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Press release from GlobeNewswire (a Nasdaq OMX company)

FirstService Reports Second Quarter Results

Wednesday, July 25, 2012

FirstService Reports Second Quarter Results04:00 EDT Wednesday, July 25, 2012Operating highlights: Three months endedSix months ended June 30June 30 2012201120122011       Revenues (millions) $593.2 $565.5 $1,083.2 $1,043.9Adjusted EBITDA (millions) (note 1) 41.2 46.8 52.0 69.4Adjusted EPS (note 2) 0.45 0.54 0.35 0.68 TORONTO, July 25, 2012 (GLOBE NEWSWIRE) -- FirstService Corporation (TSX:FSV) (Nasdaq:FSRV) (TSX:FSV.PR.U) today reported results for its second quarter ended June 30, 2012. All amounts are in US dollars. Revenues for the second quarter were $593.2 million, a 5% increase relative to the same quarter in the prior year, Adjusted EBITDA (note 1) was $41.2 million, relative to $46.8 million and Adjusted EPS (note 2) was $0.45, versus $0.54 reported in the prior year quarter. GAAP EPS was $0.28 per share in the quarter, versus $0.11 for the same quarter a year ago. For the six months ended June 30, 2012, revenues were $1.1 billion, a 4% increase relative to the comparable prior year period, Adjusted EBITDA was $52.0 million relative to $69.4 million and Adjusted EPS was $0.35, versus $0.68 reported in the prior year period. GAAP EPS for the six month period was a loss of $0.27, compared to a loss of $0.22 in the prior year period. "Second quarter results reflect very strong year over year gains in revenues and Adjusted EBITDA at Colliers International and another quarter of solid year over year growth at FirstService Residential. As expected, results in Property Services were down relative to the prior year as a result of continued weakness in foreclosure services," said Jay S. Hennick, Founder and Chief Executive Officer of FirstService. "Colliers International results were particularly strong in the US where they were up 29% over the prior year, building on our successful investments in management infrastructure, recruiting and corporate solutions during the past couple of years. FirstService Residential continued to advance its position as North America's largest manager of multi-family residential properties. As long as market conditions remain stable, we expect to finish the year up over last year with growth in revenues, Adjusted EBITDA and Adjusted EPS," he concluded.About FirstService Corporation FirstService Corporation is a global leader in the rapidly growing real estate services sector, providing a variety of services in commercial real estate, residential property management and property services. As one of the largest property managers in the world, FirstService manages more than 2.3 billion square feet of residential and commercial properties through its three industry-leading service platforms: Colliers International, one of the largest global players in commercial real estate; FirstService Residential Management, the largest manager of residential communities in North America; and Property Services, one of North America's largest providers of property-related services delivered through franchise and contractor networks. FirstService generates over $2.3 billion in annual revenues and has more than 23,000 employees worldwide. More information about FirstService is available at www.firstservice.com.Segmented Quarterly Results Commercial Real Estate Services revenues totalled $291.6 million for the second quarter, up 19% relative to the prior year quarter. Revenue growth was comprised of 10% internal growth measured in local currencies, a 3% unfavourable impact from foreign currency translation and 12% growth from the recent Colliers UK acquisition. Internal growth was driven by year over year increases in lease brokerage, appraisal and property management, particularly in the Americas region. Adjusted EBITDA was $17.9 million, up from $11.1 million reported in the prior year quarter. Residential Property Management revenues were $214.1 million for the second quarter, up 9% relative to the prior year quarter. Revenue growth was comprised of 5% internal growth and 4% from recent acquisitions. Adjusted EBITDA for the quarter was $18.8 million compared to $17.9 million in the prior year period. Property Services revenues totalled $87.5 million, down 29% from $124.0 million in the prior year period, with a 39% reduction in revenues in the property preservation and distressed asset management operations. Revenues declined slightly at the Company's property services franchise brands. Adjusted EBITDA for the second quarter was $8.6 million versus $21.1 million