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Press release from CNW Group

D + H Reports Second Quarter 2012 Results

Wednesday, August 08, 2012

D + H Reports Second Quarter 2012 Results17:12 EDT Wednesday, August 08, 2012Stock Exchange Symbol: DHWebsite: www.dhltd.comTORONTO, Aug. 8, 2012 /CNW/ - Davis + Henderson Corporation ("D+H" or the "Corporation" or the "Company") today reported solid financial results for the three and six months ended June 30, 2012 that were consistent with expectations in the context of our strategic agenda and reflected year-over-year growth in revenues, EBITDA1 and Adjusted EBITDA1.  Growth in the second quarter of 2012 was attributable to strong market activity combined with savings realized from integration and transformation initiatives in the Canadian Segment and continued growth in the Mortgagebot LLC ("Mortgagebot") business and the inclusion of Avista Solutions, Inc. ("Avista") from the date of acquisition of May 3, 2012, in the U.S. Segment.Second Quarter Highlights Revenue was $197.1 million, an increase of $11.9 million, or 6.5%, compared to $185.1 million for the same quarter in 2011, reflecting year-over-year growth of 3.2% in the Canadian Segment with the balance from growth in the Mortgagebot business and the inclusion of Avista.EBITDA of $53.1 million (26.9% margin), increased by $5.0 million, or 10.4%, from $48.1 million (26.0% margin) compared to the same quarter in 2011, due to strong volumes, savings realized from integration and transformation initiatives in the Canadian Segment, continued growth in the Mortgagebot business, and the inclusion of Avista in the U.S. Segment.Adjusted EBITDA was $57.5 million (29.2% margin) for the second quarter of 2012, an increase of $8.7 million, or 17.8%, compared to $48.8 million (26.4% margin) for the same period in 2011.  Adjusted EBITDA for the second quarter of 2012 excludes the impacts of acquisition-related and other charges related to cost-realignment initiatives of $4.4 million.  These charges consisted of $3.2 million related to severance costs in the Canadian Segment in connection with cost-realignment activities to benefit future periods, that are not considered to be in the normal course of operations, and $1.2 million in the U.S. Segment related to transaction costs and certain retention expenses associated with the acquisitions of Mortgagebot and Avista.  Acquisition-related and other charges for the same period in 2011 were $0.7 million related to the Mortgagebot acquisition. These items are excluded in calculating Adjusted EBITDA as they are not considered indicative of the underlying business performance for the period being reviewed and management believes that excluding these adjustments is more reflective of ongoing operating results.Adjusted net income1 was $32.4 million ( $0.5465 per share) for the second quarter of 2012 compared to $29.1 million ( $0.4974 per share) for the same period in 2011.Net income was $20.9 million ( $0.3526 per share) for the second quarter of 2012 compared to $23.5 million ( $0.4010 per share) for the same quarter in 2011. Net income for the second quarter of 2011 benefited from tax recoveries of $3.6 million in connection with the acquisition of Mortgagebot, related to the recognition of losses within certain U.S. subsidiaries.On May 3, 2012, D+H acquired a 100% equity interest in Avista, a leading provider of Software as a Service ("SaaS"), mortgage loan origination software, for a purchase price of US$ 40 million.Additionally, on April 24, 2012, D+H made a strategic minority investment in Compushare, Inc. ("Compushare"), based in Santa Ana, California, a technology management and cloud computing provider to financial institutions, for US$ 9.8 million.On June 29, 2012, D+H paid a dividend of $0.31 per share to its shareholders of record on May 31, 2012. On June 30, 2011, D+H paid $0.30 per share to its shareholders of record on May 31, 2011.On August 8, 2012, D+H's Board of Directors approved the undertaking of a new normal course issuer bid ("NCIB"), pursuant to which the Corporation would be authorized to purchase up to approximately 3% of the Corporation's issued and outstanding common shares as at August 8, 2012, over a twelve-month period, subject to the approval of the Toronto Stock Exchange.___________________________________________ 1 D+H financial results are prepared in accordance with IFRS. D+H reports several non-IFRS financial measures, including EBITDA, Adjusted EBITDA and Adjusted net income used above. Adjusted EBITDA is calculated as EBITDA, adjusted to remove acquisition-related and other charges, including severance costs associated with cost-realignment initiatives which are not considered to be part of normal course of operations.   Adjusted net income is calculated as net income, adjusted to remove certain non-cash items and certain items of note such as acquisition-related and other charges, including severance costs associated with cost-realignment initiatives as described above, discontinued operations and the related tax effects of these adjustments including tax effects of corporate conversions. These items are excluded in calculating Adjusted EBITDA and Adjusted net income as they are not considered indicative of the underlying business performance for the period being reviewed and management believes that excluding these adjustments is more reflective of ongoing operating results. Any non-IFRS financial measures should be considered in context with the IFRS financial statement presentation and should not be considered in isolation or as a substitute for IFRS net income or cash flows. Further, D+H's measures may be calculated differently from similarly titled measures of other companies. See Non-IFRS Financial Measures for a more complete description of these terms.Six-Month Highlights Revenue was $378.7 million, an increase of $24.0 million, or 6.8%, compared to the same six-month period in 2011.EBITDA was $93.9 million (24.8% margin), an increase of $8.3 million, or 9.7%, compared to $85.6 million (24.1% margin) for the same period in 2011.Adjusted EBITDA was $99.1 million (26.2% margin) for the first six months of  2012, an increase of $10.9 million, or 12.4%, compared to $88.1 million (24.8% margin) for the same period of 2011. Adjusted EBITDA for the first six months of 2012 excluded impacts of acquisition-related and other charges of $5.1 million, which consisted of $3.2 million related to severance costs in connection with cost-realignment initiatives to benefit future periods within the Canadian Segment and $1.9 million related to transaction costs and certain retention expenses related to the acquisition of Mortgagebot and Avista within the U.S. Segment.   Acquisition-related and other charges for the same period in 2011 were $2.5 million incurred in connection with the Mortgagebot acquisition. As described earlier, these items are excluded in calculating Adjusted EBITDA as they are not considered indicative of the underlying business performance for the period being reviewed and management believes that excluding these adjustments is more reflective of ongoing operating results.Adjusted net income was $54.3 million ( $0.9174 per share) for the first six months of 2012, an increase of $2.5 million, or 4.8%, compared to the same period in 2011. Adjusted net income per share was also impacted by the issuance of 6 million shares in April 2011 to partially fund the Mortgagebot acquisition.Net income was $35.8 million ($0.6047 per share),  a year-over-year decrease of $23.7 million, or  39.8%, compared to $59.5 million ( $1.0647 per unit) for the same period in 2011. Net income a year ago benefited from the inclusion of non-cash tax recoveries of $22.8 million attributable to D+H's conversion to a corporation in the first quarter of 2011 and a non-cash tax recovery relating to losses within certain US subsidiaries that were not previously recognized in connection with the acquisition of Mortgagebot in the second quarter of 2011.  Net income for the second quarter of 2012 was also impacted by acquisition-related and other charges as described earlier.During the first six months of 2012, dividends of $0.62 per share were paid to shareholders, up from $0.6033 per share in the same period of 2011.D+H's unaudited condensed interim consolidated financial statements for the second quarter of 2012, accompanying notes to the financial statements and management's discussion & analysis ("MD&A") along with the supplementary financial information will be available today at www.dhltd.com and 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, EBITDA , Adjusted EBITDA and Adjusted net income 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 acquisitions on the financial performance of D+H; and the expected benefits arising as a result of acquisitions. 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 personal and business cheques; 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 CallDavis + Henderson will discuss its financial results for the three and six months ended June 30, 2012 via conference call at 10:00 a.m. EST (Toronto time) on Thursday, August 9, 2012. The number to use for this call is 647-427-7450 for Local / International callers or 1-888-231-8191 for US / Canada 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: 416-849-0833 for Toronto area callers, or 1-855-859-2056 for all other callers, with Encore Password 97400239. The rebroadcast will be available until Thursday, August 23, 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 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 August 8, 2012 and should be read in conjunction with the MD&A in the Annual Report for the year ended December 31, 2011, dated March 6, 2012, and the unaudited condensed interim consolidated financial statements for the three and six months ended June 30, 2012. External economic and industry factors remain substantially unchanged from those described in the annual MD&A and the Corporation's most recently filed Annual Information Form, except as described herein.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; EBITDA also excludes fair value adjustments of interest-rate swaps which are directly related to interest expense), "Adjusted EBITDA" (EBITDA adjusted to remove acquisition-related and other charges, including severance costs in connection with cost-realignment initiatives which are not considered to be incurred in the normal course of operations and are not indicative of the underlying business performance), "Adjusted net income" (net income before certain non-cash charges such as amortization of intangibles from acquisitions and fair value adjustments of interest-rate swaps and certain items of note such as acquisition-related and other charges and discontinued operations), and "Adjusted net income per share", all of which are not defined terms under IFRS.These non-IFRS financial measures should be read in conjunction with the Consolidated Statements of Income.  See the reconciliation of EBITDA, Adjusted EBITDA and Adjusted net income to the most directly comparable IFRS measure, "Net income", in the "Operating Results" section of this MD&A.Management believes these supplementary measures 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 (with adjustments) is used to measure compliance with certain financial covenants under the Company's credit facility and bonds. EBITDA is also used by D+H in assessing the performance and the 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 EBITDA   Adjusted EBITDA is also used by D+H in assessing the performance of its businesses.  