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Press release from GlobeNewswire (a Nasdaq OMX company)

FirstService Reports Third Quarter Results

Wednesday, October 24, 2012

FirstService Reports Third Quarter Results04:00 EDT Wednesday, October 24, 2012Operating highlights:  Three months endedNine months ended September 30September 30 2012 2011 2012 2011      Revenues (millions) $589.8   $585.4  $1,673.0  $1,629.3 Adjusted EBITDA (millions) (note 1) 48.8  47.6  100.8  117.1 Adjusted EPS (note 2) 0.60  0.61  0.94  1.29  TORONTO, Oct. 24, 2012 (GLOBE NEWSWIRE) -- FirstService Corporation (TSX:FSV) (Nasdaq:FSRV) (TSX:FSV.PR.U) today reported results for its third quarter ended September 30, 2012. All amounts are in US dollars. Revenues for the third quarter were $589.8 million, a 1% increase relative to the same quarter in the prior year, Adjusted EBITDA (note 1) was $48.8 million, compared to $47.6 million and Adjusted EPS (note 2) was $0.60, versus $0.61 reported in the prior year quarter. GAAP EPS was $0.00 per share in the quarter, versus $0.17 for the same quarter a year ago. For the nine months ended September 30, 2012, revenues were $1.7 billion, a 3% increase relative to the comparable prior year period, Adjusted EBITDA was $100.8 million relative to $117.1 million and Adjusted EPS was $0.94, versus $1.29 reported in the prior year period. GAAP EPS for the nine month period was a loss of $0.27, compared to a loss of $0.05 in the prior year period. "Third quarter results reflect another quarter of strong year over year gains in revenues and EBITDA at Colliers International while FirstService Residential posted another quarter of solid growth. As expected, continued weakness in foreclosure services negatively impacted results in Property Services," said Jay S. Hennick, Founder and Chief Executive Officer of FirstService. "As long as market conditions remain stable, we expect to finish the year with overall results comparable to last year," he concluded.About FirstService Corporation FirstService Corporation is a global leader in the rapidly growing real estate services sector, providing a variety of services in commercial real estate, residential property management and property services. As one of the largest property managers in the world, FirstService manages more than 2.3 billion square feet of residential and commercial properties through its three industry-leading service platforms: Colliers International, one of the largest global players in commercial real estate; FirstService Residential Management, the largest manager of residential communities in North America; and Property Services, one of North America's largest providers of property-related services delivered through franchise and contractor networks. FirstService generates over $2.3 billion in annual revenues and has more than 23,000 employees worldwide. More information about FirstService is available at www.firstservice.com.Segmented Quarterly Results Commercial Real Estate Services revenues totalled $295.6 million for the third quarter, up 17% relative to the prior year quarter. Revenue growth was comprised of 9% internal growth measured in local currencies, a 2% unfavourable impact from foreign currency translation and 10% growth from the recent Colliers UK acquisition. Internal growth was driven by year over year increases in lease brokerage and appraisal, particularly in the Americas region. Adjusted EBITDA was $20.3 million, up from $9.0 million reported in the prior year quarter. Residential Property Management revenues were $226.6 million for the third quarter, up 9% relative to the prior year quarter. Revenue growth was comprised of 6% internal growth and 3% from recent acquisitions. Adjusted EBITDA for the quarter was $21.5 million compared to $20.9 million in the prior year period. Property Services revenues totalled $67.4 million, down 46% from $123.8 million in the prior year period, with a 63% reduction in revenues in the property preservation and distressed asset management operations. Revenues declined slightly at the Company's property services franchise brands. Adjusted EBITDA for the third quarter was $9.4 million versus $19.6 million in the prior year quarter. Included in expenses for the current quarter were $2.0 million of costs associated with transitioning out a large distressed asset management contract in August 2012. Corporate costs were $3.2 million in the third quarter, relative to $2.3 million in the prior year period, with the increase primarily attributable to a non-cash balance sheet foreign currency translation loss.Stock Repurchases During the month of September 2012, the Company purchased 246,000 Preferred Shares on the open market under its Normal Course Issuer Bid ("NCIB") at an average price of $25.25 per share. All shares purchased under the NCIB were cancelled. The Company is authorized to repurchase up to an additional 2,550,000 Subordinate Voting Shares and 146,500 Preferred Shares under its NCIB, which expires on June 6, 2013.Conference Call FirstService will be holding a conference call on Wednesday, October 24, 2012 at 11:00 a.m. Eastern Time to discuss the quarter's results. The call will be simultaneously web cast and can be accessed live or after the call at www.firstservice.com in the "Investors / Newsroom" section.Forward-looking Statements This press release includes or may include forward-looking statements. Forward-looking statements include the Company's financial performance outlook and statements regarding goals, beliefs, strategies, objectives, plans or current expectations. These statements involve known and unknown risks, uncertainties and other factors which may cause the actual results to be materially different from any future results, performance or achievements contemplated in the forward-looking statements. Such factors include: (i) general economic and business conditions, which will, among other things, impact demand for the Company's services and the cost of providing services; (ii) the ability of the Company to implement its business strategy, including the Company's ability to acquire suitable acquisition candidates on acceptable terms and successfully integrate newly acquired businesses with its existing businesses; (iii) changes in or the failure to comply with government regulations; and (iv) other factors which are described in the Company's filings with applicable Canadian and United States securities regulatory authorities (which factors are adopted herein). Summary financial information is provided in this press release. This press release should be read in conjunction with the Company's quarterly financial statements and MD&A to be made available on SEDAR at www.sedar.com.Notes 1. Reconciliation of net earnings to Adjusted EBITDA: Adjusted EBITDA is defined as net earnings, adjusted to exclude: (i) income tax; (ii) other expense (income); (iii) interest expense; (iv) depreciation and amortization; (v) acquisition-related items; (vi) stock-based compensation expense and (vii) reorganization charges. We use Adjusted EBITDA to evaluate our own operating performance and our ability to service debt, as well as an integral part of our planning and reporting systems. Additionally, we use this measure in conjunction with discounted cash flow models to determine the Company's overall enterprise valuation and to evaluate acquisition targets. We present Adjusted EBITDA as a supplemental measure because we believe such measure is useful to investors as a reasonable indicator of operating performance because of the low capital intensity of the Company's service operations. We believe this measure is a financial metric used by many investors to compare companies, especially in the services industry. This measure is not a recognized measure of financial performance under GAAP in the United States, and should not be considered as a substitute for operating earnings, net earnings or cash flow from operating activities, as determined in accordance with GAAP. Our method of calculating Adjusted EBITDA may differ from other issuers and accordingly, this measure may not be comparable to measures used by other issuers. A reconciliation of net earnings to Adjusted EBITDA appears below.   Three months ended Nine months ended (in thousands of US$) September 30 September 30  2012  2011 2012  2011          Net earnings $19,573    $13,774  $23,385   $23,416  Income tax 7,409   13,026  11,270   29,522  Other expense (income)(1,463)  1,600 (1,751)  3,539  Interest expense, net 5,749   4,066  14,522   12,752  Operating earnings 31,268   32,466  47,426   69,229  Depreciation and amortization 12,714   12,782  37,436   38,208  Acquisition-related items 4,043   1,574  13,470   2,948  Stock-based compensation expense 734   444  2,449   1,986  Reorganization charge --   367  --   4,705  Adjusted EBITDA $48,759   $47,633  $100,781   $117,076  2. Reconciliation of net earnings (loss) attributable to common shareholders and net earnings (loss) per common share to adjusted net earnings and adjusted net earnings per share: Adjusted earnings per common share is defined as diluted net earnings (loss) per common share, adjusted for the effect, after income tax, of: (i) the non-controlling interest redemption increment; (ii) acquisition-related items; (iii) amortization expense related to intangible assets recognized in connection with acquisitions; (iv) stock-based compensation expense; (v) reorganization charges and (vi) deferred income tax valuation