in the prior year quarter. Corporate costs were $4.8 million in the third quarter, relative to $3.8 million in the prior year period, with the increase attributable to a one-time accrual for a loss under the Company's self-insurance program.Conference Call FirstService will be holding a conference call on Wednesday, July 25, 2012 at 11:00 a.m. Eastern Time to discuss the quarter's results. The call will be simultaneously web cast and can be accessed live or after the call at www.firstservice.com in the "Investors / Newsroom" section.Forward-looking Statements This press release includes or may include forward-looking statements. Forward-looking statements include the Company's financial performance outlook and statements regarding goals, beliefs, strategies, objectives, plans or current expectations. These statements involve known and unknown risks, uncertainties and other factors which may cause the actual results to be materially different from any future results, performance or achievements contemplated in the forward-looking statements. Such factors include: (i) general economic and business conditions, which will, among other things, impact demand for the Company's services and the cost of providing services; (ii) the ability of the Company to implement its business strategy, including the Company's ability to acquire suitable acquisition candidates on acceptable terms and successfully integrate newly acquired businesses with its existing businesses; (iii) changes in or the failure to comply with government regulations; and (iv) other factors which are described in the Company's filings with applicable Canadian and United States securities regulatory authorities (which factors are adopted herein). Summary financial information is provided in this press release. This press release should be read in conjunction with the Company's quarterly financial statements and MD&A to be made available on SEDAR at www.sedar.com.Notes 1. Reconciliation of net earnings to Adjusted EBITDA: Adjusted EBITDA is defined as net earnings, adjusted to exclude: (i) income tax; (ii) other expense (income); (iii) interest expense; (iv) depreciation and amortization; (v) acquisition-related items; (vi) stock-based compensation expense and (vii) reorganization charges. We use Adjusted EBITDA to evaluate our own operating performance and our ability to service debt, as well as an integral part of our planning and reporting systems. Additionally, we use this measure in conjunction with discounted cash flow models to determine the Company's overall enterprise valuation and to evaluate acquisition targets. We present Adjusted EBITDA as a supplemental measure because we believe such measure is useful to investors as a reasonable indicator of operating performance because of the low capital intensity of the Company's service operations. We believe this measure is a financial metric used by many investors to compare companies, especially in the services industry. This measure is not a recognized measure of financial performance under GAAP in the United States, and should not be considered as a substitute for operating earnings, net earnings or cash flow from operating activities, as determined in accordance with GAAP. Our method of calculating Adjusted EBITDA may differ from other issuers and accordingly, this measure may not be comparable to measures used by other issuers. A reconciliation of net earnings to Adjusted EBITDA appears below.   Three months ended Six months ended (in thousands of US$) June 30 June 30  2012 20112012 2011         Net earnings $14,649  $10,932 $3,812  $9,642 Income tax 6,567  12,041 3,861  16,496 Other expense (income) (125)  862 (288)  1,939 Interest expense, net 4,266  4,305 8,773  8,686 Operating earnings 25,357  28,140 16,158  36,763 Depreciation and amortization 12,253  13,356 24,722  25,426 Acquisition-related items 2,874  502 9,427  1,374 Stock-based compensation expense 707  476 1,715  1,542 Reorganization charge --  4,338 --  4,338 Adjusted EBITDA $41,191  $46,812 $52,022  $69,443 2. Reconciliation of net earnings (loss) attributable to common shareholders and net earnings (loss) per common share to adjusted net earnings and adjusted net earnings per share: Adjusted earnings per common share is defined as diluted net earnings (loss) per common share, adjusted for the effect, after income tax, of: (i) the non-controlling interest redemption increment; (ii) acquisition-related items; (iii) amortization expense related to intangible assets recognized in connection with acquisitions; (iv) stock-based compensation expense; (v) reorganization charges and (vi) deferred income tax valuation allowances related to tax loss carry-forwards. We believe this measure is useful to investors because it provides a supplemental way to understand the underlying operating performance of the Company and enhances the comparability of operating results from period to period. Adjusted diluted net earnings per common share is not a recognized measure of financial performance under GAAP, and should not be considered as a substitute for diluted net earnings per common share, as determined in accordance with GAAP. Our method of calculating this non-GAAP measure may differ from other issuers and, accordingly, this measure may not be comparable to measures used by other issuers. A reconciliation of net earnings (loss) attributable to common shareholders to adjusted net earnings and of diluted net earnings (loss) per common share to adjusted earnings per common share appears below.   Three months ended Six months ended (in thousands of US$) June 30 June 30  2012 20112012 2011         Net earnings (loss) attributable to common shareholders $8,360  $3,360 $(8,047)  $(6,517) Non-controlling interest redemption increment (537)  1,739 3,096  7,555 Acquisition-related items 2,874  502 9,427  1,374 Amortization of intangible assets 4,490  5,773 9,288  10,707 Stock-based compensation expense 707  476 1,715  1,542 Reorganization charge --  4,338 --  4,338 Income tax on adjustments (1,858)  (3,568) (3,951)  (5,680) Deferred income tax valuation allowance --  4,731 --  9,005 Non-controlling interest on adjustments (340)  (734) (864)  (1,277) Adjusted net earnings $13,696  $16,617 $10,664  $21,047             Three months ended Six months ended (in US$) June 30 June 30  2012 20112012 2011         Diluted net earnings (loss) per common share $0.28  $0.11 $(0.27) $(0.22) Non-controlling interest redemption increment (0.02)  0.06 0.10  0.25 Acquisition-related items 0.08  0.02 0.29  0.05 Amortization of intangible assets, net of tax 0.09  0.11 0.19  0.21 Stock-based compensation expense, net of tax 0.02  0.01 0.04  0.03 Reorganization charge --  0.09 --  0.09 Deferred income tax valuation allowance --  0.14 --  0.27 Adjusted earnings per common share $0.45  $0.54 $0.35  $0.68          FIRSTSERVICE CORPORATION        Condensed Consolidated Statements of Earnings (Loss)         (in thousands of US dollars, except per share amounts)           Three months Six months   ended June 30 ended June 30 (unaudited) 2012 20112012 2011        Revenues  $593,193  $565,472$1,083,249  $1,043,854         Cost of revenues  386,832  355,819717,977  656,433 Selling, general and administrative expenses  165,877  167,655314,965  323,858 Depreciation  7,763  7,58315,434  14,719 Amortization of intangible assets  4,490  5,7739,288  10,707 Acquisition-related items (1)  2,874  5029,427  1,374Operating earnings 25,357  28,140 16,158  36,763 Interest expense, net  4,266  4,305 8,773  8,686 Other expense (income)  (125)  862 (288)  1,939 Earnings before income tax  21,216  22,973 7,673  26,138 Income tax (2)  6,567  12,041 3,861  16,496Net earnings  14,649  10,932 3,812  9,642 Non-controlling interest share of earnings  4,366  3,307 3,843  3,553 Non-controlling interest redemption increment  (537)  1,739 3,096  7,555 Net earnings (loss) attributable to Company  10,820  5,886 (3,127) (1,466) Preferred share dividends  2,460  2,526 4,920  5,051Net earnings (loss) attributable to common shareholders  $8,360  $3,360 $(8,047) $(6,517)        Net earnings (loss) per common share        Basic  $0.28  $0.11 $ (0.27)  $ (0.22)         Diluted  $0.28  $0.11 $ (0.27)  $ (0.22)        Adjusted earnings per common share (3)  $0.45  $0.54 $0.35  $0.68         Weighted average common shares (thousands)        Basic  30,029  30,093 30,006  30,184 Diluted  30,355  30,615 30,366  30,701Notes to Condensed Consolidated Statements of Earnings (Loss) (1) Acquisition-related items include contingent acquisition consideration fair value adjustments, contingent acquisition consideration-related compensation expense, transaction costs related to the Colliers International UK acquisition and a reclassification of accumulated other comprehensive earnings related to Colliers International UK. (2) Income tax expense for the three months ended June 30, 2011 includes a $4,731 valuation allowance related to deferred income tax assets; income tax expense for the six months ended June 30, 2011 includes a $9,005 valuation allowance. (3) See definition and reconciliation above.Condensed Consolidated Balance Sheets     (in thousands of US dollars)          (unaudited) June 30, 2012 December 31, 2011     