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Press release from CNW Group

Davis + Henderson Reports Fourth Quarter, Year-End 2011 Results

Tuesday, March 06, 2012

Davis + Henderson Reports Fourth Quarter, Year-End 2011 Results17:11 EST Tuesday, March 06, 2012Stock Exchange Symbol: DHWebsite: www.dhltd.comTORONTO, March 6, 2012 /CNW/ - Davis + Henderson Corporation ("D+H" or the "Business" or the "Company" or the "Corporation") today reported solid financial results for the three and twelve months ended December 31, 2011 that were consistent with expectations and we are satisfied with these results in the context of our strategic agenda.  Overall, in the fourth quarter of 2011, the Business had growth in revenues and EBITDA, compared to the same period in 2010, due primarily to the inclusion of ASSET Inc.("ASSET", acquired on January 18, 2011) and Mortgagebot LLC ("Mortgagebot", acquired on April 12, 2011) and additionally from the impacts of acquisition-related costs and restructuring charges that were recorded in 2010. For 2011, the Business achieved record revenue and EBITDA levels.Fourth Quarter Highlights Revenue was $183.8 million, an increase of $21.3 million, or 13.1%, compared to the same quarter in 2010.EBITDA1 was $45.6 million, an increase of $16.1 million, or 54.7%, compared to the same quarter in 2010. The majority of the increase was attributable to the acquisitions of ASSET and Mortgagebot and to the impact on EBITDA in the fourth quarter of 2010 of the restructuring charge.  The impact of the restructuring charge on EBITDA in the fourth quarter of 2010 was  $6.2 million. EBITDA for the fourth quarter of 2011 was also reduced by acquisition-related costs of  $0.6 million.Adjusted net income1 was $25.6 million ( $0.4315 per share) for the fourth quarter of 2011. There is no comparable measure in 2010.Net income was $15.4 million ( $0.2595 per share), a year-over-year increase of  $3.3 million, or 27.8%, compared to $12.0 million ( $0.2260 per unit) for the same quarter in 2010. The change in results in the fourth quarter of 2011 was primarily attributable to the impacts of the ASSET and Mortgagebot acquisitions, the changes in the tax status of the Business as a result of the conversion from an income trust to a corporation, and the impacts of the restructuring charge recorded in the fourth quarter of 2010 as previously described.  Net income per share for the fourth quarter of 2011 was also impacted by the issuance of 6 million shares in April 2011 to partially fund the Mortgagebot acquisition.During the fourth quarter of 2011, the Company paid a dividend of $0.3100 per share on December 30, 2011 to its shareholders of record on November 30, 2011.During the fourth quarter of 2011, the Business made a repayment of $20.0 million on its credit facilities.__________________________________1D+H financial results are prepared in accordance with IFRS. D+H reports several non-IFRS financial measures, including EBITDA and Adjusted net income used above. Adjusted net income is calculated as net income, adjusted to remove certain non-cash items and certain items of note such as acquisition-related expenses and discontinued operations. These items are excluded in calculating adjusted net income as they are not considered indicative of the financial performance of the Business for the period being reviewed. Any non-IFRS financial measures should be considered in context with the IFRS financial presentation and should not be considered in isolation or as a substitute for IFRS net income or cash flow. Further, D+H's measures may be calculated differently from similarly titled measures of other companies. See Non-IFRS Financial Measures section in the MD&A for a more complete description of these terms.2011 HighlightsRevenue was $724.7 million, an increase of  $75.0 million, or 11.5%, compared to 2010.EBITDA was $177.4 million, an increase of $30.3 million, or 20.6%, compared to the same period 2010. The majority of the increase was attributable to the acquisitions of ASSET and Mortgagebot and to the impact on EBITDA in 2010 of the restructuring charge and acquisition-related expenses.   EBITDA for 2011 was reduced by acquisition-related costs of  $3.8 million in connection with the acquisitions of ASSET and Mortgagebot.  EBITDA for 2010 was reduced by a restructuring charge and acquisition-related expense in connection with the finalization of the Resolve acquisition under IFRS, totalling  $10.6  million.Adjusted net incomewas $109.4 million ($1.8994 per share) for 2011 and there is no comparable measure for 2010.Net income was $89.9 million ($1.5620 per share),  a year-over-year increase of  $11.1 million, or  14.1% compared to $78.8 million ( $1.4800 per unit) for the same period in 2010. The net increase was primarily attributable to the impacts of the ASSET and Mortgagebot acquisitions, the changes in the tax status of the Business as a result of the conversion from an income trust to a corporation, the non-cash unrealized loss on interest-rate swaps and the various impacts of acquisition-related items and non-cash tax recoveries. Net income per share for 2011 was also impacted by the issuance of 6 million shares in April 2011 to partially fund the Mortgagebot acquisition.During 2011, D+H paid $1.2233 per share to its shareholders.During 2011, excluding the borrowings to fund the acquisitions, the Business made a net repayment of $36.0 million on its credit facilities.In September 2011, the Company announced the succession plans related to the retirement of Bob Cronin in February 2012 and the assumption of the role of CEO by Gerrard Schmid, the Company's President and COO.D+H's consolidated financial statements for 2011, accompanying notes to the financial statements and management's discussion & analysis (MD&A) along with the supplementary financial information will be available tomorrow on www.sedar.com.For a more detailed discussion of the results and management's outlook, please see the MD&A below.Caution Concerning Forward-Looking StatementsThis press release contains certain statements that constitute forward-looking information within the meaning of applicable securities laws ("forward-looking statements"). Statements concerning D+H's objectives, goals, strategies, intentions, plans, beliefs, expectations and estimates, and the business, operations, financial performance and condition of D+H are forward-looking statements.  The words "believe", "expect", "anticipate", "estimate", "intend", "may", "will", "would" and similar expressions and the negative of such expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.  These forward-looking statements are subject to important assumptions, including the following specific assumptions: the ability of D+H to meet its revenue and EBITDA targets; general industry and economic conditions; changes in D+H's relationship with its customers and suppliers; pricing pressures and other competitive factors; the anticipated effect of the acquisition of Mortgagebot on the financial performance of D+H; and the expected benefits arising as a result of the acquisition of Mortgagebot. D+H has also made certain macroeconomic and general industry assumptions in the preparation of such forward-looking statements.  While D+H considers these factors and assumptions to be reasonable based on information currently available, there can be no assurance that actual results will be consistent with these forward-looking statements.Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Business, or developments in D+H's industry, to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements.Risks related to forward-looking statements include, among other things, challenges presented by declines in the use of cheques by consumers; the Company's dependence on a limited number of large financial institution customers and dependence on their acceptance of new programs; strategic initiatives being undertaken to meet the Company's financial objective; stability and growth in the real estate, mortgage and lending markets; as well as general market conditions, including economic and interest rate dynamics. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.  The documents incorporated by reference herein also identify additional factors that could affect the operating results and performance of the Company. Forward-looking statements are based on management's current plans, estimates, projections, beliefs and opinions, and D+H does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change except as required by applicable securities laws.All of the forward-looking statements made in this press release and the documents incorporated by reference herein are qualified by these cautionary statements and other cautionary statements or factors contained herein, and there can be no assurance that the actual results or developments will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, the Company.Conference Call Davis + Henderson will discuss its financial results for the three and twelve months ended December 31, 2011 via conference call at 10:00 a.m. EST (Toronto time) on Wednesday, March 7, 2012. The number to use for this call is 647-427-7450 for Toronto area callers or 1-888-231-8191 for all other callers. The conference call will be hosted by Gerrard Schmid, Chief Executive Officer and by Brian Kyle, Chief Financial Officer. The conference call will also be available on the web by accessing CNW Group's website www.newswire.ca/en/event. For anyone unable to listen to the scheduled call, the rebroadcast number will be: 416-849-0833for Toronto area callers, or 1-855-859-2056 for all other callers, with Encore Password 48468447. The rebroadcast will be available until Wednesday, March 21, 2012.  An archive recording of the conference call will also be available at the above noted web address for one month following the call and a text version of the call will be available at www.dhltd.com.ADDITIONAL INFORMATIONAdditional information relating to the Company, including the Company's most recently filed Annual Information Form, is available on SEDAR at www.sedar.com.MANAGEMENT'S DISCUSSION AND ANALYSISManagement's Discussion and Analysis ("MD&A") for the fourth quarter of 2011 and the year ended December 31, 2011 for Davis + Henderson Corporation (the "Company" or the "Corporation" or the "Business" or "Davis + Henderson" or "D+H" or "we" or "our"), which was formerly known as Davis + Henderson Income Fund (the "Fund"), has been prepared with an effective date of March 6, 2012 and should be read in conjunction with the MD&A in the Annual Report for the year ended December 31, 2010, dated March 8, 2011, the Short Form Prospectus, dated April 6, 2011, and the attached unaudited consolidated financial statements. External economic and industry factors remain substantially unchanged from the annual MD&A and the Short Form Prospectus, unless otherwise stated.On April 12, 2011, D+H completed the acquisition of Mortgagebot LLC ("Mortgagebot") for a purchase price of US $232.7 million, excluding transaction costs. Mortgagebot is a leading Software-as-a-Solution ("SaaS") provider of mortgage point-of-sale offerings in the United States and provides a range of consumer direct, loan officer, branch and call centre mortgage and consumer loan origination solutions for over 1,070 banks and credit unions.On January 18, 2011, D+H acquired the assets and operations of ASSET Inc. ("ASSET") for $74.9 million, excluding transaction costs.  ASSET is Canada's largest provider of technology based asset recovery and insolvency management solutions to the Canadian financial services industry. This acquisition furthers D+H's strategy of being a leading provider of integrated solutions to the financial services industry and, in particular, deepens the Corporation's capabilities across the broader lending spectrum.The strategies and objectives of the Business remain unchanged.This MD&A of financial condition and results of operations has been prepared with an effective date of March 6, 2012 and should be read in conjunction with D+H's audited consolidated financial statements for the year ended December 31, 2011. This MD&A comments on D+H's operations, performance and financial condition for the years ended December 31, 2011, 2010 and 2009.STRATEGYD+H is a leading solutions provider to the financial services marketplace. We have several market-leading service offerings within Canada, including: our cheque supply program; the servicing of student loans; the provision of registration, recovery and related services for secured loan products; and the delivery of lending technology solutions. Additionally, with the recent acquisition of Mortgagebot, D+H is a market-leading provider of SaaS, point-of-sale mortgage and consumer loan solutions in the United States for over 1,070 banks and credit unions. We also offer broader technology solutions in the commercial lending, small business lending and leasing area, as well as servicing solutions within the credit card market and other outsourced services in a number of specialty areas.D+H's strategy is to establish market-leading positions within well defined and growing service areas in the financial services marketplace and to further expand our service offerings by enhancing the activities that we perform on behalf of our customers. We expect to advance this strategy through organic initiatives, as well as by partnering with third parties and by way of selective acquisitions. D+H's long-term financial objective is to deliver sustainable and growing earnings through continued organic revenue growth and by way of strategic acquisitions. The Business focuses on three primary ways to pursue its objectives. These are to: (i) evolve and enhance the value of our programs to payment accounts (specifically chequing and credit cards); (ii) extend our technology supported services related to personal, student and commercial lending and leasing markets; and (iii) pursue opportunities in other areas within the financial services marketplace.Over the past several years, D+H has executed this strategy by evolving our programs to the chequing account, completing several acquisitions, including the Resolve Corporation ("Resolve") in 2009, ASSET in January 2011, and Mortgagebot in April 2011, and by further enhancing our services and capabilities. As a result, we offer a diverse range of market-leading services.For a detailed discussion of the annual and fourth quarter 2011 results, management's outlook and risk factors, please see below.ACCOUNTING PRINCIPLES AND FINANCIAL INFORMATION PRESENTATIONFor fiscal years beginning on or after January 1, 2011, Canadian public companies are required to prepare their financial statements in accordance with International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board ("IASB"). Due to the requirement to present comparative financial information, the effective transition date was January 1, 2010. Effective January 1, 2011, the Company's consolidated financial statements have been prepared in accordance with IFRS, as issued by the IASB, with 2010 comparative figures restated to conform to IFRS.Prior to January 1, 2011, the consolidated financial statements were prepared in accordance with Canadian generally accepted accounting principles ("Canadian GAAP"), and therefore, comparative periods for 2010 have been restated to be in accordance with IFRS. Comparative periods presented in this MD&A that are prior to January 1, 2010, have not been restated for IFRS and have been presented in accordance with Canadian GAAP.Note 26 of the Corporation's audited consolidated financial statements for 2011 contain reconciliations and descriptions of the effect of the transition from Canadian GAAP to IFRS on equity, earnings and comprehensive income, including line-by-line reconciliations of the statement of financial position as at January 1, 2010 and December 31, 2010 as well as the statement of income for the year ended December 31, 2010.  