EX-99.1 2 ex991.htm EXHIBIT 99.1 -- FOURTH QUARTER PRESS RELEASE Exhibit 99.1 -- Fourth Quarter Press Release

EXHIBIT 99.1




 
COMPANY CONTACTS:
     
   
Jay S. Hennick
   
President & CEO
   
(416) 960-9500
     
   
John B. Friedrichsen
   
Senior Vice President & CFO
   
(416) 960-9500

FOR IMMEDIATE RELEASE

FirstService reports record yearend results

Increases Fiscal 2006 outlook

Yearend highlights: 
•
Revenues up 37% to US$812.3 million
•
EBITDA up 44% to US$78.8 million
•
Adjusted net earnings up 44% to US$28.2 million
•
Adjusted diluted EPS up 34% to US$0.90

TORONTO, Canada, May 18, 2005 - FirstService Corporation (Nasdaq: FSRV; TSX: FSV.SV) today reported results for its fourth quarter and fiscal year ended March 31, 2005. Annual revenues were $812.3 million (all amounts are in US dollars), an increase of 37% relative to the prior year period. Annual adjusted net earnings from continuing operations were $28.2 million, up 44%, and adjusted diluted earnings per share from continuing operations were $0.90, up 34% versus $0.67 one year ago. The adjustment relates to the non-cash amortization of short-lived intangible assets recognized on the November 2004 acquisition of CMN International Inc., particularly the estimated fair value of the backlog of pending real estate brokerage transactions and listings. Three businesses, sold during the year at a net gain of $1.2 million, were reported as discontinued operations. All current and prior year figures reflect the 2 for 1 stock split completed on December 15, 2004.

Quarterly revenues were $246.4 million, up 62% over the same period last year. EBITDA (see definition and reconciliation below) increased 37% to $13.0 million. Adjusted quarterly net earnings from continuing operations were $2.8 million versus $4.0 million in the prior year period, and the change was entirely attributable to the seasonal
 
 
 
low period of January to March for CMN’s brokerage operations, as well as additional interest and depreciation expenses related to that acquisition. Adjusted diluted earnings per share from continuing operations were $0.07 versus $0.13 in the prior year.

“FirstService achieved several significant milestones in fiscal 2005 as we surpassed US $1 billion in annualized revenue, added another significant platform for growth, expanded into international markets and secured new financial resources,” said Jay S. Hennick, President and Chief Executive Officer of FirstService Corporation. “These achievements position us well to continue to deliver strong and consistent growth in the coming years.”

“We are confident FirstService will continue to deliver another solid performance in fiscal 2006 as a result of the strong results achieved in 2005 and the favorable operating environment in our various markets,” said Hennick.

About FirstService Corporation
FirstService is a leader in the rapidly growing service sector, providing services in the following areas: commercial real estate services; residential property management; integrated security services; property improvement and business services.  Market-leading brands include Continental, Wentworth and Prime Management in residential property management; Colliers International in commercial real estate; Intercon Security and SST in integrated security services; California Closets, Paul Davis Restoration, Pillar to Post Home Inspections and Certa Pro Painters in property improvement; and Resolve Corporation in business services.

FirstService is a diversified service company with more than US$1 billion in annualized revenues and more than 16,000 employees worldwide. More information about FirstService is available at www.firstservice.com. 

Segmented Quarterly Operating Results
Residential Property Management revenues increased to $68.9 million for the quarter, 26% higher than in the prior year period. Internal growth of 12% was attributable to growth in contractual property management revenues. Revenue growth from acquisitions of 14% included property management acquisitions in Chicago and Las Vegas, both representing new regional markets for FirstService. EBITDA for the quarter was $5.5 million at a margin of 8.0%, up significantly from $4.0 million and 7.2% one year ago. The increase in margin reflects higher productivity in property services operations and change in mix due to recent acquisitions.

Commercial Real Estate Services was established with the acquisition of CMN, which operates as Colliers International, on November 30, 2004. Revenues totalled $70.9 million for the fourth quarter and EBITDA was $0.4

 
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million. The results for the quarter reflect the seasonal low months of January through March for commercial brokerage activity.

