1、FirstService Annual Report 2009www.fi Creating value one step at a timeFirstService Annual Report 2009BTG59755-FirstSer.Cvr09 AR cs4.indd 1BTG59755-FirstSer.Cvr09 AR cs4.indd 122/03/10 12:55 PM22/03/10 12:55 PMAbout FirstServiceFirstService is a global diversifi ed leader in the rapidly growing real
2、 estate services sector,providing services in commercial real estate,residential property management and property services.Industry-leading service platforms include:Colliers International,the third largest global player in commercial real estate;FirstService Residential Management,the largest manag
3、er of residential communities in North America;and TFC,North America s largest provider of property services through franchise and contractor networks.FirstService generates over U.S.$1.7 billion in annualized revenues with more than 18,000 employees worldwide.ContentsFinancial Highlights 1FirstServ
4、ice Growth Timeline 2Founder&CEO s Message 4Colliers International 5Management s Q&A 6Sustainability Commitment 9Commercial Real Estate 10Residential Property Management 12Property Services 14Directors&Offi cers 17Corporate Information 18Management s Discussion&Analysis 19Financial Statements&Notes
5、37Notice of Shareholders MeetingThe annual meeting of the shareholders will beheld on Wednesday,April 14,2010 at 4 p.m.(ET)at The Four Seasons Hotel,Regency West Room,2nd fl oor,21 Avenue Road,Toronto,OntarioBTG59755-FirstSer.Cvr09 AR cs4.indd 2BTG59755-FirstSer.Cvr09 AR cs4.indd 222/03/10 12:56 PM2
6、2/03/10 12:56 PM1Creating value one step at a time(US$thousands,except per share amounts)Year ended December 31 Year ended March 31 2009 2008 2008 2007 2006Operations Revenues$1,703,222$1,691,811$1,549,713$1,152,821$918,668Operating earnings 38,181 71,327 78,122 77,005 61,087Net(loss)earnings from c
7、ontinuing operations (7,279)19,837 52,277 50,245 38,535Net(loss)earnings from discontinued operations (576)45,297 (2,829)2,290 42,843Net(loss)earnings (7,855)65,134 49,448 51,181 81,378Financial PositionTotal assets$1,009,530$990,637$1,089,343$816,998$711,004Long-term debt 235,994 266,369 356,030 23
8、5,149 248,686Convertible debentures 77,000 Shareholders equity 166,034 199,141 131,553 159,181 187,215Common Share DataDiluted net(loss)earnings per common share from continuing operations$(1.85)$(0.19)$0.89$1.08$0.83Diluted weighted average outstanding(thousands)29,516 29,914 30,547 30,354 30,896Ca
9、sh dividends per common share Preferred Share DataNumber outstanding(thousands)5,772 5,772 5,979 Cash dividends per preferred share$1.75$1.75$1.16 Other DataEBITDA(1)$133,067$124,745$123,614$107,983$84,319Adjusted diluted net earnings per share from continuing operations(2)1.42 1.37 1.32 1.17 0.75No
10、tes1.EBITDA is defi ned as net earnings from continuing operations before non-controlling interest share of earnings,income tax,interest,depreciation,amortization,cost containment expense and stock-based compensation expense.2.Adjusted diluted earnings per share from continuing operations is defi ne
11、d as diluted net earnings per share from continuing operations plus the effect,after income taxes,of:(i)the non-controlling interest redemption increment recognized in connection with the accounting standards on NCI;(ii)amortization expense related to intangible assets recognized in connection with
12、acquisitions;(iii)goodwill impairment charges;(iv)stock-based compensation expense;(v)cost containment expense;(vi)gains and losses on available-for-sale securities and(vii)deferred income tax valuation allowances related to tax loss carry-forwards.Revenues(US$millions)?Adjusted Diluted EPS(US$)?EBI
13、TDA(US$millions)?2006 2007 2008 2008 20099191,1531,5501,7031,692841081241251332006 2007 2008 2008 20090.751.171.321.371.422006 2007 2008 2008 20091112211122111221,7031331.422006 2007 2008 2008 20092006 2007 2008 2008 20092006 2007 2008 2008 2009222Notes1.Results for fi scal years ended March 312.Res
14、ults for calendar years ended December 31Financial HighlightsFirstService Annual Report 200921989 1990 1991 1992 1993 1994 1995 1996 1997 1998$42MMREVENUES$88MM1995 Business Process OutsourcingAcquires BDP Business Data Services,a leading business process outsourcing company,which forms the basis of
15、 Business Services platform.Subsequently adds DDS Distribution Services(1996)and The Watts Group(2001).Platform later re-branded as Resolve Corporation.1989 FoundingFounder and CEO,Jay Hennick establishes FirstService with Superior Pools,the commercial swimming pool management business he started as
16、 a teenager.In 1999,FirstService acquires American Pool Enterprises,the largest commercial swimming pool and recreation facility management organization in North America and integrates operations of Superior.1993 Initial Public OfferingIPO in June on TSX raising$10 million.Subsequently lists on NASD
17、AQ(1995).1993 Integrated SecurityAcquires Intercon Security,the Canadian market leader in electronic security systems and security offi cer staffi ng for high-end commercial properties.Intercon forms basis of Integrated Security segment.Later acquisition of Philadelphia-based Security Services&Techn
18、ologies(2000)drives U.S.market growth.1997 U.S.Public OfferingFirstService raises$20 million in fi rst offering of shares in the U.S.,expanding shareholder base and further solidifying capital base.1989 Property ServicesAcquires College Pro Painters,a leading franchisor in exterior residential paint
19、ing market,forming foundation for the Property Services segment.FirstService then acquires Chemlawn Canada(1991),the Canadian leader in residential lawn care which it later sells to ServiceMaster(2004)generating a 24%annualized after-tax return on invested capital over 13 years.Subsequent acquisitio
20、ns include:-Paul Davis Restoration(1997)-California Closets(1998)-Pillar-to-Post Home Inspection(2003)-Handyman Connection(2006)1996 FirstService ResidentialAcquires Prime Management,Florida-based market leader in full-service property management,forming foundation of Residential Property Management
21、 platform.Later acquisitions build a national footprint:-The Continental Group(1997)-The Wentworth Group(1997)-Rossmar&Graham(1998)-Cooper Square Realty(2003)-RMI Management(2004)-The Merit Companies(2007)-Planned Companies(2008)Our successful track record of delivering signifi cant growth in shareh
22、older value,more than 18%annual return since 1995,is all about creating value,one step at a time.FirstService Growth Timeline3Creating value one step at a time1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009$263MM$441MM$919MM$1.7B2008 Integrated Security DivestitureFirstService divests of its
23、Integrated Security segment generating a 22%annualized after-tax return on invested capital over 15 years.2009 FirstService takes control of Colliers InternationalAccomplishes a major milestone by gaining control of the privately held Colliers International brand.FirstService now has 228 company-own
24、ed offi ces in 41 countries and partners in another 20 countries.2006 Resolve DivestitureFirstService divests of Resolve Corporation through IPO of trust units of Resolve Business Outsourcing Income Fund generating an 18%annualized after-tax return on invested capital over 11 years.2007 Field Asset
25、ServicesThe Property Services segment acquires Field Asset Services,a leading national property preservation and REO maintenance firm,with a network of more than 15,000 independent contractors.2004 Commercial Real EstateEstablishes Commercial Real Estate services segment with acquisition of Colliers
26、 Macaulay Nicolls,the largest member of privately held Colliers International.Then adds important new markets in the U.S.and internationally including:-Colliers Seeley,Los Angeles(2005)-Colliers Meredith&Grew,Boston(2006)-GVA Williams,New York(2008)-Colliers,Brazil(2006)-Colliers,Southeast Europe(20
27、07)-Colliers,Russia(2007)-Colliers,Netherlands(2008)-Colliers CRE,London(2009)29.9%interest of publically traded sharesIt also diversifi es revenue streams with:-PGP Property Valuations(2006)-PKF Consulting&PKF Hospitality Research(2007)-MHPM Project Managers(2007)4FirstService Annual Report 2009Fou
28、nder&CEO s Messagemanagers,FirstService oversees more than 1.5 billion square feet of property.Our potential to do the right thing for our planet is signifi cant,so we are launching a new sustainability strategy that will unfold over the next year.We describe our commitment to sustainable operations
29、 more fully on page 9.In 2009,we also took an important step to further strengthen our financial position through a new convertible debenture offering.The proceeds were used to repay outstanding debt providing us with more than$200 million of fi repower to continue to grow and add value for our shar
30、eholders as opportunities present themselves.We approach the year ahead confident that we are well positioned to benefit from the coming recovery in real estate services and that emerging demand for our services will continue to fuel the largest market segment in the world.Unfortunately my father,Sa
31、m Hennick,passed away on February 19,2010.Sam will be greatly missed by his family but he will also be missed by everyone at FirstService.Not only was Sam a founding member of our board and served as a director for more than 13 years,he was also there at the very beginning and he remained active and
32、 involved to his last day.Sam was immensely proud of FirstService and its success was a testament to his involvement.I will be forever indebted to my fatherfor everything I miss him already!Jay S.Hennick Founder&Chief Executive Offi cer“The highlight of our year was gaining majority control of priva
33、tely held Colliers International.”Jay S.Hennick FOUNDER&CEOFS09FirstService delivered solid results in 2009 on the strength of our highly resilient residential property management business,a strong performance from our property services division and a better than expected fi nish in commercial real
34、estate.We also took decisive steps to further establish our position as one of the world leaders in global real estate services.The highlight of our year was gaining majority control of privately held Colliers International.With 228 company-owned offi ces in 41 countries and partners in 20 more,cont
35、rolling Colliers International makes FirstService the world s third largest player in commercial real estate and creates a unique opportunity to expand our services internationally.The full story of our Colliers strategy is covered on the next page of this report:“Colliers International Drives Globa
36、l Growth.”As a leader in our industry,FirstService has a responsibility to be the forerunner in sustainable business practices.Globally,commercial and residential buildings account for more than 30%of global carbon dioxide emissions from fossil fuels.As one of the world s largest property 5Creating
37、value one step at a timeEconomic Downturn Accelerates Achievement of Strategic Goal Since its inception,FirstService has pursued a disciplined approach to growth with a view to creating long-term value for our shareholders one step at a time!In 2004,FirstService entered the commercial real estate se
38、rvices segment through the acquisition of Colliers Macaulay Nicolls(“CMN”),the largest shareholder of privately held Colliers International Property Consultants(“Colliers International”).The deal was one step unlike any other in our history and opened exceptional new opportunities for growth.Our pla
39、n was to use CMN as a platform to build a signifi cant commercial real estate business over the long-term and ultimately,to gain control of the global Colliers International brand.We were determined to remain true to our disciplined approach,while demonstrating the FirstService advantage.This combin
40、ation worked very well for us,and in 2009 we achieved our strategic goal of gaining control of Colliers International,well ahead of schedule.From the outset CMN was the role model for the larger Colliers organization.CMN invested heavily in operations,technology,and professional development.Our invo
41、lvement with CMN strengthened the business in many ways including fi nancially and operationally.We also introduced our successful partnership model to the industry.If senior leaders retain direct equity in the businesses they operate day to day,they will ensure clients receive the highest level of
42、service and consistent delivery over the long-term.As FirstService-owned operations began to outperform the others,we were able to acquire additional operations in large and vital U.S.markets such as Los Angeles(Colliers Seeley 2005)and Boston(Colliers Meredith&Grew 2006).Outside the U.S.,other shar