Adjusted EBITDA excludes: (i) acquisition-related expenses such as transaction costs, and certain retention and incentive costs incurred as part of acquisitions; and (ii) other charges incurred in connection with cost-realignment initiatives which are not considered to be part of the normal course of operations. These items are excluded in calculating Adjusted EBITDA as they are not considered indicative of the underlying business performance for the period being reviewed and management believes that excluding these adjustments is more reflective of ongoing operating results. Similar to EBITDA, Adjusted EBITDA also 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 introduced Adjusted net income and Adjusted net income per share as measures for evaluating results.  Periods prior to January 1, 2011, do not have comparable measures.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 acquisitions. 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.STRATEGYD+H is a leading solutions provider to the North American financial services marketplace. We have several market-leading service offerings.  Within the Canadian market they include payment solutions; the provision of collateral management services; the servicing of student loans; mortgage technology solutions and several specialty servicing businesses including credit card and insurance processing. In the United States, D+H is a market-leading provider of Software-as-a-Solution ("SaaS") Point-of-Sale ("POS") mortgage and consumer loan solutions to over 1,100 community banks and credit unions; and more recently through the acquisition of Avista, a leading provider of SaaS Loan Origination System ("LOS") to over 150 community banks and credit unions. We also offer leading commercial lending, small business lending and leasing technology solutions to mid-size and large financial institutions across North America.D+H's strategy is to establish market-leading positions within well defined and growing service areas in the financial services marketplace, and to reinforce these market-leading positions with technology solutions that deliver increasing value to our customers and shareholders. We expect to advance this strategy through organic initiatives, through 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.Over the past several years, D+H has executed this strategy by evolving payment solutions, completing several acquisitions in the Canadian Segment, including Resolve Business Outsourcing Income Fund ("Resolve") in 2009, ASSET Inc. ("ASSET") in 2011; and in the U.S. Segment, Mortgagebot LLC ("Mortgagebot") in 2011, and Avista Solutions, Inc. ("Avista") in 2012, and by further enhancing our services and capabilities within all service areas.Within our U.S. Segment, our strategic focus revolves around building a range of technology offerings, with an emphasis on cloud computer based solutions or SaaS offerings, to better serve the regional banks, community banks and credit unions in the U.S.  We expect to advance this strategy organically through adjacent offerings, such as our recent expansion into consumer loans, and through targeted U.S. acquisitions that will allow us to broaden our technology capabilities to this customer segment.Consistent with its strategy, on a go-forward basis, management is working to: (i) continue our organic growth initiatives in the U.S.; (ii) evolve our payment solutions programs; (iii) enhance customer value and extend our technology supported services related to mortgages, auto, personal, student, commercial and leasing markets; and (iv) identify appropriate acquisition targets to support the strategic direction of D+H.For a detailed discussion of the results for the three and six months ended June 30, 2012 and management's outlook, please see below. For a detailed discussion of risk factors, please refer to the most recent Annual Information Form and the 2011 Annual Report filed on SEDAR.ACCOUNTING PRINCIPLES AND FINANCIAL INFORMATION PRESENTATIONThe Company's consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board ("IASB").  Prior to January 1, 2011, the consolidated financial statements were reported in accordance with Canadian generally accepted accounting principles ("Canadian GAAP").Results from continuing operations include the performance of acquired businesses from the respective dates of 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.Segment ReportingD+H began reporting its results by its reportable segments in the first quarter of 2012, based on its two strategic business units, the "Canadian Segment" and the "U.S. Segment".  Comparatives have been presented to conform to the current period disclosure.The Canadian Segment includes results from payment solutions (reported as programs to chequing accounts in prior years), loan registration and recovery services, loan servicing, technology solutions in the commercial lending, small business lending and leasing area, lending technology services to the Canadian mortgage market and other business service solutions.  The U.S. Segment consists of lending technology services to the U.S. mortgage market, including results from the Mortgagebot, Avista and D+H's share of profit from the investment in Compushare, Inc. ("Compushare").The results reported under each of these segments do not include items such as interest expense, income taxes and fair value adjustments related to derivative instruments, as these items are considered to be of a corporate nature and as such, have been reported as part of Corporate for segment reporting purposes.ACQUISITION AND INVESTMENT IN AN ASSOCIATEOn May 3, 2012, D+H announced the acquisition of 100% equity interest in Avista of Charleston, South Carolina, for a purchase price of US$ 40 million.  Avista is a leading provider of SaaS mortgage loan origination software for over 150 community and regional banks, credit unions and mortgage bankers in the United States.In addition, on April 24, 2012, D+H announced the completion of a strategic minority investment in Compushare, based in Santa Ana, California, a technology management and cloud computing provider to financial institutions, for US$ 9.8 million.Both transactions were funded from D+H's existing credit facilities and subsequently through the issuance of bonds.For additional information on these transactions, refer to note 4 for details on the Avista acquisition and note 5 for details on the Compushare investment, in the condensed interim consolidated financial statements of the Corporation for the three and six months ended June 30, 2012.Management has not yet completed its assessment and valuation of the assets acquired and liabilities assumed for the Avista transaction, and as a result, purchase information as presented may be amended.CONSOLIDATED OPERATING RESULTS - SECOND QUARTER AND YEAR-TO-DATE 2012The following tables are derived from, and should be read in conjunction with, the Consolidated Statements of Income and include 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 Avista, effective from the acquisition date of May 3, 2012, reported as part of the U.S. segment.Consolidated Operating and Financial Results1(in thousands of Canadian dollars, except per share amounts, unaudited)     Quarter ended June 30, Six months ended June 30,   20122011 20122011Revenue $ 197,068  $ 185,120  $ 378,681  $ 354,668Expenses 2143,962 137,023 284,742 269,068        EBITDA 2, 3 $ 53,106  $ 48,097  $ 93,939  $ 85,600EBITDA Margin26.9%26.0% 24.8%24.1%        Adjustments:      Acquisition-related and other charges 24,378 707 5,115 2,506        Adjusted EBITDA 3 $ 57,484  $ 48,804  $ 99,054  $ 88,106Adjusted EBITDA Margin29.2%26.4% 26.2%24.8%                       Quarter ended June 30,     Six months ended June 30,     2012 vs. 2011  2012 vs. 2011     % change   % change        Revenue 6.5%  6.8%EBITDA 2, 3 10.4%  9.7%Adjusted EBITDA 3 17.8%  12.4%1   The consolidated results include those of Avista and Mortgagebot, effective from the respective dates of acquisition of May 3, 2012 and April 12, 2011.     2    Consolidated expenses for the second quarter of 2012 include severances related to cost-realignment initiatives as well as acquisition-related costs pertaining to certain transaction and retention costs related to the acquisition of Avista.  Results for the same period in 2011 included certain retention and incentive costs related to the acquisition of Mortgagebot.     3    EBITDA and Adjusted EBITDA are non-IFRS terms. See Non-IFRS Financial Measures for a more complete description of these terms.Growth in consolidated revenues and EBITDA in the second quarter of 2012, compared to the same period in 2011, was driven by both Canadian and U.S. Segments.  The Canadian Segment experienced increases in four of its five service areas as described in the discussion of business results by segment. The U.S. Segment also contributed to the increase in revenues through growth in Mortgagebot, and to a lesser extent, through the acquisition of Avista.  For the six months ended June 30, 2012, both segments contributed to the increase in revenues and EBITDA with stronger growth within the U.S. Segment.Consolidated EBITDA for both the second quarter of 2012 and the first six months of 2012 were impacted by acquisition-related charges incurred in connection with the acquisition of Avista in the U.S. Segment and severance costs incurred in relation to cost-realignment initiatives in the Canadian Segment. Consolidated Adjusted EBITDA, which excludes these charges, was higher in both segments for both the second quarter, and the first six months of 2012, compared to the same periods in 2011.Consolidated Revenue(in thousands of Canadian dollars, unaudited)     Quarter ended June 30,   Six months ended June 30,     2012201120122011Revenue         Payment solutions1    $ 76,787 $ 74,258 $ 151,568 $ 148,469 Loan registration and recovery services   45,07043,04183,02479,415 Loan servicing    33,38932,07367,50065,345 Lending technology services 2   33,62226,35859,76141,857 Business service solutions 3   8,2009,39016,82819,582             $  197,068 $ 185,120 $ 378,681 $ 354,6681    Reported as Programs to chequing account in prior years.2   Includes revenue reported as part of the U.S. segment.3   Reported as Other in prior years.     Consolidated revenue for the second quarter of 2012 was $197.1 million, an increase of $11.9 million, or 6.5%, compared to the same period in 2011. For the first six months of 2012, consolidated revenue of $378.7 million, increased by $24.0 million, or 6.8%, compared to the same period in 2011.  These increases were primarily due to growth in all service areas except the Business service solutions in the Canadian Segment, growth within the U.S. Segment, and the inclusion of Avista, acquired on May 3, 2012.  Services delivered by D+H 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.  See Operating Results by Segment section for a more detailed discussion of revenue by service area.The following table reflects the relative size of each of the major service areas as a percentage of consolidated revenue based on a rolling twelve-month period:       Rolling twelve-months ended June 30,     20122011Revenue - Consolidated       Payment solutions1    40%43% Loan registration and recovery services    22%20% Loan servicing    18%19% Lending technology services 2    16%12% Business service solutions 3    4%6%            100%100%1    Reported as Programs to chequing account in prior years.2   Includes revenues reported as part of the U.S. segment.3    Reported as Other in prior years.     