In 2010, the Company described the adjustments that were anticipated in converting from Canadian GAAP to IFRS; with the completion of the IFRS implementation project, the final adjustments have been determined, revised where appropriate, and are reported in Note 26.Results from continuing operations include the performance of acquired businesses from the date of their acquisition and exclude results from businesses classified as discontinued operations.Comparative information presented for periods prior to January 1, 2011 relate to those of the Fund, and the results for the periods subsequent to January 1, 2011 are those of the Corporation. Consequently, throughout this MD&A, any references to distributions, unitholders, and per unit amounts relate to periods prior to January 1, 2011, and any references to dividends, shareholders and per share amounts relate to periods subsequent to January 1, 2011.All amounts are in Canadian dollars, unless otherwise specified.OPERATING RESULTS FOR THE FOURTH QUARTER OverviewD+H's solid operating performance in the fourth quarter of 2011 was consistent with our expectations and we are satisfied with these results in the context of our strategic agenda. Overall, in the fourth quarter of 2011, the Business had growth in revenues and EBITDA, compared to the same period in 2010, due primarily to the inclusion of ASSET and Mortgagebot and additionally from the impacts of acquisition-related costs and restructuring charges that were recorded in 2010.  For a more detailed description on revenues and expenses, see the comments below.Consolidated revenue for the fourth quarter of 2011 was $183.8 million, an increase of $21.3 million, or 13.1%, compared to the same quarter in 2010. The increase was primarily due to the inclusion of ASSET acquired January 18, 2011 and Mortgagebot, acquired April 12, 2011, with both increases and decreases in other service areas as described below.The following table is derived from, and should be read in conjunction with, the Consolidated Statements of Income and includes non-IFRS financial measures. Management believes this supplementary disclosure provides useful additional information. See Non-IFRS Financial Measures section for a description of non-IFRS terms used.The consolidated results include those of ASSET, effective January 18, 2011, and Mortgagebot, effective April 12, 2011.Consolidated Operating and Financial Results1(in thousands of Canadian dollars, except per share amounts, unaudited)   Quarter ended December 31,     20112010Revenue   $ 183,777  $ 162,474Expenses 2  138,202 133,018       EBITDA 2, 3  45,575 29,456      Depreciation of capital assets and amortization of non-acquisition intangibles6,749 5,643Amortization of intangibles from acquisitions11,009 7,108Interest expense4,909 3,405Amortization and fair value adjustment of derivative instruments4(145)(2,796)Income tax expense (recovery) 7,684 3,448     Income from continuing operations15,369 12,648Income (loss) from discontinued operations, net of tax 5-(620)     Net income15,369 12,028     Adjustments:   Non-cash items:    Amortization of intangibles from acquisitions11,009    Amortization and fair value adjustment of derivative instruments 4(145)  Other items of note:    Acquisition-related items2637    Discontinued operations, net of tax 5-   Tax effect of above adjustments (excluding discontinued operations) 7(3,391)  Tax effect of corporate conversions and acquisitions 62,080       Adjusted net income3 $ 25,559                 Adjusted net income per share, basic and diluted 3, 8, 9 $ 0.4315  n/m Income from continuing operations per share, basic and diluted 8,9$ 0.2595$ 0.2376Net income per share, basic and diluted 8, 9 $ 0.2595  $ 0.2260                     Quarter ended December 31,    2011 vs. 2010     % change     Revenue   13.1%EBITDA 2, 3   54.7%Adjusted net income per share 3, 6, 8  n/m      n/m = not measurable1 The results for the fourth quarter of 2011 include those of ASSET and Mortgagebot effective from the dates of acquisition of January 18, 2011 and April 12, 2011, respectively.  The results for 2010 have been restated for IFRS.2 Expenses for the fourth quarter of 2011 include acquisition-related items such as certain retention and incentive costs related to the acquisition of Mortgagebot. Expenses for the fourth quarter of 2010 included a restructuring charge of $6.2 million.3 EBITDA and Adjusted net income are non-IFRS terms.   See Non-IFRS Financial Measures for a more complete description of these terms.  Periods prior to January 1, 2011 do not have a comparable measure for Adjusted net income due to the differences in taxation for D+H as an income trust prior to January 1, 2011 and as a corporation subsequent to that date.4 Amortization and fair value adjustments of derivative instruments include: (i) mark-to-market adjustments of interest-rate swaps that are not designated as hedges for hedge accounting purposes, and for which any change in the fair value of these contracts is recorded through the Consolidated Statement of Income; and (ii) amortization of mark-to-market adjustment of interest-rate swaps relating to cumulative net gains and losses that were deferred prior to January 1, 2007 when hedge accounting was discontinued for these swaps.5 The Business sold a non-strategic component of its contact centre business in October 2010 and entered into a transition agreement with the buyer which ended on April 1, 2011. The results of these operations are presented as discontinued operations for the comparative period. 6 Adjustments for the fourth quarter of 2011 were related to the de-recognition of previously recorded tax attributes.7 The following adjustments to net income are tax effected at their respective tax rates: (i) Amortization of acquisition intangibles; (ii) fair value adjustment of derivative instruments; and, (iii) acquisition-related costs.8 Diluted Net income per share and Diluted Adjusted net income per share (non-IFRS term) reflect impacts of outstanding options.  If the average market price during the period is below the option price plus the fair market value of the option, then the options are not included in the dilution calculation.9 Weighted average number of shares outstanding during the fourth quarter of 2011 was 59.2 million shares (Q4 2010 - 53.2 million shares). RevenueServices delivered by the Business are subject to seasonality, including fees earned in connection with mortgage origination services and automobile loan registration services, which are typically stronger in the second and third quarters than in the first and fourth quarters.(in thousands of Canadian dollars, unaudited) Quarter ended December 31, 20112010Revenue      Programs to the chequing account $ 73,758  $ 73,020 Loan registration and recovery services39,260 25,947 Loan servicing 33,372 32,926 Lending technology services28,571 19,946 Other1 8,816 10,635      $ 183,777  $ 162,4741 Excluded from the amounts reported are discontinued operations. Programs to the chequing account revenue for the fourth quarter of 2011 was $73.8 million, an increase of $0.7 million, or 1.0%, compared to the same quarter in 2010. Revenue for the fourth quarter of 2011 benefitted from continued positive impact of higher average order values attributable to program changes and product and service enhancements, partially offset by volume decreases.  Management believes that the long-term historical trend related to current cheque order decline is relatively unchanged and continues to be in the low single digit range, however; there has been some volatility in order volumes in recent periods, including more recent higher personal order volume reductions.Loan registration and recovery services revenue for the fourth quarter of 2011 was $39.3 million, an increase of $13.3 million, or 51.3%, compared to the same quarter in 2010.  This increase was due primarily to the inclusion of ASSET, acquired on January 18, 2011.  Volumes in this area can be variable due to changes in the economy, changes in the auto and auto lending market and seasonality. Typically, this service area experiences stronger volumes during the second and third quarters as compared to the first and fourth quarters as consumers more frequently purchase and finance cars in the spring and summer. Generally, the recovery fees related to ASSET have been as expected.Loan servicing programs revenue for the fourth quarter was $33.4 million, an increase of $0.4 million, or 1.4%, compared to the same quarter in 2010. Transaction revenue from student loan administrative services, which comprises the largest portion of revenues within this service area, was relatively unchanged compared to 2010. Volumes in this area are expected to be relatively stable and modestly growing in the short-term and cost management activities are being directed towards lowering the impact of reduced pricing and fees related to particular customers, including reduced fees we will earn as one of our customers integrates the servicing of their portfolio into that of another one of our customers.  The majority of the revenue increase in the loan servicing area is attributed to the credit card servicing area, and in turn, primarily related to specific customer initiatives that increased both revenues and expenses with minimal impact on profitability.Lending technology services revenue for the fourth quarter of 2011 was $28.6  million, an increase of  $8.6 million, or 43.2%, compared to the same quarter in 2010.  The increase during the fourth quarter of 2011 was largely due to the inclusion of Mortgagebot partially offset by reduced fees in other areas.  Fees related to origination volumes were impacted by the repatriation by a customer of certain services we historically performed for them.  In general, industry analysts expect the Canadian housing market to be relatively stable with some potential for modest cooling of prices in major urban areas through 2012 and a slight recovery in the U.S housing market, though a reduction in refinancing activity is expected. Other revenue for the fourth quarter of 2011 was $8.8 million, compared to $10.6 million for the same period in 2010.  In general, we have recently experienced and expect to continue to experience some reductions in this area as certain customers repatriate certain outsourced activities.  On October 7, 2010, the Business sold a non-strategic component of its contact centre business and entered into a transition agreement with the buyer, which expired on April 1, 2011.  The results of these operations were previously reported in this revenue category and have been presented as discontinued operations.Expenses1        On a consolidated basis, expenses of $138.2 million for the fourth quarter of 2011 increased by $5.2 million, or 3.9%, compared to the same quarter in 2010.  The increase primarily reflects the inclusion of ASSET and Mortgagebot expenses and the ongoing costs associated with the transformation and integration activities, including in the technology area, partially reduced by cost management and other net savings, including reduced restructuring expenses.   Quarter ended December 31, (in thousands of Canadian dollars, unaudited) 20112010           Employee compensation and benefits 2     $ 57,306  $ 51,616Non-compensation direct expenses356,613 50,744Other operating expenses 424,28330,658                 $ 138,202  $ 133,0181 Excluded from the reported amounts are the discontinued operations.2 Employee compensation and benefits include acquisition-related costs such as retention and incentive costs related to the acquisition of Mortgagebot and are net of certain employee-related tax benefits and amounts capitalized related to software product development. Certain comparative figures have been reclassified and adjusted to conform to current period's presentation. There was no change in total expenses related to this reclassification.3 Non-compensation direct expenses include materials, shipping, selling expenses and third party direct disbursements. Certain comparative figures have been reclassified and adjusted to conform to current period's presentation.  There was no change in total expenses related to this reclassification.4Other operating expenses include occupancy costs, communication costs, licensing fees, professional fees, contractor fees, transaction costs related to acquisitions and expenses not included in other categories. Certain comparative figures have been reclassified and adjusted to conform to current period's presentation.  There was no change in total expenses related to this reclassification. Employee compensation and benefits costs of  $57.3 million for the fourth quarter of 2011 increased by $5.7 million, or 11.0%, compared to the same quarter in 2010.  The increase was primarily related to the inclusion of ASSET and Mortgagebot expenses, and a general increase in compensation levels, partially offset by the tax credits related to the apprenticeship program and benefits related to integration of employee benefit programs. As well, the fourth quarter of 2010 included a restructuring charge related to transformation and integration activities. Additionally, the replacement of contract labour (recorded as other operating expenses) with full-time staff also impacted costs.Non-compensation direct expenses were $56.6 million for the fourth quarter of 2011, an increase of $5.9 million, or 11.6%,compared to the same quarter in 2010. The increase is primarily attributable to the third party direct disbursements relating to the ASSET business.  In general, these expenses directionally change with revenue changes.Other operating expenses for the fourth quarter of 2011 of $24.3 million, decreased by $6.4 million, or 20.8%, compared to the same quarter in 2010.  