FirstService Reports Second Quarter Results
- Press Release
- Source: FirstService Corporation
- On 7:30 am EDT, Wednesday July 29, 2009
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Operating highlights:
Quarter ended Six months ended
June 30 June 30
------------------- -------------------
2009 2008 2009 2008
--------- --------- --------- ---------
Revenues (millions) $425.3 $454.8 $786.4 $823.9
EBITDA (millions) $41.2 $47.1 $53.6 $47.5
Adjusted EPS $0.46 $0.56 $0.55 $0.41
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| FSRV | 18.67 | +0.09 |
TORONTO, July 28, 2009 (GLOBE NEWSWIRE) -- FirstService Corporation (TSX:FSV - News; TSX:FSV.PR.U - News; Nasdaq:FSRV - News) today reported results for its second quarter ended June 30, 2009. All amounts are in US dollars.
For the quarter ended June 30, 2009, revenues were $425.3 million, a decrease of 7% relative to the same period in the prior year, EBITDA (1) was $41.2 million, down from $47.1 million and Adjusted EPS (2) was $0.46, versus $0.56 reported in the prior year period. GAAP EPS from continuing operations was a loss of $0.08 per share in the quarter, compared to $0.45 for the same quarter a year ago.
For the six months ended June 30, 2009, revenues were $786.4 million, a decrease of 5% relative to the same period in the prior year, EBITDA (1) was $53.6 million, up 13% from $47.5 million in the prior year and Adjusted EPS (2) was $0.55, up from $0.41 reported in the prior year period. GAAP EPS from continuing operations was a loss of $1.62 for the six month period, compared to $0.17 for the same period a year ago.
"We remain pleased with the results of our Residential Property Management and Property Services segments, particularly the strong results from Field Asset Services, one of America's leading providers of property preservation and foreclosure services," said Jay S. Hennick, Founder and Chief Executive Officer of FirstService Corporation. "Despite revenue declines in Commercial Real Estate again this quarter compared to the same quarter last year, we did see an increase in revenues compared to the first quarter, which, combined with the significant cost containment initiatives instituted over the past 18 months, allowed us to earn a modest profit led by the results of our market-leading service platforms in Canada, Australia, New Zealand and Latin America," he concluded.
About FirstService Corporation
FirstService is a global diversified leader in the rapidly growing real estate services sector, providing services in the following three areas: commercial real estate; residential property management; and property services. Industry-leading service platforms include: FirstService Commercial Real Estate Services, the fourth largest global player in commercial real estate; 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 is a diversified property services company with more than US$1.7 billion in annualized revenues and over 18,000 employees worldwide. More information about FirstService is available at www.firstservice.com.
Segmented Quarterly Results
Revenues in Commercial Real Estate Services totalled $142.6 million for the quarter, down 32% relative to the prior year quarter. Excluding the impact of acquisitions, revenues declined 38% (28% on a local currency basis) as a result of a reduction in investment sales and leasing activity in all markets due to the global economic slowdown, and the depreciation of foreign currencies relative to the US dollar. Quarterly EBITDA, before a non-recurring $2.9 million cost containment charge, was $2.0 million, versus EBITDA of $21.1 million in the year-ago period.
Residential Property Management revenues increased to $167.9 million for the quarter, up 3% versus the prior year period, attributable to a 6% increase in property management contract revenue, offset by a decline in ancillary service revenues. EBITDA for the quarter was $16.9 million, versus $15.9 million in the prior year period.
Revenues in Property Services totalled $114.8 million, an increase of 42% over the prior year period. The revenue increase was attributable primarily to Field Asset Services and Paul Davis Restoration. Revenues from the segment's consumer-oriented franchise operations declined 30% as a result of the weak US economy. EBITDA in the second quarter was $22.7 million, an increase of 89% versus $12.0 million in the prior year.
Quarterly corporate costs were $2.0 million, relative to $2.8 million in the prior year period.
