Increases Fiscal 2006 outlook
Yearend highlights:
- Revenues up 37% to US$812.3 million
- EBITDA up 44% to US$78.8 million
- Adjusted net earnings up 44% to US$28.2 million
- Adjusted diluted EPS up 34% to US$0.90
TORONTO, May 18 /CNW/ - FirstService Corporation (Nasdaq: FSRV;
TSX: FSV.SV) today reported results for its fourth quarter and fiscal year
ended March 31, 2005. Annual revenues were $812.3 million (all amounts are in
US dollars), an increase of 37% relative to the prior year period. Annual
adjusted net earnings from continuing operations were $28.2 million, up 44%,
and adjusted diluted earnings per share from continuing operations were $0.90,
up 34% versus $0.67 one year ago. The adjustment relates to the non-cash
amortization of short-lived intangible assets recognized on the November 2004
acquisition of CMN International Inc., particularly the estimated fair value
of the backlog of pending real estate brokerage transactions and listings.
Three businesses, sold during the year at a net gain of $1.2 million, were
reported as discontinued operations. All current and prior year figures
reflect the 2 for 1 stock split completed on December 15, 2004.
Quarterly revenues were $246.4 million, up 62% over the same period last
year. EBITDA (see definition and reconciliation below) increased 37% to
$13.0 million. Adjusted quarterly net earnings from continuing operations were
$2.8 million versus $4.0 million in the prior year period, and the change was
entirely attributable to the seasonal low period of January to March for CMN's
brokerage operations, as well as additional interest and depreciation expenses
related to that acquisition. Adjusted diluted earnings per share from
continuing operations were $0.07 versus $0.13 in the prior year.
"FirstService achieved several significant milestones in fiscal 2005 as
we surpassed US $1 billion in annualized revenue, added another significant
platform for growth, expanded into international markets and secured new
financial resources," said Jay S. Hennick, President and Chief Executive
Officer of FirstService Corporation. "These achievements position us well to
continue to deliver strong and consistent growth in the coming years."
"We are confident FirstService will continue to deliver another solid
performance in fiscal 2006 as a result of the strong results achieved in 2005
and the favorable operating environment in our various markets," said Hennick.
About FirstService Corporation
------------------------------
FirstService is a leader in the rapidly growing service sector, providing
services in the following areas: commercial real estate services; residential
property management; integrated security services; property improvement and
business services. Market-leading brands include Continental, Wentworth and
Prime Management in residential property management; Colliers International in
commercial real estate; Intercon Security and SST in integrated security
services; California Closets, Paul Davis Restoration, Pillar to Post Home
Inspections and Certa Pro Painters in property improvement; and Resolve
Corporation in business services.
FirstService is a diversified service company with more than US$1 billion
in annualized revenues and more than 16,000 employees worldwide. More
information about FirstService is available at www.firstservice.com.
Segmented Quarterly Operating Results
-------------------------------------
Residential Property Management revenues increased to $68.9 million for
the quarter, 26% higher than in the prior year period. Internal growth of 12%
was attributable to growth in contractual property management revenues.
Revenue growth from acquisitions of 14% included property management
acquisitions in Chicago and Las Vegas, both representing new regional markets
for FirstService. EBITDA for the quarter was $5.5 million at a margin of 8.0%,
up significantly from $4.0 million and 7.2% one year ago. The increase in
margin reflects higher productivity in property services operations and change
in mix due to recent acquisitions.
Commercial Real Estate Services was established with the acquisition of
CMN, which operates as Colliers International, on November 30, 2004. Revenues
totalled $70.9 million for the fourth quarter and EBITDA was $0.4 million. The
results for the quarter reflect the seasonal low months of January through
March for commercial brokerage activity.
Revenues in Property Improvement Services totalled $23.8 million, an
increase of 17% over the prior year period. The Paul Davis Restoration and
California Closets franchise systems, as well as the Company's California
Closets "branchise" stores, produced strong revenue gains. EBITDA in the
seasonally low fourth quarter was $0.2 million, a decrease of $0.3 million
relative to last year, as a result of a one-time adjustment to a long-term
executive compensation plan in the quarter.
Integrated Security Services revenues in the fourth quarter were
$36.3 million, up 19% relative to the prior year period. Internal growth
accounted for 16% of the increase, while acquisitions represented 3%.
Increased commercial electronic security system revenues were the primary
internal growth driver. Quarterly EBITDA was $2.1 million at a margin of 5.9%,
up from 5.2% last year.
Fourth quarter Business Services revenues were $46.3 million, flat
relative to the comparative prior year period in which the division had a
significant short-term marketing support contract. EBITDA was $7.7 million or
16.7% of revenues, up 41% from $5.5 million or 11.9% of revenues in the fourth
quarter last year. The margin increase was due to recognition of revenue
related to a completed contract, as well as increased efficiency and slightly
higher capacity utilization.
Quarterly corporate costs were $2.9 million, relative to $2.0 million in
the prior year period primarily due to costs related to Sarbanes-Oxley
compliance and higher performance-based executive compensation accruals.
A comparison of segmented EBITDA to operating earnings is provided below.