43、eholders of Colliers International in key markets,like Brazil,Central and Eastern Europe,Russia and the Netherlands,also chose to partner with FirstService by selling a majority of their equity.Each of these acquisitions added another Colliers branded business,and each also increased our stake in Co
44、lliers International.At the same time,FirstService took steps to diversify its revenue streams and broaden its service offerings by adding Denver-based PGP Property Valuation(2006),San Francisco-based PKF Consulting and PKF Hospitality Research(2007)and Canadian-based MHPM Project Managers(2007).Fir
45、stService funded this impressive growth by intensifying its focus on global real estate services and redeploying capital.The divestiture of our Business Services(2006)and Integrated Security divisions(2008)provided orderly exit strategies from both businesses and rewarded shareholders for their capi
46、tal contributions to the development of both.These decisions,together with the strong cash flow generated from the residential property management and property service divisions put FirstService in an excellent position to capitalize when the time was right.That time arrived with the onset of the gl
47、obal recession in 2008.The economic downturn created an exceptional opportunity for FirstService as coveted acquisition targets,unavailable in a strong market,began to seek partners to weather the fi nancial storm.FirstService acted decisively in New York with the acquisition of GVA Williams(2008)an
48、d in London with a signifi cant investment in Colliers CRE(2009).Both of these investments established global gateways to two of the world s most important real estate markets.By the close of 2009,FirstService had accomplished its goal by taking control of Colliers International.With 228 company-own
49、ed offi ces in 41 countries and partners in another 20,Colliers International opens more doors,in more places,for clients around the globe.Over the past fi ve years FirstService has dedicated itself to liberating the full potential of this enterprise building the world s third largest commercial rea
50、l estate services fi rm and in the process,creating signifi cant value for our shareholders today and for many years to come.Colliers International Drives Global GrowthFirstService Annual Report 20096“Our global diversifi cation has served us well during these challenging times,and most importantly,
51、positions us well for the opportunities that lay ahead.”D.Scott Patterson John B.FriedrichsenPRESIDENT&COO SENIOR VICE-PRESIDENT&CFOQ&A2009 presented a tough operating environment for global companies,how did FirstService measure up to the challenge?We are pleased with the annual performance of our
52、three real estate services divisions.Each one faced its own unique challenge and each one successfully navigated a diffi cult economy to build long-term value for our shareholders.Overall we reported revenues of$1.7 billion,EBITDA of$133 million and adjusted earnings per share of$1.42.This compares
53、very well with our peer group of companies,with each of these key annual performance metrics showing an increase over the 12 months ended December 31,2008.What was the story in your three operating divisions?Our Residential Property Management division provided another solid year of operating result
54、s with revenues up 5%and EBITDA margins increasing to 9.4%from 8.8%in the previous year.Despite a challenging economy,the resiliency of this business based on the essential services we provide,along with our leading service model and focus on assisting our clients where their needs are greatest,was
55、clearly evident.Property Services delivered very strong results once again with revenues up 32%led by our market-leading Field Asset Services(“FAS”).FAS performed exceptionally well during another period of increasing residential mortgage foreclosures in the United States,assisting its clients in ma
56、intaining the value of their real estate collateral.This performance helped offset softness in several of our consumer-oriented franchises,while we successfully stabilized this latter group,working closely with management teams and our franchisees to align their cost structures to the realities of r
57、educed revenues.Management s Q&A:Year in Review7Creating value one step at a timeCommercial Real Estate was our most challenging service division operationally in 2009,given the adverse impact of tight credit and fi nancial markets and deteriorating employment across the globe that drove many occupi
58、ers of real estate to reduce and consolidate their space requirements.Overall revenue declined 16%,but an intense focus on cost containment initiatives started in the latter half of 2008 and carrying through 2009,reduced the negative impact on our profi tability,and contributed to an increase in EBI
59、TDA in our fourth quarter enabling us to fi nish a tough 2009 on a positive note.Much of the concern over the global economy remains focused on the U.S.,how is this affecting FirstService?Five years ago it would have been a critical threat given the concentration of our service platforms at that tim
60、e,but the realignment of our business around real estate services has diversifi ed the risk on a global basis.In 2009,74%of our revenue was generated in the U.S.,11%in Canada,11%in Asia Pacifi c,3%in Europe,and 1%in Latin America.While the current recession has impacted the global economy more broad
61、ly than any downturn in our lifetime,our global diversifi cation has served us well during these challenging times,and most importantly,positions us well for the opportunities that lay ahead.Commercial Real Estate has been especially hard hit during the recession,what has been your response?Together
62、 with our executive management team that leads our Colliers International business,we made tough decisions around cost containment that had unpleasant near-term consequences.However,we believe we have done a good job in balancing an effective response to declining revenues while ensuring that we kep
63、t our eyes on the horizon,taking steps to build value and take advantage of the opportunities that surfaced as markets came under pressure.What have been the biggest accomplishments in Commercial Real Estate in 2009?We accomplished two signifi cant strategic initiatives in 2009,one impacting our glo
64、bal operations and the other more specifi cally our operations in the U.S.As highlighted in our CEO s Message to shareholders,and detailedin a dedicated section of our annual report,we successfully secured control over the Colliers International brand.From thetime of our initial investment in Collie
65、rs Macaulay Nicolls(“CMN”)in 2004,CMN had signifi cant infl uence over the Colliers International brand,but not the control needed to deliver the type of consistency and high level of service required as part of our vision for the 3rd largest commercial real estate business globally.This move will y
66、ield benefi ts to our business that will become increasingly apparent over time.Management s Q&A:Year in ReviewWe also realigned our U.S.operations to address several gaps that contributed to subpar operating results made worse by the downturn in the U.S.economy in late 2007.So in the fourth quarter
67、 of 2008,we took a major step by acquiring a majority stake in GVA Williams,one of New York City s most established commercial real estate operations.The downturn actually helped us achieve our goal of partnering with a major New York fi rm.Then in 2009,we refocused our efforts on providing a compre
68、hensive approach to servicing the real estate needs of our corporate clients by establishing a Corporate Solutions and advisory practice and bringing on board new leadership,led by Dylan Taylor.We also entered important U.S.regional markets in Atlanta,Washington D.C.and Richmond,Virginia to further
69、enhance our operations and client service delivery.You have also moved aggressively to open new markets in Western Europe.The acquisition of a 29.9%stake in Colliers CRE,headquartered in London,provides a presence in the U.K.,Ireland and Spain,further expanding our global footprint into these establ
70、ished markets.We believe that we will be able to add signifi cant value to this operation in Europe,while enhancing our existing working relationship through our other major global markets,particularly in our North America and Asia-Pacifi c regions.Did you foresee how the 2004 acquisition of CMN wou
71、ld lead to such a comprehensive realignment of FirstService?Though it happened faster than we anticipated,our core belief has always been to seize competitive advantage as a global leader in real estate services.Two factors are driving us globally:1)client requirements to provide services in multipl
72、e markets;and 2)continuing consolidation in established markets,along with inherent growth in emerging markets.The opportunities internationally are not just in commercial real estate,but also in our other service divisions which are currently focused on North America.While our identity has clearly
73、changed in the marketplace,our core principles and operating philosophy remain constant.With 2010 looking like a year of modest recovery in most markets,will you be gearing up your acquisition activity or remain internally focused?We have a strong balance sheet and ample capital available to fund a
74、higher level of investment in acquisitions.However,we will continue to be very disciplined in allocating our capital,remaining true to our“one step at a time”approach to creating value for our shareholders.We are prepared to act when the right opportunities are presented,but also are confi dent we c
75、an capitalize on the solid organic growth areas within our existing service divisions.8FirstService Annual Report 2009Management s Q&A:Year in ReviewYour Property Services division has been an interesting refl ection on changes over the past three years in the U.S.economy,and in particular the housi
76、ng market and consumer spending.What do you see in 2010 and beyond?In September 2007,we completed the acquisition of a majority interest in Field Assets Services(“FAS”)before the downturn in the housing market.While we would like to claim we had a crystal ball,the reality is that we acquired FAS mor
77、e for its unique business model,servicing clients on a national basis through an extensive network of contractors and a sophisticated IT system and process,than riding the wave of foreclosures that really was in its infancy at the time.The incredible growth in foreclosure services has provided some
78、signifi cant diversifi cation to our Property Services division and to FirstService,offsetting the slowdown in our consumer facing franchises in this division,as well as the downturn in commercial real estate.We see signifi cant activity ahead for FAS as the U.S.residential mortgage crisis continues
79、 to play out,while our consumer sensitive franchise systems benefi t from a modest recovery in spending by U.S.consumers.Are you seeing a return of consumer confi dence in this sector?We believe the change in consumer behaviour over the last couple of years will be with us for some time to come.It s
80、 no secret that consumers in the U.S.are focused on reducing debt,increasing their saving rates,and focusing their spending on essentials.FirstService is well positioned to provide services that are essential,and that may have been deferred in recent times.From an operational perspective,being franc
81、hisors and operators of a contract network has allowed us a lot of fl exibility and leverage around costs.Our management teams have stayed close to their businesses,shrewdly making necessary cost-cutting decisions,all the while remaining focused on our clients.Residential Property Management has bee
82、n a quiet over-performer during a tough economy,what is driving their consistent success?Exceptional management,a client service culture and strong entrepreneurial instincts have made them operational and strategic leaders in all their markets.We believe this is a business that excels by listening t
83、o our clients needs and servicing them fi rst,while always looking for ways to improve operations and setting us apart from our smaller competitors.Our community association clients notice,and respond positively.What issues inspire you to make corporate social responsibility a bigger priority?FirstS
