Stock Exchange Symbol: DH
Website: www.dhltd.com
TORONTO, Feb. 26, 2013 /CNW/ - Davis + Henderson Corporation ("D+H" or
the "Corporation" or the "Company") reported financial results for the
three and twelve months ended December 31, 2012 that were consistent
with its strategic agenda reflecting the continuous transformation
towards a leading financial technology ("FinTech") provider to the
North American financial services marketplace and reflected
year-over-year growth in revenues and Adjusted EBITDA1.
"D+H made solid progress in 2012 that included adding over 500 customer
relationships in the North American community bank and credit union
marketplace through sales growth and acquisition initiatives, expanding
our financial services technology offerings and shaping our Canadian
operations to deliver greater efficiencies," said Gerrard Schmid, Chief
Executive Officer. "As a result of these actions, D+H now serves more
than 1,700 customers in North America as a stronger, more diversified
company. Our improved positioning will allow us to meet the challenges
and opportunities that are presenting themselves at this point in the
business cycle and continue our organic growth and growth by
acquisition strategies."
"We had several key operational deliverables for 2012, including
integrating our recent U.S. acquisitions, renewing key customer
agreements, reducing our cost base in Canada, repaying debt and
increasing dividends," said Brian Kyle, Chief Financial Officer. "We
are pleased to have accomplished each one of these goals as they help
to strengthen our business to the benefit of our customers and
shareholders."
Fourth Quarter Highlights
-
Revenue was $187.2 million, an increase of $3.4 million, or 1.8%,
compared to $183.8 million for the same quarter in 2011. Revenue growth
was primarily from the U.S. Segment driven by the inclusion of Avista
Solutions, Inc. ("Avista") from the date of its acquisition of May 3,
2012 and continued strong growth in Mortgagebot LLC ("Mortgagebot").
-
Net income was $13.7 million ( $0.2315 per share) compared to $15.4
million ( $0.2595 per share) for the same quarter in 2011, mainly
attributable to lower EBITDA and increased depreciation of capital
assets and amortization expense related to non-acquisition intangibles,
partially offset by lower income tax expense.
-
EBITDA1 was $41.3 million (22.0% margin), compared to $45.6 million (24.8%
margin) in the same quarter in 2011, as the inclusion of Avista,
continued strong growth in the Mortgagebot business and savings
realized from integration and transformation initiatives were offset by
charges related to cost-realignment initiatives incurred to benefit
future periods, corporate development costs related to strategic
acquisition initiatives and retention and incentive expenses related to
the Mortgagebot and Avista acquisitions. To a lesser extent, EBITDA
for 2012 was also impacted by the decline in Canadian Segment revenues.
-
Adjusted EBITDA was $47.8 million (25.6% margin), an increase of $1.6
million, or 3.5%, compared to $46.2 million (25.1% margin) for the same
period in 2011. Adjusted EBITDA for the fourth quarter of 2012
excluded $6.6 million of acquisition-related costs and other charges.
These expenses are not considered to be in the normal course of
operations and consisted of cost-realignment charges of $1.2 million
incurred to benefit future periods, corporate development expenses of
$3.0 million incurred on strategic acquisition initiatives and $2.4
million related to business integration expenses and certain retention
and incentive expenses associated with the acquisitions of Mortgagebot
and Avista. Acquisition-related and other charges for the same period
in 2011 were $0.6 million related to the Mortgagebot acquisition. These
items were excluded from Adjusted EBITDA as management believes they
are not indicative of underlying business performance and excluding
these adjustments is more reflective of ongoing operating results.
-
Adjusted net income1 of $25.6 million was unchanged year over year. On a per share basis,
Adjusted net income increased to $0.4329 per share, from $0.4315 per
share in the fourth quarter of 2011.
-
On December 31, 2012, D+H paid a dividend of $0.32 per share to its
shareholders following an increase in its target annual dividend from
$1.24 per share to $1.28 per share annualized, for shareholders of
record as of November 30, 2012. During the same period in 2011, D+H
paid $0.31 per share to its shareholders of record on November 30,
2011.
-
The Company made net repayments of $26.2 million on its credit
facilities during the fourth quarter of 2012.
-
On January 29, 2013, D+H acquired the remaining outstanding common
shares of Compushare Inc. ("Compushare"), a Santa Ana, California-based
technology management and cloud computing provider to financial
institutions, building on its initial minority investment in the
company purchased on April 24, 2012.
2012 Highlights
-
Revenue was $757.7 million, an increase of $32.9 million, or 4.5%,
compared to $724.7 million for 2011. The increase was primarily due to
the annualization of and strong growth in the Mortgagebot business and
the inclusion of Avista.
-
Net income was $69.1 million ( $1.1672 per share), compared to $89.9
million ( $1.5620 per share) in 2011. Net income for 2012 benefited
from higher EBITDA and unrealized gains of $2.0 million related to fair
value changes on interest-rate swaps, compared to an unrealized
mark-to-market loss of $3.4 million in 2011. These increases were more
than offset by higher depreciation of capital assets and amortization
of acquisition and non-acquisition intangibles. Net income for 2011
also benefited from the inclusion of non-cash tax recoveries of $20.8
million attributable to D+H's conversion to a corporation and a
non-cash tax recovery relating to losses within certain US subsidiaries
that were not previously recognized in connection with the acquisition
of Mortgagebot.
-
EBITDA was $183.2 million (24.2% margin), an increase of $5.8 million,
or 3.3%, compared to $177.4 million (24.5% margin) for 2011. The
increase in EBITDA was due to strong growth in Mortgagebot, inclusion
of Avista and savings realized from cost-realignment initiatives.
These increases were partially offset by acquisition-related and other
charges during the current year of $14.9 million described below.
EBITDA margin was also impacted by these non-normal course expenses.
-
Adjusted EBITDA was $198.1 million (26.2% margin) for 2012, an increase
of $17.0 million, or 9.4%, compared to $181.2 million (25.0% margin)
for 2011. Adjusted EBITDA for 2012 excluded impacts of
acquisition-related and other charges of $14.9 million, which consisted
of $6.7 million related to cost-realignment initiatives to benefit
future periods, $4.9 million related to transaction costs and certain
retention expenses related to the acquisition of Mortgagebot and
Avista, $3.0 million of corporate development charges related to
strategic acquisition initiatives and $0.3 million related to business
integration costs. Acquisition-related and other charges for 2011 were
$3.8 million incurred primarily in connection with the Mortgagebot
acquisition.
-
Adjusted net income was $108.1 million ( $1.8255 per share) for 2012, an
increase of $4.5 million, or 4.3%, compared to $103.7 million ( $1.8004
per share) for 2011.
-
During 2012, dividends of $1.25 per share were paid to shareholders, up
from $1.2233 per share paid in 2011.
-
D+H drew $50.6 million to finance the acquisition of Avista and the
minority investment in Compushare and also made net debt repayments of
$54.0 million during 2012.
-
On May 3, 2012, D+H acquired a 100% equity interest in Avista, a leading
provider of Software as a Service ("SaaS") mortgage loan origination
software, for a purchase price of US$ 40 million.
-
American Banker, Bank Technology News and IDC Financial Insights named
D+H as one of the world's top financial technology ("FinTech") firms
in the international FinTech 100 with a 2012 ranking of 35th, up 6
places since 2011.
-
Effective October 15, 2012, William W. Neville resigned from the D+H
Board of Directors, a role that he had held since 2009, to assume a new
executive role within the Company as the President of D+H USA, with
overall responsibility for the Company's U.S. operations and for
broadening D+H's presence in the United States.
-
Mortgagebot surpassed the one million mark in submitted U.S. loan
applications in 2012, a new record.
-
During 2012, D+H successfully extended its largest student loan
servicing contract for a multi-year term with opportunity for further
extensions.
____________________________________________
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1 D+H's financial results are prepared in accordance with IFRS. D+H
reports several non-IFRS financial measures, including EBITDA, Adjusted
EBITDA and Adjusted net income used above. Adjusted EBITDA is
calculated as EBITDA, adjusted to remove certain items of note such as
acquisition-related and other charges, including transaction costs and
retention expenses related to acquisitions, corporate development
charges related to strategic acquisition initiatives and expenses
associated with cost-realignment initiatives which are not considered
to be part of normal course of operations. Adjusted net income is
calculated as net income, adjusted to remove certain non-cash items and
certain items of note as described above, discontinued operations and
the related tax effects of these adjustments including tax effects of
acquisitions and corporate conversions. These items are excluded in
calculating Adjusted EBITDA and Adjusted net income as they are not
considered indicative of the underlying business performance for the
period being reviewed and management believes that excluding these
adjustments is more reflective of ongoing operating results. Any
non-IFRS financial measures should be considered in context with the
IFRS financial statement presentation and should not be considered in
isolation or as a substitute for IFRS net income or cash flows.
Further, D+H's measures may be calculated differently from similarly
titled measures of other companies. See Non-IFRS Financial Measures for
a more complete description of these terms.
|
D+H's consolidated financial statements for 2012, accompanying notes to
the financial statements and management's discussion & analysis
("MD&A") along with the supplementary financial information will be
available today at www.dhltd.com and tomorrow on www.sedar.com.
For a more detailed discussion of the results and management's outlook,
please see the MD&A below.
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
This press release contains certain statements that constitute
forward-looking information within the meaning of applicable securities
laws ("forward-looking statements"). Statements concerning D+H's
objectives, goals, strategies, intentions, plans, beliefs, expectations
and estimates, and the business, operations, financial performance and
condition of D+H are forward-looking statements. The words "believe",
"expect", "anticipate", "estimate", "intend", "may", "will", "would"
and similar expressions and the negative of such expressions are
intended to identify forward-looking statements, although not all
forward-looking statements contain these identifying words. These
forward-looking statements are subject to important assumptions,
including the following specific assumptions: the ability of D+H to
meet its revenue, "EBITDA", "Adjusted EBITDA" and "Adjusted net income"
targets (see Non-IFRS Financial Measures for a more complete
description of the terms EBITDA, Adjusted EBITDA and Adjusted net
income); general industry and economic conditions; changes in D+H's
relationship with its customers and suppliers; pricing pressures and
other competitive factors; the anticipated effect of acquisitions on
the financial performance of D+H; and the expected benefits arising as
a result of acquisitions. D+H has also made certain macroeconomic and
general industry assumptions in the preparation of such forward-looking
statements. While D+H considers these factors and assumptions to be
reasonable based on information currently available, there can be no
assurance that actual results will be consistent with these
forward-looking statements.
Forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause D+H's actual results,
performance or achievements, or developments in its industry, to differ
materially from the anticipated results, performance, achievements or
developments expressed or implied by such forward-looking statements.
Risks related to forward-looking statements include, among other things,
challenges presented by declines in the use of personal and business
cheques; the Company's dependence on a limited number of large
financial institution customers and dependence on their acceptance of
new programs; strategic initiatives being undertaken to meet the
Company's financial objective; stability and growth in the real estate,
mortgage and lending markets; increased pricing pressures and increased
competition which could lead to loss of contracts or reduced margins;
as well as general market conditions, including economic and interest
rate dynamics. Given these uncertainties, readers are cautioned not to
place undue reliance on such forward-looking statements. The documents
incorporated by reference herein also identify additional factors that
could affect the operating results and performance of the Company.
Forward-looking statements are based on management's current plans,
estimates, projections, beliefs and opinions, and D+H does not
undertake any obligation to update forward-looking statements should
assumptions related to these plans, estimates, projections, beliefs and
opinions change except as required by applicable securities laws.
All of the forward-looking statements made in this press release and the
documents incorporated by reference herein are qualified by these
cautionary statements and other cautionary statements or factors
contained herein, and there can be no assurance that the actual results
or developments will be realized or, even if substantially realized,
that they will have the expected consequences to, or effects on, the
Company.
Conference Call
Davis + Henderson will discuss its financial results for the three and
twelve months ended December 31, 2012 via conference call at 10:00 a.m.
