FirstService announces stock dividend of 7% cumulative preference shares, series 1



    Innovative new yield instrument provides shareholders with one preferred
    share for every five outstanding common shares

    TORONTO, June 25 /CNW/ - FirstService Corporation (TSX: FSV; NASDAQ:  
FSRV) ("FirstService") announced today that it is undertaking an initiative to
enhance shareholder value through a special distribution of 7% cumulative
preference shares, series 1 (the "Preferred Shares") to all holders of its
subordinate voting shares and multiple voting shares.
    "The issuance of the Preferred Shares will allow the holders of
subordinate voting and multiple voting shares to retain the high-growth
attributes they expect from FirstService while providing an attractive
after-tax yield instrument to those shareholders wishing to receive
dividends," said Jay S. Hennick, Founder and Chief Executive Officer. "We
believe it is in the best interests of our shareholders to allow them to
decide for themselves how they wish to participate in our future growth.
Shareholders can elect to retain both instruments and have the best of both
worlds, or they have the option to sell one or the other, as they deem
appropriate, to achieve their goals. We expect the Preferred Shares to compare
favourably to others in the market and to be an attractive investment to the
large and growing numbers of yield-oriented investors."
    The Board of Directors of FirstService has declared a stock dividend of
one Preferred Share for every five outstanding subordinate voting shares or
multiple voting shares of FirstService. No fractional Preferred Shares will be
issued. The stock dividend will be payable on August 1, 2007 to shareholders
of record at the close of business on July 25, 2007.
    Each Preferred Share is non-voting, has a stated value of US$25.00,
carries a fixed cumulative annual dividend of US$1.75 payable quarterly and is
redeemable for cash or subordinate voting shares of FirstService at the option
of FirstService. A summary of the attributes of the Preferred Shares is
annexed hereto as Schedule "A". An application will be made to the Toronto
Stock Exchange to list the Preferred Shares and the issuance and listing of
the Preferred Shares remains subject to the approval of the Toronto Stock
Exchange. The Preferred Shares are expected to trade in US dollars and
dividend payments will be made in US dollars.
    "FirstService is now of a scale where our internal cash flows and strong
balance sheet are sufficient to fund our normal growth," said Mr. Hennick.
"This issuance of Preferred Shares will return capital to our shareholders by
way of a special stock dividend while allowing FirstService to optimize its
balance sheet without increasing its leverage ratio, thereby retaining
flexibility to finance growth well into the future."
    In connection with the stock dividend of Preferred Shares, FirstService
worked closely with RBC Capital Markets in Canada and William Blair & Company
in the United States, in reviewing alternatives relating to the return of
capital to shareholders and in structuring the terms of the Preferred Shares.
    FirstService intends to make quarterly cash dividend payments on the
Preferred Shares to holders of record on or about the 15th day of the last
month in each calendar quarter, with the dividends for each quarter being paid
on the last day of each calendar quarter. The initial cash dividend on the
Preferred Shares in the amount of US$0.2877 per share will be for the period
from issuance to September 30, 2007 and is expected to be paid on or about
September 30, 2007. Subsequent regular cash dividends on the Preferred Shares
in the amount of US$0.4375 per share are anticipated to be paid for each
calendar quarter thereafter.
    At present, there are 28,535,844 subordinate voting shares and 1,325,694
multiple voting shares of FirstService outstanding. Assuming no change in
outstanding shares, after payment of the stock dividend, there would be issued
and outstanding approximately 5,972,307 Preferred Shares having an aggregate
stated value of approximately US$149.3 million. Trading in FirstService's
subordinate voting shares on an ex-dividend basis on the Toronto Stock
Exchange and on the NASDAQ Stock Market is expected to commence on July 23,
2007. By issuing the Preferred Shares, it is anticipated that there may be a
corresponding reduction in the market price per subordinate voting share.
    Share certificates representing the Preferred Shares will be mailed to
shareholders of record on or about August 1, 2007. For tax purposes,
FirstService is ascribing essentially no monetary value to the stock dividend.
Accordingly, there will be no tax payable by shareholders in respect of the
dividend. FirstService will be sending shareholders a letter, the form of
which is annexed hereto as Schedule "B", setting out certain information
regarding the Preferred Shares. For additional information, shareholders are
advised to consult their legal and tax advisors.