The decrease in other operating expenses were attributable to costs savings realized related to transformation and integration project initiatives and replacement of contract labour with full-time staff as discussed above, partially offset by increases due to the inclusion of ASSET and Mortgagebot expenses.EBITDAEBITDA during the fourth quarter of 2011 was $45.6 million, an increase of $16.1 million, or 54.7%, compared to the same quarter in 2010. The majority of the increase was attributable to the acquisitions of ASSET and Mortgagebot and to the impact on EBITDA in the fourth quarter of 2010 of the restructuring charge.  The impact of the restructuring charge on EBITDA in the fourth quarter of 2010 was $6.2 million. EBITDA for the fourth quarter of 2011 was also reduced by acquisition-related costs of $0.6 million.Depreciation of Capital Assets and Amortization of Non-acquisition IntangiblesDepreciation of capital assets and amortization of non-acquisition intangible assets during the fourth quarter of 2011 increased by $1.1 million, or 19.6%, compared to the fourth quarter of 2010. These increases were primarily related to capital additions and the inclusion of the ASSET and Mortgagebot businesses.Amortization of Intangibles from AcquisitionsAmortization of acquisition-related intangibles for the fourth quarter of 2011 increased by $3.9 million as compared to the same period in 2010 due to the addition of intangibles related to the acquisitions of ASSET and Mortgagebot.Interest ExpenseInterest expense for the fourth quarter of 2011 increased by $1.5 million, compared to the same quarter in 2010, due to increased borrowings in relation to the acquisitions of ASSET and Mortgagebot.Amortization and Fair Value Adjustment of Derivative InstrumentsInterest-rate swapsA net unrealized gain of $0.1 million on interest-rate swaps was recognized in the fourth quarter of 2011 (Q4 2010 -  net unrealized gain of $2.8 million) reflecting fair value adjustments related to changes in market interest rates at December 31, 2011 compared to September 30, 2011. The amount for the same period in 2010 also included the amortization related to the cumulative gains and losses that were deferred prior to January 1, 2007 when hedge accounting was used by D+H for these interest-rate swaps.Effective January 1, 2011, the Company's policy is to adopt hedge accounting prospectively on any new derivative instruments entered into subsequent to January 1, 2011. As of December 31, 2011, the Company had not entered into any new interest-rate swaps and the fair value adjustments of the existing interest-rate swaps continue to be recognized in the Consolidated Statement of Income.Income Tax Expense (Recovery)In the fourth quarter of 2011, an income tax expense of $7.7 million was recorded (Q4 2010 -  $3.4 million expense), which included tax expense related to taxes payable in the future and the de-recognition of previously recorded tax attributes. These items were partially offset by a recovery related to changes in timing and permanent differences between tax and accounting balances.Net Income Net income of $15.4 million for the fourth quarter of 2011 increased by $3.3 million, or 27.8%, compared to the same period in 2010.  The change in results in the fourth quarter of 2011 was primarily attributable to the impacts of the ASSET and Mortgagebot acquisitions, the changes in the tax status of the Business as a result of the conversion from an income trust to a corporation, and the impacts of the restructuring charge recorded in the fourth quarter of 2010 as previously described.Adjusted Net Income As stated earlier, periods prior to January 1, 2011 do not have a comparable measure for Adjusted net income.  For the fourth quarter of 2011, Adjusted net income was $25.6 million.  Adjusted net income for the quarter excluded: (i) non-cash impacts of items such as gains and losses related to fair value adjustment of derivative instruments, amortization of intangibles from acquisitions and income tax adjustments related to the de-recognition of previously recorded tax attributes; and (ii) other items of note such as acquisition-related costs referred to below. Net income is also adjusted for the tax impact of these adjustments to arrive at Adjusted net income. Acquisition-related CostsDuring the fourth quarter of 2011, the Corporation recorded acquisition-related costs of $0.6 million, which included certain retention and incentive costs related to Mortgagebot.CASH FLOW AND LIQUIDITYThe following table is derived from, and should be read in conjunction with, the Consolidated Statements of Cash Flows. Management believes this supplementary disclosure provides useful additional information related to the cash flows of the Corporation, repayment of debt and other investing activities.Summary of Cash Flows(in thousands of Canadian dollars, unaudited)          Quarter ended December 31,        20112010          Cash and cash equivalents provided by (used in):                OPERATING ACTIVITIES       Net income from continuing operations       $ 15,369  $ 12,648 Depreciation and amortization of assets      17,758 12,751 Amortization and fair value adjustment of derivative instruments      (145)(2,796) Difference in interest expense and cash interest paid      552 226 Non-cash income tax and options expenses      7,840 3,448                41,374 26,277 Decrease (increase) in non-cash working capital items      6,746 17,551 Changes in other operating assets and liabilities and discontinued operations      (1,080)(912)          Net cash from operating activities     47,040 42,916                       FINANCING ACTIVITIES        Net change in long-term indebtedness     (20,000)(6,000) Issuance costs, equity and debt     (28)- Distributions and dividends paid during the period         (18,362)(24,482) Net cash from (used in) financing activities     (38,390)(30,482)            INVESTING ACTIVITIES        Capital expenditures    (10,632)(13,916) Sale of discontinued operations     - 1,602Net cash used in investing activities      (10,632)(12,314)            Increase (decrease) in cash and cash equivalents for the period     (1,982)120 Cash and cash equivalents, beginning of period     4,195 1,024 Cash and cash equivalents, end of period      $ 2,213  $ 1,144 Capital Expenditures Total capital expenditures were $10.6 million, $3.3 million  lower than in the fourth quarter of 2010. Capital expenditures also include certain contract payments which relate to payment obligations under customer and partner contracts, including fixed contract or program initiation payments and annual payments payable over the life of the contract.  These contract payments reflect, among other things, the high degree of integration and sharing between D+H and its customers and partners of the many activities related to ordering, data handling, customer service, customer access and other activities.Higher capital expenditures in 2010 primarily reflected increased integration and upgrade activities, consistent with the higher capital spend commencing in the latter part of 2010, and investing in the building of technology products and capability.DividendsFor the fourth quarter of 2011, D+H paid $0.31 per share as it increased its target annualized dividend amount by 4 cents to $1.24 per share effective for shareholders of record as of August 31, 2011.For the fourth quarter of 2010, both cash distributions declared and paid were $0.4599 per unit ($24.5 million).Dividends payable by D+H to its shareholders are recorded when declared.  Actual dividends declared will be subject to the discretion of the D+H Board of Directors and may vary from the intentions stated.  Among other items, in determining actual dividends declared, the Board of Directors will consider the financial performance, capital plans, acquisition plans, expectations of future economic conditions and other factors.As at December 31, 2011, and March 6, 2012, 59,233,373 common shares were outstanding, reflecting the additional 6 million common shares issued in April 2011 to fund the Mortgagebot acquisition (as at December 31, 2010 - 53,233,373 trust units).Changes in Non-Cash Working Capital and Other Items (in thousands of Canadian dollars, unaudited)    Quarter ended December 31,   20112010      Decrease (increase) in non-cash working    capital items  $ 6,746  $ 17,551 Decrease (increase) in other operating assets and   liabilities and discontinued operations (1,080)(912)        Decrease (increase)  in non-cash working capital and     other items  $ 5,666  $ 16,639     The net decrease in non-cash working capital items for the fourth quarter of 2011 was attributable to several items, including a decrease in trade receivables due to reduced revenue from the previous quarter, the timing of collections in the fourth quarter of 2011 and an increase in accrued expenses due to normal course timing differences, partially offset by increases in prepaid expenses related to maintenance agreement and costs in connection with enhancement services related to programs to the chequing account.The Company expects to experience continued variability of non-cash working capital due to the nature and timing of services rendered in connection with the businesses recently acquired.2011 OPERATING RESULTS OverviewD+H delivered solid operating performance in 2011 that was consistent with our expectations and we are satisfied with these results in the context of our strategic agenda. Overall, the growth in revenues and EBITDA, compared to 2010, were due primarily to the inclusion of ASSET and Mortgagebot businesses acquired on January 18, 2011 and April 12, 2011 respectively, with additional impacts from restructuring charges recorded in 2010 related to integration and transformation initiatives and acquisition-related costs associated with the finalization of the Resolve acquisition in 2010 as discussed below.  The Business also experienced increases and decreases in revenues from several service areas as more fully described below.In 2010, the Business underwent significant change as a result of the integration and transformation initiatives designed to better position the Business going forward to serve customers and improve the effectiveness, efficiency and scalability of our operations.  In 2010, these activities had the effect of increasing expenses, including those related to the $8.4 million restructuring charges.  In the latter part of 2011, the Business began to realize the cost savings and enhanced effectiveness associated with these integration and transformation initiatives, which had a positive impact on EBITDA.  For a more detailed description on revenues and expenses, see the comments below.The following table is derived from, and should be read in conjunction with, the Consolidated Statements of Income and includes non-IFRS financial measures. Management believes this supplementary disclosure provides useful additional information. See Non-IFRS Financial Measures section for a description of non-IFRS terms used.The consolidated results include those of ASSET, effective January 18, 2011, and Mortgagebot effective April 12, 2011.Consolidated Operating and Financial Results1(in thousands of Canadian dollars, except per share amounts, unaudited) Year ended December 31,  201120102009IFRSIFRSCanadianGAAPRevenue  $ 724,720 $ 649,715 $ 473,852Expenses 2547,320502,604338,334EBITDA 2, 3177,400147,111135,518Depreciation of capital assets and amortization of non-acquisition intangibles23,90020,30416,517Amortization of intangibles from acquisitions40,73128,28820,087Interest expense18,96213,9889,541Amortization and fair value adjustment of derivative instruments43,386(803)(3,667)Income tax expense (recovery) 6333,300(2,372)Income from continuing operations89,78882,03495,412Income (loss)  from discontinued operations, net of tax 5140(3,247)(398)Net income89,92878,78795,014Adjustments:    Non-cash items:     Amortization of intangibles from acquisitions40,731    Amortization and fair value adjustment of derivative instruments 43,386   Other items of note:     Acquisition-related items23,753    Discontinued operations, net of tax 5 (140)   Tax effect of above adjustments (excluding discontinued operations) 7(13,245)   Tax effect of corporate conversion and acquisitions6 (15,057)  Adjusted net income3  $ 109,356        Adjusted net income per share, basic and diluted 3, 8, 9  $ 1.8994n/mn/mIncome from continuing operations per share, basic and diluted 8,9$ 1.5595$ 1.5410$ 1.9891Net income per share, basic and diluted 8, 9  $ 1.5620 $ 1.4800 $ 1.9808  2011 vs. 20102010 vs. 2009  % change% changeRevenue 11.5%37.1%EBITDA 2,3 20.6%8.6%Adjusted net income per share 3, 6, 8   n/m   n/mn/m = not measurable1 The results for 2011 include those of ASSET and Mortgagebot, effective from the dates of acquisition of January 18, 2011 and April 12, 2011, respectively.  The results for 2011 and 2010 have been reported under IFRS, and 2009 has been reported under Canadian GAAP.2 Expenses for 2011 include acquisition-related items such as transaction costs and certain retention and incentive costs related to the acquisition of Mortgagebot. Expenses for 2010 include a restructuring charge and acquisition-related costs related to the finalization of the purchase price for the Resolve acquisition under IFRS totalling $10.6 million.3 EBITDA and Adjusted net income are non-IFRS terms. See Non-IFRS Financial Measures for a more complete description of these terms.  Periods prior to January 1, 2011, do not have a comparable measure for Adjusted net income due to the differences in taxation for D+H as an income trust prior to January 1, 2011 and as a corporation subsequent to that date.4 Includes: (i) mark-to-market adjustments of interest-rate swaps that are not designated as hedges for hedge accounting purposes, and for which any change in the fair value of these contracts is recorded through the Consolidated Statement of Income; and (ii) amortization of the mark-to-market adjustment of interest-rate swaps relating to cumulative net gains and losses that were deferred prior to January 1, 2007 when hedge accounting was discontinued for these swaps.5 The Business sold a non-strategic component of its contact centre business in October 2010 and entered into a transition agreement with the buyer which ended on April 1, 2011.  The results of these operations are presented as discontinued operations. 6 Adjustments for 2011 included the following: (i) in connection with the acquisition of Mortgagebot, a non-cash income tax recovery recorded in the second quarter of 2011 related to losses within certain US subsidiaries that had not been previously recognized; (ii) non-cash income tax recoveries recorded in the first quarter of 2011 in connection with the conversion to a corporation; and (iii) income tax expense related to de-recognition of previously recorded tax attributes, among other items. 7 The following adjustments to net income are tax effected at their respective tax rates: (i)  amortization of acquisition intangibles; (ii) fair value adjustment of derivative instruments; and, (iii) acquisition-related costs.8 Diluted Net income per share and Diluted Adjusted net income per share (non-IFRS term) reflect impacts of outstanding options.  