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Press release from CNW Group

D + H Reports Fourth Quarter, Year-End 2012 Results

Tuesday, February 26, 2013

D + H Reports Fourth Quarter, Year-End 2012 Results17:05 EST Tuesday, February 26, 2013Stock Exchange Symbol: DHWebsite: www.dhltd.comTORONTO, Feb. 26, 2013 /CNW/ - Davis + Henderson Corporation ("D+H" or the "Corporation" or the "Company") reported financial results for the three and twelve months ended December 31, 2012 that were consistent with its strategic agenda reflecting the continuous transformation towards a leading financial technology ("FinTech") provider to the North American financial services marketplace and reflected year-over-year growth in revenues and Adjusted EBITDA1."D+H made solid progress in 2012 that included adding over 500 customer relationships in the North American community bank and credit union marketplace through sales growth and acquisition initiatives, expanding our financial services technology offerings and shaping our Canadian operations to deliver greater efficiencies," said Gerrard Schmid, Chief Executive Officer. "As a result of these actions, D+H now serves more than 1,700 customers in North America as a stronger, more diversified company.  Our improved positioning will allow us to meet the challenges and opportunities that are presenting themselves at this point in the business cycle and continue our organic growth and growth by acquisition strategies.""We had several key operational deliverables for 2012, including integrating our recent U.S. acquisitions, renewing key customer agreements, reducing our cost base in Canada, repaying debt and increasing dividends," said Brian Kyle, Chief Financial Officer. "We are pleased to have accomplished each one of these goals as they help to strengthen our business to the benefit of our customers and shareholders."Fourth Quarter Highlights  Revenue was $187.2 million, an increase of $3.4 million, or 1.8%, compared to $183.8 million for the same quarter in 2011. Revenue growth was primarily from the U.S. Segment driven by the inclusion of Avista Solutions, Inc. ("Avista") from the date of its acquisition of May 3, 2012 and continued strong growth in Mortgagebot LLC ("Mortgagebot").Net income was $13.7 million ( $0.2315 per share) compared to $15.4 million ( $0.2595 per share) for the same quarter in 2011, mainly attributable to lower EBITDA and increased depreciation of capital assets and amortization expense related to non-acquisition intangibles, partially offset by lower income tax expense.EBITDA1 was $41.3 million (22.0% margin), compared to $45.6 million (24.8% margin) in the same quarter in 2011, as the inclusion of Avista, continued strong growth in the Mortgagebot business and savings realized from integration and transformation initiatives were offset by charges related to cost-realignment initiatives incurred to benefit future periods, corporate development costs related to strategic acquisition initiatives and retention and incentive expenses related to the Mortgagebot and Avista acquisitions.  To a lesser extent, EBITDA for 2012 was also impacted by the decline in Canadian Segment revenues.Adjusted EBITDA was $47.8 million (25.6% margin), an increase of $1.6 million, or 3.5%, compared to $46.2 million (25.1% margin) for the same period in 2011.  Adjusted EBITDA for the fourth quarter of 2012 excluded $6.6 million of acquisition-related costs and other charges. These expenses are not considered to be in the normal course of operations and consisted of cost-realignment charges of $1.2 million incurred to benefit future periods, corporate development expenses of $3.0 million incurred on strategic acquisition initiatives and $2.4 million related to business integration expenses and certain retention and incentive expenses associated with the acquisitions of Mortgagebot and Avista. Acquisition-related and other charges for the same period in 2011 were $0.6 million related to the Mortgagebot acquisition. These items were excluded from Adjusted EBITDA as management believes they are not indicative of underlying business performance and excluding these adjustments is more reflective of ongoing operating results.Adjusted net income1 of $25.6 million was unchanged year over year. On a per share basis, Adjusted net income increased to $0.4329 per share, from $0.4315 per share in the fourth quarter of 2011.On December 31, 2012, D+H paid a dividend of $0.32 per share to its shareholders following an increase in its target annual dividend from $1.24 per share to $1.28 per share annualized, for shareholders of record as of November 30, 2012.  During the same period in 2011, D+H paid $0.31 per share to its shareholders of record on November 30, 2011.The Company made net repayments of $26.2 million on its credit facilities during the fourth quarter of 2012.On January 29, 2013, D+H acquired the remaining outstanding common shares of Compushare Inc. ("Compushare"), a Santa Ana, California-based technology management and cloud computing provider to financial institutions, building on its initial minority investment in the company purchased on April 24, 2012.2012 Highlights Revenue was $757.7 million, an increase of $32.9 million, or 4.5%, compared to $724.7 million for 2011.  The increase was primarily due to the annualization of and strong growth in the Mortgagebot business and the inclusion of Avista.Net income was $69.1 million ( $1.1672 per share), compared to $89.9 million ( $1.5620 per share) in 2011. Net income for 2012 benefited from higher EBITDA and unrealized gains of $2.0 million related to fair value changes on interest-rate swaps, compared to an unrealized mark-to-market loss of $3.4 million in 2011. These increases were more than offset by higher depreciation of capital assets and amortization of acquisition and non-acquisition intangibles.   Net income for 2011 also benefited from the inclusion of non-cash tax recoveries of $20.8 million attributable to D+H's conversion to a corporation 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.EBITDA was $183.2 million (24.2% margin), an increase of $5.8 million, or 3.3%, compared to $177.4 million (24.5% margin) for 2011.  The increase in EBITDA was due to strong growth in Mortgagebot, inclusion of Avista and savings realized from cost-realignment initiatives.  These increases were partially offset by acquisition-related and other charges during the current year of $14.9 million described below. EBITDA margin was also impacted by these non-normal course expenses.Adjusted EBITDA was $198.1 million (26.2% margin) for  2012, an increase of $17.0 million, or 9.4%, compared to $181.2 million (25.0% margin) for 2011. Adjusted EBITDA for 2012 excluded impacts of acquisition-related and other charges of $14.9 million, which consisted of $6.7 million related to cost-realignment initiatives to benefit future periods, $4.9 million related to transaction costs and certain retention expenses related to the acquisition of Mortgagebot and Avista, $3.0 million of corporate development charges related to strategic acquisition initiatives and $0.3 million related to business integration costs.  Acquisition-related and other charges for 2011 were $3.8 million incurred primarily in connection with the Mortgagebot acquisition.Adjusted net income was $108.1 million ( $1.8255 per share) for 2012, an increase of $4.5 million, or 4.3%, compared to $103.7 million ( $1.8004 per share) for 2011.During 2012, dividends of $1.25 per share were paid to shareholders, up from $1.2233 per share paid in 2011.D+H drew $50.6 million to finance the acquisition of Avista and the minority investment in Compushare and also made net debt repayments of $54.0 million during 2012.On May 3, 2012, D+H acquired a 100% equity interest in Avista, a leading provider of Software as a Service ("SaaS") mortgage loan origination software, for a purchase price of US$ 40 million.American Banker, Bank Technology News and IDC Financial Insights named D+H as one of the world's top financial technology ("FinTech") firms in the international FinTech 100 with a 2012 ranking of 35th, up 6 places since 2011. Effective October 15, 2012, William W. Neville resigned from the D+H Board of Directors, a role that he had held since 2009, to assume a new executive role within the Company as the President of D+H USA, with overall responsibility for the Company's U.S. operations and for broadening D+H's presence in the United States.Mortgagebot surpassed the one million mark in submitted U.S. loan applications in 2012, a new record.During 2012, D+H successfully extended its largest student loan servicing contract for a multi-year term with opportunity for further extensions.____________________________________________1 D+H's 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 certain items of note such as acquisition-related and other charges, including transaction costs and retention expenses related to acquisitions, corporate development charges related to strategic acquisition initiatives and expenses 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 as described above, discontinued operations and the related tax effects of these adjustments including tax effects of acquisitions and 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.D+H's consolidated financial statements for 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 (see Non-IFRS Financial Measures for a more complete description of the terms EBITDA, Adjusted EBITDA and Adjusted net income); 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 D+H's actual results, performance or achievements, or developments in its 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; increased pricing pressures and increased competition which could lead to loss of contracts or reduced margins; as well as general market conditions, including economic and interest rate dynamics. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.  The documents incorporated by reference herein also identify additional factors that could affect the operating results and performance of the Company. Forward-looking statements are based on management's current plans, estimates, projections, beliefs and opinions, and D+H does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change except as required by applicable securities laws.All of the forward-looking statements made in this press release and the documents incorporated by reference herein are qualified by these cautionary statements and other cautionary statements or factors contained herein, and there can be no assurance that the actual results or developments will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, the Company.Conference Call Davis + Henderson will discuss its financial results for the three and twelve months ended December 31, 2012 via conference call at 10:00 a.m. EST (Toronto time) on Wednesday, February 27, 2013. 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/webcast/detail/1104487/1203723. For anyone unable to listen to the scheduled call, the rebroadcast number will be: 416-849-0833for Toronto area callers, or 1-855-859-2056 for all other callers, with Encore Password 93787489. The rebroadcast will be available until Wednesday March 13, 2013.  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 ANALYSISThis Management's Discussion and Analysis ("MD&A") of financial condition and results of operations has been prepared with an effective date of February 26, 2013 and should be read in conjunction with Davis + Henderson Corporation's ("D+H" or the "Corporation" or the "Company" or "Davis + Henderson" or the "Business" or "we" or "our") audited consolidated financial statements for the year ended December 31, 2012. This MD&A comments on D+H's operations, performance and financial condition for the quarters ended December 31, 2012 and 2011 and years ended December 31, 2012, 2011 and 2010.NON-IFRS FINANCIAL MEASURESThe information presented within the tables in this MD&A include certain adjusted financial measures such as "EBITDA" (Earnings excluding interest, taxes, depreciation and amortization and fair value adjustments of interest-rate swaps which are directly related to interest expense), and adjusted financial measures such as "Adjusted EBITDA" (EBITDA adjusted to remove acquisition-related and other charges, including expenses incurred in connection with cost-realignment initiatives, corporate development expenses related to strategic acquisition initiatives and certain retention and incentive expenses and business integration costs incurred in connection with acquisitions, all of 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, discontinued operations, including tax effects of these items and tax effects of acquisitions and corporate conversion), and "Adjusted net income per share", all of which are not defined terms under International Financial Reporting Standards ("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 as a factor 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 such as corporate development costs related to strategic acquisition initiatives, costs incurred in connection with cost-realignment initiatives and business integration costs, all of 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, D+H 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 of note such as: acquisition-related and other charges, including transaction costs, business integration costs and retention expenses related to acquisitions; corporate development charges related to strategic acquisition initiatives and expenses associated with cost-realignment initiatives, all of which are not considered to be part of normal course of operations; 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 periods being reviewed.ACQUISITIONSAvista On May 3, 2012, the Corporation announced the acquisition of Avista Solutions, Inc ("Avista"), a leading provider of Software-as-a-Service ("SaaS") mortgage loan origination software ("LOS") to community banks and credit unions in the United States, for US$40 million. This transaction was funded from D+H's existing credit facilities and subsequently through the issuance of bonds.  For additional information on this transaction, please refer to Note 5 in the Consolidated Financial Statements of the Corporation for the year ended December 31, 2012.In order to consolidate D+H's U.S. businesses, effective December 31, 2012, Avista merged with Mortgagebot LLC ("Mortgagebot"), with Mortgagebot being the surviving entity.CompushareOn April 24, 2012, the Corporation announced that it had completed a strategic investment in Compushare Inc. ("Compushare"), a California-based provider of Infrastructure-as-a-Service ("IaaS") to U.S. banks and credit unions. Compushare specializes in helping customers achieve rigorous compliance standards with systems management, network security, and application solutions that are designed specifically for financial institutions.As part of this transaction, Compushare and D+H entered into an investor rights agreement dated April 24, 2012 which provided the Corporation with a call option to acquire the remaining issued and outstanding shares of Compushare not already owned by D+H (the "Call Option"). On January 29, 2013, D+H exercised this Call Option and purchased all remaining outstanding common shares of Compushare. Financial terms of this transaction were not disclosed as they were not material to D+H's financial position.STRATEGYD+H's goal is to be a leading financial technology ("FinTech") provider to the North American financial services marketplace. FinTech companies develop and deliver technology and technology-enabled products and services to banks, credit unions and other leading financial services customers who use these solutions to drive growth, improve customer convenience, streamline operations, reduce infrastructure costs and enhance compliance. 