10-Q/A

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q/A
Amendment No. 1

ý    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2003

or

o    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
(State or other
jurisdiction of incorporation
or organization) Not Applicable
(I.R.S. employer
identification number,
if applicable)

FirstService Building
1140 Bay Street, Suite 4000
Toronto, Ontario, Canada
M5S 2B4
(416) 960-9500
(Address and telephone number of Registrant's principal executive office)

        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 ý    No o

        Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes ý    No o

        Indicate the number of shares outstanding of each of the Registrant's classes of common stock as of the latest practicable date:

Subordinate Voting Shares — 13,537,843 as of October 17, 2003
Multiple Voting Shares — 662,847 as of October 17, 2003

Explanatory note

        This Amendment No. 1 to our report on Form 10-Q for the quarter ended September 30, 2003, initially filed with the Securities and Exchange Commission ("SEC") on October 27, 2003 (the "Originally Filed 10-Q"), is being filed to reflect restatements of the consolidated financial statements for the three and six month periods ended September 30, 2003 and 2002, and as at September 30, 2003 and March 31, 2003.

        The restatements are the result of a detailed review of the accounting for certain intangible assets, including purchase accounting and accounting upon the adoption of FASB Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets. The restatements affect the following accounts: goodwill, intangible assets, deferred income tax liabilities, minority interest, amortization expense and income tax expense. For a complete description of the restatements, please see note 3 to the consolidated financial statements included in Item 1.

        This Amendment No. 1 amends and restates Items 1, 2 and 6 of the Originally Filed 10-Q, and no other information in the Originally Filed 10-Q is amended hereby. The explanatory caption at the beginning of each Item of this Amendment No. 1 sets forth the nature of the revisions to that Item.

        We did not amend our Annual Reports on Form 10-K or Quarterly Reports on Form 10-Q for periods affected by the restatements that ended prior to March 31, 2003, and the consolidated financial statements, auditors' reports and related financial information for the affected periods should no longer be relied upon.

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FIRSTSERVICE CORPORATION

Form 10-Q/A
for the quarterly period ended September 30, 2003

INDEX

	Page
PART I    FINANCIAL INFORMATION
ITEM 1.    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	4
ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL                    CONDITION AND RESULTS OF OPERATIONS	16
PART II    OTHER INFORMATION
ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K	21
SIGNATURES	22

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PART I    FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The unaudited condensed consolidated financial statements, including the notes thereto, have been revised to reflect restatements, and except for these revisions, do not reflect events and developments subsequent to September 30, 2003.

FIRSTSERVICE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)
(in thousands of U.S. Dollars, except per share amounts)  — in accordance with
U.S. generally accepted accounting principles

		Three month periods ended September 30				Six month periods ended September 30
		2003		2002		2003		2002
		(restated — see note 3)		(restated — see note 3)		(restated — see note 3)		(restated — see note 3)
Revenues		$	166,531	$	145,209	$	324,328	$	291,245
Cost of revenues			112,628		95,143		218,903		191,334
Selling, general and administrative expenses			32,528		28,902		66,942		60,237
Depreciation			3,405		3,073		6,815		6,079
Amortization			614		422		1,260		823
Operating earnings			17,356		17,669		30,408		32,772
Interest			2,071		2,235		4,141		4,584
Earnings before income taxes and minority interest			15,285		15,434		26,267		28,188
Income taxes			4,637		5,070		7,963		9,261
Earnings before minority interest			10,648		10,364		18,304		18,927
Minority interest share of earnings			1,679		1,569		2,924		2,824
Net earnings		$	8,969	$	8,795	$	15,380	$	16,103
Earnings per share:
	Basic	$	0.63	$	0.63	$	1.09	$	1.16
	Diluted		0.62		0.60		1.07		1.09

The accompanying notes are an integral part of these financial statements.

4

FIRSTSERVICE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)
(in thousands of U.S. Dollars) — in accordance with U.S. generally accepted accounting principles

	September 30, 2003			March 31, 2003
	(restated — see note 3)			(restated — see note 3)
Assets
Current assets
Cash and cash equivalents	$	11,176		$	5,378
Accounts receivable, net		98,724			85,484
Inventories		13,659			15,095
Prepaids and other assets		10,126			13,617
Deferred income taxes		2,021			2,808
		135,706			122,382
Other receivables		7,024			5,839
Interest rate swaps		5,795			6,279
Fixed assets		48,287			46,600
Other assets		2,538			2,777
Deferred income taxes		—			103
Intangible assets		30,875			31,427
Goodwill		175,919			173,624
		270,438			266,649
	$	406,144		$	389,031
Liabilities and shareholders' equity
Current liabilities
Accounts payable	$	24,878		$	22,564
Accrued liabilities		38,074			34,270
Income taxes payable		1,489			1,209
Unearned revenues		6,703			8,369
Long-term debt — current		3,334			3,030
Deferred income taxes		424			1,066
		74,902			70,508
Long-term debt — non-current		152,544			161,889
Deferred income taxes		19,405			19,404
Minority interest		15,948			13,824
		187,897			195,117
Shareholders' equity
Capital stock		61,050			60,571
Receivables pursuant to share purchase plan		(2,434	)		(2,434	)
Retained earnings		78,328			62,948
Cumulative other comprehensive earnings		6,401			2,321
		143,345			123,406
	$	406,144		$	389,031

The accompanying notes are an integral part of these financial statements.