allowances related to tax loss carry-forwards. We believe this measure is useful to investors because it provides a supplemental way to understand the underlying operating performance of the Company and enhances the comparability of operating results from period to period. Adjusted diluted net earnings per common share is not a recognized measure of financial performance under GAAP, and should not be considered as a substitute for diluted net earnings per common share, as determined in accordance with GAAP. Our method of calculating this non-GAAP measure may differ from other issuers and, accordingly, this measure may not be comparable to measures used by other issuers. A reconciliation of net earnings (loss) attributable to common shareholders to adjusted net earnings and of diluted net earnings (loss) per common share to adjusted earnings per common share appears below.   Three months ended Nine months ended (in thousands of US$) September 30 September 30  2012  2011 2012  2011          Net earnings (loss) attributable to common shareholders $--   $5,061 $(8,047) $(1,456) Non-controlling interest redemption increment 10,745   4,140  13,841   11,695  Acquisition-related items 4,043   1,574  13,470   2,948  Amortization of intangible assets 4,744   4,961  14,032   15,668  Stock-based compensation expense 734   444  2,449   1,986  Reorganization charge --   367  --   4,705  Income tax on adjustments (1,972)  (1,995) (5,923)  (7,675) Deferred income tax valuation allowance --   4,443  --   13,448  Non-controlling interest on adjustments (221)  (503) (1,085)  (1,780) Adjusted net earnings $18,073   $18,492  $28,737   $39,539              Three months ended Nine months ended (in US$) September 30 September 30  2012  2011 2012  2011          Diluted net earnings (loss) per common share $--   $0.17 $(0.27) $(0.05) Non-controlling interest redemption increment 0.35   0.14  0.45   0.38  Acquisition-related items 0.13   0.05  0.42   0.10  Amortization of intangible assets, net of tax 0.10   0.10  0.29   0.31  Stock-based compensation expense, net of tax 0.02   0.01  0.05   0.04  Reorganization charge --   0.01  --   0.10  Deferred income tax valuation allowance --   0.13  --   0.41  Adjusted earnings per common share $0.60   $0.61  $0.94   $1.29           FIRSTSERVICE CORPORATIONCondensed Consolidated Statements of Earnings (Loss) (in thousands of US dollars, except per share amounts)   Three months Nine months   ended September 30 ended September 30 (unaudited) 2012  2011 2012  2011          Revenues $589,754   $585,424 $1,673,003   $1,629,278          Cost of revenues  389,383   381,215 1,107,360   1,037,648  Selling, general and administrative expenses  152,347   157,387 467,312   481,245  Depreciation  7,969   7,821 23,403   22,540  Amortization of intangible assets  4,744   4,961 14,032   15,668  Acquisition-related items (1)  4,043   1,574 13,470   2,948 Operating earnings 31,268   32,466  47,426   69,229  Interest expense, net  5,749   4,066  14,522   12,752  Other expense (income) (1,463)  1,600 (1,751)  3,539  Earnings before income tax  26,982   26,800  34,655   52,938  Income tax (2)  7,409   13,026  11,270   29,522 Net earnings 19,573   13,774  23,385   23,416  Non-controlling interest share of earnings  6,433   2,113  10,276   5,666  Non-controlling interest redemption increment  10,745   4,140  13,841   11,695  Net earnings (loss) attributable to Company  2,395   7,521 (732)  6,055  Preferred share dividends  2,395   2,460  7,315   7,511 Net earnings (loss) attributable to common shareholders $--   $5,061 $(8,047) $(1,456)        Net earnings (loss) per common share      Basic  $--   $0.17 $(0.27) $(0.05)         Diluted  $--   $0.17 $(0.27) $(0.05)       Adjusted earnings per common share (3)  $0.60   $0.61  $0.94   $1.29         Weighted average common shares (thousands)        Basic  30,030   30,069  30,120   30,145  Diluted  30,364   30,534  30,471   30,645           Notes to Condensed Consolidated Statements of Earnings (Loss) (1) Acquisition-related items include contingent acquisition consideration fair value adjustments, contingent acquisition consideration-related compensation expense, transaction costs related to the Colliers International UK acquisition and a reclassification of accumulated other comprehensive earnings related to Colliers International UK. (2) Income tax expense for the three months ended September 30, 2011 includes a $4,443 valuation allowance related to deferred income tax assets; income tax expense for the nine months ended September 30, 2011 includes a $13,448 valuation allowance. (3) See definition and reconciliation above.      