84、ervice has a unique opportunity to contribute to a better future for our environment and the society in which we do business.We are one of the world s foremost third-party managers of both commercial and residential real estate and that brings with it an obligation,as well as an opportunity,to lead
85、our clients in conservation and best practices in operating their properties.In response,we have initiated a sustainability program throughout our network and you can expect to hear much more from us on this issue in the coming years.You also added strength to your fi nancial position in 2009,was th
86、is necessary?The turbulent markets of the past two years have taught us that having ample liquidity and a strong capital base is an advantage,particularly when uncertainty makes capital scarce.Though we were not compelled in any way to raise capital last year,we looked ahead and took advantage of an
87、 improvement in capital markets by completing a$77 million public offering of unsecured subordinated convertible debentures,with a fi xed interest rate of 6.50%and a conversion premium of 40%at the time of issue.We used the proceeds to pay down debt on our$225 million revolving credit facility,and g
88、oing into 2010 have over$200 million available to fund our future growth.We are ready to move when the opportunity is right.What are your expectations for 2010?In Commercial Real Estate,we expect a modest recovery in 2010,with prospects improving more as we enter the latter half of the year.We will
89、continue to strike a balance between closely monitoring costs while aggressively strengthening our global platform as opportunities arise.For 2010 in Property Services,we expect that FAS will once againbe a major contributor to our revenue and profi tability,with continued growth.Meanwhile,we expect
90、 our franchise and branchise operations to benefi t from measures taken in 2009 to reduce costs and streamline operations,positioning them for a modest improvement in revenues and profi tability as U.S.consumers slowly increase their spending.In Residential Property Management,we expect continued gr
91、owth in our accounts under management based on market share gains,as well as modest growth in ancillary services to assist our clients in providing a well functioning residential community for their residents.Though price increases will remain challenging,we believe that we can maintain and possibly
92、 improve margins,based on additional operating leverage achieved through continued growth.9Creating value one step at a timeResidential and commercial buildings account for 31%of global CO2 emissions from fossil fuels.FirstService collectively manages 1.5 billion square feet of commercial and reside
93、ntial space across the globe.Due to the size of our operations,our potential to do the right thing for the planet is unmatched in our industry.FirstService has embarked on a new sustainability strategy and renewed commitment to engage and assist our clients in signifi cantly reducing energy consumpt
94、ion,and in the process creating substantial energy savings.Keeping Our Commitment-Launched FirstService Energy.-First Global Partner with the World Green Building Council.-FirstService currently has more than 200 LEED(Leadership in Energy and Environmental Design)accredited professionals,with an add
95、itional 100 currently seeking accreditation.-Certifi ed ISO 14001 in the UK,the leading international environmental standard,for our premises management practices.-Developing comprehensive conservation policies and strategies for our portfolio of commercial and residential buildings.-Developing cons
96、istent recycling and green cleaning policies across our entire portfolio of commercial and residential buildings.FirstService Energy Launched in 2009,FS Energy is our innovative approach to creating an energy master plan for our portfolio of 350 multifamily properties in the New York and Tri-State m
97、arket.FS Energy is a new,value-added service offering that takes a holistic view of energy management within our portfolio of properties.Using energy consumption data and different building topologies across our managed portfolio,FS Energy created an energy benchmark,or Energy Use Index(“EUI”),for m
98、ultifamily properties.Unique in the market,the EUI enables us to compare and benchmark an individual property against a portfolio of similar properties regardless of fuel source,differentiating amenities,age and size.This tool is a value-added service for our clients;it assists us in both educating
99、them and advocating energy effi ciency investments.The creation of this benchmark measurement launched FS Energy towards our 3-year goal of 25%reduction in energy consumption across a portfolio of 70,000 residential units.More than 100 buildings to date are engaged in a variety of programs including
100、:preventative maintenance and training programs,demand management strategies,procurement strategies,energy assessments,and retrofi ts with demonstrated returns on investment.Each of these elements offer energy cost savings for our clients and reduces the environmental footprint of properties we mana
101、ge.SustainabilityWe are pleased with our progress.Since launching this past year,FS Energy has provided our clients a combined$4 million savings a solid start to achieving our goal of 25%reduction of energy consumption in our clients properties.FirstService Annual Report 200910Commercial Real Estate
102、FirstService operates the third largest global commercial real estate services company under the Colliers International brand.Through a shared culture of service excellence and commitment,we have integrated the resources of real estate specialists worldwide to accelerate our clients achievement of s
103、uccess.Our unique partnership model helps us attract the best and brightest in the industry those who are entrepreneurial and client-centered by nature,and who seek opportunities that match their industry aspirations.Revenue$725M(not including revenues from affi liate partners)Recognized Global Lead
104、er with Global Coverage-3rd largest global player-Over$52 billion in transaction value-228 company-owned offi ces in 41 countries-Partner offi ces in 20 other countries-15,000 employees-Market leader in North America,Latin America,Asia Pacifi c,and Central and Eastern Europe-Strength in emerging mar
105、kets including BRIC countries Corporate Solutions and Institutional Asset Management-More than 1 billion square feet under management-Specialized advisors for Fortune 500 multinational companies Colliers University-Over 1,000 classes delivered through multiple media-LEED preparation and certifi cati
106、on courses in all countries“Our successful partnership model enables key executives to retain signifi cant equity in the businesses they operate,creating alignment and accountability,and ensuring clients receive the highest level of service and consistent delivery over the long term.”Doug Frye CEO11
107、Creating value one step at a timeAlbaniaArgentinaAustralia AustriaBelarusBelgiumBrazilBulgariaCanadaChile ChinaColombiaCosta RicaCroatiaCzech RepublicDenmarkEstoniaFinlandFranceGermanyGreeceHong KongHungaryIndiaIndonesiaIrelandIsraelItalyJapanLatviaLithuaniaMexicoMontenegroNetherlandsNew ZealandNorw
108、ayPakistanPeruPhilippinesPolandPortugalQatarRomaniaRussiaSaudi ArabiaSerbiaSingaporeSlovakiaSouth AfricaSouth KoreaSpain SwedenSwitzerlandTaiwanThailandTurkeyUAEUkraineUnited KingdomUSAVietnamColliers International provides a full range of services to real estate users,owners,developers and investor
109、s worldwide.Our services include sales and lease brokerage,investment sales,appraisal and valuations,institutional asset and property management,corporate solutions,hotel and hospitality consulting,and project management.FirstService Annual Report 200912Residential Property ManagementFirstService Re
110、sidential is the largest manager of residential communities in North America,overseeing more than 4,000 properties and over one million residential units from 50 offi ces across 18 U.S.States.Properties managed include low,mid and high-rise condominiums,co-operatives and rental communities;large sca
111、le master-planned and active adult communities;and hospitality and other mixed-use properties.This division also includes the operations of American Pool Enterprises,North America s largest commercial swimming pool and recreational facility management operation.Revenue$645MIndustry Dynamics-+60 mill
112、ion Americans live in+24 million residential units in+300,000 community associations-Estimated value of all residential units in all community associations in America is+$5 trillion(about 20%of overall value of residential properties)-As largest industry player,with+1 million residential units,First
113、Service Residential has less than 5%market share FirstService is largest industry player-50 offi ces,18 states-+4,000 properties-+1 million units managed-+$5 billion annual spend administered to maintain client properties-Approximately 85%of revenues are contractual-Long-term contracts with+90%reten
114、tion rates“As the largest player in the industry,we are continuously investing in innovation to add value to our clients.Our recent investment in sustainability,particularly in fi nding new ways to incorporate energy management into our core service offering,will be a signifi cant differentiator in
115、the years to come.”Gene Gomberg CEO13Creating value one step at a timeDallas,TX Dania Beach,FLDestin,FL Fairfax,VA Folsom,CA Fort Worth,TX Hackensack,NJ Hollywood,FL Jupiter,FL Las Vegas,NV Lawrenceville,NJ Leesburg,VA Mesa,AZ Miami,FL Murietta,CA Alexandria,VA Aliso Viejo,CA Bakersfi eld,CABaltimor
116、e,MD Barrington,NJ Boca Raton,FL Brooklyn,NY Chicago,IL New York,NY Orlando,FL Palm Desert,CA Pembroke Pines,FLPeoria,AZ San Diego,CA San Ramon,CA Scottsdale,AZ St.Petersburg,FL Staten Island,NY Stockton,CASuffern,NY Tucson,AZ Valencia,CA Valley Forge,PA Vero Beach,FLWellington,FL West Long Branch,N
117、J West Palm Beach,FL Wilmington,DE Winter Park,FLWe oversee expenditures of more than$5 billion annually to administer the day-to-day operations and maintenance of client properties.Services include traditional property management,on-site staffi ng,rental management and leasing,energy management con
118、sulting and a variety of specialty services and fi nancial products.FirstService Annual Report 200914Property ServicesOver the years,we have developed an innovative,high performance business model that leverages decentralized platform company leadership with centralized business planning,skills deve
119、lopment and best practices sharing.Key competencies include continuous innovation in property service franchising and third-party service contracting;attracting,retaining and motivating business leaders at all levels;and customer focused strategic planning and execution that increases customer level
120、 sales and enhances existing service brands.The company facilitates high performing stakeholders to add additional services,transfer from one business opportunity to another or increase the size and breadth of their existing business.Revenue$435MFranchise Systems-1,800 franchisees-+350,000 propertie
121、s served-$110 million in royalty and other revenues-$900 million system-wide,customer level sales-Market leading service brandsContractor Networks-15,000 vendor contractors-+200,000 properties served-$325 million corporate revenues-Clients include some of America s largest and best-known residential
122、 mortgage lenders and mortgage service companies+80%revenue from long-term contracts“Through FirstService subsidiary TFC,we are the largest provider of property services through franchise and contractor networks in North America.”Steven S.Rogers CEO15Creating value one step at a timeStakeholders,whe
123、ther franchisees,third party contractors or management partners,own direct equity in the franchises or service lines they operate day-to-day,thereby ensuring a high level of alignment and customer satisfaction.FirstService Annual Report 200916In MemoriamSam Hennick1931 2010Father Director Mentor Hum
124、anitarianIt is with deep sadness that we note the passing of Sam Hennick,father of Founder and CEO Jay Hennick.In addition to being a devoted father and mentor to Jay,Sam played a crucial role in founding and building FirstService.He served as a Director of the Company from its founding until 2003,a
125、nd continued on as a special advisor until his fi nal days.The values and principles on which Sam based his life were the foundation of our business principles at FirstService.Deliver what you promise,respect the individual,have pride in what you do,and be open-minded to possibilities;these were all
