-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VNrve9WLssqAipgqRkbL6Lz1nR01XJ9QfaTPfvguNEcTS0mdMT/9u3ZGiH4hyE2s G/wWu013NwozggQG9Ppg+Q== 0000912057-99-005225.txt : 19991115 0000912057-99-005225.hdr.sgml : 19991115 ACCESSION NUMBER: 0000912057-99-005225 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRSTSERVICE CORP CENTRAL INDEX KEY: 0000913353 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-DETECTIVE, GUARD & ARMORED CAR SERVICES [7381] IRS NUMBER: 000000000 FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-24762 FILM NUMBER: 99748998 BUSINESS ADDRESS: STREET 1: 1140 BAY ST STREET 2: SUITE 4000 CITY: TORONTO ONTARIO CANA STATE: A6 MAIL ADDRESS: STREET 1: FIRSTSERVICE BUILDING 1140 BAY STREET STREET 2: SUITE 4000 CITY: TORONTO ONTARIO CANA STATE: A6 10-Q 1 FORM 10-Q - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-Q /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO ______________ COMMISSION FILE NUMBER 0-24762 ------------------------ FIRSTSERVICE CORPORATION (Exact name of registrant as specified in its charter) ONTARIO, CANADA NOT APPLICABLE (Province or other jurisdiction (I.R.S. employer identification of incorporation or number, if applicable) organization)
1140 BAY STREET SUITE 4000 TORONTO, ONTARIO CANADA M5S 2B4 (416) 960-9500 (ADDRESS AND TELEPHONE NUMBER OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE) FIRSTSERVICE CORPORATION 6300 PARK OF COMMERCE BLVD. BOCA RATON, 33487 U.S.A. (561) 989-5100 (NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE IN THE UNITED STATES) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / Indicate the number of shares outstanding of the registrant's common stock as of the latest practicable date: * Subordinate Voting Shares 12,266,133 as of September 30, 1999. * Multiple Voting Shares 662,847 as of September 30, 1999. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FIRSTSERVICE CORPORATION FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1999 INDEX
PAGE -------- PART 1. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements a) Statements of Earnings For the Three and Six Months Ended September 30, 1999, and 1998.................................................... 3 b) Balance Sheets As of September 30, 1999 and March 31, 1999.............. 4 c) Statements of Cash Flows For the Six Months Ended September 30, 1999 and 1998..... 5 d) Notes to Financial Statements........................... 6 Management's Discussion and Analysis of Financial Item 2. Condition and Results of Operations......................... 8 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders......... 13 Item 6. Exhibits and Reports on Form 8-K............................ 14 Signature........................................................................... 15
2 FIRSTSERVICE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (IN THOUSANDS OF U.S. DOLLARS)
THREE MONTH PERIODS SIX MONTH PERIODS ENDED SEPTEMBER 30 ENDED SEPTEMBER 30 ------------------- ------------------- 1999 1998 1999 1998 -------- -------- -------- -------- (Unaudited) Revenues................................................... $96,547 $69,402 $181,454 $134,166 Cost of revenues........................................... 59,765 43,141 115,835 85,963 Selling, general and administrative expenses............... 19,783 13,844 37,376 26,600 Depreciation............................................... 1,615 1,320 3,085 2,512 Amortization............................................... 1,050 607 1,864 1,238 Interest................................................... 1,959 1,268 3,722 2,568 ------- ------- -------- -------- Earnings before income taxes and minority interest......... 12,375 9,222 19,572 15,285 Income taxes............................................... 4,947 3,672 7,806 6,106 ------- ------- -------- -------- Earnings before minority interest.......................... 7,428 5,550 11,766 9,179 Minority interest share of earnings........................ 1,242 754 1,996 1,144 ------- ------- -------- -------- Net earnings............................................... $ 6,186 $ 4,796 $ 9,770 $ 8,035 ------- ------- -------- -------- Earnings per share: Basic.................................................... 0.48 0.38 0.76 0.65 Diluted.................................................. 0.45 0.36 0.71 0.60 Weighted average shares outstanding: Basic.................................................... 12,933 12,496 12,929 12,421 Diluted.................................................. 13,733 13,228 13,769 13,604
3 FIRSTSERVICE CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS OF U.S. DOLLARS)