Condensed Consolidated Balance Sheets    (in thousands of US dollars)               (unaudited) September 30, 2012  December 31, 2011     Assets     Cash and cash equivalents  $84,321   $97,799   Restricted cash  4,119   4,493  Accounts receivable  321,642   286,019  Inventories  17,084   11,831  Prepaid expenses and other current assets  55,682   50,062 Current assets 482,848   450,204  Other non-current assets  20,631   17,028  Fixed assets  94,819   94,150  Deferred income tax  106,373   87,940  Goodwill and intangible assets  576,913   584,396 Total assets $1,281,584   $1,233,718           Liabilities and shareholders' equity     Accounts payable and accrued liabilities  $349,023   $354,220  Other current liabilities  25,157   23,657  Long-term debt - current  37,632   216,373 Current liabilities 411,812   594,250  Long-term debt - non-current  319,019   100,042  Convertible unsecured subordinated debentures  77,000   77,000  Other liabilities  45,954   39,243  Deferred income tax  40,883   38,160  Non-controlling interests  148,070   141,404  Shareholders' equity  238,845   243,619 Total liabilities and equity $1,281,583   $1,233,718           Supplemental balance sheet information    Total debt  $433,651   $393,415  Total debt excluding convertible debentures  356,651   316,415  Total debt, net of cash  349,330   295,616  Total debt excluding convertible debentures, net of cash  272,330   218,616           Consolidated Statements of Cash Flows        (in thousands of US dollars)           Three months ended Nine months ended   September 30 September 30 (unaudited) 2012  2011 2012  2011         Cash provided by (used in)              Operating activities        Net earnings  $19,573   $13,774  $23,385   $23,416  Items not affecting cash:        Depreciation and amortization  12,713   12,782  37,435   38,208  Deferred income tax (6,988)  1,163 (17,474) (158) Other  1,890   3,277  6,442   8,097  Net cash provided by operating activities before changes in working capital  27,188   30,996  49,788  69,563  Changes in working capital  28,050   16,683 (30,944) (46,911) Net cash provided by operating activities  55,238   47,679  18,844   22,652         Investing activities        Acquisition of businesses, net of cash acquired (1,174) (12,191)(14,379) (22,064) Purchases of fixed assets (8,322) (10,868)(22,621) (24,040) Other investing activities  123  (319) 574 (793) Net cash used in investing activities (9,373) (23,378)(36,426) (46,897)        Financing activities        Increase (decrease) in long-term debt, net (23,669)  19,494  38,682   70,437  Purchases of non-controlling interests (2,536) (33,949)(4,167) (35,446) Dividends paid to preferred shareholders (2,395) (2,460)(7,315) (7,511) Other financing activities (10,944) (9,242)(24,486) (25,754) Net cash (used in) provided by financing activities (39,544) (26,157) 2,714   1,726          Effect of exchange rate changes on cash  963  (2,064) 1,390  (156)         Increase (decrease) in cash and cash equivalents  7,284  (3,920)(13,478) (22,675)         Cash and cash equivalents, beginning of period  77,037   81,604  97,799   100,359          Cash and cash equivalents, end of period  $84,321   $77,684  $84,321   $77,684             Segmented Revenues, Adjusted EBITDA and Operating Earnings           (in thousands of US dollars)                   Commercial Residential         Real Estate Property Property     (unaudited) Services Management Services Corporate Consolidated       Three months ended September 30                      2012      Revenues $295,649  $226,596  $67,449  $60  $589,754 Adjusted EBITDA 20,284  21,541  9,414 (3,214) 48,025  Stock-based compensation     734       48,759 Operating earnings 8,852  18,508  7,161 (3,253) 31,268             2011            Revenues  $252,882   $208,727   $123,775   $40   $585,424  Adjusted EBITDA  8,998   20,887   19,602  (2,298)  47,189  Stock-based compensation          444             47,633  Operating earnings  1,294   16,988   16,590  (2,406)  32,466                            Commercial Residential         Real Estate Property Property       Services Management Services Corporate Consolidated       Nine months ended September 30                      2012      Revenues $800,554  $632,537  $239,750  $162  $1,673,003 Adjusted EBITDA 36,195  52,525  20,885 (11,273) 98,332 Stock-based compensation     2,449       100,781 Operating earnings 5,208  39,344  14,364 (11,490) 47,426             2011            Revenues  $694,212   $572,618   $362,326   $122   $1,629,278  Adjusted EBITDA  22,657   50,270   51,999  (9,836)  115,090  Stock-based compensation          1,986             117,076  Operating earnings  1,979   38,259   39,062  (10,071)  69,229 CONTACT: COMPANY CONTACTS: Jay S. Hennick Founder & CEO D. Scott Patterson President & COO John B. Friedrichsen Senior Vice President & CFO (416) 960-9500