Discontinued operations for the fourth quarter included an after-tax loss
on sale of $0.7 million related to the businesses sold during the year. For
the year, the net gain on sale for the three dispositions was $1.2 million.
Financial Outlook
-----------------
Based on the strong operating results for fiscal 2005, FirstService is
increasing and updating the outlook for fiscal 2006 previously issued on
January 26, 2005.
<<
(in millions of US dollars, except per
share amounts) Year ending March 31, 2006
Previous Updated
--------------- ---------------
Revenues $1,050 - $1,100 $1,050 - $1,100
EBITDA 90.0 - 95.0 92.0 - 99.0
Adjusted diluted earnings per share
from continuing operations $0.97 - $1.05 $0.97 - $1.07
Note: The updated outlook assumes (i) no further acquisitions or
divestitures completed during the outlook period; (ii) current economic
conditions in the markets in which the Company operates remaining
unchanged; and (iii) an exchange rate of US$0.80 per C$1.00. 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 Wednesday, May 18, 2005
at 11:00 AM Eastern Time to discuss results for the fourth quarter and year as
well as the outlook for fiscal 2006. 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 Year ended
March 31 March 31
--------------------- ---------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
Revenues $ 246,362 $ 151,810 $ 812,290 $ 593,782
Cost of revenues 153,311 105,364 526,623 408,327
Selling, general and
administrative expenses 80,004 36,934 206,904 130,934
Depreciation 4,782 3,336 15,320 12,824
Amortization of intangibles
other than backlog 1,099 641 3,140 2,212
Amortization of brokerage
backlog(1) 3,777 - 8,735 -
---------- ---------- ---------- ----------
Operating earnings 3,389 5,535 51,568 39,485
Other income (375) (1,116) (375) (1,116)
Interest expense 3,661 1,807 11,019 7,900
---------- ---------- ---------- ----------
103 4,844 40,924 32,701
Income taxes (566) 673 11,338 9,815
---------- ---------- ---------- ----------
669 4,171 29,586 22,886
Minority interest share
of earnings 259 190 6,941 3,224
---------- ---------- ---------- ----------
Net earnings from continuing
operations 410 3,981 22,645 19,662
Net (loss) earnings from
discontinued operations,
net of income taxes (1,065) (2,347) 562 (638)
---------- ---------- ---------- ----------
Net (loss) earnings $ (655) $ 1,634 $ 23,207 $ 19,024
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net (loss) earnings
per share(2)
Basic
Continuing operations $ 0.01 $ 0.14 $ 0.76 $ 0.69
Discontinued operations (0.03) (0.08) 0.02 (0.02)
---------- ---------- ---------- ----------
$ (0.02) $ 0.06 $ 0.78 0.67
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Diluted(3)
Continuing operations $ (0.01) $ 0.13 $ 0.72 $ 0.67
Discontinued operations (0.03) (0.08) 0.02 (0.02)
---------- ---------- ---------- ----------
$ (0.04) $ 0.05 $ 0.74 $ 0.65
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Adjusted diluted net earnings
per share from continuing
operations(4) $ 0.07 $ 0.13 $ 0.90 $ 0.67
---------- ---------- ---------- ----------
Weighted average shares
outstanding: (in thousands)
Basic 30,065 29,154 29,777 28,570
Diluted 30,743 29,658 30,467 29,192
Notes
(1) Amortization of short-lived brokerage backlog intangible assets
recognized upon the acquisition of CMN. 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) Share and per-share information has been updated for each period
presented to reflect the 2 for 1 stock split completed on December 15,
2004.
(3) Numerators for diluted earnings per share calculations have been
adjusted to reflect dilution from stock options at subsidiaries.
