Counsel Corporation Announces 2011 Fiscal Year Results Revenues Increase 270%
TORONTO, March 28, 2012 /CNW/ - Counsel Corporation ("Counsel" or the "Company") (TSX: CXS), a financial services company, today announced net income attributable to shareholders of $25.5 million, or $0.32 per basic and $0.30 per diluted share, on $79.8 million in revenues for the fiscal year ended December 31, 2011, compared to a loss of $4.7 million, or $0.08 per basic and diluted share, on revenues of $21.5 million in fiscal 2010. The Company adopted International Financial Reporting Standards ("IFRS") commencing January 1, 2011 and the comparative 2010 results have been revised to conform to IFRS. All amounts are stated in Canadian dollars, unless noted.
The significant increase in Counsel's revenues is due to strong growth in both of its main operating companies, Street Capital Financial Corporation ("Street Capital") and Counsel RB Capital LLC ("Counsel RB").
Street Capital, acquired on May 31, 2011, is a leading Canadian residential mortgage lender. Street Capital's revenues in the fourth quarter of 2011 were 29% higher than the previous quarter (comparative figures for the same period in 2010 are not available due to Street Capital being a private company and having a different fiscal year prior to its acquisition by Counsel).
Street Capital's revenues are comprised of the gain on sales of mortgages to institutional investors. The company sold $3.7 billion of mortgages in the calendar year ending December 31, 2011 (it sold $2.86 billion in its previous fiscal year, from November 1, 2009 to October 31, 2010), placing it among the industry leaders in mortgage underwriting in Canada. In the seven months of 2011 following its acquisition by Counsel, Street Capital sold $2.5 billion of mortgages and ended the year with $7.5 billion in mortgages under administration.
"We're extremely pleased with Street Capital's performance under Counsel and the consistent revenues and earnings it has provided," said Allan Silber, Chairman and CEO of Counsel. "Street Capital is led by a very experienced management team whose ability to deliver high quality customer service and competitive product offerings has led to the company's increasing stature as a lender of choice within the mortgage broker distribution channel in Canada. It is now among the leaders in mortgage broker market share."
Revenues also increased substantially at Counsel's other major operating business, Counsel RB, a leading provider of capital asset solutions in the United States and Canada. The company generated $18.9 million in revenues in 2011, a 69% increase over the prior year. Counsel RB derives revenues from three sources: first, acting as a principal, it specializes in the acquisition and disposition of distressed and surplus manufacturing facilities; second, it serves as an agent/consultant on complex asset transactions; and third, it offers specialized structured distressed debt, that is senior to all other outstanding debt and equity, to firms in financial difficulty or under Chapter 11 bankruptcy restructuring processes. Counsel established Counsel RB in February 2009 in partnership with its two co-CEOs, former bankruptcy attorneys with decades of experience and numerous relationships in the industry. The company is a wholly owned subsidiary of Counsel RB Capital Inc. ("CRBCI") (OTCQB: CRBN), a U.S. public company controlled by Counsel.
"We're extremely excited about the potential of our asset liquidation business. In less than three years, Counsel RB has risen quickly to become an innovative industry leader in distressed and surplus capital asset transactions," said Mr. Silber, who serves as CRBCI's chairman. "The company has recently made two strategic acquisitions: a boutique investment banking firm for distressed companies and an in-house industrial auction division. These moves will broaden the array of capital asset solutions the company can offer, which will help ensure it's at the front of the line for potential deal flow."
CRBCI contributed a tax recovery of $26.3 million, related to the previously unrecognized benefit of its tax losses, to Counsel's 2011 net income. Following almost three years of consistent profitability from Counsel RB, coupled with its acquisition in February, 2012 of Heritage Global Partners Inc. ("HGP"), a full-service global auction and asset advisory firm, it was determined that it is now more likely than not that CRBCI will utilize all of its tax losses against estimated future taxable income. Accordingly, in the fourth quarter of 2011, CRBCI was required to recognize the benefit of those losses.
"We believe 2011 was the year we clearly charted our path to success," concluded Mr. Silber. "We completed the purchase of Street Capital, and Counsel RB has continued to grow into an industry leader. This has given us two major operating businesses that provide consistent revenues and earnings and which are led by experienced and entrepreneurial leaders who have a clear stake in Counsel's success. I believe it validates our decision to refocus Counsel on our core competency of financial services, a strategy we have successfully executed and which has resulted in an upward trend in shareholders' equity. I look forward to reporting on our progress throughout 2012."
Highlights of 2011 and 2012 to Date:
- On January 25, 2011, all of the Company's Series B preferred shares were converted into common shares at $0.75 per share, resulting in the issuance of 15,384,617 common shares. The conversion strengthened Counsel's balance sheet and simplified its share structure.