Payment solutions include: (i) the cheque supply program which serves the personal and small business account holders of our financial services customers; and (ii) various other subscription fee based enhancement services and other service offerings directed towards account opening activities and other service offerings directed towards chequing and credit card programs. 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.  These volume declines have been partially offset by growth in service enhancements to the chequing and credit card programs. Revenue from payment solutions is reported as part of the Canadian Segment.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 contributors within this revenue category are search and registration services, which currently account for approximately 50% to 60% of revenue, and recovery services accounting for approximately 25% to 35%. 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.  Revenues from loan registration and recovery services are reported as part of the Canadian Segment.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 as student loans balances have been increasing and the term of the loans extended.  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.  Revenues from loan servicing programs are reported as part of the Canadian Segment.Lending technology services include services directed towards mortgage markets in both Canada and, recently with the acquisitions of Avista in May 2012 and 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 mortgage markets currently represent approximately 85% to 95% of revenues within this category, with approximately 50% to 60% attributable to transaction-based fees earned in connection with Canadian mortgage originations and 40% to 50% representing fees related to the U.S. SaaS loan origination services.  Mortgage origination fees can be variable and are impacted by many factors including the economy, the housing market and interest rates, among others.  For segment reporting purposes, revenues from the lending technology services to the Canadian mortgage markets and the products and technology solutions for leasing, commercial lending and small business lending offered in both Canada and U.S. are reported as part of the Canadian Segment. Revenues from the U.S. SaaS loan origination services related to Mortgagebot and Avista are reported as part of the U.S. Segment.Business service solutions (reported as Other in prior years), include a number of smaller service offerings that are primarily outsourced activities D+H performs on behalf of a variety of customers including non-financial services customers. Revenues from these activities are reported as part of the Canadian Segment.Consolidated Expenses      (in thousands of Canadian dollars, unaudited)      Quarter ended June 30,    Six months ended June 30,    2012201120122011       Employee compensation and benefits 1  $ 56,312  $ 53,178 $ 113,339  $ 103,559Non-compensation direct expenses 2 62,077 59,576119,042 115,515Other operating expenses 3 25,573 24,26952,361 49,994           $ 143,962  $ 137,023 $ 284,742  $ 269,0681   Employee compensation and benefits includes retention and incentive expenses related to acquisition of businesses and are net of apprenticeship tax credits and amounts capitalized related to software product development. Employee compensation expenses for the second quarter of 2012 included $3.2 million of severance related to cost-realignment initiatives.2    Non-compensation direct expenses include materials, shipping, selling expenses and third party direct disbursements.3   Other operating expenses include occupancy costs, communication costs, licensing fees, professional fees, contractor fees, transaction costs related to acquisitions of businesses and expenses not included in other categories.     Consolidated expenses of $144.0 million for the second quarter of 2012 increased by $6.9 million, or 5.1%, compared to the same quarter in 2011. For the first six months of 2012, consolidated expenses were $284.7 million, an increase of $15.7 million, or 5.8%, compared to the same period in 2011. Consolidated expenses for the second quarter of 2012 included acquisition-related and other charges of  $4.4 million ($0.7 million for the same period in 2011) consisting of severance costs of $3.2 million for cost-realignment initiatives in the Canadian Segment, as well as acquisition-related expenses attributable to the acquisitions of Mortgagebot and Avista of $1.2 million, in the U.S. Segment. For the first six months of 2012, acquisition-related and other charges were $5.1 million, compared to $2.5 million for the same period in 2011 in connection with the acquisition of Mortgagebot.Consolidated EBITDA and EBITDA MarginConsolidated EBITDA during the second quarter of 2012 was $53.1 million, an increase of $5.0 million, or 10.4%, compared to the same quarter in 2011. For the first six months of 2012, consolidated EBITDA of $93.9 million, increased by $8.3 million, or 9.7% compared to the same period in 2011. Both the Canadian and the U.S. Segments contributed to the growth in EBITDA in 2012. This growth was attributable to savings realized from transformation and integration in the Canadian Segment and strong market activity in both segments. EBITDA margin of 26.9% for the second quarter of 2012 increased from 26.0% for the same period in 2011.Consolidated Adjusted EBITDA and Adjusted EBITDA MarginConsolidated Adjusted EBITDA during the second quarter of 2012 was $57.5 million, an increase of $8.7 million, or 17.8%, compared to the same quarter in 2011. For the first six months of 2012, consolidated Adjusted EBITDA of $99.1 million, increased by $10.9 million, or 12.4%, compared to the same period in 2011.  Consolidated Adjusted EBITDA excluded acquisition-related and other charges of $4.4 million for the second quarter of 2012, consisting of $3.2 million in the Canadian Segment and $1.2 million in the U.S. Segment and for the six months ended June 30, 2012, excluded acquisition-related and other charges of $5.1 million.   On a consolidated basis, Adjusted EBITDA margin for the second quarter of 2012 was 29.2%, up from 26.4% a year ago.  For the first six months of 2012, Adjusted EBITDA margin was 26.2% on a consolidated basis, compared to 24.8% for the same period in 2011.Consolidated Net Income (in thousands of Canadian dollars, except per share amounts, unaudited)      Quarter ended June 30,   Six months ended June 30,   20122011 20122011EBITDA 1 $ 53,106  $ 48,097  $ 93,939  $ 85,600Depreciation of capital assets and amortizationof non-acquisition intangibles7,360 5,827 14,197 11,331Amortization of intangibles from acquisitions11,250 10,590 22,189 18,682Interest expense4,821 5,272 9,642 9,261Income from investment in an associate 6(38)- (38)-Amortization and fair value adjustment ofderivative instruments 2616 1,227 (1,029)(460)Income tax expense (recovery) 8,210 1,717 13,157 (12,573)        Income from continuing operations20,887 23,464 35,821 59,359Income (loss) from discontinued operations, net of tax 3-- - 140        Net income20,887 23,464 35,821 59,499                Income from continuing operations per share,basic and diluted 4, 5 $ 0.3526  $ 0.4010  $ 0.6047  $ 1.0622Net income per share, basic and diluted 4, 5 $ 0.3526  $ 0.4010  $ 0.6047  $ 1.06471    EBITDA is a non-IFRS term. See Non-IFRS Financial Measures for a more complete description of this term. 2   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. 3    D+H 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 in the comparative periods presented.  4    Diluted net income per share (non-IFRS term) reflects 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. The options outstanding were not dilutive for the periods presented. 5    Weighted average number of shares outstanding during the second quarter and the first six months of 2012 was 59,233,373 shares (Q2 2011 - 58,508,098 shares; Six months ended June 30, 2011 - 55,885,307 shares). 6   D+H's share of profit from Compushare, the minority investment purchased on April 24, 2012, reported as part of the U.S. Segment.Consolidated net income of $20.9 million for the second quarter of 2012 was lower by $2.6 million, or 11.0%, compared to net income of $23.5 million for the same quarter in 2011. For the six-month period ended June 30, 2012, consolidated net income of $35.8 million, decreased by $23.7 million, or 39.8%, compared to $59.5 million for the same period in 2011. Net income for the second quarter of 2011 benefited from tax recoveries of $3.6 million related to the recognition of a deferred tax asset attributable to losses of certain U.S. subsidiaries that were recognized as a consequence of the acquisition of Mortgagebot. Net income for the second quarter of 2012 was additionally impacted by acquisition-related and other charges of $4.4 million, which included costs incurred to achieve operational effectiveness, reported as part of the Canadian Segment. Net income for the first six months of 2011 included tax recoveries of $19.2 million related to changes in the tax status of the Company as a result of the conversion from an income trust to a corporation.Consolidated net income for the second quarter of 2012 also included our share of income from investment in an associate, Compushare, effective from April 24, 2012.Consolidated Adjusted Net Income (in thousands of Canadian dollars, except per share amounts, unaudited)      Quarter ended June 30,   Six months ended June 30,   20122011 20122011Net income $ 20,887  $ 23,464  $ 35,821  $ 59,499Adjustments:      Non-cash items:       Amortization of intangibles from acquisitions11,250 10,590 22,189 18,682  Amortization and fair value adjustment ofderivative instruments 2616 1,227 (1,029)(460) Other items of note:       Acquisition-related and other charges 34,378 707 5,115 2,506  Discontinued operations, net of tax 4- - - (140) Tax effect of above adjustments (excludingdiscontinued operations) 5(4,758)(3,256) (7,756)(5,389) Tax effect of corporate conversion and acquisitions 6- (3,628) - (22,837)        Adjusted net income 1 $ 32,373  $ 29,104  $ 54,340  $ 51,861                Adjusted net income per share, basic and diluted 1, 7, 8 $ 0.5465  $ 0.4974  $ 0.9174  $ 0.9280              Quarter ended June 30,    Six months ended June 30,     2012 vs. 2011   2012 vs. 2011      % change    % changeAdjusted net income per share 1, 7, 8  9.9%   (1.1%)          1   Adjusted net income and Adjusted net income per share are non-IFRS terms. See Non-IFRS Financial Measures for a more complete description of these terms.     2     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.     3   Acquisition-related and other charges for the second quarter of 2012 include severances related to cost-realignment initiatives as well as acquisition related costs pertaining to certain transaction and retention expenses in connection with the acquisition of Avista.  Acquisition-related and other charges for the same period in 2011 included certain retention and incentive costs related to the acquisition of Mortgagebot.     4   D+H 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 in the comparative periods presented.      5   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 of derivative instruments; and, (iii) acquisition-related and other charges.     