EST (Toronto time) on Wednesday, February 27, 2013. The number to use
for this call is 647-427-7450 for Local / International callers or
1-888-231-8191 for US / Canada callers. The conference call will be
hosted by Gerrard Schmid, Chief Executive Officer and by Brian Kyle,
Chief Financial Officer. The conference call will also be available on
the web by accessing CNW Group's website www.newswire.ca/en/webcast/detail/1104487/1203723. For anyone unable to listen to the scheduled call, the rebroadcast
number will be: 416-849-0833 for Toronto area callers, or 1-855-859-2056 for all other callers, with
Encore Password 93787489. The rebroadcast will be available until
Wednesday March 13, 2013. An archive recording of the conference call
will also be available at the above noted web address for one month
following the call and a text version of the call will be available at www.dhltd.com.
ADDITIONAL INFORMATION
Additional information relating to the Company, including the Company's
most recently filed Annual Information Form, is available on SEDAR at www.sedar.com.
MANAGEMENT'S DISCUSSION AND ANALYSIS
This Management's Discussion and Analysis ("MD&A") of financial
condition and results of operations has been prepared with an effective
date of February 26, 2013 and should be read in conjunction with Davis
+ Henderson Corporation's ("D+H" or the "Corporation" or the "Company"
or "Davis + Henderson" or the "Business" or "we" or "our") audited
consolidated financial statements for the year ended December 31, 2012.
This MD&A comments on D+H's operations, performance and financial
condition for the quarters ended December 31, 2012 and 2011 and years
ended December 31, 2012, 2011 and 2010.
NON-IFRS FINANCIAL MEASURES
The information presented within the tables in this MD&A include certain
adjusted financial measures such as "EBITDA" (Earnings excluding
interest, taxes, depreciation and amortization and fair value
adjustments of interest-rate swaps which are directly related to
interest expense), and adjusted financial measures such as "Adjusted
EBITDA" (EBITDA adjusted to remove acquisition-related and other
charges, including expenses incurred in connection with
cost-realignment initiatives, corporate development expenses related to
strategic acquisition initiatives and certain retention and incentive
expenses and business integration costs incurred in connection with
acquisitions, all of which are not considered to be incurred in the
normal course of operations and are not indicative of the underlying
business performance), "Adjusted net income" (net income before certain
non-cash charges such as amortization of intangibles from acquisitions
and fair value adjustments of interest-rate swaps and certain items of
note such as acquisition-related and other charges, discontinued
operations, including tax effects of these items and tax effects of
acquisitions and corporate conversion), and "Adjusted net income per
share", all of which are not defined terms under International
Financial Reporting Standards ("IFRS").
These non-IFRS financial measures should be read in conjunction with the
Consolidated Statements of Income. See the reconciliation of EBITDA,
Adjusted EBITDA and Adjusted net income to the most directly comparable
IFRS measure, "net income", in the "Operating Results" section of this
MD&A.
Management believes these supplementary measures provide useful
additional information related to the operating results of the
Corporation. Management uses these subtotals as measures of financial
performance and as a supplement to the Consolidated Statements of
Income. Investors are cautioned that these measures should not be
construed as an alternative to using net income as a measure of
profitability or as an alternative to the IFRS Consolidated Statements
of Income or other IFRS statements.
Further, these measures do not have any standardized meaning and D+H's
method of calculating each balance may not be comparable to
calculations used by other companies bearing the same description.
EBITDA
In addition to its use by management as an internal measure of financial
performance, EBITDA (with adjustments) is used to measure compliance
with certain financial covenants under the Company's credit facility
and bonds. EBITDA is also used by D+H as a factor in assessing the
performance and the value of a business. EBITDA has limitations as an
analytical tool, and the reader should not consider it in isolation or
as a substitute for analysis of results as reported under IFRS.
Adjusted EBITDA
Adjusted EBITDA is also used by D+H in assessing the performance of its
businesses. Adjusted EBITDA excludes: (i) acquisition-related expenses
such as transaction costs, and certain retention and incentive costs
incurred as part of acquisitions; and (ii) other charges such as
corporate development costs related to strategic acquisition
initiatives, costs incurred in connection with cost-realignment
initiatives and business integration costs, all of which are not
considered to be part of the normal course of operations. These items
are excluded in calculating Adjusted EBITDA as they are not considered
indicative of the underlying business performance for the period being
reviewed and management believes that excluding these adjustments is
more reflective of ongoing operating results.
Similar to EBITDA, Adjusted EBITDA also has limitations as an analytical
tool, and the reader should not consider it in isolation or as a
substitute for analysis of results as reported under IFRS.
Adjusted Net Income and Adjusted Net Income per Share
Effective January 1, 2011, as a result of the conversion from an income
trust structure to a corporate structure, D+H introduced Adjusted net
income and Adjusted net income per share as measures for evaluating
results. Periods prior to January 1, 2011, do not have comparable
measures.
Adjusted net income is used as a measure of internal performance similar
to net income, but is calculated after removing the impacts of certain
items of note such as: acquisition-related and other charges, including
transaction costs, business integration costs and retention expenses
related to acquisitions; corporate development charges related to
strategic acquisition initiatives and expenses associated with
cost-realignment initiatives, all of which are not considered to be
part of normal course of operations; discontinued operations; and,
certain non-cash items such as amortization of intangibles from
acquisitions and fair value adjustments of interest-rate swaps. Also
excluded from Adjusted net income are the tax effects of corporate
conversion and acquisitions. These items are excluded in calculating
Adjusted net income as they are not considered indicative of the
financial performance of the Business for the periods being reviewed.
ACQUISITIONS
Avista
On May 3, 2012, the Corporation announced the acquisition of Avista
Solutions, Inc ("Avista"), a leading provider of Software-as-a-Service
("SaaS") mortgage loan origination software ("LOS") to community banks
and credit unions in the United States, for US$40 million. This
transaction was funded from D+H's existing credit facilities and
subsequently through the issuance of bonds. For additional information
on this transaction, please refer to Note 5 in the Consolidated
Financial Statements of the Corporation for the year ended December 31,
2012.
In order to consolidate D+H's U.S. businesses, effective December 31,
2012, Avista merged with Mortgagebot LLC ("Mortgagebot"), with
Mortgagebot being the surviving entity.
Compushare
On April 24, 2012, the Corporation announced that it had completed a
strategic investment in Compushare Inc. ("Compushare"), a
California-based provider of Infrastructure-as-a-Service ("IaaS") to
U.S. banks and credit unions. Compushare specializes in helping
customers achieve rigorous compliance standards with systems
management, network security, and application solutions that are
designed specifically for financial institutions.
As part of this transaction, Compushare and D+H entered into an investor
rights agreement dated April 24, 2012 which provided the Corporation
with a call option to acquire the remaining issued and outstanding
shares of Compushare not already owned by D+H (the "Call Option"). On
January 29, 2013, D+H exercised this Call Option and purchased all
remaining outstanding common shares of Compushare. Financial terms of
this transaction were not disclosed as they were not material to D+H's
financial position.
STRATEGY
D+H's goal is to be a leading financial technology ("FinTech") provider
to the North American financial services marketplace. FinTech companies
develop and deliver technology and technology-enabled products and
services to banks, credit unions and other leading financial services
customers who use these solutions to drive growth, improve customer
convenience, streamline operations, reduce infrastructure costs and
enhance compliance.
D+H's strategy is to establish market-leading positions within
well-defined and growing service areas in the financial services
marketplace, and to reinforce these market-leading positions with
technology solutions that deliver increasing value to our customers and
shareholders. We expect to advance this strategy through organic
initiatives, by partnering with third parties and making selective
acquisitions. D+H's long-term financial objective is to deliver
sustainable and growing earnings through continued organic revenue
growth and by way of strategic acquisitions.
Over the past several years, D+H has executed this strategy by evolving
payment solutions, completing several acquisitions including ASSET and
Mortgagebot in 2011, Avista in 2012 and Compushare in early 2013 and by
further enhancing our services and capabilities within all service
areas.
As announced recently, D+H's improved ranking in the FinTech 100 is a
testament to D+H's increasing technological capabilities, as the
FinTech 100 ranks companies according to their global financial
technology revenues. Through a series of strategic acquisitions,
including the most recent acquisitions of Mortgagebot, Avista and
Compushare, D+H has extended its reach and capabilities as a company
that offers a range of technology solutions to the financial services
market. This recognition is a reflection of the steps D+H has taken to
provide a broad spectrum of financial technology products and services
to its customers and including ongoing innovation and growth to better
serve the financial services industry.
Within our U.S. Segment, our strategic intent is to build a range of
technology offerings, with an emphasis on cloud computing solutions or
SaaS offerings, to better serve regional banks, community banks and
credit unions. We expect to advance this strategy organically through
adjacent offerings, such as our recent expansion into consumer loan
origination, and through further U.S. acquisitions that will allow us
to broaden our technology capabilities to banks and credit unions.
On a go-forward basis, consistent with its strategy, management is
working to: (i) continue our organic growth initiatives in the U.S.;
(ii) evolve our payment solutions programs; (iii) enhance customer
value and extend our technology-supported services related to
mortgages, auto, personal, student, commercial and leasing markets; and
(iv) identify appropriate acquisition targets to support the strategic
direction of D+H.
For a detailed discussion of the results for the quarter and year ended
December 31, 2012 and management's outlook, please see below.
ACCOUNTING PRINCIPLES AND FINANCIAL INFORMATION PRESENTATION
The Company's consolidated financial statements have been prepared in
accordance with IFRS, as issued by the International Accounting
Standards Board ("IASB").
Results from continuing operations include the performance of acquired
businesses from the respective dates of acquisition and exclude results
from businesses classified as discontinued operations.
Comparative information presented for periods prior to January 1, 2011
relate to those of Davis + Henderson Income Fund ("the Fund"), and the
results for periods subsequent to January 1, 2011 are those of the
Corporation. Consequently, throughout this MD&A, any references to
distributions, unitholders and per unit amounts relate to periods prior
to January 1, 2011, and any references to dividends, shareholders and
per share amounts relate to periods subsequent to January 1, 2011.
All amounts are in Canadian dollars, unless otherwise specified.
Segment Reporting
D+H began reporting its results by segments in the first quarter of 2012
based on its strategic business units, the "Canadian Segment" and the
"U.S. Segment". These business units are components of the entity that
the Corporation's executives monitor in making decisions about
resources to be allocated to the segments and to assess performance.
The Canadian Segment includes results from payment solutions (reported
as programs to chequing accounts in prior years), loan registration and
recovery services, loan servicing, technology solutions in the
commercial lending, small business lending and leasing areas, lending
technology services to the Canadian mortgage market and other business
service solutions. The U.S. Segment consists of lending technology
services to the U.S. mortgage market, including results from
Mortgagebot LLC ("Mortgagebot") and Avista Solutions, Inc. ("Avista").
Charges related to cost-realignment initiatives, corporate development
expenses related to strategic acquisition initiatives, retention and
incentive expenses, transaction costs and business integration costs
related to acquisitions are recorded as part of Corporate as these
items are not part of the normal course of operations and they are not
indicative of the underlying performance of the segments and the
business.
Performance of the segments are measured based on the segment's revenue
and EBITDA.
Comparatives have been presented to conform to the current period
disclosure.
OPERATING RESULTS - FOURTH QUARTER OF 2012
(in thousands of Canadian dollars, except per share amounts, unaudited)
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Quarter ended December 31,
|
|
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2012
|
2011
|
|
Revenue
|
$
|
187,175
|
$
|
183,777
|
|
Expenses
|
145,904
|
138,202
|
|
EBITDA 1
|
41,271
|
45,575
|
|
Depreciation of capital assets and amortization
|
|
|
|
|
|
|
of non-acquisition intangibles
|
7,956
|
6,749
|
|
Amortization of intangibles from acquisitions
|
11,519
|
11,009
|
|
Interest expense
|
4,629
|
4,909
|
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Income from investment in an associate, net of tax 2
|
23
|
-
|
|
Amortization and fair value adjustment of
|
|
|
|
|
|
|
derivative instruments 3
|
(542)
|
(145)
|
|
Income tax expense
|
3,975
|
7,684
|
|
Net income
|
$
|
13,711
|
$
|
15,369
|
|
|
|
|
|
|
|
|
|
|
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Income from continuing operations per share,
|
|
|
|
|
|
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basic and diluted 4,5
|
$
|
0.2315
|
$
|
0.2595
|
|
Net income per share, basic and diluted 4, 5
|
$
|
0.2315
|
$
|
0.2595
|
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1
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EBITDA is a non-IFRS term. See Non-IFRS Financial Measures for a more
complete description of this term.