- On March 15, 2011, CRBCI completed a private placement of 1,000,000 common shares at an issue price of US$1.83 per share. The shares were purchased by an institutional investor. The share issuance reduced Counsel's ownership from 79.5% to 76.6%. Proceeds from the private placement are being deployed to fund additional distressed and surplus capital asset transactions and to expand and diversify Counsel RB's capabilities to offer complementary services in this sector.
- On May 31, 2011 Counsel completed the acquisition of Street Capital, a leader in the prime residential mortgage lending industry. Consequently, Street Capital's earnings for the seven months commencing June 1 are included in Counsel's 2011 financial results. Street Capital contributed $51.8 million to Counsel's 2011 revenues and $8.2 million to its income from continuing operations.
- In May 2011, the Company's wholly owned subsidiary, Knight's Bridge Capital Partners, an opportunistic and diversified private equity manager, acquired a 10% ownership interest in Robert Graham Designs, LLC through its fund, Knight's Bridge Capital Partners Fund I. Robert Graham is an apparel retailer and manufacturer of high quality men's and women's clothing.
- On May 13, 2011, Counsel RB completed the sale of the Fraser Paper mill in Gorham, New Hampshire, which was acquired at the end of 2010.
- In June 2011, Counsel RB expanded and diversified its capital solutions capabilities through the acquisition of 100% of EP USA, LLC (d/b/a Equity Partners), a boutique investment banking firm and leading provider of financial solutions for distressed businesses and properties
- In September 2011, Terra Firma Capital Corporation ("Terra Firma") (TSX.V:TII), a publicly traded real estate finance company managed and 20% owned by Counsel, completed a non-brokered private placement of convertible unsecured debentures for $10.1 million. The net proceeds will be used to enhance Terra Firma's liquidity position and fund business activities on an active and growing pipeline of equity and debt deals in the commercial real estate space. The debentures bear interest of 7% per annum and are convertible at the option of the holders at $0.70 per share.
- In December 2011, Terra Firma completed a non-brokered private placement of 11.7 million common shares at a price of $0.50 per common share for gross proceeds of $5.85 million. The net proceeds will be used to enhance Terra Firma's liquidity position, fund business activity needs and for other general corporate purposes. Counsel subscribed to its proportionate share of the private placement.
- At the end of February 2012, CRBCI completed the acquisition of HGP, a company with whom Counsel RB had partnered with previously, including on the disposition of the assets of BP Solar and Solyndra. The acquisition of a turnkey in-house industrial auction capability is a key step in Counsel RB's goal of building a diversified and scalable full-service organization that can successfully meet the needs of its expanding client base. The transaction included a combination of cash and notes as well as equity in CRBCI in the form of shares and options.
Financial Overview
The Company recorded income from continuing operations attributable to shareholders of $25.0 million, or $0.31 per share, basic and $0.29 per share, diluted in 2011, compared with a loss of $12.3 million, or $0.20 per share, basic and diluted, for the year ended December 31, 2010. Including discontinued operations, the Company had net income of $25.5 million, or $0.32 per share, basic and $0.30 per share, diluted, attributable to shareholders for the year ended December 31, 2011, compared with a net loss of $4.7 million, or $0.08 per share, basic and diluted, for the year ended December 31, 2010. The bottom line in 2011 includes a tax recovery totaling $26.3 million.
The Company's Management's Discussion and Analysis and Financial Statements for the year ended December 31, 2011 have been filed and are available on SEDAR (www.sedar.com).
About Counsel Corporation
Counsel Corporation (TSX: CXS) is a financial services company that operates through its individually branded businesses in residential mortgage lending, distressed and surplus capital asset transactions, real estate finance and private equity investment. For further information, please visit Counsel's website at www.counselcorp.com.
Forward-Looking Statements
The statements made in this release that are not historical facts contain forward-looking information that involves risks and uncertainties. All statements, other than statements of historical facts, which address Counsel Corporation's expectations, should be considered as forward-looking statements. Such statements are based on knowledge of the environment in which Counsel Corporation currently operates, but because of the factors listed herein, as well as other factors beyond Counsel Corporation's control, actual results may differ materially from the expectations expressed in the forward-looking statements. Important factors that may cause actual results to differ from anticipated results include, but are not limited to, obtaining necessary approvals and other risks detailed from time to time in the Company's securities and other regulatory filings.