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, by partnering with third parties and making 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 including ASSET and Mortgagebot in 2011, Avista in 2012 and Compushare in early 2013 and by further enhancing our services and capabilities within all service areas.As announced recently, D+H's improved ranking in the FinTech 100 is a testament to D+H's increasing technological capabilities, as the FinTech 100 ranks companies according to their global financial technology revenues. Through a series of strategic acquisitions, including the most recent acquisitions of Mortgagebot, Avista and Compushare, D+H has extended its reach and capabilities as a company that offers a range of technology solutions to the financial services market.  This recognition is a reflection of the steps D+H has taken to provide a broad spectrum of financial technology products and services to its customers and including ongoing innovation and growth to better serve the financial services industry.Within our U.S. Segment, our strategic intent is to build a range of technology offerings, with an emphasis on cloud computing solutions or SaaS offerings, to better serve regional banks, community banks and credit unions.  We expect to advance this strategy organically through adjacent offerings, such as our recent expansion into consumer loan origination, and through further U.S. acquisitions that will allow us to broaden our technology capabilities to banks and credit unions.On a go-forward basis, consistent with its strategy, 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 quarter and year ended December 31, 2012 and management's outlook, please see below.ACCOUNTING PRINCIPLES AND FINANCIAL INFORMATION PRESENTATIONThe Company's consolidated financial statements have been prepared in accordance with IFRS, as issued by the International Accounting Standards Board ("IASB").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 Davis + Henderson Income Fund ("the Fund"), and the results for 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 segments in the first quarter of 2012 based on its strategic business units, the "Canadian Segment" and the "U.S. Segment". These business units are components of the entity that the Corporation's executives monitor in making decisions about resources to be allocated to the segments and to assess performance.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 areas, 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 Mortgagebot LLC ("Mortgagebot") and Avista Solutions, Inc. ("Avista"). Charges related to cost-realignment initiatives, corporate development expenses related to strategic acquisition initiatives, retention and incentive expenses, transaction costs and business integration costs related to acquisitions are recorded as part of Corporate as these items are not part of the normal course of operations and they are not indicative of the underlying performance of the segments and the business.Performance of the segments are measured based on the segment's revenue and EBITDA.Comparatives have been presented to conform to the current period disclosure.OPERATING RESULTS - FOURTH QUARTER OF 2012(in thousands of Canadian dollars, except per share amounts, unaudited)       Quarter ended December 31,     20122011Revenue$ 187,175 $183,777Expenses 145,904 138,202EBITDA 141,271 45,575Depreciation of capital assets and amortization    of non-acquisition intangibles7,956 6,749Amortization of intangibles from acquisitions11,519 11,009Interest expense4,629 4,909Income from investment in an associate, net of tax 223 -Amortization and fair value adjustment of    derivative instruments 3(542)(145)Income tax expense3,975 7,684Net income$ 13,711 $15,369          Income from continuing operations per share,    basic and diluted 4,5$ 0.2315 $0.2595Net income per share, basic and diluted 4, 5$ 0.2315 $0.25951 EBITDA is a non-IFRS term. See Non-IFRS Financial Measures for a more complete description of this term.2D+H's share of profit from Compushare, the minority investment purchased on April 24, 2012.3 Includes 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 Statements of Income.4Diluted net income per share reflects the 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.5 Weighted average number of shares outstanding during the fourth quarter of 2012 was 59,233,373 shares (Q4 2011 - 59,233,373 shares).(in thousands of Canadian dollars, unaudited)                Quarter ended December 31,     Canadian Segment      U.S. Segment   Corporate   Consolidated     20122011  20122011  20122011  20122011Revenue $171,788  $173,189    $15,387  $10,588    $-  $-    $187,175  $183,777Expenses  130,647  131,837    8,699  5,728    6,558  637    145,904  138,202                            EBITDA 1 41,141  41,352    6,688  4,860    (6,558) (637)    41,271  45,575EBITDA Margin 23.9% 23.9%    43.5% 45.9%    -  -    22.0% 24.8%Adjustments:                          Acquisition-related and other charges 2 -  -    -  -    6,558  637    6,558  637                           Adjusted EBITDA 1 $41,141  $41,352    $6,688  $4,860    $-  $-    $47,829  $46,212Adjusted EBITDA Margin 23.9% 23.9%    43.5% 45.9%    -  -    25.6% 25.1%1 EBITDA and Adjusted EBITDA are non-IFRS terms. See Non-IFRS Financial Measures for a more complete description of these terms.2Acquisition-related and other charges for the fourth quarter of 2012 included corporate development expenses related to strategic acquisition initiatives, expenses related to cost-realignment initiatives and acquisition-related costs pertaining to business integration costs and certain retention and incentive costs in connection with the acquisitions of Mortgagebot and Avista.  Acquisition-related and other charges for the same period in 2011 included certain retention and incentive costs related to the acquisition of Mortgagebot.                    Quarter ended December 31,             Canadian    U.S.               Segment    Segment  Consolidated             2012 vs. 2011  2012 vs. 20112012 vs. 2011             % change   % change % changeRevenue           (0.8%)  45.3%1.8%EBITDA 1           (0.5%)  37.6%(9.4%)Adjusted EBITDA1             (0.5%)   37.6% 3.5%1 EBITDA and Adjusted EBITDA are non-IFRS terms. See Non-IFRS Financial Measures for a more complete description of these terms.(in thousands of Canadian dollars, except per share amounts, unaudited)     Quarter ended December 31,   20122011Net income $13,711  $15,369Adjustments:     Non-cash items:      Amortization of intangibles from acquisitions 11,519  11,009  Amortization and fair value adjustment of      derivative instruments 2 (542) (145) Other items of note:      Acquisition-related and other charges 3 6,558  637 Tax effect of above adjustments (excluding      discontinued operations) 4 (5,603) (3,391) Tax effect of acquisitions and conversion 5 -  2,080Adjusted net income 1 $25,643  $25,559        Adjusted net income per share, basic and diluted 1, 6, 7 $0.4329  $0.4315                    Quarter ended December 31,       2012 vs. 2011       % changeAdjusted net income per share 1, 6, 7    0.3%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 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.3Acquisition-related and other charges for the fourth quarter of 2012 included corporate development expenses related to strategic acquisition initiatives, cost-realignment initiatives and certain retention and incentive and business integration costs pertaining to the acquisitions of Mortgagebot and Avista.  Acquisition-related and other charges for the same period in 2011 included certain retention and incentive costs related to the acquisition of Mortgagebot.4The 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.5Adjustment for the fourth quarter of 2011 related to derecognition of previously recognized tax attributes.6Diluted Adjusted net income per share (non-IFRS term) reflects the impacts of outstanding options.  If theaverage 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.7 Weighted average number of shares outstanding during the fourth quarter of 2012 was 59,233,373 shares (Q4 2011 - 59,233,373 shares).Overview - ConsolidatedGrowth in consolidated revenues in the fourth quarter of 2012 compared to the same period in 2011 was driven by the U.S. Segment, attributable to the acquisition of Avista and continued strong organic growth in Mortgagebot.Compared to the fourth quarter of 2011, the decline in consolidated EBITDA for the fourth quarter of 2012 was due to the impact of certain non-normal course expenses and acquisition-related charges. Consolidated Adjusted EBITDA, which excludes these charges, was higher in the fourth quarter of 2012 compared to the same period in 2011.Consolidated net income for the three months ended December 31, 2012 was lower compared to the same period in 2011. Net income during the fourth quarter of 2012 was impacted by acquisition-related and other charges in Corporate.  This impact was partially offset by the EBITDA growth in the U.S. Segment.Consolidated Adjusted net income for the fourth quarter of 2012 was higher compared to the same period in 2011.  Consolidated Adjusted net income excludes the following: (i) impacts of non-cash 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 discontinued operations; 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 expense / recoveries relating to acquisitions.  Net income was also adjusted for the tax impact of these items to arrive at Adjusted net income.REVENUE The following table reflects the relative size of each of the major service areas as a percentage of consolidated revenue based on a twelve-month period:               Year ended December 31,     201220112010 Payment solutions1    40%41%45% Loan registration and recovery services    22%22%17% Loan servicing    17%18%20% Lending technology services 2    17%14%12% Business service solutions 3    4%5%6%     100%100%100%1Reported as Programs to chequing account in prior years.2Includes revenues reported as part of the U.S. segment.3Reported 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 subscription fee-based enhancement services and other service offerings directed towards the 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. Cheque order volumes are declining as consumers and small businesses choose other payment methods.  These volume declines have been partially offset by increased average order values for cheques and 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 affected by both economic cyclicality and seasonality, while recovery services are, in general, counter-cyclical. Other services within this 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 category.  In general, student loan servicing volumes have been stable and modestly growing on higher student loan balances and extended loan durations.  Recent integration of two lending portfolios into a single managed portfolio reduced the fees we earn on a net basis and this impact is expected to continue through the first half of 2013. Volumes related to credit card servicing can be more variable and are primarily impacted by customer initiatives.  Revenues from loan servicing programs are reported in the Canadian Segment.Lending technology services include services directed towards mortgage markets in both Canada and, 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 U.S. SaaS loan origination services, of which approximately 20% to 30% relate to transaction-based activity.  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.  Effective from the date of acquisition of January 29, 2013, revenues from Compushare will be reported in the U.S. Segment.Business service solutions 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.Revenue - Consolidated(in thousands of Canadian dollars, unaudited)    Quarter ended December 31,    20122011Payment solutions1    $76,113  $73,758Loan registration and recovery services    40,542  39,260Loan servicing     30,018  33,372Lending technology services 2    32,661  28,571Business service solutions 3    7,841  8,816     $187,175  $183,7771 Reported as Programs to chequing account in prior years.2Includes revenue reported as part of the U.S. segment.3 Reported as Other in prior years.Consolidated revenue for the fourth quarter of 2012 was $187.2 million, an increase of $3.4 million, or 1.8%, compared to the same period in 2011. The increase was primarily due to growth within the U.S. Segment as a result of the inclusion of Avista acquired on May 3, 2012 and strong ongoing organic growth in Mortgagebot.  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.Revenue - Canadian SegmentTotal revenues in the Canadian Segment for the fourth quarter of 2012 of $171.8 million, decreased by $1.4 million, or 0.8%, compared to the same quarter in 2011.(in thousands of Canadian dollars, unaudited)   Quarter ended December 31, 20122011Payment solutions 1 $76,113  $73,758Loan registration and recovery services  40,542  39,260Loan servicing  30,018  33,372Lending technology services 2 17,274  17,983Business service solutions 3 7,841  8,816   $171,788  $173,1891 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 fourth quarter of 2012 was $76.1 million, an increase of $2.4 million, or 3.2%, compared to the same quarter in 2011. Revenue for the fourth quarter of 2012 benefited from the positive impact of higher average order values and product and service enhancements in the chequing and credit card programs, partially offset by volume declines in cheque orders. Management believes that the downward trend in cheque order volumes is in the low to mid-single digit range annually and in recent periods, there has been more volatility in personal cheque order volumes. Management expects that this volatility will continue into 2013. D+H continues to develop service enhancements to offset this impact and to generate future growth within this category.Loan registration and recovery services revenue for the fourth quarter of 2012 was $40.5 million, an increase of $1.3 million, or 3.3%, compared to the same quarter 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 attributable to higher volumes in registration services was partially offset by an expected decline in automotive lending recovery services, due to counter-cyclicality and certain program repatriations.Loan servicing programs revenue for the fourth quarter of 2012 was $30.0 million, a decrease of $3.4 million, or 10.1%, compared to the same quarter in 2011. Modestly higher volumes in the fourth quarter of 2012 were offset by reduced professional service fees due to timing and an expected reduction in fees from a previously announced consolidation and integration between two customers within the student loans program. Volumes in the student loan administration service area are expected to be relatively stable and modestly growing in the short term.  