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FIRSTSERVICE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF RETAINED EARNINGS AND CUMULATIVE OTHER COMPREHENSIVE EARNINGS (LOSS)

(Unaudited)
(in thousands of U.S. Dollars, except share information) — in accordance with U.S. generally accepted accounting principles

		Issued and outstanding shares	Capital stock		Receivables pursuant to share purchase plan			Retained earnings			Cumulative other comprehensive earnings (loss)			Total shareholders' equity
Balance, March 31, 2002, as previously reported		13,775,265	$	57,712	$	(2,630	)	$	45,386		$	(626	)	$	99,842
Restatement adjustment		—		—		—			(621	)		—			(621	)
Balance, March 31, 2002, as restated (see note 3)		13,775,265		57,712		(2,630	)		44,765			(626	)		99,221
Comprehensive earnings:
	Net earnings	—		—		—			16,103			—			16,103
	Foreign currency translation adjustments	—		—		—			—			200			200
Comprehensive earnings															16,303
Subordinate Voting Shares:
	Stock options exercised	93,750		629		—			—			—			629
Balance, September 30, 2002 (restated — see note 3)		13,869,015	$	58,341	$	(2,630	)	$	60,868		$	(426	)	$	116,153

		Issued and outstanding shares	Capital stock		Receivables pursuant to share purchase plan			Retained earnings			Cumulative other comprehensive earnings		Total shareholders' equity
Balance, March 31, 2003, as previously reported		14,164,190	$	60,571	$	(2,434	)	$	63,965		$	2,321	$	124,423
Restatement adjustment		—		—		—			(1,017	)		—		(1,017	)
Balance, March 31, 2003, as restated (see note 3)		14,164,190		60,571		(2,434	)		62,948			2,321		123,406
Comprehensive earnings:
	Net earnings	—		—		—			15,380			—		15,380
	Foreign currency translation adjustments	—		—		—			—			4,080		4,080
Comprehensive earnings														19,460
Subordinate Voting Shares:
	Stock options exercised	36,500		479		—			—			—		479
Balance, September 30, 2003 (restated — see note 3)		14,200,690	$	61,050	$	(2,434	)	$	78,328		$	6,401	$	143,345

The accompanying notes are an integral part of these financial statements.

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FIRSTSERVICE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)
(in thousands of U.S. Dollars) — in accordance with U.S. generally accepted accounting principles

		Six-month periods ended September 30
		2003			2002
		(restated — see note 3)			(restated — see note 3)
Cash provided by (used in)
Operating activities
Net earnings		$	15,380		$	16,103
Items not affecting cash:
	Depreciation and amortization		8,075			6,902
	Deferred income taxes		249			(1,205	)
	Minority interest share of earnings		2,924			2,824
	Other		311			284
Changes in non-cash working capital:
	Accounts receivable		(7,843	)		(4,693	)
	Inventories		1,623			(109	)
	Prepaids and other assets		3,964			3,901
	Accounts payable and other accrued liabilities		1,526			1,004
	Unearned revenues		(2,221	)		(5,502	)
Net cash provided by operating activities			23,988			19,509
Investing activities
Acquisition of businesses, net of cash acquired			(1,013	)		(2,999	)
Purchases of minority shareholders' interests			(940	)		(2,204	)
Purchases of fixed assets			(7,116	)		(5,849	)
Purchases (disposals) of intangibles and other assets			(681	)		1,280
Increase in other receivables			(974	)		(1,017	)
Net cash used in investing activities			(10,724	)		(10,789	)
Financing activities
Increases in long-term debt			4,144			8,342
Repayments of long-term debt			(12,702	)		(14,345	)
Issuance of Subordinate Voting Shares			479			629
Dividends paid to minority shareholders of subsidiaries			(193	)		(129	)
Net cash used in financing activities			(8,272	)		(5,503	)
Effect of exchange rate changes on cash and cash equivalents			806			(77	)
Increase in cash and cash equivalents during the period			5,798			3,140
Cash and cash equivalents, beginning of period			5,378			7,332
Cash and cash equivalents, end of period		$	11,176		$	10,472

The accompanying notes are an integral part of these financial statements.

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FIRSTSERVICE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2003
(Unaudited)
(in thousands of U.S. Dollars, except per share amounts)

        1. DESCRIPTION OF THE BUSINESS — FirstService Corporation (the "Company") is a provider of property and business services to commercial, residential and institutional customers in the United States and Canada. The Company's operations are conducted through four segments: Residential Property Management, Integrated Security Services, Consumer Services and Business Services.

        2. SUMMARY OF PRESENTATION — The condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC") for the presentation of interim financial information. Certain information and footnote disclosures normally included in annual 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. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. generally accepted accounting principles.

        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, 2003, the results of its operations for the three and six months ended September 30, 2003 and 2002 and cash flows for the six-month periods ended September 30, 2003 and 2002. All such adjustments are of a normal recurring nature. The results of operations for the six months ended September 30, 2003 are not necessarily indicative of the results to be expected for the fiscal year ending March 31, 2004. For further information, refer to the consolidated financial statements and footnotes thereto for the fiscal year ended March 31, 2003 contained in the Company's Form 10-K/A as filed with the SEC.

        3. RESTATEMENTS — As a result of a detailed review of the accounting for certain intangible assets, including purchase accounting at the times of acquisition and accounting upon the adoption of Statement of Financial Accounting Standards ("SFAS") No. 142, Goodwill and Other Intangible Assets, at April 1, 2001, the Company has made certain restatements. In particular, the Company recorded deferred income taxes with respect to franchise intangible assets acquired upon the October 1998 acquisition of California Closet Company, Inc. ("CCC") and the October 1997 acquisition of Paul Davis Restoration, Inc. ("PDR"). In addition, the Company reevaluated the estimated useful lives of the franchise intangible assets associated with CCC and PDR. It was determined that the amortization of franchise rights should follow the pattern of use, specifically the attrition rate of the franchisees that were present at the dates of acquisition. The amortization of trademarks and trade names was determined to be 35 and 25 years for CCC and PDR, respectively. Previously, all of these assets were treated as indefinite life intangible assets.

        The following presents the impact on net earnings of the restatement adjustments for the three and six-month periods ended September 30, 2003 and 2002.

		Three months ended September 30						Six months ended September 30
		2003			2002			2003			2002
Net earnings, as previously reported		$	9,066		$	8,892		$	15,577		$	16,300
Adjustments:
	Amortization expense		(205	)		(205	)		(411	)		(411	)
	Income tax recovery		87			87			173			173
	Minority interest		21			21			41			41
Net earnings, as restated		$	8,969		$	8,795		$	15,380		$	16,103

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        The consolidated balance sheets as at September 30, 2003 and March 31, 2003 were restated. The recognition of deferred income taxes related to the CCC and PDR franchise intangible assets resulted in an increase to goodwill and an increase to deferred income taxes long-term liability. In addition, the balance sheets were restated to take into account the amortization expense, income tax recovery, minority interest, and effect on retained earnings resulting from the restatement adjustments to net earnings described in the chart above. A reconciliation of the consolidated balance sheets at September 30, 2003 and March 31, 2003 follows.

