ 0.11 | $ (1.87) | |
| Adjusted diluted net earnings per common share (4) | $0.37 | $ 0.27 | $1.61 | $1.42 |
| Weighted average common shares (thousands) | ||||
| Basic | 30,266 | 29,547 | 30,081 | 29,438 |
| Diluted | 30,669 | 29,719 | 30,367 | 29,516 |
| 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, 2010 includes a $672 reversal of valuation allowance related to deferred income tax assets (2009 -- $1,232 reversal); income tax expense for the year ended December 31, 2010 includes a $12,590 valuation allowance (2009 -- $17,289). | ||||
| (3) Amount shown is before NCI share. For the three months ended December 31, 2010, NCI share of discontinued operations was nil (2009 -- $180); for the year ended December 31, 2010, NCI share of discontinued operations was nil (2009 - ($95)). | ||||
| (4) See definition and reconciliation above. | ||||
| Condensed Consolidated Balance Sheets | ||
| (in thousands of US dollars) | ||
| (unaudited) | December 31, 2010 | December 31, 2009 |
| Assets | ||
| Cash and cash equivalents | $ 100,359 | $ 99,778 |
| Restricted cash | 4,337 | 5,039 |
| Accounts receivable | 262,654 | 214,285 |
| Inventories | 9,140 | 9,458 |
| Prepaid expenses and other current assets | 43,140 | 53,733 |
| Current assets | 419,630 | 382,293 |
| Other non-current assets | 50,726 | 46,479 |
| Fixed assets | 86,134 | 75,939 |
| Goodwill and intangible assets | 575,976 | 504,819 |
| Total assets | $ 1,132,466 | $ 1,009,530 |
| Liabilities and shareholders' equity | ||
| Accounts payable and accrued liabilities | $ 346,156 | $ 269,668 |
| Other current liabilities | 26,498 | 29,008 |
| Long-term debt - current | 39,249 | 22,347 |
| Current liabilities | 411,903 | 321,023 |
| Long-term debt - non-current | 201,491 | 213,647 |
| Convertible unsecured subordinated debentures | 77,000 | 77,000 |
| Other liabilities | 35,291 | 27,606 |
| Deferred income tax | 33,175 | 40,052 |
| Non-controlling interests | 174,358 | 164,168 |
| Shareholders' equity | 199,248 | 166,034 |
| Total liabilities and equity | $ 1,132,466 | $ 1,009,530 |
| Supplemental balance sheet information | ||
| Total debt | $ 317,740 | $ 312,994 |
| Total debt excluding convertible debentures | 240,740 | 235,994 |
| Total debt, net of cash | 217,381 | 213,216 |
| Total debt excluding convertible debentures, net of cash | 140,381 | 136,216 |
| Consolidated Statements of Cash Flows | ||||
| (in thousands of US dollars) | ||||
| Three months ended | Twelve months ended | |||
| December 31 | December 31 | |||
| (unaudited) | 2010 | 2009 | 2010 | 2009 |
| Cash provided by (used in) | ||||
| Operating activities | ||||
| Net earnings (loss) from continuing operations | $ 12,223 | $ 8,711 | $ 47,900 | $ (7,279) |
| Items not affecting cash: | ||||
| Depreciation and amortization | 12,646 | 10,689 | 47,886 | 46,383 |
| Goodwill impairment charge | -- | -- | -- | 29,583 |
| Deferred income tax | (438) | (4,057) | (7,440) | (3,178) |
| Other | 4,115 | 708 | 2,817 | 2,548 |
| 28,546 | 16,051 | 91,163 | 68,057 | |
| Changes in operating assets and liabilities | 26,078 | 41,815 | 23,888 | 15,240 |
| Discontinued operations | -- | (2,869) | -- | (2,248) |
| Net cash provided by operating activities | 54,624 | 54,997 | 115,051 | 81,049 |
| Investing activities | ||||
| Acquisition of businesses, net of cash acquired | (21,115) | (11,239) | (34,710) | (16,831) |
| Purchases of fixed assets | (9,303) | (5,686) | (32,460) | (24,234) |
| Other investing activities | (2,460) | (14,638) | 1,045 | (5,829) |
| Discontinued operations | -- | 1,511 | -- | 1,343 |
| Net cash used in investing activities | (32,878) | (30,052) | (66,125) | (45,551) |
| Financing activities | ||||
| Increase in long-term debt, net | 8,324 | 27,411 | 1,747 | 43,197 |
| Purchases of non-controlling interests (net) | (18,617) | (13,148) | (38,210) | (42,246) |
| Dividends paid to preferred shareholders | (2,525) | (2,525) | (10,101) | (10,101) |
| Other financing activities | (1,946) | (4,936) | (4,486) | (14,380) |
| Net cash (used in) provided by financing activities | (14,764) | 6,802 | (51,050) | (23,530) |
| Effect of exchange rate changes on cash | (1,517) | 4,611 | 2,705 | 7,761 |
| Increase in cash and cash equivalents | 5,465 | 36,358 | 581 | 19,729 |
| Cash and cash equivalents, beginning of period including cash held by discontinued operations | 94,894 | 63,420 | 99,778 | 80,049 |
| Cash and cash equivalents, end of period including cash held by discontinued operations | $ 100,359 | $ 99,778 | $ 100,359 | $ 99,778 |
| Segmented Revenues, Adjusted EBITDA and Operating Earnings | |||||
| (in thousands of US dollars) | |||||
| Commercial | Residential | ||||
| Real Estate | Property | Property | |||
| (unaudited) | Services | Management | Services | Corporate | Consolidated |
| Three months ended December 31 | |||||
| 2010 | |||||
| Revenues | $ 268,014 | $ 164,431 | $ 119,572 | $ 73 | $ 552,090 |
| Adjusted EBITDA | 16,759 | 11,545 | 15,883 | (7,873) | 36,314 |
| Stock-based compensation | 682 | ||||
| 36,996 | |||||
| Operating earnings | 7,888 | 8,189 | 13,417 | (8,035) | 21,459 |
| 2009 | |||||
| Revenues | $ 205,953 | $ 155,980 | $ 103,818 | $ 38 | $ 465,789 |
| Adjusted EBITDA | 6,465 | 14,886 | 11,061 | (2,841) | 29,571 |
| Stock-based compensation | 728 | ||||
| Cost containment | 5,655 | 5,655 | |||
| 12,120 | 35,954 | ||||
| Operating earnings | 1,162 | 11,997 | 8,677 | (2,954) | 18,882 |
| Commercial | Residential | ||||
| Real Estate | Property | Property | |||
| Services | Management | Services | Corporate | Consolidated | |
| Twelve months ended December 31 | |||||
| 2010 | |||||
| Revenues | $ 861,917 | $ 662,033 | $ 462,141 | $ 180 | $ 1,986,271 |
| Adjusted EBITDA | 39,485 | 59,119 | 68,215 | (22,272) | 144,547 |
| Stock-based compensation | 2,761 | ||||
| 147,308 | |||||
| Operating earnings | 14,694 | 46,670 | 58,671 | (22,503) | 97,532 |
| 2009 | |||||
| Revenues | $ 622,996 | $ 645,251 | $ 434,838 | $ 137 | $ 1,703,222 |
| Adjusted EBITDA | (7,051) | 60,960 | 71,475 | (11,237) | 114,147 |
| Stock-based compensation | 5,424 | ||||
| Cost containment | 13,496 | 13,496 | |||
| 6,445 | 133,067 | ||||
| Operating earnings | (61,665) | 49,399 | 62,028 | (11,581) | 38,181 |