EX-99.3 4 exh_993.htm EXHIBIT 99.3 exh_993.htm
EXHIBIT 99.3





NEW FSV

 

 
PRO FORMA COMBINED FINANCIAL STATEMENTS
 
(unaudited)

 

 

 

 
Year ended December 31, 2014 and
 
Quarter ended March 31, 2015
 
 
 
 
NEW FSV
  
PRO FORMA COMBINED STATEMENT OF EARNINGS
  
(Unaudited)
  
(in thousands of US dollars, except per share amounts)
  
 
  
 
    
 
    
 
    
 
  
 
Year ended December 31, 2014
  
 
  
New
    
Add(deduct)
    
 
    
New
  
 
  
FSV
    
pro forma
    
 
    
FSV
  
   
carve-out
    
adjustments
    
Note 2
    
pro forma
  
 
  
 
    
 
    
 
    
 
  
Revenues
   $ 1,132,002     $ -    
 
     $ 1,132,002  
 
                  
 
          
Cost of revenues
     800,046       -    
 
       800,046  
Selling, general and administrative expenses
     258,678       -    
 
       258,678  
 
                  
 
          
Depreciation
     17,730       -    
 
       17,730  
Amortization of intangible assets
     8,744       -    
 
       8,744  
Acquisition-related items
     1,183       -    
 
       1,183  
Operating earnings
     45,621       -    
 
       45,621  
 
                  
 
          
Interest expense, net
     6,932       -    
 
       6,932  
Other income, net
     255       -    
 
       255  
Earnings before income tax
     38,434       -    
 
       38,434  
Income tax
     12,242       -    
 
       12,242  
Net earnings
     26,192       -    
 
       26,192  
 
                  
 
          
Non-controlling interest share of earnings
     3,105       -    
 
       3,105  
Non-controlling interest redemption increment
     10,117       -    
 
       10,117  
Net earnings attributable to New FSV
   $ 12,970     $ -    
 
     $ 12,970  
 
                  
 
          
Net earnings per common share
                    A          
 
                                
Basic
   $ 0.36                     $ 0.36  
 
                                
Diluted
     0.36                       0.36  
 
                                
Weighted average common shares outstanding
                                
Basic
     35,917                       35,917  
Dilutive effect of stock options
     392                       392  
Diluted
     36,309                       36,309  

 
Page 2 of 9
 
NEW FSV
  
PRO FORMA COMBINED STATEMENT OF EARNINGS
  
(Unaudited)
  
(in thousands of US dollars, except per share amounts)
  
 
  
 
    
 
    
 
    
 
  
 
Three months ended March 31, 2015
  
 
  
New
    
Add(deduct)
    
 
    
New
  
 
  
FSV
    
pro forma
    
 
    
FSV
  
   
carve-out
    
adjustments
    
Note 2
    
pro forma
  
 
  
 
    
 
    
 
    
 
  
Revenues
   $ 272,189     $ -    
 
     $ 272,189  
 
                  
 
          
Cost of revenues
     197,307       -    
 
       197,307  
Selling, general and administrative expenses
     66,230       -    
 
       66,230  
 
                  
 
          
Depreciation
     4,448       -    
 
       4,448  
Amortization of intangible assets
     2,550       -    
 
       2,550  
Acquisition-related items
     247       -    
 
       247  
Operating earnings
     1,407       -    
 
       1,407  
 
                  
 
          
Interest expense, net
     1,868       -    
 
       1,868  
Other income, net
     202       -    
 
       202  
Earnings before income tax
     (663 )     -    
 
       (663 )
Income tax
     (229 )     -    
 
       (229 )
Net earnings
     (434 )     -    
 
       (434 )
 
                  
 
          
Non-controlling interest share of earnings
     1,119       -    
 
       1,119  
Non-controlling interest redemption increment
     1,758       -    
 
       1,758  
Net earnings attributable to New FSV
   $ (3,311 )   $ -    
 
     $ (3,311 )
 
                  
 
          
Net earnings per common share
                    A          
 
                                
Basic
   $ (0.09 )                   $ (0.09 )
 
                                
Diluted
     (0.09 )                     (0.09 )
 
                                
Weighted average common shares outstanding
                                
Basic
     35,871                       35,871  
Dilutive effect of stock options
     392                       392  
Diluted
     36,263                       36,263  
 
 
Page 3 of 9
 
NEW FSV
  
PRO FORMA COMBINED BALANCE SHEET
  
(Unaudited)
  
(in thousands of US dollars)
  