As at September 30, 2003		As previously reported			Restatement adjustment			Restated
Assets
Current assets
	Cash and cash equivalents	$	11,176		$	—		$	11,176
	Accounts receivable		98,724			—			98,724
	Inventories		13,659			—			13,659
	Prepaids and other		10,126			—			10,126
	Deferred income taxes		2,021			—			2,021
			135,706			—			135,706
Other receivables			7,024			—			7,024
Interest rate swap			5,795			—			5,795
Fixed assets			48,287			—			48,287
Other assets			2,538			—			2,538
Deferred income taxes			—			—			—
Intangible assets			33,398			(2,523	)		30,875
Goodwill			166,905			9,014			175,919
			263,947			6,491			270,438
		$	399,653		$	6,491		$	406,144
Liabilities
Current liabilities
	Accounts payable	$	24,878		$	—		$	24,878
	Accrued liabilities		38,074			—			38,074
	Income taxes payable		1,489			—			1,489
	Unearned revenue		6,703			—			6,703
	Long-term debt — current		3,334			—			3,334
	Deferred income taxes		424			—			424
			74,902			—			74,902
Long-term debt less current portion			152,544			—			152,544
Deferred income taxes			11,451			7,954			19,405
Minority interest			16,197			(249	)		15,948
			180,192			7,705			187,897
Shareholders' equity
	Capital stock		61,050			—			61,050
	Receivables pursuant to share purchase plan		(2,434	)		—			(2,434	)
	Retained earnings		79,542			(1,214	)		78,328
	Cumulative other comprehensive earnings		6,401			—			6,401
			144,559			(1,214	)		143,345
		$	399,653		$	6,491		$	406,144

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As at March 31, 2003		As previously reported			Restatement adjustment			Restated
Assets
Current assets
	Cash and cash equivalents	$	5,378		$	—		$	5,378
	Accounts receivable		85,484			—			85,484
	Inventories		15,095			—			15,095
	Prepaids and other		13,617			—			13,617
	Deferred income taxes		2,808			—			2,808
			122,382			—			122,382
Other receivables			5,839			—			5,839
Interest rate swap			6,279			—			6,279
Fixed assets			46,600			—			46,600
Other assets			2,777			—			2,777
Deferred income taxes			103			—			103
Intangible assets			33,539			(2,112	)		31,427
Goodwill			164,610			9,014			173,624
			259,747			6,902			266,649
		$	382,129		$	6,902		$	389,031
Liabilities
Current liabilities
	Accounts payable	$	22,564		$	—		$	22,564
	Accrued liabilities		34,270			—			34,270
	Income taxes payable		1,209			—			1,209
	Unearned revenue		8,369			—			8,369
	Long-term debt — current		3,030			—			3,030
	Deferred income taxes		1,066			—			1,066
			70,508			—			70,508
Long-term debt less current portion			161,889			—			161,889
Deferred income taxes			11,277			8,127			19,404
Minority interest			14,032			(208	)		13,824
			187,198			7,919			195,117
Shareholders' equity
	Capital stock		60,571			—			60,571
	Receivables pursuant to share purchase plan		(2,434	)		—			(2,434	)
	Retained earnings		63,965			(1,017	)		62,948
	Cumulative other comprehensive earnings		2,321			—			2,321
			124,423			(1,017	)		123,406
		$	382,129		$	6,902		$	389,031

        4. NEW ACCOUNTING STANDARDS — In April 2003, SFAS No. 149, Amendment of SFAS 133 on Derivative Instruments and Hedging Activities ("SFAS 149") was issued. SFAS 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"). SFAS 149 is effective for contracts entered into or modified after June 30, 2003 and hedging

10

relationships designated after June 30, 2003. SFAS 149 did not have a material impact on the Company's financial condition or results of operations.

        In May 2003, SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity ("SFAS 150") was issued. SFAS 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity, and is effective for financial instruments entered into or modified after May 31, 2003 and otherwise is effective July 1, 2003. SFAS 150 had no impact on the Company's financial condition or results of operations.

        In January 2003, FASB Interpretation No. 46 Consolidation of Variable Interest Entities (an interpretation of ARB No. 51) ("FIN 46") was issued. In October 2003, FASB deferred the effective date for applying the provisions of FIN 46 provided certain conditions are met. FIN 46 will now be effective December 31, 2003 for the Company. The Company is currently evaluating the potential impact of FIN 46.

        5. ACQUISITIONS OF BUSINESSES AND PURCHASES OF MINORITY INTERESTS — During the six-month period, there were no acquisitions of businesses. During the prior year period, one business acquisition in the amount of $526 ($351 net of cash acquired) was completed.

        Certain vendors, at the time of acquisition, are entitled to receive contingent consideration if the acquired businesses achieve specified earnings levels during the two — to four-year periods following the dates of acquisition. Such contingent consideration is issued at the expiration of the contingency period. As at September 30, 2003, there was contingent consideration outstanding of up to $11,500 ($12,700 as at March 31, 2003). The contingencies will expire during the period extending to April 2007. Vendors are entitled to receive interest on contingent consideration issued to them, which interest is calculated from the acquisition date to the payment date at interest rates ranging from 5% to 7%. The contingent consideration will be recorded when the contingencies are resolved and the consideration is issued or becomes issuable, at which time the Company will record the fair value of the consideration issued or issuable, including interest, as additional costs of the acquired businesses. There was $1,013 of contingent consideration issued or issuable during the six-month period (2002 — $2,648) and allocated to goodwill.

        During the six months ended September 30, 2003, the Company purchased minority interests from one (2002 — four) minority shareholder(s) for total consideration of $940 (2002 — $2,204). The purchase price for the 2003 purchase was allocated as follows: minority interest $656 and goodwill $284.

        Subsequent to September 30, 2003, the company acquired four businesses in its Consumer Services segment. The aggregate purchase price was approximately $12,800.

        6. LONG-TERM DEBT — The Company has an amended and restated credit agreement with a syndicate of banks that provides a $140,000 committed senior revolving credit facility (the "Credit Facility") renewable and extendible in 364-day increments, and if not renewed, a two-year final maturity. The Credit Facility was most recently renewed and extended on May 7, 2003. The Credit Facility bears interest at 1.5% to 3.0% over floating reference rates, depending on certain leverage ratios. At September 30, 2003, the Company had drawn $41,947 on the Credit Facility and had letters of credit of $4,992 outstanding.

