FirstService reports record third quarter results



    
    Highlights:
              -  Revenues up 26%
              -  EBITDA up 30%
              -  Adjusted EPS up 30%

    Increases financial outlook for fiscal 2007
    Provides preliminary outlook for fiscal 2008
    

    TORONTO, Jan. 30 /CNW/ - FirstService Corporation (NASDAQ:   FSRV; TSX:
FSV) today reported record results for its third quarter ended December 31,
2006, updated its financial outlook for its fiscal year ending March 31, 2007
and presented its preliminary outlook for the fiscal year ending March 31,
2008. All amounts are in US dollars.
    Quarterly revenues were $374.8 million, an increase of 26% relative to
the same period last year. EBITDA (see definition and reconciliation below)
increased 30% to $26.8 million versus $20.7 million in the prior year.
Adjusted diluted earnings per share from continuing operations for the quarter
increased 30% to $0.30 versus $0.23 in the prior year period. The adjustment
to earnings per share represents the non-cash and rapid amortization of
short-lived intangible assets, relating to pending commercial real estate
brokerage transactions and listings, recognized on acquisitions in the
Company's Commercial Real Estate Services unit during the past twelve months.
    Cash flow from operations for the quarter was $55.2 million, up 49% from
the $36.9 million reported in the third quarter last year.
    For the nine months ended December 31, 2006, revenues were $1.04 billion,
an increase of 27% relative to the same period one year ago, while EBITDA
increased 22% to $96.2 million. Adjusted diluted earnings per share from
continuing operations were $1.19, up 25% relative to the prior year period.
    "We've had a strong third quarter and are confident we will achieve our
internal growth targets for the year" said Jay S. Hennick, Founder and Chief
Executive Officer of FirstService Corporation. "We have achieved our goal of
replacing the earnings we sold in the Resolve IPO with new acquisitions and
are in a strong financial position to capitalize on growth opportunities in
the coming year", he concluded.

    About FirstService Corporation
    ------------------------------

    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 in residential property management; consumer
brands California Closets, Paul Davis Restoration, Pillar to Post Home
Inspections and CertaPro Painters in property improvement; and Intercon
Security and SST in integrated security.
    FirstService is a diversified property services company with more than
US$1.3 billion in annualized revenues and over 13,000 employees worldwide.
More information about FirstService is available at www.firstservice.com.

    Segmented Quarterly Results
    ---------------------------

    Revenues in Commercial Real Estate Services totalled $190.0 million for
the quarter, an increase of 35%. Acquisitions contributed 24% of the increase
while internal growth of 11% represented the balance. Internal growth was led
by the Asia-Pacific and Central European operations, which continued to report
strong brokerage activity and corresponding market share gains. Third quarter
EBITDA was $13.6 million compared to $11.5 million during the year-ago period.
The margin in the current period was impacted primarily by the variable
brokerage commission structure adopted for 2006 that resulted in lower
commission expense in the first half of the calendar year until minimum
thresholds were achieved and higher commission expense later in the calendar
year.
    Residential Property Management revenues increased to $101.7 million for
the quarter, 23% higher than in the prior year period. Internal growth of 13%
resulted from property management contracts added during the past twelve
months, particularly in South Florida and New York City. The balance of growth
was attributable to recent acquisitions. EBITDA for the quarter was
$8.5 million, up 17% from $7.3 million one year ago.
    Revenues in Property Improvement Services totalled $35.4 million, an
increase of 9% over the prior year period. Internal revenue growth was 5%,
with the balance of the growth resulting from recent acquisitions. EBITDA in
the third quarter was $4.0 million, up 29% from $3.1 million last year, a
result of a change in mix favouring royalty revenues which carry higher
margins than service revenues.
    Integrated Security Services revenues for the third quarter were
$47.6 million, an increase of 19% relative to the prior year period. The
growth was attributable to increased systems installation activity in both the
US and Canada compared to the year ago period. Quarterly EBITDA was $4.2
million, up 51% versus $2.8 million in the prior year and was favourably
impacted by higher productivity and operating leverage.
    Quarterly corporate costs were $3.4 million, relative to $4.0 million in
the prior year period.
    A comparison of segmented EBITDA to operating earnings is provided below.