We expect that the impact on revenue of consolidation and integration of the two customers discussed above will continue through the first half of 2013.  Activities related to cost management and improving delivery efficiency are being directed towards lowering the impact of reduced pricing and fees related to the recent customer consolidation. The benefits from these cost management initiatives that we started to realize in 2012 will continue into 2013.A decline in revenues in the credit card servicing component within the loan servicing programs compared to the prior year was attributable to specific customer initiatives in prior periods that contributed to higher revenues in those periods.Revenue from lending technology services related to the Canadian Segment for the fourth quarter of 2012 was $17.3 million, a decrease of $0.7 million, or 3.9%, compared to the same quarter in 2011.  Fourth quarter 2012 revenue was impacted by lower mortgage origination fees due to softening Canadian housing and mortgage market activity compared to the same quarter in 2011. In general, due to tightening of mortgage rules announced by the Department of Finance in 2012, industry analysts expect the recently observed reduction in Canadian housing market prices and sales volumes to continue in major urban areas in 2013. Revenues in the future periods may also be impacted by price modifications, which are expected to be offset by potential revenue increases from the launch of new products in the Canadian lending market, including extension of our technology solutions across various areas in the lending value chain.Revenues from business service solutions in the fourth quarter of 2012 were $7.8 million, compared to $8.8 million for the same period in 2011 due to program repatriations by certain customers in prior periods.Revenue - U.S. Segment(in thousands of Canadian dollars, unaudited)    Quarter ended December 31, 20122011Lending technology services  $15,387  $10,588 U.S. Segment revenue related to online mortgage origination from Mortgagebot and Avista for the fourth quarter of 2012 was $15.4 million, an increase of $4.8 million, or 45.3%, compared to $10.6 million for the same period in 2011. The increase was due to the inclusion of Avista since its acquisition in May 2012 and strong organic growth in Mortgagebot as a result of higher volumes driven by continued low interest-rate environment in the U.S.EXPENSESExpenses - Consolidated  (in thousands of Canadian dollars, unaudited)     Quarter ended December 31,    20122011Employee compensation and benefits 1  $55,886  $54,920Non-compensation direct expenses 2  58,989  56,613Other operating expenses 3  31,029  26,669    $145,904  $138,2021Employee compensation and benefits on a consolidated basis includes retention and incentive expenses related to acquisitions of businesses and are net of apprenticeship tax credits and amounts capitalized related to software product development. Employee compensation expenses for the fourth quarter of 2012 included $1.2 million of expenses related to cost-realignment initiatives.2 Non-compensation direct expenses include materials, shipping, selling expenses and third party direct disbursements.3Other 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 expenses for the fourth quarter of 2012 include corporate development costs related to strategic acquisition initiatives.Consolidated expenses of $145.9 million for the fourth quarter of 2012 increased by $7.7 million, or 5.6%, compared to the same quarter in 2011, and included acquisition-related and other charges of $6.6 million which were considered as non-normal course expenses and therefore, recognized as part of Corporate. The inclusion of Avista expenses also contributed to the increase in the fourth quarter of 2012.Expenses - Canadian SegmentTotal expenses for the Canadian Segment for the fourth quarter of 2012 were $130.6 million, a decrease of $1.2 million, or 0.9%, compared to the same quarter in 2011.(in thousands of Canadian dollars, unaudited)      Quarter ended December 31,     2012  2011Employee compensation and benefits 1 $47,905  $51,245Non-compensation direct expenses 2 58,720  56,213Other operating expenses 3 24,022  24,379    $130,647  $131,8371Employee compensation and benefits are net of apprenticeship tax credits and amounts capitalized related to software product development.2 Non-compensation direct expenses include materials, shipping, selling expenses and third party direct disbursements.3Other 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 $47.9 million for the fourth quarter of 2012 for the Canadian Segment were lower by $3.3 million, or 6.5%, compared to the same quarter in 2011.  Expenses for the fourth quarter of 2012 benefited from savings realized as a result of cost-realignment initiatives executed in prior periods and apprenticeship tax credits.Non-compensation direct expenses for the Canadian Segment were $58.7 million for the fourth quarter of 2012, an increase of $2.5 million, or 4.5%, compared to the same quarter in 2011.  In general, these expenses directionally change with revenue changes.  An increase in direct costs associated with the payment solutions and the loan registration service areas, consistent with the increase in revenues in these service areas, was partially offset by a decrease in direct costs in the recovery business and other services.Other operating expenses of $24.0 million for the fourth quarter of 2012 were lower by $0.4 million, or 1.5%, compared to the same quarter in 2011, primarily due to savings realized from transformation and integration initiatives and an increase in capitalization of development costs.Expenses - U.S. SegmentTotal expenses for the U.S. Segment for the fourth quarter of 2012 were $8.7 million, an increase of $3.0 million, or 51.9%, compared to the same quarter in 2011. This increase was primarily due to the inclusion of the Avista cost base and expense growth in Mortgagebot consistent with revenue growth.(in thousands of Canadian dollars, unaudited)      Quarter ended December 31,     2012  2011Employee compensation and benefits  $4,697  $3,038Non-compensation direct expenses  269  400Other operating expenses 1 3,733  2,290    $8,699  $5,7281Other operating expenses include inter-segment management fees, occupancy costs and expenses not included in other categories.Employee compensation and benefits costs of $4.7 million for the fourth quarter of 2012 for the U.S. Segment were higher by $1.7 million, or 54.6%, compared to the same quarter in 2011. The increase in the fourth quarter of 2012 was primarily due to the inclusion of the Avista cost base and increased costs related to the integration of Mortgagebot and Avista.Non-compensation direct expenses for the U.S. Segment of $0.3 million for the fourth quarter of 2012 remained relatively consistent to the same quarter in 2011.Other operating expenses of $3.7 million for the fourth quarter of 2012 were higher by $1.4 million, or 63.0%, compared to the same quarter in 2011 primarily attributable to expenses associated with cloud-based growth initiatives and the inclusion of Avista. Also included in other expenses for the periods presented is the inter-segment management fees charged by the Canadian Segment for shared services.Expenses - Corporate(in thousands of Canadian dollars, unaudited)     Quarter ended December 31,   20122011Employee compensation and benefits  $3,284  $637Non-compensation direct expenses  -  -Other operating expenses  3,274  -    $6,558  $637 Employee compensation and benefits Employee compensation and benefits expenses for the fourth quarter of 2012 in Corporate of $3.3 million consisted of charges related to cost-realignment initiatives of $1.2 million, and retention and incentive expenses of $2.1 million incurred in connection with Avista and Mortgagebot acquisitions. Charges incurred in relation to the cost-realignment initiatives are expected to benefit the Company in both current and future periods.Other expensesOther expenses for 2012 in Corporate included corporate development expenses related to strategic acquisition initiatives of $3.0 million and business integration costs of $0.3 million.  For the same period in 2011, $0.6 million was recognized as acquisition-related and other charges in connection with the acquisition of Mortgagebot.EBITDA AND EBITDA MARGINConsolidatedConsolidated EBITDA during the fourth quarter of 2012 was $41.3 million, a decrease of $4.3 million, or 9.4%, compared to $45.6 million for the same quarter in 2011. EBITDA margin of 22.0% on a consolidated basis for the fourth quarter of 2012 decreased from 24.8% for the same period in 2011.  Growth in EBITDA in the U.S Segment was offset by non-normal course expenses in Corporate such as charges related to cost-realignment initiatives, corporate development costs related to strategic acquisition initiatives, retention and incentive expenses and acquisition transaction costs.Canadian SegmentCanadian Segment EBITDA for the fourth quarter of 2012 was $41.1 million, a decrease of $0.2 million, or 0.5%, compared to the same quarter in 2011, primarily due to a decline in revenues in the loan servicing and business service solutions service areas. These decreases were partially offset by the contribution made by strong volumes in the loan registration services and savings realized from cost-realignment, integration and transformation initiatives. 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 in the loan servicing area.EBITDA margin of 23.9% for the fourth quarter of 2012 was unchanged from the fourth quarter of 2011.U.S. SegmentU.S. Segment EBITDA for the fourth quarter of 2012 was $6.7 million, an increase of $1.8 million, compared to the same quarter in 2011, attributable to strong growth in the Mortgagebot business as well as the inclusion of Avista results effective from the date of acquisition of May 3, 2012.ADJUSTED EBITDA AND ADJUSTED EBITDA MARGINConsolidatedConsolidated Adjusted EBITDA excludes the following items reported as part of Corporate: (i) acquisition-related expenses such as transaction costs, business integration costs, and certain retention and incentive costs incurred as part of the acquisitions; and (ii) other charges incurred in connection with cost-realignment initiatives and corporate development costs related to strategic acquisition 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.Consolidated Adjusted EBITDA during the fourth quarter of 2012 was $47.8 million, an increase of $1.6 million, or 3.5%, compared to the same quarter in 2011. Consolidated Adjusted EBITDA excluded acquisition-related and other charges of $6.6 million for the fourth quarter of 2012, consisting of $1.2 million related to cost-realignment initiatives, $3.0 million related to corporate development costs for strategic acquisition initiatives, $2.1 million related to transaction costs and retention expenses related to the Mortgagebot and Avista acquisitions and business integration costs of $0.3 million. On a consolidated basis, Adjusted EBITDA margin for the fourth quarter of 2012 was 25.6%, up from 25.1% a year ago.DEPRECIATION OF CAPITAL ASSETS AND AMORTIZATION OF NON-ACQUISITION INTANGIBLESConsolidated depreciation of capital assets and amortization of non-acquisition intangible assets of $8.0 million during the fourth quarter of 2012 increased by $1.2 million, or 17.9%, compared to the same period in 2011. The increase was related to the commencement of amortization of completed projects in 2012.AMORTIZATION OF INTANGIBLES FROM ACQUISITIONSConsolidated amortization of acquisition intangibles for the fourth quarter of 2012 was $11.5 million, an increase of $0.5 million, compared to the same period in 2011. The increase was attributable to the amortization of intangibles from the Avista acquisition.INTEREST EXPENSEInterest expense for the fourth quarter of 2012 decreased by  $0.3 million compared to the same quarter in 2011 due to favourable pricing on the renewed credit facility due to renegotiated terms.INCOME FROM INVESTMENT IN AN ASSOCIATEConsolidated net income for the fourth quarter of 2012 included D+H's share of income related to the investment in an associate, Compushare, effective from April 24, 2012.The investment in Compushare is accounted for using the equity method of accounting and is recognized initially at cost.  The cost of the investment includes transaction costs related to the investment.Subsequent to December 31, 2012, D+H acquired the remaining 67% interest in Compushare.AMORTIZATION AND FAIR VALUE ADJUSTMENT OF DERIVATIVE INSTRUMENTSInterest-rate swapsCompared to a net unrealized gain of $0.1 million in the fourth quarter of 2011, a net unrealized gain of $0.5 million on interest-rate swaps was recognized in the fourth quarter of 2012 reflecting fair value adjustments related to changes in market interest rates at December 31, 2012 compared to September 30, 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 the statement of income as the related swaps mature. D+H has historically held its derivative contracts to maturity.INCOME TAX EXPENSE Compared to an income tax expense of $7.7 million for the fourth quarter of 2011, in the fourth quarter of 2012, an income tax expense of  $4.0 million was recorded.  