6   Adjustments for second quarter of 2011 related to a non-cash income tax recovery attributable to losses within certain U.S. subsidiaries that had not been previously recognized.  The amounts for the first six months of 2011 also included a non-cash income tax recovery recorded in connection with the conversion to a Corporation.     7   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. The options outstanding were not dilutive for the periods presented.     8    Weighted average number of shares outstanding during the second quarter and the first six months of 2012 was 59,233,373 shares (Q2 2011 - 58,508,098 shares; Six months ended June 30, 2011 - 55,885,307 shares).Consolidated Adjusted net income for the second quarter of 2012 and for the same period in 2011 excluded: (i) non-cash impacts of items such as amortization of intangibles from acquisitions and gains and losses related to fair value adjustment of derivative instruments; (ii) other items of note such as acquisition-related and other charges described earlier; and (iii) tax recoveries related to the changes in the tax status of D+H as a result of the conversion from an income trust to a corporation, and non-cash tax recoveries relating to acquisitions.  Net income was also adjusted for the tax impact of these items to arrive at Adjusted net income.For the second quarter of 2012, consolidated Adjusted net income was $32.4 million ($0.5465 per share), an increase of $3.3 million, or 11.2%, compared to $29.1 million ($0.4974 per share) for the same period in 2011.  Consolidated Adjusted net income for the second quarter of 2011 excluded tax recoveries of $3.6 million ( $0.0620 per share) recognized in connection with the acquisition of Mortgagebot in relation to losses within certain U.S. subsidiaries that were not previously recognized while the amounts for the first six months of 2011 also excluded tax recoveries of $19.2 million related to the changes in the tax status of D+H as a result of the conversion from an income trust to a corporation.OPERATING RESULTS BY SEGMENT1(in thousands of Canadian dollars, unaudited)             Quarter ended June 30,   Canadian Segment U.S. Segment Corporate Consolidated   20122011 20122011 20122011 20122011Revenue $ 183,133  $ 177,456  $ 13,935  $ 7,664  $ -  $ -  $ 197,068  $ 185,120Expenses 2135,907 132,292 8,055 4,731 - - 143,962 137,023              EBITDA 2, 347,226 45,164 5,880 2,933 - - 53,106 48,097EBITDA Margin25.8%25.5% 42.2%38.3% - -  26.9%26.0%              Adjustments:            Acquisition-related and other charges 23,175 - 1,203 707 - - 4,378 707              Adjusted EBITDA 3 $ 50,401  $ 45,164  $ 7,083  $ 3,640  $ -  $ -  $ 57,484  $ 48,804Adjusted EBITDA Margin27.5%25.5% 50.8%47.5% - -  29.2%26.4%       Quarter ended June 30,     Canadian   U.S.       Segment   Segment  Consolidated     2012 vs. 2011 2012 vs. 20112012 vs. 2011     % change  % change % change        Revenue 3.2% 81.8%6.5%EBITDA 2, 3 4.6% 100.5%10.4%Adjusted EBITDA 3 11.6% 94.6%17.8%                        Quarter ended June 30,     Canadian Segment   U.S. Segment   Corporate   Consolidated   20122011 20122011 20122011 20122011              EBITDA 2, 3 $ 47,226  $ 45,164  $ 5,880  $ 2,933  $ -  $ -  $ 53,106  $ 48,097Depreciation of capital assets andnon-acquisition intangibles6,960 5,597 400 230 - - 7,360 5,827Amortization of intangibles from acquisitions8,131 8,181 3,119 2,409 - - 11,250 10,590Interest expense - - - - 4,821 5,272 4,821 5,272Income from investment in an associate 6- - (38)- - - (38)-Amortization and fair value adjustmentof derivative instruments4- - - - 616 1,227 616 1,227Income tax expense - - - - 8,210 1,717 8,210 1,717Net income (loss)32,135 31,386 2,399 294 (13,647)(8,216) 20,887 23,464                                                Six months ended June 30,   Canadian Segment U.S. Segment Corporate Consolidated   20122011 20122011 20122011 20122011Revenue $ 353,155  $ 347,004  $ 25,526  $ 7,664  $ -  $ -  $ 378,681  $ 354,668Expenses 2270,398 262,737 14,344 6,331 - - 284,742 269,068              EBITDA 2, 382,757 84,267 11,182 1,333 - - 93,939 85,600EBITDA Margin23.4%24.3% 43.8%17.4% - -  24.8%24.1%              Adjustments:           Acquisition-related and other charges 23,175 199 1,940 2,307 - - 5,115 2,506              Adjusted EBITDA 3 $ 85,932  $ 84,466  $ 13,122  $ 3,640  $ -  $ -  $ 99,054  $ 88,106Adjusted EBITDA Margin24.3%24.3% 51.4%47.5% - -  26.2%24.8%               Six months ended June 30,     Canadian   U.S.       Segment   Segment  Consolidated     2012 vs. 2011 2012 vs. 20112012 vs. 2011     % change  % change % change        Revenue 1.8% 233.1%6.8%EBITDA 2, 3 (1.8%) 738.9%9.7%Adjusted EBITDA 3 1.7% 260.5%12.4%                          Six months ended June 30,     Canadian Segment   U.S. Segment   Corporate   Consolidated   20122011 20122011 20122011 20122011              EBITDA 2, 3 $ 82,757  $ 84,267  $ 11,182  $ 1,333  $ -  $ -  $ 93,939  $ 85,600Depreciation of capital assets andnon-acquisition intangibles13,464 11,101 733 230 - - 14,197 11,331Amortization of intangibles from acquisitions16,262 16,273 5,927 2,409 - - 22,189 18,682Interest expense- - - - 9,642 9,261 9,642 9,261Income from investment in an associate 6- - (38)- - -  (38)-Amortization and fair value adjustmentof derivative instruments4- - - - (1,029)(460) (1,029)(460)Income tax expense (recovery) - - - - 13,157 (12,573) 13,157 (12,573)              Income (loss) from continuing operations53,031 56,893 4,560 (1,306) (21,770)3,772 35,821 59,359Income from discontinuedoperations, net of tax 5- 140 -- -- - 140              Net income (loss)53,031 57,033 4,560 (1,306) (21,770)3,772 35,821 59,4991    The results include those of Avista (as part of the U.S. Segment) effective from the date of acquisition of May 3, 2012.2   EBITDA includes and Adjusted EBITDA excludes acquisition-related and other charges such as transaction costs related to acquisitions and certain retention and incentive payments related to the Avista and Mortgagebot acquisitions in the U.S. Segment, and severance costs in connection with cost-realignment initiatives in the Canadian Segment.3   EBITDA and Adjusted EBITDA are non-IFRS terms.  See Non-IFRS Financial Measures for a more complete description of these terms.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   D+H 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 periods.6    D+H's share of profit from Compushare, the minority investment purchased on April 24, 2012, reported as part of the U.S. Segment.OPERATING RESULTS - CANADIAN SEGMENTOperating results from the following service areas are included in the Canadian Segment:  (i) payment solutions; (ii) loan registration and recovery services; (iii) loan servicing; (iv) lending technology services in Canada; and (v) business service solutions.Overall, in the second quarter of 2012, all service areas in the Canadian Segment experienced growth in revenue other than the business service solutions.  This growth was partially offset by $3.2 million in severance related to cost-realignment initiatives incurred to benefit future periods. For a more detailed discussion on revenues and expenses in this segment, see the comments below.Revenue (in thousands of Canadian dollars, unaudited)   Quarter ended June 30,   Six months ended June 30,  2012201120122011Revenue - Canadian Segment     Payment solutions 1 $ 76,787  $ 74,258 $ 151,568  $ 148,469 Loan registration and recovery services 45,070 43,04183,024 79,415 Loan servicing 33,389 32,07367,500 65,345 Lending technology services 219,687 18,69434,235 34,193 Business service solutions 38,200 9,39016,828 19,582       $ 183,133  $ 177,456 $ 353,155  $ 347,0041    Reported as Programs to chequing account in prior years.2    Excludes revenues from Mortgagebot and Avista.3    Reported as Other in prior years.Revenue from payment solutions for the second quarter of 2012 was $76.8 million, an increase of $2.5 million, or 3.4%, compared to the same quarter in 2011. For the six months ended June 30, 2012, revenue was $151.6 million, an increase of $3.1 million, or 2.1%, compared to the same period in 2011.  Revenue for the second quarter of 2012 benefited from the positive impact of higher average order values attributable to program changes and product and service enhancements in the chequing and credit card programs, partially offset by volume declines in cheque orders. Revenue for the second quarter of 2011 was negatively impacted by the postal strike that occurred in the latter part of the quarter.  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 and is expected to be partially offset by the growth in service enhancements to the chequing and credit card programs. In recent periods, there has been greater volatility in order volumes, including higher personal order volume reductions.Loan registration and recovery services revenue for the second quarter of 2012 was  $45.1 million, an increase of $2.0 million, or 4.7%, compared to the same quarter in 2011.  For the first six months of  2012, revenue was $83.0 million, an increase of $3.6 million, or 4.5%, compared to the same period in 2011.  This increase was mainly due to higher transaction volumes in registration services reflecting a continuing recovery within the auto and auto lending markets.  Volumes in this area can be variable due to changes in the economy, changes in the auto and auto lending markets 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.  The increase in revenue related to registration volumes during the second quarter of 2012 was partially offset by an expected decline in recovery services related to ASSET, a counter-cyclical business, primarily due to decline in the automotive recovery services.Loan servicing programs revenue for the second quarter was $33.4 million, an increase of $1.3 million, or 4.1%, compared to the same quarter in 2011. For the first six months of 2012, revenue of $67.5 million increased by $2.2 million, or 3.3%, compared to the same period in 2011. Loan servicing programs consist of student loan administration services, the largest portion of revenues within this service area, and credit card servicing. Growth during the second quarter of 2012 was primarily attributable to an increase in professional fees combined with modestly higher volumes, partially offset by contractual price declines and a reduction in fees as a result of one of our customers integrating the servicing of their portfolio into that of another customer, all within the student loans program. Volumes in this area are expected to be relatively stable and modestly growing in the short-term. Activities related to cost management and improving delivery efficiency are being directed towards lowering the impact of reduced pricing and fees related to recent customer consolidation.  The increase in revenue in the student loan administration services was partially offset by a decrease in the credit card servicing area, where prior periods reflected specific customer initiatives that increased both revenues and expenses with minimal impact on profitability in those periods.Revenue from lending technology services related to the Canadian Segment for the second quarter of 2012 was $19.7 million, an increase of $1.0 million, or 5.3%, compared to the same quarter in 2011.  Revenue of $34.2 million for the first six months of 2012 was relatively consistent with the same period in 2011. The second quarter of 2012 benefited from higher mortgage origination fees due to strong housing and mortgage market activity compared to the same quarter in 2011. For the first six months of 2012, the increase due to market activity was offset by the decrease in origination fees driven by customer repatriation of certain services we historically performed for them as previously announced.  