SEPTEMBER 30 MARCH 31 1999 1999 ------------- --------- (Unaudited) (Audited) ASSETS CURRENT ASSETS Cash........................................................ $ 5,616 $ 4,627 Accounts receivable, net.................................... 55,067 41,360 Inventories................................................. 10,100 7,969 Prepaids and other assets................................... 8,586 6,759 -------- -------- 79,369 60,715 -------- -------- Other receivables........................................... 5,856 3,425 Fixed assets................................................ 28,132 25,847 Other assets................................................ 4,848 3,429 Deferred income taxes....................................... 636 1,264 Goodwill.................................................... 107,626 88,764 -------- -------- 147,098 122,729 -------- -------- $226,467 $183,444 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and other current liabilities.............. $ 45,585 $ 27,194 Unearned revenue............................................ 3,332 6,099 Long-term debt -- current................................... 2,164 1,726 -------- -------- 51,081 35,019 -------- -------- Long-term debt less current portion......................... 101,563 84,516 Minority interest........................................... 6,103 4,889 SHAREHOLDERS' EQUITY Capital stock............................................... 53,636 53,654 Receivables pursuant to company's share purchase plan....... (3,294) (3,294) Retained earnings........................................... 15,938 6,168 Cumulative other comprehensive income....................... 1,440 2,492 -------- -------- 67,720 59,020 -------- -------- $226,467 $183,444 ======== ========
4 FIRSTSERVICE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS OF U.S. DOLLARS)
SIX MONTH PERIODS ENDED SEPTEMBER 30 ------------------- 1999 1998 -------- -------- (Unaudited) CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES Net earnings for the period................................. $ 9,770 $ 8,035 Items not affecting cash Depreciation and amortization............................. 4,949 3,750 Deferred income taxes..................................... 198 (40) Minority interest share of earnings....................... 1,996 1,144 Other..................................................... 222 160 ------- ------- 17,135 13,049 ------- ------- Changes in working capital, net of acquisitions Accounts receivable....................................... (4,593) (12,140) Inventories............................................... (2,130) 1,440 Prepaids and other........................................ (987) 921 Accounts payable and other current liabilities............ 12,228 4,006 Unearned revenue.......................................... (7,992) (5,119) ------- ------- Net cash provided by operating activities................... 13,661 2,157 ------- ------- INVESTING ACTIVITIES Acquisition of businesses................................... (14,646) (26,975) Increase in fixed assets.................................... (4,401) (2,655) (Increase) decrease in other assets......................... (930) 194 Increase in other receivables............................... (2,432) (428) ------- ------- Net cash used for investing................................. (22,409) (29,864) ------- ------- FINANCING ACTIVITIES Net increase in long-term debt.............................. 11,656 20,849 Financing fees paid......................................... (543) (735) Issuance of subordinate voting shares, net of repurchases... (18) 877 Dividends paid to minority shareholders of subsidiaries..... (166) (106) ------- ------- Net cash provided by financing.............................. 10,929 20,884 ------- ------- Effect of exchange rate changes on cash..................... (1,192) 4,255 ------- ------- Increase (decrease) in cash and cash equivalents during the period.................................................... 989 (2,567) Cash and cash equivalents, beginning of period.............. 4,627 2,630 ------- ------- Cash and cash equivalents, end of period.................... $ 5,616 $ 63 ======= =======
5 FIRSTSERVICE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1999 (UNAUDITED) 1. DESCRIPTION OF THE BUSINESS FirstService Corporation (the "Company") is a provider of property and business services to corporate, public sector and residential customers in the United States and Canada, principally in Ontario. The Company's operations are conducted through two principal operating divisions, Property Services and Business Services. The Property Services division includes community association management, security, franchising and lawncare and represented approximately 80% of the Company's revenues for the year ended March 31, 1999. The Business Services division provides outsourcing services such as transaction processing and literature fulfillment for corporations and government agencies. 2. SUMMARY OF PRESENTATION The condensed consolidated financial statements included herein have been prepared by FirstService Corporation, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission for the presentation of interim financial information. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information not misleading. In the opinion of management, the condensed consolidated financial statements contain all adjustments necessary to present fairly the financial position of the Company as of September 30, 1999 and the results of its operations for the three months and six months ended September 30, 1999 and 1998 and its cash flows for the six months ended September 30, 1999 and 1998. All such adjustments are of a normal recurring nature. The results of operations for the three and six months ended September 30, 1999 are not necessarily indicative of the results to be expected for the year ended March 31, 2000. For further information, refer to the consolidated financial statements and footnotes thereto for the year ended March 31, 1999 contained in the Company's annual information form included as an Exhibit to its Form 6-K for the month of August, 1999. 