The tax expense was reduced by a tax recovery related to the difference in the tax rate applicable to losses incurred in the U.S. in the fourth quarter, substantially as a result of deductible corporate development expenses related to strategic acquisition initiatives in the U.S. The income tax expense in the fourth quarter of 2011 was increased by the de-recognition of certain previously recorded tax attributes.NET INCOME Consolidated net income of $13.7 million for the fourth quarter of 2012 was lower by $1.7 million, or 10.8%, compared to consolidated net income of $15.4 million for the same quarter in 2011. Consolidated net income for the fourth quarter of 2012 was impacted by acquisition-related and other charges of $6.6 million reported in Corporate, which included expenses related to cost-realignment initiatives incurred to achieve operational effectiveness, corporate development expenses related to strategic acquisition initiatives and retention and incentive expenses and business integration costs in connection with acquisitions.ADJUSTED NET INCOME For the fourth quarter of 2012, consolidated Adjusted net income of $25.6 million ($0.4329 per share) remained relatively consistent with the same period in 2011 ($0.4315 per share).CONSOLIDATED CASH FLOW AND LIQUIDITY - FOURTH QUARTERThe 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 December 31,        2012  2011 Cash and cash equivalents provided by (used in):      OPERATING ACTIVITIES         Income from continuing operations           $13,711  $15,369 Depreciation and amortization of assets           19,475  17,758 Amortization and fair value adjustment of derivative               instruments          (542) (145)Income from investment in an associate, net of tax           23  - Difference in interest expense and cash interest paid         381  552 Non-cash income tax and options expenses         4,091  7,840           37,139  41,374 Changes in non-cash working capital items           24,740  6,746 Changes in other operating assets and liabilities and     discontinued operations   (2,743) (1,080)Net cash from operating activities       59,136  47,040               FINANCING ACTIVITIES           Net change in long-term indebtedness       (26,187) (20,000) Issuance costs, equity and debt       -  (28) Distributions and dividends paid during the period             (18,956) (18,362) Net cash used in financing activities         (45,143) (38,390)               INVESTING ACTIVITIES             Capital expenditures           (9,717) (10,632) Net cash used in investing activities             (9,717) (10,632) Increase (decrease) in cash and cash equivalents for the period  4,276  (1,982) Cash and cash equivalents, beginning of period         1,443  4,195 Cash and cash equivalents, end of period         $5,719  $2,213As at December 31 2012, cash and cash equivalents totalled $5.7 million, compared to $2.2 million at December 31, 2011.Operating ActivitiesOperating activities provided $59.1 million during the three months ended December 31, 2012, compared to $47.0 million for the same period in 2011. The change in net cash from operating activities for the three-month period ended December 31, 2012 compared to the same quarter in 2011 was primarily due to working capital changes resulting from lower receivables and higher accrued payables as described below.Changes in Non-Cash Working Capital and Other Items(in thousands of Canadian dollars, unaudited)      Quarter ended December 31,   20122011 Changes in non-cash working    capital items  $24,740  $6,746 Changes in other operating assets and    liabilities and discontinued operations  (2,743) (1,080) Decrease in non-cash working capital and    other items  $21,997  $5,666The net decrease in non-cash working capital in the fourth quarter of 2012 primarily related to a decrease in trade receivables consistent with lower revenue in the fourth quarter of 2012 compared to the third quarter of 2012.  Also contributing to the decrease in non-cash working capital was lower apprenticeship tax credit receivable balances and higher accrued payables related to compensation arrangements.Financing ActivitiesNet cash used for financing activities was $45.1 million during the quarter ended December 31, 2012, compared to $38.4 million used for the same period in 2011. The net change during the quarter was primarily due to debt repayments within our credit facilities and a dividend increase in the fourth quarter of 2012. D+H made net repayments of $26.2 million during the fourth quarter of 2012.DividendsDuring the fourth quarter of 2012, D+H paid a dividend of $0.32 per share to its shareholders, following an increase in target annual dividend from $1.24 per share to $1.28 per share annualized, for shareholders of record as of November 30, 2012, to be paid on December 31, 2012.  For the same quarter in 2011, $0.31 per share was paid to shareholders.Investing ActivitiesDuring the fourth quarter of 2012, $9.7 million was used by investing activities, by way of capital expenditures, compared to $10.6 million during the same period in 2011.Capital Expenditures Consolidated capital expenditures were $9.7 million for the fourth quarter of 2012, $0.9 million lower compared to the same period of 2011. Higher capital expenditures in 2011 reflected timing of expenditures as well as integration and upgrade activities, and investing in the development of technology products and capability.OPERATING RESULTS - 2012The following tables should be read in conjunction with, the Consolidated Statements of Income for the year ended December 31, 2012 and include non-IFRS financial measures. Management believes these supplementary disclosures provide useful additional information. See Non-IFRS Financial Measures section for a description of non-IFRS terms used.The consolidated results include those of ASSET, Mortgagebot and Avista, effective from the respective dates of acquisition of January 18, 2011, April 12, 2011 and May 3, 2012.  Revenues and expenses relating to ASSET have been reported as part of the Canadian Segment and revenues and expenses related to Mortgagebot and Avista have been reported as part of the U.S. Segment.(in thousands of Canadian dollars, except per share amounts, unaudited)        Year ended December 31,      201220112010Revenue   $757,663  $724,720 $649,715Expenses 1    574,457 547,320502,604EBITDA 1, 2    183,206 177,400147,111      Depreciation of capital assets and amortization of non-acquisition intangibles    29,183 23,90020,304Amortization of intangibles from acquisitions  44,638 40,73128,288Interest expense  19,214 18,96213,988Income from investment in an associate, net of tax     (68)--Amortization and fair value adjustment of derivative instruments 3    (2,016)3,386(803)Income tax expense    23,118 6333,300Income from continuing operations  69,137 89,78882,034Income (loss) from discontinued operations, net of tax 4  - 140(3,247)Net income  69,137 89,92878,787            Adjustments:        Non-cash items:           Amortization of intangibles from acquisitions44,638 40,731     Amortization and fair value adjustment of derivative instruments 3(2,016)3,386  Other items of note:         Acquisition-related and other charges 114,938 3,753     Discontinued operations, net of tax 4- (140)  Tax effect of above adjustments (excluding discontinued operations) 6  (17,410)(13,245)  Tax effect of corporate conversion and acquisitions 5  (1,156)(20,757) Adjusted net income 2   $108,131  $103,656             Adjusted net income per share, basic and diluted 2, 6, 7   $1.8255  $1.8004 n/m Income from continuing operations per share, basic and diluted 7   $1.1672  $1.5595 $1.5410Net income per share, basic and diluted 7   $1.1672  $1.5620 $1.4800         Year ended December 31,       2012 vs. 2011        % changeAdjusted net income per share 2, 6, 7       1.4%  n/m = not measurable  1 Expenses included acquisition-related and other charges relating to transaction costs and certain retention and incentive costs related to the Avista and Mortgagebot acquisitions, charges related to cost re-alignment initiatives, corporate development expenses related to strategic acquisition initiatives, and business integration costs.2 EBITDA and Adjusted net income are non-IFRS terms.  See Non-IFRS Financial Measures for a more completedescription of these terms.3  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.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 expired on April 1, 2011.  The results of these operations are presented as discontinued operations.5Adjustments for 2012 included a non-cash tax recovery related to liabilities recognized in connection with the acquisition of Mortgagebot.  Adjustments for 2011 included non-cash income tax recoveries recorded in connection with the conversion to a corporation and acquisitions and  de-recognition of previously recognized tax attributes.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 Diluted net income from continuing operations per share, 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 notincluded in the dilution calculation.OverviewOverall, D+H delivered solid operating performance in 2012 that was consistent with its strategic agenda.(in thousands of Canadian dollars, unaudited)                                    Year ended December 31,            Canadian Segment     U.S. Segment     Corporate     Consolidated        201220112010 201220112010 201220112010 201220112010Revenue    $ 701,018  $695,921 $649,715  $56,645 $28,799 $-  $- $- $-  $757,663 $724,720 $649,715 Expenses     531,417528,528 494,176  28,102 15,039 -  14,938 3,7538,428  574,457     547,320502,604EBITDA 1   169,601167,393155,539 28,54313,760-  (14,938) (3,753) (8,428) 183,206177,400147,111EBITDA Margin   24.2%24.1%23.9% 50.4%47.8%- --- 24.2%24.5%22.6%                                      Adjustments:     Acquisition-related and other charges 2     - --   -  -- 14,938 3,753 8,428   14,938    3,7538,428 Adjusted EBITDA 1    $169,601 $167,393 $155,539  $28,543 $13,760 $           -  $-  $- $-  $198,144 $181,153 $155,539Adjusted EBITDA Margin   24.2%24.1%23.9% 50.4%47.8%- --- 26.2%25.0%23.9%1 EBITDA and Adjusted EBITDA are non-IFRS terms.  See Non-IFRS Financial Measures for a more complete description of these terms.2Acquisition-related and other charges for 2012 include transaction costs and certain retention and incentive costs related to the Avista and Mortgagebot acquisitions, charges related to cost re-alignment initiatives, corporate development expenses related to strategic acquisition initiatives and business integration costs.  Amounts for 2011 consisted of transaction costs and certain retention and incentive expenses related to the Mortgagebot acquisition.  Amounts for 2010 related to restructuring charges incurred in connection withtransformation and integration initiatives.                   Year ended December 31,                Canadian  U.S.                  Segment  Segment  Consolidated                2012 vs. 20112012 vs. 20112012 vs. 2011                % change % change % changeRevenue            0.7%96.7%4.5%EBITDA 1            1.3%107.4%3.3%Adjusted EBITDA 1                1.3% 107.4%9.4%1 EBITDA and Adjusted EBITDA are non-IFRS terms.  See Non-IFRS Financial Measures for a more complete description of these terms.                   Year ended December 31,                Canadian  U.S.                  Segment  Segment  Consolidated                2011 vs. 20102011 vs. 20102011 vs. 2010                % change % change % changeRevenue            7.1%n/a11.5%EBITDA 1            7.6%n/a20.6%Adjusted EBITDA 1               7.6% n/a 16.5%1 EBITDA and Adjusted EBITDA are non-IFRS terms.  See Non-IFRS Financial Measures for a more complete description of these terms.Year-over-year growth in consolidated revenues and EBITDA was driven by both Canadian and U.S. Segments.Strong growth in Mortgagebot and the inclusion of Avista were primary contributors to year-over-year growth in revenues. Consolidated EBITDA for 2012 also benefited from strong growth in Mortgagebot, inclusion of Avista and savings realized from cost-realignment, transformation and integration initiatives.  These benefits were partially offset by acquisition-related and other charges incurred in relation to cost-realignment and strategic acquisition initiatives, and charges in connection with the acquisitions of Mortgagebot and Avista and business integration costs. Consolidated Adjusted EBITDA, which excludes these charges, was higher in 2012 compared to 2011.Compared to 2010, growth in revenues and EBITDA in 2011 were due primarily to the inclusion of ASSET and Mortgagebot acquired on January 18, 2011 and April 12, 2011 respectively.  EBITDA for 2010 included restructuring charges related to integration and transformation initiatives.  These initiatives were designed to better position the Business going forward to serve customers and improve the effectiveness, efficiency and scalability of operations which have resulted in efficiencies and improved delivery effectiveness.  In the latter part of 2011, the Business began to realize cost savings due to efficiencies and improved delivery effectiveness associated with these integration and transformation initiatives.  These positive contributions also continued to benefit consolidated EBITDA in 2012.For 2012, consolidated net income was lower, while consolidated Adjusted net income was higher, compared to 2011.  Increase in Adjusted net income is consistent with the overall growth of the Business. Consolidated Adjusted net income excluded the following: (i) impacts of non-cash 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 discontinued operations; 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.REVENUE - ANNUALConsolidated(in thousands of Canadian dollars, unaudited)         Year ended December 31,      201220112010 Payment solutions1    $301,432  $296,322 $293,838 Loan registration and recovery services    167,344  160,677 111,683 Loan servicing     128,925  131,143 125,698 Lending technology services 2    128,139  99,454 77,281 Business service solutions 3    31,823  37,124 41,215     $757,663  $724,720 $649,7151 Reported as Programs to chequing account in prior years.2Includes revenue reported as part of the U.S. segment.3 Reported as Other in prior years.Consolidated revenue for 2012 was $757.7 million, an increase of $32.9 million, or 4.5%, compared to 2011.  The increase was primarily due to growth in Mortgagebot and the inclusion of Avista acquired on May 3, 2012, in the U.S. Segment.  To a lesser extent, payment solutions and the loan registration service areas in the Canadian Segment also contributed to revenue growth.Consolidated revenue for 2011 of $724.7 million, increased by 11.5%, compared to 2010 primarily due to the inclusion of ASSET acquired January 18, 2011 and Mortgagebot, acquired April 12, 2011.Revenue - Canadian SegmentTotal revenues in the Canadian Segment for 2012 were $701.0 million, an increase of $5.1 million, or 0.7%, compared to 2011.(in thousands of Canadian dollars, unaudited)       Year ended December 31,  201220112010 Payment solutions 1  $301,432  $296,322 $293,838 Loan registration and recovery services   167,344  160,677 111,683 Loan servicing   128,925  131,143 125,698 Lending technology services 2  71,494  70,655 77,281 Business service solutions 3  31,823  37,124 41,215   $701,018  $695,921 $649,7151 Reported as Programs to chequing account in prior years.2Excludes revenues from Mortgagebot and Avista.3 Reported as Other in prior years.       Payment SolutionsRevenue from payment solutions for 2012 was $301.4 million, an increase of $5.1 million, or 1.7%, compared to 2011.  For 2011, payment solutions revenue increased by $2.5 million, or 0.8%, compared to 2010.  The year-over-year increases were attributable to the positive impact of higher average order values and product and service enhancements in the chequing and credit card programs partially offset by volume declines in cheque orders. Management believes that the downward trend in cheque order volumes is in the low to mid-single digit range annually, and in recent periods, there has been more volatility in personal cheque order volumes. Management expects that this volatility will continue into 2013. D+H continues to develop products and service enhancements to offset this impact and to generate future growth within this category.Loan Registration and Recovery Services Loan registration and recovery services revenue for 2012  was $167.3 million, an increase of $6.7 million, or 4.1%, compared to 2011.  