    Repurchases of FirstService Shares
    ----------------------------------

    During the period from December 15, 2006 to December 20, 2006, the
Company repurchased 342,000 Subordinate Voting Shares for cancellation through
the facilities of the Toronto Stock Exchange and NASDAQ National Market at an
average cost of US$23.39 pursuant to a normal course issuer bid. The
repurchases represented 1.1% of the total shares outstanding prior to the
repurchases and were funded from cash on hand. The total number of shares
repurchased since March 31, 2006 is 659,200 representing 2.2% of the total
shares outstanding prior to the repurchases.

    Updated Financial Outlook
    -------------------------

    FirstService is updating the outlook for its fiscal year ending March 31,
2007 issued on October 31, 2006 to reflect the operating results achieved for
the first nine months of the fiscal year as well as the recent acquisitions in
its Commercial Real Estate Services operations. The Company is also presenting
its preliminary outlook for the fiscal year ending March 31, 2008.

    
    (US$ millions, except per share
     amounts)                        Year ending               Year ending
                                    March 31, 2007            March 31, 2008
                           --------------------------------  ----------------
                               Updated          Previous       Preliminary
                               -------          --------       -----------
    Revenues               $1,275 - $1,325  $1,225 - $1,300  $1,450 - $1,550
    EBITDA                   $111 - $117    $107.5 - $115.5    $126 - $136
    Adjusted EPS            $1.27 - $1.32    $1.23 - $1.31    $1.40 - $1.50
    

    Note: EPS refers to adjusted diluted earnings per share from continuing
    operations. The outlook assumes (i) no further acquisitions or
    divestitures completed during the outlook period and (ii) current
    economic conditions in the markets in which the Company operates
    remaining unchanged and in particular the market for commercial real
    estate services. Actual results may differ materially. The Company
    undertakes no obligation to continue to update this information.

    Conference Call
    ---------------

    FirstService will be holding a conference call on Tuesday, January, 30,
2007 at 11:00 a.m. Eastern Time to discuss the results for the third quarter
as well as the updated outlook for fiscal 2007 and preliminary outlook for
fiscal 2008. The call will be simultaneously web cast and can be accessed live
or after the call at www.firstservice.com in the "Investor Relations/News
Releases" section.

    Forward-looking Statements
    --------------------------

    This press release includes 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 the Ontario
Securities Commission.

    
    FIRSTSERVICE CORPORATION
    Condensed Consolidated Statements of Earnings
    ---------------------------------------------
    (in thousands of US dollars, except per share amounts)
    (unaudited)

                              Three months ended        Nine months ended
                                  December 31               December 31
                          ---------------------------------------------------
                                 2006         2005         2006        2005
                          ------------ ------------ ------------ ------------

    Revenues                $ 374,757    $ 296,651  $ 1,038,942    $ 820,187
    Cost of revenues          247,044      193,580      669,275      522,099
    Selling, general and
     administrative expenses  100,897       82,408      273,515      219,403
    Depreciation and
     amortization other
     than backlog               6,592        4,021       16,554       11,552
    Amortization of
     brokerage backlog(1)       2,720        3,712        6,870        4,870
                          ------------ ------------ ------------ ------------
    Operating earnings         17,504       12,930       72,728       62,263
    Interest expense, net       2,395        2,774        7,702        8,766
    Other (income) expense     (2,546)      (2,542)      (4,929)      (3,729)
                          ------------ ------------ ------------ ------------
                               17,655       12,698       69,955       57,226
    Income taxes                5,254        4,835       22,962       19,223
                          ------------ ------------ ------------ ------------
                               12,401        7,863       46,993       38,003
    Minority interest share
     of earnings                4,644        2,492       13,130       10,440
                          ------------ ------------ ------------ ------------
    Net earnings from
     continuing operations      7,757        5,371       33,863       27,563
    Net earnings from dis-
     continued operations,
     net of tax(2)                  -        2,782            -        5,502
                          ------------ ------------ ------------ ------------
    Net earnings before
     cumulative effect of
     change in accounting
     principle                  7,757        8,153       33,863       33,065
    Cumulative effect of
     change in accounting
     principle, net of tax(3)       -            -       (1,353)           -
                          ------------ ------------ ------------ ------------
    Net earnings              $ 7,757      $ 8,153     $ 32,510     $ 33,065
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    Net earnings (loss)
     per share
      Basic
        Continuing
         operations            $ 0.26       $ 0.18       $ 1.14       $ 0.91
        Discontinued
         operations                 -         0.09            -         0.18
        Cumulative effect
         of change in
         accounting principle       -            -        (0.05)           -
                          ------------ ------------ ------------ ------------
                               $ 0.26       $ 0.27       $ 1.09       $ 1.09
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