Revenues in Property Improvement Services totalled $23.8 million, an increase of 17% over the prior year period. The Paul Davis Restoration and California Closets franchise systems, as well as the Company’s California Closets “branchise” stores, produced strong revenue gains. EBITDA in the seasonally low fourth quarter was $0.2 million, a decrease of $0.3 million relative to last year, as a result of a one-time adjustment to a long-term executive compensation plan in the quarter.

Integrated Security Services revenues in the fourth quarter were $36.3 million, up 19% relative to the prior year period. Internal growth accounted for 16 % of the increase, while acquisitions represented 3%. Increased commercial electronic security system revenues were the primary internal growth driver. Quarterly EBITDA was $2.1 million at a margin of 5.9%, up from 5.2% last year.

Fourth quarter Business Services revenues were $46.3 million, flat relative to the comparative prior year period in which the division had a significant short-term marketing support contract. EBITDA was $7.7 million or 16.7% of revenues, up 41% from $5.5 million or 11.9% of revenues in the fourth quarter last year. The margin increase was due to recognition of revenue related to a completed contract, as well as increased efficiency and slightly higher capacity utilization.

Quarterly corporate costs were $2.9 million, relative to $2.0 million in the prior year period primarily due to costs related to Sarbanes-Oxley compliance and higher performance-based executive compensation accruals.

A comparison of segmented EBITDA to operating earnings is provided below.

Discontinued operations for the fourth quarter included an after-tax loss on sale of $0.7 million related to the businesses sold during the year. For the year, the net gain on sale for the three dispositions was $1.2 million.
 
 
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Financial Outlook
Based on the strong operating results for fiscal 2005, FirstService is increasing and updating the outlook for fiscal 2006 previously issued on January 26, 2005.
 
(in millions of US dollars, except per share amounts)
  
Year ending March 31, 2006
  
   
Previous
  
Updated
  
Revenues
   $ 1,050 - $1,100   $ 1,050 - $1,100  
EBITDA
    
90.0 - 95.0
    
92.0 - 99.0
  
Adjusted diluted earnings per share from continuing operations
  
$
0.97 - $1.05
  
$
0.97 - $1.07
  

 
Note: The updated outlook assumes (i) no further acquisitions or divestitures completed during the outlook period; (ii) current economic conditions in the markets in which the Company operates remaining unchanged; and (iii) an exchange rate of US$0.80 per C$1.00. Actual results may differ materially. The Company undertakes no obligation to continue to update this information.
 
Conference Call
FirstService will be holding a conference call on Wednesday, May 18, 2005 at 11:00 AM Eastern Time to discuss results for the fourth quarter and year as well as the outlook for fiscal 2006. The call will be simultaneously web cast and can be accessed live or after the call at www.firstservice.com in the “Investor Relations / News Releases” section.

Forward-looking Statements
This press release includes forward-looking statements. Forward-looking statements include the Company’s financial performance outlook and statements regarding goals, beliefs, strategies, objectives, plans or current expectations. These statements involve known and unknown risks, uncertainties and other factors which may cause the actual results to be materially different from any future results, performance or achievements contemplated in the forward-looking statements. Such factors include: (i) general economic and business conditions, which will, among other things, impact demand for the Company’s services and the cost of providing services; (ii) the ability of the Company to implement its business strategy, including the Company’s ability to acquire suitable acquisition candidates on acceptable terms and successfully integrate newly acquired businesses with its existing businesses; (iii) changes in or the failure to comply with government regulations; and (iv) other factors which are described in the Company’s filings with the Ontario Securities Commission.
 