3. ACQUISITIONS Effective June 1, 1999 the Company acquired American Pool Enterprises Inc. ("APE") which is the largest commercial swimming pool and recreation facility management operation in the U.S. APE, headquartered in Beltsville, Maryland, provides management, repair, maintenance and renovation services to more than 1,100 apartment, condominium and community association swimming pool and recreation facilities, through 11 branches in 9 States. APE generated revenues of $20 million for the year ended December 31, 1998. On July 1, 1999, the Company acquired DDS Southwest Distribution Services Limited ("Southwest") through it's 89% owned subsidiary, DDS Distribution Services Limited. Southwest provides order processing and fulfillment, kit preparation, invoicing and accounts receivable collection to customers in the educational publishing industry. The acquired company generated revenues of approximately $8 million for the year ended December 31, 1998. The results of operations of these acquisitions have been included in the condensed consolidated financial statements included herein since the applicable date of acquisition. These acquisitions were accounted for using the purchase method of accounting. As a result, the purchase prices has been allocated to the assets acquired, including intangibles, based on their respective fair values. The purchase price allocations are preliminary and subject to adjustment. 4. LONG TERM DEBT On April 1, 1999, the Company amended and restated its lending agreement increasing credit availability by approximately U.S. $30.0 million and splitting the facilities into tranches of Cdn. $50.0 million and U.S. $130 million. The amended facilities which will be used for acquisitions, capital expenditures and working capital, provide a more tax efficient structure and more effectively match long-term U.S. dollar denominated assets with U.S. dollar denominated debt. The revolving facilities provide that the Company may borrow using Prime, LIBOR or Bankers Acceptances interest rate options that vary within a range depending on certain leverage ratios. Borrowings currently bear interest at the lenders cost of funds rate plus 1.25%. The Company has an interest rate swap contract to December 31, 2002 at a fixed rate of 5.3% in the amount of Cdn.$20 million to hedge against interest rate exposure on a portion of its revolving facilities. As security for the revolving credit facilities, the Company has granted the lenders various security including the following: an interest in all of the assets of the Company including the Company's share of its subsidiaries, an assignment of material contracts and an assignment of the Company's "call rights" with respect to shares of the subsidiaries held by minority interests. The Company is also required to comply with certain operating and financial ratios. 6 FIRSTSERVICE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 1999 (UNAUDITED) 5. COMPREHENSIVE INCOME Total comprehensive income was $5,570 and $3,871 for the three months ended September 30, 1999 and 1998, respectively, and $8,719 and $10,460 for the six months ended September 30, 1999 and 1998, respectively. Total comprehensive income includes net earnings and foreign currency exchange adjustments. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 Revenues increased $27.1 million, or 39%, to $96.5 million in the second quarter of fiscal 2000 from $69.4 million in the second quarter of fiscal 1999. Approximately $18.0 million of the increase was attributable to acquired companies owned less than one year including California Closets, American Pool Enterprises ("APE") and DDS Southwest Distribution Services ("DDS Southwest"). The balance of the increase resulted from internal growth. Earnings before interest, taxes, depreciation and amortization ("EBITDA") increased 37% to $17.0 million from $12.4 million in the prior year period. EBITDA margins for the three months ended September 30, 1999, were 17.6% compared to 17.9% in the second quarter of fiscal 1999. The slight margin decline reflects the continuing change in the seasonal mix of business impacted by strong growth in the non-seasonal operations which generate consistent EBITDA margins across four quarters relative to the seasonal businesses which generate very high margins in the June and September quarters and losses in the December and March quarters. This continuing mix change was somewhat offset in the second quarter by the acquisitions of APE and DDS Southwest which are both seasonal businesses and generate higher EBITDA margins in the September quarter. Depreciation for the quarter ended September 30, 1999 was $1.6 million up 22% from the prior year quarter due largely to acquisitions. The increase also reflected