updated 2/16/2011 7:46:59 AM ET 2011-02-16T12:46:59

Operating highlights:

  Three months ended Year ended
  December 31 December 31
  2010  2009  2010  2009 
         
Revenues (millions) $ 552.1  $ 465.8  $ 1,986.3  $ 1,703.2 
Adjusted EBITDA (millions) (note 1)  37.0   36.0   147.3   133.1 
Adjusted EPS (note 2)  0.37   0.27   1.61   1.42 

TORONTO, Feb. 16, 2011 (GLOBE NEWSWIRE) -- FirstService Corporation (TSX:FSV) (Nasdaq:FSRV) preferred shares – (TSX:FSV.PR.U) today reported results for its fourth quarter and year ended December 31, 2010. All amounts are in US dollars.

Revenues for the fourth quarter were $552.1 million, a 19% increase relative to the same quarter in the prior year, Adjusted EBITDA (note 1) was $37.0 million, versus $36.0 million and Adjusted EPS (note 2) was $0.37, up 37% versus $0.27 reported in the prior year quarter. GAAP EPS from continuing operations was a loss of $0.12 per share in the quarter, compared to a loss of $0.40 for the same quarter a year ago.

For the year ended December 31, 2010, revenues were $1.986 billion, a 17% increase relative to the prior year, while Adjusted EBITDA was $147.3 million, up 11%, and Adjusted EPS was $1.61, up 13%. The Company's 29.6% equity investment in Colliers UK, which is not included in consolidated revenues or Adjusted EBITDA, negatively impacted results by $0.12 per share as it restructured its operations; excluding this loss, full year Adjusted EPS would have been $1.73 per share, up 22% versus the prior year. GAAP EPS from continuing operations for the year was $0.11, compared to a loss of $1.85 in the prior year.

"FirstService delivered solid fourth quarter and annual results for the year ended December 31, 2010," said Jay S. Hennick, Founder and Chief Executive Officer of FirstService. "Colliers International reported strong revenue growth across all service lines, while FirstService Residential and Property Services continued to deliver solid results considering the challenging, but improving, economic conditions in the US," he added.

About FirstService Corporation

FirstService Corporation is a global diversified leader in the rapidly growing real estate services sector, providing services in commercial real estate, residential property management and property services. Industry-leading service platforms include Colliers International, the third largest global player in commercial real estate services; FirstService Residential Management, the largest manager of residential communities in North America; and TFC, North America's largest provider of property services through franchise and contractor networks.

FirstService generates about US$2 billion in annual revenues and has more than 20,000 employees worldwide. More information about FirstService is available at www.firstservice.com .

Segmented Quarterly Results

Commercial Real Estate Services revenues totalled $268.0 million for the fourth quarter, up 30% relative to the prior year quarter. Revenue growth was comprised of 20% internal growth measured in local currencies, a 4% favourable impact from foreign currency translation and 6% growth from recent acquisitions. Internal growth was primarily driven by year over year revenue increases in the Americas and Asia Pacific regions. Adjusted EBITDA was $16.8 million, up 38% from $12.1 million reported in the prior year quarter. Fourth quarter results were negatively impacted by $1.0 million in Colliers International global re-branding costs.

Residential Property Management revenues were $164.4 million for the fourth quarter, up 5% relative to the prior year quarter. Revenue growth was comprised of 1% internal growth from property management contract wins and 4% from recent acquisitions. Adjusted EBITDA for the quarter was $11.5 million versus $14.9 million in the prior year period, impacted by a reduction in higher-margin ancillary service revenues in the current quarter and a surge in collections revenues and profits experienced in the prior year period.

Property Services revenues totalled $119.6 million, up 15% from $103.8 million in the prior year period, attributable primarily to foreclosure services growth, with franchised services also reporting more modest quarter-over-quarter growth. Adjusted EBITDA for the fourth quarter was $15.9 million, up 44% versus $11.1 million in the prior year quarter, primarily due to improved profitability in the franchise group relative to the prior year period.

Corporate costs were $7.9 million in the fourth quarter, relative to $2.8 million in the prior year period. The current quarter's results were impacted by higher performance-based executive compensation accruals and foreign currency translation of Canadian dollar-denominated expenses.

Segmented Annual Results

Commercial Real Estate Services annual revenues for 2010 totalled $861.9 million, up 38% relative to the prior year. Revenue growth was comprised of 26% internal growth measured in local currencies, a 6% favourable impact from foreign currency translation and 6% growth from recent acquisitions. Adjusted EBITDA for 2010 was $39.5 million, up from $6.4 million reported in the prior year. Annual results for 2010 were negatively impacted by $2.7 million in Colliers International global re-branding costs, which are expected to continue through the first half of 2011. In 2009, the Company incurred $13.5 million of cost containment expense to reduce its headcount and office footprint; these costs were excluded from Adjusted EBITDA to provide a more meaningful indication of ongoing results from operations.