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

   
Three months ended
  
Year ended
   
March 31
  
March 31
   
2005
  
2004
  
2005
  
2004
  
Revenues
  
$
246,362
  
$
151,810
  
$
812,290
  
$
593,782
  
Cost of revenues
    
153,311
    
105,364
    
526,623
    
408,327
  
Selling, general and administrative expenses
    
80,004
    
36,934
    
206,904
    
130,934
  
Depreciation
    
4,782
    
3,336
    
15,320
    
12,824
  
Amortization of intangibles other than backlog
    
1,099
    
641
    
3,140
    
2,212
  
Amortization of brokerage backlog (1)
    
3,777
    
-
    
8,735
    
-
  
Operating earnings
    
3,389
    
5,535
    
51,568
    
39,485
  
Other income
    
(375
)
  
(1,116
)
  
(375
)
  
(1,116
)
Interest expense
    
3,661
    
1,807
    
11,019
    
7,900
  
     
103
    
4,844
    
40,924
    
32,701
  
Income taxes
    
(566
)
  
673
    
11,338
    
9,815
  
     
669
    
4,171
    
29,586
    
22,886
  
Minority interest share of earnings
    
259
    
190
    
6,941
    
3,224
  
Net earnings from continuing operations
    
410
    
3,981
    
22,645
    
19,662
  
Net (loss) earnings from discontinued operations, net of income taxes
    
(1,065
)
  
(2,347
)
  
562
    
(638
)
Net (loss) earnings
  
$
(655
)
$
1,634
  
$
23,207
  
$
19,024
  
Net (loss) earnings per share (2)
                          
     Basic
                          
    Continuing operations
  
$
0.01
  
$
0.14
  
$
0.76
  
$
0.69
  
    Discontinued operations
    
(0.03
)
  
(0.08
)
  
0.02
    
(0.02
)
   
$
(0.02
)
$
0.06
  
$
0.78
    
0.67
  
     Diluted (3)
                          
    Continuing operations
  
$
(0.01
)
$
0.13
  
$
0.72
  
$
0.67
  
    Discontinued operations
    
(0.03
)
  
(0.08
)
  
0.02
    
(0.02
)
   
$
(0.04
)
$
0.05
  
$
0.74
  
$
0.65
  
Adjusted diluted net earnings per share from continuing operations (4)
  
$
0.07
  
$
0.13
  
$
0.90
  
$
0.67
  
Weighted average shares      Basic
    
30,065
    
29,154
    
29,777
    
28,570
  
    outstanding: (in thousands)                                   Diluted
    
30,743
    
29,658
    
30,467
    
29,192
  

Notes
(1) Amortization of short-lived brokerage backlog intangible assets recognized upon the acquisition of CMN. Brokerage backlog represents the fair value of pending commercial real estate brokerage transactions and listings as at the acquisition date. Amortization is recorded to coincide with the completion of the related brokerage transactions.
(2) Share and per-share information has been updated for each period presented to reflect the 2 for 1 stock split completed on December 15, 2004.
(3) Numerators for diluted earnings per share calculations have been adjusted to reflect dilution from stock options at subsidiaries.
(4) See “Reconciliation of operating earnings, net earnings and net earnings per share to adjusted operating earnings, adjusted net earnings and adjusted net earnings per share” below.

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

The Company is presenting adjusted earnings measures to eliminate the impact of amortization of the short-lived brokerage backlog intangible asset recognized upon the acquisition of CMN. All of the adjustments are non-cash and are considered “non-GAAP financial measures” under OSC and SEC guidelines. The following tables provide a reconciliation of the adjusted measures:

   
Three months ended
  
Year ended
   
March 31
  
March 31
   
2005
  
2004
  
2005
  
2004
  
                   
Adjusted operating earnings
  
$
7,166
  
$
5,535
  
$
60,303
  
$
39,485
  
Amortization of brokerage backlog
    
(3,777
)
  
-
    
(8,735
)
  
-
  
Operating earnings
  
$
3,389
  
$
5,535
  
$
51,568
  
$
39,485
  
Adjusted net earnings from continuing operations
  
$
2,827
  
$
3,981
  
$
28,235
  
$
19,662
  
Amortization of brokerage backlog
    
(3,777
)
  
-
    
(8,735
)
  