a sharp step-up in capital investment in management information systems over the past year. Generally, these investments are depreciated over a short time frame relative to the Company's other pool of assets. Amortization was $1.1 million, up 73% due to the significant increase in goodwill resulting from acquisitions completed during the past year. Interest expense increased 54% over prior year levels to $2.0 million as a result of increased borrowings related to acquisitions. All acquisitions completed during the past year have been financed through the Company's credit facilities. The income tax provision for the second quarter was approximately 40.0% of earnings before taxes, consistent with the prior year. Minority interest expense increased 65% to $1.2 million or 16.7% of earnings before minority interest compared to $0.75 million or 13.6% in the prior year quarter. The minority interest in the current year more accurately reflects the average equity interest in the Company's subsidiaries held by management and more closely reflects the expected expense ratio in the future. The prior year consolidated minority interest expense was lower due to the deficit position of an 80% owned, profitable subsidiary of the Company which resulted in a lower minority interest expense being reflected for the subsidiary. The deficit position was eliminated during the second quarter of fiscal 1999. Net income was $6.2 million, up 29% over the prior year, while diluted earnings per share increased 25% to $0.45. Diluted earnings per share reflect a 4% increase in the weighted average number of shares outstanding. Revenues for the Property Services division were $75.6 million, an increase of approximately $20.8 million or 38% over the prior year. Approximately $14.0 million of the revenue increase resulted from acquisitions including California Closets and APE, which closed effective June 1, 1999. The balance of the increase resulted from internal growth. Property Services EBITDA grew 31% to $13.0 million or 17.2% of revenue compared to an EBITDA margin of 18.1% in the prior year. The margin decline reflects a change in the seasonal mix of business as discussed above. Revenues for the Business Services division rose to $20.9 million for the second quarter, a 43% increase over the prior year, reflecting the impact of the acquisition of DDS Southwest and solid internal growth. Business Services EBITDA was $5.0 million or 24.0% of revenue, up from $3.1 million and 21.0% of revenue in the prior year impacted primarily by the acquisition of DDS Southwest which is a seasonal business that generates a higher EBITDA margin in the September quarter. Corporate expenses increased to $1.0 million in the second quarter from $0.6 million as a result of higher salary costs and increased travel relative to the prior year. 8 RESULTS OF OPERATIONS SIX MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 Revenues for the first six months of fiscal 2000 increased 35% to $181.5 million from $134.2 million in the first six months of fiscal 1999. Approximately $29.0 million of the increase was attributable to acquired companies owned less than one year. The remaining increase resulted from internal growth. EBITDA increased 31% to $28.2 million from $21.6 million in the prior year period. EBITDA margins for the six months ended September 30, 1999, were 15.5% compared to $16.0% for the six months ended September 30, 1998. The margin decline primarily reflects a change in the seasonal mix of business as discussed in the three month comparison. Depreciation for the six month period was $3.1 million up 23% from the prior year period due largely to acquisitions. However, as discussed in the three month comparison, the increase also reflected a step-up in capital investment relative to the prior year. Amortization was $1.9 million, up 51% due to the increase in goodwill that has resulted from acquisitions completed during the past year. Interest expense increased 45% over prior year levels to $3.7 million as a result of increased borrowings related to acquisitions. The income tax provision for the six months ended September 30, 1999 was approximately 40.0% of earnings before taxes, consistent with the prior year period. Minority interest expense increased 74% to $2.0 million or 17.0% of earnings before minority interest compared to $1.1 million or 12.5% in the prior year period. The minority interest in the current year more accurately reflects the average equity interest in the Company's subsidiaries held by management and more closely reflects the expected expense ratio in the future. As discussed in the three month comparison, the prior year consolidated minority interest expense was lower due to the deficit position of an 80% owned, profitable subsidiary of the Company which resulted in no minority interest expense being reflected for the subsidiary. The deficit position was eliminated during the second quarter of fiscal 1999. Net income for the first six months of fiscal 2000 was $9.8 million, up 22% over the first six months of fiscal 1999, while diluted earnings per share increased 18% to $0.71. Diluted earnings per share reflect a 