Full year Residential Property Management revenues were $662.0 million, up 3% relative to 2009. Internal growth was nominal, but included an increase in contractual management fees offset by a decline in ancillary service revenues. Recent acquisitions accounted for the 3% revenue growth. Adjusted EBITDA was $59.1 million versus $61.0 million in the prior year, and was impacted by the reduction in ancillary service revenues which tend to be at higher margins than contractual management fees.

Property Services revenues for the full year totalled $462.1 million, up 6% from $434.8 million in the prior year, comprised entirely of internal growth in both franchising and foreclosure services. Adjusted EBITDA for the year was $68.2 million, versus $71.5 million in the prior year, primarily due to the foreclosure services operation, which experienced significant operating leverage in early 2009 from a surge of new business as well as additional costs from increases in the scope of client engagements in the current year.

Corporate costs were $22.3 million for the full year, relative to $11.2 million in the prior year. The current year's results were impacted by higher performance-based executive compensation and foreign currency translation of Canadian dollar-denominated expenses. Performance-based compensation was based on growth in full year Adjusted EPS less cost containment expense, which increased 44%.

Deferred Income Tax Asset Valuation Allowance

During the fourth quarter, the Company recorded a decrease in its valuation allowance with respect to deferred income tax assets, which decreased income tax expense by $0.7 million and increased GAAP earnings per share by $0.02. In the prior year quarter, the valuation allowance decreased by $1.2 million, increasing GAAP earnings per share by $0.04. For the full year, the increase to income tax expense and reduction to GAAP earnings per share were $12.6 million and $0.39, respectively (2009 - $17.3 million and $0.54, respectively). The valuation allowance relates to tax loss carry-forwards in the Company's Commercial Real Estate operations, which remain available to offset income tax over the next 17 to 20 years.

Conference Call

FirstService will be holding a conference call on Wednesday, February 16, 2011 at 11:00 a.m. Eastern Time to discuss results for the fourth quarter. The call will be simultaneously web cast and can be accessed live or after the call at www.firstservice.com in the "Investors / Newsroom" section.

Forward-looking Statements

This press release includes or may include forward-looking statements. Forward-looking statements include the Company's financial performance outlook and statements regarding goals, beliefs, strategies, objectives, plans or current expectations. These statements involve known and unknown risks, uncertainties and other factors which may cause the actual results to be materially different from any future results, performance or achievements contemplated in the forward-looking statements. Such factors include: (i) general economic and business conditions, which will, among other things, impact demand for the Company's services and the cost of providing services; (ii) the ability of the Company to implement its business strategy, including the Company's ability to acquire suitable acquisition candidates on acceptable terms and successfully integrate newly acquired businesses with its existing businesses; (iii) changes in or the failure to comply with government regulations; and (iv) other factors which are described in the Company's filings with applicable Canadian and United States securities regulatory authorities (which factors are adopted herein).

Summary financial information is provided in this press release. This press release should be read in conjunction with the Company's consolidated financial statements and MD&A to be made available on SEDAR at www.sedar.com.

Notes

1. Reconciliation of net earnings (loss) from continuing operations to Adjusted EBITDA:

Adjusted EBITDA is defined as net earnings (loss) from continuing operations, adjusted to exclude: (i) income tax; (ii) other expense (income); (iii) interest expense; (iv) depreciation and amortization; (v) goodwill impairment charges; (vi) acquisition-related items; (vii) stock-based compensation expense; and (vii) cost containment expense. Cost containment expense refers to charges in the Commercial Real Estate segment on account of headcount and office footprint reductions; such charges are shown only if material. The Company uses Adjusted EBITDA to evaluate its own operating performance and its ability to service debt, as well as an integral part of its planning and reporting systems. Additionally, this measure is used in conjunction with discounted cash flow models to determine the Company's overall enterprise valuation and to evaluate acquisition targets. Adjusted EBITDA is presented as a supplemental measure because the Company believes such measure is useful to investors as a reasonable indicator of operating performance because of the low capital intensity of its service operations. The Company believes this measure is a financial metric used by many investors to compare companies, especially in the services industry. This measure is not a recognized measure of financial performance under GAAP in the United States, and should not be considered as a substitute for operating earnings, net earnings or cash flow from operating activities, as determined in accordance with GAAP. The Company's method of calculating Adjusted EBITDA may differ from other issuers and accordingly, this measure may not be comparable to measures used by other issuers. A reconciliation of net earnings (loss) from continuing operations to Adjusted EBITDA appears below.