Deferred Income Tax Charge
During the quarter, the Company recorded a non-cash valuation allowance with respect to deferred income tax assets, which increased income tax expense by $2.5 million and reduced GAAP earnings per share by $0.08. For the six month period ended June 30, 2009, the valuation allowance amounted to $15.0 million, or $0.47 per share. The valuation allowance relates to tax loss carry-forwards in the Company's North American Commercial Real Estate operations. The loss carry-forwards remain available to offset taxes over the next 20 years.
Conference Call
FirstService will be holding a conference call on Wednesday, July 29, 2009 at 11:00 am Eastern Daylight Time to discuss results for the second 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.
Footnotes
---------
1. Reconciliation of net earnings (loss) from continuing operations to
EBITDA:
Three months ended Six months ended
June 30 June 30
(in thousands of US dollars) ------------------- -------------------
(unaudited) 2009 2008 2009 2008
--------- --------- --------- ---------
Net earnings (loss) from
continuing operations $11,659 $23,837 $(32,668) $17,647
Income tax 11,693 8,811 19,184 179
Other income (963) (1,094) (1,054) (1,920)
Interest expense, net 3,040 3,724 5,694 7,569
--------- --------- --------- ---------
Operating earnings (loss) 25,429 35,278 (8,844) 23,475
Depreciation 6,625 6,062 12,364 11,625
Amortization of intangible
assets 4,732 4,038 11,253 9,287
Goodwill impairment charge -- -- 29,583 --
--------- --------- --------- ---------
36,786 45,378 44,356 44,387
Stock-based compensation
expense 1,534 945 3,171 2,320
Cost containment 2,863 790 6,075 790
--------- --------- --------- ---------
EBITDA $41,183 $47,113 $53,602 $47,497
--------- --------- --------- ---------
EBITDA is defined as net earnings from continuing operations before income taxes, interest, depreciation and amortization, stock-based compensation expense and other non-cash or non-recurring expenses. The Company uses EBITDA to evaluate operating performance. EBITDA is an integral part of the Company's planning and reporting systems. Additionally, the Company uses multiples of current and projected EBITDA in conjunction with discounted cash flow models to determine its overall enterprise valuation and to evaluate acquisition targets. The Company believes EBITDA is a reasonable measure of operating performance because of the low capital intensity of its service operations. The Company also believes EBITDA is a financial metric used by many investors to compare companies, especially in the services industry, on the basis of operating results and the ability to incur and service debt. EBITDA is not a recognized measure of financial performance under United States generally accepted accounting principles (GAAP), and should not be considered as a substitute for operating earnings, net earnings or cash flows from operating activities, as determined in accordance with GAAP. The Company's method of calculating EBITDA may differ from other issuers and accordingly, EBITDA may not be comparable to measures used by other issuers.
2. Reconciliation of net (loss) earnings and net (loss) earnings per
common share from continuing operations to adjusted net earnings and
adjusted net earnings per share:
Three months ended Six months ended
(in thousands of US dollars) June 30 June 30
------------------- -------------------
(unaudited) 2009 2008 2009 2008
--------- --------- --------- ---------
Net (loss) earnings
attributable to common
shareholders $(1,918) $24,606 $(50,397) $(8,796)
Non-controlling interest
redemption increment 8,931 (9,357) 10,847 12,068
Company share of net
(earnings) loss from
discontinued operations, net
of tax (364) (625) 2,954 1,856
Amortization of intangible
assets 4,732 4,038 11,253 9,287
Goodwill impairment charge -- -- 29,583 --
Stock-based compensation
expense 1,534 945 3,171 2,320
Cost containment 2,863 790 6,075 790
Realized gain on sale of AFS
securities (943) -- (943) --
Income tax on adjustments (2,906) (1,996) (6,653) (4,249)
Deferred income tax valuation
allowance 2,476 -- 14,958 --
Non-controlling interest on
adjustments (770) (407) (4,709) (941)
--------- --------- --------- ---------
Adjusted net earnings from
continuing operations $13,635 $17,994 $16,139 $12,335
--------- --------- --------- ---------
Three months ended Six months ended
(in US dollars) June 30 June 30
------------------- -------------------