If the average market price during the period is below the option price plus the fair market value of the option, then the options are not included in the dilution calculation.9 Weighted average number of shares outstanding during 2011 was 57.6 million. Revenue1The following table reflects the relative size of each of the major service areas as a percentage of total revenue for 2011:Allocation of Revenue by Service Area, unaudited % RevenueRevenue         Programs to the chequing account  41% Loan registration and recovery services  22% Loan servicing    18% Lending technology services  14% Other      5%               100%1 Excluded from the amounts reported are discontinued operations. Programs to the chequing account include: (i) our cheque program which serves the personal and small business account holders of our financial services customers; and (ii) various other service offerings directed towards account opening activities, identity protection services and other enhancement services, including services for credit card holders. These service offerings (excluding the component of enhancement and identity protection services that are integrated in the cheque order) currently represent a small component of revenues within this revenue category. In general, cheque order volumes in this area have historically been declining as consumers and small businesses choose other payment methods.Loan registration and recovery services support the personal and commercial lending activities of our financial services customers. Services include the registration and management of data related to secured lending for both personal and real property loans as well as recovery services related to both secured and unsecured lending activities. The largest service areas within this revenue category are registration services, which currently account for approximately 65% to 75% of revenue, and recovery services accounting for approximately 25% to 35% of revenue. In both instances, loans relating to vehicle purchases are a significant driver of activity and as such can be variable. In general, registration services are impacted by both economic cyclicality and seasonality, while recovery services are, in general, counter-cyclical. Other services within this revenue category include mortgage discharge services and various search-related services, both of which we deliver on behalf of our financial institution customers.Loan servicing programs include student loans administration services offered to financial institutions and governments and credit card servicing offered to card issuers.  The student loans administration services currently account for approximately 70% to 80% of revenues within this revenue category.  In general, student loan servicing volumes have been stable and modestly growing.  Recent integration of two lending portfolios into a single managed portfolio will reduce the fees we earn on a net basis.Volumes related to credit card servicing can be more variable and are primarily impacted by customer initiatives.Lending technology services include services directed towards mortgage markets in both Canada and, more recently with the acquisition of Mortgagebot in April 2011, the United States. As well, we offer technology products and services in both countries directed towards leasing, commercial lending and small business lending. Revenues related to the mortgage area currently represent approximately 85% to 95% of revenue within this category, with approximately 60% to 70% attributable to transaction-based fees earned in connection with Canadian mortgage originations and 15% to 25% representing transaction fees related to the U.S. SaaS loan origination service.  Mortgage origination fees can be variable and are impacted by many factors including the economy, the housing market and interest rates, among others. Other revenues include a number of smaller service offerings that are primarily outsourced activities we perform on behalf of a variety of customers including non-financial services customers.See comments below for discussion on annual impacts on revenue for each service area.Revenue - 2011 vs. 2010Consolidated revenue for 2011 was $724.7 million, an increase of $75.0 million, or 11.5%, compared to 2010. The increase was primarily due to the inclusion of ASSET acquired January 18, 2011 and Mortgagebot, acquired April 12, 2011, with our core businesses reflecting some growth, offset by declines elsewhere, as described below.(in thousands of Canadian dollars, unaudited)         Year ended December 31,  20112010Revenue            Programs to the chequing account $ 296,322  $ 293,838 Loan registration and recovery services160,677 111,683 Loan servicing     131,143 125,698 Lending technology services  99,454 77,281 Other137,124 41,215                 $ 724,720  $ 649,7151 Excluded from the amounts reported are discontinued operations. Programs to the chequing account revenue for 2011 was $296.3 million, an increase of $2.5 million, or 0.8%, compared to 2010.  The modest increase in 2011 was primarily attributable to program changes and product and service enhancements that provided increased average order values partially offset by cheque order volume reductions.  Management believes that the long-term historical trend related to current cheque order decline is relatively unchanged with the financial impact continuing to be in the low single digit range; however, there has been some volatility in recent periods, including more recent higher personal order volume reductions.Loan registration and recovery services revenue for 2011 was  $160.7 million, an increase of  $49.0 million, or 43.9%, compared to 2010.  This increase was due primarily to the inclusion of ASSET, acquired on January 18, 2011.  Volumes in this area can be variable due to changes in the economy, changes in the auto and auto lending market and seasonality. Generally, the recovery fees related to ASSET have been as expected.Loan servicing programs revenue for 2011 was $131.1 million, an increase of $5.4 million, or 4.3%, compared to 2010. Transaction revenue from student loan administrative services, which comprises the largest portion of revenues within this service area, was relatively unchanged for 2011 as compared to 2010 as an increase in service volumes offset contractual price declines. We will earn reduced fees in this area as one of our customers integrates the servicing of their portfolio into that of another one of our customers. The majority of the annual revenue increase is attributed to the credit card servicing area, and in turn, primarily related to specific customer initiatives that increased both revenues and expenses with minimal impact on profitability. Currently, cost management activities in this area are being directed towards lowering the impact of reduced pricing and fees related to particular customers.Lending technology services revenue for 2011 was $99.5 million, an increase of $22.2 million, or 28.7%, compared to 2010. The increase was due to the inclusion of Mortgagebot, effective from the date of acquisition of April 12, 2011, partially offset by reduced fees in other areas.  Transaction-based fees in this service area can be variable. Fees related to origination volumes were impacted by the repatriation by a customer of certain services we historically performed for them.  In general, industry analysts expect the Canadian housing market to be relatively stable with some potential for modest cooling of prices in major urban areas through 2012 and a slight recovery in the U.S. housing market, though a reduction in refinancing activity is expected. Other revenue for 2011 was $37.1 million compared to $41.2 million for 2010.  In general, we have recently experienced and expect to continue to experience some reductions in this area as certain customers repatriate outsourced activities.  On October 7, 2010, the Business sold a non-strategic component of its contact centre business and entered into a transition agreement with the buyer, which expired on April 1, 2011.  The results of these operations were previously reported in this revenue category and have been presented as discontinued operations.Expenses1On a consolidated basis, expenses  were  $547.3  million, an increase of  $44.7  million, or 8.9%, compared to 2010. The increase primarily reflects the inclusion of ASSET and Mortgagebot expenses and the ongoing costs associated with the transformation and integration activities in the technology area.  These increases were partially offset by cost management and other net savings in 2011, and by the impacts in 2010 of restructuring charges and acquisition-related items expensed under IFRS in connection with the finalization of the Resolve acquisition, totalling $10.6 million. (in thousands of Canadian dollars, unaudited)       Year ended December 31,  20112010       Employee compensation and benefits 2     $ 222,363  $ 198,118Non-compensation direct expenses3231,418 204,663Other operating expenses 493,539 99,823             $ 547,320 $ 502,6041 Excluded from the reported amounts are the discontinued operations.2 Employee compensation and benefits include acquisition-related costs such as retention and incentive costs related to the acquisition of Mortgagebot and are net of certain employee-related tax benefits and amounts capitalized related to software product development. Certain comparative figures have been reclassified and adjusted to conform to current period's presentation. There was no change in total expenses related to this reclassification.3 Non-compensation direct expenses include materials, shipping, selling expenses and third party direct disbursements. Certain comparative figures have been reclassified and adjusted to conform to current period's presentation.  There was no change in total expenses related to this reclassification.4Other operating expenses include occupancy costs, communication costs, licensing fees, professional fees, contractor fees, transaction costs related to acquisitions and expenses not included in other categories. Certain comparative figures have been reclassified and adjusted to conform to current period's presentation.  There was no change in total expenses related to this reclassification. Employee compensation and benefits costs for 2011 were  $222.4  million, an increase of  $24.2 million, or 12.2%, compared to 2010. The increase was primarily related to the inclusion of ASSET and Mortgagebot expenses, and a general increase in compensation levels, partially offset by tax credits related to the  apprenticeship program. As well, 2010 included a restructuring charge related to transformation and integration activities and acquisition-related expenses in connection with the finalization of the Resolve acquisition under IFRS. Additionally, we have been replacing contract labour (recorded as other operating expenses) with full-time staff as the nature and certainty of work within certain service areas mature.Non-compensation direct expenses were $231.4 million, an increase of $26.8 million, or 13.1%, compared to 2010. The increase was primarily attributable to third party direct disbursements within the ASSET business.  In general, these expenses directionally change with revenue changes.Other operating expenses for 2011 of $93.5 million decreased by $6.3 million, or 6.3%, compared to 2010.  The decrease in other operating expenses reflected decreases in several cost areas, including costs savings realized related to transformation and integration project initiatives, as well as the impact of certain restructuring charges recorded in 2010.EBITDAEBITDA for 2011 was $177.4 million, an increase of $30.3 million, or 20.6%, compared to 2010.  The majority of the increase was attributable to the acquisitions of ASSET and Mortgagebot and to the impact on EBITDA in 2010 of the restructuring charge and acquisition-related expenses. EBITDA for 2011 was reduced by acquisition-related costs of $3.8 million in connection with the acquisitions of ASSET and Mortgagebot.  EBITDA for 2010 was reduced by a restructuring charge and acquisition-related expenses in connection with the finalization of the Resolve acquisition under IFRS, totalling $10.6 million.Depreciation of Capital Assets and Amortization of Non-acquisition IntangiblesDepreciation of capital assets and amortization of non-acquisition intangible assets for 2011 increased by $3.6 million, or 17.7%, compared to 2010.  This increase was primarily related to increased capital additions in 2010 and 2011, in addition to the inclusion of the ASSET and Mortgagebot businesses.Amortization of Intangibles from AcquisitionsAmortization of acquisition-related intangibles for 2011 increased by $12.4 million, as compared to 2010 due to the addition of intangibles related to the acquisitions of ASSET and Mortgagebot.Interest ExpenseInterest expense for 2011 increased by $5.0 million compared to 2010 due to increased borrowings in relation to the acquisitions of ASSET and Mortgagebot.Amortization and Fair Value Adjustment of Derivative InstrumentsInterest-rate swapsA net unrealized loss of $3.4 million was recognized during 2011, reflecting fair value adjustments of interest-rate swaps attributable to changes in market interest rates during the year.  For 2010, a net unrealized gain of $0.8 million was recorded.  These amounts also included the amortization related to the cumulative gains and losses that were deferred prior to January 1, 2007 when hedge accounting was discontinued for these swaps.These unrealized gains and losses are recognized in income because these interest-rate swaps are not designated as hedges for accounting purposes.  In general, a loss on interest-rate swaps is recorded when interest rates decrease as compared to certain previous periods and a gain is recorded when interest rates increase.  Provided the Company does not cancel its interest-rate swaps, the unrealized amounts represent a non-cash unrealized gain or loss that will subsequently reverse through income as the related swaps mature.  The Company has historically held its derivative contracts to maturity.Effective January 1, 2011, the Company's policy is to adopt hedge accounting prospectively on any new derivative instruments entered into subsequent to January 1, 2011.  At December 31, 2011, the Company had not entered into any new interest-rate swaps and the fair value adjustments of the existing interest-rate swaps continue to be recognized in the Consolidated Statement of Income.Income Tax Expense (Recovery)In 2011, an income tax expense of $0.6 million was recorded (2010 - $3.3 million expense).  