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2
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D+H's share of profit from Compushare, the minority investment purchased
on April 24, 2012.
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3
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Includes mark-to-market adjustments of interest-rate swaps that are not
designated as hedges for hedge accounting purposes, and for which any
change in the fair value of these contracts is recorded through the
Consolidated Statements of Income.
|
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4
|
Diluted net income per share reflects the impacts of outstanding
options. If the average market price during the period is below the
option price plus the fair market value of the option, then the options
are not included in the dilution calculation.
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5
|
Weighted average number of shares outstanding during the fourth quarter
of 2012 was 59,233,373 shares (Q4 2011 - 59,233,373 shares).
|
(in thousands of Canadian dollars, unaudited)
|
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Quarter ended December 31,
|
|
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Canadian Segment
|
|
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U.S. Segment
|
|
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Corporate
|
|
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Consolidated
|
|
|
2012
|
2011
|
|
|
2012
|
2011
|
|
|
2012
|
2011
|
|
|
2012
|
2011
|
|
Revenue
|
$
|
171,788
|
$
|
173,189
|
|
|
|
$
|
15,387
|
$
|
10,588
|
|
|
|
$
|
-
|
$
|
-
|
|
|
|
$
|
187,175
|
$
|
183,777
|
|
Expenses
|
|
130,647
|
|
131,837
|
|
|
|
|
8,699
|
|
5,728
|
|
|
|
|
6,558
|
|
637
|
|
|
|
|
145,904
|
|
138,202
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA 1
|
|
41,141
|
|
41,352
|
|
|
|
|
6,688
|
|
4,860
|
|
|
|
|
(6,558)
|
|
(637)
|
|
|
|
|
41,271
|
|
45,575
|
|
EBITDA Margin
|
|
23.9%
|
|
23.9%
|
|
|
|
|
43.5%
|
|
45.9%
|
|
|
|
|
-
|
|
-
|
|
|
|
|
22.0%
|
|
24.8%
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related and other charges 2
|
|
-
|
|
-
|
|
|
|
|
-
|
|
-
|
|
|
|
|
6,558
|
|
637
|
|
|
|
|
6,558
|
|
637
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA 1
|
$
|
41,141
|
$
|
41,352
|
|
|
|
$
|
6,688
|
$
|
4,860
|
|
|
|
$
|
-
|
$
|
-
|
|
|
|
$
|
47,829
|
$
|
46,212
|
|
Adjusted EBITDA Margin
|
|
23.9%
|
|
23.9%
|
|
|
|
|
43.5%
|
|
45.9%
|
|
|
|
|
-
|
|
-
|
|
|
|
|
25.6%
|
|
25.1%
|
|
1
|
EBITDA and Adjusted EBITDA are non-IFRS terms. See Non-IFRS Financial
Measures for a more complete description of these terms.
|
|
2
|
Acquisition-related and other charges for the fourth quarter of 2012
included corporate development expenses related to strategic
acquisition initiatives, expenses related to cost-realignment
initiatives and acquisition-related costs pertaining to business
integration costs and certain retention and incentive costs in
connection with the acquisitions of Mortgagebot and Avista.
Acquisition-related and other charges for the same period in 2011
included certain retention and incentive costs related to the
acquisition of Mortgagebot.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canadian
|
|
|
U.S.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
|
|
|
Segment
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012 vs. 2011
|
|
|
2012 vs. 2011
|
2012 vs. 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% change
|
|
|
% change
|
% change
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
(0.8%)
|
|
|
45.3%
|
1.8%
|
|
EBITDA 1
|
|
|
|
|
|
|
|
|
|
|
|
(0.5%)
|
|
|
37.6%
|
(9.4%)
|
|
Adjusted EBITDA1
|
|
|
|
|
|
|
|
|
|
|
|
(0.5%)
|
|
|
37.6%
|
3.5%
|
|
1
|
EBITDA and Adjusted EBITDA are non-IFRS terms. See Non-IFRS Financial
Measures for a more complete description of these terms.
|
(in thousands of Canadian dollars, except per share amounts, unaudited)
|
|
|
|
Quarter ended December 31,
|
|
|
|
|
2012
|
2011
|
|
Net income
|
$
|
13,711
|
$
|
15,369
|
|
Adjustments:
|
|
|
|
|
|
|
Non-cash items:
|
|
|
|
|
|
|
|
Amortization of intangibles from acquisitions
|
|
11,519
|
|
11,009
|
|
|
|
Amortization and fair value adjustment of
|
|
|
|
|
|
|
|
|
derivative instruments 2
|
|
(542)
|
|
(145)
|
|
|
Other items of note:
|
|
|
|
|
|
|
|
Acquisition-related and other charges 3
|
|
6,558
|
|
637
|
|
|
Tax effect of above adjustments (excluding
|
|
|
|
|
|
|
|
|
discontinued operations) 4
|
|
(5,603)
|
|
(3,391)
|
|
|
Tax effect of acquisitions and conversion 5
|
|
-
|
|
2,080
|
|
Adjusted net income 1
|
$
|
25,643
|
$
|
25,559
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income per share, basic and diluted 1, 6, 7
|
$
|
0.4329
|
$
|
0.4315
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended December 31,
|
|
|
|
2012 vs. 2011
|
|
|
|
% change
|
|
Adjusted net income per share 1, 6, 7
|
0.3%
|
|
1
|
Adjusted net income and Adjusted net income per share are non-IFRS
terms. See Non-IFRS Financial Measures for a more complete description
of these terms.
|
|
2
|
Includes mark-to-market adjustments of interest-rate swaps that are not
designated as hedges for hedge accounting purposes, and for which any
change in the fair value of these contracts is recorded through the
Consolidated Statement of Income.
|
|
3
|
Acquisition-related and other charges for the fourth quarter of 2012
included corporate development expenses related to strategic
acquisition initiatives, cost-realignment initiatives and certain
retention and incentive and business integration costs pertaining to
the acquisitions of Mortgagebot and Avista. Acquisition-related and
other charges for the same period in 2011 included certain retention
and incentive costs related to the acquisition of Mortgagebot.
|
|
4
|
The following adjustments to net income are tax effected at their
respective tax rates: (i) amortization of acquisition intangibles; (ii)
amortization and fair value adjustment of derivative instruments; and
(iii) acquisition-related and other charges.
|
|
5
|
Adjustment for the fourth quarter of 2011 related to derecognition of
previously recognized tax attributes.
|
|
6
|
Diluted Adjusted net income per share (non-IFRS term) reflects the
impacts of outstanding options. If the
average market price during the period is below the option price plus
the fair market value of the option, then the options are not included
in the dilution calculation.
|
|
7
|
Weighted average number of shares outstanding during the fourth quarter
of 2012 was 59,233,373 shares (Q4 2011 - 59,233,373 shares).
|
Overview - Consolidated
Growth in consolidated revenues in the fourth quarter of 2012 compared
to the same period in 2011 was driven by the U.S. Segment, attributable
to the acquisition of Avista and continued strong organic growth in
Mortgagebot.
Compared to the fourth quarter of 2011, the decline in consolidated
EBITDA for the fourth quarter of 2012 was due to the impact of certain
non-normal course expenses and acquisition-related charges.
Consolidated Adjusted EBITDA, which excludes these charges, was higher
in the fourth quarter of 2012 compared to the same period in 2011.
Consolidated net income for the three months ended December 31, 2012 was
lower compared to the same period in 2011. Net income during the fourth
quarter of 2012 was impacted by acquisition-related and other charges
in Corporate. This impact was partially offset by the EBITDA growth in
the U.S. Segment.
Consolidated Adjusted net income for the fourth quarter of 2012 was
higher compared to the same period in 2011. Consolidated Adjusted net
income excludes the following: (i) impacts of non-cash items such as
amortization of intangibles from acquisitions and gains and losses
related to fair value adjustment of derivative instruments; (ii) other
items of note such as acquisition-related and other charges described
earlier and discontinued operations; and (iii) tax recoveries related
to the changes in the tax status of D+H as a result of the conversion
from an income trust to a corporation, and non-cash tax expense /
recoveries relating to acquisitions. Net income was also adjusted for
the tax impact of these items to arrive at Adjusted net income.
REVENUE
The following table reflects the relative size of each of the major
service areas as a percentage of consolidated revenue based on a
twelve-month period:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
|
|
|
2012
|
2011
|
2010
|
|
|
Payment solutions1
|
|
|
|
|
40%
|
41%
|
45%
|
|
|
Loan registration and recovery services
|
|
|
|
|
22%
|
22%
|
17%
|
|
|
Loan servicing
|
|
|
|
|
17%
|
18%
|
20%
|
|
|
Lending technology services 2
|
|
|
|
|
17%
|
14%
|
12%
|
|
|
Business service solutions 3
|
|
|
|
|
4%
|
5%
|
6%
|
|
|
|
|
|
|
100%
|
100%
|
100%
|
1Reported as Programs to chequing account in prior years.
2Includes revenues reported as part of the U.S. segment.
3Reported as Other in prior years.
Payment solutions include: (i) the cheque supply program which serves
the personal and small business account holders of our financial
services customers; and (ii) various subscription fee-based enhancement
services and other service offerings directed towards the chequing and
credit card programs. These service offerings (excluding the component
of enhancement and identity protection services that are integrated in
the cheque order) currently represent a small component of revenues
within this revenue category. Cheque order volumes are declining as
consumers and small businesses choose other payment methods. These
volume declines have been partially offset by increased average order
values for cheques and growth in service enhancements to the chequing
and credit card programs. Revenue from payment solutions is reported as
part of the Canadian Segment.
Loan registration and recovery services support the personal and
commercial lending activities of our financial services customers.
Services include the registration and management of data related to
secured lending for both personal and real property loans as well as
recovery services related to both secured and unsecured lending
activities. The largest contributors within this revenue category are
search and registration services, which currently account for
approximately 50% to 60% of revenue, and recovery services accounting
for approximately 25% to 35%. In both instances, loans relating to
vehicle purchases are a significant driver of activity and as such can
be variable. In general, registration services are affected by both
economic cyclicality and seasonality, while recovery services are, in
general, counter-cyclical. Other services within this category include
mortgage discharge services and various search-related services, both
of which we deliver on behalf of our financial institution customers.
Revenues from loan registration and recovery services are reported as
part of the Canadian Segment.
Loan servicing programs include student loans administration services
offered to financial institutions and governments and credit card
servicing offered to card issuers. The student loans administration
services currently account for approximately 70% to 80% of revenues
within this category. In general, student loan servicing volumes have
been stable and modestly growing on higher student loan balances and
extended loan durations. Recent integration of two lending portfolios
into a single managed portfolio reduced the fees we earn on a net basis
and this impact is expected to continue through the first half of 2013.
Volumes related to credit card servicing can be more variable and are
primarily impacted by customer initiatives. Revenues from loan
servicing programs are reported in the Canadian Segment.
Lending technology services include services directed towards mortgage
markets in both Canada and, with the acquisitions of Avista in May 2012
and Mortgagebot in April 2011, the United States. As well, we offer
technology products and services in both countries directed towards
leasing, commercial lending and small business lending. Revenues
related to mortgage markets currently represent approximately 85% to
95% of revenues within this category, with approximately 50% to 60%
attributable to transaction-based fees earned in connection with
Canadian mortgage originations and 40% to 50% representing fees related
to U.S. SaaS loan origination services, of which approximately 20% to
30% relate to transaction-based activity. Mortgage origination fees
can be variable and are impacted by many factors including the economy,
the housing market and interest rates, among others. For segment
reporting purposes, revenues from the lending technology services to
the Canadian mortgage markets and the products and technology solutions
for leasing, commercial lending and small business lending offered in
both Canada and U.S. are reported as part of the Canadian Segment.