(unaudited) 2009 2008 2009 2008
--------- --------- --------- ---------
Diluted net (loss) earnings
per common share from
continuing operations $(0.08) $0.45 $(1.62) $0.17
Non-controlling interest
redemption increment 0.30 -- 0.37 --
Amortization of intangible
assets, net of income tax 0.09 0.07 0.23 0.17
Goodwill impairment charge -- -- 0.93 --
Stock-based compensation
expense, net of income tax 0.03 0.02 0.06 0.05
Cost containment, net of
income tax 0.06 0.02 0.13 0.02
Realized gain on sale of AFS
securities, net of income tax (0.02) -- (0.02) --
Deferred income tax valuation
allowance 0.08 -- 0.47 --
--------- --------- --------- ---------
Adjusted diluted net earnings
per common share from
continuing operations $0.46 $0.56 $0.55 $0.41
--------- --------- --------- ---------
The Company is presenting adjusted earnings measures to eliminate the impact of: (i) the non-controlling interest ("NCI") redemption increment in connection with SFAS 160 and related guidance; (ii) amortization expense related to intangible assets recognized in connection with acquisitions; (iii) a non-recurring goodwill impairment charge; (iv) stock-based compensation expense; (v) non-recurring cost containment expenses; (vi) any realized gains or losses on the sale of available-for-sale securities and (vii) a deferred income tax valuation allowance related to tax loss carry-forwards. All of the adjustments are considered "non-GAAP financial measures" under applicable securities regulatory authority policies and guidelines.
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 full quarterly financial statements and MD&A to be made available on SEDAR at www.sedar.com.
FIRSTSERVICE CORPORATION
Condensed Consolidated Statements of Earnings
---------------------------------------------
(in thousands of US dollars, except per share amounts)
Three months ended Six months ended
June 30 June 30
------------------- -------------------
(unaudited) 2009 2008 2009 2008
--------- --------- --------- ---------
Revenues $425,344 $454,769 $786,353 $823,900
Cost of revenues 259,316 272,510 486,928 505,864
Selling, general and
administrative expenses 129,242 136,881 255,069 273,649
Depreciation 6,625 6,062 12,364 11,625
Amortization of intangible
assets 4,732 4,038 11,253 9,287
Goodwill impairment charge -- -- 29,583 --
--------- --------- --------- ---------
Operating earnings (loss) 25,429 35,278 (8,844) 23,475
Other income (963) (1,094) (1,054) (1,920)
Interest expense, net 3,040 3,724 5,694 7,569
--------- --------- --------- ---------
23,352 32,648 (13,484) 17,826
Income tax (1) 11,693 8,811 19,184 179
--------- --------- --------- ---------
Net earnings (loss) from
continuing operations 11,659 23,837 (32,668) 17,647
Discontinued operations, net
of tax (2) 692 325 (3,229) (3,218)
--------- --------- --------- ---------
Net earnings (loss) 12,351 24,162 (35,897) 14,429
Non-controlling interest
share of earnings (loss) 2,812 6,297 (1,398) 5,925
Non-controlling interest
redemption increment 8,931 (9,357) 10,847 12,068
--------- --------- --------- ---------
Net earnings (loss)
attributable to Company $ 608 $27,222 $(45,346) $(3,564)
Preferred share dividends 2,526 2,616 5,051 5,232
--------- --------- --------- ---------
Net (loss) earnings
attributable to common
shareholders $(1,918) $24,606 $(50,397) $(8,796)
========= ========= ========= =========
Net (loss) earnings per common
share (3)
Basic
Continuing operations $(0.08) $0.49 $(1.62) $0.17
Discontinued operations 0.01 0.02 (0.10) (0.06)
--------- --------- --------- ---------
$(0.07) $0.51 $(1.72) $0.11
========= ========= ========= =========
Diluted (4)
Continuing operations $(0.08) $0.45 $(1.62) $0.17
Discontinued operations 0.01 0.02 (0.10) (0.06)
--------- --------- --------- ---------
$(0.07) $0.47 $(1.72) $0.11
========= ========= ========= =========
Adjusted diluted net earnings
per common share from
continuing operations (5) $0.46 $0.56 $0.55 $0.41
========= ========= ========= =========
Weighted average common shares
outstanding: (in thousands) 29,405 30,099 29,380 30,041
29,427 30,365 29,388 30,322
Notes to Condensed Consolidated Statements of Earnings
(1) Income tax expense for the three months ended June 30, 2009
includes a $2,476 non-cash valuation allowance charge related to
deferred income tax assets (2008 - nil); income tax expense for the
six months ended June 30, 2009 includes a $14,958 non-cash valuation
allowance charge related to deferred income tax assets (2008 - nil).