3.5% increase in the weighted average number of shares outstanding. Six month revenues for the Property Services division were $144.6 million, an increase of approximately $38.9 million or 37% over the prior year. Approximately $25.0 million of the revenue increase resulted from acquisitions including California Closets and American Pool Enterprises, which closed effective June 1, 1999. The balance of the increase resulted from internal growth. Property Services EBITDA margin for the six months was 15.4% compared to 16% in the prior year. The margin decline reflects a change in the seasonal mix of business as discussed in the three month comparison. Six month revenues for the Business Services division were $36.7 million, up 30% over the prior year, reflecting the impact of the acquisition of DDS Southwest and solid internal growth. The Business Services EBITDA margin for the first six months of fiscal 2000 was 22% of revenue, up from 20.7% in the prior year impacted by the acquisition of DDS Southwest which is a seasonal business that generates a higher EBITDA margin in the first two quarters, somewhat offset by higher expenditures at our fulfillment operation during the period to expand capacity. Corporate expenses increased to $2.1 million in the first half of fiscal 2000 from $1.3 million as a result of higher salary costs and increased travel relative to the prior year. SEASONALITY AND QUARTERLY FLUCTUATIONS Certain segments of the Company's operations, which in the aggregate comprise approximately 15% of revenues, are subject to seasonal variations. Specifically, the demand for residential lawn care services, exterior painting services, and commercial pool maintenance in the northern United States and in Canada is highest during late spring, summer and early fall and very low during winter. As a result, these operations generate a large percentage of their annual revenues between April and September. The Company has historically 9 generated lower profits or net losses during its third and fourth fiscal quarters, from October to March. The community association management, security, business services and many of the franchise systems generate revenues approximately evenly throughout the fiscal year. The seasonality of the lawn care, painting and pool maintenance operations results in variations in quarterly EBITDA margins. Variations in quarterly EBITDA margins can also be caused by acquisitions which alter the consolidated service mix. The Company's non-seasonal businesses typically generate a consistent EBITDA margin over all four quarters, while the Company's seasonal businesses experience high EBITDA margins in the first two quarters, offset by negative EBITDA in the last two quarters. As non-seasonal revenues increase as a percentage of total revenues, the Company's quarterly EBITDA margin fluctuations should be reduced. LIQUIDITY AND CAPITAL RESOURCES Bank borrowings, proceeds from capital stock issues, and cashflow from operations have historically been the funding sources for working capital requirements, capital expenditures and acquisitions. Management believes that funds from these sources will remain available and are adequate to support ongoing operational requirements and near-team acquisition growth. In December 1996, FirstService entered into a lending agreement with a syndicate of chartered banks. The agreement -- amended and restated in October 1997, again in June, 1998 and most recently on April 1, 1999, - -- currently provides six-year committed revolving credit facilities for acquisitions of Cdn $50 million and US $130 million. Outstanding indebtedness under the facilities bears interest at a rate based on competitive floating reference rates, as selected by the Company, such as LIBOR plus a margin of 1.00% to 1.50% per annum, depending on certain leverage ratios. The agreement requires the Company to meet specific financial ratios and places certain limitations on additional borrowing and the ability to pay dividends or sell assets. As of September 30, 1999, the Company had drawn Cdn $4.0 million and US $98.0 million. FirstService is exposed to foreign currency exchange risk. The Company's exposure to foreign exchange losses may be mitigated as the lending agreement provides that it may borrow in Canadian or U.S. funds. During the second quarter, capital expenditures were approximately $2.2 million split approximately equally between management information systems and vehicles and equipment. FirstService does not anticipate paying dividends on its outstanding shares in the foreseeable future. Management believes that it is in the best interest of shareholders to retain all available funds to invest in its businesses with the objective of building long-term shareholder value. YEAR 2000 The Company is currently in the process of addressing the Year 2000 issue, which is the result of computer programs being written using two digits rather than four to define the applicable year. As a result, computer applications and software may recognize an input of two zeros (00) as the year 1900. This incorrect date recognition could cause systems and software malfunctions that may have a material