        The Company has outstanding $100,000 of 8.06% fixed-rate Senior Secured Notes (the "8.06% Notes"), held by a group of U.S. institutional investors. The final maturity of the 8.06% Notes is June 29, 2011, with equal annual principal repayments commencing on June 29, 2005.

        Subsequent to the end of the quarter, on October 1, 2003, the Company issued $50,000 of 6.40% fixed-rate Senior Secured Notes (the "6.40% Notes") to a group of U.S. institutional investors. The 6.40% Notes have a final maturity of September 30, 2015 with equal annual principal repayments commencing on September 30, 2012. The proceeds of the 6.40% Notes were used to repay amounts drawn on the Credit Facility. Concurrent

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with the issuance of the 6.40% Notes, the Company's Credit Facility was reduced to $90,000, resulting in no net change to the Company's overall borrowing capacity.

        The Credit Facility and the Notes rank equally in terms of seniority. The Company has granted the lenders and Note-holders 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 covenants and other limitations within the amended and restated credit agreement and the Note agreements are substantially the same. The covenants require the Company to maintain certain ratios including leverage, fixed charge coverage, interest coverage and net worth. The Company is limited from undertaking certain mergers, acquisitions and dispositions without prior approval.

        7. FINANCIAL INSTRUMENTS — The Company has two interest rate swap agreements to exchange the fixed rate on the 8.06% Notes for variable rates. The first interest rate swap exchanges the fixed rate on $75,000 of principal for LIBOR + 250.5 basis points and the second on $25,000 for LIBOR + 445 basis points. The terms of the swaps match the term of the Notes with a maturity of June 29, 2011.

        The swaps are being accounted for as fair value hedges in accordance with SFAS 133. The swaps are carried at fair value on the balance sheet, with gains or losses recognized in earnings. The carrying value of the hedged debt is adjusted for changes in fair value attributable to the hedged interest rate risk; the associated gain or loss is recognized currently in earnings. So long as the hedge is considered highly effective, the net impact on earnings is nil. The fair value of the swaps is determined based on the present value of the estimated future net cash flows using implied rates in the applicable yield curve as of the valuation date. Due to changes in the yield curve, the fair values of the swaps fluctuate and at September 30, 2003, the fair values were a gain of $5,795.

        The Company from time to time purchases and sells foreign currencies by using forward contracts, which have not been specifically identified as hedges. The values of these contracts are marked to market with resulting gains and losses included in earnings. At September 30, 2003 the Company had outstanding one foreign currency contract to purchase $Cdn2,111 at a rate of $Cdn1.4074 per $US1.0000 on December 29, 2003, the fair value of which represented a gain of $Cdn86 ($US64). The purpose of the contract is to match expected future U.S. dollar denominated cash inflows at the Canadian Business Services operations to Canadian dollar denominated expenses.

        Subsequent to the end of the quarter, on October 2, 2003, the Company entered into tw interest rate swap agreements to exchange the fixed rate on the newly issued 6.40% Notes for a variable rate of LIBOR + 170 basis points. The terms of the swaps match the term of the 6.40% Notes with a maturity of September 30, 2015.

        8. EARNINGS PER SHARE — The following table presents a reconciliation of the denominators used in computing earnings per share:

	Three-month period ended September 30		Six-month period ended September 30
(in thousands)	2003	2002	2003	2002
Basic earnings per share — weighted average shares outstanding	14,172	13,862	14,168	13,831
Assumed exercise of stock options, net of shares assumed acquired under the Treasury Stock Method	270	820	161	889
Diluted earnings per share — weighted average shares outstanding	14,442	14,682	14,329	14,720

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        9. STOCK-BASED COMPENSATION — The Company has a stock option plan for officers, key full-time employees and directors of the Company and its subsidiaries. Options are granted at the market price for the underlying shares on the date of grant. Each option vests over a four-year period and expires five years from the date granted and allows for the purchase of one Subordinate Voting Share.

        In December 2002, SFAS No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure an Amendment of SFAS 123 ("SFAS 148") was issued. SFAS 148 provides alternative methods of transition for making a voluntary change to fair value-based accounting for stock-based compensation. The Company continues to account for its stock option plans under the intrinsic value recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25"), and related interpretations. Effective for interim periods beginning after December 15, 2002, SFAS 148 also requires disclosure of pro forma results on a quarterly basis as if the Company had applied the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation ("SFAS 123").

        In accordance with APB 25, no stock-based employee compensation cost has been recognized in earnings. The following table illustrates the effect on net earnings and earnings per share if the Company had applied the fair value recognition provisions of SFAS 123, as amended, to all options outstanding under the Company's stock option plan.

		Three-month period ended September 30						Six-month period ended September 30
		2003			2002			2003			2002
Net earnings, as reported		$	8,969		$	8,795		$	15,380		$	16,103
Less: Total stock-based compensation expense determined under fair value method, net of tax			(544	)		(545	)		(1,088	)		(1,090	)
Pro forma net earnings		$	8,425		$	8,250		$	14,292		$	15,013
Reported earnings per share:
	Basic	$	0.63		$	0.63		$	1.09		$	1.16
	Diluted		0.62			0.60			1.07			1.09
Pro forma net earnings per share:
	Basic	$	0.59		$	0.60		$	1.01		$	1.09
	Diluted		0.58			0.56			1.00			1.02

        During the six-month period ended September 30, 2003, the Company granted 37,000 stock options that call for settlement by the issuance of Subordinate Voting Shares at a weighted average exercise price of $12.00 per share with an estimated fair value of $4.03 per share (2002 — 34,000 stock options at a weighted average exercise price of $22.04 per share and an estimated fair value of $7.64 per share). The value of these option grants was estimated at the date of grant using a Black-Scholes pricing model with the following assumptions:

	Six-month period ended September 30,
	2003	2002
Risk-free interest rate	3.6%	5.1%
Expected life in years	4.4	4.4
Volatility	30%	30%
Dividend yield	0.0%	0.0%

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        10. CONTINGENCIES — The Company is involved in legal proceedings and claims primarily arising in the normal course of its business. In the opinion of management, the Company's liability, if any, would not materially affect its results of operations or financial condition.