To a lesser extent, the decrease was also attributable to the changes announced by the Department of Finance on January 17, 2011 to tighten mortgage rules that became effective in the first quarter of 2011 that the Company believes contributed to an acceleration of origination activities in early 2011.  In general, due to the continued tightening of mortgage rules announced by the Department of Finance on June 21, 2012 that became effective in July 2012, industry analysts expect the Canadian housing market to continue to moderate with some potential for cooling of prices in major urban areas through 2012.Revenues from business service solutions in the second quarter of 2012 were $8.2 million, compared to $9.4 million for the same period in 2011.  In general, we expect to continue to experience some reductions in this area as a result of program repatriation by certain customers.  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 for the comparative periods presented.Expenses Total expenses for the Canadian Segment for the second quarter of 2012 were $135.9 million, an increase of $3.6 million, or 2.7%, compared to the same quarter in 2011.  Expenses for the first six months of 2012 were $270.4 million, an increase of $7.7 million, or 2.9%, compared to the same period in 2011.  For both periods, an increase in direct costs consistent with increase in revenues was partially offset by cost savings related to integration initiatives from prior periods.  Expenses for the second quarter 2012 for the Canadian Segment also included $3.2 million of severance costs related to cost-realignment initiatives that are not considered to be part of the normal-course operations. No such charges were recorded in the second quarter of 2011, however, the first six months of 2011 included $0.2 million of acquisition-related charges in connection with the acquisition of ASSET.Canadian Segment    Quarter ended June 30,     Six months ended June 30,  (in thousands of Canadian dollars, unaudited) 20122011 20122011        Employee compensation and benefits 1 $ 51,653  $ 50,306  $ 104,910  $ 100,687Non-compensation direct expenses 261,798 59,321 118,506 115,260Other operating expenses 322,456 22,665 46,982 46,790            $ 135,907  $ 132,292  $ 270,398  $ 262,7371   Employee compensation and benefits are net of apprenticeship tax credits and amounts capitalized related to software product development. Employee compensation expenses for the second quarter of 2012 included $3.2 million of severance related to cost-realignment initiatives.2    Non-compensation direct expenses include materials, shipping, selling expenses and third party direct disbursements.3   Other operating expenses include occupancy costs, communication costs, licensing fees, professional fees, contractor fees, transaction costs related to acquisitions of businesses and expenses not included in other categories. Other operating expenses are net of inter-segment management fees received from the U.S. segment.Employee compensation and benefits costs of $51.7 million for the second quarter of 2012 for the Canadian Segment were $1.3 million, or 2.7%, higher than in the same quarter in 2011, and for the first six months of 2012, costs of $104.9 million, increased by $4.2 million, or 4.2%, compared to the same period in 2011. As described earlier, employee compensation expenses for the second quarter of 2012 included $3.2 million of severances in relation to cost-realignment initiatives, partially offset by savings realized as a result of cost savings initiatives from prior periods and tax credits associated with an apprenticeship program.  Replacement of contract labour (recorded as other operating expenses) with full-time staff also contributed to the increase in expenses in the first six months of 2012 compared to the same period in 2011.Non-compensation direct expenses for the Canadian Segment were $61.8 million for the second quarter of 2012, an increase of $2.5 million, or 4.2%, compared to the same quarter in 2011. For the first six months of 2012, non-compensation direct expenses of $118.5 million, increased by $3.2 million, or 2.8%, compared to the same period in 2011.  In general, these expenses directionally change with revenue changes.Other operating expenses of $22.5 million for the second quarter of 2012 decreased by $0.2 million, or 0.9%, compared to the same quarter in 2011 due to replacement of contract labour with full-time staff. For the first half of the current year, other operating expenses of $47.0 million, increased by $0.2 million, or 0.4%, compared to the same period in 2011, primarily attributable to costs associated with technology transformation and integration activities. The increases were partially offset by the replacement of contract labour with full-time staff as discussed above and inter-segment management fees charged to the U.S. Segment for shared services.EBITDA and EBITDA MarginCanadian Segment EBITDA for the second quarter of 2012 was $47.2 million, an increase of $2.0 million, or 4.6%, compared to the same quarter in 2011, attributable to revenue growth from strong volumes in four service areas as well as savings realized from integration and transformation initiatives.  EBITDA for the first six months of 2012 of $82.8 million, was lower by 1.8% compared to EBITDA of $84.3 million for the same period in 2011 due to the impact of integration and program repatriation by the customers as previously described. Cost management activities are being directed towards lowering the impact of reduced pricing and fees as a result of the integration and repatriation by the customers as described above. Growth in EBITDA for the second quarter of 2012 in the Canadian Segment was partially offset by $3.2 million of severances in relation to cost realignment initiatives.EBITDA margin for the second quarter and the first six months of 2012 was 25.8% and 23.4% respectively, compared to 25.5% and 24.3% for the same periods in 2011.  Higher EBITDA margin in the second quarter of 2012 is attributable to the cost savings realized as a result of transformation and integration initiatives in the Canadian Segment.Adjusted EBITDA and Adjusted EBITDA MarginAdjusted EBITDA excludes: (i) acquisition-related expenses such as transaction costs, and certain retention and incentive costs incurred as part of the acquisitions; and (ii) other charges incurred in connection with cost-realignment initiatives which are not considered to be part of the normal course of operations. These items are excluded from the calculation of Adjusted EBITDA as they are not considered indicative of the underlying business performance for the period being reviewed and management believes that excluding these adjustments is more reflective of ongoing operating results.Canadian Segment Adjusted EBITDA of $50.4 million for the second quarter of 2012 was up 11.5% compared to $45.2 million for the same quarter in 2011 and excluded severance costs of $3.2 million incurred in connection with the cost-realignment initiatives.  Adjusted EBITDA margin for the second quarter of 2012 was 27.5% compared to 25.5% a year ago.For the six-month period ended June 30, 2012, Adjusted EBITDA of $85.9 million, was higher by 1.7% compared to $84.5 million for the same period in 2011.  Adjusted EBITDA for the first six months of 2011 excluded $0.2 million of acquisition-related charges incurred in connection with the ASSET acquisition.  Adjusted EBITDA margin of 24.3% for the first six months of 2012 was consistent with the first six months of 2011.Depreciation of Capital Assets and Amortization of Non-acquisition Intangibles Depreciation of capital assets and amortization of non-acquisition intangible assets of $7.0 million during the second quarter of 2012 for the Canadian Segment increased by $1.4 million, or 24.4%, compared to the second quarter of 2011.  For the first six months of 2012, depreciation and amortization was $13.5 million, compared to $11.1 million for the same period in 2011. The increases in both periods were related to capital additions.Amortization of Intangibles from AcquisitionsIn the Canadian Segment, amortization of acquisition-related intangibles for the second quarter of 2012 of $8.1 million was consistent with the same period in 2011. For the first six months of 2012, amortization of $16.3 million was consistent with the same period in 2011.OPERATING RESULTS - U.S. SEGMENTThe U.S. Segment consists of the operating results of Mortgagebot and Avista since their respective acquisition dates of April 12, 2011 and May 3, 2012.  Mortgagebot is a leading SaaS provider of mortgage point-of-sale offerings in the United States and provider of a range of consumer direct, loan officer, branch and call centre mortgage and consumer loan origination solutions.  Avista is a leading provider of SaaS mortgage loan origination software for over 150 community and regional banks, credit unions and mortgage bankers in the United States.  D+H's share of profit from the investment in an associate, Compushare, is also recorded as part the U.S. Segment, from the date of the purchase of the minority investment of April 24, 2012.RevenueU.S. Segment revenue for the second quarter of 2012 was $13.9 million, related to online mortgage origination revenue from Mortgagebot and Avista, compared to $7.7 million for the same period in 2011. Revenue for the first six months of 2012 was $25.5 million, compared to $7.7 million for the same period in 2011.  The increase in revenue in 2012 in the U.S. Segment is primarily attributable to strong growth in Mortgagebot, which comprised an entire quarter of revenue in the 2012 period, and the inclusion of Avista.ExpensesTotal expenses for the U.S. Segment for the second quarter of 2012 were $8.1 million, an increase of $3.3 million, or 70.3%, compared to the same quarter in 2011  and for the first six months of 2012 were $14.3 million, an increase of $8.0 million, compared to the same period in 2011, primarily due to the inclusion of the Avista expenses base effective from the date of acquisition of May 3, 2012. Expenses for the second quarter 2012 were impacted by $1.2 million of acquisition-related charges in connection with the Avista and Mortgagebot acquisitions, and for the same period in 2011, were impacted by $0.7 million of costs related to the Mortgagebot acquisition, as more fully described below.U.S. Segment    Quarter ended June 30,     Six months ended June 30,  (in thousands of Canadian dollars, unaudited) 20122011 20122011        Employee compensation and benefits 1 $ 4,659  $ 2,872  $ 8,429  $ 2,872Non-compensation direct expenses 279 255 536 255Other operating expenses 23,117 1,604 5,379 3,204            $ 8,055  $ 4,731  $ 14,344  $ 6,3311    Employee compensation and benefits expenses include retention and incentive costs related to the acquisitions of Avista and Mortgagebot.2   Other operating expenses include inter-segment management fees, occupancy costs, transaction costs related to acquisitions of businesses and expenses not included in other categories. Amounts reported for 2012 and 2011 include transaction costs incurred in connection with the acquisitions of Avista and Mortgagebot respectively.EBITDAU.S. Segment EBITDA for the second quarter of 2012 was $5.9 million, an increase of $2.9 million, compared to the same quarter in 2011, attributable to growth in the Mortgagebot business as well as the inclusion of Avista results effective from the date of acquisition. EBITDA for the second quarter of 2012 included acquisition-related costs of $1.2 million, consisting of transaction costs and retention expenses related to the acquisition of Avista as well as retention expenses for the Mortgagebot acquisition. EBITDA for the first six months of 2012 in the U.S. Segment was $11.2 million, compared to $1.3 million for the same period in 2011.Adjusted EBITDAU.S. Segment Adjusted EBITDA of $7.1 million for the second quarter of 2012 excluded acquisition-related expenses of $1.2 million described above.  