adverse effect on business operations. This potential problem could affect not only the Company's internal information systems and other infrastructure containing embedded technology, but also those of third parties, such as customers and suppliers using systems that may interact with or affect the Company's operations or, in the case of the Company's security operation, systems supplied by the Company. COMPANY'S READINESS. Beginning in late fiscal 1997 the Company undertook a comprehensive review of its software applications and computer infrastructure and other infrastructure containing embedded technology that are likely to be affected by the Year 2000 issue. The review was completed in fiscal 1999 using the Company's employees and various computer consultants. As a result of this review, new systems or upgrades were implemented at several of the operations during fiscal 1998, fiscal 1999 and the first half of fiscal 2000. The Company's objective is to complete all its Y2K readiness programs by the fall of calendar 1999. The Company presently believes that it is largely Y2K compliant and that the Year 2000 issue will not pose significant operational problems for its computer systems. 10 The Company has identified its significant customers and suppliers that it believes, at this time, to be critical to its various operations. Steps are underway to ascertain their respective stages of readiness through the use of questionnaires, interviews, and other available means to determine the progress that those customers and suppliers are making in remediating their own Year 2000 issues. The Company is requiring that significant customers and suppliers certify those products and services to be Year 2000 compliant. However, there can be no assurance that the information systems provided by or utilized by other companies which affect the Company's operations will be timely revised in such a way as to allow them to continue normal business operations or furnish products, services or data to the Company without disruption. COST OF COMPLIANCE. Many of the systems upgrades which are dealing with Y2K issue would have occurred in the normal course of business. In other cases, the Company is accelerating normal course systems replacements or upgrades in view of the Y2K issue. The costs incurred to date to replace non-compliant systems that would not otherwise have been replaced are not material and the Company does not expect its future Year 2000 costs to be material. All Year 2000 costs have been funded with cash from operations. COMPANY RISK AND CONTINGENCY PLANS. The Company's systems identified as non-compliant or in need of replacement are being upgraded or replaced. The Company expects this remediation to be substantially completed by the fall of calendar 1999. The Company has not made contingency plans to deal with any failure to its systems or the systems of its significant customers or suppliers as a result of the Year 2000 issue. If needed conversions to the Company's information systems are not made on a timely basis or the Company's significant customers or suppliers fail to make such remediations and conversions on a timely basis, it could have a material adverse effect on the Company's results of operation or financial condition. 11 PART II. OTHER INFORMATION ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company's Annual Meeting of Shareholders was held on September 15, 1999. The matters voted upon and the results of voting were as follows: To ratify the appointment of PricewaterhouseCoopers LLP, Chartered Accountants, as the auditors of the Corporation and the authorization of the directors to fix their renumeration.
For..................... 18,232,611 Against................. 5,786
To re-elect the current Board of Directors of the Corporation to serve until the next meeting called for the purpose of electing directors or until their respective successors are duly appointed. For..................... 18,233,895 Against................. 4,502
To approve an amendment to the Company's Stock Option Plan No. 2 to reserve an additional 500,000 subordinate voting shares. The amendment increases the maximum number of shares issuable from the option plan pool from 2.35 million to 2.85 million subordinate voting shares. For..................... 2,060,756 Against................. 1,039,369 Ineligible.............. 14,799,251 Not voted............... 339,021
12 ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits 3.1* Articles of Incorporation and Amendment 3.2* By-Laws and Amendments 10.1* Credit Facility dated April 1, 1999 among the company and a syndicate of bank lenders b) Reports on Form 8-K None - ------------ * Incorporated by reference to the company's report on Form 10-Q for the period ended June 30, 1999 (Commission File number 0-24762) 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DATE: NOVEMBER 12, 1999 FIRSTSERVICE CORPORATION By: /s/ D. SCOTT PATTERSON ---------------------------------------------- D. Scott Patterson SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER (Principal Financial Officer & Authorized Signatory)
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