FirstService Reports Record Fourth Quarter and Full Year Results for 2013

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| Source: FirstService Corporation

Full year Adjusted EPS up 31% over prior year

Colliers International posts 47% Adjusted EBITDA growth for 2013

Operating highlights:

  Three months ended Year ended
  December 31 December 31
  2013 2012 2013 2012
         
Revenues (millions) $ 691.7 $ 604.1 $ 2,343.6 $ 2,110.5
Adjusted EBITDA (millions) (note 1) 73.3 57.3 185.5 152.3
Adjusted EPS (note 2) 0.97 0.77 2.15 1.64

TORONTO, Feb. 12, 2014 (GLOBE NEWSWIRE) -- FirstService Corporation (TSX:FSV) (Nasdaq:FSRV) today reported record fourth quarter and full year results for the year ended December 31, 2013. All amounts are in US dollars and all percentage revenue variances are calculated on a local currency basis.

Revenues for the fourth quarter were $691.7 million, a 16% increase relative to the same quarter in the prior year. Adjusted EBITDA (note 1) was $73.3 million, up 28%, and Adjusted EPS (note 2) was $0.97, up 26% from the prior year quarter. GAAP EPS from continuing operations was $0.12 per share in the quarter, compared to $0.24 for the same quarter a year ago.

For the year ended December 31, 2013, revenues were $2.34 billion, a 12% increase relative to the prior year. Adjusted EBITDA was $185.5 million, up 22%. Adjusted EPS was $2.15, up 31% versus the prior year. GAAP EPS from continuing operations for the year was a loss of $0.46, compared to a loss of $0.08 in the prior year and was negatively impacted by accelerated amortization of intangible assets and one-time re-branding related costs in connection with the re-branding of the Company's residential real estate services operations to "FirstService Residential".

"FirstService finished the year strongly, posting record quarterly and full year results. Colliers International continued to bolster its global platform making excellent progress operationally and financially with substantial growth in profits and margins to record levels," said Jay S. Hennick, Founder and Chief Executive Officer of FirstService. "FirstService Residential delivered solid year over year growth while dedicating considerable time, effort and financial resources to its bold re-branding initiative opening a new chapter in the story of North America's largest manager of residential communities. FirstService Brands also delivered robust growth in both revenue and profits over the prior year benefiting from increased consumer spending as the US economy continues to recover," he added. "With our current momentum across all of our service lines, FirstService is better positioned today, than ever before, to continue creating value for our shareholders in the years ahead," he concluded.

John Friedrichsen, Senior Vice President and Chief Financial Officer of FirstService Corporation said "With our strong financial performance and the sale of our foreclosure services business, we finished the year with a leverage ratio of 1.2 times (expressed in terms of net debt to EBITDA) providing us with a strong balance sheet, low cost of capital and ample liquidity to support our future growth."

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 FirstService Brands, one of North America's largest providers of essential property services delivered through company-owned operations and franchise systems.

FirstService generates over US$2.3 billion in annual revenues and has more than 24,000 employees worldwide. More information about FirstService is available at www.firstservice.com

Segmented Fourth Quarter Results

Colliers International revenues totalled $436.6 million for the fourth quarter, compared to $369.9 million in the prior year quarter, up 21%. The revenue increase was comprised of 14% internal growth and 7% growth from recent acquisitions. Internal growth was led by the Europe and Asia Pacific regions, both of which had strong year over year gains in investment sales, leasing and consulting. Adjusted EBITDA was $61.7 million, up 44% versus the prior year quarter, at a margin of 14.1%, up 250 basis points over the prior year period.

FirstService Residential revenues totalled $219.1 million for the fourth quarter, up 9% relative to the prior year quarter. The revenue increase was comprised of 8% internal growth from new property management contract wins and 1% from recent acquisitions. Adjusted EBITDA was $11.9 million, up 5% versus the prior year period.

FirstService Brands revenues totalled $36.0 million, up 8% versus the prior year period. Adjusted EBITDA for the quarter was $7.1 million, up 17% versus the prior year quarter, at a margin of 19.6%, up 160 basis points over the prior year period. Each of the franchise brands reported strong increases in system-wide sales and royalties.