For the same quarter in 2011, $0.7 million of transaction costs and retention expenses related to the acquisition of Mortgagebot were excluded from EBITDA, to arrive at Adjusted EBITDA. Adjusted EBITDA for the first six months of 2012 of $13.1 million excluded $1.9 million of acquisition-related costs, compared to an Adjusted EBITDA of $3.6 million for the same period in 2011, which excluded acquisition-related charges of $2.3 million.Depreciation of Capital Assets and Amortization of Non-acquisition IntangiblesDepreciation of capital assets and amortization of non-acquisition intangible assets during the second quarter of 2012 for the U.S. Segment was $0.4 million, and for the first six months of 2012 was $0.7 million, compared to $0.2 million for the second quarter and the first six months of 2011.Amortization of Intangibles from AcquisitionsAmortization of intangibles from acquisitions for the second quarter of 2012 for the U.S. Segment was $3.1 million, including intangibles related to the acquisition of Avista, compared to $2.4 million for the same quarter in 2011 which included intangibles from the acquisition of Mortgagebot.  For the six months ended June 30, 2012, amortization was $5.9 million, compared to $2.4 million for the same period in 2011.OPERATING RESULTS - CORPORATE The following items are reported as part of Corporate: (i) interest expense; (ii) amortization and fair value adjustments of derivative instruments; and (iii) income tax expense (recovery).Interest ExpenseInterest expense for the second quarter of 2012 decreased by $0.5 million compared to the same quarter in 2011 as the average debt balances in 2011 were higher due to the Mortgagebot acquisition in early April 2011. The average debt balance in 2012 was lower due to debt repayments.  Interest expense in the second quarter of 2012 also benefited from favourable pricing on the credit facility, partially offset by increased borrowings in relation to the acquisition of Avista.  For the first six months of 2012, interest expense was higher by $0.4 million, compared to the same period in 2011.Amortization and Fair Value Adjustment of Derivative InstrumentsInterest-rate swapsCompared to a net unrealized loss of $1.2 million in the second quarter of 2011, a net unrealized loss of $0.6 million  on interest-rate swaps was recognized in the second quarter of 2012 reflecting fair value adjustments related to changes in market interest rates at June 30, 2012 compared to March 31, 2012.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.  D+H has historically held its derivative contracts to maturity.Income Tax Expense (Recovery)An income tax expense of $8.2 million was recorded in the second quarter of 2012, compared to a tax expense of $1.7 million for the second quarter of 2011, and included tax expense related to the utilization of loss carry-forwards and book income not taxable until a future period.  The income tax expense in the second quarter of 2011 was offset by a tax recovery due to the recognition of a previously unrecognized deferred tax asset related to losses within certain US subsidiaries that was recognized in connection with the acquisition of Mortgagebot.Tax expense for the first six months of 2012 was $13.2 million, attributable to the utilization of loss carry-forwards and book income not taxable until a future period.  Tax recoveries for the first six months of 2011 of $12.6 million, included the recognition of a previously unrecognized deferred tax asset related to intangible assets which are expected to be realized as a consequence of the corporate conversion in the first quarter of 2011.  Additional recoveries related to the corporate conversion were also recognized in the first quarter of 2011, as well as the recovery related to the recognition of a previously unrecognized deferred tax asset related to certain losses within US subsidiaries that was recognized in the second quarter of 2011 in connection with the acquisition of Mortgagebot.Due to the corporate structure and certain available tax losses, the Company does not expect to pay any significant cash taxes until after 2013.EIGHT QUARTER CONSOLIDATED STATEMENT OF INCOME - SUMMARY1(in thousands of Canadian dollars, except per share amounts, unaudited)                2012  2011  2010       Q2  Q1  Q4  Q3  Q2  Q1  Q4  Q3              Revenue $ 197,068  $ 181,613 $ 183,777 $ 186,275 $ 185,120 $ 169,548 $ 162,474 $ 164,319Expenses2143,962 140,780138,202140,050137,023132,045133,018128,147             EBITDA 2, 353,106 40,83345,57546,22548,09737,50329,45636,172Adjustments:          Acquisition-related and other charges 2    4,378 7376376107071,7996,2682,160Adjusted EBITDA 3     $ 57,484  $ 41,570 $ 46,212 $ 46,835 $ 48,804 $ 39,302 $ 35,724 $ 38,332             EBITDA 2, 3     $ 53,106  $ 40,833 $ 45,575 $ 46,225 $ 48,097 $ 37,503 $ 29,456 $ 36,172Depreciation of capital assets and amortization        of non-acquisition intangibles7,360 6,8376,7495,8205,8275,5045,6435,030Amortization of intangibles from acquisitions11,250 10,93911,00911,04010,5908,0927,1086,925Interest expense4,821 4,8214,9094,7925,2723,9893,4053,517Income from investment in an associate(38)-------Amortization and fair value adjustment of        derivative instruments4616 (1,645)(145)3,9911,227(1,687)(2,796)1,566Income tax expense (recovery)8,210 4,9477,6845,5221,717(14,290)3,448(1,447)             Income from continuing operations20,887 14,93415,36915,06023,46435,89512,64820,581Income (loss) from discontinued operations, net of tax 5- ----140(620)(1,886)             Net income $ 20,887  $ 14,934 $ 15,369 $ 15,060 $ 23,464 $ 36,035 $ 12,028 $ 18,695             Adjustments:           Non-cash items:            Amortization of intangibles from acquisitions $ 11,250  $ 10,939 $ 11,009 $ 11,040 $ 10,590 $ 8,092    Amortization and fair value adjustment ofderivative instruments 4616 (1,645)(145)3,9911,227(1,687)   Other items of note:            Acquisition-related and other charges 24,378 7376376107071,799    Discontinued operations, net of tax 5- ----(140)   Tax effect of above adjustments (excludingdiscontinued operations) 6(4,758)(2,998)(3,391)(4,465)(3,256)(2,133)   Tax effect of corporate conversion and acquisitions 7  - -2,080-(3,628)(19,209)               Adjusted net income3   $ 32,373  $ 21,967 $ 25,559 $ 26,236 $ 29,104 $ 22,757                                         Adjusted net income per share, basic and diluted 3, 8 $ 0.5465  $ 0.3709 $ 0.4315 $ 0.4429 $ 0.4974 $ 0.4275 n/m  n/m Income from continuing operations per share,basic and diluted 8 $ 0.3526  $ 0.2521 $ 0.2595 $ 0.2542 $ 0.4010 $ 0.6743 $ 0.2376 $ 0.3866Net income per share, basic and diluted 8 $ 0.3526  $ 0.2521 $ 0.2595 $ 0.2542 $ 0.4010 $ 0.6769 $ 0.2260 $ 0.3512             n/m = not measurable1    Results include those of Avista, effective from the date of acquisition of May 3, 2012, Mortgagebot effective from the date of acquisition of April 12, 2011 and ASSET, effective from the date of acquisition of January 18, 2011.     2    Expenses include acquisition-related and other charges including transaction costs incurred in connection with acquisition of businesses as well as certain retention and incentive costs related to the Avista and Mortgagebot acquisitions. For the second quarter of 2012, acquisition-related and other charges also included severance costs related to cost-realignment initiatives.     3   EBITDA, Adjusted 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   D+H 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    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 and other charges.     7    Adjustments for the first and second quarters of 2011 included non-cash income tax recoveries recorded in connection with the conversion to a corporation and acquisitions.  Adjustments for the fourth quarter of 2011 related to de-recognition of previously recognized tax attributes.     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.  The options outstanding are not dilutive for the periods presented.D+H 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, specifically the housing and mortgage markets and the auto lending markets, 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. EBITDA is impacted by acquisition-related and other charges during the quarters, including transaction and retention costs related to acquisitions as well as other charges attributable to cost-realignment initiatives not considered to be incurred in the normal course of operations. Adjusted EBITDA removes the impacts of these charges as these are not indicative of the underlying business performance and management believes that excluding these items is more reflective of ongoing operating results. The acquisitions of ASSET on January 18, 2011, Mortgagebot on April 12, 2011, and Avista on May 3, 2012 have 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, D+H began 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 non-cash items such as fair value adjustments of interest-rate swaps, amortization of intangibles from acquisitions, acquisition-related and other charges and changes in other non-cash tax items.CONSOLIDATED 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 disclosure provides useful additional information related to the cash flows of the Corporation, repayment of debt and other investing activities.Consolidated Summary of Cash Flows   (in thousands of Canadian dollars, unaudited)          Quarter ended June 30,     Six months ended June 30,        20122011 20122011             Cash and cash equivalents provided by (used in):                      OPERATING ACTIVITIES          Income from continuing operations       $ 20,887  $ 23,464  $ 35,821  $ 59,359 Depreciation and amortization of assets      18,610 16,417 36,386 30,013 Amortization and fair value adjustment of derivative instruments      616 1,227 (1,029)(460) Share of profit of investment in associate      (38)- (38)- Difference in interest expense and cash interest paid      335 929 935 733 Non-cash income tax and options expenses      8,107 1,766 14,972 (12,524)                   48,517 43,803 87,047 77,121 Increase in non-cash working capital items      (12,669)(15,129) (27,309)(30,803) Changes in other operating assets and liabilities anddiscontinued operations  348 1,233 1,031 1,337             Net cash from operating activities     36,196 29,907 60,769 47,655                         FINANCING ACTIVITIES           Net change in long-term indebtedness     35,561 103,505 40,561 184,505 Issuance costs, equity and debt     (111)(8,492) (111)(9,797) Proceeds from the issuance of shares     - 121,800 - 121,800 Distributions and dividends paid during the period       (18,362)(17,770) (36,724)(33,916)                         Net cash from financing activities     17,088 199,043 3,726 262,592             INVESTING ACTIVITIES           Capital expenditures    (6,130)(7,930) (16,666)(17,651) Acquisition of investment in associate    (10,058)- (10,058)- Acquisition of subsidiaries     (37,946)(222,259) (37,946)(292,993)                     Net cash used in investing activities       (54,134)(230,189) (64,670)(310,644)                         Decrease in cash and cash equivalents for the period     (850)(1,239) (175)(397) Cash and cash equivalents, beginning of period     2,888 1,986 2,213 1,144                     Cash and cash equivalents, end of period      $ 2,038  $ 747  $ 2,038  $ 747             Consolidated Capital Expenditures Consolidated capital expenditures were $6.1 million for the second quarter of 2012, $1.8 million lower compared to the same period of 2011. For the six months ended June 30, 2012, capital expenditures were $16.7 million, a decrease of $1.0 million compared to the same period in 2011. Higher capital expenditures in 2011 reflected timing of expenditures as well as integration and upgrade activities, and investing in the building of technology products and capability.DividendsDuring the second quarter of 2012, D+H paid dividends of $0.31 per share to its shareholders.  