 
  
 
    
 
    
 
    
 
  
 
December 31, 2014
  
 
  
New
    
Add(deduct)
    
 
    
New
  
 
  
FSV
    
pro forma
    
 
    
FSV
  
 
  
carve-out
    
adjustments
    
Note 2
    
pro forma
  
Assets
 
    
 
    
 
    
 
  
Current Assets
 
    
 
    
 
    
 
  
Cash and cash equivalents
   $ 66,790     $ -       D     $ 66,790  
Restricted cash
     3,657       -               3,657  
Accounts receivable, net of allowance
     115,143       -               115,143  
Income tax recoverable
     16,262       -               16,262  
Inventories
     9,489       -               9,489  
Prepaid expenses and other current assets
     20,715       -               20,715  
Deferred income tax
     18,667       -               18,667  
 
     250,723       -               250,723  
 
                                
Other receivables
     4,581       -               4,581  
Other assets
     155       -               155  
Fixed assets
     55,203       -               55,203  
Deferred income tax
     4,572       -               4,572  
Intangible assets
     82,877       -               82,877  
Goodwill
     217,433       -               217,433  
 
     364,821       -               364,821  
 
   $ 615,544     $ -             $ 615,544  
 
                                
Liabilities and shareholders' equity
                                
Current Liabilities
                                
Accounts payable
   $ 24,687     $ 1,000       B     $ 25,687  
Accrued liabilities
     55,563       -               55,563  
Income taxes payable
     5,650       -               5,650  
Unearned revenues
     16,079       -               16,079  
Long-term debt - current
     17,725       -       D       17,725  
Contingent acquisition consideration - current
     4,586       -               4,586  
Deferred income tax
     1,804       -               1,804  
 
     126,094       1,000               127,094  
 
                                
Long-term debt - non-current
     221,632       -       D       221,632  
Contingent acquisition consideration
     1,509       -               1,509  
Other liabilities
     12,398       -               12,398  
Deferred income tax
     14,236       -               14,236  
 
     249,775       -               249,775  
Redeemable non-controlling interests
     80,926       -               80,926  
 
                                
Shareholders' equity
                                
Contributed surplus
     -       157,498       C       157,498  
Retained earnings (deficit)
     -       (1,000 )     B       (1,000 )
FirstService's net investment
     157,498       (157,498 )     C       -  
Accumulated other comprehensive earnings
     1,251       -               1,251  
Total shareholders' equity
     158,749       (1,000 )             157,749  
 
   $ 615,544     $ -             $ 615,544  
 
 
Page 4 of 9
 
NEW FSV
  
PRO FORMA COMBINED BALANCE SHEET
  
(Unaudited)
  
(in thousands of US dollars)
  
 
  
 
    
 
    
 
    
 
  
 
March 31, 2015
  
 
  
New
    
Add(deduct)
    
 
    
New
  
 
  
FSV
    
pro forma
    
 
    
FSV
  
 
  
carve-out
    
adjustments
    
Note 2
    
pro forma
  
Assets
 
    
 
    
 
    
 
  
Current Assets
 
    
 
    
 
    
 
  
Cash and cash equivalents
   $ 45,142     $ -       D     $ 45,142  
Restricted cash
     2,762       -               2,762  
Accounts receivable, net of allowance
     106,315       -               106,315  
Income tax recoverable
     12,704       -               12,704  
Inventories
     11,128       -               11,128  
Prepaid expenses and other current assets
     19,086       -               19,086  
Deferred income tax
     18,644       -               18,644  
 
     215,781       -               215,781  
 
                                
Other receivables
     3,757       -               3,757  
Other assets
     154       -               154  
Fixed assets
     54,627       -               54,627  
Deferred income tax
     3,621       -               3,621  
Intangible assets
     85,493       -               85,493  
Goodwill
     214,902       -               214,902  
 
     362,554       -               362,554  
 
   $ 578,335     $ -             $ 578,335  
 
                                
Liabilities and shareholders' equity
                                
Current Liabilities
                                
Accounts payable
   $ 14,660     $ 1,000       B     $ 15,660  
Accrued liabilities
     58,329       -               58,329  
Income taxes payable
     4,988       -               4,988  
Unearned revenues
     19,475       -               19,475  
Long-term debt - current
     16,965       -       D       16,965  
Contingent acquisition consideration - current
     5,037       -               5,037  
Deferred income tax
     1,803       -               1,803  
 