      Diluted(4)
        Continuing
         operations            $ 0.25       $ 0.16       $ 1.06       $ 0.86
        Discontinued
         operations                 -         0.09            -         0.18
        Cumulative effect
         of change in
         accounting principle       -            -        (0.04)           -
                          ------------ ------------ ------------ ------------
                               $ 0.25       $ 0.25       $ 1.02       $ 1.04
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    Adjusted diluted net
     earnings per share from
     continuing operations(5)  $ 0.30       $ 0.23       $ 1.19       $ 0.95
                          ------------ ------------ ------------ ------------

    Weighted average shares
     outstanding:   Basic      29,844       30,185       29,899       30,215
     (in thousands) Diluted    30,237       30,915       30,338       30,951

    Notes to Condensed Consolidated Statements of Earnings
    (1) Amortization of short-lived brokerage backlog intangible assets
        recognized upon the acquisitions of Commercial Real Estate Services
        businesses in the past twelve months. Brokerage backlog represents
        the fair value of pending commercial real estate brokerage
        transactions and listings as at the acquisition date. Amortization is
        recorded to coincide with the completion of the related brokerage
        transactions.
    (2) Represents earnings of Resolve, the Business Services segment, which
        operations were sold in March 2006.
    (3) Cumulative effect of the adoption of SFAS No. 123(R), Share Based
        Payment, on April 1, 2006.
    (4) Numerators for diluted earnings per share calculations have been
        adjusted to reflect dilution from stock options at subsidiaries. The
        adjustment for the quarter ended December 31, 2006 was $247
        (2005 - $283) and nine months ended December 31, 2006 was $1,549
        (2005 - $984).
    (5) See "Reconciliation of operating earnings, net earnings and net
        earnings per share to adjusted operating earnings, adjusted net
        earnings and adjusted net earnings per share" below.


    Reconciliation of Operating Earnings, Net Earnings and Net Earnings Per
    ------------------------------------------------------------------------
    Share to Adjusted Operating Earnings, Adjusted Net Earnings and Adjusted
    ------------------------------------------------------------------------
    Net Earnings Per Share
    ----------------------
    (in thousands of US dollars, except per share amounts)
    (unaudited)

    The Company is presenting adjusted earnings measures to eliminate the
impact of amortization of the short-lived brokerage backlog intangible asset
recognized upon the acquisitions of Commercial Real Estate Services businesses
within the past twelve months. All of the adjustments are non-cash and are
considered "non-GAAP financial measures" under OSC and SEC guidelines. The
following tables provide a reconciliation of the adjusted measures:

                              Three months ended        Nine months ended
                                  December 31               December 31
                          ---------------------------------------------------
                                 2006         2005         2006        2005
                          ------------ ------------ ------------ ------------

    Adjusted operating
     earnings                $ 20,224     $ 16,642     $ 79,598     $ 67,133
    Amortization of
     brokerage backlog         (2,720)      (3,712)      (6,870)      (4,870)
                          ------------ ------------ ------------ ------------
    Operating earnings       $ 17,504     $ 12,930     $ 72,728     $ 62,263
                          ------------ ------------ ------------ ------------