        11. GUARANTEE — In connection with a contract, the Company has assumed risks associated with work to be performed by a third party. In the unlikely event of non-performance by the third party, the maximum exposure to the Company would be $7,408.

        12. SEGMENTED INFORMATION — The Company has four reportable operating segments. The segments are grouped with reference to the nature of services provided and the types of clients that use those services. The Company assesses each segment's performance based on operating earnings or operating earnings before depreciation and amortization. Residential Property Management provides property management, maintenance, landscaping, painting and restoration and other services to residential community associations in the United States. Integrated Security Services provides security systems installation, maintenance, monitoring and manpower to primarily commercial customers in Canada and the United States. Consumer Services provides franchised and Company-owned property services to consumers in the United States and Canada. Business Services provides customer support and fulfillment and business process outsourcing services to corporate and institutional clients in Canada and the United States. Corporate includes the costs of operating the Company's headquarters.

OPERATING SEGMENTS

	Residential Property Management		Integrated Security Services		Consumer Services		Business Services		Corporate			Consolidated
Three-month period ended September 30, 2003
Revenues	$	66,820	$	29,529	$	34,011	$	36,086	$	85		$	166,531
Operating earnings		4,973		1,749		8,761		3,578		(1,705	)		17,356
Three-month period ended September 30, 2002
Revenues	$	59,543	$	25,216	$	28,310	$	32,030	$	110		$	145,209
Operating earnings		4,414		1,626		8,559		4,310		(1,240	)		17,669

	Residential Property Management		Integrated Security Services		Consumer Services		Business Services		Corporate			Consolidated
Six-month period ended September 30, 2003
Revenues	$	128,941	$	59,721	$	66,285	$	69,206	$	175		$	324,328
Operating earnings		10,475		3,355		14,004		5,755		(3,181	)		30,408
Six-month period ended September 30, 2002
Revenues	$	116,686	$	52,526	$	57,377	$	64,495	$	161		$	291,245
Operating earnings		9,958		3,354		13,920		8,001		(2,461	)		32,772

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GEOGRAPHIC INFORMATION

	Canada		United States		Consolidated
Three-month period ended September 30, 2003
Revenues	$	52,845	$	113,686	$	166,531
Total long-lived assets		59,334		195,747		255,081
Three-month period ended September 30, 2002
Revenues	$	46,081	$	99,128	$	145,209
Total long-lived assets		54,797		183,854		238,651

	Canada		United States		Consolidated
Six-month period ended September 30, 2003
Revenues	$	101,241	$	223,087	$	324,328
Six-month period ended September 30, 2002
Revenues	$	97,255	$	193,990	$	291,245

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ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in U.S. Dollars)

The Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") has been revised to reflect the restatements and to update certain forward-looking statements to reflect current expectations, as well as to incorporate certain conforming changes. Apart from these revisions, this MD&A does not reflect events and developments subsequent to September 30, 2003.

Results of operations — three months ended September 30, 2003 and 2002

        Revenues for our second quarter of fiscal 2004 were $166.5 million, 15% higher than the comparative second quarter. Approximately 4% of the increase was due to changes in foreign exchange rates and 2% or $2.8 million of the increase resulted from acquisitions completed during the last twelve months. The balance, 9%, was due to internal growth.

        During the quarter, 30% of our revenues were originally denominated in Canadian currency, and the balance in U.S. dollars. Based on the average foreign exchange rates in effect during the quarter, the Canadian dollar was 13% stronger relative to the U.S. dollar during the quarter than in the comparable quarter last year. The Company's Canadian dollar denominated revenues and earnings benefit from a stronger Canadian dollar upon conversion to U.S. dollars. This is offset by exchange losses incurred by certain Business Services operations based in Canada that sell services to U.S. clients in U.S. dollars. If exchange rates had stayed constant year-over-year, the current year's second quarter revenues would have been $5.8 million lower and EBITDA¹ would have been unchanged.

1

EBITDA is defined as net earnings before extraordinary items, minority interest share of earnings, income taxes, interest, depreciation and amortization. EBITDA excludes income taxes and interest, both of which are charges that require cash settlement. EBITDA is not a recognized measure for financial statement presentation under United States generally accepted accounting principles ("U.S. GAAP"). The most directly comparable U.S. GAAP measure is operating earnings. Operating earnings takes into account depreciation and amortization expenses, while EBITDA does not. Management utilizes EBITDA as a measure to assess the performance of its operations, to evaluate acquisition candidates and establish pricing, for performance-based compensation purposes, and within its debt covenants with its lenders. 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. The table below reconciles EBITDA to operating earnings.

Three months ended September 30	2003		2002
EBITDA	$	21,375	$	21,164
Less: depreciation and amortization		4,019		3,495
Equals: operating earnings		17,356		17,669

Six months ended September 30	2003		2002
EBITDA	$	38,483	$	39,674
Less: depreciation and amortization		8,075		6,902
Equals: operating earnings		30,408		32,772

        The quarter's EBITDA was $21.4 million, up slightly from $21.2 million in the prior year quarter. Our EBITDA margin declined to 12.8% of revenues from 14.6% of revenues because of foreign exchange (higher revenues without corresponding EBITDA), lower capacity utilization in Business Services, revenue mix changes in Consumer Services, and higher Corporate costs. Operating earnings for the quarter were $17.4 million, a decline of $0.3 million versus last year, reflecting increased depreciation and amortization expenses.

        Interest expense was $2.1 million versus $2.2 million recorded in the prior year quarter. The average interest rate during the quarter was 5.4%, the same as last year. We continued to benefit from low floating reference rates during the quarter. Substantially all of our indebtedness was at variable interest rates during the quarter. We monitor interest rates closely and we intend to fix a portion of our debt if economic indicators warrant.

        The consolidated income tax rate declined to approximately 30% of earnings before income taxes and minority interest from 33% in the prior year's quarter. The reduction in tax rate is primarily the result of continuing leverage from the cross-border tax structure we implemented in fiscal 2000.