    UPDATED FINANCIAL OUTLOOK

    As a result of the issuance of the Preferred Shares, the earnings
available to the subordinate voting shares and multiple voting shares for
diluted earnings per share purposes will be reduced by the amount of the
dividends paid to holders of the Preferred Shares. For the fiscal year ending
March 31, 2008, the impact of the anticipated cash dividends on the Preferred
Shares on diluted earnings per share is expected to be $0.23. Accordingly, the
outlook for adjusted diluted earnings per share from continuing operations is
updated by this amount to a range of $1.25 to $1.37, from the previous range
of $1.48 to $1.60. The outlook for revenues and EBITDA remains unchanged.

    CONFERENCE CALL

    FirstService will be holding a conference call on Tuesday, June 26, 2007
at 11:00 a.m. Eastern Time to discuss the stock dividend and the Preferred
Shares. To participate, please dial 1-866-904-6251 several minutes before
11:00 a.m. If you are not available to participate in the call at the
scheduled time, you may listen to a recorded replay by dialing 1-888-203-1112.
The access code for the replay is 7434307. The replay will be available from
5:00 p.m., June 26, 2007 through to July 2, 2007. Additionally, an on-line
broadcast will be available at www.firstservice.com in the "Investor
Relations" section under the tab "Upcoming Events".

    ABOUT FIRSTSERVICE

    FirstService is a leader in the rapidly growing property services sector,
providing services in the following areas: commercial real estate; residential
property management; property improvement; and integrated security services.
Market-leading brands include Colliers International in commercial real
estate; The Continental Group, The Wentworth Group and The Merit Companies in
residential property management; Consumer brands California Closets, Paul
Davis Restoration, Pillar to Post Home Inspections, Certa Pro Painters and
Handyman Connection, in property improvement; and Intercon Security and
Security Services & Technologies in integrated security.
    FirstService is a diversified property services company with more than
US $1.5 billion in annualized revenues and more than 16,000 employees
worldwide. More information about FirstService is available at
www.firstservice.com.

    FORWARD-LOOKING STATEMENTS

    Certain statements included in this release constitute "forward-looking
statements" within the meaning of the U.S. Private Securities Litigation
Reform Act of 1995. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievements of FirstService, or industry results, to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following: general economic and business conditions, which
will, among other things, impact demand for FirstService's services, service
industry conditions and capacity; the ability of FirstService to implement its
business strategy, including FirstService's ability to acquire suitable
acquisition candidates on acceptable terms and successfully integrate newly
acquired businesses with its existing businesses; changes in or the failure to
comply with government regulations (especially safety and environmental laws
and regulations); and other factors which are described in FirstService's
filings with the U.S. Securities and Exchange Commission and the Canadian
regulatory authorities.

    
                                 Schedule "A"

                       Attributes of Preferred Shares
                       ------------------------------
    

    The authorized capital of FirstService consists of an unlimited number of
preference shares, issuable in series at the discretion of the Board of
Directors of FirstService, an unlimited number of subordinate voting shares
and an unlimited number of convertible multiple voting shares. FirstService's
Annual Information Form for the year ended March 31, 2007 contains a summary
of the rights, privileges, restrictions and conditions attached to such
shares. Below is a summary of the material rights, privileges, restrictions
and conditions attached to the Preferred Shares and is qualified in its
entirety by reference to the articles of FirstService, including the articles
of amendment of FirstService pursuant to which the Preferred Shares will be
created, a copy of which will be filed with the Canadian provincial securities
regulatory authorities and be available at www.sedar.com.

    
    Stated Amount:     US$25.00 per Preferred Share.