This increase was mainly due to higher transaction volumes in registration services reflecting a continuing recovery in 2012 within the auto and auto lending markets.  Volumes in this area can be variable due to changes in the economy and changes in the auto and auto lending markets. Revenues related to registration services in 2011 benefited from specific customer initiatives in 2011 that contributed to higher revenues in that year.  The increase in revenue attributable to higher volumes in registration services was partially offset by an expected decline in the automotive lending recovery services, due to counter-cyclicality and certain program repatriations.Loan registration and recovery services revenue for 2011 of $160.7 million increased by $49.0 million, or 43.9%, compared to 2010 primarily due to the inclusion of ASSET, acquired on January 18, 2011.Loan Servicing Loan servicing revenue for 2012 of $128.9 million decreased by $2.2 million, or 1.7%, compared to 2011.  Loan servicing programs consist of student loan administration services, the largest portion of revenues within this service area, and credit card servicing. Modestly higher volumes and higher professional fees in 2012 were offset by contractual price declines and an expected reduction in fees from a previously announced consolidation and integration between two customers within the student loans program. We expect that the impact on revenue from the consolidation and integration of the two customers discussed above will continue through the first half of 2013.  Activities related to cost management and improving delivery efficiency are being directed towards lowering the impact of reduced pricing and fees related to the recent customer consolidation. The benefits from these cost management initiatives that we started to realize in 2012 will continue into 2013. Volumes in the student loan administration service area are expected to be relatively stable and modestly growing in the short term. During 2012, D+H successfully extended its largest student loan servicing contract for a multi-year term with opportunity for further extensions.  D+H services student loan portfolios under long-term contracts to governments and financial institutions. Successfully extending this contract provides greater certainty around revenue streams within the student loan administration services component.A modest increase in revenue within the student loan administration services was offset by a decline in revenues in the credit card servicing component within loan servicing programs.  The decline in 2012 in the credit card servicing component compared to the prior year was attributable to specific customer initiatives in prior periods that contributed to higher revenues in those periods.Loan servicing revenues for 2011 of $131.1 million increased 4.3% over 2010. Transaction revenue from student loan administrative services was relatively unchanged for 2011 as compared to 2010 as an increase in service volumes offset contractual price declines. The majority of the annual revenue increase is attributed to the credit card servicing area, primarily related to specific customer initiatives that increased both revenues and expenses.Lending Technology Services Revenue from lending technology services related to the Canadian Segment for 2012 was $71.5 million, an increase of $0.8 million, or 1.2%, compared to 2011. A modest increase in market activity was partially offset by the expected decrease in origination fees resulting from customer repatriation of certain services.  In general, due to tightening of mortgage rules announced by the Department of Finance on June 21, 2012 that became effective in July 2012, industry analysts expect the recently observed reduction in Canadian housing market prices and sales volumes to continue in major urban areas in 2013. Revenues in the future periods may also be impacted by price modifications, which are expected to be offset by potential revenue increases from the launch of new products in the Canadian lending market, including extension of our technology solutions across various areas in the lending value chain.Lending technology services revenue for 2011 was $70.7 million, a decrease of $6.6 million, or 8.5%, compared to 2010.   This decrease was due to reduced transaction-based fees related to origination volumes, which were impacted by the customer repatriation.Business Service SolutionsRevenues from business service solutions for 2012 were $31.8 million, compared to $37.1 million for 2011 and $41.2 million for 2010 due to program repatriations by certain customers in prior periods.  We expect the effects of these repatriated businesses to stabilize in upcoming periods.  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.Revenue - U.S. Segment(in thousands of Canadian dollars, unaudited)     Year ended December 31, 201220112010 Lending technology services $56,645  $28,799 $- U.S. Segment revenue related to online mortgage origination increased 96.5% to $56.6 million, compared to $28.8 million for  2011.  The increase in 2012 reflected the inclusion of Avista since its acquisition in May 2012, annualization of Mortgagebot's revenue and the strong ongoing organic growth in Mortgagebot as a result of higher volumes driven by continued low interest-rate environment in the U.S. and an increased customer base.  Within the U.S. Segment, subscription-based SaaS revenue represented approximately 68% of total revenue for 2012 compared to 78% for 2011.  Transaction revenue may be impacted in future periods as the U.S. housing market continues to show modest improvements and refinancing levels soften as interest rates accelerate in the U.S.EXPENSESExpenses - Consolidated  (in thousands of Canadian dollars, unaudited)        Year ended December 31,     201220112010Employee compensation and benefits 1   $226,030  $214,127 $192,069Non-compensation direct expenses 2   238,618  231,418 204,663Other operating expenses 3   109,809  101,775 105,872    $574,457  $547,320 $502,6041Employee compensation and benefits are net of apprenticeship tax credits and amounts capitalized related to software productdevelopment.2 Non-compensation direct expenses include materials, shipping, selling expenses and third party direct disbursements.3Other operating expenses include occupancy costs, communication costs, licensing fees, professional fees, contractor fees andexpenses not included in other categories.Consolidated expenses were $574.5 million for 2012, an increase of $27.1 million, or 5.0%, compared to 2011. This reflected the inclusion of the Avista cost base, annualization of Mortgagebot expenses and an increase in non-normal course expenses, which for 2012 included acquisition-related and other charges of $14.9 million in Corporate, consisting of cost-realignment initiatives, corporate development expenses related to strategic acquisition initiatives, transaction costs and retention and incentive costs related to acquisitions.  For 2011, non-normal course expenses of $3.8 million were incurred in connection with the acquisitions of ASSET and Mortgagebot, recorded as part of Corporate.Consolidated expenses for 2011 of $547.3 million increased by $44.7 million, or 8.9%, compared to 2010. The increase primarily reflected the inclusion of ASSET and Mortgagebot expenses and the ongoing costs associated with transformation and integration activities.  These increases were partially offset by cost management and other net savings in 2011, and by the impact of a restructuring charge in 2010.Expenses - Canadian SegmentTotal expenses for the Canadian Segment for 2012 were $531.4 million, an increase of $2.9 million, or 0.5%, compared to 2011. In 2011, Canadian Segment expenses of $528.5 million increased by $34.3 million, or 7.0%, compared to 2010 reflecting the inclusion of ASSET and the ongoing costs associated with transformation and integration activities.(in thousands of Canadian dollars, unaudited)             Year ended December 31,      2012  20112010Employee compensation and benefits 1  $199,078   $203,880 $183,641Non-compensation direct expenses 2  237,556   230,503 204,663Other operating expenses 3  94,783   94,145 105,872       $531,417   $528,528 $494,1761Employee compensation and benefits are net of apprenticeship tax credits and amounts capitalized related to software productdevelopment.2 Non-compensation direct expenses include materials, shipping, selling expenses and third party direct disbursements.3Other operating expenses include occupancy costs, communication costs, licensing fees, professional fees, contractor fees andexpenses not included in other categories. Other operating expenses are net of inter-segment management fees received fromthe U.S. segment.Employee compensation and benefitsEmployee compensation and benefits costs of $199.1 million for 2012, decreased by $4.8 million, or 2.4%, compared to 2011. Expenses for 2012 benefited from savings realized as a result of cost-realignment initiatives executed during 2012 and apprenticeship tax credits.  These benefits were partially offset by the replacement of contract labour (recorded as other operating expenses) with full-time staff and an increase in share-based compensation expense.Employee compensation and benefits costs for 2011 were $203.9 million, an increase of $20.2 million, or 11.0%, compared to 2010. The increase was primarily related to the inclusion of ASSET expenses, and a general increase in compensation levels, partially offset by the tax credits related to the apprenticeship program. Replacement of contract labour with full-time staff also contributed to the increase in 2011 compared to 2010.Non-compensation direct expensesNon-compensation direct expenses for the Canadian Segment of $237.6 million, increased by $7.1 million, or 3.1%, compared to 2011.  In general, these expenses directionally change with revenue changes.  An increase in direct costs associated with the loan registration services, which represents the largest portion of the increase, was consistent with the increase in revenues in this service area.  This increase was partially offset by a decrease in direct costs in other service areas.Non-compensation direct expenses for 2011 of $230.5 million, increased by $25.8 million, or 12.6%, compared to 2010. The increase was primarily attributable to third party direct disbursements within the recovery business.Other operating expensesOther operating expenses of $94.8 million increased by $0.6 million, or 0.7%, compared to 2011, primarily attributable to costs associated with technology transformation, integration and risk mitigation initiatives. 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.Other operating expenses for 2011 of $94.1 million decreased by $11.7 million, or 11.1%, compared to 2010.  The decrease in other operating expenses reflected decreases in several areas, including costs savings realized from transformation and integration project initiatives, as well as the impact of certain restructuring charges recorded in 2010.Expenses - U.S. SegmentTotal expenses for the U.S. Segment for 2012 were $28.1 million, an increase of $13.1 million, compared to 2011.  The increase was attributable to the inclusion of the Avista cost base, effective from the date of acquisition of May 3, 2012 and annualization of Mortgagebot expenses.(in thousands of Canadian dollars, unaudited)             Year ended December 31,      2012  20112010Employee compensation and benefits  $15,946   $8,493 $            -Non-compensation direct expenses   1,062   915 -Other operating expenses 1  11,094   5,631 -       $28,102   $15,039 $-1Other operating expenses include inter-segment management fees, occupancy costs, and expenses not included in other categories.Employee compensation and benefits costs of $15.9 million for 2012 for the U.S. Segment, increased by $7.5 million, or 87.8%, compared to 2011. The increase was primarily due to the inclusion of the Avista cost base, increased headcount to accommodate growth in the Mortgagebot business and annualization of Mortgagebot expenses.Non-compensation direct expenses for the U.S. Segment of $1.1 million, increased by $0.1 million, or 16.1%, compared to 2011 due to the inclusion of Avista and timing of the Mortgagebot acquisition.  In general, these expenses directionally change with revenue changes.Other operating expenses of $11.1 million for 2012 increased by $5.5 million, or 97.0%, compared to 2011, primarily attributable to expenses associated with cloud-based growth initiatives, annualization of Mortgagebot and the inclusion of Avista. Also included in other expenses for the periods presented are inter-segment management fees charged by the Canadian Segment for shared services.Expenses - Corporate(in thousands of Canadian dollars, unaudited)              Year ended December 31,      2012  20112010Employee compensation and benefits   $11,006   $1,754 $8,428Non-compensation direct expenses   -   - -Other operating expenses   3,932   1,999 -      $14,938   $3,753 $8,428 Employee compensation and benefits Employee compensation and benefits expenses for 2012 in Corporate of $11.0 million consisted of charges related to cost-realignment initiatives of $6.7 million, and retention and incentive expenses of $4.3 million incurred in connection with the Avista and Mortgagebot acquisitions. Charges incurred in relation to the cost-realignment initiatives are expected to benefit the Company in both current and future periods.   Annualized savings are expected to be realized going forward, and will be used to offset an increase in expenses to support future growth. These cost-realignment initiatives were made possible by the recent completion of a successful business integration project that began in late 2010.Employee compensation and benefits expenses for 2011 in Corporate of $1.8 million consisted of retention and incentive expenses in connection with the Mortgagebot acquisition, while the 2010 expenses consisted of a restructuring charge related to transformation and integration initiatives.Other expensesOther expenses for 2012 in Corporate included corporate development expenses related to strategic acquisition initiatives of $3.0 million, transaction costs of $0.6 million incurred in connection with the acquisition of Avista and business integration costs of $0.3 million.  Other expenses for 2011 consisted of transaction costs related to the Mortgagebot and ASSET acquisitions.EBITDA AND EBITDA MARGINConsolidatedConsolidated EBITDA of $183.2 million, increased by $5.8 million, or 3.3%, compared to $177.4 million for the same period in 2011. Growth in EBITDA in 2012 was mainly driven by the U.S Segment, partially offset by the impact of expenses not incurred in the normal course of operations recorded in Corporate.Compared to 2010, EBITDA for 2011 increased by $30.3 million, or 20.6%.  