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        Net earnings for the quarter were $9.0 million, compared to $8.8 million in the prior year quarter. Lower interest and income taxes partially offset the quarter's lower operating earnings.

        Revenues at our Residential Property Management operations were $66.8 million for the quarter, up $7.3 million or 12% versus the prior year quarter. Approximately 3% of the growth resulted from the acquisition of a Manhattan-based property management business, Cooper Square Realty, Inc. ("CSR"), in February 2003. The balance was generated internally by growth in our core contractual management revenues. Residential Property Management EBITDA was $6.0 million, up $0.6 million relative to the prior year quarter. The EBITDA margin was 9.0%, consistent with the prior year period.

        In our Integrated Security Services segment, revenues rose 17% to $29.5 million. Foreign exchange on our Canadian operations accounted for 7% of the revenue increase, while strong systems installation sales at our U.S. operations accounted for the balance. Integrated Security Services EBITDA was $2.2 million, an increase of 11%. Margins declined to 7.5% from 7.9% in the prior year period due to revenue mix differences.

        Our Consumer Services segment's revenues were $34.0 million, an increase of 20% over the prior year period. Four percent of the increase was the result of two California Closets "branchise" acquisitions completed during fiscal 2003, 5% was from the impact of foreign exchange rates on Canadian operations, and the remaining 11% was from organic growth. EBITDA at Consumer Services was $9.6 million, up $0.4 million relative to the prior year. The margin declined to 28.4% primarily as a result of the change in revenue mix caused by an increase in the proportion of Company-owned operations as a result of recent acquisitions. Our Company-owned operations carry lower margins than our franchising operations.

        Second quarter revenues in Business Services were $36.1 million, an increase of 13% over the fiscal 2003 period. Internal growth accounted for 5% of the revenue increase, while foreign exchange represented the balance. Business Services EBITDA was $5.2 million versus $5.8 million reported in the same period one year ago. Internal revenue growth reflects recent new client wins, which carry implementation costs and lower margins than existing business. In addition, under-utilization of fulfillment warehouse capacity negatively impacted the quarter's margins. Foreign exchange, while causing reported revenues to increase, had only a nominal impact on EBITDA because margins at our Canadian operations that sell services to U.S. clients in U.S. dollars contracted.

        Corporate expenses for the quarter totaled $1.7 million. The $0.5 million increase relative to the prior year was due to foreign exchange of $0.2 million (most Corporate costs are denominated in Canadian dollars) and to increased payroll costs.

Results of operations — six months ended September 30, 2003 and 2002

        Revenues for the six-month period were $324.3 million, 11% higher than revenues reported in the same period one year ago. Approximately 4% of the revenue growth was attributable to changes in foreign exchange rates and 2% or $6.3 million of the revenue growth resulted from acquisitions completed during the past twelve months. The balance, 5%, was from internal growth.

        During the six-month period, 30% of our revenues were originally denominated in Canadian currency, and the balance in U.S. dollars. Based on the average foreign exchange rates in effect during the quarter, the Canadian dollar was 12% stronger relative to the U.S. dollar during the period than in the comparable period last year. The Company's Canadian dollar denominated revenues and earnings benefit from a stronger Canadian dollar upon conversion to U.S. dollars. This is offset by exchange losses incurred by certain Business Services operations based in Canada that sell services to U.S. clients in U.S. dollars. If exchange rates had stayed constant year-over-year, the current year period's revenues would have been $10.6 million lower and EBITDA would have been $0.1 million higher.

        For the six months ended September 30, 2003, EBITDA was $38.5 million, $1.2 million lower than the prior year period. The decline was the result of lower profitability in the first quarter, especially in the Business Services segment. Operating earnings were $30.4 million, down $2.4 million versus the prior year due to higher depreciation and amortization expense resulting from fixed and intangible assets acquired in business acquisitions during fiscal 2003.

        Net earnings for the six-month period were $15.4 million versus $16.1 million in the comparable period. The net earnings decline was narrower than the operating earnings reduction because of lower interest expense due to lower floating interest rates as well as a decline in our income tax rate.

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        Residential Property Management reported year-to-date revenues of $128.9 million, reflecting growth of 11% relative to the prior year. Internal growth was 7%, with the balance attributable to CSR acquired in February 2003. Revenue growth came from core property management client wins. EBITDA was $12.7 million, up from $11.9 million in the prior year period.

        Integrated Security Services revenues for the six month period were $59.7 million, up 14% versus the prior year. Approximately 6% of the revenue growth was a result of foreign exchange, while the balance was due to higher systems installation volumes in our US operations. EBITDA, at $4.3 million, was up $0.2 million versus the prior year period, while the margin declined slightly to 7.2% due to several large security systems projects at lower than usual margins during the first quarter.

        Consumer Services revenues were $66.3 million, up 16% relative to the prior year period. Four percent of the revenue growth was attributable to two California Closets "branchise" acquisitions completed in October 2002, while 5% was attributable to foreign exchange on Canadian operations. Internal growth was 7%, evenly distributed amongst our major franchise systems. EBITDA was $15.7 million, up 3%, while margins declined from 26.6% in last year's period to 23.7% this year. The margin decline was revenue mix related, since Company-owned operations such as the branchises contribute lower margins and do not have a seasonal peak in the first half of the year.

        Business Services reported year-to-date revenues of $69.2 million, an increase of 7% relative to last year. Foreign exchange accounted for 6% of the increase, resulting in internal growth of 1%. While revenues contracted early in the year, production started on several new clients in the second quarter to effect the year to date increase. EBITDA was down to $8.9 million from $10.9 million reported one year ago, due to excess fulfillment capacity and lower margins on new business. We anticipate that EBITDA margins will continue to be lower than historical margins for the next several quarters.

        Corporate costs were $3.1 million for the six months, $0.7 million higher than in the prior period, primarily as a result of foreign exchange impact of $0.3 million (a majority of corporate costs are denominated in Canadian dollars) but also due to an executive severance in the first quarter and higher payroll costs.