    Dividends:         The holders of Preferred Shares will be entitled to
                       receive quarterly fixed cumulative cash dividends, if,
                       as and when declared by the Board of Directors of
                       FirstService, in an amount equal to US$1.75 per share
                       per annum (less any tax required to be deducted and
                       withheld by FirstService from payments to non-
                       residents), payable on the last day of March, June,
                       September and December in each year. Assuming an issue
                       date of August 1, 2007, the first such dividend, if,
                       as and when declared, will be payable on September 30,
                       2007 and will be US$0.2877 per Preferred Share (less
                       any tax required to be deducted or withheld by
                       FirstService from payments to non-residents).

    Redemption:        FirstService may redeem at any time all, or from time
                       to time any, of the then outstanding Preferred Shares.
                       Such redemption may be made upon payment in cash of
                       the amount of (each, a "Redemption Price"):

                       -  US$26.00 per share if redeemed on or after August
                          1, 2007 and prior to August 1, 2008;
                       -  US$25.75 per share if redeemed on or after August
                          1, 2008 and prior to August 1, 2009;
                       -  US$25.50 per share if redeemed on or after August
                          1, 2009 and prior to August 1, 2010;
                       -  US$25.25 per share if redeemed on or after August
                          1, 2010 and prior to August 1, 2011; and
                       -  US$25.00 per share if redeemed on or after
                          August 1, 2011;

                       plus, in each case, an amount equal to all unpaid
                       dividends thereon to but excluding the date of
                       redemption (less any tax required to be deducted and
                       withheld by FirstService from payments to non-
                       residents). FirstService shall provide not less than
                       30 and not more than 60 days' notice of such
                       redemption to each holder of Preferred Shares to be
                       redeemed. If less than all outstanding Preferred
                       Shares are at any time to be redeemed, the shares to
                       be redeemed will be selected on a pro-rata basis.

    Conversion:        FirstService may, subject to applicable law and, if
                       required, regulatory approval, convert all, or from
                       time to time any part, of the then outstanding
                       Preferred Shares into that number of freely tradeable
                       subordinate voting shares of FirstService determined
                       (per Preferred Share) by dividing the Redemption
                       Price, together with all unpaid dividends up to but
                       excluding the date fixed for conversion, by the
                       greater of: (i) US$2.00 and (ii) 95% of the weighted
                       average trading price of the subordinate voting shares
                       on The NASDAQ Stock Market (or if the subordinate
                       voting shares do not trade on The NASDAQ Stock Market
                       on the date specified for conversion, on the Toronto
                       Stock Exchange or such other exchange or trading
                       system with the greatest volume of subordinate voting
                       shares traded during the 20 day period referred to
                       below) for the 20 consecutive trading days ending on
                       the fourth day prior to the date specified for
                       conversion, or, if such fourth day is not a trading
                       day, the immediately preceding trading day. Fractional
                       subordinate voting shares will not be issued on any
                       conversion of Preferred Shares, but in lieu thereof
                       FirstService will make cash payments.

                       Notice of any conversion will be given by
                       FirstService not less than 30 days and not more than
                       60 days prior to the date fixed for conversion. If
                       less than all the outstanding Preferred Shares are at
                       any time to be converted, the shares to be converted
                       will be selected on a pro-rata basis.

                       Upon exercise by FirstService of its right to convert
                       Preferred Shares into subordinate voting shares,
                       FirstService is not required to issue subordinate
                       voting shares to any person whose address is in, or
                       whom FirstService or its transfer agent has reason to
                       believe is a resident of, any jurisdiction outside
                       Canada, to the extent that such issue would require
                       compliance by FirstService with the securities or
                       other laws of such jurisdiction. If in such
                       circumstances FirstService elects not to issue
                       subordinate voting shares, FirstService may elect, in
                       lieu thereof, to make a cash payment. Any such payment
                       will be considered to have been paid on a redemption
                       of Preferred Shares in accordance with the terms and
                       conditions of the Preferred Shares.