(2) Reflects (i) the Integrated Security segment; (ii) the Canadian
commercial mortgage securitization operation; and (iii) the
Chicago-based US mortgage brokerage and servicing operation. Amounts
shown are before NCI share. For the three months ended June 30, 2009,
NCI was $328 (2008 - $(300)) and for the six months ended June 30,
2009 NCI was $(275) (2008 - $(1,362)).
(3) Based on the implementation rules within SFAS 160 and related
guidance, comparative earnings per share for both the three months
and six months ended June 30, 2008 were not restated for the changes
in accounting for NCI.
(4) Numerators for diluted earnings per share calculations have been
adjusted to reflect dilution from stock options at a subsidiary. The
adjustment for the three months ended June 30, 2009 was nil (2008 - $
1,036) and six months ended June 30, 2009 was nil (2008 - $18).
(5) See definition and reconciliation above.
Condensed Consolidated Balance Sheets
-------------------------------------
(in thousands of US dollars)
June 30 December 31
(unaudited) 2009 2008
----------- -----------
Assets
------
Cash and cash equivalents $65,230 $79,642
Restricted cash 10,464 10,240
Accounts receivable 198,458 175,520
Inventories 10,550 10,572
Prepaids and other current assets 49,494 50,674
Assets held for sale 5,484 14,210
----------- -----------
Current assets 339,680 340,858
Fixed assets 76,219 76,789
Other non-current assets 43,633 39,363
Goodwill and intangibles 493,652 527,124
Assets held for sale 2,036 6,503
----------- -----------
Total assets $955,220 $990,637
========== ===========
Liabilities and shareholders' equity
------------------------------------
Accounts payable and accrued liabilities $193,785 $215,992
Other current liabilities 39,461 35,242
Long term debt - current 24,915 20,899
Liabilities related to assets held for sale 81 12,946
----------- -----------
Current liabilities 258,242 285,079
Long term debt - non-current 291,889 245,470
Other liabilities 24,171 21,832
Deferred income tax 43,634 42,072
Liabilities related to assets held for sale -- 278
Non-controlling interest 178,967 196,765
Shareholders' equity 158,317 199,141
----------- -----------
Total liabilities and equity $955,220 $990,637
========== ===========
Supplemental Balance Sheet information
Total debt $316,804 $266,369
----------- -----------
Total debt, net of cash 251,574 186,727
----------- -----------
Condensed Consolidated Statements of Cash Flows
-----------------------------------------------
(in thousands of US dollars)
Three months ended Six months ended
(unaudited) June 30 June 30
------------------- -------------------
2009 2008 2009 2008
--------- --------- --------- ---------
Operating activities
Net earnings (loss) from
continuing operations $11,659 $23,837 $(32,668) $17,647
Items not affecting cash:
Depreciation and
amortization 11,357 10,100 23,617 20,912
Goodwill impairment charge -- -- 29,583 --
Deferred income tax 208 (1,118) 2,426 (19,594)
Other 265 740 1,116 3,796
--------- --------- --------- ---------
23,489 33,559 24,074 22,761
Changes in operating assets
and liabilities 71 (31,875) (31,477) (42,899)
Discontinued operations 2,060 896 (5,952) 7,307
--------- --------- --------- ---------
Net cash provided by (used) in
operating activities 25,620 2,580 (13,355) (12,831)
--------- --------- --------- ---------