126、 Sam s values.And while Sam taught us the value of seeking out the best advisors and professionals,he also encouraged us to forge our own path,and make decisions based on the strength of our own judgement and experience.Without him,we would not be where we are today.Sam will also be remembered as a
127、loving father to his four children and a devoted grandfather to 13 grandchildren and one great-grandchild.His generosity and humanitarian infl uence extended throughout our community.He will be missed by everyone his life touched.17Creating value one step at a timeDirectors&Offi cersBoard of Directo
128、rsDavid R.Beatty,O.B.E.,2,3,4Toronto,OntarioCorporate Director,Director of the Clarkson Centre forBusiness EthicsBrendan Calder3,4Toronto,OntarioCorporate Director,Professor,“Getting-It-Done”Rotman School of ManagementUniversity of TorontoPeter F.Cohen1,2,4Toronto,OntarioPresident,The Dawsco GroupBe
129、rnard I.Ghert2Toronto,OntarioFounder,The Ghert FoundationJay S.HennickToronto,OntarioFounder&CEO,FirstService CorporationMichael D.Harris3Vaughan,Ontario22nd Premier of Ontario(1995-2002)Senior Business Advisor,Cassels Brock&Blackwell LLPSteven S.RogersMississauga,OntarioChief Executive Officer,The
130、Franchise Company,Inc.1 Chairman2 Audit Committee3 Executive Compensation Committee4 Nominating and CorporateGovernance CommitteeSenior OfficersPeter F.CohenChairmanJay S.HennickFounder&CEOD.Scott PattersonPresident&COOJohn B.Friedrichsen Senior Vice-President&CFORoman KocurSenior Vice-President,Str
131、ategy&Corporate DevelopmentDouglas G.CookeVice President,Corporate Controller&Corporate SecretaryElias MulamoottilVice-President,Strategy&Corporate DevelopmentChristian MayerVice President,Finance Neil D.ChanderVice President,TaxDavid HanDirector,Compliance&Risk ManagementLynda A.CralliAssistant Cor
132、porate SecretaryCommercial Real EstateDouglas P.FryeCEOResidential Property ManagementGene GombergCEOProperty ServicesSteven S.RogersCEO18FirstService Annual Report 2009Corporate InformationCorporate Offi cesHead Offi ce,Canada1140 Bay Street,Suite 4000Toronto,Ontario M5S 2B4Phone:416.960.9500Head O
133、ffi ce,United States1815 Griffi n RoadDania Beach,Florida 33004 Legal CounselCanadaFogler,Rubinoff LLPUnited StatesOlshan LLPIndependent AuditorsPricewaterhouseCoopers LLPLendersThe Bank of Nova ScotiaHSBC Bank CanadaJPMorgan Chase BankRoyal Bank of CanadaThe Toronto Dominion BankBank of MontrealBan
134、k of AmericaUnited Overseas BankRegistrar&Transfer AgentCanadaEquity Transfer&Trust CompanyPhone:416.361.0152E-mail:U.S.co-transfer agentRegistrar and Transfer CompanyPhone:1.800.368.5948E-mail:Investor RelationsSecurities,portfolio managers and representatives of fi nancial institutions seeking inf
135、ormation about FirstService may contact:Lynda Cralli Assistant Corporate SecretaryPhone:416.960.9500Greg PowerOptimum Public RelationsPhone:416.934.8059Stock Exchange ListingsCommon Shares:NASDAQ Global Select Market(SymbolFSRV)Toronto Stock Exchange(SymbolFSV)Preferred Shares:Toronto Stock Exchange
136、(SymbolFSV.PR.U)Convertible Debentures:Toronto Stock Exchange(SymbolFSV.DB.U)FirstService common shares are included in the S&P/TSX Composite Index.Earnings&Corporate NewsCorporate news releases,including earnings and other fi nancial information,are available at:Website:www.fi Phone:416.960.9500Cop
137、ies of FirstService s Annual Report and Quarterly fi lings may be obtained on-line through the Company s website.Research CoverageInvestors may contact the following fi rms who have recently provided research coverage on FirstService:William Blair&Co.TD Newcrest Sidoti&Company CIBC World Markets Pac
138、ifi c International Securities Raymond James RBC Capital MarketsThe reference to such fi rms does not imply any endorsement of information by FirstService.FIRSTSERVICE CORPORATION Managements discussion and analysis of results of operations and financial condition for the year ended December 31,2009
139、(in US dollars)March 1,2010 The following Managements Discussion and Analysis of Results of Operations and Financial Condition(“MD&A”)should be read together with the audited consolidated financial statements and the accompanying notes(the“Consolidated Financial Statements”)of FirstService Corporati
140、on(the“Company”or“FirstService”)for the year ended December 31,2009.The Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States(“GAAP”).All financial information herein is presented in United States dollars.The Company has
141、 prepared this MD&A with reference to National Instrument 51-102 Continuous Disclosure Obligations of the Canadian Securities Administrators(the“CSA”).Under the U.S./Canada Multijurisdictional Disclosure System,the Company is permitted to prepare this MD&A in accordance with the disclosure requireme
142、nts of Canada,which requirements are different from those of the United States.This MD&A provides information for the year ended December 31,2009 and up to and including March 1,2010.Additional information about the Company,including the Companys Annual Information Form,which is included in FirstSer
143、vices Annual Report on Form 40-F,can be found on SEDAR at and on the U.S.Securities and Exchange Commission(the SEC)website at www.sec.gov.Consolidated review The operating results for the year ended December 31,2009 reflected growth in revenues and profitability in our Residential Property Manageme
144、nt and Property Services operations,while our Commercial Real Estate business continued to be affected by the global economic slowdown and credit contraction that started in 2008.Consolidated revenues for the year were$1.70 billion,an increase of 1%over the prior calendar year,primarily attributable
145、 to recently completed acquisitions.Our adjusted diluted earnings per share from continuing operations(see“Non-GAAP earnings measures”below)were$1.42 for the year,versus$1.37 in the prior calendar year(GAAP:loss of$1.85 versus a loss of$0.19 in the prior calendar year).We generated strong operating
146、cash flow in 2009,with$81.0 million of cash flow from operations,up 59%relative to 2008,despite difficult market conditions in our Commercial Real Estate operations.We acquired controlling interests in three businesses during 2009.The aggregate initial purchase price for these acquisitions was$4.9 m
147、illion and comprised two complementary regional operations in the Residential Property Management segment and one in Property Services.In addition,in our Commercial Real Estate segment,we purchased a 29.99%interest in Colliers CRE plc,a publicly traded commercial real estate services company operati
148、ng in the UK,Ireland and Spain,for cash consideration of$14.0 million.We also acquired non-controlling interests valued at$57.3 million in all three operating segments,the purchase price of which was funded with a combination of cash,repayment of notes receivable and Subordinate Voting Shares.The ca
149、sh consideration was funded with borrowings on our revolving credit facility and cash on hand.In November 2009,we completed a public offering of 6.50%convertible unsecured subordinated debentures(“Convertible Debentures”)due December 31,2014.The net proceeds of$73.4 million were used to pay down our
150、 revolving credit facility,thereby freeing up additional borrowing capacity.19 We are the largest member of Colliers International,a global commercial real estate services organization operating under a common brand.In January 2010,the members of Colliers International voted to align the governance
151、structure of the organization with the economic interests of the members,resulting in FirstService gaining control over the Colliers International brand.Gaining control over the brand was a significant strategic step that is expected to result in a more consistent brand identity around the world and
152、 in our clients receiving more consistent service delivery across markets.Retrospective adoption of new accounting standards The minority equity positions in the Companys subsidiaries are now referred to as non-controlling interests(“NCI”).On January 1,2009,we adopted new accounting standards for NC
153、I.Except for earnings per share calculations,all presentation and disclosure requirements of the new guidance were adopted retrospectively,and as a result we recorded an increase to non-controlling interest of$105.7 million and a corresponding decrease to shareholders equity as of April 1,2007.As a
154、result of the retrospective adoption,all periods presented have been restated for the effect of the adoption of these standards.The NCI are considered to be redeemable securities and accordingly,the NCI is recorded at the greater of(i)the redemption amount or(ii)the amount initially recorded as NCI
155、at the date of inception of the minority equity position.This amount is recorded in the“mezzanine”section of the balance sheet,outside of shareholders equity.Changes in the NCI amount are recognized immediately as they occur.Results of operations year ended December 31,2009 The analysis of the resul
156、ts of operations for the year ended December 31,2009 is presented compared to the twelve-month calendar year ended December 31,2008.References to“prior year”and“2008”are in respect of this period.We reported revenues from continuing operations of$1.70 billion for the year ended December 31,2009,an i
157、ncrease of 1%relative to 2008.The increase was comprised of an internal revenue decline of 2%,positive impact of acquisitions of 4%and a 1%decline as a result of foreign exchange,as the US dollar appreciated against local currencies at our global operations.Operating earnings decreased 46%relative t
158、o the prior period,to$38.2 million,while EBITDA(see“Non-GAAP earnings measures”below)was up 7%to$133.1 million.Operating earnings were negatively impacted by$31.1 million of goodwill and intangible asset impairment charges and$13.5 million of cost containment expenses in our Commercial Real Estate o
159、perations during the year ended December 31,2009.The cost containment charges related to workforce reductions and office lease terminations incurred to better match our infrastructure with expected future revenues.The growth in EBITDA was attributable to service mix,with strong revenue increases in
160、the Property Services segment at higher margins than the other operating segments.Depreciation expense was$26.8 million relative to$24.4 million in the prior year.The increase was attributable to investments in information technology platforms in each of the three operating segments made over the pa
161、st two years.Amortization expense was$19.6 million in 2009,relative to$18.2 million in the prior year.The increase was attributable to(i)a$1.5 million impairment charge in our European operations within the Commercial Real Estate segment and(ii)a$0.3 million decrease in backlog amortization related
162、to recent Commercial Real Estate acquisitions,where we recorded a short-lived intangible asset relating to the backlog of pending brokerage transactions that existed at the acquisition dates.The backlog intangible is amortized to coincide with the expected completion 20 dates of the underlying broke
163、rage transactions,generally over a period of 6 to 18 months.As of December 31,2009,the net book value of remaining brokerage backlog was$0.1 million.We recorded a goodwill impairment loss in the amount of$29.6 million during 2009.We were required to perform a goodwill impairment test during the quar
164、ter ended March 31,2009 triggered by a deterioration of economic conditions in the Commercial Real Estate operations.In particular,we determined that there was impairment in the North American and Central Europe&Latin American reporting units within the Commercial Real Estate segment driven by(i)adv
165、erse economic conditions and sharply reduced brokerage activity which in turn reduced future expected cash flows and(ii)increased discount rates due to higher risk premiums being demanded by market participants.In relation to the valuation of the impaired reporting units for the goodwill impairment
166、test as of March 31,2009,discounted cash flow projections based on ten-year financial forecasts were used.The key assumptions in the forecast for the CRE North America reporting unit were(i)a revenue decline of 8%for 2009 followed by annual increases beginning in 2010,reaching a steady state interna
167、l growth rate of 3%in 2015;(ii)the application of accumulated tax losses in the amount of$57 million against future earnings;(iii)a discount rate of 13.5%applied to future cash flows and(iv)a terminal growth rate of 2%.The key assumptions in the forecast for the CRE Central Europe and Latin America