For the same quarter in 2011, $0.30 per share was paid to shareholders.  During the first six months of 2012, D+H paid $0.62 per share to its shareholders, and for the same period in 2011, $0.6033 per share was paid.  The 2011 payment comprised of a $0.1533 per unit distribution that was paid on January 31, 2011 (declared on December 31, 2010 when D+H was an income trust), a $0.15 per share special dividend paid on March 31, 2011 and a $0.30 per share dividend paid on June 30, 2011.Shares OutstandingAs at June 30, 2012, and August 8, 2012, common shares outstanding were 59,233,373, the same as at June 30, 2011 and December 31, 2011.Consolidated Changes in Non-Cash Working Capital and Other Items (in thousands of Canadian dollars, unaudited)     Quarter ended June 30,    Six months ended June 30,    2012201120122011       Increase in non-cash working      capital items $ (12,669)$ (15,129)$ (27,309)$ (30,803) Decrease in other operating assets and     liabilities and discontinued operations 348 1,2331,031 1,337       Increase in non-cash working capital and     other items $ (12,321)$ (13,896)$ (26,278)$ (29,466)       The net increase in non-cash working capital in the second quarter of 2012 primarily related to an increase in trade receivables attributable to higher revenues in the quarter, partially offset by an increase in accrued payables due to normal course timing differences. The net increase in the second quarter in 2011 was additionally impacted by higher receivables as a result of deferred collections due to the postal strike which occured in the latter part of the quarter. The net increase in non-cash working capital for the first six months of 2012 related to an increase in trade receivables combined with a reduction in accrued payables reflecting payments during the period.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.Consolidated Cash Balances and Long-Term IndebtednessAt June 30, 2012, cash and cash equivalents totalled $2.0 million, compared to $2.2 million at December 31, 2011.As at June 30, 2012, the Company had $499.1 million of committed funds and $187.7 million of additional uncommitted arrangements available subject to the prior approval of the relevant lenders with any fees, spreads and other additional terms to be negotiated at that time. Total committed funds consisted of $355.0 million under the credit facility and $144.1 million from bonds as described below.  Total uncommitted funds consisted of $150.0 million under the credit facility and $37.7 million from the bonds, also as described below.The long-term indebtedness is recorded on the Consolidated Statement of Financial Position, net of unamortized deferred financing fees. The long-term indebtedness as at June 30, 2012, before deducting unamortized deferred finance fees of $5.6 million, was $392.7 million, compared to $352.1 million at December 31, 2011.  During the second quarter of 2012, the Business drew $50.6 million on its credit facilities to fund the Compushare investment and the Avista acquisition in April and May 2012, respectively, and made net repayments of $15.0 million.The long-term indebtedness as at June 30, 2012 included drawings under a Seventh Amended and Restated Credit Agreement ("Credit Agreement") dated April 12, 2011 of $248.6 million.  Total committed senior secured credit facilities under this Credit Agreement as at June 30, 2012 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 $106.4 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 D+H 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.As at June 30, 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 ("Note Purchase Agreement") dated April 12, 2011, 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 $30.0 million Bond at 5.17%, both maturing on June 30, 2017.  In addition, the Business entered into a Note Purchase and Private Shelf Agreement ("Prudential Note Purchase Agreement") pursuant to which the Company issued US$ 63.0 million (C$ 64.1 million) of senior secured guaranteed notes at 5.59%, maturing on April 12, 2021 to partially fund the acquisition of Mortgagebot.As at June 30, 2012, the Credit Agreement provides for an additional uncommitted credit arrangement of up to $150.0 million and the Prudential Note Purchase Agreement provides for an additional uncommitted shelf of up to US$ 37.0 million with the use of the shelf subject to the prior approval of the relevant lenders with any fees, spreads and other additional terms to be negotiated at that time.Effective July 5, 2012, the following changes were made to the long term indebtedness: (i) the Credit Agreement was amended in accordance with the First Amending Agreement to the Seventh Amended and Restated Credit Agreement ("Credit Agreement Amendment") to extend the maturity date by one year to April 12, 2017 and include more favourable pricing as well as amendments to certain covenants: (ii) the Note Purchase Agreement was amended in accordance with the First Amendment to Second Amended And Restated Note Purchase and Private Shelf Agreement ("Amendment to Note Purchase Agreement") to make consequential changes to certain covenants: (iii) the Prudential Note Purchase Agreement was amended in accordance with the First Amendment To Note Purchase and Private Shelf Agreement ("Amendment to Prudential Note Purchase Agreement") to increase the uncommitted shelf per the Prudential Note Purchase Agreement by US$ 50.0 million from US$ 37.0 million to US$ 87.0 million, amend certain covenants and issue US$ 16.5 million of senior secured guaranteed notes at 3.94%, maturing on June 30, 2022 reducing the available shelf to US$ 70.5 million: and (iv) enter into a new Note Purchase and Private Shelf Agreement, ranking equally in all material respects with the Credit Agreement and Prudential Note Purchase Agreement, pursuant to which the Company issued US$ 15.0 million of senior secured guaranteed notes at 3.94% maturing June 30, 2022 leaving an additional uncommitted shelf of up to US$ 60.0 million with the use of the shelf subject to the prior approval of the relevant lenders with any fees, spreads and other additional items to be negotiated at that time ("NY Life Note Purchase Agreement").The aggregate proceeds from the US$ 31.5 million of senior secured guaranteed notes issued pursuant to the Amendment to Prudential Note Purchase Agreement and NY Life Note Purchase Agreement were used to refinance amounts drawn under the Credit Agreement in the second quarter of 2012, to fund the Avista acquisition and for the Compushare investment.The Credit Agreement, Credit Agreement Amendment, Note Purchase Agreement, Amendment to Note Purchase Agreement, Prudential Note Purchase Agreement, Amendment to Prudential Note Purchase Agreement and NY Life Note Purchase Agreement are available at www.sedar.com.The Company has historically hedged against increases in market interest rates on certain of its debt by utilizing interest-rate swaps and by issuing fixed rate long-term bonds as described above.  As at June 30, 2012, the average effective interest rate on the Corporation's total indebtedness was approximately 4.6%.Hedge ContractsInterest-rate swapsIn respect of interest-rate swap contracts with its lenders, as of June 30, 2012, the Company's borrowing rates on 38.2% 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 $ - $ 8642.720%March 18, 201525,000-1,0782.940%March 18, 201725,000-2,0653.350%March 20, 201720,000-1,6673.366%       $ 95,000 $ - $ 5,674 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 June 30, 2012, the Company's long-term bank indebtedness was subject to bankers' acceptance fees of 1.75% over the applicable BA rate and prime rate spreads of 0.75% over the prime rate.As at June 30, 2012, the Company would have to pay the fair value of $5.7 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 contracts The Company enters into foreign exchange contracts to fix foreign exchange rates on its foreign currency transactions, which are relatively minor.   As at June 30, 2012, the Company had foreign exchange forward contracts aggregating US $5.0 million with two of its lenders, as follows:(in thousands of Canadian dollars, unless otherwise noted, unaudited)   Fair value of foreign exchange contracts Maturity date Notional  amount (USD)AssetLiabilityExchange rate     September 14, 2012 $ 3,000 $ 45 $ -1.0347September 14, 20122,0007-1.0231       $ 5,000 $ 52 $ -  Under these contracts, the Company is required to deliver the agreed US 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 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.Normal Course Issuer Bid ("NCIB")On August 8, 2012, D+H's Board of Directors approved the undertaking of a new normal course issuer bid ("NCIB"), pursuant to which the Corporation would be authorized to purchase up to approximately 3% of the Corporation's issued and outstanding common shares as at August 8, 2012, over a twelve-month period, subject to the approval of the Toronto Stock Exchange ("TSX").Purchases will be made by the Company in accordance with the requirements of the TSX and the price which the Company will pay for any such common shares will be the market price of any such common shares at the time of acquisition, or such other price as may be permitted by the TSX. Any tendered Shares taken up and paid for by the Company will be cancelled.The Company intends to fund these purchases through available cash. D+H believes that the market price of its common shares, from time to time, may not reflect their underlying value based on the Company's business and strong financial position. As a result, D+H believes that an investment in its outstanding common shares represents an attractive investment and a desirable use of a portion of its corporate funds.BUSINESS RISKS  A comprehensive discussion of the risks that impact the Business can be found on the Corporation's most recently filed Annual Information Form and the most recently filed annual MD&A, available on SEDAR at www.sedar.com.  Risks and uncertainties related to the Corporation have not changed since the filing of the 2011 annual MD&A and the 2011 Annual Information Form.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. In April and May 2012, respectively, D+H announced the completion of the minority interest investment in Compushare, and the acquisition of Avista.  