Corporate costs were $7.4 million in the fourth quarter, relative to $2.8 million in the prior year period, primarily attributable to increased performance-based compensation expense in the current year, relative to the prior year.

Segmented Full Year Results

Colliers International annual revenues for 2013 totalled $1.32 billion, compared to $1.17 billion in the prior year, up 14%. The revenue increase was comprised of 8% internal growth and 6% growth from recent acquisitions. Adjusted EBITDA for 2013 was $116.0 million, up 47% versus the prior year, at a margin of 8.8%, up 210 basis points relative to the prior year, due primarily to increased broker productivity, operating leverage, and the impact of acquisitions.

FirstService Residential revenues were $884.3 million, up 9% relative to 2012, with the increase comprised of 8% internal growth and 1% from acquisitions. Adjusted EBITDA was $57.9 million, down 5% versus the prior year, and was impacted by $6.0 million of re-branding and other related costs incurred during the year.

FirstService Brands revenues for the year totalled $140.3 million, up 12% versus the prior year. Adjusted EBITDA for the year was $28.9 million, up 20% relative to the prior year, due to operating leverage on royalties from increasing system-wide sales at the division's franchise brands.

Corporate costs were $17.3 million for the full year, relative to $11.6 million in the prior year. The current year's results were impacted by increased performance-based compensation costs in accordance with the Company's performance-based compensation plan, relative to the prior year.

Conference Call

FirstService will be holding a conference call on Wednesday, February 12, 2014 at 11:00 a.m. Eastern Time to discuss results for the fourth quarter and full year. 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 from continuing operations to adjusted EBITDA:

Adjusted EBITDA is defined as net earnings from continuing operations, adjusted to exclude: (i) income tax; (ii) other expense (income); (iii) interest expense; (iv) depreciation and amortization; (v) acquisition-related items; and (vi) stock-based compensation expense. 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 from continuing operations 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 from continuing operations to adjusted EBITDA appears below.

  Three months ended Twelve months ended
(in thousands of US$) December 31 December 31
  2013 2012 2013 2012
         
Net earnings from continuing operations $ 28,351 $ 20,557 $ 47,640 $ 42,217
Income tax 16,137 10,871 22,624 21,007
Other expense (income) 305 (662) (1,531) (2,441)
Interest expense, net 4,220 5,064 21,501 19,565
Operating earnings 49,013 35,830 90,234 80,348
Depreciation and amortization 14,620 13,674 71,995 48,155
Acquisition-related items 2,118 2,856 10,498 16,326
Stock-based compensation expense 7,526 4,985 12,734 7,434
Adjusted EBITDA $ 73,277 $ 57,345 $ 185,461 $ 152,263

2. Reconciliation of net earnings (loss) attributable to common shareholders and net earnings (loss) per common share from continuing operations to adjusted net earnings and adjusted net earnings per share:

Adjusted net earnings per 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) acquisition-related items; (iii) amortization of intangible assets recognized in connection with acquisitions; and (iv) stock-based compensation expense. 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 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 diluted net earnings (loss) per common share from continuing operations to adjusted net earnings per share appears below.

  Three months ended Twelve months ended
(in thousands of US$) December 31 December 31
  2013 2012 2013 2012
         
Net earnings (loss) attributable to common shareholders $ 1,220 $ 4,294 $ (21,185) $ (3,753)
Non-controlling interest redemption increment 18,373 7,290 41,430 21,131
Company share of net (earnings) loss from discontinued operations, net of tax 2,952 3,018 5,997 1,328
Acquisition-related items 2,118 2,856 10,498 16,326
Amortization of intangible assets (1) 6,007 4,356 37,213 17,461
Stock-based compensation expense 7,525 4,985 12,734 7,434
Income tax on adjustments (2,281) (3,089) (11,025) (8,643)
Non-controlling interest on adjustments (910) (283) (4,078) (1,368)
Adjusted net earnings $ 35,004 $ 23,427 $ 71,584 $ 49,916
         
  Three months ended Twelve months ended
(in US$) December 31 December 31
  2013 2012 2013 2012
         
Diluted net earnings (loss) per common share from continuing operations $ 0.12 $ 0.24 $ (0.46) $ (0.08)
Non-controlling interest redemption increment 0.51 0.24 1.25 0.69
Acquisition-related items 0.05 0.09 0.30 0.51
Amortization of intangible assets, net of tax (1) 0.10 0.09 0.73 0.36
Stock-based compensation expense, net of tax 0.19 0.11 0.33 0.16
Adjusted net earnings per share $ 0.97 $ 0.77 $ 2.15 $ 1.64

(1) Amortization of intangible assets for the year ended December 31, 2013 includes $11,153 ($0.26 per share) of accelerated amortization related to legacy regional trademarks and trade names in connection with Residential Real Estate Services re-branding.