  Three months ended Twelve months ended
(in thousands of US$) December 31 December 31
  2010  2009  2010  2009 
         
Net earnings (loss) from continuing operations $ 12,223  $ 8,711  $ 47,900  $ (7,279)
Income tax  5,776   7,846   29,228   39,066 
Other expense (income)  (741)  (1,559)  3,007   (1,624)
Interest expense, net  4,201   3,884   17,397   12,506 
Realized gain on available for sale securities  --   --   --   (4,488)
Operating earnings  21,459   18,882   97,532   38,181 
Depreciation and amortization  12,646   10,689   47,886   46,383 
Goodwill impairment charge  --   --   --   29,583 
Acquisition-related items  2,209   --   (871)  -- 
Stock-based compensation expense  682   728   2,761   5,424 
Cost containment  --   5,655   --   13,496 
Adjusted EBITDA $ 36,996  $ 35,954  $ 147,308  $ 133,067 

2. Reconciliation of net earnings (loss) and net earnings (loss) per common share from continuing operations to adjusted net earnings and adjusted net earnings per common share:

Adjusted diluted net earnings per common share is defined as diluted net earnings (loss) per common share from continuing operations, adjusted for the effect, after income tax, of: (i) the non-controlling interest redemption increment; (ii) amortization expense related to intangible assets recognized in connection with acquisitions; (iii) goodwill impairment charges; (iv) acquisition-related items; (v) stock-based compensation expense; (vi) cost containment expense; (vii) realized gain on available-for-sale securities; and (viii) deferred income tax asset valuation allowances related to tax loss carry-forwards. Cost containment expense refers to charges in the Commercial Real Estate segment on account of headcount and office footprint reductions; such charges are shown only if material. The Company believes this measure is useful to investors because it provides a supplemental way to understand the underlying operating performance of the Company and enhances the comparability of operating results from period to period. Adjusted diluted net earnings per common share is not a recognized measure of financial performance under GAAP, and should not be considered as a substitute for diluted net earnings per common share from continuing operations, as determined in accordance with GAAP. The Company's method of calculating this non-GAAP measure may differ from other issuers and, accordingly, this measure may not be comparable to measures used by other issuers. A reconciliation of net earnings (loss) attributable to common shareholders to adjusted net earnings and of diluted net earnings (loss) per common share from continuing operations to adjusted diluted net earnings per common share appears below.

     
  Three months ended Twelve months ended
(in thousands of US$) December 31 December 31
  2010  2009  2010  2009 
         
Net (loss) earnings attributable to common shareholders $ (3,675) $ (9,351) $ 3,463  $ (54,955)
Non-controlling interest redemption increment  10,053   14,815   18,916   32,602 
Company share of net (earnings) loss from discontinued operations, net of tax  --   (2,492)  --   481 
Acquisition-related items  2,209   --   (871)  -- 
Amortization of intangible assets  5,087   3,348   19,606   19,550 
Goodwill impairment charge  --   --   --   29,583 
Stock-based compensation expense  682   728   2,761   5,424 
Cost containment  --   5,655   --   13,496 
Realized gain on available-for-sale securities  --   --   --   (4,488)
Income tax on adjustments  (2,019)  (3,174)  (7,778)  (11,361)
Deferred income tax asset valuation allowance  (672)  (1,232)  12,590   17,289 
Non-controlling interest on adjustments  (258)  (354)  153   (5,735)
Adjusted net earnings $ 11,407  $ 7,943  $ 48,840  $ 41,886 
         
  Three months ended Twelve months ended
(in US$) December 31 December 31
  2010  2009  2010  2009 
         
Net (loss) earnings per common share from continuing operations $ (0.12) $ (0.40) $ 0.11  $ (1.85)
Non-controlling interest redemption increment  0.33   0.50   0.62   1.10 
Acquisition-related items  0.07   --   0.03   -- 
Amortization of intangible assets, net of tax  0.10   0.07   0.40   0.39 
Goodwill impairment charge  --   --   --   0.93 
Stock-based compensation expense, net of tax  0.01   0.02   0.06   0.11 
Cost containment, net of tax  --   0.12   --   0.30 
Realized gain on available-for-sale securities  --   --   --   (0.10)
Deferred income tax asset valuation allowance  (0.02)  (0.04)  0.39   0.54 
Adjusted diluted net earnings per common share $ 0.37  $ 0.27  $ 1.61  $ 1.42 
 