Revenues from the U.S. SaaS loan origination services related to
Mortgagebot and Avista are reported as part of the U.S. Segment.
Effective from the date of acquisition of January 29, 2013, revenues
from Compushare will be reported in the U.S. Segment.
Business service solutions include a number of smaller service offerings
that are primarily outsourced activities D+H performs on behalf of a
variety of customers including non-financial services customers.
Revenues from these activities are reported as part of the Canadian
Segment.
Revenue - Consolidated
(in thousands of Canadian dollars, unaudited)
|
|
|
|
|
Quarter ended December 31,
|
|
|
|
|
|
2012
|
2011
|
|
Payment solutions1
|
|
|
|
$
|
76,113
|
$
|
73,758
|
|
Loan registration and recovery services
|
|
|
|
|
40,542
|
|
39,260
|
|
Loan servicing
|
|
|
|
|
30,018
|
|
33,372
|
|
Lending technology services 2
|
|
|
|
|
32,661
|
|
28,571
|
|
Business service solutions 3
|
|
|
|
|
7,841
|
|
8,816
|
|
|
|
|
|
$
|
187,175
|
$
|
183,777
|
|
1
|
Reported as Programs to chequing account in prior years.
|
|
2
|
Includes revenue reported as part of the U.S. segment.
|
|
3
|
Reported as Other in prior years.
|
Consolidated revenue for the fourth quarter of 2012 was $187.2 million,
an increase of $3.4 million, or 1.8%, compared to the same period in
2011. The increase was primarily due to growth within the U.S. Segment
as a result of the inclusion of Avista acquired on May 3, 2012 and
strong ongoing organic growth in Mortgagebot. Services delivered by
D+H are subject to seasonality, including fees earned in connection
with mortgage origination services and automobile loan registration
services, which are typically stronger in the second and third quarters
than in the first and fourth quarters.
Revenue - Canadian Segment
Total revenues in the Canadian Segment for the fourth quarter of 2012 of
$171.8 million, decreased by $1.4 million, or 0.8%, compared to the
same quarter in 2011.
(in thousands of Canadian dollars, unaudited)
|
|
Quarter ended December 31,
|
|
|
2012
|
2011
|
|
Payment solutions 1
|
$
|
76,113
|
$
|
73,758
|
|
Loan registration and recovery services
|
|
40,542
|
|
39,260
|
|
Loan servicing
|
|
30,018
|
|
33,372
|
|
Lending technology services 2
|
|
17,274
|
|
17,983
|
|
Business service solutions 3
|
|
7,841
|
|
8,816
|
|
|
$
|
171,788
|
$
|
173,189
|
|
1
|
Reported as Programs to chequing account in prior years.
|
|
2
|
Excludes revenues from Mortgagebot and Avista.
|
|
3
|
Reported as Other in prior years.
|
Revenue from payment solutions for the fourth quarter of 2012 was $76.1
million, an increase of $2.4 million, or 3.2%, compared to the same
quarter in 2011. Revenue for the fourth quarter of 2012 benefited from
the positive impact of higher average order values and product and
service enhancements in the chequing and credit card programs,
partially offset by volume declines in cheque orders. Management
believes that the downward trend in cheque order volumes is in the low
to mid-single digit range annually and in recent periods, there has
been more volatility in personal cheque order volumes. Management
expects that this volatility will continue into 2013. D+H continues to
develop service enhancements to offset this impact and to generate
future growth within this category.
Loan registration and recovery services revenue for the fourth quarter
of 2012 was $40.5 million, an increase of $1.3 million, or 3.3%,
compared to the same quarter in 2011. This increase was mainly due to
higher transaction volumes in registration services reflecting a
continuing recovery within the auto and auto lending markets. Volumes
in this area can be variable due to changes in the economy, changes in
the auto and auto lending markets and seasonality. Typically, this
service area experiences stronger volumes during the second and third
quarters as compared to the first and fourth quarters as consumers more
frequently purchase and finance cars in the spring and summer. The
increase in revenue attributable to higher volumes in registration
services was partially offset by an expected decline in automotive
lending recovery services, due to counter-cyclicality and certain
program repatriations.
Loan servicing programs revenue for the fourth quarter of 2012 was $30.0
million, a decrease of $3.4 million, or 10.1%, compared to the same
quarter in 2011. Modestly higher volumes in the fourth quarter of 2012
were offset by reduced professional service fees due to timing and an
expected reduction in fees from a previously announced consolidation
and integration between two customers within the student loans program.
Volumes in the student loan administration service area are expected to
be relatively stable and modestly growing in the short term. We expect
that the impact on revenue of consolidation and integration of the two
customers discussed above will continue through the first half of
2013. Activities related to cost management and improving delivery
efficiency are being directed towards lowering the impact of reduced
pricing and fees related to the recent customer consolidation. The
benefits from these cost management initiatives that we started to
realize in 2012 will continue into 2013.
A decline in revenues in the credit card servicing component within the
loan servicing programs compared to the prior year was attributable to
specific customer initiatives in prior periods that contributed to
higher revenues in those periods.
Revenue from lending technology services related to the Canadian Segment
for the fourth quarter of 2012 was $17.3 million, a decrease of $0.7
million, or 3.9%, compared to the same quarter in 2011. Fourth quarter
2012 revenue was impacted by lower mortgage origination fees due to
softening Canadian housing and mortgage market activity compared to the
same quarter in 2011. In general, due to tightening of mortgage rules
announced by the Department of Finance in 2012, industry analysts
expect the recently observed reduction in Canadian housing market
prices and sales volumes to continue in major urban areas in 2013.
Revenues in the future periods may also be impacted by price
modifications, which are expected to be offset by potential revenue
increases from the launch of new products in the Canadian lending
market, including extension of our technology solutions across various
areas in the lending value chain.
Revenues from business service solutions in the fourth quarter of 2012
were $7.8 million, compared to $8.8 million for the same period in 2011
due to program repatriations by certain customers in prior periods.
Revenue - U.S. Segment
(in thousands of Canadian dollars, unaudited)
|
|
Quarter ended December 31,
|
|
|
2012
|
2011
|
|
Lending technology services
|
$
|
15,387
|
$
|
10,588
|
U.S. Segment revenue related to online mortgage origination from
Mortgagebot and Avista for the fourth quarter of 2012 was $15.4
million, an increase of $4.8 million, or 45.3%, compared to $10.6
million for the same period in 2011. The increase was due to the
inclusion of Avista since its acquisition in May 2012 and strong
organic growth in Mortgagebot as a result of higher volumes driven by
continued low interest-rate environment in the U.S.
EXPENSES
Expenses - Consolidated
(in thousands of Canadian dollars, unaudited)
|
|
|
Quarter ended December 31,
|
|
|
|
|
2012
|
2011
|
|
Employee compensation and benefits 1
|
|
$
|
55,886
|
$
|
54,920
|
|
Non-compensation direct expenses 2
|
|
|
58,989
|
|
56,613
|
|
Other operating expenses 3
|
|
|
31,029
|
|
26,669
|
|
|
|
|
$
|
145,904
|
$
|
138,202
|
|
1
|
Employee compensation and benefits on a consolidated basis includes
retention and incentive expenses related to acquisitions of businesses
and are net of apprenticeship tax credits and amounts capitalized
related to software product development. Employee compensation expenses
for the fourth quarter of 2012 included $1.2 million of expenses
related to cost-realignment initiatives.
|
|
2
|
Non-compensation direct expenses include materials, shipping, selling
expenses and third party direct disbursements.
|
|
3
|
Other operating expenses include occupancy costs, communication costs,
licensing fees, professional fees, contractor fees, transaction costs
related to acquisitions of businesses and expenses not included in
other categories. Other expenses for the fourth quarter of 2012
include corporate development costs related to strategic acquisition
initiatives.
|
Consolidated expenses of $145.9 million for the fourth quarter of 2012
increased by $7.7 million, or 5.6%, compared to the same quarter in
2011, and included acquisition-related and other charges of $6.6
million which were considered as non-normal course expenses and
therefore, recognized as part of Corporate. The inclusion of Avista
expenses also contributed to the increase in the fourth quarter of
2012.
Expenses - Canadian Segment
Total expenses for the Canadian Segment for the fourth quarter of 2012
were $130.6 million, a decrease of $1.2 million, or 0.9%, compared to
the same quarter in 2011.
(in thousands of Canadian dollars, unaudited)
|
|
|
|
Quarter ended December 31,
|
|
|
|
|
2012
|
2011
|
|
Employee compensation and benefits 1
|
$
|
47,905
|
$
|
51,245
|
|
Non-compensation direct expenses 2
|
|
58,720
|
|
56,213
|
|
Other operating expenses 3
|
|
24,022
|
|
24,379
|
|
|
|
|
$
|
130,647
|
$
|
131,837
|
|
1
|
Employee compensation and benefits are net of apprenticeship tax credits
and amounts capitalized related to software product development.
|
|
2
|
Non-compensation direct expenses include materials, shipping, selling
expenses and third party direct disbursements.
|
|
3
|
Other operating expenses include occupancy costs, communication costs,
licensing fees, professional fees, contractor fees, transaction costs
related to acquisitions of businesses and expenses not included in
other categories. Other operating expenses are net of inter-segment
management fees received from the U.S. segment.
|
Employee compensation and benefits costs of $47.9 million for the fourth
quarter of 2012 for the Canadian Segment were lower by $3.3 million, or
6.5%, compared to the same quarter in 2011. Expenses for the fourth
quarter of 2012 benefited from savings realized as a result of
cost-realignment initiatives executed in prior periods and
apprenticeship tax credits.
Non-compensation direct expenses for the Canadian Segment were $58.7
million for the fourth quarter of 2012, an increase of $2.5 million, or
4.5%, compared to the same quarter in 2011. In general, these expenses
directionally change with revenue changes. An increase in direct costs
associated with the payment solutions and the loan registration service
areas, consistent with the increase in revenues in these service areas,
was partially offset by a decrease in direct costs in the recovery
business and other services.
Other operating expenses of $24.0 million for the fourth quarter of 2012
were lower by $0.4 million, or 1.5%, compared to the same quarter in
2011, primarily due to savings realized from transformation and
integration initiatives and an increase in capitalization of
development costs.
Expenses - U.S. Segment
Total expenses for the U.S. Segment for the fourth quarter of 2012 were
$8.7 million, an increase of $3.0 million, or 51.9%, compared to the
same quarter in 2011. This increase was primarily due to the inclusion
of the Avista cost base and expense growth in Mortgagebot consistent
with revenue growth.
(in thousands of Canadian dollars, unaudited)
|
|
|
|
Quarter ended December 31,
|
|
|
|
|
2012
|
2011
|
|
Employee compensation and benefits
|
$
|
4,697
|
$
|
3,038
|
|
Non-compensation direct expenses
|
|
269
|
|
400
|
|
Other operating expenses 1
|
|
3,733
|
|
2,290
|
|
|
|
|
$
|
8,699
|
$
|
5,728
|
|
1
|
Other operating expenses include inter-segment management fees,
occupancy costs and expenses not included in other categories.
|
Employee compensation and benefits costs of $4.7 million for the fourth
quarter of 2012 for the U.S. Segment were higher by $1.7 million, or
54.6%, compared to the same quarter in 2011. The increase in the fourth
quarter of 2012 was primarily due to the inclusion of the Avista cost
base and increased costs related to the integration of Mortgagebot and
Avista.
Non-compensation direct expenses for the U.S. Segment of $0.3 million
for the fourth quarter of 2012 remained relatively consistent to the
same quarter in 2011.