The majority of the increase was attributable to the inclusion of ASSET and Mortgagebot and the impact of the 2010 restructuring charge on EBITDA. EBITDA for 2011 was reduced by acquisition-related costs of $3.8 million in connection with the acquisitions of ASSET and Mortgagebot.  EBITDA for 2010 was impacted by a restructuring charge of $8.4 million.Consolidated EBITDA margin of 24.2% decreased from 24.5% in 2011 attributable to an increase in non-normal course expenses in 2012 in Corporate compared to 2011, as described below.Canadian SegmentCanadian Segment EBITDA for 2012 of $169.6 million was higher by 1.3%, compared to EBITDA of $167.4 million for 2011 and $155.5 million for 2010 due to the benefits realized from transformation and integration initiatives and cost-realignment initiatives, partially offset by the impact of integration and program repatriation by 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.  Compared to 2010, Canadian Segment EBITDA for 2011 also benefited from the inclusion of ASSET acquired in early 2011.Canadian Segment EBITDA margin for 2012 of 24.2%, compared favourably to an EBITDA margin of 24.1% in 2011 and 23.9% in 2010, due to benefits realized from transformation and integration initiatives.U.S. SegmentU.S. Segment EBITDA for 2012 was $28.5 million, compared to $13.8 million for 2011, attributable to strong growth in, and annualization of, the Mortgagebot business as well as the inclusion of Avista results effective from the date of acquisition of May 3, 2012.CorporateEBITDA for Corporate for 2012 included the impacts of: $6.7 million of charges in relation to cost-realignment initiatives as described earlier; corporate development costs related to strategic acquisition initiatives of $3.0 million; retention and incentive expenses of $4.3 million incurred in connection with Avista and Mortgagebot acquisitions; transaction costs of $0.6 million incurred in connection with the acquisition of Avista; and business integration costs of $0.3 million.Corporate EBITDA in 2011 was impacted by the acquisition-related expenses related to the Mortgagebot and ASSET acquisitions, whereas the 2010 Corporate EBITDA included a restructuring charge.ADJUSTED EBITDA AND ADJUSTED EBITDA MARGINConsolidatedConsolidated Adjusted 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, corporate development expenses related to strategic acquisition initiatives and business integration costs, all of 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.Consolidated Adjusted EBITDA of $198.1 million for 2012, increased by $17.0 million, or 9.4%, compared to 2011.  Consolidated Adjusted EBITDA for 2012 excluded acquisition-related expenses and other charges totalling $14.9 million related to non-normal course expenses, transaction costs and retention and incentive expenses for the Avista and Mortgagebot acquisitions and business integration costs.Consolidated Adjusted EBITDA of $181.2 million for 2011, increased by $25.6 million, or 16.5%, compared to 2010, primarily due to the inclusion of ASSET and Mortgagebot.Consolidated Adjusted EBITDA margin for 2012 was 26.2%, compared to 25.0% for 2011 and 23.9% in 2010 and the year-over-year growth in both years was due to EBITDA growth in the U.S. Segment and benefits realized from transformation and integration initiatives in the Canadian Segment.DEPRECIATION OF CAPITAL ASSETS AND AMORTIZATION OF NON-ACQUISITION INTANGIBLESConsolidated depreciation of capital assets and amortization of non-acquisition intangible assets increased year-over-year by $5.3 million, or 22.1%, to $29.2 million in 2012. The increase was related to the commencement of amortization of completed projects in 2012.Depreciation of capital assets and amortization of non-acquisition intangible assets for 2011 increased by $3.6 million, or 17.7%, compared to 2010.  The increase was primarily due to increased capital additions in 2010 and 2011 and the inclusion of the ASSET and Mortgagebot businesses.AMORTIZATION OF INTANGIBLES FROM ACQUISITIONSConsolidated amortization of acquisition-related intangibles for 2012 was $44.6 million, an increase of $3.9 million, or 9.6%, compared to 2011.  The increase was mainly due to acquisition intangibles from the Mortgagebot and Avista acquisitions.Amortization of acquisition-related intangibles for 2011 increased by $12.4 million, compared to 2010 due to the addition of intangibles related to the acquisitions of ASSET and Mortgagebot.INTEREST EXPENSEInterest expense for 2012 was higher by $0.3 million, compared to 2011, due to increased long-term, fixed-rate borrowings related to the acquisition of Avista and a minority investment in Compushare.  The increase in interest expense in 2012 was partially offset by favourable pricing on the renewed credit facility due to renegotiated terms.Interest expense for 2011 increased by $5.0 million, compared to 2010, due to increased borrowings in relation to the acquisitions of ASSET and Mortgagebot.INCOME FROM INVESTMENT IN AN ASSOCIATEConsolidated net income for 2012 included D+H's share of income related to the investment in an associate, Compushare, effective from April 24, 2012.  The investment in Compushare is accounted for using the equity method of accounting and is recognized initially at cost.  The cost of the investment includes transaction costs.Subsequent to the year ended December 31, 2012, D+H exercised its option to purchase all outstanding shares of Compushare, which resulted in 100% ownership of Compushare effective from the date of acquisition of January 29, 2013.AMORTIZATION AND FAIR VALUE ADJUSTMENT OF DERIVATIVE INSTRUMENTSInterest-rate swapsFor 2012, net unrealized gain related to interest-rate swaps was $2.0 million, compared to a net unrealized loss of $3.4 million for 2011 reflecting fair value adjustments related to changes in market interest rates at December 31, 2012 compared to December 31, 2011.  For 2010, a net unrealized gain of $0.8 million was recorded.INCOME TAX EXPENSE In 2012, an income tax expense of $23.1 million was recorded (2011 - $0.6 million expense). The Company continued realizing the benefit of prior-year tax losses and unamortized tax balances such that no significant cash taxes were payable in 2012.  Due to its corporate structure and certain available tax losses, the Company does not expect to pay any significant cash taxes until after 2013.The income tax expense for 2012 was partially offset by a tax recovery related to liabilities recognized in connection with the acquisition of Mortgagebot.Income tax expense for 2011 was reduced by a tax recovery related to the recognition of a deferred tax asset attributable to losses of certain U.S. subsidiaries that are now expected to be realized as a result of the acquisition of Mortgagebot, as well as the recognition of a deferred tax asset related to intangible assets that are now expected to be realized as a consequence of the corporate conversion and an internal reorganization, but partially offset by the de-recognition of certain previously recorded tax attributes. The deferred tax expense was also partially offset by a recovery related to changes in timing and permanent differences between tax and accounting balances.NET INCOME Consolidated net income of $69.1 million, was lower by $20.8 million, or 23.1%, compared to $89.9 million for 2011. Net income for 2012 benefited from higher EBITDA and unrealized gains of $2.0 million related to fair value changes on interest-rate swaps, compared to an unrealized mark-to-market loss of $3.4 million recognized in 2011. The increases in 2012 were more than offset by higher depreciation of capital assets and amortization of acquisition and non-acquisition intangibles described earlier.   Net income for 2011 benefited from the inclusion of non-cash tax recoveries of $20.8 million attributable to D+H's conversion to a corporation 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.Consolidated net income of $89.9 million for 2011 increased by $11.1 million, or 14.1%, compared to 2010.  The increase was primarily attributable to the impacts of the ASSET and Mortgagebot acquisitions, the changes in the tax status of the Business as a result of the conversion from an income trust to a corporation, the non-cash unrealized loss on interest-rate swaps and the various impacts of acquisition-related items and tax recoveries as previously described.ADJUSTED NET INCOME Effective January 1, 2011, as a result of the conversion from an income trust structure to a corporate structure, the Business commenced using Adjusted net income as a measure for evaluating its results.  Adjusted net income is a non-IFRS financial measure.  See Non-IFRS Financial Measures for a more complete description of this term.  Periods prior to January 1, 2011 do not have a comparable measure for Adjusted net income.Consolidated Adjusted net income for 2012 was $108.1 million, an increase of $4.5 million, or 4.3%, compared to $103.7 million for 2011.  Consolidated Adjusted net income for 2012 excluded a non-cash tax recovery of $1.2 million related to liabilities recognized in connection with the acquisition of Mortgagebot. Consolidated Adjusted net income for 2011 excluded non-cash tax recoveries of $20.8 million related to (i) the changes in the tax status of D+H as a result of the conversion from an income trust to a corporation and (ii) the acquisition of Mortgagebot in relation to losses within certain U.S. subsidiaries that were not previously recognized.CONSOLIDATED CASH FLOW AND LIQUIDITY The 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)              Year ended December 31,      20122011 2010 Cash and cash equivalents provided by (used in):           OPERATING ACTIVITIES          Income from continuing operations         $69,137  $89,788 $82,034 Depreciation and amortization of assets         73,821  64,631 48,592 Amortization and fair value adjustment of derivative instruments         (2,016) 3,386 (803)Income from investment in an associate, net of tax         (68) - - Business combination adjustments         -  - 2,257 Difference in interest expense and cash interest paid         2,096  1,567 993 Non-cash income tax and options expenses     23,992  943  3,300           166,962  160,315 136,373 Changes in non-cash working capital items         (3,881) (23,021) 423Changes in other operating assets and liabilities and discontinued operations            105  1,387  457 Net cash from operating activities      163,186  138,681 137,253                   FINANCING ACTIVITIES             Net change in long-term indebtedness       (3,415) 149,505 (11,000) Issuance costs, equity and debt       (902) (9,928) (2,564) Proceeds from issuance of shares       -  121,800 - Distributions and dividends paid during the year           (74,042) (70,640) (97,928) Net cash from (used in) financing activities     (78,359) 190,737 (111,492)               INVESTING ACTIVITIES             Capital expenditures      (33,317) (35,356) (30,264) Acquisition of investment in an associate    (10,058) - - Acquisition of subsidiaries    (37,946) (292,993) 167Sale of discontinued operations       -  - 1,602Net cash used in investing activities           (81,321)  (328,349)   (28,495) Increase (decrease) in cash and cash              equivalents for the year       3,506  1,069 (2,734) Cash and cash equivalents, beginning of year       2,213  1,144 3,878 Cash and cash equivalents, end of year          $5,719 $ 2,213$1,144As at December 31, 2012, cash and cash equivalents totalled $5.7 million, compared to $2.2 million at December 31, 2011.Operating ActivitiesFor 2012, operating activities provided $163.2 million, compared to $138.7 million during 2011, an increase of $24.5 million, or 17.7%. The changes in net cash from operating activities for 2012 compared to 2011 was due to strong growth in EBITDA compared to 2011 reflecting the annualization of Mortgagebot's results and the inclusion of Avista.Net cash from operating activities for 2011 increased by $1.4 million, or 1.0%, compared to 2010.Changes in Non-Cash Working Capital and Other Items(in thousands of Canadian dollars, unaudited)         Year ended December 31,    201220112010       Changes in non-cash working     capital items   $(3,881) $(23,021) $423 Changes in other operating assets and         liabilities and discontinued operations 105 1,387 457 Decrease (increase)  in non-cash working capital and       other items $(3,776)$(21,634) $880The net increase in non-cash working capital for 2012 was primarily attributable to an increase in trade receivables related to year-over-year revenue growth, partially offset by an increase in deferred revenue attributable to growth in enhancement services that is part of the payment solutions service area.The net increase in non-cash working capital items during 2011 was attributable to several items including increases in trade receivables and prepaid expenses in connection with enhancement services.   The net increase in working capital was also attributable to the receivables related to the apprenticeship tax credits program during 2011.  Payables remained relatively unchanged from 2010.The Company expects to experience continued variability of non-cash working capital due to the nature and timing of services rendered in connection with the businesses acquired.Financing ActivitiesNet cash used for financing activities during 2012 was $78.4 million compared to $190.7 million provided by financing activities during 2011. Net cash used for 2012 reflects drawings on credit facilities to fund the Compushare investment and the Avista acquisition in April and May 2012, respectively, increased dividend payments, and debt repayments during the year.  In 2012, D+H drew $50.6 million to finance the acquisition of Avista and the minority investment in Compushare and also made net debt repayments of $54.0 million.  Increased dividend payments during the current year were a result of D+H increasing its target annual dividend from $1.24 per share to $1.28 per share annualized. A quarterly dividend at the higher prescribed rate of $0.32 was paid on December 31, 2012 to shareholders of record as of November 30, 2012.Net cash provided by financing activities during 2011 reflected net proceeds from the issuance of equity and debt to fund the Mortgagebot and ASSET acquisitions in 2011.DividendsDuring 2012, D+H paid $1.25 per share to its shareholders ($0.31 for the first three quarters and $0.32 for the fourth quarter). During 2011, $1.2233 per share was paid.  Dividends paid during 2011 were 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, a $0.30 per share dividend paid on June 30, 2011 and $0.31 per share paid on September 30, 2011 and December 31, 2011.In 2010, cash distributions paid were $1.8396 per unit.Investing ActivitiesFor 2012, investing activities used $81.3 million compared to $328.3 million in 2011.Amounts for 2012 reflected the acquisition of Avista in May 2012 and the acquisition of a minority investment in Compushare in April 2012, and amounts for 2011 reflected the ASSET and Mortgagebot acquisitions in January and April 2011 respectively.Capital Expenditures Consolidated capital expenditures were $33.3 million, a decrease of $2.0 million, compared to 2011, due to timing of capital expenditures.  