168、reporting unit were(i)a revenue decline of 52%for 2009 followed by annual increases beginning in 2010,reaching a steady state internal growth rate of 5%in 2015;(ii)a discount rate of 14%applied to future cash flows and(iii)a terminal growth rate of 2%.If,in future periods,economic conditions and ope
169、rating results deteriorate,a further goodwill impairment charge may be necessary.Interest expense decreased to$13.9 million from$16.1 million in the prior year.Our weighted average interest rate decreased to 4.7%from 5.8%in the prior year,primarily on account of lower floating reference rates,fixed
170、to floating interest rate swaps entered into during 2009 and ongoing annual principal repayments on our 8.06%Senior Notes.Other income for the current year includes earnings from investments accounted for under the equity method in the Commercial Real Estate segment,including Colliers CRE plc,acquir
171、ed in October 2009.During 2009,we realized a gain of$4.5 million on the sale of our 7%stake in Resolve Business Outsourcing Income Fund(“Resolve”).In the prior year,we recorded a$14.7 million other-than-temporary impairment loss on this investment.Our consolidated income tax rate for the year ended
172、December 31,2009 was 123%versus 53%in 2008.The current years tax rate was affected by(i)a non-tax deductible goodwill impairment loss and(ii)the recognition of a valuation allowance on deferred tax assets related primarily to operating loss carry-forwards.The most significant factor leading to the d
173、etermination that a valuation allowance was necessary is uncertainty in the near-term outlook for taxable income in our US Commercial Real Estate operations,consistent with factors that led to the goodwill impairment charge.The loss carry-forwards have a statutory carry-forward period of 20 years.Ex
174、cluding the impact of these two items,the tax rate would have been 35%,relative to 16%in the prior year.Our tax rate for both years reflects the continuing benefit of cross-border financing structures first implemented in fiscal 2000.Due to the change in yearend from March 31 to December 31 as of De
175、cember 31,2008,the benefit of the cross-border tax structure for 2008 was amplified,resulting in the unusually low tax rate of 16%.The net loss from continuing operations was$7.3 million,relative to profit of$19.8 million in the prior year.The majority of the decrease is attributable to the goodwill
176、 impairment in our Commercial Real Estate segment.In addition,increases in operating earnings at our Property Services and Residential Property Management segments were more than offset by declines in our Commercial Real Estate segment.21 The Commercial Real Estate segment reported revenues of$623.0
177、 million for 2009,down 17%relative to the prior year.Internal revenues declined 20%,foreign exchange resulted in a revenue decline of 3%and growth of 6%was attributable to acquisitions.EBITDA(before cost containment charges)was$6.4 million,at a margin of 1.0%,versus the prior years EBITDA of$30.7 mi
178、llion at a margin of 4.1%.The margin decline was primarily a result of significant declines in investment and sales brokerage volumes in all markets,but particularly the United States and Europe.During the year we took steps to contain costs and align our service capabilities with anticipated revenu
179、es.As a result,$13.5 million in cost containment charges were incurred relating to severances and lease terminations.In Residential Property Management,revenues increased 5%to$645 million.Internal growth was 4%,with a 6%increase in property management contract revenues offset by a modest decline in
180、property services activity including landscape installation and painting.Recent business acquisitions accounted for 1%of the growth.Residential Property Management reported EBITDA of$61.0 million or 9.4%of revenues,up from$54.3 million or 8.8%of revenues in the prior year.Our Property Services opera
181、tions reported revenues of$434.8 million,an increase of 32%versus the prior year,comprised entirely of internal growth.Internal growth was attributable to continuing strong volumes of residential property foreclosures at our Field Asset Services contractor network.EBITDA for the period was$71.5 mill
182、ion,59%higher than the prior period,and the EBITDA margin increased to 16.4%from 13.7%.The margin increase was attributable to Field Asset Services,which experienced higher margins due to operating leverage associated with higher revenues.Corporate costs for 2009 were$11.2 million relative to$9.2 mi
183、llion in the prior year.Costs in the current period were flat in local currency terms,as a result of decisions by management to freeze salaries and discretionary expenses.Most expenses are incurred in Canadian dollars.The$2.0 million increase in US dollar terms was attributable to foreign currency t
184、ranslation losses in 2009 relative to gains in the prior year.Discontinued operations included:(i)the Integrated Security Services segment,which was disposed of in 2008;(ii)the U.S.Mortgage Brokerage(“USMB”)operation,formerly included in the Commercial Real Estate segment which was sold in 2009;and(
185、iii)the Canadian Commercial Mortgage Securitization(“CCMS”)operation,formerly included in the Commercial Real Estate segment,which was wound down in 2009.During 2009,in relation to CCMS,we sold all remaining mortgages for proceeds of$14.8 million and settled all outstanding interest rate derivative
186、contracts for a cash payment of$10.1 million.Revenues from discontinued operations were$5.1 million and the net loss from discontinued operations was$0.6 million.As of December 31,2009,all discontinued operations were either sold or wound down.Results of operations nine-month period ended December 3
187、1,2008 In May 2008,the Board of Directors approved a change in our fiscal year-end from March 31 to December 31,effective December 31,2008,resulting in a nine-month transition period ended December 31,2008.The analysis of the results of operations for the nine-month period ended December 31,2008 is
188、presented compared to the nine-month period ended December 31,2007.References to“comparable prior period”are in respect of this period.We reported revenues from continuing operations of$1.32 billion for the nine-month period ended December 31,2008,an increase of 12%relative to the comparable prior p
189、eriod.The increase was comprised of internal growth of 2%,impact of acquisitions of 12%and a 2%decline as a result of foreign exchange,as the US dollar appreciated against the local currencies at our global operations.22 Operating earnings decreased 8%relative to the comparable prior period,to$83.1
190、million,while EBITDA was up 1%to$124.4 million.The gap between the operating earnings and EBITDA performance relative to revenue growth is attributable to:(i)Property Services margin declines,due to service mix;and(ii)Commercial Real Estate brokerage transaction volume decreases.The gap between oper
191、ating earnings and EBITDA is primarily the result of cost containment charges incurred in our Commercial Real Estate operations during the nine months ended December 31,2008 and incremental depreciation resulting from capital spending on Commercial Real Estate office renovations and information tech
192、nology during the past year.Depreciation and amortization expense was$31.7 million relative to$26.9 million in the comparable prior period.The increase in depreciation and amortization was the result of:(i)intangible assets recognized upon acquisitions during the past two years;and(ii)increases in f
193、ixed assets resulting from capital expenditures offset by(iii)a decrease in the amount of backlog amortization as a result of lower acquisition activity during the past year.Interest expense decreased to$11.1 million from$11.8 million in the comparable prior period.Our weighted average interest rate
194、 decreased to 5.4%from 7.1%in the comparable prior period.The$2.9 million of interest income earned during the period was attributable to cash on hand.Other income for the current period included distributions received on our investment in Resolve and earnings from investments accounted for under th
195、e equity method in the Commercial Real Estate segment.We held an investment in 2.4 million units of Resolve,representing a 7%stake.In November 2008,Resolve suspended the payment of its monthly distribution.We determined that as of September 30,2008,and again at December 31,2008,our investment in Res
196、olve was other-than-temporarily impaired and recorded an aggregate non-cash impairment charge of$14.7 million during the period.In July 2008,we paid a$5.7 million cash divestiture bonus to management in connection with the successful completion of and substantial gain on the sale of the Integrated S
197、ecurity division.Although the divestiture bonus related to a discontinued operation,under GAAP it was required to be reported in continuing operations.Our consolidated income tax rate for the nine-month period ended December 31,2008 was 54%versus 31%in the comparable prior period.The current periods
198、 tax rate was higher than expected due to the recognition of a valuation allowance on deferred tax assets related primarily to operating loss carry-forwards.Excluding the impact of this item,the tax rate would have been 27%,relative to 31%in the prior period.The most significant factor leading to th
199、e determination that a valuation allowance was necessary is uncertainty in the near-term outlook for taxable income in our US Commercial Real Estate operations.The loss carry-forwards have a statutory carry-forward period of 20 years.Our tax rate for both periods reflected the continuing benefit of
200、cross-border financing structures first implemented in fiscal 2000.Net earnings from continuing operations were$26.0 million,relative to$58.5 million in the comparable prior period.The majority of the decrease was attributable to the Resolve impairment loss and the Integrated Security divestiture bo
201、nus.Increases in operating earnings at our Property Services and Residential Property Management segments were more than offset by declines in our Commercial Real Estate segment.The Commercial Real Estate segment reported revenues of$578.2 million during the current period,down 7%relative to$619.2 m
202、illion in the comparable prior period.Internal revenues declined 11%,foreign exchange resulted in a revenue decline of 3%and growth of 7%was attributable to acquisitions in four markets including New York.EBITDA(before a cost containment charge)was$42.4 million,at a margin of 7.3%,versus the compara
203、ble prior periods 23 EBITDA of$54.4 million at a margin of 8.8%.The margin decline was primarily a result of the following factors:(i)operating losses at certain US brokerage offices due to declines in investment and sales brokerage volumes;and(ii)compression due to revenue declines in all markets.D
204、uring the period we took steps to contain costs and align our service capabilities with anticipated revenues.As a result,a$6.9 million cost containment charge was incurred relating to severances and lease terminations.In Residential Property Management,revenues increased 18%to$475.3 million.Internal
205、 growth,resulting from property management contract wins,was 9%,while recent business acquisitions accounted for the balance of the growth.Residential Property Management reported EBITDA of$44.3 million or 9.3%of revenues,up from$40.2 million or 9.9%of revenues in the comparable prior period.The Pro
206、perty Services operations reported revenues of$269.1 million,an increase of 72%versus the comparable prior period.Of the increase,37%was attributable to acquisitions,particularly Field Asset Services,while internal growth was 35%.Internal growth was led by growth in residential foreclosure managemen
207、t revenues at our Field Asset Services contractor network,offsetting a 12%decline at our consumer-oriented franchise systems.EBITDA for the period was$42.0 million,19%higher than the comparable prior period,and the EBITDA margin decreased from 22.5%to 15.6%.The margin decrease was attributable to:(i
208、)the impact of Field Asset Services,which operates at a lower margin than the remainder of the segment,on average;and(ii)royalty revenue declines at our consumer-oriented franchise systems,which have a direct impact on earnings.Corporate costs for the nine months were$6.8 million relative to$13.1 mi