Other operating expenses of $3.7 million for the fourth quarter of 2012
were higher by $1.4 million, or 63.0%, compared to the same quarter in
2011 primarily attributable to expenses associated with cloud-based
growth initiatives and the inclusion of Avista. Also included in other
expenses for the periods presented is the inter-segment management fees
charged by the Canadian Segment for shared services.
Expenses - Corporate
(in thousands of Canadian dollars, unaudited)
|
|
|
|
Quarter ended December 31,
|
|
|
|
|
2012
|
2011
|
|
Employee compensation and benefits
|
$
|
3,284
|
$
|
637
|
|
Non-compensation direct expenses
|
|
-
|
|
-
|
|
Other operating expenses
|
|
3,274
|
|
-
|
|
|
|
|
$
|
6,558
|
$
|
637
|
Employee compensation and benefits
Employee compensation and benefits expenses for the fourth quarter of
2012 in Corporate of $3.3 million consisted of charges related to
cost-realignment initiatives of $1.2 million, and retention and
incentive expenses of $2.1 million incurred in connection with Avista
and Mortgagebot acquisitions. Charges incurred in relation to the
cost-realignment initiatives are expected to benefit the Company in
both current and future periods.
Other expenses
Other expenses for 2012 in Corporate included corporate development
expenses related to strategic acquisition initiatives of $3.0 million
and business integration costs of $0.3 million. For the same period in
2011, $0.6 million was recognized as acquisition-related and other
charges in connection with the acquisition of Mortgagebot.
EBITDA AND EBITDA MARGIN
Consolidated
Consolidated EBITDA during the fourth quarter of 2012 was $41.3 million,
a decrease of $4.3 million, or 9.4%, compared to $45.6 million for the
same quarter in 2011. EBITDA margin of 22.0% on a consolidated basis
for the fourth quarter of 2012 decreased from 24.8% for the same period
in 2011. Growth in EBITDA in the U.S Segment was offset by non-normal
course expenses in Corporate such as charges related to
cost-realignment initiatives, corporate development costs related to
strategic acquisition initiatives, retention and incentive expenses and
acquisition transaction costs.
Canadian Segment
Canadian Segment EBITDA for the fourth quarter of 2012 was $41.1
million, a decrease of $0.2 million, or 0.5%, compared to the same
quarter in 2011, primarily due to a decline in revenues in the loan
servicing and business service solutions service areas. These decreases
were partially offset by the contribution made by strong volumes in the
loan registration services and savings realized from cost-realignment,
integration and transformation initiatives. Cost management activities
are being directed towards lowering the impact of reduced pricing and
fees as a result of the integration and repatriation by the customers
in the loan servicing area.
EBITDA margin of 23.9% for the fourth quarter of 2012 was unchanged from
the fourth quarter of 2011.
U.S. Segment
U.S. Segment EBITDA for the fourth quarter of 2012 was $6.7 million, an
increase of $1.8 million, compared to the same quarter in 2011,
attributable to strong growth in the Mortgagebot business as well as
the inclusion of Avista results effective from the date of acquisition
of May 3, 2012.
ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN
Consolidated
Consolidated Adjusted EBITDA excludes the following items reported as
part of Corporate: (i) acquisition-related expenses such as transaction
costs, business integration costs, and certain retention and incentive
costs incurred as part of the acquisitions; and (ii) other charges
incurred in connection with cost-realignment initiatives and corporate
development costs related to strategic acquisition initiatives which
are not considered to be part of the normal course of operations.
These items are excluded from the calculation of Adjusted EBITDA as
they are not considered indicative of the underlying business
performance for the period being reviewed and management believes that
excluding these adjustments is more reflective of ongoing operating
results.
Consolidated Adjusted EBITDA during the fourth quarter of 2012 was $47.8
million, an increase of $1.6 million, or 3.5%, compared to the same
quarter in 2011. Consolidated Adjusted EBITDA excluded
acquisition-related and other charges of $6.6 million for the fourth
quarter of 2012, consisting of $1.2 million related to cost-realignment
initiatives, $3.0 million related to corporate development costs for
strategic acquisition initiatives, $2.1 million related to transaction
costs and retention expenses related to the Mortgagebot and Avista
acquisitions and business integration costs of $0.3 million. On a
consolidated basis, Adjusted EBITDA margin for the fourth quarter of
2012 was 25.6%, up from 25.1% a year ago.
DEPRECIATION OF CAPITAL ASSETS AND AMORTIZATION OF NON-ACQUISITION
INTANGIBLES
Consolidated depreciation of capital assets and amortization of
non-acquisition intangible assets of $8.0 million during the fourth
quarter of 2012 increased by $1.2 million, or 17.9%, compared to the
same period in 2011. The increase was related to the commencement of
amortization of completed projects in 2012.
AMORTIZATION OF INTANGIBLES FROM ACQUISITIONS
Consolidated amortization of acquisition intangibles for the fourth
quarter of 2012 was $11.5 million, an increase of $0.5 million,
compared to the same period in 2011. The increase was attributable to
the amortization of intangibles from the Avista acquisition.
INTEREST EXPENSE
Interest expense for the fourth quarter of 2012 decreased by $0.3
million compared to the same quarter in 2011 due to favourable pricing
on the renewed credit facility due to renegotiated terms.
INCOME FROM INVESTMENT IN AN ASSOCIATE
Consolidated net income for the fourth quarter of 2012 included D+H's
share of income related to the investment in an associate, Compushare,
effective from April 24, 2012.
The investment in Compushare is accounted for using the equity method of
accounting and is recognized initially at cost. The cost of the
investment includes transaction costs related to the investment.
Subsequent to December 31, 2012, D+H acquired the remaining 67% interest
in Compushare.
AMORTIZATION AND FAIR VALUE ADJUSTMENT OF DERIVATIVE INSTRUMENTS
Interest-rate swaps
Compared to a net unrealized gain of $0.1 million in the fourth quarter
of 2011, a net unrealized gain of $0.5 million on interest-rate swaps
was recognized in the fourth quarter of 2012 reflecting fair value
adjustments related to changes in market interest rates at December 31,
2012 compared to September 30, 2012.
These unrealized gains and losses are recognized in income because these
interest-rate swaps are not designated as hedges for accounting
purposes. In general, a loss on interest-rate swaps is recorded when
interest rates decrease as compared to certain previous periods and a
gain is recorded when interest rates increase. Provided the Company
does not cancel its interest-rate swaps, the unrealized amounts
represent a non-cash unrealized gain or loss that will subsequently
reverse through the statement of income as the related swaps mature.
D+H has historically held its derivative contracts to maturity.
INCOME TAX EXPENSE
Compared to an income tax expense of $7.7 million for the fourth quarter
of 2011, in the fourth quarter of 2012, an income tax expense of $4.0
million was recorded. The tax expense was reduced by a tax recovery
related to the difference in the tax rate applicable to losses incurred
in the U.S. in the fourth quarter, substantially as a result of
deductible corporate development expenses related to strategic
acquisition initiatives in the U.S. The income tax expense in the
fourth quarter of 2011 was increased by the de-recognition of certain
previously recorded tax attributes.
NET INCOME
Consolidated net income of $13.7 million for the fourth quarter of 2012
was lower by $1.7 million, or 10.8%, compared to consolidated net
income of $15.4 million for the same quarter in 2011. Consolidated net
income for the fourth quarter of 2012 was impacted by
acquisition-related and other charges of $6.6 million reported in
Corporate, which included expenses related to cost-realignment
initiatives incurred to achieve operational effectiveness, corporate
development expenses related to strategic acquisition initiatives and
retention and incentive expenses and business integration costs in
connection with acquisitions.
ADJUSTED NET INCOME
For the fourth quarter of 2012, consolidated Adjusted net income of
$25.6 million ($0.4329 per share) remained relatively consistent with
the same period in 2011 ($0.4315 per share).
CONSOLIDATED CASH FLOW AND LIQUIDITY - FOURTH QUARTER
The following table is derived from, and should be read in conjunction
with, the Consolidated Statements of Cash Flows. Management believes
this disclosure provides useful additional information related to the
cash flows of the Corporation, repayment of debt and other investing
activities.
Consolidated Summary of Cash Flows
(in thousands of Canadian dollars, unaudited)
|
|
|
Quarter ended December 31,
|
|
|
|
2012
|
2011
|
|
Cash and cash equivalents provided by (used in):
|
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
Income from continuing operations
|
|
$
|
13,711
|
$
|
15,369
|
|
Depreciation and amortization of assets
|
|
|
19,475
|
|
17,758
|
|
Amortization and fair value adjustment of derivative
|
|
|
|
|
|
|
instruments
|
|
|
(542)
|
|
(145)
|
|
Income from investment in an associate, net of tax
|
|
|
23
|
|
-
|
|
Difference in interest expense and cash interest paid
|
|
|
381
|
|
552
|
|
Non-cash income tax and options expenses
|
|
|
4,091
|
|
7,840
|
|
|
|
|
37,139
|
|
41,374
|
|
Changes in non-cash working capital items
|
|
|
24,740
|
|
6,746
|
|
Changes in other operating assets and liabilities and
|
|
|
|
|
|
|
|
discontinued operations
|
|
|
(2,743)
|
|
(1,080)
|
|
Net cash from operating activities
|
|
|
59,136
|
|
47,040
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
Net change in long-term indebtedness
|
|
|
(26,187)
|
|
(20,000)
|
|
Issuance costs, equity and debt
|
|
|
-
|
|
(28)
|
|
Distributions and dividends paid during the period
|
|
|
(18,956)
|
|
(18,362)
|
|
Net cash used in financing activities
|
|
|
(45,143)
|
|
(38,390)
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(9,717)
|
|
(10,632)
|
|
Net cash used in investing activities
|
|
|
(9,717)
|
|
(10,632)
|
|
Increase (decrease) in cash and cash equivalents for the period
|
|
|
4,276
|
|
(1,982)
|
|
Cash and cash equivalents, beginning of period
|
|
|
1,443
|
|
4,195
|
|
Cash and cash equivalents, end of period
|
|
$
|
5,719
|
$
|
2,213
|
As at December 31 2012, cash and cash equivalents totalled $5.7 million,
compared to $2.2 million at December 31, 2011.
Operating Activities
Operating activities provided $59.1 million during the three months
ended December 31, 2012, compared to $47.0 million for the same period
in 2011. The change in net cash from operating activities for the
three-month period ended December 31, 2012 compared to the same quarter
in 2011 was primarily due to working capital changes resulting from
lower receivables and higher accrued payables as described below.
Changes in Non-Cash Working Capital and Other Items
(in thousands of Canadian dollars, unaudited)
|
|
|
Quarter ended December 31,
|
|
|
|
2012
|
2011
|
|
Changes in non-cash working
|
|
|
|
|
capital items
|
$
|
24,740
|
$
|
6,746
|
|
Changes in other operating assets and
|
|
|
|
|
|
liabilities and discontinued operations
|
|
(2,743)
|
|
(1,080)
|
|
Decrease in non-cash working capital and
|
|
|
|
|
|
other items
|
$
|
21,997
|
$
|
5,666
|
The net decrease in non-cash working capital in the fourth quarter of
2012 primarily related to a decrease in trade receivables consistent
with lower revenue in the fourth quarter of 2012 compared to the third
quarter of 2012. Also contributing to the decrease in non-cash working
capital was lower apprenticeship tax credit receivable balances and
higher accrued payables related to compensation arrangements.
Financing Activities
Net cash used for financing activities was $45.1 million during the
quarter ended December 31, 2012, compared to $38.4 million used for the
same period in 2011. The net change during the quarter was primarily
due to debt repayments within our credit facilities and a dividend
increase in the fourth quarter of 2012. D+H made net repayments of
$26.2 million during the fourth quarter of 2012.
Dividends
During the fourth quarter of 2012, D+H paid a dividend of $0.32 per
share to its shareholders, following an increase in target annual
dividend from $1.24 per share to $1.28 per share annualized, for
shareholders of record as of November 30, 2012, to be paid on December
31, 2012. For the same quarter in 2011, $0.31 per share was paid to
shareholders.