Expenditures in 2012 and 2011 included investment in integration and upgrade activities as well as development of technology products and capability.Capital expenditures for 2011 increased by $5.1 million compared to 2010 primarily due to increased integration and upgrade activities, consistent with the higher capital spend commencing in the latter part of 2010, and investments in building technology products and capability.EIGHT QUARTER CONSOLIDATED STATEMENT OF INCOME - SUMMARY1(in thousands of Canadian dollars, except per share amounts, unaudited)       2012  2011     Q4  Q3  Q2  Q1  Q4  Q3  Q2  Q1 Revenue $187,175 $191,807 $197,068 $181,613 $183,777 $186,275 $185,120 $169,548Expenses2 145,904 143,811 143,962 140,780 138,202 140,050 137,023 132,045EBITDA 2, 3 41,271 47,996 53,106 40,833 45,575 46,225 48,097 37,503Adjustments:                Acquisition-related and other charges 2     6,558  3,265 4,378 737 637 610 707 1,799Adjusted EBITDA 3 $47,829  $51,261 $57,484 $41,570 $46,212 $46,835 $48,804 $39,302                     EBITDA 2, 3 $41,271  $47,996 $53,106 $40,833 $45,575 $46,225 $48,097 $37,503Depreciation of capital assets and amortization                 of non-acquisition intangibles 7,956  7,030 7,360 6,837 6,749 5,820 5,827 5,504Amortization of intangibles from acquisitions 11,519  10,930 11,250 10,939 11,009 11,040 10,590 8,092Interest expense 4,629  4,943 4,821 4,821 4,909 4,792 5,272 3,989Income from investment in an associate, net of tax 23  (53) (38) - - - - -Amortization and fair value adjustment of                 derivative instruments4 (542) (445) 616 (1,645) (145) 3,991 1,227 (1,687)Income tax expense (recovery) 3,975  5,986 8,210 4,947 7,684 5,522 1,717 (14,290)Income from continuing operations 13,711  19,605 20,887 14,934 15,369 15,060 23,464 35,895Income from discontinued operations, net of tax 5 -  - - - - - - 140Net income $13,711  $19,605 $20,887 $14,934 $15,369 $15,060 $23,464 $36,035Adjustments:                 Non-cash items:                    Amortization of intangibles from acquisitions $11,519  $10,930 $11,250 $10,939 $11,009 $11,040 $10,590 $8,092    Amortization and fair value adjustment of                   derivative instruments 4 (542) (445) 616 (1,645) (145) 3,991 1,227 (1,687) Other items of note:                    Acquisition-related and other charges 2 6,558  3,265 4,378 737 637 610 707 1,799    Discontinued operations, net of tax 5 -  - - - - - - (140) Tax effect of above adjustments (excluding                  discontinued operations) 6 (5,603) (4,051) (4,758) (2,998) (3,391) (4,465) (3,256) (2,133) Tax effect of corporate conversion and acquisitions 7 -  (1,156) - - 2,080 - (3,628) (19,209)Adjusted net income3 $25,643  $28,148 $32,373 $21,967 $25,559 $26,236 $29,104 $22,757                                    Adjusted net income per share, basic and diluted 3, 8 $0.4329  $0.4752 $0.5465 $0.3709 $0.4315 $0.4429 $0.4974 $0.4275Income from continuing operations per share,                 basic and diluted 8 $0.2315  $0.3310 $0.3526 $0.2521 $0.2595 $0.2542 $0.4010 $0.6743Net income per share, basic and diluted 8 $0.2315  $0.3310 $0.3526 $0.2521 $0.2595 $0.2542 $0.4010 $0.67691 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 relating to transaction costs incurred in connection with acquisition of businesses, certain retention and incentive costs related to the Avista and Mortgagebot acquisitions, charges related to cost re-alignment initiatives,corporate development expenses related to strategic acquisition initiatives, and business integration costs.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.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 third quarter of 2012 included a non-cash tax recovery related to liabilities recognized in connection with the acquisition of Mortgagebot.  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 from continuing operations per share, 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.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. Also, there has been more volatility in personal cheque order volumes. Measured on a sequential quarter-to-quarter basis, revenues can also vary due to seasonality and are generally stronger in the second and third quarters. The acquisitions of ASSET on January 18, 2011, Mortgagebot on April 12, 2011, and Avista on May 3, 2012 increased revenues and expenses. EBITDA was impacted by acquisition-related and other charges during the quarters, including transaction costs, business integration costs, and certain retention and incentive costs related to acquisitions as well as other charges attributable to cost-realignment initiatives and strategic acquisition initiatives that are 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.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.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.Common Shares OutstandingAs at December 31, 2012, and February 26, 2013, common shares outstanding were 59,233,373, the same as at December 31, 2011.Normal Course Issuer Bid ("NCIB")On September 10, 2012, D+H announced that it received regulatory approval from the Toronto Stock Exchange ("TSX") to carry out a NCIB, pursuant to which the Corporation, during the period from September 12, 2012 to September 11, 2013, would be authorized to purchase up to 1,777,000 common shares, representing approximately 3% of the Corporation's issued and outstanding common shares as at September 4, 2012. Daily purchases will be limited to 37,491 common shares, other than block purchase exemptions.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.Automatic Share Purchase PlanD+H also announced that it entered into an automatic share purchase plan with a broker in order to facilitate repurchases of its common shares under its NCIB, and under which the broker may repurchase common shares under the NCIB at any time including without limitation when D+H would ordinarily not be permitted to due to regulatory restrictions or self-imposed blackout periods, based upon the parameters prescribed by the TSX and the terms of the parties' agreement.  The automatic share purchase plan has been reviewed and approved by the TSX.As of February 26, 2013, no shares were purchased under the NCIB.Financial Instruments The Company utilizes interest-rate swaps to hedge interest rate exposure and foreign exchange forward contracts to hedge foreign currency.Interest-rate swapsIn respect of interest-rate swap contracts with its lenders, as of December 31, 2012, the Company's borrowing rates on 55.1% of outstanding long-term indebtedness under the Seventh Amended and Restated Credit Agreement ("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-rateswaps  Maturity Date Notional amountAssetLiabilityInterest Rate ¹ December 18, 2014 $25,000 $- $6482.720% March 18, 2015 25,000 - 8362.940% March 18, 2017 25,000 - 1,7723.350% March 20, 2017 20,000 - 1,4303.366%  $95,000 $- $4,686 1The listed interest rates exclude bankers' acceptance fees and prime-rate spreads currently in effect.  Such fees and spreads couldincrease or decrease depending on the Company's financial leverage compared to certain levels specified in the Credit Agreement. Based on the financial leverage as at December 31, 2012, the Company's long-term bank indebtedness will be subject to bankers'acceptance fees of 1.50% over the applicable BA rate and prime rate spreads of 0.50% over the prime rate.As at December 31, 2012, the Company would have to pay the fair value of $4.7 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 from time to time to fix foreign exchange rates on its foreign currency transactions.   Under these contracts, the Company is required to deliver the agreed U.S. dollar amount and in return receive the contracted Canadian dollar amount set forth in each contract.  The Company has historically held its derivative contracts to maturity.These foreign exchange contracts are designated as hedges of the Corporation's net investment in foreign operations for which U.S. dollar is the functional currency, in accordance with IFRS for hedge accounting purposes.  The Company accounts for these hedges as net investment hedges as per IAS 39. The unrealized gains or losses arising from recording the foreign exchange contracts at fair value at each reporting date, to the extent that the hedging relationship is effective, are recorded in other comprehensive income or loss ("OCI") and presented in the foreign currency translation reserve within equity, and are limited to the translation gain or loss on the net investment. When the hedged net investment is disposed of, the relevant amounts in the translation reserve is transferred to profit or loss as part of the gain or loss on disposal.The Company had no foreign exchange forward contracts in place as at December 31, 2012.SELECTED BALANCE SHEET INFORMATION        Year ended December 31, (in thousands of Canadian dollars, unaudited)    2012 2011  2010  Total assets   $1,289,390  $1,283,325 $933,037 Total long-term liabilities   $474,089  $466,800 $271,461 Total assets of $1.3 billion at December 31, 2012 increased by $6.1 million compared to December 31, 2011.  The increase mainly relates to an increase in cash and accounts receivable balances as at December 31, 2012 compared to December 31, 2011.  The increase in cash was attributable to timing of payments and the increase in accounts receivable balance at December 31, 2012 related to higher revenues in 2012 compared to 2011.Total assets of $1.3 billion at December 31, 2011 increased by $350.3 million compared to December 31, 2010, primarily as a result of goodwill and acquisition intangibles from the ASSET and Mortgagebot acquisitions.Long-term liabilities at December 31, 2012 increased by $7.3 million compared to 2011, mainly due to an increase in deferred tax liabilities attributable to intangibles related to acquisitions,  temporary differences related to capitalized software development expenses and  increased deferred partnership income.  This increase was partially offset by a decrease in long-term indebtedness attributable to significant debt repayments during 2012, and a decrease in derivative liabilities related to the interest-rate swaps as a result of lower interest rates.  Long-term liabilities at December 31, 2011 increased by $195.3 million compared to 2010 primarily due to the increase in long-term borrowings related to the ASSET and Mortgagebot acquisitions and adjustments to deferred tax liabilities related to the acquisitions.CONTRACTUAL OBLIGATIONSThe table below presents the contractual obligations of the Business as at December 31, 2012 and the timing of the expected payments.        Less than1 - 34 - 5After 5 (in thousands of Canadian dollars, unaudited)  Total1 yearyearsyears years Long-term indebtedness  $346,324  $- $- $252,306 $94,018 Operating leases  32,257  8,440 11,853 6,007 5,957 Employee future benefits  2,938  184 367 367 2,020 Obligations relating to deferred compensation              program       4,691  2,154 2,537 - - Other obligations  5,666  5,024 642 - -    $391,876  $15,802 $15,399 $258,680 $101,995 Long-Term IndebtednessAs at December 31, 2012, the Company had $529.0 million of committed funds available.  The Company also had $279.8 million of additional uncommitted arrangements available, subject to 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 $174.0 million, which was drawn from bonds, as described below.  Total uncommitted funds consisted of $150.0 million under the credit facility and $129.8 million from the bonds, also as described below.Long-term indebtedness is recorded on the Consolidated Statement of Financial Position, net of unamortized deferred financing fees. Long-term indebtedness as at December 31, 2012, before deducting unamortized deferred finance fees of $5.7 million, was $346.3 million, compared to $352.1 million at December 31, 2011.Credit FacilityThe long-term indebtedness as at December 31, 2012 included drawings under a Credit Agreement dated April 12, 2011 of $172.3 million.  Total committed senior secured credit facilities under this Credit Agreement as at December 31, 2012 were $355.0 million, consisting of a revolving credit facility.  Effective July 5, 2012, 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. The Business is permitted to draw on the revolving facility's available balance of $182.7 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 December 31, 2012, the Credit Agreement provides for an additional uncommitted credit arrangement of up to $150.0 million with the use of the funds subject to the prior approval of the relevant lenders with any fees, spreads and other additional terms to be negotiated at that time.BondsAs at December 31, 2012, committed funds of $174.0 million were drawn and $129.8 million of uncommitted funds were available from bonds.The bonds consisted of the following:  (i) 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 included a $50.0 million bond issued under the senior secured Note Purchase Agreement at a fixed-interest rate of 5.99% and a $30.0 million bond at 5.17%, both maturing on June 30, 2017; (ii) a Note Purchase and Private Shelf Agreement ("Prudential Note Purchase Agreement") pursuant to which the Company issued US$ 63.0 million of senior secured guaranteed notes at 5.59%, maturing on April 12, 2021 to partially fund the acquisition of Mortgagebot.  Effective July 5, 2012, this 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. Also effective July 5, 2012,  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), including amendments to certain covenants.  In addition, D+H issued 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.Effective July 5, 2012, the Company also entered into a new Note Purchase and Private Shelf Agreement ("NY Life Note Purchase 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.Also during 2012, 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 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 December 31, 2012, the average effective interest rate on the Corporation's total indebtedness was approximately 4.5%, compared to 4.9% as at December 31, 2011.Operating LeasesThe Business rents facilities, equipment and vehicles under various operating leases. At December 31, 2012, minimum payments under these operating leases totalled $32.3 million.Employee Future BenefitsObligations relating to employee future benefits relate to the Company's non-pension post-retirement benefit plans. The latest actuarial valuation of the post-retirement benefit plans was performed as of December 31, 2012.Other ObligationsOther obligations include retention and incentive obligations related to the Avista and Mortgagebot acquisitions.Deferred Compensation ProgramDeferred Compensation Program consists of obligations under the Company's medium-term incentive plans consisting of two components: (i) restricted share units plan ("RSUs") and (ii) performance share units plan ("PSUs") both of which are cash-settled.  