The Company continued realizing the benefit from prior year tax losses and unamortized tax balances such that no current taxes were payable relating to 2011. Due to the corporate structure, certain available tax losses, and no requirements to pay 2012 tax instalments, the Company does not expect to pay any significant cash taxes in 2012. In 2013, we expect to pay taxes on 2012 taxable income and to commence making corporate tax instalments on 2013 taxable income.The income tax expense for 2011 included a tax recovery related to the recognition of a deferred tax asset attributable to losses of certain U.S. subsidiaries that are now expected to be realized in connection with the acquisition of Mortgagebot, as well as the recognition of a deferred tax asset related to intangible assets that are now expected to be realized as a consequence of the corporate conversion and an internal reorganization, partially offset by the de-recognition of previously recorded tax attributes. The deferred tax expense was partially offset by a recovery related to changes in timing and permanent differences between tax and accounting balances.Net Income Net income of $89.9 million increased by $11.1 million, or 14.1% compared to 2010.  The net increase was primarily attributable to the impacts of the ASSET and Mortgagebot acquisitions, the changes in the tax status of the Business as a result of the conversion from an income trust to a corporation, the non-cash unrealized loss on interest-rate swaps and the various impacts of acquisition-related items and tax recoveries as previously described.Adjusted Net IncomeEffective January 1, 2011, as a result of the conversion from an income trust structure to a corporate structure, the Business commenced using Adjusted net income as a measure for evaluating its financial results.  Adjusted net income is a non-IFRS financial measure.  See Non-IFRS Financial Measures for a more complete description of this term.  Periods prior to January 1, 2011 do not have a comparable measure for Adjusted net income.Adjusted net income excludes both: (i) non-cash impacts of items such as gains and losses related to fair value adjustment of derivative instruments, amortization of intangibles from acquisitions, an income tax recovery related to the recognition of a deferred tax asset attributable to losses of certain US subsidiaries that were not previously recognized and to tax recoveries related to the corporate conversion and de-recognition of previously recorded tax attributes); and (ii) other items of note such as acquisition-related costs referred to below and discontinued operations.  Net income is also adjusted for the tax impacts of these adjustments.  Adjusted net income for 2011 was $109.4 million. Acquisition-related CostsIn 2011, the Corporation recorded acquisition-related costs of $3.8 million, which included certain retention and incentive costs related to Mortgagebot and certain transaction costs incurred in connection with the ASSET and Mortgagebot acquisitions.During 2010, the purchase accounting for the Resolve acquisition was finalized under Canadian GAAP.  Under IFRS, certain costs did not qualify for equivalent recognition. As such, $2.3 million was recorded as part of continuing operations and $1.9 million (before taxes) was recorded as part of discontinued operations in 2010.EIGHT QUARTER CONSOLIDATED STATEMENT OF INCOME - SUMMARY 1, 9(in thousands of Canadian dollars, except per share amounts, unaudited)      IFRS     20112010      Q4  Q3  Q2  Q1  Q4  Q3  Q2  Q1              Revenue $183,777 $ 186,275 $ 185,120 $ 169,548 $ 162,474 $ 164,319 $ 167,093 $ 155,829Expenses2138,202140,050137,023132,045133,018128,147123,319118,120             EBITDA 2, 345,57546,22548,09737,50329,45636,17243,77437,709             Depreciation of capital assets and amortization of non-acquisition intangibles 6,749  5,820  5,827  5,504  5,643  5,030  4,962  4,669Amortization of intangibles from acquisitions11,00911,04010,5908,0927,1086,9257,1587,097Interest expense 4,9094,7925,2723,9893,4053,5173,6923,374Amortization and fair value adjustment of derivative instruments4 (145)  3,991  1,227  (1,687)  (2,796)  1,566  1,797  (1,370)Income tax expense (recovery)7,6845,5221,717(14,290)3,448(1,447)395904             Income from continuing operations15,36915,06023,46435,89512,64820,58125,77023,035Income (loss) from discontinued operations, net of tax 5---140(620)(1,886)(531)(210)             Net income15,369 $ 15,060 $ 23,464 $ 36,035 $ 12,028 $ 18,695 $ 25,239 $ 22,825             Adjustments:           Non-cash items:            Amortization of intangibles from acquisitions11,00911,04010,5908,092      Amortization and fair value adjustment of derivative instruments 4(145)3,9911,227(1,687)     Other items of note:            Acquisition-related items26376107071,799     Discontinued operations, net of tax 5---(140)     Tax effect of above adjustments (excluding discontinued operations) 7  (3,391)(4,465)(3,256)(2,133)       Tax effect of corporate conversion and acquisitions 6  2,080-(3,628)(13,509)                   Adjusted net income3   $ 25,559 $ 26,236 $ 29,104 $ 28,457                                             Adjusted net income per share, basic and diluted 3, 8 $ 0.4315 $ 0.4429 $ 0.4974 $ 0.5346 n/m  n/m  n/m  n/m Income from continuing operations per share, basic and diluted8$ 0.2595$ 0.2542$ 0.4010$ 0.6743$ 0.2376$ 0.3866$ 0.4841$ 0.4327Net income per share, basic and diluted 8 $ 0.2595 $ 0.2542 $ 0.4010 $ 0.6769 $ 0.2260 $ 0.3512 $ 0.4741 $ 0.4288n/m = not measurable1 The 2011 results include those of ASSET, effective from the date of acquisition of January 18, 2011 and those of Mortgagebot effective from the date of acquisition of April 12, 2011.  Certain comparative figures have been reclassified and adjusted to conform to the current period's presentation.2 Expenses for 2011 include acquisition-related items including transaction costs as well as certain retention and incentive costs related to the Mortgagebot acquisition.  Expenses for 2010 include a restructuring charge and acquisition-related costs totalling $10.6 million.3 EBITDA and Adjusted net income are non-IFRS terms.  See Non-IFRS Financial Measures for a more complete description of these terms.  Periods prior to January 1, 2011, do not have a comparable measure for Adjusted net income due to the differences in taxation for D+H as an income trust prior to January 1, 2011 and as a corporation subsequent to that date.4 Includes: (i) amortization of fair value adjustment of interest-rate swaps relating to the amortization of cumulative net gains and losses that were deferred prior to January 1, 2007 when hedge accounting was discontinued for these swaps; and (ii) fair value adjustments of interest-rate swaps that are not designated as hedges for hedge accounting purposes, and for which any change in the fair value of these contracts is recorded through the Consolidated Statement of Income.5 The Business sold a non-strategic component of its contact centre business in October 2010 and entered into a transition agreement with the buyer, which expired on April 1, 2011.  The results of these operations are presented as discontinued operations.6 Adjustments for the fourth quarter of 2011 related to the de-recognition of previously recognized tax attributes. Adjustments for the  second quarter of 2011 included, a non-cash income tax recovery related to losses within certain U.S. subsidiaries that were not previously recognized, in connection with the acquisition of Mortgagebot.  Adjustments for the first quarter of 2011 included non-cash income tax recoveries recorded in connection with the conversion to a corporation, among other items. 7  The following adjustments to net income are tax effected at their respective tax rates: (i) amortization of acquisition intangibles; (ii) amortization and fair value adjustment on derivative instruments; and (iii) acquisition-related costs.8  Diluted Net income per share and Diluted Adjusted net income per share (non-IFRS term) reflect impacts of outstanding options.  If the average market price during the period is below the option price plus the fair market value of the option, then the options are not included in the dilution calculation.9  With the adoption of IFRS, 2010 comparative figures have been restated.  The reconciliations from Canadian GAAP to IFRS for all four quarters of 2010 have been provided below:(in thousands of Canadian dollars, unaudited)              Q1 2010Q2 2010Q3 2010Q4 2010 Cdn GAAPEffect ofTransition to IFRSTransitionIFRSCdn GAAPEffect ofTransition to IFRSTransitionIFRSCdn GAAPEffect ofTransition to IFRSTransitionIFRSCdn GAAPEffect ofTransition to IFRSTransitionIFRS             Revenue 1 $ 153,698 $ 2,131 $ 155,829 $ 164,319 $ 2,774 $ 167,093 $ 161,900 $ 2,419 $ 164,319 $ 160,457 $ 2,017 $ 162,474Expenses 1115,9892,131118,120120,5452,774123,319121,3116,836128,147124,7338,285133,018Restructuring charges 2------2,160(2,160)-6,268(6,268)-EBITDA 537,709-37,70943,774-43,77438,429(2,257)36,17229,456-29,456             Depreciation of capital assets and amortization of non-acquisition intangibles  4,669  -  4,669  4,962  -  4,962  5,030  -  5,030  5,643  -  5,643Amortization of intangibles from acquisitions7,097-7,0977,158-7,1586,925-6,9257,108-7,108Interest expense 3,374-3,3743,692-3,6923,517-3,5173,405-3,405Amortization and fair value adjustment of derivative instruments  (1,370)  -  (1,370)  1,797  -  1,797  1,566  -  1,566  (2,796)  -  (2,796)Income tax expense (recovery) 3661243904603(208)395(645)(802)(1,447)2,6208283,448             Income from continuing operations23,278(243)23,03525,56220825,77022,036(1,455)20,58113,476(828)12,648Income (loss) from discontinued operations, net of tax 4(210)-(210)(531)-(531)(465)(1,421)(1,886)(620)-(620)             Net income $ 23,068 $ (243) $ 22,825 $ 25,031 $ 208 $ 25,239 $ 21,571 $ (2,876) $ 18,695 $ 12,856 $ (828) $ 12,028             Net income per unit, basic and diluted $ 0.4333$ (0.0046) $ 0.4288 $ 0.4702 $ 0.0039 $ 0.4741 $ 0.4052$ (0.0540) $ 0.3512 $ 0.2415$ (0.0156) $ 0.22601 IFRS requires that uniform policies be used for like transactions and events throughout the Company.  The Company determined that revenue transactions related to loan registration and recovery services should be presented on the basis of gross amount billed to customers.  A subsidiary previously accounted for these transactions on a net basis.  With the conversion to IFRS, the subsidiary has aligned its treatment of these transactions with that of the Company and the effect is to increase revenue and expenses with no impact on net income.2 Under IFRS, non-recurring items are not classified as separate line items.  The effect in the third and fourth quarters of 2010 was to reclassify the restructuring charges as expenses within relevant categories with no impact on net income.3 The effect of transition to IFRS on income tax expense (recovery) relates to the tax rates used to calculate deferred tax assets and liabilities under Canadian GAAP versus IFRS.4 During the third quarter of 2010, the purchase accounting for Resolve acquisition was finalized under Canadian GAAP. Under IFRS, certain costs did not qualify for the equivalent recognition.  Such costs amounted to $4.2 million of which $2.2 million was recorded as part of the continuing operations and $1.4 million was recorded as part of the discontinued operations ($1.9 million before taxes) for IFRS purposes.5 EBITDA is a non-IFRS term.  See Non-IFRS Financial Measures for a more complete description of this term. The Business has generally reported quarterly revenues that are relatively stable and growing when measured on a year-over-year basis, however more recent changes in the economic environment generally, the housing and mortgage markets and the auto lending markets specifically, have increased volatility. Measured on a sequential quarter-to-quarter basis, revenues can also vary due to seasonality and are generally stronger in the second and third quarters. The acquisition of the Resolve business resulted in a substantial increase in all reported balances since the acquisition on July 27, 2009, except per share amounts, which were additionally impacted by the issuance of 9,286,581 additional units of Davis + Henderson Income Fund in the third quarter of 2009 to fund the Resolve acquisition.  Additionally, the acquisition of ASSET on January 18, 2011 and the acquisition of Mortgagebot on April 12, 2011 increased revenues and expenses. Per share amounts were also impacted by the issuance of 6,000,000 additional shares of Davis + Henderson Corporation in April 2011 to partially fund the acquisition of Mortgagebot.Effective January 1, 2011, as a result of the conversion from an income trust structure to a corporate structure, the Business commenced using Adjusted net income as a measure for evaluating its results.  Adjusted net income is a non-IFRS financial measure.  See Non-IFRS Financial Measures for a more complete description of this term.  Periods prior to January 1, 2011, do not have a comparable measure for Adjusted net income.Net income has been more variable as it has been affected by the variability in non-cash items such as fair value adjustments of interest-rate swaps, amortization of intangibles from acquisitions and changes in other non-cash tax items.SELECTED BALANCE SHEET INFORMATION          Year ended December 31,      2011   2010    2009 (in thousands of Canadian dollars, unaudited)  IFRS  IFRS  Canadian GAAPTotal assets  $  1,283,325  $  933,037 $941,555Total long-term liabilities  $  466,800  $  271,461 $  278,801            Total assets of $1.3 billion at December 31, 2011 increased by $350.3 million compared to December 31, 2010, primarily as a result of goodwill and acquisition intangibles from the ASSET and Mortgagebot acquisitions. The decrease in total assets between December 31, 2009 and December 31, 2010 was primarily a result of the amortization of acquisition intangibles relating to the acquisition of Resolve.Long-term liabilities at December 31, 2011 increased by $195.3 million compared to 2010 and the increase was primarily due to the increase in long-term borrowings related to the ASSET and Mortgagebot acquisitions and adjustments to deferred tax liabilities related to the acquisitions.  