     121,257       1,000               122,257  
 
                                
Long-term debt - non-current
     230,009       -       D       230,009  
Contingent acquisition consideration
     2,053       -               2,053  
Other liabilities
     13,037       -               13,037  
Deferred income tax
     14,143       -               14,143  
 
     259,242       -               259,242  
Redeemable non-controlling interests
     75,071       -               75,071  
 
                                
Shareholders' equity
                                
Contributed surplus
     -       118,385       C       118,385  
Retained earnings (deficit)
     -       (1,000 )     B       (1,000 )
FirstService's net investment
     118,385       (118,385 )     C       -  
Accumulated other comprehensive earnings
     4,380       -               4,380  
Total shareholders' equity
     122,765       (1,000 )             121,765  
 
   $ 578,335     $ -             $ 578,335  
 
 
Page 5 of 9
 
NEW FSV
  
PRO FORMA COMBINED STATEMENT OF CASH FLOW FROM OPERATING ACTIVITIES
  
(Unaudited)
  
(in thousands of US dollars)
  
 
  
 
    
 
  
 
  
 
  
 
Year ended December 31, 2014
  
 
  
 
    
 
  
 
  
 
  
 
  
New
    
Add(deduct)
  
 
  
New
  
 
  
FSV
    
pro forma
  
 
  
FSV
  
 
  
carve-out
    
adjustments
  
Note 2
  
pro forma
  
Cash provided by (used in)
 
    
 
  
 
  
 
  
 
  
 
    
 
  
 
  
 
  
Operating activities
 
    
 
  
 
  
 
  
Net earnings
   $ 26,192     $ -  
 
   $ 26,192  
 
                
 
        
Items not affecting cash:
                
 
        
Depreciation and amortization
     26,474       -  
 
     26,474  
Deferred income tax
     (2,479 )     -  
 
     (2,479 )
Other
     2,056       -  
 
     2,056  
 
                
 
        
Changes in non-cash working capital:
                
 
        
Accounts receivable
     3,231       -  
 
     3,231  
Inventories
     72       -  
 
     72  
Prepaid expenses and other current assets
     (3,327 )     -  
 
     (3,327 )
Payables and accruals
     (8,164 )     -  
 
     (8,164 )
Unearned revenues
     741       -  
 
     741  
Other liabilities
     660       -  
 
     660  
Contingent acquisition consideration
     (279 )     -  
 
     (279 )
Net cash provided by operating activities
   $ 45,177     $ -  
 
   $ 45,177  
 
 
Page 6 of 9
 
NEW FSV
  
PRO FORMA COMBINED STATEMENT OF CASH FLOW FROM OPERATING ACTIVITIES
  
(Unaudited)
  
(in thousands of US dollars)
  
 
  
 
    
 
  
 
  
 
  
 
Three months ended March 31, 2015
  
 
  
 
    
 
  
 
  
 
  
 
  
New
    
Add(deduct)
  
 
  
New
  
 
  
FSV
    
pro forma
  
 
  
FSV
  
 
  
carve-out
    
adjustments
  
Note 2
  
pro forma
  
Cash provided by (used in)
 
    
 
  
 
  
 
  
 
  
 
    
 
  
 
  
 
  
Operating activities
 
    
 
  
 
  
 
  
Net earnings
   $ (434 )   $ -  
 
   $ (434 )
 
                
 
        
Items not affecting cash:
                
 
        
Depreciation and amortization
     6,998       -  
 
     6,998  
Deferred income tax
     880       -  
 
     880  
Other
     666       -  
 
     666  
 
                
 
        
Changes in non-cash working capital:
                
 
        
Accounts receivable
     9,695       -  
 
     9,695  
Inventories
     (1,638 )     -  
 
     (1,638 )
Prepaid expenses and other current assets
     1,629       -  
 
     1,629  
Payables and accruals
     (3,162 )     -  
 
     (3,162 )
Unearned revenues
     3,396       -  
 
     3,396  
Other liabilities
     640       -  
 
     640  
Net cash provided by operating activities
   $ 18,670     $ -  
 
   $ 18,670  

 
Page 7 of 9
 
NEW FSV
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
(Unaudited)
(in thousands of US dollars)


1.             Background and basis of presentation

On March 11, 2015, the Board of Directors of FirstService Corporation (“FirstService”) unanimously approved a proposal to split FirstService into two independent public companies, being (i) a Commercial Real Estate Services company operating principally as Colliers International and (ii) a Residential Real Estate Services and Property Services company operating principally as FirstService Residential and several franchise brand companies including California Closets, Paul Davis Restoration and CertaPro Painters.