FIRSTSERVICE CORPORATION
Operating Results
(in thousands of US dollars, except per share amounts)
  Three months Twelve months
  ended December 31 ended December 31
(unaudited) 2013 2012 2013 2012
         
Revenues $ 691,732 $ 604,119 $ 2,343,634 $ 2,110,466
         
Cost of revenues 424,913 385,708 1,509,882 1,362,980
Selling, general and administrative expenses 201,068 166,051 661,025 602,657
Depreciation 8,613 9,318 34,782 30,694
Amortization of intangible assets 6,007 4,356 37,213 17,461
Acquisition-related items (1) 2,118 2,856 10,498 16,326
Operating earnings 49,013 35,830 90,234 80,348
Interest expense, net 4,220 5,064 21,501 19,565
Other expense (income) 305 (662) (1,531) (2,441)
Earnings before income tax 44,488 31,428 70,264 63,224
Income tax 16,137 10,871 22,624 21,007
Net earnings from continuing operations 28,351 20,557 47,640 42,217
Discontinued operations, net of income tax (2) (2,952) (3,018) (5,997) (1,328)
Net earnings 25,399 17,539 41,643 40,889
Non-controlling interest share of earnings 5,806 3,667 18,252 13,908
Non-controlling interest redemption increment 18,373 7,290 41,430 21,131
Net earnings (loss) attributable to Company 1,220 6,582 (18,039) 5,850
Preferred share dividends -- 2,288 3,146 9,603
Net earnings (loss) attributable to common shareholders $ 1,220 $ 4,294 $ (21,185) $ (3,753)
         
Net earnings (loss) per common share        
Basic        
Continuing operations $ 0.12 $ 0.24 $ (0.46) $ (0.08)
Discontinued operations (0.09) (0.10) (0.18) (0.04)
  $ 0.03 $ 0.14 $ (0.64) $ (0.12)
         
Diluted        
Continuing operations $ 0.12 $ 0.24 $ (0.46) $ (0.08)
Discontinued operations (0.09) (0.10) (0.18) (0.04)
  $ 0.03 $ 0.14 $ (0.64) $ (0.12)
         
Adjusted net earnings per share (3) $ 0.97 $ 0.77 $ 2.15 $ 1.64
         
Weighted average common shares (thousands)        
Basic 35,709 30,064 32,928 30,026
Diluted 36,148 30,419 33,262 30,376

(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) Discontinued operations include Field Asset Services (sold on September 30, 2013) and the residential rental operations (held for sale as of December 31, 2013).

(3) See definition and reconciliation above.

Condensed Consolidated Balance Sheets
(in thousands of US dollars)
 
(unaudited) December 31, 2013 December 31, 2012
     
Assets    
Cash and cash equivalents $ 142,704 $ 108,684
Restricted cash 5,613 3,649
Accounts receivable 371,423 328,455
Other current assets 71,582 51,618
Deferred income tax 23,938 18,135
Current assets 615,260 510,541
Other non-current assets 19,711 20,300
Deferred income tax 102,629 99,464
Fixed assets 101,554 107,011
Goodwill and intangible assets 604,357 580,594
Total assets $ 1,443,511 $ 1,317,910
     
     
Liabilities and shareholders' equity    
Accounts payable and accrued liabilities $ 485,436 $ 401,805
Other current liabilities 39,943 27,054
Long-term debt - current 44,785 39,038
Current liabilities 570,164 467,897
Long-term debt - non-current 328,009 298,167
Convertible debentures -- 77,000
Other liabilities 43,051 48,259
Deferred income tax 31,165 34,683
Redeemable non-controlling interests 222,073 147,751
Shareholders' equity 249,049 244,153
Total liabilities and equity $ 1,443,511 $ 1,317,910
     