The decrease in 2010 compared to 2009 related to repayments made under the credit facilities in 2010.CASH FLOW AND LIQUIDITYThe following table is derived from, and should be read in conjunction with, the Consolidated Statements of Cash Flows. Management believes this supplementary disclosure provides useful additional information related to the cash flows of the Corporation, repayment of debt and other investing activities.Summary of Cash Flows (in thousands of Canadian dollars, unaudited)               Year ended December 31,       2011 IFRS2010IFRS2009Canadian GAAP              Cash and cash equivalents provided by (used in):                      OPERATING ACTIVITIES        Net income from continuing operations          $ 89,788  $ 82,034$ 95,411Depreciation and amortization of assets         64,631 48,59236,604Amortization and fair value adjustment of derivative instruments         3,386 (803)(3,667)Business combination adjustments         - 2,257-Difference in interest expense and cash interest paid         1,567 993508Non-cash income tax and options expenses         943 3,300(2,371)                         160,315 136,373126,485Decrease (increase) in non-cash working capital items         (23,021)423(8,443)Changes in other operating assets and liabilities and discontinued operations         1,387 4571,680              Net cash from operating activities       138,681 137,253119,722                            FINANCING ACTIVITIES          Net change in long-term indebtedness       149,505 (11,000)(11,948)Issuance costs, equity and debt       (9,928)(2,564)(2,321)Proceeds from issuance of shares       121,800 --Distributions and dividends paid during the year           (70,640)(97,928)(87,962)Net cash from (used in) financing activities       190,737 (111,492)(102,231)              INVESTING ACTIVITIES          Capital expenditures      (35,356)(30,264)(14,805)Acquisitions       (292,993)167(10,874)Sale of discontinued operations       - 1,602-Net cash used in investing activities          (328,349)(28,495)(25,679)              Increase (decrease) in cash and cash equivalents for the year         1,069 (2,734)(8,188)Cash and cash equivalents, beginning of year       1,144 3,87812,066Cash and cash equivalents, end of year        $ 2,213  $ 1,144 $ 3,878              Capital Expenditures Total capital expenditures for 2011 increased by $5.1 million compared to 2010. The increase primarily reflected increased integration and upgrade activities, consistent with the higher capital spend commencing in the latter part of 2010, and investments in building technology products and capability.  The increase in 2010 compared to 2009 was attributable to the additional capital spending related to the Resolve businesses acquired in July 2009.Capital expenditures also include certain contract payments which relate to payment obligations under customer and partner contracts, including fixed contract or program initiation payments and annual payments payable over the life of the contract.  These contract payments reflect, among other things, the high degree of integration and sharing between D+H and its customers and partners of the many activities related to ordering, data handling, customer service, customer access and other activities.The Business' capital program provides for continued expenditures to be funded by cash flows from operations.DividendsConsistent with the announcement in 2010 of our intention to pay quarterly dividends commencing in 2011 at an initial annualized amount of $1.20 per share, D+H paid approximately $0.30 per share during each of the first and second quarters of 2011. For the third and fourth quarters of 2011, D+H paid $0.31 per share as it increased its target annualized dividend amount by 4 cents to $1.24 per share effective for shareholders of record as of August 31, 2011.  D+H paid a total of $1.2233 per share ( $70.6 million) to its shareholders in 2011. In 2010, both cash distributions declared and paid were $1.8396 per unit ( $97.9 million).Changes in Non-Cash Working Capital and Other Items (in thousands of Canadian dollars, unaudited)     Year ended December 31,    2011 IFRS2010IFRS2009Canadian GAAP       Decrease (increase) in non-cash working      capital items $ (23,021)$ 423$ (8,443) Decrease (increase) in other operating assets and     liabilities and discontinued operations 1,387 4571,680       Decrease (increase)  in non-cash working capital and        other items $ (21,634) $ 880$ (6,763)            The net increase in non-cash working capital items during 2011 was attributable to several items including increases in trade receivables and prepaid expenses in connection with the enhancement services related to the programs to the chequing account. The net increase in working capital was also attributable to the receivables related to the apprenticeship tax credits program during 2011.  Payables remained relatively unchanged from 2010.The Company expects to experience continued variability of non-cash working capital due to the nature and timing of services rendered in connection with the businesses recently acquired.AcquisitionsOn April 12, 2011, D+H completed the acquisition of Mortgagebot for a purchase price of US $232.7 million, excluding transaction costs. The acquisition was funded through the issuance of $121.8 million new equity (6 million common shares at $20.30 per share) and the balance from borrowings.   Mortgagebot is a leading provider of SaaS mortgage point-of-sale solutions in the United States and provides a range of consumer direct, loan officer and branch and call centre mortgage origination solutions for over 1,070 banks and credit unions. Management has not yet completed its assessment and valuation of the assets acquired and liabilities assumed for the Mortgagebot acquisition, and as a result, the purchase information presented in the Corporation's consolidated financial statements may change.On January 18, 2011, D+H acquired the assets and operations of ASSET for $74.9 million, excluding transaction costs.  This acquisition was funded by utilizing an extension of the Company's secured credit facilities.  ASSET is Canada's largest provider of technology based asset recovery and insolvency management solutions to the Canadian financial services industry.For additional information on the acquisitions, refer to Note 5 of the consolidated financial statements of the Company for the year ended December 31, 2011.Cash Balances and Long-Term IndebtednessAt December 31, 2011, cash and cash equivalents totalled $2.2 million, compared to $1.1 million at December 31, 2010.The long-term indebtedness is recorded on the Consolidated Statement of Financial Position, net of unamortized deferred financing fees of $6.2 million as at December 31, 2011. The long-term indebtedness as at December 31, 2011, before deducting unamortized deferred finance fees, was $352.1 million compared to $199.0 million at December 31, 2010.  During 2011, excluding the borrowings to fund the acquisitions, the Business made a net repayment of $36.0 million on its credit facilities.The long-term indebtedness includes drawings under a Seventh Amended and Restated Credit Agreement ("Credit Agreement") dated April 12, 2011 of $208.0 million.  Total committed senior secured credit facilities under this Credit Agreement as at December 31, 2011 were $355.0 million, consisting of a revolving credit facility that matures on April 12, 2016.  The Business is permitted to draw on the revolving facility's available balance of $147.0 million to fund capital expenditures or for other general purposes.  The Credit Agreement contains a number of covenants and restrictions, including the requirement to meet certain financial ratios and financial condition tests.  The financial covenants include a leverage test, a fixed charge coverage ratio test and a limit on the maximum amount of distributions by Davis + Henderson Corporation to its shareholders during each rolling four-quarter period.  The Company was in compliance with all of its financial covenants and financial condition tests as of the end of its latest quarterly period.  A copy of the Credit Agreement is available at www.sedar.com.As at December 31, 2011, and March 6, 2012, long-term indebtedness also consists of fixed-rate Bonds of $80.0 million issued under a Second Amended and Restated Note Purchase and Private Shelf Agreement dated April 12, 2011 ("Note Purchase Agreement"), which include  a $50.0 million Bond issued under the senior secured Note Purchase Agreement at a fixed-interest rate of 5.99% and a $30.0 million Bond at 5.17%, both maturing on June 30, 2017.  In addition, the Business entered into a Note Purchase and Private Shelf Agreement pursuant to which the Company issued US$ 63 million of senior secured guaranteed notes at 5.59%, maturing on April 12, 2021 to partially fund the acquisition of Mortgagebot.The Bonds rank equally in all respects with amounts outstanding under the Credit Agreement, any related hedging contracts and cash management facilities and benefit from the same financial covenants that exist under the Credit Agreement described above.  The Note Purchase Agreement and the Note Purchase and Private Shelf Agreement are available at www.sedar.com.To reduce liquidity risk, management has historically renewed the terms of the Company's long-term indebtedness in advance of its maturity dates and the Company has maintained financial ratios that are conservative compared to financial covenants applicable to the financing arrangements.  To enhance its liquidity position, in prior years the Company has made numerous voluntary payments on its outstanding long-term indebtedness and a portion of its committed credit facilities remain undrawn.As at December 31, 2011, and as at March 6, 2012, the Credit Agreement provides for an additional uncommitted credit arrangement of up to $150.0 million and the Note Purchase and Private Shelf Agreement provides for an additional uncommitted arrangement of up to US$ 37 million with the use of these arrangements subject to the prior approval of the relevant lenders with any fees, spreads and other additional terms to be negotiated at that time.The Company has historically hedged against increases in market interest rates on certain of its debt by utilizing interest-rate swaps and more recently by issuing fixed rate long-term bonds as described above.As at December 31, 2011, the average effective interest rate on the Corporation's total indebtedness was approximately 4.9%.D+H believes that its customers, suppliers and lenders, while impacted by economic volatility, will continue to operate with the Company on similar terms to those currently in place.  As well, while the Company's products and services may be impacted by the changing economic environment, the Company expects to remain profitable and generate positive cash flows.Cash flows from operations, together with cash balances on hand and unutilized term credit facilities are expected to be sufficient to fund the Business' operating requirements, asset expenditures, contractual obligations and anticipated dividends.Hedge ContractsInterest-rate swapsIn respect of interest-rate swap contracts with its lenders, as of December 31, 2011, the Company's borrowing rates on 45.7%  of outstanding long-term indebtedness under the Credit Agreement are effectively fixed at the interest rates and for the time periods ending as outlined in the following table: (in thousands of Canadian dollars, unaudited)     Fair value of interest-rate swaps Maturity Date Notional AmountAssetLiabilityInterest Rate ¹December 18, 2014 $ 25,000 $ - $ 1,1062.720%March 18, 201525,000-1,3492.940%March 18, 201725,000-2,3513.350%March 20, 201720,000-1,8973.366%  $ 95,000 $ - $ 6,703 1 The listed interest rates exclude bankers' acceptance fees and prime-rate spreads currently in effect.  Such fees and spreads could increase or decrease depending on the Company's financial leverage compared to certain levels specified in the Credit Agreement.  As at December 31, 2011, the Company's long-term bank indebtedness was subject to bankers' acceptance fees of 2.25% over the applicable BA rate and prime rate spreads of 1.25% over the prime rate. As at December 31 2011, the Company would have to pay the fair value of $6.7 million if it were to close out all of its interest-rate swap contracts as set out in the Consolidated Statement of Financial Position.  It is not the present intention of management to close out these contracts and the Company has historically held its derivative contracts to maturity.Foreign exchange forward contractsThe Company enters into foreign exchange contracts to fix foreign exchange rates on its foreign currency transactions, which are relatively minor.   As at December 31, 2011, the Company had foreign exchange forward contracts aggregating US $15.0 million, with two of its lenders, as follows:(in thousands of Canadian dollars, unless otherwise noted, unaudited)       Fair value of foreign exchange contracts  Notional   Maturity date amount (USD)AssetLiabilityExchange rate     March 15, 2012$ 3,000$ 43 $ -1.0334March 15, 20122,0003-1.0208June 15, 20123,00039-1.0339June 15, 20122,0002-1.0221September 14, 20123,00037-1.0347September 14, 20122,0002-1.0231       $ 15,000 $ 126 $ - Under these contracts, the Company is required to deliver the agreed U.S. dollar amount and in return receive the contracted Canadian dollar amount set forth in each contract.  It is not the present intention of management to close out these contracts.  The Company has historically held its derivative contracts to maturity.These foreign exchange contracts have been designated as hedges in accordance with IFRS, for hedge accounting purposes to hedge a set amount of the forecasted cash inflows.  The Company accounts for these hedges as cash flow hedges as per IAS 39. The change in fair value of the hedging instrument (foreign exchange forward contracts), to the extent it is effective, is recorded in Other Comprehensive Income ("OCI"). The ineffective portion of the gain or loss on the hedging instrument is recognized in profit or loss.  The fair value changes are recorded in OCI, as the hedging relationship was considered to be effective both at inception of these hedges and at the reporting date.Contractual Obligations - Payments Due by Period  The table below presents the contractual obligations of the Business as at December 31, 2011 and the timing of the expected payments.            (in thousands of Canadian dollars, unaudited)   TotalLess than1 year1 - 3years4 - 5yearsAfter 5 years         Long-term indebtedness $ 352,071 $ -$ -$ 288,000$ 64,071 Operating leases 35,581 8,04313,8637,1026,573 Employee future benefits 2,768 1634883261,791 Obligations relating to deferred compensation program 3,240 1,403  1,837-- Other obligations 2,514 1,1881,326--            $ 396,174  $ 10,797 $ 17,514 $ 295,428 $ 72,435       Long-term IndebtednessThe long-term indebtedness as at December 31, 2011 was $352.1 million. During 2011, excluding the borrowings to fund the acquisitions, the Business made a net repayment of $36.0 million on its credit facilities.As discussed previously, the long-term indebtedness includes drawings of $208.0 million under the Credit Agreement that matures on April 12, 2016 and fixed-rate Bonds of $80.0 million issued under the Note Purchase Agreement, maturing on June 30, 2017 (which include  a $50.0 million Bond issued under the senior secured Note Purchase Agreement at a fixed-interest rate of 5.99% and a $30.0 million Bond at 5.17%).  In addition, the Company issued US$63 million (C$64.1 million) of senior secured guaranteed notes at 5.59%, maturing on April 12, 2021 pursuant to a Note Purchase and Private Shelf Agreement.  