209、llion in the comparable prior period.Costs in the current period benefited from a$0.8 million favorable foreign exchange impact,as most costs are incurred in Canadian dollars.Included in the prior period was$3.3 million of incremental stock option expense related to options granted during the period
210、 from 1995 to 2006.Discontinued operations included:(i)the Integrated Security Services segment;(ii)USMB,formerly included in the Commercial Real Estate segment;(iii)CCMS,formerly included in the Commercial Real Estate segment;and(iv)the Business Services segment,disposed in March 2006.Revenues from
211、 discontinued operations were$49.6 million and net earnings were$48.8 million,including the Integrated Security Services disposal gain of$69.7 million.Results of operations year ended March 31,2008 We reported revenues from continuing operations of$1.55 billion for the year ended March 31,2008(“fisc
212、al 2008”),an increase of 34%relative to the prior year.The increase was comprised of internal growth of 10%,acquisitions of 21%and the impact of foreign exchange of 3%.Operating earnings increased 1%relative to the prior year,to$78.1 million.EBITDA increased 15%to$123.6 million.The gap between opera
213、ting earnings relative to revenue and EBITDA growth was primarily the result of:(i)an increase in stock-based compensation expense;and(ii)the rapid amortization of brokerage backlog intangibles related to recent acquisitions in the Commercial Real Estate segment,which had a significant impact on the
214、 first year after acquisition.Depreciation and amortization expense was$37.7 million relative to$26.0 million in the prior year.The increase in depreciation and amortization was the result of:(i)intangible assets,including brokerage backlog,recognized upon acquisitions during the past two years;and(
215、ii)increases in fixed assets resulting from capital expenditures and acquisitions.Interest expense increased to$16.9 million from$13.2 million in the prior year.Our weighted average interest rate increased slightly to 7.1%from 6.9%in the prior year.24 Other income for fiscal 2008 included distributi
216、ons received on our investment in Resolve and earnings from investments accounted for under the equity method in the Commercial Real Estate segment.Our consolidated income tax rate for fiscal 2008 was 25%versus 29%in the prior year.On January 1,2008 we recognized a$2.3 million deferred tax asset rel
217、ating to the deductibility,for tax purposes,of stock option expense.We had previously not recognized this tax benefit.Net earnings from continuing operations were$52.3 million,up$2.0 million versus fiscal 2007.Increases in our Property Services and Residential Property Management segments were offse
218、t by declines in our Commercial Real Estate segment coupled with increased costs at Corporate,resulting in the decrease in net earnings.Our Commercial Real Estate segment reported revenues of$787.5 million during fiscal 2008,up 36%relative to$577.7 million in the prior year.Internal growth was 10%,f
219、oreign exchange contributed 6%and the balance was attributable to acquisitions in several markets including South Eastern Europe,Boston and Hawaii.EBITDA was$42.8 million,at a margin of 5.4%,versus the prior years EBITDA of$46.8 million at a margin of 8.1%.The margin decline was primarily a result o
220、f the following factors:(i)operating losses at certain US brokerage offices due to declines in investment and sales brokerage volumes;and(ii)lower margins at our Australian operations relative to the prior year.Margins in Canada,Eastern Europe,Asia and Latin America were generally consistent with th
221、ose experienced in the prior year.In Residential Property Management,revenues increased 29%to$545.0 million.Internal growth,resulting from property management contract wins,was 9%,while acquisitions in California,Texas and the Northeast accounted for the balance of the growth.Residential Property Ma
222、nagement reported EBITDA of$50.2 million or 9.2%of revenues,up from$40.3 million or 9.5%of revenues in the prior year.The decrease in margin was primarily the result of a decrease in higher margin ancillary services.The Property Services operations reported revenues of$217.0 million,an increase of 4
223、4%versus the prior year.Of the increase,34%was attributable to acquisitions,particularly Field Asset Services,while internal growth was 9%and foreign exchange had a positive impact of 1%.Internal growth was led by increases in royalty revenues primarily at our CertaPro franchise system.EBITDA for th
224、e year was$38.4 million,26%higher than the prior year,and the EBITDA margin decreased from 20.3%to 17.7%.The margin decrease was attributable to:(i)unusually low expenses in the comparative year,due to bad debt recoveries and the deferral of a franchisee conference and(ii)the impact of the Field Ass
225、et Services acquisition,which operates at a lower margin than the remainder of the segment.Corporate costs rose to$15.6 million from$14.6 million in fiscal 2007.Included in the current year is a charge of$3.3 million related to additional stock-based compensation expense as a result of the stock opt
226、ion review completed in the third quarter.No senior management bonuses were accrued in fiscal 2008 under our performance-based incentive compensation plan.Discontinued operations included:(i)the Integrated Security Services segment;(ii)USMB,formerly included in the Commercial Real Estate segment;(ii
227、i)CCMS,formerly included in the Commercial Real Estate segment and(iii)the Business Services segment,disposed in March 2006.Revenues from discontinued operations were$222.9 million.The Company realized a gain of$2.3 million in August 2007 on the settlement of a liability in connection with the March
228、 2006 disposal of our Business Services operations.The net loss from discontinued operations was$2.8 million.25 Selected annual information last five fiscal periods(in thousands of US$,except per share amounts)Year ended December 31 Nine months ended December 31 Year ended March 31 2009 2008 2008 20
229、08 2007 2006 OPERATIONS Revenues$1,703,222$1,691,811$1,322,680$1,549,713$1,152,821$918,668 Operating earnings 38,181 71,327 83,130 78,122 77,005 61,087 Net(loss)earnings from continuing operations(7,279)19,837 26,027 52,277 50,245 38,535 Net(loss)earnings from discontinued operations(576)45,297 48,8
230、40(2,829)2,290 42,843 Net(loss)earnings(7,855)65,134 74,867 49,448 51,181 81,378 FINANCIAL POSITION Total assets$1,009,530$990,637$990,637$1,089,343$816,998$711,004 Long-term debt 235,994 266,369 266,369 356,030 235,149 248,686 Convertible debentures 77,000-Shareholders equity 166,034 199,141 199,14
231、1 131,553 159,181 187,215 COMMON SHARE DATA Net(loss)earnings per common share:Basic Continuing operations$(1.85)$(0.19)$0.12$0.95$1.17$0.89 Discontinued operations(0.02)1.61 1.71(0.03)0.04 1.41 Cumulative effect adjustment -(0.04)-(1.87)1.42 1.83 0.92 1.17 2.30 Diluted Continuing operations$(1.85)$
232、(0.19)$0.11$0.89$1.08 0.83 Discontinued operations(0.02)1.61 1.70(0.04)0.04 1.38 Cumulative effect adjustment -(0.04)-(1.87)1.42 1.81 0.85 1.08 2.21 Weighted average common shares outstanding(thousands)Basic 29,438 29,684 29,584 29,905 29,903 30,171 Diluted 29,516 29,914 29,755 30,547 30,354 30,896
233、Cash dividends per common share-PREFERRED SHARE DATA Number outstanding(thousands)5,772 5,772 5,772 5,979-Cash dividends per preferred share$1.75$1.75$1.31$1.16-OTHER DATA EBITDA$133,067$124,745$124,361$123,614$107,983$84,319 Adjusted diluted net earnings per share from continuing operations 1.42 1.
234、37 1.55 1.32 1.17 0.75 26 Quarterly results fiscal periods ended December 31,2009 and 2008 and March 31,2008 (in thousands of US$,except per share amounts)Fiscal period Q1 Q2 Q3 Q4 Period Year ended December 31,2009 Revenues$361,009$425,344$451,080$465,789$1,703,222 Operating(loss)earnings (34,273)2
235、5,429 28,143 18,882 38,181 Net(loss)earnings from continuing operations(44,327)11,659 16,678 8,711(7,279)Net(loss)earnings from discontinued operations(3,921)692(19)2,672(576)Net(loss)earnings(48,248)12,351 16,659 11,383(7,855)Net(loss)earnings per common share:Basic(1.65)(0.07)0.16(0.32)(1.87)Dilut
236、ed(1.65)(0.07)0.16(0.32)(1.87)Nine-month period ended December 31,2008 Revenues$454,769$450,051$417,860 NA$1,322,680 Operating earnings 35,278 35,442 12,410 83,130 Net earnings(loss)from continuing operations 23,837 19,257(17,068)26,027 Net earnings(loss)from discontinued operations 325 67,628(19,11
237、3)48,840 Net earnings(loss)24,162 86,885(36,181)74,867 Net earnings(loss)per common share:Basic 0.51 2.68(1.36)1.83 Diluted 0.47 2.66(1.36)1.81 Year ended March 31,2008 Revenues$359,661$373,287$447,634$369,131$1,549,713 Operating earnings(loss)33,449 32,833 23,643(11,803)78,122 Net earnings(loss)fro
238、m continuing operations 20,992 20,818 16,657(6,190)52,277 Net earnings(loss)from discontinued operations 4,002 997(4,285)(3,543)(2,829)Net earnings(loss)24,994 21,815 12,372(9,733)49,448 Net earnings(loss)per common share:Basic 0.61 0.53 0.18(0.40)0.92 Diluted 0.56 0.50 0.15(0.40)0.85 OTHER DATA EBI
239、TDA Year ended December 31,2009$12,419$41,183$43,511$35,954$133,067 EBITDA Period ended December 31,2008 47,113 47,451 29,797 NA 124,361 EBITDA Year ended March 31,2008 41,509 42,760 38,961 384 123,614 Results of operations fourth quarter ended December 31,2009 Consolidated operating results for the
240、 fourth quarter ended December 31,2009 improved relative to the results experienced in the prior year quarter in terms of revenues,EBITDA and operating earnings.Commercial Real Estate revenues increased 13%versus the prior year quarter due to improved brokerage transaction volume,primarily in Canada
241、 and Australia,as well as favorable foreign exchange rate impacts as the US dollar declined in value against foreign currencies.Property Services revenues were up 14%versus the prior year period,primarily due to continuing growth in residential property foreclosure services.EBITDA and operating earn
242、ings margins held steady or improved at all of our operating segments and,on a consolidated basis the EBITDA margin improved 80 basis points to 7.7%while the operating earnings margin improved 110 basis points to 4.1%.Operating outlook We are committed to a long-term growth strategy that includes av
243、erage internal revenue growth in the 8-10%range combined with acquisitions to build each of our service platforms,resulting in targeted average annual percentage growth in revenues,EBITDA and earnings per share in excess of 15%.Economic conditions will negatively or positively impact these percentag
244、e growth rates in any given year.Given current economic conditions,for 2010 we expect modest revenue and earnings growth in each of our operating segments.27 Seasonality and quarterly fluctuations Certain segments of the Companys operations are subject to seasonal variations.The seasonality of the s
245、ervice lines noted below results in variations in quarterly revenues and operating margins.Variations can also be caused by acquisitions or dispositions,which alter the consolidated service mix.The Commercial Real Estate segment generates peak revenues and earnings in the month of December followed
246、by a low in January and February as a result of the timing of closings on commercial real estate brokerage transactions.Revenues and earnings during the balance of the year are relatively even.These brokerage operations comprise approximately 21%of consolidated revenues.The demand for exterior paint
247、ing(Property Services segment)and swimming pool management in the northern United States and Canada(Residential Property Management segment)is highest during late spring,summer and early fall and very low during winter.These operations generate most of their annual revenues and earnings between Apri
248、l and September and comprise approximately 7%of consolidated revenues.Liquidity and capital resources The Company generated cash flow from operating activities,including discontinued operations,of$81.0 million for year ended December 31,2009.Operating cash flow excluding the effect of discontinued o
249、perations was$83.3 million relative to$46.4 million for prior year.The increase in operating cash flow was attributable to improvements in working capital,particularly increases in accrued liabilities related to broker commissions and employee compensation which are a result of timing of payments.We
250、 expect these accruals to decrease in 2010,resulting in cash outflows during the first quarter.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.During 2009,we invested cash in acquisitions as fo