These acquisitions continue to strengthen our ability to deliver on our goal of being a leading solutions provider to the North American financial services industry, provide further revenue diversification and support our long-term strategy.Going forward, we will focus on executing our organic growth initiatives and continuing to diligently identify efficiency opportunities to better serve customers as our businesses evolve.  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 through a combination of organic initiatives, partnering with third parties and by way of selective acquisitions. Our organic initiatives are many and include: (i) continuing to expand our customer base of SaaS mortgage POS and LOS offerings in the U.S.; (ii) expansion into adjacent cloud computer based offerings in the U.S. market; (iii) the ongoing advancement of payment solutions through growth in value-added services to credit card and chequing account customers; (iv) the expansion of our current offerings within the mortgage, auto, personal, student lending, commercial and leasing markets; and (v) selling and delivering our lending technology solutions to new customers.Our acquisition strategy focuses on acquiring companies that extend or add to the services that we provide within the financial services marketplace, with a bias for companies that have strong SaaS cloud capabilities, defensible business models, growing revenues, and capable management and offer an extension to our existing businesses.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 markets; (ii) timing differences and variability in professional services work; and (iii) fees and expenses associated with acquisitions and related integration activities.  Within the Canadian Segment, the Company believes that revenues from lending technology solutions in the second half of 2012 will be impacted by the previously announced customer repatriation, more moderate housing prices and lower real estate activity compared to the previous year.  In the U.S. Segment, a slight recovery in the U.S. housing market is expected to offset a reduction in refinancing activity in the second half of 2012.For 2012, we anticipate that our capital spending will be approximately $35 million, although additional spending will be incurred in support of new growth opportunities if and as they arise.As described earlier, the Corporation does not expect to pay any significant cash taxes until after 2013.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, unaudited) June 30, 2012 December 31, 2011       ASSETS      Cash and cash equivalents  $ 2,038   $ 2,213 Trade and other receivables 96,216  79,753 Prepayments  13,434  12,821 Inventories 4,464  4,946 Derivative assets held for risk management  52  126       Total current assets  116,204  99,859       Deferred tax assets 32,553  39,987 Property, plant and equipment 31,879  32,169 Intangible assets 444,708  444,575 Goodwill 693,640  666,735 Investment in associate 10,097  -       Total non-current assets  1,212,877  1,183,466 Total assets   $ 1,329,081   $ 1,283,325       LIABILITIES      Trade payables and accrued liabilities  $ 87,265   $ 93,131 Deferred revenue 12,218  10,216 Provisions 520  3,480 Current tax liabilities  1,424  -       Total current liabilities  101,427  106,827       Deferred revenue  9,445  9,492 Derivative liabilities held for risk management 5,674  6,703 Loans and borrowings 387,064  345,921 Deferred tax liabilities 108,621  97,350 Other long-term liabilities 7,743  7,334       Total non-current liabilities  518,547  466,800 Total liabilities  619,974  573,627       EQUITY      Share capital 673,515  673,163 Retained earnings 26,546  27,449 Accumulated other comprehensive income 9,046  9,086 Total equity 709,107  709,698             Total liabilities and equity   $ 1,329,081   $ 1,283,325Consolidated Statements of Income(in thousands of Canadian dollars, except per share amounts, unaudited)    Three months ended   Six months ended  June 30, 2012 June 30, 2011 June 30, 2012 June 30, 2011Revenue $ 197,068   $ 185,120  $ 378,681  $ 354,668Employee compensation and benefits56,312   53,178  113,339  103,559Other expenses87,650  83,845 171,403  165,509Income from operating activities before depreciation and amortization53,106  48,097 93,939  85,600 Depreciation of property, plant and equipment2,686  2,595  4,951   4,934Amortization of intangible assets15,924  13,822 31,435  25,079Income from operating activities 34,496  31,680 57,553  55,587         Finance expenses:         Amortization and fair value adjustment of derivative instruments616        1,227 (1,029) (460) Interest expense 4,821  5,272 9,642  9,261Income from investment in an associate(38) - (38) -Income from continuing operations before income tax29,097  25,181 48,978  46,786Income tax expense (recovery) 8,210  1,717 13,157  (12,573)Income from continuing operations 20,887  23,464 35,821  59,359         Income from discontinued operations net of taxes-  - -  140Net income $ 20,887  $ 23,464  $ 35,821  $ 59,499         Net income per share from continuing operations, basic and diluted  $ 0.3526  $ 0.4010  $ 0.6047  $ 1.0622Net income per share from discontinued operations, basic and diluted $ -   $ -  $ -   $ 0.0025Net income per share, basic and diluted  $ 0.3526   $ 0.4010  $ 0.6047  $ 1.0647Consolidated Statements of Comprehensive Income Three months ended Six months ended(in thousands of Canadian dollars, unaudited) June 30, 2012June 30, 2011 June 30, 2012June 30, 2011       Net income   $ 20,887  $ 23,464  $ 35,821  $ 59,499       Cash flow hedges:        Amortization of mark-to-market adjustment of derivative instruments  -  34  -  86 Effective portion of changes in fair value  (244)- (74)- Net amount transferred to profit or loss  196 - (85)-Foreign currency translation  3,056 667 119 667Total comprehensive income  $ 23,895  $ 24,165  $ 35,781  $ 60,252Consolidated Statements of Changes in Equity (in thousands of Canadian dollars, unaudited)      Three months ended June 30, 2012        Accumulated other comprehensiveincome (loss)   Share capitalForeign currencytranslationreserveHedgingreserveRetainedearnings /(deficit)Total equity      Balance at April 1, 2012 $ 673,352 $ 6,389 $ (351) $ 24,021 $ 703,411Net income for the period---20,88720,887Cash flow hedges--(48)-(48)Foreign currency translation-3,056--3,056Share issuance-----Dividends---(18,362)(18,362)Options 163---163Balance at June 30, 2012 $ 673,515 $ 9,445 $ (399) $ 26,546 $ 709,107            (in thousands of Canadian dollars, unaudited)      Three months ended June 30, 2011        Accumulated other comprehensiveincome (loss)   Share capitalForeign currencytranslationreserveHedgingreserveRetainedearnings /(deficit)Total equity      Balance at April 1, 2011 $ 555,236 $ - $ (34) $ 28,050 $ 583,252Net income for the period---23,46423,464Amortization of mark-to-      market adjustment of       derivative  instruments--34-34Foreign currency translation-667--667Share issuance117,617---117,617Dividends---(17,770)(17,770)Options 49---49Balance at June 30, 2011 $ 672,902 $ 667 $ - $ 33,744 $ 707,313          (in thousands of Canadian dollars, unaudited)      Six months ended June 30, 2012       Accumulated other comprehensiveincome (loss)   Share capitalForeign currencytranslationreserveHedgingreserveRetainedearnings /(deficit)Total equity      Balance at January 1, 2012 $ 673,163 $ 9,326 $ (240) $ 27,449 $ 709,698Net income for the period---35,82135,821Cash flow hedges--(159)-(159)Foreign currency translation-119--119Share issuance-----Dividends---(36,724)(36,724)Options 352---352Balance at June 30, 2012 $ 673,515 $ 9,445 $ (399) $ 26,546 $ 709,107            (in thousands of Canadian dollars, unaudited)      Six months ended June 30, 2011        Accumulated other comprehensiveincome (loss)   Share capitalForeign currencytranslationreserveHedgingreserveRetainedearnings /(deficit)Total equity      Balance at January 1, 2011 $ 595,859 $ - $ (86) $ (40,623) $ 555,150Net income for the period---59,49959,499Amortization of mark-to-      market adjustment of       derivative instruments--86-86Foreign currency translationCapital reduction pursuant - 667- - 667 to the Arrangement(40,623)--40,623-Share issuance117,617---117,617Dividends---(25,755)(25,755)Options 49---49Balance at June 30, 2011 $ 672,902 $ 667 $ - $ 33,744 $ 707,313Consolidated Statements of Cash Flows         Three months ended     Six months ended (in thousands of Canadian dollars, unaudited)  June 30, 2012 June 30, 2011 June 30, 2012 June 30, 2011            Cash and cash equivalents provided by (used in):                    OPERATING ACTIVITIES         Income from continuing operations    $ 20,887  $ 23,464  $ 35,821   $ 59,359Adjustments for:           Depreciation of property, plant  and equipment   2,686  2,595 4,951  4,934 Amortization of intangible assets  15,924  13,822 31,435  25,079 Amortization of mark-to-market adjustment of derivative instruments   -  34 -  86 Fair value adjustment of derivative instruments   616  1,193 (1,029) (546) Interest expense  4,821  5,272 9,642  9,261 Deferred taxes   6,861  1,717 13,196  (12,573) Current taxes   1,083  - 1,424  - Options expense   163  49 352  49 Changes in non-cash working capital items  (12,669) (15,129) (27,309) (30,803) Changes in other operating assets and liabilities  348  1,233 1,031  1,148 Share of profit of associate, net of income tax  (38) - (38) -Cash generated from operating activities   40,682  34,250 69,476  55,994 Interest paid   (4,486) (4,343) (8,707) (8,528) Cash flows from discontinued operations   - - -  189Net cash from operating activities   36,196  29,907 60,769  47,655            FINANCING ACTIVITIES          Repayment of long-term indebtedness   (25,000) (136,000) (30,000) (217,000)Proceeds from long-term indebtedness   60,561  239,505 70,561  401,505Payment of issuance costs of long-term indebtedness   (111) (3,031) (111) (4,336)Proceeds from issuance of shares   -  121,800 -  121,800Payment of issuance costs of shares   -  (5,461) -  (5,461)Dividends paid   (18,362) (17,770) (36,724) (33,916)Net cash from financing activities   17,088  199,043 3,726  262,592                        INVESTING ACTIVITIES          Acquisition of property, plant and equipment   (512) (1,137) (4,197) (3,947)Acquisition of intangible assets   (5,618) (6,793) (12,469) (13,704)Acquisition of subsidiaries   (37,946) (222,259) (37,946) (292,993)Acquisition of investment in associate  (10,058) - (10,058) -Net cash used in investing activities   (54,134) (230,189) (64,670) (310,644)            Decrease in cash and cash equivalents for the period   (850) (1,239) (175) (397)Cash and cash equivalents, beginning of period 2,888  1,986 2,213  1,144Cash and cash equivalents, end of period    $ 2,038   $ 747  $ 2,038   $ 747About D+HD+H is a leading solutions provider to the North American financial services marketplace, providing innovative technology-based programs, products and business services tailored to our customers' needs. A deeply rooted tradition of developing and nurturing valued customer relationships and a broad set of integrated solutions position D+H for dynamic, ongoing growth in our chosen markets. In 2011, D+H rose to 41st on the FinTech 100, a ranking of the top technology providers to the global financial services industry.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.           SOURCE: Davis + Henderson CorporationFor further information: Brian Kyle, Executive Vice President and Chief Financial Officer, Davis + Henderson Corporation, (416) 696-7700, investorrelations@dhltd.com or visit our website at www.dhltd.com