    Adjusted net earnings
     from continuing
     operations               $ 9,331      $ 7,514     $ 37,666     $ 30,447
    Amortization of
     brokerage backlog         (2,720)      (3,712)      (6,870)      (4,870)
    Deferred income taxes         826        1,411        2,321        1,828
    Minority interest             320          158          746          158
                          ------------ ------------ ------------ ------------
    Net earnings from
     continuing
     operations               $ 7,757      $ 5,371     $ 33,863     $ 27,563
                          ------------ ------------ ------------ ------------

    Adjusted diluted net
     earnings per share
     from continuing
     operations                $ 0.30       $ 0.23       $ 1.19       $ 0.95
    Amortization of
     brokerage backlog,
     net of income taxes        (0.05)       (0.07)       (0.13)       (0.09)
                          ------------ ------------ ------------ ------------
    Diluted net earnings
     per share from
     continuing operations     $ 0.25       $ 0.16       $ 1.06       $ 0.86
                          ------------ ------------ ------------ ------------



    Reconciliation of EBITDA to Operating Earnings
    ----------------------------------------------
    (in thousands of US dollars)
    (unaudited)

    EBITDA is defined as net earnings from continuing operations before
minority interest share of earnings, income taxes, interest, depreciation and
amortization. The Company uses EBITDA to evaluate operating performance and as
a measure for debt covenants with its lenders. 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 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. A
reconciliation of EBITDA to operating earnings appears below.


                              Three months ended        Nine months ended
                                  December 31               December 31
                          ---------------------------------------------------
                                 2006         2005         2006        2005
                          ------------ ------------ ------------ ------------

    EBITDA                   $ 26,816     $ 20,663     $ 96,152     $ 78,685
    Depreciation and
     amortization other
     than backlog              (6,592)      (4,021)     (16,554)     (11,552)
    Amortization of
     brokerage backlog         (2,720)      (3,712)      (6,870)      (4,870)
                          ------------ ------------ ------------ ------------
    Operating earnings       $ 17,504     $ 12,930     $ 72,728     $ 62,263
                          ------------ ------------ ------------ ------------


    Condensed Consolidated Balance Sheets
    -------------------------------------
    (in thousands of US dollars)
    (unaudited)
                                                    December 31     March 31
                                                           2006         2006
                                                    ------------ ------------

    Assets
    ------
    Cash and cash equivalents                         $ 137,281    $ 167,938
    Accounts receivable                                 170,862      128,276
    Inventories                                          29,375       27,267
    Prepaids and other current assets                    52,918       31,928
                                                    ------------ ------------
      Current assets                                    390,436      355,409

    Fixed assets                                         59,690       48,733
    Other non-current assets                             49,358       39,600
    Goodwill and intangibles                            338,071      267,262
                                                    ------------ ------------
      Total assets                                    $ 837,555    $ 711,004
                                                    ------------ ------------
                                                    ------------ ------------

    Liabilities and shareholders' equity
    ------------------------------------
    Accounts payable and accrued liabilities          $ 232,799    $ 149,875
    Other current liabilities                            30,517       16,187
    Long term debt - current                             20,756       18,646
                                                    ------------ ------------
      Current liabilities                               284,072      184,708

    Long term debt - non-current                        215,886      230,040
    Deferred income taxes                                35,297       30,041
    Minority interest                                    42,974       28,463
    Shareholders' equity                                259,326      237,752
                                                    ------------ ------------
      Total liabilities and equity                    $ 837,555    $ 711,004
                                                    ------------ ------------
                                                    ------------ ------------

    Total debt                                        $ 236,642    $ 248,686
                                                    ------------ ------------
    Total debt, net of cash                              99,361       80,748
                                                    ------------ ------------



    Condensed Consolidated Statements of Cash Flows
    -----------------------------------------------
    (in thousands of US dollars)
    (unaudited)

                              Three months ended        Nine months ended
                                 December 31               December 31
                          ------------------------- -------------------------
                                 2006         2005         2006        2005
                          ------------ ------------ ------------ ------------