251、llows:$4.5 million in new business acquisitions,$12.4 million in contingent consideration payments related to previously completed acquisitions,$42.6 million in acquisitions of non-controlling interests,and$14.0 million to purchase shares accounted for as equity method investments.In relation to acq
252、uisitions completed during the past three fiscal periods,we have outstanding contingent consideration totaling$23.4 million as at December 31,2009(December 31,2008-$51.8 million)assuming all contingencies are satisfied and payment due in full.On pre-January 1,2009 acquisitions,the amount of the cont
253、ingent consideration is not recorded as a liability unless the outcome of the contingency is resolved and additional consideration is paid or payable and is recorded as additional costs of the acquired businesses.On post-December 31,2008 acquisitions,the contingent consideration liability is recogni
254、zed at fair value upon acquisition and is updated to fair value each quarter.The contingent consideration is based on achieving specified earnings levels,and is paid or payable at the end of the contingency period,which extends to February 2012.We estimate that,based on current operating results,app
255、roximately 10%of the contingent consideration outstanding as of December 31,2009 will ultimately be paid.Capital expenditures for the year were$24.2 million,which consisted primarily of investments in productivity-enhancing information technology systems in all three operating segments.For 2010,we e
256、xpect to deploy approximately$30 million in capital expenditures,with a focus on information technology systems primarily in our Commercial Real Estate operations.Net indebtedness as at December 31,2009 was$213.2 million,versus$186.7 million at December 31,2008.Net indebtedness is calculated as the
257、current and non-current portions of long-term debt less cash and cash equivalents.Excluding the Convertible Debentures,which we expect will be settled in Subordinate Voting Shares,net indebtedness as at December 31,2009 was$136.2 million.28 We have an amended and restated credit agreement with a syn
258、dicate of banks to provide a$225 million committed senior revolving credit facility with a five-year term extending to September 2012.The credit facility bears interest at 0.75%to 1.30%over floating reference rates,depending on the ratio of our net debt to adjusted EBITDA(0.95%over floating referenc
259、e rate as of December 31,2009).In November 2009,we received net proceeds of$73.4 million on a public offering of Convertible Debentures,which was applied to reduce indebtedness under our credit facility.We had$142.7 million of available revolving credit as of December 31,2009.Given the Convertible D
260、ebenture financing completed in 2009 and the 2.7 year remaining term on our credit facility,we do not foresee a need to access capital markets for financing in the near term.We are in compliance with the covenants required of our financing agreements as at December 31,2009 and we expect to remain in
261、 compliance with such covenants going forward.During the year ended December 31,2009,we paid$10.1 million of dividends on the Preferred Shares.The annual Preferred Share dividend obligation for 2010,based on the number of Preferred Shares outstanding as of December 31,2009,is$10.1 million.We also di
262、stributed$13.3 million to minority shareholders of subsidiaries during the same period,primarily to facilitate the payment of income taxes on account of those subsidiaries organized as flow-through entities.These distributions are expected to decrease in 2010 on account of recent purchases of non-co
263、ntrolling interests.The following table summarizes our contractual obligations as at December 31,2009:Contractual obligations Payments due by period(in thousands of US$)Total Less than 1 year 1-3 years 4-5 years After 5 years Long-term debt$233,480$20,180$114,718$65,219$33,363 Convertible Debentures
264、 77,000-77,000-Interest on long-term debt 37,775 11,492 17,333 7,882 1,068 Interest on Convertible Debentures 25,025 5,005 10,010 10,010-Capital lease obligations 3,821 2,167 1,650 4-Operating leases 207,414 47,992 81,209 49,027 29,186 Total contractual obligations$584,515$86,836$224,920$209,142$63,
265、617 At December 31,2009,we had commercial commitments totaling$12.8 million comprised of letters of credit outstanding due to expire within one year.We are required to make semi-annual payments of interest on our Senior Notes and Convertible Debentures at a weighted average interest rate of 6.2%.To
266、manage our insurance costs,we take on risk in the form of high deductibles on many of our coverages.We believe this step reduces overall insurance costs in the long term,but may cause fluctuations in the short term depending on the frequency and severity of insurance incidents.One of our subsidiarie
267、s has issued options to purchase shares to its operating managers.The numerators for our diluted earnings per share calculations are adjusted to account for potential dilution from stock options in the subsidiary,if any.When stock options are exercised,the minority shareholders become party to a sha
268、reholders agreement as described below.In most operations where managers,employees or brokers are also minority owners,the Company is party to shareholders agreements.These agreements allow us to“call”the minority position at fair value determined with the use of a formula price,which is in most cas
269、es equal to a multiple of trailing two-year average earnings,less debt.Minority owners may also“put”their interest to the Company at the same price,with certain limitations including(i)the inability to“put”29 more than 50%of their holdings in any twelve-month period and(ii)the inability to“put”any h
270、oldings for at least one year after the date of our initial acquisition of the business or the date the minority shareholder acquired the stock,as the case may be.The total value of the minority shareholders interests(the“redemption amount”),as calculated in accordance with shareholders agreements,w
271、as as follows.(in thousands of US$)December 31,2009 December 31,2008 Commercial Real Estate$22,174$56,020 Residential Property Management 66,621 84,458 Property Services 67,992 56,287 Redemption amount$156,787$196,765 The amount recorded on our balance sheet under the caption“non-controlling interes
272、ts”is the greater of(i)the redemption amount(as above)or(ii)the amount initially recorded as NCI at the date of inception of the minority equity position.As at December 31,2009,the NCI recorded on the balance sheet was$164.2 million.The purchase prices of the NCI may be paid in cash or in Subordinat
273、e Voting Shares of FirstService.Discussion of critical accounting estimates Critical accounting estimates are those that management deems to be most important to the portrayal of our financial condition and results of operations,and that require managements most difficult,subjective or complex judgm
274、ents,due to the need to make estimates about the effects of matters that are inherently uncertain.We have identified five critical accounting estimates:goodwill impairment testing,accounting for income taxes,accounts receivable allowances,amortization of intangible assets and acquisition purchase pr
275、ice allocations.Goodwill impairment testing involves making estimates concerning the fair value of reporting units and then comparing the fair value to the carrying amount of each unit.The determination of what constitutes a reporting unit requires significant management judgment.The Company has eig
276、ht reporting units determined with reference to service type,customer type,service delivery model and geography.Goodwill is attributed to the reporting units at the time of acquisition.Estimates of fair value can be impacted by sudden changes in the business environment,prolonged economic downturns
277、or declines in the market value of the Companys own shares and therefore require significant management judgment in their determination.A 10%decline in the fair value of each reporting unit as of December 31,2009 would not result in an indication of impairment.The determination of fair value is done
278、 with reference to a discounted cash flow model which requires management to make certain estimates.The most sensitive estimates are estimated future cash flows and the discount rate applied to future cash flows.Changes in these assumptions could result in a materially different fair value.Income ta
279、xes are calculated based on the expected treatment of transactions recorded in the consolidated financial statements.The benefits of certain net operating loss carry-forwards,which have been recognized in the financial statements,require significant management judgment regarding future realization.I
280、n determining current and deferred components of income taxes,we interpret tax legislation and make assumptions about the timing of the reversal of deferred tax assets and liabilities.If our interpretations differ from those of tax authorities or if the timing of reversals is not as anticipated,the
281、provision for income taxes could increase or decrease materially in future periods.A 10%reduction in the deferred income tax valuation allowance would reduce income tax expense by$3.3 million.Accounts receivable allowances are determined using a combination of historical experience,current informati
282、on,and management judgment.Actual collections may differ from our estimates.A 10%increase in the accounts receivable allowance would increase bad debt expense by$1.8 million.30 Amortization of intangible assets requires management to make estimates of useful lives and to select methods of amortizati
283、on.Useful lives and methods of amortization are determined at the time assets are initially acquired,and then are re-evaluated each reporting period.Significant judgment is required to determine whether events and circumstances warrant a revision to remaining periods of amortization.Changes to estim
284、ated useful lives and methods of amortization could result in increases or decreases in amortization expense.A 10%reduction to the weighted average useful life of intangible assets,other than short-lived brokerage backlog,would result in an increase to the amortization expense for the period of$1.6
285、million.Acquisition purchase price allocations require use of estimates and judgment on the part of management,especially in the determination of intangible assets acquired.For example,if different assumptions were used regarding the profitability and expected lives of acquired customer contracts an
286、d relationships,different amounts of intangible assets and related amortization could be reported.A 10%increase in the amount allocated to intangible assets during the year ended December 31,2009 would result in an increase to amortization expense for the period of$0.1 million.Non-GAAP earnings meas
287、ures EBITDA is defined as net earnings from continuing operations before non-controlling interest share of earnings,income taxes,interest,depreciation,amortization,cost containment and stock-based compensation expense.The Company uses EBITDA to evaluate its own operating performance and as an integr
288、al part of its planning and reporting systems.Additionally,the Company uses EBITDA in conjunction with discounted cash flow models to determine its overall enterprise valuation and to evaluate acquisition targets.The Company believes EBITDA is a reasonable measure of operating performance because of
289、 the low capital intensity of its service operations.The Company believes EBITDA is a financial metric used by many investors to compare companies,especially in the services industry.EBITDA is not a recognized measure of financial performance under GAAP in the United States,and should not be conside
290、red as a substitute for operating earnings,net earnings or cash flow from operating activities,as determined in accordance with GAAP.The Companys method of calculating EBITDA may differ from other issuers and accordingly,EBITDA may not be comparable to measures used by other issuers.A reconciliation
291、 of net earnings from continuing operations to EBITDA appears below.(in thousands of US$)Year ended December 31 Nine months ended December 31 Year ended March 31 2009 2008 2008 2008 Net(loss)earnings from continuing operations$(7,279)$19,837$26,027$52,277 Income tax 39,066 22,246 30,878 17,108 Other
292、 income,net(1,624)(3,248)(2,422)(4,650)Interest expense,net 12,506 12,097 8,252 13,387(Gain)loss on available-for-sale securities(4,488)14,680 14,680 -Integrated Security division divestiture bonus-5,715 5,715 -Operating earnings 38,181 71,327 83,130 78,122 Depreciation and amortization 46,383 42,55