-
  
Deferred income taxes
    
1,360
    
-
    
3,145
    
-
  
Net earnings from continuing operations
  
$
410
  
$
3,981
  
$
22,645
  
$
19,662
  
Adjusted diluted net earnings per share from continuing operations
  
$
0.07
  
$
0.13
  
$
0.90
  
$
0.67
  
Amortization of brokerage backlog, net of deferred income taxes
    
(0.08
)
  
-
    
(0.18
)
  
-
  
Diluted net (loss) earnings per share from continuing operations
  
$
(0.01
)
$
0.13
  
$
0.72
  
$
0.67
  


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

EBITDA is defined as net earnings from continuing operations before minority interest share of earnings, income taxes, interest, depreciation and amortization. The Company uses EBITDA to evaluate operating performance and as a measure for debt covenants with its lenders. EBITDA is an integral part of the Company’s planning and reporting systems. Additionally, the Company uses multiples of current and projected EBITDA in conjunction with discounted cash flow models to determine its overall enterprise valuation and to evaluate acquisition targets. The Company believes EBITDA is a reasonable measure of operating performance because of the low capital intensity of its service operations. The Company believes EBITDA is a financial metric used by many investors to compare companies, especially in the services industry, on the basis of operating results and the ability to incur and service debt. EBITDA is not a recognized measure of financial performance under United States or Canadian generally accepted accounting principles (GAAP), and should not be considered as a substitute for operating earnings, net earnings or cash flows from operating activities, as determined in accordance with GAAP. The Company’s method of calculating EBITDA may differ from other issuers and accordingly, EBITDA may not be comparable to measures used by other issuers. A reconciliation of EBITDA to operating earnings appears below.

   
Three months ended
 
Year ended
   
March 31
  
March 31
   
2005
  
2004
  
2005
  
2004
  
EBITDA
  
$
13,047
  
$
9,512
  
$
78,763
  
$
54,521
  
Depreciation
    
(4,782
)
  
(3,336
)
  
(15,320
)
  
(12,824
)
Amortization of intangibles other than brokerage backlog
    
(1,099
)
  
(641
)
  
(3,140
)
  
(2,212
)
Amortization of brokerage backlog
    
(3,777
)
  
-
    
(8,735
)
  
-
  
Operating earnings
  
$
3,389
  
$
5,535
  
$
51,568
  
$
39,485
  
 
 
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Condensed Consolidated Balance Sheets
(in thousands of US dollars)
(unaudited)


   
March 31
  
March 31
  
   
2005
  
2004
  
Assets
              
Cash and cash equivalents
  
$
37,458
  
$
15,620
  
Accounts receivable
    
168,927
    
97,367
  
Inventories
    
20,878
    
15,229
  
Prepaids and other current assets
    
21,507
    
19,017
  
     Current assets
    
248,770
    
147,233
  
Fixed assets
    
57,241
    
49,826
  
Other non-current assets
    
22,755
    
17,198
  
Goodwill and intangibles
    
297,962
    
223,296
  
     Total assets
  
$
626,728
  
$
437,553
  
Liabilities and shareholders’ equity
              
Accounts payable and accrued liabilities
  
$
155,429
  
$
69,879
  
Other current liabilities
    
9,147
    
12,987
  
Long term debt - current
    
18,206
    
3,502
  
           Current liabilities
    
182,782
    
86,368
  
Long term debt - non-current
    
201,809
    
160,386
  
Deferred income taxes
    
29,802
    
19,594
  
Minority interest
    
26,464
    
16,104
  
Shareholders’ equity
    
185,871
    
155,101
  
     Total liabilities and equity
  
$
626,728
  
$
437,553
  
               
Total debt, excluding interest rate swaps
  
$
219,732
  
$
157,083
  
Total debt, net of cash, excluding interest rate swaps
    
182,274
    
141,463
  

 
 
-8-


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

   
Year ended March 31
   
2005
  
2004
  
Operating activities
              
Net earnings from continuing operations
  
$
22,645
  
$
19,662
  
Items not affecting cash:
              