The proposed corporate reorganization (the “Arrangement”) would be implemented through a court approved plan of arrangement. Shareholder approval for the Arrangement was obtained on April 21, 2015, but the Arrangement remains subject to certain conditions. The reorganization would result in two publicly traded entities with the Residential Real Estate Services and Property Services company named FirstService Corporation (“New FSV”), and FirstService renamed as Colliers International Group Inc. FirstService shareholders would receive one New FSV Multiple Voting Share or Subordinate Voting Share for each FirstService Multiple Voting Share or Subordinate Voting Share held, respectively.

The unaudited pro forma combined financial statements for the year ended December 31, 2014 have been prepared from the audited New FSV Carve-out Combined Financial Statements for the year ended December 31, 2014. The unaudited pro forma combined financial statements for the three months ended March 31, 2015 have been prepared from the unaudited New FSV Carve-out Combined Financial Statements for the three months ended March 31, 2015. The carve-out combined financial statements were derived from the historical accounting records of FirstService on a carve-out basis and therefore include allocations of certain expenses. These allocated costs may not be representative of the costs that may be incurred in the future as an independent, publicly-traded company.

These unaudited pro forma combined financial statements should be read in conjunction with the FirstService audited Consolidated Financial Statements for the year ended December 31, 2014 and unaudited Consolidated Financial Statements for the three months ended March 31, 2015 and the related Management’s Discussion and Analysis as well as the New FSV audited Carve-out Combined Financial Statements for the year ended December 31, 2014 and the unaudited Carve-out Combined Financial Statements for the three months ended March 31, 2015 and the related Management’s Discussion and Analysis.

These unaudited pro forma combined financial statements are for illustrative and information purposes only and may not be indicative of the results that actually would have occurred if the Arrangement had been in effect on the dates indicated or of the results that may be obtained in the future. In addition to the pro forma adjustments to the historical carve-out combined financial statements, various other factors may have an effect on the financial condition and results of operations after the completion of the Arrangement.

The unaudited pro forma combined balance sheets give effect to the Arrangement as if it had taken place on December 31, 2014 and March 31, 2015. The unaudited pro forma combined statements of earnings give effect to the Arrangement as if it had taken place on January 1, 2014 and January 1, 2015. Note 2 outlines the pro forma assumptions and adjustments that have been made. Pro forma adjustments to the carve-out combined statement of earnings give effect to events that are directly attributable to the Arrangement, expected to have a continuing impact on New FSV, and are factually supportable. Pro forma adjustments to the carve-out combined balance sheet are based on the best information available as of the date of this Circular.

For the year ended December 31, 2014, FirstService allocated corporate general and administrative expenses of $10,680 to New FSV (three months ended March 31, 2015 – $2,101). Corporate general and administrative expenses include costs related to finance, legal, treasury, insurance, corporate development and costs associated with being a public company. Effective with the Arrangement, New FSV will assume responsibility for all of these functions and related costs.

 
Page 8 of 9
 
New FSV expects that its annual corporate general and administrative expenses will increase approximately $900 in 2015 compared to 2014 on account of additional costs required to function as an independent public company. No pro forma adjustments have been made to the statement of earnings to reflect the incremental expenses described in this paragraph.

2.             Pro forma assumptions and adjustments

A.  
Pro forma net basic and diluted earnings per common share is calculated using the same weighted average number of pre-arrangement FirstService basic and diluted common shares (Multiple Voting Shares and Subordinate Voting Shares) outstanding as at December 31, 2014 and March 31, 2015 because the New FSV shares will be issued on a one-for-one basis.

B.  
Adjustment to increase accounts payable to accrue for the New FSV share of the estimated transaction costs to complete the Arrangement. This results from the pro forma combined balance sheet as of December 31, 2014 giving effect to the Arrangement as of December 31, 2014. The pro forma consolidated balance sheet as of March 31, 2015 gives effect to the Arrangement as of March 31, 2015.

C.  
The amount of the FirstService net investment in New FSV, which was recorded by New FSV as FirstService’s net investment in its Carve-out Combined Financial Statements, is reclassified to contributed surplus. FirstService’s net investment in New FSV is subject to amendment in accordance with any adjustments arising from the transition agreement to achieve New FSV’s new capital structure post-split.

D.  
The New FSV long-term debt balance is subject to amendment at the time of the Arrangement in accordance with any adjustments arising from the transition agreement to achieve New FSV’s new capital structure post-split.

 
 
 

Page 9 of 9