Acquisitions

        In October 2003, after the end of the quarter, we completed four acquisitions in our Consumer Services segment. Two acquisitions are California Closets franchises in San Francisco and Toronto, that will become our fifth and six Company-owned "branchises". In addition, we acquired two franchise systems — Pillar to Post, Inc. ("PTP") and Floor Coverings International, Inc. ("FCI"). PTP is one of the largest home franchised home inspection services in North America, with 300 franchisees and approximately $30 million in annual system-wide sales. FCI franchises mobile shop-at-home floor coverings businesses with 100 franchisees and annual system-wide sales of $20 million. The four acquisitions collectively generated approximately $10 million in revenues and $1.8 million in EBITDA in their most recent fiscal years prior to acquisition.

Restatements

        On January 27, 2004, the Company announced that as a result of a detailed review of the accounting for certain intangible assets, including purchase accounting at the times of acquisition and accounting upon the adoption of Statement of Financial Accounting Standards ("SFAS") No. 142, Goodwill and Other Intangible Assets at April 1, 2001, certain restatements would be made. In particular, the Company recorded deferred income taxes with respect to franchise intangible assets acquired upon the October 1998 acquisition of California Closet Company, Inc. ("CCC") and the October 1997 acquisition of Paul Davis Restoration, Inc. ("PDR"). In addition, the Company reevaluated the useful lives of the franchise intangible assets associated with CCC and PDR. It was determined that the amortization of franchise rights should follow the pattern of use, specifically the attrition rate of the franchisees that were present at the dates of acquisition. The amortization of trademarks and trade names was determined to be 35 and 25 years for CCC and PDR, respectively. Previously, all of these assets were treated as indefinite life intangible assets.

        The impact of the restatements upon net earnings for the three months ended September 30, 2003 and 2002 was $0.1 million. This was comprised of an increase to amortization expense of $0.2 million less income tax and minority interest effects of $0.1 million. The cumulative impact of the restatements upon retained earnings as at September 30, 2003 was $1.2 million. On an annual basis, the impact upon net earnings for the years ended March 31, 2003 and 2002 is $0.4 million comprised of additional amortization expense of $0.8 million less income tax and minority interest effects of $0.4 million. The annual impact on diluted earnings per share for each of these years is $0.03.

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Outlook for the remainder of fiscal 2004

        Also on January 27, 2004, the Company put forth an updated outlook for the balance of 2004, which incorporates operating results achieved year-to-date and the impact of the restatement adjustments. The updated outlook is as follows: revenues $610 million to $620 million; EBITDA $55.0 million to $56.0 million; and diluted earnings per share of $1.27 to $1.30. The previous outlook, which did not incorporate the restatement adjustments, was: revenues $590 million to $600 million; EBITDA $54.5 million to $56.0 million, and diluted earnings per share of $1.27 to $1.32.

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, exterior painting, and swimming pool management in the northern United States and 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 generated lower profits or net losses during its first and fourth fiscal quarters, from October to March. Residential Property Management (with the exception of swimming pool management), Integrated Security Services, and Business Services generate revenues evenly throughout the fiscal year.

        The seasonality of swimming pool management and certain Consumer Services operations (exterior painting and lawn care) 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

        Net cash provided by operating activities for the six-month period was $24.0 million, up from $19.5 million in the prior year. The most significant factor contributing to the increase in cash flow was more efficient utilization of working capital. We believe that cash from operations and other existing resources will continue to be adequate to satisfy the ongoing working capital needs of the Company.

        Net indebtedness as at September 30, 2003 was $138.9 million, down from $153.3 million at March 31, 2003. Net indebtedness is calculated as the current and non-current portion of long-term debt adjusted for interest rate swaps less cash and cash equivalents. Cash from operating activities effected the $14.4 million reduction in net indebtedness during the six-month period.

        We are in compliance with the covenants within our financing agreements as at September 30, 2003 and, based on our outlook for the balance of the year, we expect to remain in compliance with the covenants. We had $93.1 million of available un-drawn credit as of September 30, 2003.

        After the end of the quarter, on October 1, 2003, we completed a private placement of $50 million of 6.40% Senior Secured Notes (the "6.40% Notes") due September 30, 2015. The 6.40% Notes have an average life of 10.5 years, with equal annual principal repayments commencing September 30, 2012. Concurrent with the issuance of the 6.40% Notes, we amended our credit facility such that available credit was reduced by $50 million from $140 million to $90 million. Our total borrowing capacity remains unchanged. On October 2, 2003, we entered into interest rate swap agreements to exchange the fixed rate on the 6.40% Notes for a variable rate of LIBOR + 170 basis points.

        For the six months ended September 30, 2003, capital expenditures were $7.1 million. Significant purchases included service vehicle fleet replacement and expansion for the Company-owned Consumer Services and Residential Property Management operations and a call center technology upgrade in Business Services. Capital expenditures for the year are expected to be approximately $12 million, slightly higher than the amount expended during fiscal 2003.

        In relation to acquisitions completed during the past three years, we have outstanding contingent consideration totaling $11.5 million as at September 30, 2003 ($12.7 million as at March 31, 2003). The amount of the contingent consideration is not recorded as a liability unless the outcome of the contingency is determined to be beyond a reasonable doubt. The contingent consideration is based on achieving specified earnings levels, and is issued or issuable at the end of the contingency period. When the contingencies are resolved and additional consideration is

19

distributable, we will record the fair value of the additional consideration as additional costs of the acquired businesses.

        In those operations where operating managements are also minority owners, the Company is party to shareholders' agreements. These agreements allow us to "call" the minority position for a predetermined formula price, which is usually equal to the multiple of trailing two-year average earnings paid by the Company for the original acquisition. Minority owners may also "put" their interest to the Company at the same price, with certain limitations. The total value of the minority shareholders' interests, as calculated in accordance with shareholders' agreements, was approximately $28.0 million at September 30, 2003 (March 31, 2003 — $26.0 million). While it is not our intention to acquire outstanding minority interests, this step would materially increase net earnings. On an annual basis, the impact of the acquisition of all minority interests would increase interest expense by $1.1 million, reduce income taxes by $0.3 million and reduce minority interest share of earnings by $3.2 million, resulting in an approximate increase to net earnings of $2.4 million.

Critical accounting policies

        There has been no change in the Company's critical accounting policies since March 31, 2003.