    Operating activities
    Net earnings from
     continuing
     operations               $ 7,757      $ 5,371     $ 33,863     $ 27,563
    Items not affecting cash:
      Depreciation and
       amortization             9,312        7,733       23,424       16,422
      Deferred income taxes      (607)      (1,101)      (3,941)      (2,887)
      Minority interest
       share of earnings        4,644        2,492       13,130       10,440
      Other                      (850)        (807)         133         (800)

    Changes in operating
     assets and liabilities    34,912       21,311       13,047       17,222
    Discontinued operations         -        1,939            -        2,741
                          ------------ ------------ ------------ ------------
    Net cash provided by
     operating activities      55,168       36,938       79,656       70,701

    Investing activities
    Acquisitions of
     businesses, net of
     cash acquired            (23,953)     (20,166)     (64,939)     (25,627)
    Purchases of fixed
     assets, net               (4,716)      (4,734)     (15,469)     (14,807)
    Other investing
     activities                 5,414         (158)       4,065       (2,014)
    Discontinued operations         -         (858)           -       (5,774)
                          ------------ ------------ ------------ ------------
    Net cash used in
     investing                (23,255)     (25,916)     (76,343)     (48,222)

    Financing activities
    Increase (decrease) in
     long-term debt, net         (353)      20,625      (15,318)      48,165
    Repurchases of Subordinate
     Voting Shares, net        (7,726)     (12,271)     (14,092)     (11,601)
    Other financing
     activities                (1,700)        (131)      (3,036)      (2,151)
    Discontinued operations         -      (18,595)           -      (17,511)
                          ------------ ------------ ------------ ------------
    Net cash (used in)
     provided by financing     (9,779)     (10,372)     (32,446)      16,902

    Effect of exchange rate
     changes on cash           (1,799)      (3,453)      (1,524)          (5)

    Increase (decrease) in
     cash and cash
     equivalents               20,335       (2,803)     (30,657)      39,376
                          ------------ ------------ ------------ ------------
    Cash and cash
     equivalents, beginning
     of period                116,946       79,637      167,938       37,458
                          ------------ ------------ ------------ ------------
    Cash and cash
     equivalents, end
     of period              $ 137,281     $ 76,834    $ 137,281     $ 76,834
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------



    Segmented Revenues, EBITDA and Operating Earnings
    -------------------------------------------------
    (in thousands of US dollars)
    (unaudited)
                                     Property
            Commercial  Residential  Improve-  Integrated
           Real Estate     Property  ment        Security  Corpor-  Consoli-
              Services   Management  Services    Services      ate     dated
             ----------------------------------------------------------------

    Three months
     ended December 31

    2006
    Revenues  $ 189,972  $ 101,726   $ 35,373   $ 47,610      $ 76  $ 374,757
    EBITDA       13,603      8,469      3,957      4,217    (3,430)    26,816
    Operating
     earnings     8,721      6,213      2,523      3,544    (3,497)    17,504


    2005
    Revenues  $ 141,241   $ 82,751   $ 32,454   $ 40,091     $ 114  $ 296,651
    EBITDA       11,532      7,252      3,080      2,785    (3,986)    20,663
    Operating
     earnings     6,921      5,879      2,082      2,076    (4,028)    12,930


    Nine months
     ended December 31

    2006
    Revenues  $ 470,260  $ 316,075  $ 121,066  $ 131,320     $ 221 $1,038,942
    EBITDA       37,636     31,655     28,613      8,443   (10,195)    96,152
    Operating
     earnings    25,443     26,320     24,984      6,383   (10,402)    72,728


    2005
    Revenues  $ 344,493  $ 258,791   $108,210  $ 108,465     $ 228  $ 820,187
    EBITDA       30,971     25,288     25,393      6,261    (9,228)    78,685
    Operating
     earnings    23,408     21,271     22,682      4,254    (9,352)    62,263

    




For further information:

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

Organization Profile

FIRSTSERVICE CORPORATION

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