The agreements do not require the Company to make any principal payments prior to their stated maturities.Operating LeasesThe Business rents facilities, equipment and vehicles under various operating leases. At December 31, 2011, minimum payments under these operating leases totalled $35.6 million.Employee Future BenefitsObligations relating to employee future benefits relate to the Company's non-pension post-retirement benefit plans. The latest actuarial valuation of the post-retirement benefit plans was performed as of December 31, 2011.Other ObligationsOther obligations include acquisition-related costs related to the Mortgagebot acquisition and contractual supplier obligation relating to payments to be made for a customized software package.Deferred Compensation ProgramDeferred Compensation Program consists of obligations under the Company's medium-term incentive plans consisting of two components: (i) restricted share units plan ("RSUs") and (ii) performance share units plan ("PSUs") both of which are cash-settled.  RSUs have a term of three years and vest 1/3 each year.  PSUs have a term of three years and vest in the third year.  The performance target for the PSUs is based on the annual three-year change in per share earnings during the three-year vesting period as measured against a performance grid set for a specific period.  The per share earnings is a derivative calculation of pre-incentive net income before taxes, amortization of acquisition intangibles and gains or losses on interest-rate swaps, as well as certain other adjustments made from time to time as approved by the HR/Governance Committee. The fair value amount payable is recognized as an expense with a corresponding increase in liabilities over the three-year vesting period.  The liability is re-measured at each reporting date and at settlement date.  Any changes in the fair value of the liability are recognized in profit or loss.NON-IFRS FINANCIAL MEASURESThe information presented within the tables in this MD&A include certain adjusted financial measures such as "EBITDA" (Earnings before interest, taxes, depreciation and amortization), "Adjusted net income" (net income before certain non-cash charges and certain items of note such as acquisition-related expenses and discontinued operations), and "Adjusted net income per share", all of which are not defined terms under IFRS. EBITDA also excludes fair value adjustments of interest-rate swaps which are directly realted to interest expense. These non-IFRS financial measures should be read in conjunction with, the Consolidated Statements of Income.  See the reconciliation of EBITDA and Adjusted net income to the most directly comparable IFRS measure in the "Operating Results" section of this press release.Management believes these supplementary disclosures provide useful additional information related to the operating results of the Corporation.  Management uses these subtotals as measures of financial performance and as a supplement to the Consolidated Statements of Income.  Investors are cautioned that these measures should not be construed as an alternative to using net income as a measure of profitability or as an alternative to the IFRS Consolidated Statements of Income or other IFRS statements. Further, these measures do not have any standardized meaning and D+H's method of calculating each balance may not be comparable to calculations used by other companies bearing the same description.EBITDAIn addition to its use by management as an internal measure of financial performance, EBITDA is used to measure (with adjustments) compliance with certain financial covenants under the Company's credit facility. EBITDA is also widely used by D+H in assessing performance and value of a business. EBITDA has limitations as an analytical tool, and the reader should not consider it in isolation or as a substitute for analysis of results as reported under IFRS.Adjusted Net Income and Adjusted Net Income per ShareEffective January 1, 2011, as a result of the conversion from an income trust structure to a corporate structure, the Business commenced using Adjusted net income and Adjusted net income per share as a measure for evaluating its results.  Periods prior to January 1, 2011, do not have a comparable measure.Adjusted net income is used as a measure of internal performance similar to net income, but is calculated after removing the impacts of certain items such as acquisition-related expenses, discontinued operations and certain non-cash items such as amortization of intangibles from acquisitions and fair value adjustments of interest-rate swaps. Also excluded from Adjusted net income are the tax effects of corporate conversion and acquisition. These items are excluded in calculating Adjusted net income as they are not considered indicative of the financial performance of the Business for the period being reviewed.CHANGES IN ACCOUNTING POLICIESThe Company actively monitors developments in standards as issued by the IASB and the Canadian Accounting Standards Board ("AcSB"), as well as regulatory developments as issued by the Canadian Securities Administrators ("CSA").Adoption of IFRSCommencing January 1, 2011, the Corporation's financial statements have been prepared in accordance with IFRS, with 2010 comparative figures restated to conform to IFRS. The Company identified and implemented changes to existing accounting policies, data systems, business processes, internal controls over financial reporting and disclosure controls. These changes were adequately tested prior to reporting for the first quarter of 2011.  We have completed the design, implementation and documentation of the internal controls over the IFRS changeover process by applying our existing control framework.  All accounting policy selections and changes and transitional impacts to the financial statements were subject to review by senior management and the Audit Committee of the Board of Directors.Some of the key differences identified that were applicable to the Company between Canadian GAAP and IFRS for the opening Consolidated Statement of Financial Position include accounting for business combinations, change in tax rates used to calculate deferred income tax assets and liabilities and recognition of vested past service costs. The differences identified did not have significant effects on the business functions of the Company.The Company also made accounting policy choices, including those under IFRS 1, First-Time Adoption of International Financial Reporting Standards ("IFRS 1"). Upon evaluation of the options under IFRS 1, D+H elected to use the following exemptions:Business CombinationsA first-time adopter of IFRS may elect not to apply IFRS 3 retrospectively to business combinations that occurred before the date of transition to IFRS. The retrospective basis would require restatement of all business combinations that occurred prior to the transition date.  The Company has elected not to apply IFRS 3 retrospectively to business combinations that occurred prior to the transition date and such business combinations will not be restated.  As a result of applying these exemptions, except as required under IFRS 1, any goodwill arising on such business combinations before the transition date was not adjusted from the carrying value previously determined under Canadian GAAP.Fair value as deemed costIFRS 1 permits measuring, at the date of transition, an item of property, plant and equipment or intangible assets that meet the criteria specified in IAS 38 at either its fair value and using those amounts as deemed cost, or using the historical valuation under previous GAAP.  The Company continues to apply the cost model to property, plant and equipment and intangible assets and did not restate to fair value under IFRS.  The Company continues to use the historical basis under Canadian GAAP as deemed cost under IFRS at transition date.Employee Future BenefitsA first-time adopter of IFRS may elect to recognize all cumulative actuarial gains and losses at the date of transition to IFRS, even if it uses the corridor approach for future actuarial gains and losses.  The Company elected to apply the exemption at transition date.Key Differences Identified Between Canadian GAAP and IFRSThe key differences identified by the Company compared to the accounting policies under Canadian GAAP are as follows (Refer to Note 26 of the Corporation's financial statements for the year ended December 31, 2011 which contains reconciliations and descriptions of the effect of the transition from Canadian GAAP to IFRS on equity, earnings and comprehensive income including line-by-line reconciliations of the statement of financial position as at December 31, 2010 as well as statement of income for the year ended December 31, 2010):Business CombinationsAs described above, the Company has elected under IFRS 1 not to apply IFRS 3 Business Combinations retrospectively to business combinations that occurred prior to the transition date of January 1, 2010.Employee Future BenefitsCumulative gains and losses: The Company has elected under IFRS 1 to recognize all cumulative gains and losses related to employee benefits deferred under Canadian GAAP in opening retained earnings at the transition date.Past service costs:  Under IFRS, if past service cost entitlements are not conditional on future service and thus vest immediately, then the expense and the change in the obligation are recognized in full immediately.  Under Canadian GAAP, liabilities and expenses for both vested and unvested past service cost are amortized on a straight-line basis over the remaining service period of the employees.Income TaxesFor the periods prior to January 1, 2011, prior to the conversion of the income trust to a corporate structure, IAS 12 requires that current and deferred tax assets and liabilities are measured at the tax rate applicable to undistributed profits until such time that the distribution becomes payable.  Canadian GAAP allows an entity to anticipate future distributions, provided certain conditions are met, and therefore uses the tax rate applicable to distributed profits.  Under the tax rules applicable to income trusts, distributions from a unit trust are taxed at corporate tax rates whereas undistributed income is taxed at the top marginal individual income tax rate.  As such, the net deferred tax liability of the flow-through entities must be recorded under IFRS at the top marginal tax rate for individuals in Ontario, which is approximately 46.4%, as opposed to the corporate tax rate, which is less than 30%.Impact on internal controls over financial reporting and disclosure controlsThe Company completed the assessment of the impact of the conversion to IFRS on internal controls over financial reporting and disclosure controls and determined that its current information technology infrastructure, data systems and reporting capabilities are sufficient to support the Company during and after transition to IFRS.Hedge AccountingAs previously described, effective January 1, 2011, the Company's policy is to adopt hedge accounting prospectively on any new derivative instruments entered into subsequent to January 1, 2011.Each of the Company's existing foreign currency forward contracts has been designated in its entirety at inception to hedge a set amount of the forecasted cash inflows.  The Company accounts for this hedge as a cash flow hedge as per IAS 39. The fair value change of the hedging instrument (Foreign Currency Forwards), to the extent it is effective, is recorded in OCI. The ineffective portion of the gain or loss on the hedging instrument is recognized in profit or loss.In respect of each hedging relationship, at the end of each reporting date during the term of that hedging relationship, the balance in accumulated other comprehensive income ("AOCI") associated with the hedged item will be adjusted to the lesser of the following (in absolute amounts):(i) the cumulative gain or loss on the hedging instrument from inception of the hedge; and(ii) the cumulative change in fair value (present value) of the expected future cash flows on the hedged net cash inflows from inception of the hedge.To the extent that (i) is greater than (ii), there will be ineffectiveness and this will be recognized in the income statement in the respective reporting period.At inception and during the life of the hedging relationship, an eligible hedge is expected to be highly effective in offsetting the changes in the hedging instrument's fair value and the variability in cash flows attributable to the hedged item. D+H will conclude that the hedge is effective if changes in the fair value of the currency forward are between 80% and 125% of the present value of the changes in the cash flows of the hedged cash-flows attributable to changes in designated forward foreign exchange rate.D+H will assess prospective effectiveness at the inception of each hedge, and will perform prospective and retrospective testing on each outstanding hedge at the end of every reporting period.  All effectiveness testing will be performed using regression analysis.  At each reporting date subsequent to the inception of the hedge, the regression analysis performed for demonstrating effectiveness retrospectively will also be used for assessing effectiveness prospectively.Future Accounting and Reporting ChangesThe Company will continue to monitor changes to IFRS in the upcoming periods. The IFRS standard-setting bodies have significant ongoing projects that could impact the IFRS accounting policies that D+H has selected. In particular, there may be additional new or revised standards in relation to revenue recognition, consolidation, financial instruments, hedge accounting, discontinued operations, leases and employee benefits. We have implemented processes to ensure that potential changes to the IFRS are monitored, evaluated and implemented in a timely manner.OUTLOOK D+H's long-term financial objective is to deliver sustainable and growing earnings through continued organic revenue growth and by way of strategic acquisitions. In January and April 2011, respectively, the Company completed the acquisitions of ASSET and Mortgagebot and these acquisitions will increase the revenues and expenses of future periods as compared to previous periods.  The acquisitions also provide further revenue diversification and support our long-term strategy.In the immediate future, we will focus on executing our organic growth initiatives, integrating the Business and continuing to diligently manage costs through our transformational and integration initiatives.  