(4) 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 acquisition of CMN. 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 Year ended
March 31 March 31
--------------------- ---------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
Adjusted operating earnings $ 7,166 $ 5,535 $ 60,303 $ 39,485
Amortization of brokerage
backlog (3,777) - (8,735) -
---------- ---------- ---------- ----------
Operating earnings $ 3,389 $ 5,535 $ 51,568 $ 39,485
---------- ---------- ---------- ----------
Adjusted net earnings from
continuing operations $ 2,827 $ 3,981 $ 28,235 $ 19,662
Amortization of brokerage
backlog (3,777) - (8,735) -
Deferred income taxes 1,360 - 3,145 -
---------- ---------- ---------- ----------
Net earnings from continuing
operations $ 410 $ 3,981 $ 22,645 $ 19,662
---------- ---------- ---------- ----------
Adjusted diluted net earnings
per share from continuing
operations $ 0.07 $ 0.13 $ 0.90 $ 0.67
Amortization of brokerage
backlog, net of deferred
income taxes (0.08) - (0.18) -
---------- ---------- ---------- ----------
Diluted net (loss) earnings
per share from continuing
operations $ (0.01) $ 0.13 $ 0.72 $ 0.67
---------- ---------- ---------- ----------
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 or
Canadian 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 Year ended
March 31 March 31
--------------------- ---------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
EBITDA $ 13,047 $ 9,512 $ 78,763 $ 54,521
Depreciation (4,782) (3,336) (15,320) (12,824)
Amortization of intangibles
other than brokerage backlog (1,099) (641) (3,140) (2,212)
Amortization of brokerage
backlog (3,777) - (8,735) -
---------- ---------- ---------- ----------
Operating earnings $ 3,389 $ 5,535 $ 51,568 $ 39,485
---------- ---------- ---------- ----------
Condensed Consolidated Balance Sheets
-------------------------------------
(in thousands of US dollars)
(unaudited)
March 31 March 31
2005 2004
---------- ----------
Assets
------
Cash and cash equivalents $ 37,458 $ 15,620
Accounts receivable 168,927 97,367
Inventories 20,878 15,229
Prepaids and other current assets 21,507 19,017
---------- ----------
Current assets 248,770 147,233
Fixed assets 57,241 49,826
Other non-current assets 22,755 17,198
Goodwill and intangibles 297,962 223,296
---------- ----------
Total assets $ 626,728 $ 437,553
---------- ----------
---------- ----------
Liabilities and shareholders' equity
------------------------------------
Accounts payable and accrued liabilities $ 155,429 $ 69,879
Other current liabilities 9,147 12,987
Long term debt - current 18,206 3,502
---------- ----------
Current liabilities 182,782 86,368
Long term debt - non-current 201,809 160,386
Deferred income taxes 29,802 19,594
Minority interest 26,464 16,104
Shareholders' equity 185,871 155,101
---------- ----------
Total liabilities and equity $ 626,728 $ 437,553
---------- ----------
---------- ----------
Total debt, excluding interest rate swaps $ 219,732 $ 157,083
---------- ----------
Total debt, net of cash, excluding interest
rate swaps 182,274 141,463
---------- ----------
Condensed Consolidated Statements of Cash Flows
-----------------------------------------------
(in thousands of US dollars)
(unaudited)
Year ended March 31
---------------------
2005 2004
---------- ----------
Operating activities
Net earnings from continuing operations $ 22,645 $ 19,662
Items not affecting cash:
Depreciation and amortization 27,195 15,036
Deferred income taxes (8,922) (683)
Minority interest share of earnings 6,941 3,224
Other 963 (181)
Changes in operating assets and liabilities (11,791) (1,267)
---------- ----------
Net cash provided by operating activities 37,031 35,791
---------- ----------
Investing activities
Acquisitions of businesses, net of cash acquired (59,017) (17,117)
Purchases of fixed assets, net (17,028) (13,121)
Other investing activities 2,199 1,155
---------- ----------
Net cash used in investing (73,846) (29,083)
---------- ----------
Financing activities
Increase in long-term debt 48,630 (2,037)
Other financing activities 2,087 7,098
---------- ----------
Net cash provided by financing 50,717 5,061
---------- ----------
Net cash provided by (used in) discontinued
operation 4,801 (1,052)
---------- ----------
Effect of exchange rate changes on cash 3,135 (475)
---------- ----------
Increase in cash and cash equivalents during
the period 21,838 10,242
Cash and cash equivalents, beginning of period 15,620 5,378
---------- ----------
Cash and cash equivalents, end of period $ 37,458 $ 15,620
---------- ----------
---------- ----------
Segmented Revenues, EBITDA and Operating Earnings
-------------------------------------------------
(in thousands of US dollars)
(unaudited)
Commer-
cial Inte- Property
Residential Real grated Improve
Property Estate Security -ment Business Consol-
Management Services Services Services Services Corporate idated
-------------------------------------------------------------------
Three months ended March 31
2005
Revenues $ 68,873 $ 70,936 $ 36,252 $ 23,841 $ 46,253 $ 207 $246,362
EBITDA 5,542 413 2,131 157 7,710 (2,906) 13,047
Operating
earnings 3,961 (4,232) 1,044 (640) 6,226 (2,970) 3,389
Brokerage
backlog
amortization 3,777
---------
Adjusted
operating
earnings $ (455)
---------
2004
Revenues $ 54,643 $ - $ 30,435 $ 20,366 $ 46,201 $ 165 $151,810
EBITDA 3,952 - 1,593 481 5,478 (1,992) 9,512
Operating
earnings 2,773 - 1,048 (70) 3,814 (2,030) 5,535
Commer-
cial Inte- Property
Residential Real grated Improve
Property Estate Security -ment Business Consol-
Management Services Services Services Services Corporate idated
-------------------------------------------------------------------
Year ended March 31
2005
Revenues $275,229 $120,535 $143,160 $111,779 $160,914 $ 673 $812,290
EBITDA 24,088 11,144 10,286 19,867 22,350 (8,972) 78,763
Operating
earnings 18,917 1,276 7,468 16,796 16,262 (9,151) 51,568
Brokerage
backlog
amortization 8,735
---------
Adjusted
operating
earnings $ 10,011
---------
2004
Revenues $228,790 $ - $122,748 $ 89,361 $152,449 $ 434 $593,782
EBITDA 19,733 - 8,429 14,938 18,302 (6,881) 54,521
Operating
earnings 15,514 - 6,481 12,669 11,852 (7,031) 39,485
>>
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