Counsel Corporation
Consolidated Statements of Operations
For the years ended December 31
(in thousands of Cdn Dollars, except per share amounts)
(Audited)
December 31, | ||||
2011 | 2010 | |||
$ | $ | |||
Revenues | 79,810 | 21,549 | ||
Expenses (exclusive of depreciation, amortization and interest expense shown below) and other (income) losses | ||||
Operating costs | 48,084 | 13,069 | ||
Selling, general and administrative expense | 25,800 | 13,052 | ||
Foreign exchange (gain) loss | (622) | 1,184 | ||
Depreciation and amortization | 739 | 148 | ||
Interest expense | 3,033 | 2,117 | ||
Other | (50) | 5,582 | ||
76,984 | 35,152 | |||
Income (loss) before fair value adjustments | 2,826 | (13,603) | ||
Fair value adjustments | 2,044 | 2,593 | ||
Income (loss) before income taxes and discontinued operations | 4,870 | (11,010) | ||
Income tax provision (recovery) | (27,853) | (1,269) | ||
Income (loss) from continuing operations | 32,723 | (9,741) | ||
Less: Income (loss) attributable to non-controlling interest | 7,740 | 2,552 | ||
Income (loss) attributable to shareholders | 24,983 | (12,293) | ||
Income from discontinued operations | 561 | 8,081 | ||
Less: Income (loss) attributable to non-controlling interest | 33 | 443 | ||
Income (loss) attributable to shareholders | 528 | 7,638 | ||
Net income (loss) attributable to shareholders | 25,511 | (4,655) | ||
Basic net income (loss) per share : | ||||
Continuing operations | 0.31 | (0.20) | ||
Discontinued operations | 0.01 | 0.12 | ||
Basic net income (loss) per share | 0.32 | (0.08) | ||
Weighted average number of common shares outstanding (in thousands) - basic | 80,603 | 61,820 | ||
Diluted net income (loss) per share: | ||||
Continuing operations | 0.29 | (0.20) | ||
Discontinued operations | 0.01 | 0.12 | ||
Diluted net income (loss) per share | 0.30 | (0.08) | ||
Weighted average number of common shares | ||||
outstanding (in thousands) - diluted | 87,285 | 61,820 |
The notes contained in the Company's annual consolidated financial statements are an integral part of these condensed consolidated financial statements.
Counsel Corporation
Consolidated Statements of Financial Position
As at December 31
(in thousands of Cdn Dollars)
(Audited)
December 31, | December 31, | |||||
2011 | 2010 | |||||
$ | $ | |||||
Assets | ||||||
Current assets | ||||||
Cash and cash equivalents | 15,212 | 61,897 | ||||
Marketable securities | 255 | 333 | ||||
Mortgages, accounts and deferred interest receivable | 15,643 | 1,732 | ||||
Inventory | 3,197 | 4,564 | ||||
Prepaid expenses, deposits and deferred charges | 2,262 | 1,743 | ||||
Assets of discontinued operations | 180 | 1,199 | ||||
36,749 | 71,468 | |||||
Non-current assets | ||||||
Deferred interest receivable | 12,483 | - | ||||
Deferred charges | 15,880 | - | ||||
Properties under development | 11,502 | 7,198 | ||||
Property, plant and equipment | 3,502 | 2,609 | ||||
Interests in joint ventures | 3,514 | 3,529 | ||||
Investment in associates | 2,482 | 1,716 | ||||
Portfolio investments | 47,460 | 40,694 | ||||
Intangible assets | 6,654 | - | ||||
Goodwill | 44,844 | 20,797 | ||||
Deferred income tax assets | 29,271 | 2,220 | ||||
Other assets | 67 | 194 | ||||
Assets of discontinued operations | - | 538 | ||||
Total assets | 214,408 | 150,963 | ||||
Liabilities | ||||||
Current liabilities | ||||||
Accounts payable and accrued liabilities | 21,441 | 9,831 | ||||
Customer deposits | 1,641 | 2,495 | ||||
Income taxes payable | 284 | 218 | ||||
Current portion of mortgages and loans payable | 8,728 | 8,902 | ||||
Convertible preferred shares | - | 11,538 | ||||
Liabilities of discontinued operations | 629 | 2,663 | ||||
32,723 | 35,647 | |||||
Non-current liabilities | ||||||
Mortgages and loans payable | 20,035 | 6,685 | ||||
Convertible debenture | 11,893 | - | ||||
Contingent consideration | 10,715 | - | ||||
Deferred income tax liabilities | 4,463 | - | ||||
Derivative liability | 131 | - | ||||
Other liabilities | 2,353 | 1,794 | ||||
Total liabilities | 82,313 | 44,126 | ||||
Shareholders' equity | 132,095 | 106,837 | ||||
Total liabilities and shareholders' equity | 214,408 | 150,963 |
The notes contained in the Company's annual consolidated financial statements are an integral part of these condensed consolidated financial statements.
Counsel Corporation
Stephen Weintraub
EVP, Secretary & CFO
[email protected]
Tel: (416) 866-3058
The Equicom Group
Tim Foran
[email protected]
Tel: (416) 815-0700 ext. 251
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