     
Supplemental balance sheet information    
Total debt $ 372,794 $ 414,205
Total debt, net of cash 230,090 305,521
 
Condensed Consolidated Statements of Cash Flows
(in thousands of US dollars)
  Three months ended Twelve months ended
  December 31 December 31
(unaudited) 2013 2012 2013 2012
         
Cash provided by (used in)        
         
Operating activities        
Net earnings $ 25,399 $ 17,539 $ 41,643 $ 40,889
Items not affecting cash:        
Depreciation and amortization 14,677 16,067 75,352 53,502
Deferred income tax 480 (1,186) (23,868) (18,660)
Other (1,277) 1,132 5,598 5,106
  39,279 33,552 98,725 80,837
         
Changes in operating assets and liabilities 61,093 50,595 17,552 22,154
Net cash provided by operating activities 100,372 84,147 116,277 102,991
         
Investing activities        
Acquisition of businesses, net of cash acquired (2,474) (4,774) (37,735) (19,153)
Disposal of business, net of cash disposed -- -- 49,460 --
Purchases of fixed assets (13,070) (21,774) (34,824) (44,395)
Other investing activities (1,812) 1,120 (4,198) 1,694
Net cash used in investing activities (17,356) (25,428) (27,297) (61,854)
         
Financing activities        
(Decrease) increase in long-term debt, net (94,690) (19,447) 35,453 19,235
Purchases of non-controlling interests (net) (3,808) (2,265) (5,704) (6,432)
Dividends paid to preferred shareholders -- (2,288) (2,537) (9,603)
Dividends paid to common shareholders (3,564) -- (6,890) --
Redemption of preferred shares -- -- (39,232) --
Other financing activities (4,083) (10,853) (29,268) (35,339)
Net cash used in financing activities (106,145) (34,853) (48,178) (32,139)
         
Effect of exchange rate changes on cash (1,288) 497 (6,782) 1,887
         
(Decrease) increase in cash and cash equivalents (24,417) 24,363 34,020 10,885
         
Cash and cash equivalents, beginning of period 167,121 84,321 108,684 97,799
         
Cash and cash equivalents, end of period $ 142,704 $ 108,684 $ 142,704 $ 108,684
 
Segmented Results
(in thousands of US dollars)
 
  Commercial Residential      
  Real Estate Real Estate Property    
(unaudited) Services Services Services Corporate Consolidated
           
Three months ended December 31           
2013          
Revenues $ 436,593 $ 219,090 $ 35,976 $ 73 $ 691,732
Adjusted EBITDA 61,672 11,907 7,051 (7,353) 73,277
Operating earnings 44,640 8,297 4,347 (8,271) 49,013
2012          
Revenues $ 369,873 $ 200,749 $ 33,441 $ 56 $ 604,119
Adjusted EBITDA 42,754 11,360 6,024 (2,793) 57,345
Operating earnings 28,588 5,997 4,768 (3,523) 35,830
           
           
  Commercial Residential      
  Real Estate Real Estate Property    
  Services Services Services Corporate Consolidated
           
Year ended December 31          
2013          
Revenues $ 1,318,779 $ 884,334 $ 140,317 $ 204 $ 2,343,634
Adjusted EBITDA (1) 116,003 57,878 28,878 (17,298) 185,461
Operating earnings (2) 60,663 30,509 20,305 (21,243) 90,234
2012          
Revenues $ 1,170,427 $ 814,617 $ 125,204 $ 218 $ 2,110,466
Adjusted EBITDA 78,949 60,818 24,113 (11,617) 152,263
Operating earnings 33,796 42,574 18,991 (15,013) 80,348

(1) Adjusted EBITDA for the Residential Real Estate Services segment for the year ended December 31, 2013 includes $6,000 of re-branding related costs.

(2) Operating earnings for the Residential Real Estate Services segment for the year ended December 31, 2013 includes $11,153 of accelerated amortization related to legacy regional trademarks and trade names in connection with re-branding and $6,000 of re-branding related costs.

COMPANY CONTACTS:

Jay S. Hennick
Founder & CEO

D. Scott Patterson
President & COO

John B. Friedrichsen
Senior Vice President & CFO

(416) 960-9500