    Depreciation and amortization
    
27,195
    
15,036
  
    Deferred income taxes
    
(8,922
)
  
(683
)
    Minority interest share of earnings
    
6,941
    
3,224
  
    Other
    
963
    
(181
)
Changes in operating assets and liabilities
    
(11,791
)
  
(1,267
)
Net cash provided by operating activities
    
37,031
    
35,791
  
Investing activities
              
Acquisitions of businesses, net of cash acquired
   
(59,017
)
  
(17,117
)
Purchases of fixed assets, net
    
(17,028
)
  
(13,121
)
Other investing activities
    
2,199
    
1,155
  
Net cash used in investing
    
(73,846
)
  
(29,083
)
Financing activities
              
Increase in long-term debt
    
48,630
    
(2,037
)
Other financing activities
    
2,087
    
7,098
  
Net cash provided by financing
    
50,717
    
5,061
  
Net cash provided by (used in) discontinued operation
    
4,801
    
(1,052
)
Effect of exchange rate changes on cash
   
3,135
    
(475
)
Increase in cash and cash equivalents during the period
    
21,838
    
10,242
  
Cash and cash equivalents, beginning of period
    
15,620
    
5,378
  
Cash and cash equivalents, end of period
  
$
37,458
  
$
15,620
  

 
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Segmented Revenues, EBITDA and Operating Earnings
(in thousands of US dollars)
(unaudited)


   
Residential
  
Commercial
  
Integrated
  
Property
              
   
Property
  
Real Estate
  
Security
  
Improvement
  
Business
          
   
Management
  
Services
  
Services
  
Services
  
Services
  
Corporate
  
Consolidated
  
Three months ended March 31
                                            
                                             
2005
                                            
Revenues
  
$
68,873
  
$
70,936
  
$
36,252
  
$
23,841
  
$
46,253
  
$
207
  
$
246,362
  
EBITDA
    
5,542
    
413
    
2,131
    
157
    
7,710
    
(2,906
)
  
13,047
  
Operating earnings
    
3,961
    
(4,232
)
  
1,044
    
(640
)
  
6,226
    
(2,970
)
  
3,389
  
Brokerage backlog amortization
          
3,777
                                
Adjusted operating earnings
        
$
(455
)
                              
                                             
2004
                                            
Revenues
  
$
54,643
  
$
-
  
$
30,435
  
$
20,366
  
$
46,201
  
$
165
  
$
151,810
  
EBITDA
    
3,952
    
-
    
1,593
    
481
    
5,478
    
(1,992
)
  
9,512
  
Operating earnings
    
2,773
    
-
    
1,048
    
(70
)
  
3,814
    
(2,030
)
  
5,535
  




   
Residential
  
Commercial
  
Integrated
  
Property
              
   
Property
  
Real Estate
  
Security
  
Improvement
  
Business
          
   
Management
  
Services
  
Services
  
Services
  
Services
  
Corporate
  
Consolidated
  
Year ended March 31
                                            
                                             
2005
                                            
Revenues
  
$
275,229
  
$
120,535
  
$
143,160
  
$
111,779
  
$
160,914
  
$
673
  
$
812,290
  
EBITDA
    
24,088
    
11,144
    
10,286
    
19,867
    
22,350
    
(8,972
)
  
78,763
  
Operating earnings
    
18,917
    
1,276
    
7,468
    
16,796
    
16,262
    
(9,151
)
  
51,568
  
Brokerage backlog amortization
          
8,735
                                
Adjusted operating earnings
        
$
10,011
                                
                                             
2004
                                            
Revenues
  
$
228,790
  
$
-
  
$
122,748
  
$
89,361
  
$
152,449
  
$
434
  
$
593,782
  
EBITDA
    
19,733
    
-
    
8,429
    
14,938
    
18,302
    
(6,881
)
  
54,521
  
Operating earnings
    
15,514
    
-
    
6,481
    
12,669
    
11,852
    
(7,031
)
  
39,485
  



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