293、8 31,746 37,673 Goodwill impairment charge 29,583-114,147 113,885 114,876 115,795 Stock-based compensation expense 5,424 3,926 2,551 7,819 Cost containment 13,496 6,934 6,934 -EBITDA$133,067$124,745$124,361$123,614 Adjusted diluted earnings per share from continuing operations is defined as diluted
294、net earnings per share from continuing operations plus the effect,after income taxes,of:(i)the non-controlling interest redemption increment recognized in connection with the accounting standards on NCI;(ii)amortization expense related to intangible assets recognized in connection with 31 acquisitio
295、ns;(iii)goodwill impairment charges;(iv)stock-based compensation expense;(v)cost containment expense;(vi)gains and losses on available-for-sale securities and(vii)deferred income tax valuation allowances related to tax loss carry-forwards.The Company believes adjusted earnings per share is a useful
296、measure of operating performance because it enhances the comparability of operating results from period to period.This is not a recognized measure of financial performance under GAAP,and should not be considered as a substitute for diluted net earnings per share from continuing operations,as determi
297、ned in accordance with GAAP.The Companys method of calculating this measure may differ from other issuers and,accordingly,this measure may not be comparable to measures used by other issuers.A reconciliation appears below.(in US$)Year ended December 31 Nine months ended December 31 Year ended March
298、31 2009 2008 2008 2008 Diluted net(loss)earnings per common share from continuing operations$(1.85)$(0.19)$0.11$0.89 Pro forma impact of dividends on preferred shares-(0.12)Non-controlling interest redemption increment 1.10-Amortization of intangible assets,net of tax 0.39 0.35 0.25 0.33 Goodwill im
299、pairment charge 0.93-Stock-based compensation expense,net of tax 0.11 0.08 0.05 0.22 Cost containment,net of tax 0.30 0.15 0.15 -Integrated Security division divestiture bonus,net of tax-0.12 0.12 -(Gain)loss on available-for-sale securities,net of tax(0.10)0.40 0.41 -Deferred income tax valuation a
300、llowance 0.54 0.46 0.46 -Adjusted diluted net earnings per common share from continuing operations$1.42$1.37$1.55$1.32 Stock-based compensation expense One of our key operating principles is for senior management to have a significant long-term equity stake in the businesses they operate.The equity
301、owned by senior management takes the form of stock,stock options or notional value appreciation plans,the latter two of which require the recognition of compensation expense under GAAP.The amount of expense recognized with respect to stock options is determined by allocating the grant-date fair valu
302、e of each option over the expected term of the option.The amount of expense recognized with respect to notional value appreciation plans is re-measured quarterly.Recently adopted accounting standards As of July 1,2009,the Financial Accounting Standards Board(“FASB”)Accounting Standards Codification(
303、“ASC”)became the single source for authoritative non-governmental GAAP in the United States of America and superseded all existing non-SEC accounting and reporting standards.All other non-grandfathered non-SEC accounting literature not included in the ASC became non-authoritative.The Company adopted
304、 the ASC and all references to US GAAP are to the ASC topic number,rather than to the previous FASB Statement of Accounting Standards numbers and titles,unless a specific standard has not been included in the ASC.The adoption of the ASC did not have a material effect on the Companys results of opera
305、tions or financial position.The Company adopted a new accounting standard requiring additional disclosure for derivatives and hedging activities on January 1,2009.The new standard includes enhanced disclosures about the Companys derivative and hedging activities such as the objective for using deriv
306、ative instruments,the method of accounting for derivative instruments and related hedged items,and the effect of derivative instruments and related hedged items on the Companys financial position,financial performance,and cash flows.32 As of January 1,2009,the Company began to apply a new accounting
307、 standard on fair value measurements to all non-financial assets and liabilities that are recognized or disclosed at fair value on a non-recurring basis which is consistent with the fair value requirements for financial assets and liabilities.The adoption of this standard did not have a material eff
308、ect on the Companys results of operations or financial position.Where required,assets and liabilities are measured using inputs from the three levels of the fair value hierarchy.An asset or liabilitys classification within the hierarchy is determined based on the lowest level input that is significa
309、nt to the fair value measurement.The three levels are as follows:Level 1 Quoted prices(unadjusted)in active markets for identical assets or liabilities Level 2 Observable market-based inputs other than quoted prices in active markets for identical assets or liabilities Level 3 Unobservable inputs Th
310、e Company adopted additional guidance issued to assist in the determination of the useful life of intangible assets on January 1,2009.The new guidance amends the factors used when considering the useful life of recognized intangible assets.The adoption did not have a material effect on the Companys
311、results of operations or financial position.On January 1,2009,the Company adopted new accounting standards for NCI.Except for earnings per share calculations,all presentation and disclosure requirements were adopted retrospectively,and as a result the Company recorded an increase to NCI of$105.7 mil
312、lion(see note 12 to the Consolidated Financial Statements)and a corresponding decrease to shareholders equity as of April 1,2007.As a result of retrospective adoption,all periods presented have been restated for the effect of the adoption of these standards,however consistent with the transition pro
313、visions the Company presented the effect of the adoption of these standards on earnings per share prospectively,effective January 1,2009.The NCI are considered to be redeemable securities and accordingly,the NCI is recorded at the greater of(i)the redemption amount or(ii)the amount initially recorde
314、d as NCI at the date of inception of the minority equity position.This amount is recorded in the“mezzanine”section of the balance sheet,outside of shareholders equity.Changes in the NCI amount are recognized immediately as they occur.The Company adopted a new accounting standard for business combina
315、tions on January 1,2009.The new standard prospectively changes the manner in which business acquisitions are accounted for.The following are key requirements for acquisitions completed under the standard:(i)transaction costs are expensed;(ii)contingent consideration is recognized at fair value at th
316、e acquisition date;and(iii)the fair value of contingent consideration is re-measured each period.This standard is not applicable to acquisitions where control is not obtained.The adoption of this standard did not have a material effect on the Companys results of operations or financial position,as a
317、cquisitions for 2009 were not material.Impact of recently issued accounting standards In June 2009,the FASB issued new consolidation guidance for variable interest entities.The new guidance amends the consolidation guidance for variable interest entities,in particular:(i)to require ongoing reassessm
318、ents of whether an enterprise is the primary beneficiary of a variable interest entity;(ii)to eliminate the quantitative approach previously required for determining the primary beneficiary of a variable interest entity and(iii)to require enhanced disclosures that will provide more transparent infor
319、mation about involvement in a variable interest entity,if any.It is possible that the application of the new guidance will change an enterprises assessment of which entities with which it is involved are variable interest entities.This standard is effective as of January 1,2010.We are in the process
320、 of evaluating the impact of its adoption.Transactions with related parties Please refer to note 21 to the Consolidated Financial Statements for information regarding transactions with related parties.33 Outstanding share data The authorized capital of the Company consists of an unlimited number of
321、preference shares,issuable in series,of which are authorized an unlimited number of Preferred Shares,an unlimited number of Subordinate Voting Shares and an unlimited number of Multiple Voting Shares.The holders of Subordinate Voting Shares are entitled to one vote in respect of each Subordinate Vot
322、ing Share held at all meetings of the shareholders of the Company.The holders of Multiple Voting Shares are entitled to twenty votes in respect of each Multiple Voting Share held at all meetings of the shareholders of the Company.The holders of the Preferred Shares are not entitled,except as otherwi
323、se provided by law or in the conditions attaching to the Preferred Shares as a class,to receive notice of,attend or vote at any meeting of the shareholders of the Company.Each Multiple Voting Share is convertible into one Subordinate Voting Share at any time at the election of the holders thereof.Th
324、e Preferred Shares are redeemable for cash or convertible into Subordinate Voting Shares at the option of the Company at any time as set out in the Articles of the Company.The Company also has outstanding US$77.0 million aggregate principal amount of Convertible Debentures.The Convertible Debentures
325、 mature on December 31,2014 and accrue interest at the rate of 6.50%per annum payable semi-annually in arrears on June 30 and December 31 in each year,commencing June 30,2010.At the holders option,the Convertible Debentures may be converted into Subordinate Voting Shares at any time prior to the clo
326、se of business on the earlier of the business day immediately preceding either the maturity date and the date specified by FirstService for redemption of the Convertible Debentures.The conversion price is US$28.00 for each Subordinate Voting Share,subject to adjustment in certain circumstances.The C
327、onvertible Debentures will not be redeemable before December 31,2012.On and after December 31,2012 and prior to December 31,2013,the Convertible Debentures may be redeemed in whole or in part from time to time at FirstServices option,provided that the volume weighted average trading price of the Sub
328、ordinate Voting Shares on the Toronto Stock Exchange(converted into a US dollar equivalent)during the 20 consecutive trading days ending on the fifth trading day preceding the date on which the notice of the redemption is given is not less than 125%of the conversion price.On and after December 31,20
329、13 and prior to the maturity date,FirstService may,at its option,redeem the Convertible Debentures,in whole or in part,from time to time at par plus accrued and unpaid interest.Subject to specified conditions,FirstService has the right to repay the outstanding principal amount of the Convertible Deb
330、entures,on maturity or redemption,through the issuance of Subordinate Voting Shares.FirstService also has the option to satisfy its obligation to pay interest through the issuance and sale of Subordinate Voting Shares.A summary of additional terms of the Convertible Debentures is set out in the sect
331、ion entitled Description Of The Securities Being Distributed contained in the Companys(final)prospectus dated November 3,2009 qualifying the distribution of the Convertible Debentures,which section is incorporated herein by reference.As of the date hereof,the Company has outstanding 28,299,216 Subor
332、dinate Voting Shares,1,325,694 Multiple Voting Shares and 5,772,274 Preferred Shares.In addition,as at the date hereof:(a)1,655,000 Subordinate Voting Shares are issuable upon exercise of options granted under the Companys stock option plan;and(b)2,750,000 Subordinate Voting Shares are issuable upon
333、 conversion or redemption or in respect of repayment at maturity of the outstanding Convertible Debentures(using the conversion price of US$28.00 for each Subordinate Voting Share),with a maximum of 3,871,290 Subordinate Voting Shares being issuable upon conversion of the Convertible Debentures following certain“change of control”transactions.Canadian tax treatment of preferred dividends For the p
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