Beyond the immediate term, we believe that our market leadership and combined capabilities will solidly position D+H in the markets we serve and allow us to grow consistent with our long-term objectives.As set out in our statement of strategy, we look to grow our Business through a combination of organic initiatives, partnering with third parties and by way of selective acquisitions. Our organic initiatives are many and include: (i) the ongoing enhancement and evolution of programs to the chequing and credit card accounts through the addition of value-added service enhancements; (ii) the expansion of our current services within the student lending, commercial and personal lending areas (including the mortgage, credit card and personal property markets); (iii) selling and delivering our lending technology services to new customers; and (iv) combining the capabilities of D+H together with those of the recently acquired businesses to develop new service offerings for our financial institution customers. Our acquisition strategy focuses on acquiring companies that extend or add to the services that we provide within the financial services marketplace.  Our acquisition plans may continue to involve extending beyond the Canadian market consistent with the expansion strategies of our major Canadian customers.With the inclusion of several new service areas over the last several years, we expect to continue to experience some increase in variability in year-over-year quarterly revenues, earnings and cash flows, due to, among other items: (i) volume variances within the lien registration and mortgage origination service areas; (ii) variability in professional services work; and (iii) fees and expenses incurred in connection with acquisitions and related business integration activities.  The Company believes that, in general, revenues in early 2010 benefited from stronger volumes as housing and mortgage markets, and auto and personal lending markets increased following earlier contractions. During 2011 and for the next several quarters, our results will compare to these earlier periods that featured strong activity in real estate, mortgage and other lending markets where activity is now expected to moderate. For 2012, we anticipate that our capital spending will be approximately $35 million, although additional spending will be incurred in support of growth opportunities if and as they surface.As discussed earlier, the Company does not expect to pay any significant cash taxes in 2012. In 2013, we expect to pay taxes on 2012 taxable income and to commence making corporate tax instalments on 2013 taxable income.Caution Concerning Forward-Looking StatementsThis MD&A contains certain statements that constitute forward-looking information within the meaning of applicable securities laws ("forward-looking statements"). Statements concerning D+H's objectives, goals, strategies, intentions, plans, beliefs, expectations and estimates, and the business, operations, financial performance and condition of D+H are forward-looking statements.  The words "believe", "expect", "anticipate", "estimate", "intend", "may", "will", "would" and similar expressions and the negative of such expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.  These forward-looking statements are subject to important assumptions, including the following specific assumptions: the ability of D+H to meet its revenue and EBITDA targets; general industry and economic conditions; changes in D+H's relationship with its customers and suppliers; pricing pressures and other competitive factors; the anticipated effect of the acquisition of Mortgagebot on the financial performance of D+H; and the expected benefits arising as a result of the acquisition of Mortgagebot. D+H has also made certain macroeconomic and general industry assumptions in the preparation of such forward-looking statements.  While D+H considers these factors and assumptions to be reasonable based on information currently available, there can be no assurance that actual results will be consistent with these forward-looking statements.Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Business, or developments in D+H's industry, to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements.Risks related to forward-looking statements include, among other things, challenges presented by declines in the use of cheques by consumers; the Company's dependence on a limited number of large financial institution customers and dependence on their acceptance of new programs; strategic initiatives being undertaken to meet the Company's financial objective; stability and growth in the real estate, mortgage and lending markets; as well as general market conditions, including economic and interest rate dynamics. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.  The documents incorporated by reference herein also identify additional factors that could affect the operating results and performance of the Company. Forward-looking statements are based on management's current plans, estimates, projections, beliefs and opinions, and D+H does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change except as required by applicable securities laws.All of the forward-looking statements made in this MD&A and the documents incorporated by reference herein are qualified by these cautionary statements and other cautionary statements or factors contained herein, and there can be no assurance that the actual results or developments will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, the Company.ADDITIONAL INFORMATIONAdditional information relating to the Company, including the Company's most recently filed Annual Information Form, is available on SEDAR at www.sedar.com.CONSOLIDATED STATEMENTS OF FINANCIAL POSITION(in thousands of Canadian dollars)   December 31,2011  December 31, 2010  January 1, 2010           ASSETS           Cash and cash equivalents $2,213  $  1,144 $  3,878 Trade and other receivables   79,753   63,902  57,251 Prepayments   12,821   7,552  6,156 Inventories  4,946   6,006  6,197           Total current assets   99,733  78,604  73,482 Derivative assets held for risk management   126   -  456 Deferred tax assets  39,987   31,079  24,772 Property, plant and equipment  32,169   32,289  33,296 Intangible assets  444,575   266,837  289,774 Goodwill  666,735   524,228  519,848           Total non-current assets   1,183,592   854,433  868,146 Total assets  $  1,283,325  $  933,037 $  941,628           LIABILITIES           Dividend (distribution) payable  $  -  $  8,161 $  8,161 Trade payable and accrued liabilities  93,131   79,569  68,007 Deferred revenue  10,216   6,338  7,028 Provisions  3,480   12,358  4,277           Total current liabilities   106,827   106,426  87,473           Deferred revenue   9,492   9,226  9,510 Derivative liabilities held for risk management  6,703   3,403  4,733 Loans and borrowings  345,921   196,215  208,463 Deferred tax liabilities  97,350   55,327  51,440 Other long-term liabilities  7,334   7,290  6,114           Total non-current liabilities   466,800   271,461  280,260 Total liabilities   573,627   377,887  367,733           EQUITY           Share capital  673,163   -   -  Trust units  -   595,859  595,859 Retained earnings / (deficit)   27,449   (40,623)  (21,482) Accumulated other comprehensive income / (loss)   9,086   (86)  (482) Total equity  709,698   555,150  573,895           Total liabilities and equity  $  1,283,325  $  933,037 $  941,628          CONSOLIDATED STATEMENTS OF INCOME (in thousands of Canadian dollars, except per share amounts, unaudited)   Quarter ended December 31,   Year ended December 31,    2011  2010  2011  2010Revenue $  183,777  $  162,474 $  724,720  $  649,715Employee compensation and benefits  57,306   51,616  222,363   198,118Other expenses  80,896   81,402  324,957   304,486     45,575   29,456  177,400   147,111               Depreciation of property, plant and equipment   2,799   2,406  10,303   9,157Amortization of intangible assets  14,959   10,345  54,328   39,435Results from operating activities   27,817   16,705  112,769   98,519               Finance expenses:             Amortization and fair value adjustment of derivative instruments   (145)  (2,796)  3,386   (803)Interest expense   4,909   3,405  18,962   13,988Income from continuing operations before income tax   23,053   16,096  90,421   85,334               Income tax expense / (recovery)  7,684   3,448  633   3,300Income from continuing operations   15,369   12,648  89,788   82,034               Income / (loss) from discontinued operations, net of taxes  -   (620)  140   (3,247)Net income  $  15,369  $ $ 12,028 $  89,928  $ $ 78,787               Net income per share / unit from continuing operations, basic and diluted  $  0.2595  $  0.2376 $  1.5595  $  1.5410Net income / (loss) per share / unit from discontinued operations, basic and diluted  $  -  $  (0.0116) $  0.0025  $  (0.0610) Net income per share / unit, basic and diluted  $  0.2595  $  0.2259 $  1.5620  $  1.4800             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands of Canadian dollars, unaudited)  Quarter ended December 31, Year ended December 31,  20112010 20112010        Net income  $ 15,369  $ 12,028  $ 89,928  $ 78,787        Cashflow hedges:       Amortization of mark-to-market adjustment of derivative instruments   -   52     86   396 Effective portion of changes in fair value of cash flow hedges 295- 126 - Net change in fair value of cash flow hedges transferred to profit or loss (366)- (366)-Foreign currency translation differences (5,003)- 9,326 -Total comprehensive income  $ 10,295  $ 12,080  $ 99,100  $ 79,183 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (in thousands of Canadian dollars, unaudited)                   Quarter ended December 31, 2011      Accumulated other comprehensiveincome (loss)         Share capital  Foreign currencytranslation reserve  Hedging reserve  Retained earnings/ (deficit)  Total equity                Balance at September 30, 2011 $673,007 $  14,329 $  (169) $  30,442 $  717,609Net income  -  -  -  15,369  15,369Other comprehensive income movements  -  (5,003)  (71)  -  (5,074)Dividends  -  -  -  (18,362)  (18,362)Options   156  -  -  -  156Balance at December 31, 2011 $  673,163 $9,326 $(240) $27,449 $709,698                                Quarter ended December 31, 2010      Accumulated other comprehensiveincome (loss)         Trust units  Foreign currencytranslation reserve  Hedging reserve  Retained earnings/ (deficit)  Total equity                Balance at September 30, 2010 $595,859 $  - $  (138) $(28,169) $  567,552Net income  -  -  -  12,028  12,028Amortization of mark-to-market adjustment of derivative instruments    -    -    52    -    52Distributions  -  -  -  (24,482)  (24,482)Balance at December 31, 2010 $  595,859 $- $(86) $(40,623) $555,150                                Year endedDecember 31, 2011      Accumulated other comprehensiveincome (loss)         Share capital  Foreign currencytranslation reserve  Hedging reserve  Retained earnings/(deficit)  Total equity                Balance at January 1, 2011 $- $  - $  (86) $(40,623) $  (40,709)Net income  -  -  -  89,928  89,928Other comprehensive income movements  -  9,326  (154)  -  9,172Share issuance  713,476  -  -  -  713,476Capital reduction pursuant to the Arrangement   (40,623)  -  -  40,623  -Dividends  -  -  -  (62,479)  (62,479)Options   310  -  -  -  310Balance at December 31, 2011 $  673,163 $9,326 $  (240) $  27,449 $  709,698                                Year ended December 31, 2010      Accumulated other comprehensiveincome (loss)         Trust units  Foreign currencytranslation reserve  Hedging reserve  Retained earnings/ (deficit)  Total equity                Balance at January 1, 2010 $ $ 595,859 $  - $(482) $  (21,482) $  573,895Net income  -  -  -  78,787  78,787Amortization of mark-to-market adjustment of derivative instruments    -    -    396    -    396Distributions  -  -  -  (97,928)  (97,928)Balance at December 31, 2010 $  595,859 $  - $(86) $(40,623) $555,150 CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands of Canadian dollars, unaudited)     Quarter ended December 31,  Year ended December 31,    2011  2010  2011  2010               Cash and cash equivalents provided by (used in):                            OPERATING ACTIVITIES             Net income from continuing operations  $  15,369  $  12,648 $  89,788  $  82,034Adjustments for:              Depreciation of property, plant and equipment   2,799   2,406  10,303   9,157 Amortization of intangible assets   14,959   10,345  54,328   39,435 Amortization of mark-to-market adjustment of derivative instruments    -     52   86     396 Fair value adjustment of derivative instruments   (145)  (2,848)  3,300   (1,199) Business combination adjustments   -   -   -   2,257 Finance costs   4,909   3,405  18,962   13,988 Deferred taxes   7,684   3,448  633   3,300 Options expense   156   -  310   - Changes in non-cash working capital items   6,746   17,551  (23,021)  423 Changes in other operating assets and liabilities  (1,080)  (74)  1,198   2,807Cash generated from operating activities   51,397   46,933  155,887   152,598 Interest paid   (4,357)  (3,179)  (17,395)  (12,995) Cash flows from used in discontinued operations   -   (838)  189   (2,350)Net cash from operating activities   47,040   42,916  138,681   137,253               FINANCING ACTIVITIES             Repayment of long-term indebtedness   (20,000)  (6,000)  (252,000)  (83,900)Proceeds from long-term indebtedness   -   -  401,505   72,900Payment of issuance costs of long-term indebtedness   (28)  -  (4,467)  (2,564)Proceeds from issuance of shares   -   -  121,800   -Payment of issuance costs of shares   -   -  (5,461)  -Dividends / distributions paid   (18,362)  (24,482)  (70,640)  (97,928)Net cash from (used in) financing activities   (38,390)  (30,482)  190,737   (111,492)               INVESTING ACTIVITIES             Acquisition of property, plant and equipment   (2,148)  (5,160)  (8,007)  (9,597)Acquisition of intangible assets   (8,484)  (8,756)  (27,349)  (20,667)Acquisition of subsidiaries and acquisition adjustments   -   -  (292,993)  167Proceeds from sale of discontinued operations   -   1,602  -   1,602Net cash used in investing activities   (10,632)  (12,314)  (328,349)  (28,495)Increase (decrease) in cash and cash equivalents for the year    (1,982)    120   1,069     (2,734)Cash and cash equivalents, beginning of period   4,195   1,024  1,144   3,878Cash and cash equivalents, end of period  $  2,213  $  1,144 $2,213   1,144             About Davis + HendersonDavis + Henderson is a leading solutions provider to the financial services marketplace. Founded in 1875, the company today provides innovative programs, technology products and technology based business services to customers who offer chequing accounts, credit card accounts and personal, commercial, and other lending and leasing products. Davis + Henderson Corporation is listed on the Toronto Stock Exchange under the symbol DH. Further information can be found in the disclosure documents filed by Davis + Henderson Corporation with the securities regulatory authorities, available at www.sedar.com. For further information: Brian Kyle, Chief Financial Officer, Davis + Henderson Corporation, (416) 696-7700, extension 5690, brian.kyle@dhltd.com