    Purchase for       Subject to applicable law and the provisions described
    Cancellation:      next to "Restrictions on Retirement of Shares",
                       FirstService may at any time or times purchase for
                       cancellation the whole or any part of the then
                       outstanding Preferred Shares on the open market, by
                       private agreement, pursuant to tenders received by
                       FirstService upon an invitation for tenders addressed
                       to all holders of the Preferred Shares, or otherwise,
                       at the lowest price or prices at which in the opinion
                       of the Board of Directors of FirstService such shares
                       are obtainable.

    Liquidation,       In the event of the liquidation, dissolution or
    Dissolution and    winding up of FirstService or any other distribution
    Winding Up:        of assets of FirstService among its shareholders for
                       the purpose of winding up its affairs, subject to the
                       prior satisfaction of the claims of all creditors of
                       FirstService and of holders of shares of FirstService
                       ranking prior to the Preferred Shares, if any, the
                       holders of the Preferred Shares will be entitled to
                       payment of an amount equal to US$25.00 per Preferred
                       Share, plus an amount equal to all unpaid dividends up
                       to but excluding the date fixed for payment or
                       distribution (less any tax required to be deducted and
                       withheld by FirstService), before any amount is paid
                       or any assets of FirstService are distributed to the
                       holders of any shares ranking junior as to capital to
                       the Preferred Shares. The holders of the Preferred
                       Shares will not be entitled to share in any further
                       distribution of the assets of FirstService.

    Restrictions on    So long as any of the Preferred Shares are
    Retirement of      outstanding, FirstService will not, without the
    Shares:            approval of the holders of the Preferred Shares given
                       as described next to "Modification of Preferred
                       Shares" unless, in each such case, all unpaid
                       dividends up to and including the dividend payable for
                       the last completed period for which dividends were
                       payable on the Preferred Shares have been declared and
                       paid or monies set apart for payment, redeem, call for
                       redemption, purchase for cancellation or otherwise
                       retire or make any return of capital in respect of
                       less than all of the Preferred Shares then
                       outstanding.

    Voting Rights:     The holders of the Preferred Shares will not be
                       entitled (except as otherwise provided by law or in
                       the conditions attaching to the preference shares of
                       FirstService as a class) to receive notice of, attend,
                       or vote at, any meeting of shareholders of
                       FirstService, including, for greater certainty, at any
                       meeting relating to a proposal to effect an exchange
                       of the Preferred Shares by way of an amalgamation or
                       plan of arrangement involving FirstService provided
                       that the rights, privileges, restrictions and
                       conditions of the Preferred Shares are not removed or
                       changed and provided that no class of shares of
                       FirstService superior to the Preferred Shares is
                       created.

    Modification of    The approval of all amendments to the rights,
    Preferred Shares:  privileges, restrictions and conditions attaching to
                       the Preferred Shares as a series and any other
                       approval to be given by the holders of the Preferred
                       Shares may be given by a resolution passed by an
                       affirmative vote of not less than a majority of the
                       votes cast at a duly called and held meeting at which
                       the holders of at least 10% of the outstanding
                       Preferred Shares are present in person or represented
                       by proxy or, if no quorum is present at such meeting,
                       at an adjourned meeting at which the holders of
                       Preferred Shares then present would form the necessary
                       quorum. At any meeting of holders of Preferred Shares
                       as a series, each such holder shall be entitled to one
                       vote in respect of each Preferred Share held.

    Tax Election:      The provisions of the Preferred Shares as a series
                       require FirstService to make an election in prescribed
                       form pursuant to the provisions of subsection 191.2(1)
                       of the Income Tax Act (Canada), and within the time
                       limits provided therein, for purposes of determining
                       the tax payable under Part VI.1 of such Act with
                       respect to the Preferred Shares.