New accounting standards

        In April 2003, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 149, Amendment of SFAS 133 on Derivative Instruments and Hedging Activities ("SFAS 149"). SFAS 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS 133, Accounting for Derivative Instruments and Hedging Activities. SFAS 149 is effective for contracts entered into or modified after June 30, 2003 and hedging relationships designated after June 30, 2003. The adoption of SFAS 149 had no material impact on our financial condition or results of operations.

        In May 2003, SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity ("SFAS 150") was issued. SFAS 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity, and is effective for financial instruments entered into or modified after May 31, 2003 and otherwise is effective July 1, 2003. The adoption of SFAS 150 had no impact on our financial condition or results of operations.

        In January 2003, FASB issued Interpretation No. 46 Consolidation of Variable Interest Entities (an interpretation of ARB No. 51) ("FIN 46"). On October 2003, FASB deferred the effective date for applying the provisions of FIN 46 provided certain conditions are met. FIN 46 will now be effective December 31, 2003 for the Company. We are currently evaluating the potential impact of FIN 46.

Forward-looking statements

        This quarterly report on Form 10-Q contains or incorporates by reference certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend that such forward-looking statements be subject to the safe harbors created by such legislation. Such forward-looking statements involve risks and uncertainties and include, but are not limited to, statements regarding future events and the Company's plans, goals and objectives. Such statements are generally accompanied by words such as "intend", "anticipate", "believe", "estimate", "expect" or similar statements. Our actual results may differ materially from such statements. Factors that could result in such differences, among others, are:

•

Political conditions, including any outbreak or escalation of terrorism or hostilities and the impact thereof on our business.



•

U. S. and Canadian economic conditions, especially as they relate to consumer spending and business spending on customer relations and promotion.



•

Extreme weather conditions impacting demand for our services or our ability to perform those services.



•

Competition in the markets served by the Company.



•

Labor shortages or increases in wage rates.



•

The effects of changes in interest rates on our cost of borrowing.



•

Unexpected increases in operating costs, such as insurance, workers' compensation, health care and fuel prices.



•

Changes in government policies at the federal, state/provincial or local level that may adversely impact our firearms registration processing, lawn care, or textbook fulfillment activities.



•

The effects of changes in the Canadian dollar foreign exchange rate in relation to the U.S. dollar on the Company's Canadian dollar denominated revenues and expenses.



•

Our ability to make acquisitions at reasonable prices and successfully integrate acquired operations.

        Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the results contemplated in such forward-looking statements will be realized. The inclusion of such forward-looking statements should not be regarded as a representation by the Company or any other person that the future events, plans or expectations contemplated by the Company will be achieved. We note that past performance in operations and share price are not necessarily predictive of future performance.

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PART II    OTHER INFORMATION

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

1.	a)	Exhibits
		10.1	Note and Guarantee Agreement dated September 29, 2003 —  U.S.$50,000,000 6.40% Guaranteed Senior Secured Notes due 2015 (included with the Originally Filed 10-Q)
		10.2	Second Amendment to Third Amended and Restated Credit Agreement dated September 29, 2003 (included with the Originally Filed 10-Q)
		31.1-31.2	Certifications of CEO and CFO pursuant to Rule 13a-14 or 15d-14.
		32.1-32.2	Certifications of CEO and CFO pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	b)	Reports on Form 8-K
		A Form 8-K report regarding the Company's earnings press release for the first quarter ended June 30, 2003 was filed with the SEC on July 22, 2003.

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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.

FIRSTSERVICE CORPORATION

February 11, 2004	/s/ Jay S. Hennick Jay S. Hennick President and Chief Executive Officer (Principal Executive Officer)
February 11, 2004	/s/ John B. Friedrichsen John B. Friedrichsen Senior Vice President and Chief Financial Officer (Principal Financial Officer)

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QuickLinks

FIRSTSERVICE CORPORATION
Form 10-Q/A for the quarterly period ended September 30, 2003
INDEX
FIRSTSERVICE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (in thousands of U.S. Dollars, except per share amounts) — in accordance with U.S. generally accepted accounting principles
FIRSTSERVICE CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands of U.S. Dollars) — in accordance with U.S. generally accepted accounting principles
FIRSTSERVICE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF RETAINED EARNINGS AND CUMULATIVE OTHER COMPREHENSIVE EARNINGS (LOSS) (Unaudited) (in thousands of U.S. Dollars, except share information) — in accordance with U.S. generally accepted accounting principles
FIRSTSERVICE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands of U.S. Dollars) — in accordance with U.S. generally accepted accounting principles
FIRSTSERVICE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2003 (Unaudited) (in thousands of U.S. Dollars, except per share amounts)
SIGNATURES
FIRSTSERVICE CORPORATION

EX-31.1

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EXHIBIT 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14(a)

I, Jay S. Hennick, certify that:

1.

I have reviewed this quarterly report on Form 10-Q/A of FirstService Corporation;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

February 11, 2004

/s/ Jay S. Hennick Jay S. Hennick
President and Chief Executive Officer

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CERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14(a)

EX-31.2

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EXHIBIT 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14(a)

I, John B. Friedrichsen, certify that:

1.

I have reviewed this quarterly report on Form 10-Q/A of FirstService Corporation;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

February 11, 2004

/s/ John B. Friedrichsen John B. Friedrichsen
Senior Vice President and Chief Financial Officer

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CERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14(a)

EX-32.1

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EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ENACTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

        In connection with the report on Form 10-Q/A of FirstService Corporation (the "Company") dated February 11, 2004 containing the financial statements of the Company for the fiscal quarter ended September 30, 2003 (the "Report") filed with the U.S. Securities and Exchange Commission on the date hereof, I, Jay S. Hennick, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that, to the best of my knowledge:

1.

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/  JAY S. HENNICK Jay S. Hennick
President and Chief Executive Officer
February 11, 2004

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

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CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ENACTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

EX-32.2

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EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ENACTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

        In connection with the report on Form 10-Q/A of FirstService Corporation (the "Company") dated February 11, 2004 containing the financial statements of the Company for the fiscal quarter ended September 30, 2003 (the "Report") filed with the U.S. Securities and Exchange Commission on the date hereof, I, John B. Friedrichsen, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that, to the best of my knowledge:

1.

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/  JOHN B. FRIEDRICHSEN John B. Friedrichsen
Senior Vice President and Chief Financial Officer
February 11, 2004

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

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CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ENACTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002