 
FIRSTSERVICE CORPORATION
Condensed Consolidated Statements of Earnings (Loss)
(in thousands of US dollars, except per share amounts)
  Three months Twelve months
  ended December 31 ended December 31
(unaudited) 2010  2009  2010  2009 
         
Revenues $ 552,090  $ 465,789  $ 1,986,271  $ 1,703,222 
         
Cost of revenues  331,193   300,009  1,221,323   1,062,406 
Selling, general and administrative expenses  184,583   136,209  620,401   526,669 
Depreciation   7,559   7,341  28,280   26,833 
Amortization of intangible assets  5,087   3,348  19,606   19,550 
Goodwill impairment charge   --   --   --   29,583 
Acquisition-related items (1)  2,209   --  (871)  -- 
Operating earnings  21,459   18,882   97,532   38,181 
Interest expense, net  4,201   3,884   17,397   12,506 
Other (income) expense  (741)  (1,559)  3,007   (6,112)
Earnings before income tax  17,999   16,557   77,128   31,787 
Income tax (2)  5,776   7,846   29,228   39,066 
Net earnings (loss) from continuing operations  12,223   8,711   47,900   (7,279)
Discontinued operations, net of income tax (3)  --   2,672   --   (576)
Net earnings (loss)  12,223   11,383   47,900   (7,855)
Non-controlling interest share of earnings  3,320   3,394   15,420   4,397 
Non-controlling interest redemption increment   10,053   14,815   18,916   32,602 
Net (loss) earnings attributable to Company   (1,150)  (6,826)  13,564   (44,854)
Preferred share dividends  2,525   2,525   10,101   10,101 
Net (loss) earnings attributable to common shareholders $ (3,675) $ (9,351) $ 3,463  $ (54,955)
         
Net (loss) earnings per common share         
Basic        
Continuing operations $ (0.12) $ (0.40) $ 0.12  $ (1.85)
Discontinued operations  --   0.08   --   (0.02)
  $ (0.12) $ (0.32) $ 0.12  $ (1.87)
         
Diluted        
Continuing operations $ (0.12) $ (0.40) $ 0.11  $ (1.85)
Discontinued operations  --   0.08   --   (0.02)
  $ (0.12) $ (0.32) $ 0.11  $ (1.87)
         
Adjusted diluted net earnings per common share (4) $0.37  $ 0.27  $1.61  $1.42 
         
Weighted average common shares (thousands)        
Basic  30,266   29,547   30,081   29,438 
Diluted  30,669   29,719   30,367   29,516 
 
Notes to Condensed Consolidated Statements of Earnings
(1) Acquisition-related items include contingent acquisition consideration fair value adjustments, contingent acquisition consideration-related compensation expense, settlements of contingent liabilities of acquired entities initially recognized at the acquisition date and transaction costs.
(2) Income tax expense for the three months ended December 31, 2010 includes a $672 reversal of valuation allowance related to deferred income tax assets (2009 -- $1,232 reversal); income tax expense for the year ended December 31, 2010 includes a $12,590 valuation allowance (2009 -- $17,289).
(3) Amount shown is before NCI share. For the three months ended December 31, 2010, NCI share of discontinued operations was nil (2009 -- $180); for the year ended December 31, 2010, NCI share of discontinued operations was nil (2009 - ($95)).
(4) See definition and reconciliation above.
 
 
Condensed Consolidated Balance Sheets
(in thousands of US dollars)
 
 
(unaudited) December 31, 2010 December 31, 2009
     
Assets    
Cash and cash equivalents $ 100,359  $ 99,778 
Restricted cash  4,337   5,039 
Accounts receivable  262,654   214,285 
Inventories  9,140   9,458 
Prepaid expenses and other current assets  43,140   53,733 
Current assets  419,630   382,293 
Other non-current assets  50,726   46,479 
Fixed assets  86,134   75,939 
Goodwill and intangible assets  575,976   504,819 
Total assets $ 1,132,466  $ 1,009,530 
     
     
Liabilities and shareholders' equity    
Accounts payable and accrued liabilities $ 346,156  $ 269,668 
Other current liabilities  26,498   29,008 
Long-term debt - current   39,249   22,347 
Current liabilities  411,903   321,023 
Long-term debt - non-current   201,491   213,647 
Convertible unsecured subordinated debentures  77,000   77,000 
Other liabilities  35,291   27,606 
Deferred income tax  33,175   40,052 
Non-controlling interests   174,358   164,168 
Shareholders' equity  199,248   166,034 
Total liabilities and equity $ 1,132,466  $ 1,009,530 
     