                                 Schedule "B"

                       Form of Letter to Shareholders
                       ------------------------------
    

    August 1, 2007

    Dear Shareholder:

    Re: Stock Dividend of 7% Cumulative Preference Shares, Series 1

    On June 25, 2007, the board of directors of FirstService Corporation
("FirstService") declared a stock dividend of one 7% cumulative preference
share, series 1 of FirstService (a "Preferred Share") for every five
outstanding subordinate voting shares or multiple voting shares of
FirstService. No fractional Preferred Shares may be issued.
    The stock dividend is payable to shareholders of record at the close of
business on July 25, 2007, with every five outstanding subordinate voting
shares or multiple voting shares being entitled to one Preferred Share.
    Trading in FirstService's subordinate voting shares on an ex-dividend
basis on the Toronto Stock Exchange and on the NASDAQ Stock Market commenced
on July 23, 2007.
    Enclosed please find a share certificate representing the number of
Preferred Shares to which you are entitled. FirstService is ascribing
essentially no monetary value to the stock dividend. Accordingly, there will
be no tax payable by shareholders in respect of the stock dividend.

    Preferred Shares

    Each Preferred Share is non-voting, has a stated value of US$25.00,
carries a fixed cumulative annual dividend of US$1.75 payable quarterly and is
redeemable for cash or subordinate voting shares of FirstService at the option
of FirstService. A summary of the attributes of the Preferred Shares is
annexed to FirstService's press release dated June 25, 2007. The Toronto Stock
Exchange has approved the listing of the Preferred Shares subject to its usual
conditions. The Preferred Shares will trade in US dollars and dividend
payments will be made in US dollars.
    FirstService intends to make the quarterly cash dividend payments on the
Preferred Shares to holders of record on or about the 15th day of the last
month in each calendar quarter, with the dividends for each quarter being paid
on the last day of each calendar quarter. The initial cash dividend on the
Preferred Shares in the amount of US$0.2877 per share will be for the period
from issuance to September 30, 2007 and is expected to be paid on or about
September 30, 2007. Subsequent regular cash dividends on the Preferred Shares
in the amount of US$0.4375 per share are anticipated to be paid for each
calendar quarter thereafter.

    Rationale for Stock Dividend

    We have undertaken this initiative to enable our shareholders to receive
regular quarterly cash dividends while at the same time continuing to
participate in the anticipated growth of FirstService in the years ahead. We
believe that the Preferred Shares will allow yield-oriented investors access
to the strong and consistent cash flows of FirstService through an attractive
after-tax yield. Growth-oriented investors will to continue to participate in
equity returns through direct ownership in FirstService's subordinate voting
shares. In addition, the creation of the Preferred Shares also allows
FirstService to optimize its balance sheet without increasing its leverage
ratio, thereby retaining flexibility to finance future growth. We continue to
have outstanding US$207 million of investment-grade long-term senior debt,
which has been rated "NAIC-2" by the National Association of Insurance
Commissioners.

    Income Tax Considerations

    The summary of Canadian and U.S. tax considerations which follows is of a
general nature only and is not intended to be, nor should it be construed as,
legal or tax advice to any shareholder. In particular, FirstService has not
requested or obtained any tax rulings from any applicable tax authority or any
formal tax opinions from its advisors as to the matters discussed below.
Accordingly, shareholders are strongly urged to consult their own tax advisors
with respect to their own particular circumstances.

    Canadian Federal Income Tax Considerations

    The following summarizes the principal Canadian federal income tax
    considerations in connection with the issuance of Preferred Shares as
    described herein:

    
    (i)    a recipient of the stock dividend will be deemed to receive a
           nominal amount as a taxable dividend, as the Preferred Shares will
           be issued with an aggregate stated capital of $1.00;

    (ii)   as a result, the paid-up capital and adjusted cost base of the
           Preferred Shares for tax purposes will also be a nominal amount;

    (iii)  quarterly dividends received by individuals should qualify for the
           enhanced dividend tax credit;

    (iv)   shareholders which are private corporations will generally pay
           refundable Part IV tax of 33 1/3% of dividends received on the
           Preferred Shares unless they are connected (as defined in the
           Income Tax Act (Canada)) to FirstService;