RSUs have a term of three years and vest 1/3 each year.  PSUs have a term of three years and vest in the third year.  The performance target for the PSUs is based on the annual three-year change in per share earnings during the three-year vesting period as measured against a performance grid set for a specific period.  The per share earnings is a derivative calculation of pre-incentive net income before taxes, amortization of acquisition intangibles and gains or losses on interest-rate swaps, as well as certain other adjustments made from time to time as approved by the Human Resources and Governance Committee. The fair value amount payable is recognized as an expense with a corresponding increase in liabilities over the three-year vesting period.  The liability is re-measured at each reporting date and at settlement date.  Any changes in the fair value of the liability are recognized in profit or loss.SUBSEQUENT EVENTOn January 29, 2013, D+H announced that it has exercised its option to purchase all outstanding shares of Santa Ana, California-based Compushare Inc., a technology management and cloud computing provider to financial institutions. Building on its initial minority investment in the company announced on April 24, 2012, this transaction gives D+H one hundred per cent ownership of Compushare.  Compushare offers a full suite of technology solutions that assist community banks, credit unions and other financial services providers in controlling costs, increasing efficiencies and preparing for increased compliance requirements. The acquisition was financed through drawings from D+ H's existing credit facilities.OTHERPlease refer to the annual report for a detailed discussion on management's annual report on disclosure controls and internal controls over financial reporting, critical accounting estimates, future accounting and reporting changes and business risks.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. ASSET and Mortgagebot acquisitions in 2011, the acquisition of Avista in 2012 and the acquisition of Compushare in 2013 continue to: (i) strengthen our ability to deliver on our goal of being a leading FinTech provider to the North American financial services industry; (ii) provide revenue diversification; (iii) provide strong and sustainable cash flows to fund future growth; and (iv) 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.  Cost-realignment initiatives executed in 2012 are expected to result in annualized savings benefitting both current and future periods, and will be used to offset an increase in expenses to support future growth. 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 include: (i) continuing to expand our customer base of SaaS mortgage POS, LOS and cloud-based offerings in the U.S.; (ii) the ongoing advancement of payment solutions through growth in value-added consumer and business services to financial institution customers; (iii) expanding our current technology-enabled offerings within the mortgage, auto, personal, student lending, commercial and leasing markets; and (iv) 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, 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) personal cheque order volume declines; (ii) competitive dynamics in Canadian lending; (iii) volume variances within the mortgage origination and lien registration markets; (iv) timing differences and variability in professional services work; and (v) fees and expenses associated with acquisitions and related integration activities.  Within the Canadian Segment, D+H believes that revenues from lending technology solutions in 2013 may be impacted by potential price adjustments and more moderate housing prices and lower real estate activity compared to the previous years, which is expected to be offset by potential revenue increases from the launch of new products in the Canadian lending market, including extension of our technology solutions across various areas in the lending value chain.  In the U.S. Segment, a slight recovery in the U.S. housing market is expected to somewhat offset a reduction in refinancing activity in 2013.For 2013, capital spending of approximately $35 million is currently anticipated, which may vary based on spending 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.CAUTION CONCERNING FORWARD-LOOKING STATEMENTSThis MD&A contains certain statements that constitute forward-looking information within the meaning of applicable securities laws ("forward-looking statements"). Statements concerning D+H's objectives, goals, strategies, intentions, plans, beliefs, expectations and estimates, and the business, operations, financial performance and condition of D+H are forward-looking statements.  The words "believe", "expect", "anticipate", "estimate", "intend", "may", "will", "would" and similar expressions and the negative of such expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.  These forward-looking statements are subject to important assumptions, including the following specific assumptions: the ability of D+H to meet its revenue, "EBITDA", "Adjusted EBITDA" and "Adjusted net income" targets (see Non-IFRS Financial Measures for a more complete description of the terms EBITDA, Adjusted EBITDA and Adjusted net income); 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 D+H's actual results, performance or achievements, or developments in its 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; increased pricing pressures and increased competition which could lead to loss of contracts or reduced margins; as well as general market conditions, including economic and interest rate dynamics. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.  The documents incorporated by reference herein also identify additional factors that could affect the operating results and performance of the Company. Forward-looking statements are based on management's current plans, estimates, projections, beliefs and opinions, and D+H does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change except as required by applicable securities laws.All of the forward-looking statements made in this MD&A and the documents incorporated by reference herein are qualified by these cautionary statements and other cautionary statements or factors contained herein, and there can be no assurance that the actual results or developments will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, the Company.ADDITIONAL INFORMATIONAdditional information relating to the Company, including the Company's most recently filed Annual Information Form, is available on SEDAR at www.sedar.com.Consolidated Statements of Financial Position     (in thousands of Canadian dollars)                December 31, 2012 December 31, 2011 ASSETS      Cash and cash equivalents  $5,719   $2,213 Trade and other receivables 84,996  79,753 Prepayments  14,104  12,821 Inventories  4,181  4,946 Derivative assets held for risk management -  126 Total current assets  109,000  99,859 Deferred tax assets 28,095  39,987 Property, plant and equipment 30,201  32,169 Investment in an associate 10,145  - Intangible assets 421,366  444,575 Goodwill 690,583  666,735 Total non-current assets  1,180,390  1,183,466 Total assets   $1,289,390   $  1,283,325       LIABILITIES      Trade payables, accrued and other liabilities  $100,226   $93,131 Deferred revenue 12,586  10,216 Provisions 381  3,480 Total current liabilities  113,193  106,827 Deferred revenue  9,419  9,492 Derivative liabilities held for risk management 4,686  6,703 Loans and borrowings 340,577  345,921 Deferred tax liabilities 113,291  97,350 Other long-term liabilities 6,116  7,334 Total non-current liabilities  474,089  466,800 Total liabilities  587,282  573,627 EQUITY      Capital 673,680  673,163 Retained earnings 22,544  27,449 Accumulated other comprehensive income 5,884  9,086 Total equity 702,108  709,698 Total liabilities and equity   $1,289,390   $  1,283,325 Consolidated Statements of Income       (in thousands of Canadian dollars, except per share amounts, unaudited)                      Three months ended   Twelve months ended   December 31, 2012 December 31, 2011 December 31, 2012 December 31, 2011 Revenue  $187,175   $183,777  $757,663   $724,720 Employee compensation and benefits55,886  54,920 226,030  214,127 Other expenses90,018  83,282 348,427  333,193 Income from operating activities before depreciation and amortization 41,271  45,575  183,206  177,400 Depreciation of property, plant and equipment2,586  2,799 10,070  10,303 Amortization of intangible assets16,889  14,959 63,751  54,328 Income from operating activities 21,796  27,817 109,385  112,769           Finance expenses:          Amortization and fair value adjustment of derivative instruments (542) (145) (2,016) 3,386  Interest expense 4,629  4,909 19,214  18,962 Income from investment in an associate, net of income tax23  - (68) - Income from continuing operations before income tax 17,686  23,053 92,255  90,421 Income tax expense3,975  7,684 23,118  633 Income from continuing operations 13,711  15,369 69,137  89,788 Income from discontinued operations, net of income tax-  - -  140 Net income $13,711   $15,369  $69,137   $89,928 Net income per share from continuing        operations, basic and diluted  $0.2315   $0.2595  $1.1672   $1.5595 Net income per share from discontinued        operations, basic and diluted  $-   $-  $-   $0.0025 Net income per share, basic and diluted  $0.2315   $0.2595  $1.1672   $1.5620 Consolidated Statements of Comprehensive Income        (in thousands of Canadian dollars, unaudited)                        Three months ended   Twelve months ended  December 31, 2012December 31, 2011 December 31, 2012 December 31, 2011 Net income  $13,711  $15,369  $69,137   $89,928            Cash flow hedges:            Amortization of mark-to-market adjustment            of derivative instruments - - -  86 Effective portion of changes in fair value - 295 (126) 126 Net amount transferred to profit or loss 533 (366) 366  (366) Foreign currency translation 1,819 (5,003) (3,442) 9,326 Total comprehensive income $16,063  $10,295  $65,935   $99,100 Consolidated Statements of Changes in Equity.     (in thousands of Canadian dollars, unaudited)                                Three months endedDecember 31, 2012   Accumulated othercomprehensive income (loss)        Share capital Foreigncurrencytranslationreserve Hedging reserve Retainedearnings /(deficit) Total equityBalance at September 30, 2012$673,691$4,065 $(533)$  27,789 $  705,012 Net income for the period -  -  -  13,711  13,711 Cash flow hedges -  -  533    533 Foreign currency translation -  1,819  -  -  1,819 Dividends -  -  -  (18,956) (18,956)Options  (11) -  -  -  (11)Balance at December 31, 2012$673,680$  5,884 $  - $  22,544 $  702,108                                            Three months endedDecember 31, 2011   Accumulated othercomprehensive income (loss)        Share capital Foreigncurrencytranslationreserve Hedging reserve Retainedearnings /(deficit) Total equityBalance at September 30, 2011$  673,007$  14,329$  (169)$  30,442$  717,609Net income for the period - - - 15,369 15,369Cash flow hedges - - (71) - (71)Foreign currency translation - (5,003) - - (5,003)Dividends - - - (18,362) (18,362)Options  156 - - - 156Balance at December 31, 2011$  673,163$  9,326$  (240)$ $ 27,449$  709,698                                           Twelve months endedDecember 31, 2012   Accumulated othercomprehensive income (loss)        Share capital Foreigncurrencytranslationreserve Hedgingreserve Retainedearnings Total equityBalance at January 1, 2012$673,163$  9,326 $  (240)$  27,449 $  709,698 Net income for the year -  -  -  69,137  69,137 Cash flow hedges -  -  240  -  240 Foreign currency translation -  (3,442) -  -  (3,442)Dividends -  -  -  (74,042) (74,042)Options  517  -  -  -  517 Balance at December 31, 2012$673,680$  5,884 $  - $  22,544 $  702,108                                            Twelve months endedDecember 31, 2011   Accumulated othercomprehensive income (loss)     Share capital Foreigncurrencytranslationreserve Hedgingreserve Retainedearnings Total equityBalance at January 1, 2011$  595,859$  -$  (86)$  (40,623)$  555,150Net income for the year - - - 89,928 89,928Cash flow hedges - - (154) - (154)Foreign currency translation - 9,326 - - 9,326Capital reduction pursuant to the Arrangement (40,623) - - 40,623 -Share issuance 117,617 - - - 117,617Dividends - - - (62,479) (62,479)Options  310 - - - 310Balance at December 31, 2011$  673,163$  9,326$  (240)$  27,449$  709,698 Consolidated Statements of Cash Flows         (in thousands of Canadian dollars, unaudited)                        Three months ended   Twelve months ended   December 31, 2012 December 31, 2011 December 31, 2012 December 31, 2011           Cash and cash equivalents provided by (used in):                    OPERATING ACTIVITIES          Income from continuing operations $  13,711  $15,369$   69,137 $  89,788 Adjustments for:           Depreciation of property, plant  and equipment  2,586  2,799 10,070  10,303  Amortization of intangible assets 16,889  14,959 63,751  54,328  Amortization of mark-to-market adjustment of derivative instruments  -  - -  86  Fair value adjustment of derivative  instruments  (542) (145) (2,016) 3,300  Interest expense  4,629  4,909 19,214  18,962  Deferred taxes  4,102  7,684 23,475  633  Options expense  (11) 156 517  310  Changes in non-cash working capital items  24,740  6,746 (3,881) (23,021)  Changes in other operating assets and liabilities (2,743) (1,080) 105  1,198  Income from investment in an associate, net of income tax 23  - (68) - Cash generated from operating activities  63,384  51,397 180,304  155,887  Interest paid  (4,248) (4,357) (17,118) (17,395)  Cash flows from discontinued operations  - - -  189 Net cash from operating activities  59,136  47,040 163,186  138,681           FINANCING ACTIVITIES          Repayment of long-term indebtedness  (26,187) (20,000) (106,467) (252,000) Proceeds from long-term indebtedness  -  - 103,052  401,505 Payment of issuance costs of long-term  indebtedness  -  (28) (902) (4,467) Proceeds from issuance of shares  -  - -  121,800 Payment of issuance costs of shares  -  - -  (5,461) Dividends paid  (18,956) (18,362) (74,042) (70,640) Net cash from (used in) financing activities  (45,143) (38,390) (78,359) 190,737          INVESTING ACTIVITIES          Acquisition of property, plant and equipment  (2,124) (2,148) (7,676) (8,007) Acquisition of intangible assets  (7,593) (8,484) (25,641) (27,349) Acquisition of subsidiaries - - (37,946) (292,993) Acquisition of investment in an associate -  - (10,058) - Net cash used in investing activities  (9,717) (10,632) (81,321) (328,349) Increase in cash and cash equivalents for the period  4,276  (1,982) 3,506  1,069 Cash and cash equivalents, beginning of period  1,443  4,195 2,213  1,144 Cash and cash equivalents, end of period $  5,719 $  2,213 $  5,719$  2,213 About 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 ongoing growth in our chosen markets. In 2012, D+H rose to 35th 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.