     
Supplemental balance sheet information    
Total debt $ 317,740  $ 312,994 
Total debt excluding convertible debentures  240,740   235,994 
Total debt, net of cash  217,381   213,216 
Total debt excluding convertible debentures, net of cash  140,381   136,216 
 
 
Consolidated Statements of Cash Flows
(in thousands of US dollars)
  Three months ended Twelve months ended
  December 31 December 31
(unaudited) 2010  2009  2010  2009 
         
Cash provided by (used in)        
         
Operating activities        
Net earnings (loss) from continuing operations $ 12,223  $ 8,711  $ 47,900  $ (7,279)
Items not affecting cash:        
Depreciation and amortization  12,646   10,689   47,886   46,383 
Goodwill impairment charge  --   --   --   29,583 
Deferred income tax  (438)  (4,057)  (7,440)  (3,178)
Other   4,115   708   2,817   2,548 
   28,546   16,051   91,163   68,057 
         
Changes in operating assets and liabilities  26,078   41,815   23,888   15,240 
Discontinued operations  --   (2,869)  --   (2,248)
Net cash provided by operating activities  54,624   54,997   115,051   81,049 
         
Investing activities        
Acquisition of businesses, net of cash acquired   (21,115)  (11,239)  (34,710)  (16,831)
Purchases of fixed assets  (9,303)  (5,686)  (32,460)  (24,234)
Other investing activities  (2,460)  (14,638)  1,045   (5,829)
Discontinued operations  --   1,511   --   1,343 
Net cash used in investing activities  (32,878)  (30,052)  (66,125)  (45,551)
         
Financing activities        
Increase in long-term debt, net  8,324   27,411   1,747   43,197 
Purchases of non-controlling interests (net)  (18,617)  (13,148)  (38,210)  (42,246)
Dividends paid to preferred shareholders   (2,525)  (2,525)  (10,101)  (10,101)
Other financing activities  (1,946)  (4,936)  (4,486)  (14,380)
Net cash (used in) provided by financing activities  (14,764)  6,802   (51,050)  (23,530)
         
Effect of exchange rate changes on cash  (1,517)  4,611   2,705   7,761 
         
Increase in cash and cash equivalents  5,465   36,358   581   19,729 
         
Cash and cash equivalents, beginning of period including cash held by discontinued operations  94,894   63,420   99,778   80,049 
         
Cash and cash equivalents, end of period including cash held by discontinued operations $ 100,359  $ 99,778  $ 100,359  $ 99,778 


Segmented Revenues, Adjusted EBITDA and Operating Earnings
(in thousands of US dollars)
 
  Commercial Residential      
  Real Estate Property Property    
(unaudited) Services Management Services Corporate Consolidated
           
Three months ended December 31          
2010          
Revenues $ 268,014  $ 164,431  $ 119,572  $ 73  $ 552,090 
Adjusted EBITDA  16,759   11,545   15,883   (7,873)  36,314 
Stock-based compensation          682 
           36,996 
Operating earnings  7,888   8,189   13,417   (8,035)  21,459 
           
2009          
Revenues $ 205,953  $ 155,980  $ 103,818  $ 38  $ 465,789 
Adjusted EBITDA  6,465   14,886   11,061   (2,841)  29,571 
Stock-based compensation          728 
Cost containment  5,655         5,655 
   12,120         35,954 
           
Operating earnings  1,162   11,997   8,677   (2,954)  18,882 
           
           
  Commercial Residential      
  Real Estate Property Property    
  Services Management Services Corporate Consolidated
Twelve months ended December 31          
2010          
Revenues $ 861,917  $ 662,033  $ 462,141  $ 180  $ 1,986,271 
Adjusted EBITDA  39,485   59,119   68,215   (22,272)  144,547 
Stock-based compensation          2,761 
           147,308 
Operating earnings  14,694   46,670   58,671   (22,503)  97,532 
           
2009          
Revenues $ 622,996  $ 645,251  $ 434,838  $ 137  $ 1,703,222 
Adjusted EBITDA  (7,051)  60,960   71,475   (11,237)  114,147 
Stock-based compensation          5,424 
Cost containment  13,496         13,496 
   6,445         133,067 
Operating earnings  (61,665)  49,399   62,028   (11,581)  38,181 
CONTACT: Jay S. Hennick
         Founder & CEO
         
         D. Scott Patterson
         President & COO
         
         John B. Friedrichsen
         Senior Vice President & CFO
         (416) 960-9500

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