Assets     Cash and cash equivalents  $77,037   $97,799  Restricted cash  5,106   4,493  Accounts receivable  316,268   286,019  Inventories  18,431   11,831  Prepaid expenses and other current assets  65,155   50,062 Current assets  481,997   450,204  Other non-current assets  21,058   17,028  Fixed assets  94,032   94,150  Deferred income tax  96,990   87,940  Goodwill and intangible assets  577,047   584,396 Total assets  $1,271,124   $1,233,718      Liabilities and shareholders' equity     Accounts payable and accrued liabilities  $325,268   $354,220  Other current liabilities  32,649   23,657  Long-term debt - current  37,121   216,373 Current liabilities  395,038   594,250  Long-term debt - non-current  341,645   100,042  Convertible unsecured subordinated debentures  77,000   77,000  Other liabilities  41,028   39,243  Deferred income tax  37,295   38,160  Non-controlling interests  138,678   141,404  Shareholders' equity  240,440   243,619 Total liabilities and equity  $1,271,124   $1,233,718      Supplemental balance sheet information     Total debt  $455,766   $393,415  Total debt excluding convertible debentures  378,766   316,415  Total debt, net of cash  378,729   295,616  Total debt excluding convertible debentures, net of cash  301,729   218,616       Consolidated Statements of Cash Flows         (in thousands of US dollars)           Three months ended Six months ended   June 30 June 30 (unaudited) 2012 20112012 2011        Cash provided by (used in)               Operating activities        Net earnings  $14,649  $10,932 $3,812  $9,642 Items not affecting cash:        Depreciation and amortization  12,253  13,356 24,722  25,426 Deferred income tax  (3,289)  (555)(10,486)  (1,321) Other  3,686  1,830 4,678  4,820         Net cash provided by operating activities before changes  27,299  25,563 22,726  38,567         Changes in working capital  (9,262)  (1,438)(58,994)  (63,594) Net cash provided by (used in) operating activities  18,037  24,125(36,268)  (25,027)        Investing activities        Acquisition of businesses, net of cash acquired  (554)  (8,689)(13,205)  (9,873) Purchases of fixed assets  (7,429)  (7,828)(14,299)  (13,172) Other investing activities  579  30 451  (474) Net cash used in investing activities  (7,404)  (16,487)(27,053)  (23,519)        Financing activities        Increase (decrease) in long-term debt, net  6,417  (7,002) 62,351  50,943 Purchases of non-controlling interests  (2,592)  (59)(1,631)  (1,497) Dividends paid to preferred shareholders  (2,460)  (2,526)(4,920)  (5,051) Other financing activities  (2,596)  (2,369)(13,668)  (16,512) Net cash (used in) provided by financing activities  (1,231)  (11,956) 42,132  27,883         Effect of exchange rate changes on cash  (362)  596 427  1,908         Increase (decrease) in cash and cash equivalents  9,040  (3,722)(20,762)  (18,755)         Cash and cash equivalents, beginning of period  67,997 85,326 97,799  100,359         Cash and cash equivalents, end of period  $77,037  $81,604 $77,037  $81,604        Segmented Revenues, Adjusted EBITDA and Operating Earnings       (in thousands of US dollars)                         Commercial Residential         Real Estate Property Property      (unaudited) Services Management Services Corporate Consolidated            Three months ended June 30                      2012      Revenues $291,635 $214,052 $87,455 $51 $593,193Adjusted EBITDA 17,879 18,826 8,597(4,818) 40,484 Stock-based compensation     707      41,191Operating earnings 10,725 12,768 6,599(4,735) 25,357             2011            Revenues  $245,731  $195,657  $124,042  $42  $565,472 Adjusted EBITDA  11,086  17,929  21,138 (3,817)  46,336  Stock-based compensation          476            46,812             Operating earnings  4,053  14,474  13,491 (3,878)  28,140               Commercial Residential         Real Estate Property Property       Services Management Services Corporate Consolidated            Six months ended June 30            2012      Revenues $504,905 $405,941 $172,301 $102 $1,083,249Adjusted EBITDA 15,911 30,984 11,471(8,059) 50,307 Stock-based compensation     1,715      52,022Operating earnings(3,644) 20,836 7,203(8,237) 16,158             2011            Revenues  $441,330  $363,891  $238,551  $82  $1,043,854 Adjusted EBITDA  13,659  29,383  32,397 (7,538)  67,901  Stock-based compensation          1,542            69,443             Operating earnings  685  21,271  22,472 (7,665)  36,763CONTACT: COMPANY CONTACTS: Jay S. Hennick Founder & CEO D. Scott Patterson President & COO John B. Friedrichsen Senior Vice President & CFO (416) 960-9500