    (v)    pursuant to the terms of the Preferred Shares, FirstService will
           elect to ensure that such holders are not required to pay the
           additional Part IV.1 tax in connection with dividends received on
           taxable preferred shares;

    (vi)   any redemption of Preferred Shares by FirstService for cash (other
           than purchases made on the open market) will result in the holder
           being deemed to have received a dividend;

    (vii)  any conversion of Preferred Shares by FirstService into
           subordinate voting shares will have no immediate tax consequences
           to the holder;

    (viii) the Preferred Shares, if issued on the date hereof, would be
           qualified investments under the Income Tax Act (Canada) and the
           regulations thereunder for trusts governed by registered
           retirement savings plans, registered retirement income funds,
           deferred profit sharing plans and registered education savings
           plans; and

    (ix)   non-residents of Canada will be subject to Canadian withholding
           tax on any dividends received on the Preferred Shares (including
           any dividends deemed to be received on a redemption of Preferred
           Shares by FirstService) but will generally not be subject to
           Canadian tax on any capital gain arising from a sale, and will not
           be subject to any Canadian tax by reason of the conversion of
           Preferred Shares into subordinate voting shares of FirstService.

    U.S. Federal Income Tax Considerations

    The following summarizes the principal U.S. federal income tax
    considerations in connection with the issuance of Preferred Shares as
    described herein:

    (i)    pursuant to Internal Revenue Code (the "Code") Section 305, the
           distribution of the Preferred Shares as a stock dividend to U.S.
           shareholders should not be subject to U.S. tax and, consequently:

              a. each shareholder will allocate his or her basis in his or
                 her subordinate voting shares to the Preferred Shares based
                 on the fair market value of the Preferred Shares and the
                 subordinate voting shares owned by such shareholder; and

              b. each shareholder's holding period in the Preferred Shares
                 will be deemed to begin on the date that the subordinate
                 voting shares in respect of which the Preferred Share stock
                 dividend was declared were acquired;

    (ii)   pursuant to Article X of the Income Tax Convention between the
           United States and Canada, dividends payable to a U.S. shareholder
           on the Preferred Shares will be subject to a 15% Canadian
           withholding tax, for which U.S. shareholders should be able to
           receive a foreign tax credit;

    (iii)  the quarterly dividends received on the Preferred Shares by non-
           corporate taxpayers should be qualifying dividends under Code
           Section 1(h)(11)(B)(ii) and thus taxed at capital gains rates
           through the end of 2010;

    (iv)   the Preferred Shares will be treated as Section 306 stock pursuant
           to Code Section 306, such that the proceeds received on
           disposition of the Preferred Shares will be treated as an ordinary
           dividend to shareholders (without regard to the basis allocation
           discussed in (i)(a) above). As discussed in (iii), the dividend
           would be subject to capital gains rates until 2010. A deduction
           for intercorporate dividends pursuant to Code Section 243 will not
           apply to this dividend equivalent amount. If the shareholder
           disposes of all of his or her Preferred Shares and subordinate
           voting shares in one transaction, the transaction should be
           treated as a sale of stock subject to the normal capital gains
           rules, and Code Section 306 should not apply; and

    (v)    if all or any portion of the Preferred Shares are redeemed by
           FirstService for cash, the holder of Preferred Shares will pay
           income tax on the proceeds of redemption as an ordinary dividend
           to the extent of FirstService's earnings and profits in the year
           of the redemption. Non-corporate taxpayers should qualify for the
           favorable capital gains rates on the amount of income treated as
           an ordinary dividend pursuant to Code Section 1(h)(11).
    

    We trust that the foregoing information is useful to you. Nevertheless,
we do recommend that you consult your own legal and tax advisors for your
individual circumstances.

    Yours truly,

    FIRSTSERVICE CORPORATION

    Jay S. Hennick
    Founder and Chief Executive Officer





For further information:

For further information: Jay S. Hennick, Founder & CEO, (416) 960-9500;
John B. Friedrichsen, Senior Vice President & CFO, (416) 960-9500

Organization Profile

FIRSTSERVICE CORPORATION

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