Investing Activities
During the fourth quarter of 2012, $9.7 million was used by investing
activities, by way of capital expenditures, compared to $10.6 million
during the same period in 2011.
Capital Expenditures
Consolidated capital expenditures were $9.7 million for the fourth
quarter of 2012, $0.9 million lower compared to the same period of
2011. Higher capital expenditures in 2011 reflected timing of
expenditures as well as integration and upgrade activities, and
investing in the development of technology products and capability.
OPERATING RESULTS - 2012
The following tables should be read in conjunction with, the
Consolidated Statements of Income for the year ended December 31, 2012
and include non-IFRS financial measures. Management believes these
supplementary disclosures provide useful additional information. See
Non-IFRS Financial Measures section for a description of non-IFRS terms
used.
The consolidated results include those of ASSET, Mortgagebot and Avista,
effective from the respective dates of acquisition of January 18, 2011,
April 12, 2011 and May 3, 2012. Revenues and expenses relating to
ASSET have been reported as part of the Canadian Segment and revenues
and expenses related to Mortgagebot and Avista have been reported as
part of the U.S. Segment.
(in thousands of Canadian dollars, except per share amounts, unaudited)
|
|
Year ended December 31,
|
|
|
2012
|
2011
|
2010
|
|
Revenue
|
$
|
757,663
|
$
|
724,720
|
$
|
649,715
|
|
Expenses 1
|
574,457
|
547,320
|
502,604
|
|
EBITDA 1, 2
|
183,206
|
177,400
|
147,111
|
|
|
|
|
|
|
Depreciation of capital assets and amortization of non-acquisition
intangibles
|
29,183
|
23,900
|
20,304
|
|
Amortization of intangibles from acquisitions
|
44,638
|
40,731
|
28,288
|
|
Interest expense
|
19,214
|
18,962
|
13,988
|
|
Income from investment in an associate, net of tax
|
(68)
|
-
|
-
|
|
Amortization and fair value adjustment of derivative instruments 3
|
(2,016)
|
3,386
|
(803)
|
|
Income tax expense
|
23,118
|
633
|
3,300
|
|
Income from continuing operations
|
69,137
|
89,788
|
82,034
|
|
Income (loss) from discontinued operations, net of tax 4
|
-
|
140
|
(3,247)
|
|
Net income
|
69,137
|
89,928
|
78,787
|
|
|
|
|
Adjustments:
|
|
|
|
Non-cash items:
|
|
|
|
|
Amortization of intangibles from acquisitions
|
44,638
|
40,731
|
|
|
|
|
Amortization and fair value adjustment of derivative instruments 3
|
(2,016)
|
3,386
|
|
|
|
Other items of note:
|
|
|
|
|
|
|
Acquisition-related and other charges 1
|
14,938
|
3,753
|
|
|
|
|
Discontinued operations, net of tax 4
|
-
|
(140)
|
|
|
|
Tax effect of above adjustments (excluding discontinued operations) 6
|
(17,410)
|
(13,245)
|
|
|
|
Tax effect of corporate conversion and acquisitions 5
|
(1,156)
|
(20,757)
|
|
|
Adjusted net income 2
|
$
|
108,131
|
$
|
103,656
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income per share, basic and diluted 2, 6, 7
|
$
|
1.8255
|
$
|
1.8004
|
n/m
|
|
Income from continuing operations per share, basic and diluted 7
|
$
|
1.1672
|
$
|
1.5595
|
$
|
1.5410
|
|
Net income per share, basic and diluted 7
|
$
|
1.1672
|
$
|
1.5620
|
$
|
1.4800
|
|
|
|
|
|
Year ended December 31,
|
|
|
2012 vs. 2011
|
|
|
% change
|
|
Adjusted net income per share 2, 6, 7
|
1.4%
|
|
|
n/m = not measurable
|
|
|
|
|
1
|
Expenses included acquisition-related and other charges relating to
transaction costs and certain retention and incentive costs related to
the Avista and Mortgagebot acquisitions, charges related to cost
re-alignment initiatives, corporate development expenses related to
strategic acquisition initiatives, and business integration costs.
|
|
2
|
EBITDA and Adjusted net income are non-IFRS terms. See Non-IFRS
Financial Measures for a more complete
description of these terms.
|
|
3
|
Includes: (i) mark-to-market adjustments of interest-rate swaps that are
not designated as hedges for hedge accounting purposes, and for which
any change in the fair value of these contracts is recorded through the
Consolidated Statement of Income; and (ii) amortization of the
mark-to-market adjustment of interest-rate swaps relating to cumulative
net gains and losses that were deferred prior to January 1, 2007 when
hedge accounting was discontinued for these swaps.
|
|
4
|
D+H sold a non-strategic component of its contact centre business in
October 2010 and entered into a transition agreement with the buyer,
which expired on April 1, 2011. The results of these operations are
presented as discontinued operations.
|
|
5
|
Adjustments for 2012 included a non-cash tax recovery related to
liabilities recognized in connection with the acquisition of
Mortgagebot. Adjustments for 2011 included non-cash income tax
recoveries recorded in connection with the conversion to a corporation
and acquisitions and de-recognition of previously recognized tax
attributes.
|
|
6
|
The following adjustments to net income are tax effected at their
respective tax rates: (i) amortization of acquisition intangibles; (ii)
amortization and fair value adjustment on derivative instruments; and
(iii) acquisition-related and other charges.
|
|
7
|
Diluted net income from continuing operations per share, Diluted net
income per share and Diluted Adjusted net income per share (non-IFRS
term) reflect impacts of outstanding options. If the average market
price during the period is below the option price plus the fair market
value of the option, then the options are not
included in the dilution calculation.
|
Overview
Overall, D+H delivered solid operating performance in 2012 that was
consistent with its strategic agenda.
(in thousands of Canadian dollars, unaudited)
|
|
|
|
|
Year ended December 31,
|
|
|
|
|
|
Canadian Segment
|
|
U.S. Segment
|
|
Corporate
|
|
Consolidated
|
|
|
|
|
|
2012
|
2011
|
2010
|
|
2012
|
2011
|
2010
|
|
2012
|
2011
|
2010
|
|
2012
|
2011
|
2010
|
|
Revenue
|
|
|
|
$
|
701,018
|
$
|
695,921
|
$
|
649,715
|
|
$
|
56,645
|
$
|
28,799
|
$
|
-
|
|
$
|
-
|
$
|
-
|
$
|
-
|
|
$
|
757,663
|
$
|
724,720
|
$
|
649,715
|
|
|
Expenses
|
|
|
|
531,417
|
528,528
|
494,176
|
|
28,102
|
15,039
|
-
|
|
14,938
|
3,753
|
8,428
|
|
574,457
|
547,320
|
502,604
|
|
EBITDA 1
|
|
|
|
169,601
|
167,393
|
155,539
|
|
28,543
|
13,760
|
-
|
|
|
(14,938)
|
|
(3,753)
|
|
(8,428)
|
|
183,206
|
177,400
|
147,111
|
|
EBITDA Margin
|
|
|
|
24.2%
|
24.1%
|
23.9%
|
|
50.4%
|
47.8%
|
-
|
|
-
|
-
|
-
|
|
24.2%
|
24.5%
|
22.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
Acquisition-related and other charges 2
|
|
|
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
14,938
|
3,753
|
8,428
|
|
14,938
|
3,753
|
8,428
|
|
Adjusted EBITDA 1
|
|
|
|
$
|
169,601
|
$
|
167,393
|
$
|
155,539
|
|
$
|
28,543
|
$
|
13,760
|
$
|
-
|
|
$
|
-
|
$
|
-
|
$
|
-
|
|
$
|
198,144
|
$
|
181,153
|
$
|
155,539
|
|
Adjusted EBITDA Margin
|
|
|
|
24.2%
|
24.1%
|
23.9%
|
|
50.4%
|
47.8%
|
-
|
|
-
|
-
|
-
|
|
26.2%
|
25.0%
|
23.9%
|
|
1
|
EBITDA and Adjusted EBITDA are non-IFRS terms. See Non-IFRS Financial
Measures for a more complete description of these terms.
|
|
2
|
Acquisition-related and other charges for 2012 include transaction costs
and certain retention and incentive costs related to the Avista and
Mortgagebot acquisitions, charges related to cost re-alignment
initiatives, corporate development expenses related to strategic
acquisition initiatives and business integration costs. Amounts for
2011 consisted of transaction costs and certain retention and incentive
expenses related to the Mortgagebot acquisition. Amounts for 2010
related to restructuring charges incurred in connection with
transformation and integration initiatives.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canadian
|
U.S.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
|
Segment
|
Consolidated
|
|
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2012 vs. 2011
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2012 vs. 2011
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2012 vs. 2011
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% change
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% change
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% change
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Revenue
|
|
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|
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|
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0.7%
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96.7%
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4.5%
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EBITDA 1
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|
|
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|
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|
|
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1.3%
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107.4%
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3.3%
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Adjusted EBITDA 1
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|
|
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|
|
|
|
|
|
|
|
|
|
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1.3%
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107.4%
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9.4%
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1
|
EBITDA and Adjusted EBITDA are non-IFRS terms. See Non-IFRS Financial
Measures for a more complete description of these terms.
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Year ended December 31,
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Canadian
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U.S.
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Segment
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Segment
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Consolidated
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2011 vs. 2010
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2011 vs. 2010
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2011 vs. 2010
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% change
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% change
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% change
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
7.1%
|
n/a
|
11.5%
|
|
EBITDA 1
|
|
|
|
|
|
|
|
|
|
|
|
|
7.6%
|
n/a
|
20.6%
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|
Adjusted EBITDA 1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7.6%
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n/a
|
16.5%
|
|
1
|
EBITDA and Adjusted EBITDA are non-IFRS terms. See Non-IFRS Financial
Measures for a more complete description of these terms.
|
Year-over-year growth in consolidated revenues and EBITDA was driven by
both Canadian and U.S. Segments.
Strong growth in Mortgagebot and the inclusion of Avista were primary
contributors to year-over-year growth in revenues. Consolidated EBITDA
for 2012 also benefited from strong growth in Mortgagebot, inclusion of
Avista and savings realized from cost-realignment, transformation and
integration initiatives. These benefits were partially offset by
acquisition-related and other charges incurred in relation to
cost-realignment and strategic acquisition initiatives, and charges in
connection with the acquisitions of Mortgagebot and Avista and business
integration costs. Consolidated Adjusted EBITDA, which excludes these
charges, was higher in 2012 compared to 2011.
Compared to 2010, growth in revenues and EBITDA in 2011 were due
primarily to the inclusion of ASSET and Mortgagebot acquired on January
18, 2011 and April 12, 2011 respectively. EBITDA for 2010 included
restructuring charges related to integration and transformation
initiatives. These initiatives were designed to better position the
Business going forward to serve customers and improve the
effectiveness, efficiency and scalability of operations which have
resulted in efficiencies and improved delivery effectiveness. In the
latter part of 2011, the Business began to realize cost savings due to
efficiencies and improved delivery effectiveness associated with these
integration and transformation initiatives. These positive
contributions also continued to benefit consolidated EBITDA in 2012.
For 2012, consolidated net income was lower, while consolidated Adjusted
net income was higher, compared to 2011. Increase in Adjusted net
income is consistent with the overall growth of the Business.
Consolidated Adjusted net income excluded the following: (i) impacts of
non-cash items such as amortization of intangibles from acquisitions
and gains and losses related to fair value adjustment of derivative
instruments; (ii) other items of note such as acquisition-related and
other charges described earlier and discontinued operations; and (iii)
tax recoveries related to the changes in the tax status of D+H as a
result of the conversion from an income trust to a corporation, and
non-cash tax recoveries relating to acquisitions. Net income was also
adjusted for the tax impact of these items to arrive at Adjusted net
income.