Investing activities
Acquisitions of businesses,
net of cash acquired (13,450) (9,166) (25,279) (28,527)
Purchases of fixed assets, net (7,107) (8,173) (11,315) (15,275)
Other investing activities (6,325) 1,205 (3,014) 7,394
Discontinued operations (491) (691) (474) (688)
--------- --------- --------- ---------
Net cash used in investing
activities (27,373) (16,825) (40,082) (37,096)
--------- --------- --------- ---------
Financing activities
Increase in long-term debt,
net 10,293 24,187 47,821 48,579
Preferred share dividends (2,526) (2,616) (5,051) (5,232)
Other financing activities (2,641) (20,509) (5,547) (23,934)
Discontinued operations -- -- -- 140
--------- --------- --------- ---------
Net cash provided by financing
activities 5,126 1,062 37,223 19,553
--------- --------- --------- ---------
Effect of exchange rate
changes on cash 3,976 1,744 1,395 (2,435)
--------- --------- --------- ---------
Increase (decrease) in cash
and cash equivalents 7,349 (11,439) (14,819) (32,809)
Cash and cash equivalents,
beginning of period including
cash held by discontinued
operations $57,881 $80,666 $80,049 $102,036
--------- --------- --------- ---------
Cash and cash equivalents, end
of period including cash held
by discontinued operations $65,230 $69,227 $65,230 $69,227
========= ========= ========= =========
Segmented Revenues, EBITDA and Operating Earnings
-------------------------------------------------
(in thousands of US dollars)
Commercial Residential
Real Estate Property Property
(unaudited) Services Management Services Corporate Consolidated
--------------------------------------------------------
Three months
ended June
30
2009
Revenues $142,570 $167,897 $114,833 $44 $425,344
EBITDA (832) 16,894 22,727 (2,003) 36,786
Stock-based
compensation 1,534
Cost
containment 2,863 2,863
---------- -------------
2,031 41,183
---------- -------------
Operating
earnings
(loss) (6,773) 13,955 20,331 (2,084) 25,429
2008
Revenues $210,902 $163,176 $80,637 $54 $454,769
EBITDA 20,310 15,859 11,999 (2,790) 45,378
Stock-based
compensation 945
Cost
containment 790 790
---------- -------------
21,100 47,113
---------- -------------
Operating
earnings
(loss) 14,995 13,018 10,146 (2,881) 35,278
Commercial Residential
Real Estate Property Property
(unaudited) Services Management Services Corporate Consolidated
--------------------------------------------------------
Six months
ended June
30
2009
Revenues $261,059 $314,514 $210,715 $65 $786,353
EBITDA (15,524) 28,428 36,234 (4,782) 44,356
Stock-based
compensation 3,171
Cost
containment 6,075 6,075
---------- -------------
(9,449) 53,602
---------- -------------
Operating
earnings
(loss) (1) (58,489) 22,683 31,894 (4,932) (8,844)
2008
Revenues $379,184 $303,650 $140,945 $121 $823,900
EBITDA 8,672 25,882 15,103 (5,270) 44,387
Stock-based
compensation 2,320
Cost
containment 790 790
---------- -------------
9,462 47,497
---------- -------------
Operating
earnings
(loss) (2,521) 19,970 11,524 (5,498) 23,475
(1) Includes goodwill impairment charge in the amount of $29,583
recorded in the Commercial Real Estate segment during the quarter
ended March 31, 2009.
Contact:
FirstService Corporation
Jay S. Hennick, Founder & CEO
D. Scott Patterson, President & COO
John B. Friedrichsen, Senior Vice President & CFO
(416) 960-9500
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