REVENUE - ANNUAL
Consolidated
(in thousands of Canadian dollars, unaudited)
|
|
|
|
|
Year ended December 31,
|
|
|
|
|
|
2012
|
2011
|
2010
|
|
|
Payment solutions1
|
|
|
|
$
|
301,432
|
$
|
296,322
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$
|
293,838
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|
Loan registration and recovery services
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|
|
|
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167,344
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160,677
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|
111,683
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|
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Loan servicing
|
|
|
|
|
128,925
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131,143
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|
125,698
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|
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Lending technology services 2
|
|
|
|
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128,139
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|
99,454
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|
77,281
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|
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Business service solutions 3
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|
|
|
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31,823
|
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37,124
|
|
41,215
|
|
|
|
|
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$
|
757,663
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$
|
724,720
|
$
|
649,715
|
|
1
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Reported as Programs to chequing account in prior years.
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2
|
Includes revenue reported as part of the U.S. segment.
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3
|
Reported as Other in prior years.
|
Consolidated revenue for 2012 was $757.7 million, an increase of $32.9
million, or 4.5%, compared to 2011. The increase was primarily due to
growth in Mortgagebot and the inclusion of Avista acquired on May 3,
2012, in the U.S. Segment. To a lesser extent, payment solutions and
the loan registration service areas in the Canadian Segment also
contributed to revenue growth.
Consolidated revenue for 2011 of $724.7 million, increased by 11.5%,
compared to 2010 primarily due to the inclusion of ASSET acquired
January 18, 2011 and Mortgagebot, acquired April 12, 2011.
Revenue - Canadian Segment
Total revenues in the Canadian Segment for 2012 were $701.0 million, an
increase of $5.1 million, or 0.7%, compared to 2011.
(in thousands of Canadian dollars, unaudited)
|
|
|
Year ended December 31,
|
|
|
|
2012
|
2011
|
2010
|
|
|
Payment solutions 1
|
|
$
|
301,432
|
$
|
296,322
|
$
|
293,838
|
|
|
Loan registration and recovery services
|
|
|
167,344
|
|
160,677
|
|
111,683
|
|
|
Loan servicing
|
|
|
128,925
|
|
131,143
|
|
125,698
|
|
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Lending technology services 2
|
|
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71,494
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|
70,655
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|
77,281
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|
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Business service solutions 3
|
|
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31,823
|
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37,124
|
|
41,215
|
|
|
|
$
|
701,018
|
$
|
695,921
|
$
|
649,715
|
|
1
|
Reported as Programs to chequing account in prior years.
|
|
2
|
Excludes revenues from Mortgagebot and Avista.
|
|
3
|
Reported as Other in prior years.
|
Payment Solutions
Revenue from payment solutions for 2012 was $301.4 million, an increase
of $5.1 million, or 1.7%, compared to 2011. For 2011, payment
solutions revenue increased by $2.5 million, or 0.8%, compared to
2010. The year-over-year increases were attributable to the positive
impact of higher average order values and product and service
enhancements in the chequing and credit card programs partially offset
by volume declines in cheque orders. Management believes that the
downward trend in cheque order volumes is in the low to mid-single
digit range annually, and in recent periods, there has been more
volatility in personal cheque order volumes. Management expects that
this volatility will continue into 2013. D+H continues to develop
products and service enhancements to offset this impact and to generate
future growth within this category.
Loan Registration and Recovery Services
Loan registration and recovery services revenue for 2012 was $167.3
million, an increase of $6.7 million, or 4.1%, compared to 2011. This
increase was mainly due to higher transaction volumes in registration
services reflecting a continuing recovery in 2012 within the auto and
auto lending markets. Volumes in this area can be variable due to
changes in the economy and changes in the auto and auto lending
markets. Revenues related to registration services in 2011 benefited
from specific customer initiatives in 2011 that contributed to higher
revenues in that year. The increase in revenue attributable to higher
volumes in registration services was partially offset by an expected
decline in the automotive lending recovery services, due to
counter-cyclicality and certain program repatriations.
Loan registration and recovery services revenue for 2011 of $160.7
million increased by $49.0 million, or 43.9%, compared to 2010
primarily due to the inclusion of ASSET, acquired on January 18, 2011.
Loan Servicing
Loan servicing revenue for 2012 of $128.9 million decreased by $2.2
million, or 1.7%, compared to 2011. Loan servicing programs consist of
student loan administration services, the largest portion of revenues
within this service area, and credit card servicing. Modestly higher
volumes and higher professional fees in 2012 were offset by contractual
price declines and an expected reduction in fees from a previously
announced consolidation and integration between two customers within
the student loans program. We expect that the impact on revenue from
the consolidation and integration of the two customers discussed above
will continue through the first half of 2013. Activities related to
cost management and improving delivery efficiency are being directed
towards lowering the impact of reduced pricing and fees related to the
recent customer consolidation. The benefits from these cost management
initiatives that we started to realize in 2012 will continue into 2013.
Volumes in the student loan administration service area are expected to
be relatively stable and modestly growing in the short term. During
2012, D+H successfully extended its largest student loan servicing
contract for a multi-year term with opportunity for further
extensions. D+H services student loan portfolios under long-term
contracts to governments and financial institutions. Successfully
extending this contract provides greater certainty around revenue
streams within the student loan administration services component.
A modest increase in revenue within the student loan administration
services was offset by a decline in revenues in the credit card
servicing component within loan servicing programs. The decline in
2012 in the credit card servicing component compared to the prior year
was attributable to specific customer initiatives in prior periods that
contributed to higher revenues in those periods.
Loan servicing revenues for 2011 of $131.1 million increased 4.3% over
2010. Transaction revenue from student loan administrative services was
relatively unchanged for 2011 as compared to 2010 as an increase in
service volumes offset contractual price declines. The majority of the
annual revenue increase is attributed to the credit card servicing
area, primarily related to specific customer initiatives that increased
both revenues and expenses.
Lending Technology Services
Revenue from lending technology services related to the Canadian Segment
for 2012 was $71.5 million, an increase of $0.8 million, or 1.2%,
compared to 2011. A modest increase in market activity was partially
offset by the expected decrease in origination fees resulting from
customer repatriation of certain services. In general, due to
tightening of mortgage rules announced by the Department of Finance on
June 21, 2012 that became effective in July 2012, industry analysts
expect the recently observed reduction in Canadian housing market
prices and sales volumes to continue in major urban areas in 2013.
Revenues in the future periods may also be impacted by price
modifications, which are expected to be offset by potential revenue
increases from the launch of new products in the Canadian lending
market, including extension of our technology solutions across various
areas in the lending value chain.
Lending technology services revenue for 2011 was $70.7 million, a
decrease of $6.6 million, or 8.5%, compared to 2010. This decrease
was due to reduced transaction-based fees related to origination
volumes, which were impacted by the customer repatriation.
Business Service Solutions
Revenues from business service solutions for 2012 were $31.8 million,
compared to $37.1 million for 2011 and $41.2 million for 2010 due to
program repatriations by certain customers in prior periods. We expect
the effects of these repatriated businesses to stabilize in upcoming
periods. On October 7, 2010, the Business sold a non-strategic
component of its contact centre business and entered into a transition
agreement with the buyer, which expired on April 1, 2011. The results
of these operations were previously reported in this revenue category
and have been presented as discontinued operations for the comparative
periods presented.
Revenue - U.S. Segment
(in thousands of Canadian dollars, unaudited)
|
|
Year ended December 31,
|
|
|
2012
|
2011
|
2010
|
|
Lending technology services
|
$
|
56,645
|
$
|
28,799
|
$
|
-
|
U.S. Segment revenue related to online mortgage origination increased
96.5% to $56.6 million, compared to $28.8 million for 2011. The
increase in 2012 reflected the inclusion of Avista since its
acquisition in May 2012, annualization of Mortgagebot's revenue and the
strong ongoing organic growth in Mortgagebot as a result of higher
volumes driven by continued low interest-rate environment in the U.S.
and an increased customer base. Within the U.S. Segment,
subscription-based SaaS revenue represented approximately 68% of total
revenue for 2012 compared to 78% for 2011. Transaction revenue may be
impacted in future periods as the U.S. housing market continues to show
modest improvements and refinancing levels soften as interest rates
accelerate in the U.S.
EXPENSES
Expenses - Consolidated
(in thousands of Canadian dollars, unaudited)
|
|
|
|
Year ended December 31,
|
|
|
|
|
2012
|
2011
|
2010
|
|
Employee compensation and benefits 1
|
|
|
$
|
226,030
|
$
|
214,127
|
$
|
192,069
|
|
Non-compensation direct expenses 2
|
|
|
|
238,618
|
|
231,418
|
|
204,663
|
|
Other operating expenses 3
|
|
|
|
109,809
|
|
101,775
|
|
105,872
|
|
|
|
|
$
|
574,457
|
$
|
547,320
|
$
|
502,604
|
|
1
|
Employee compensation and benefits are net of apprenticeship tax credits
and amounts capitalized related to software product
development.
|
|
2
|
Non-compensation direct expenses include materials, shipping, selling
expenses and third party direct disbursements.
|
|
3
|
Other operating expenses include occupancy costs, communication costs,
licensing fees, professional fees, contractor fees and
expenses not included in other categories.
|
Consolidated expenses were $574.5 million for 2012, an increase of $27.1
million, or 5.0%, compared to 2011. This reflected the inclusion of the
Avista cost base, annualization of Mortgagebot expenses and an increase
in non-normal course expenses, which for 2012 included
acquisition-related and other charges of $14.9 million in Corporate,
consisting of cost-realignment initiatives, corporate development
expenses related to strategic acquisition initiatives, transaction
costs and retention and incentive costs related to acquisitions. For
2011, non-normal course expenses of $3.8 million were incurred in
connection with the acquisitions of ASSET and Mortgagebot, recorded as
part of Corporate.
Consolidated expenses for 2011 of $547.3 million increased by $44.7
million, or 8.9%, compared to 2010. The increase primarily reflected
the inclusion of ASSET and Mortgagebot expenses and the ongoing costs
associated with transformation and integration activities. These
increases were partially offset by cost management and other net
savings in 2011, and by the impact of a restructuring charge in 2010.
Expenses - Canadian Segment
Total expenses for the Canadian Segment for 2012 were $531.4 million, an
increase of $2.9 million, or 0.5%, compared to 2011. In 2011, Canadian
Segment expenses of $528.5 million increased by $34.3 million, or 7.0%,
compared to 2010 reflecting the inclusion of ASSET and the ongoing
costs associated with transformation and integration activities.
(in thousands of Canadian dollars, unaudited)
|
|
|
Year ended December 31,
|
|
|
|
2012
|
|
2011
|
2010
|
|
Employee compensation and benefits 1
|
|
$
|
199,078
|
|
$
|
203,880
|
$
|
183,641
|
|
Non-compensation direct expenses 2
|
|
|
237,556
|
|
|
230,503
|
|
204,663
|
|
Other operating expenses 3
|
|
|
94,783
|
|
|
94,145
|
|
105,872
|
|
|
|
$
|
531,417
|
|
$
|
528,528
|
$
|
494,176
|
|
1
|
Employee compensation and benefits are net of apprenticeship tax credits
and amounts capitalized related to software product
development.
|
|
2
|
Non-compensation direct expenses include materials, shipping, selling
expenses and third party direct disbursements.
|
|
3
|
Other operating expenses include occupancy costs, communication costs,
licensing fees, professional fees, contractor fees and
expenses not included in other categories. Other operating expenses are
net of inter-segment management fees received from
the U.S. segment.
|
Employee compensation and benefits
Employee compensation and benefits costs of $199.1 million for 2012,
decreased by $4.8 million, or 2.4%, compared to 2011. Expenses for 2012
benefited from savings realized as a result of cost-realignment
initiatives executed during 2012 and apprenticeship tax credits. These
benefits were partially offset by the replacement of contract labour
(recorded as other operating expenses) with full-time staff and an
increase in share-based compensation expense.
Employee compensation and benefits costs for 2011 were $203.9 million,
an increase of $20.2 million, or 11.0%, compared to 2010. The increase
was primarily related to the inclusion of ASSET expenses, and a general
increase in compensation levels, partially offset by the tax credits
related to the apprenticeship program. Replacement of contract labour
with full-time staff also contributed to the increase in 2011 compared
to 2010.
Non-compensation direct expenses
Non-compensation direct expenses for the Canadian Segment of $237.6
million, increased by $7.1 million, or 3.1%, compared to 2011. In
general, these expenses directionally change with revenue changes. An
increase in direct costs associated with the loan registration
services, which represents the largest portion of the increase, was
consistent with the increase in revenues in this service area. This
increase was partially offset by a decrease in direct costs in other
service areas.
Non-compensation direct expenses for 2011 of $230.5 million, increased
by $25.8 million, or 12.6%, compared to 2010. The increase was
primarily attributable to third party direct disbursements within the
recovery business.
Other operating expenses
Other operating expenses of $94.8 million increased by $0.6 million, or
0.7%, compared to 2011, primarily attributable to costs associated with
technology transformation, integration and risk mitigation initiatives.
The increases were partially offset by the replacement of contract
labour with full-time staff as discussed above and inter-segment
management fees charged to the U.S. Segment for shared services.
Other operating expenses for 2011 of $94.1 million decreased by $11.7
million, or 11.1%, compared to 2010. The decrease in other operating
expenses reflected decreases in several areas, including costs savings
realized from transformation and integration project initiatives, as
well as the impact of certain restructuring charges recorded in 2010.
Expenses - U.S. Segment
Total expenses for the U.S. Segment for 2012 were $28.1 million, an
increase of $13.1 million, compared to 2011. The increase was
attributable to the inclusion of the Avista cost base, effective from
the date of acquisition of May 3, 2012 and annualization of Mortgagebot
expenses.
(in thousands of Canadian dollars, unaudited)
|
|
|
Year ended December 31,
|
|
|
|
2012
|
|
2011
|
2010
|
|
Employee compensation and benefits
|
|
$
|
15,946
|
|
$
|
8,493
|
$
|
-
|
|
Non-compensation direct expenses
|
|
|
1,062
|
|
|
915
|
|
-
|
|
Other operating expenses 1
|
|
|
11,094
|
|
|
5,631
|
|
-
|
|
|
|
$
|
28,102
|
|
$
|
15,039
|
$
|
-
|
|
1
|
Other operating expenses include inter-segment management fees,
occupancy costs, and expenses not included in other categories.
|
Employee compensation and benefits costs of $15.9 million for 2012 for
the U.S. Segment, increased by $7.5 million, or 87.8%, compared to
2011. The increase was primarily due to the inclusion of the Avista
cost base, increased headcount to accommodate growth in the Mortgagebot
business and annualization of Mortgagebot expenses.
Non-compensation direct expenses for the U.S. Segment of $1.1 million,
increased by $0.1 million, or 16.1%, compared to 2011 due to the
inclusion of Avista and timing of the Mortgagebot acquisition. In
general, these expenses directionally change with revenue changes.
Other operating expenses of $11.1 million for 2012 increased by $5.5
million, or 97.0%, compared to 2011, primarily attributable to expenses
associated with cloud-based growth initiatives, annualization of
Mortgagebot and the inclusion of Avista. Also included in other
expenses for the periods presented are inter-segment management fees
charged by the Canadian Segment for shared services.
Expenses - Corporate
(in thousands of Canadian dollars, unaudited)
|
|
|
Year ended December 31,
|
|
|
|
2012
|
|
2011
|
2010
|
|
Employee compensation and benefits
|
|
$
|
11,006
|
|
$
|
1,754
|
$
|
8,428
|
|
Non-compensation direct expenses
|
|
|
-
|
|
|
-
|
|
-
|
|
Other operating expenses
|
|
|
3,932
|
|
|
1,999
|
|
-
|
|
|
|
$
|
14,938
|
|
$
|
3,753
|
$
|
8,428
|
Employee compensation and benefits
Employee compensation and benefits expenses for 2012 in Corporate of
$11.0 million consisted of charges related to cost-realignment
initiatives of $6.7 million, and retention and incentive expenses of
$4.3 million incurred in connection with the Avista and Mortgagebot
acquisitions. Charges incurred in relation to the cost-realignment
initiatives are expected to benefit the Company in both current and
future periods. Annualized savings are expected to be realized going
forward, and will be used to offset an increase in expenses to support
future growth. These cost-realignment initiatives were made possible by
the recent completion of a successful business integration project that
began in late 2010.
Employee compensation and benefits expenses for 2011 in Corporate of
$1.8 million consisted of retention and incentive expenses in
connection with the Mortgagebot acquisition, while the 2010 expenses
consisted of a restructuring charge related to transformation and
integration initiatives.
Other expenses
Other expenses for 2012 in Corporate included corporate development
expenses related to strategic acquisition initiatives of $3.0 million,
transaction costs of $0.6 million incurred in connection with the
acquisition of Avista and business integration costs of $0.3 million.
Other expenses for 2011 consisted of transaction costs related to the
Mortgagebot and ASSET acquisitions.
EBITDA AND EBITDA MARGIN
Consolidated
Consolidated EBITDA of $183.2 million, increased by $5.8 million, or
3.3%, compared to $177.4 million for the same period in 2011. Growth in
EBITDA in 2012 was mainly driven by the U.S Segment, partially offset
by the impact of expenses not incurred in the normal course of
operations recorded in Corporate.
Compared to 2010, EBITDA for 2011 increased by $30.3 million, or 20.6%.
The majority of the increase was attributable to the inclusion of ASSET
and Mortgagebot and the impact of the 2010 restructuring charge on
EBITDA. EBITDA for 2011 was reduced by acquisition-related costs of
$3.8 million in connection with the acquisitions of ASSET and
Mortgagebot. EBITDA for 2010 was impacted by a restructuring charge of
$8.4 million.
Consolidated EBITDA margin of 24.2% decreased from 24.5% in 2011
attributable to an increase in non-normal course expenses in 2012 in
Corporate compared to 2011, as described below.
Canadian Segment
Canadian Segment EBITDA for 2012 of $169.6 million was higher by 1.3%,
compared to EBITDA of $167.4 million for 2011 and $155.5 million for
2010 due to the benefits realized from transformation and integration
initiatives and cost-realignment initiatives, partially offset by the
impact of integration and program repatriation by customers as
previously described. Cost management activities are being directed
towards lowering the impact of reduced pricing and fees as a result of
the integration and repatriation by the customers as described above.
Compared to 2010, Canadian Segment EBITDA for 2011 also benefited from
the inclusion of ASSET acquired in early 2011.
Canadian Segment EBITDA margin for 2012 of 24.2%, compared favourably to
an EBITDA margin of 24.1% in 2011 and 23.9% in 2010, due to benefits
realized from transformation and integration initiatives.
U.S. Segment
U.S. Segment EBITDA for 2012 was $28.5 million, compared to $13.8
million for 2011, attributable to strong growth in, and annualization
of, the Mortgagebot business as well as the inclusion of Avista results
effective from the date of acquisition of May 3, 2012.
Corporate
EBITDA for Corporate for 2012 included the impacts of: $6.7 million of
charges in relation to cost-realignment initiatives as described
earlier; corporate development costs related to strategic acquisition
initiatives of $3.0 million; retention and incentive expenses of $4.3
million incurred in connection with Avista and Mortgagebot
acquisitions; transaction costs of $0.6 million incurred in connection
with the acquisition of Avista; and business integration costs of $0.3
million.
Corporate EBITDA in 2011 was impacted by the acquisition-related
expenses related to the Mortgagebot and ASSET acquisitions, whereas the
2010 Corporate EBITDA included a restructuring charge.
ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN
Consolidated
Consolidated Adjusted EBITDA excludes: (i) acquisition-related expenses
such as transaction costs, and certain retention and incentive costs
incurred as part of the acquisitions; and (ii) other charges incurred
in connection with cost-realignment initiatives, corporate development
expenses related to strategic acquisition initiatives and business
integration costs, all of which are not considered to be part of the
normal course of operations. These items are excluded from the
calculation of Adjusted EBITDA as they are not considered indicative of
the underlying business performance for the period being reviewed and
management believes that excluding these adjustments is more reflective
of ongoing operating results.
Consolidated Adjusted EBITDA of $198.1 million for 2012, increased by
$17.0 million, or 9.4%, compared to 2011. Consolidated Adjusted EBITDA
for 2012 excluded acquisition-related expenses and other charges
totalling $14.9 million related to non-normal course expenses,
transaction costs and retention and incentive expenses for the Avista
and Mortgagebot acquisitions and business integration costs.
Consolidated Adjusted EBITDA of $181.2 million for 2011, increased by
$25.6 million, or 16.5%, compared to 2010, primarily due to the
inclusion of ASSET and Mortgagebot.
Consolidated Adjusted EBITDA margin for 2012 was 26.2%, compared to
25.0% for 2011 and 23.9% in 2010 and the year-over-year growth in both
years was due to EBITDA growth in the U.S. Segment and benefits
realized from transformation and integration initiatives in the
Canadian Segment.
DEPRECIATION OF CAPITAL ASSETS AND AMORTIZATION OF NON-ACQUISITION
INTANGIBLES
Consolidated depreciation of capital assets and amortization of
non-acquisition intangible assets increased year-over-year by $5.3
million, or 22.1%, to $29.2 million in 2012. The increase was related
to the commencement of amortization of completed projects in 2012.
Depreciation of capital assets and amortization of non-acquisition
intangible assets for 2011 increased by $3.6 million, or 17.7%,
compared to 2010. The increase was primarily due to increased capital
additions in 2010 and 2011 and the inclusion of the ASSET and
Mortgagebot businesses.
AMORTIZATION OF INTANGIBLES FROM ACQUISITIONS
Consolidated amortization of acquisition-related intangibles for 2012
was $44.6 million, an increase of $3.9 million, or 9.6%, compared to
2011. The increase was mainly due to acquisition intangibles from the
Mortgagebot and Avista acquisitions.
Amortization of acquisition-related intangibles for 2011 increased by
$12.4 million, compared to 2010 due to the addition of intangibles
related to the acquisitions of ASSET and Mortgagebot.
INTEREST EXPENSE
Interest expense for 2012 was higher by $0.3 million, compared to 2011,
due to increased long-term, fixed-rate borrowings related to the
acquisition of Avista and a minority investment in Compushare. The
increase in interest expense in 2012 was partially offset by favourable
pricing on the renewed credit facility due to renegotiated terms.
Interest expense for 2011 increased by $5.0 million, compared to 2010,
due to increased borrowings in relation to the acquisitions of ASSET
and Mortgagebot.
INCOME FROM INVESTMENT IN AN ASSOCIATE
Consolidated net income for 2012 included D+H's share of income related
to the investment in an associate, Compushare, effective from April 24,
2012. The investment in Compushare is accounted for using the equity
method of accounting and is recognized initially at cost. The cost of
the investment includes transaction costs.
Subsequent to the year ended December 31, 2012, D+H exercised its option
to purchase all outstanding shares of Compushare, which resulted in
100% ownership of Compushare effective from the date of acquisition of
January 29, 2013.
AMORTIZATION AND FAIR VALUE ADJUSTMENT OF DERIVATIVE INSTRUMENTS
Interest-rate swaps
For 2012, net unrealized gain related to interest-rate swaps was $2.0
million, compared to a net unrealized loss of $3.4 million for 2011
reflecting fair value adjustments related to changes in market interest
rates at December 31, 2012 compared to December 31, 2011. For 2010, a
net unrealized gain of $0.8 million was recorded.
INCOME TAX EXPENSE
In 2012, an income tax expense of $23.1 million was recorded (2011 -
$0.6 million expense). The Company continued realizing the benefit of
prior-year tax losses and unamortized tax balances such that no
significant cash taxes were payable in 2012. Due to its corporate
structure and certain available tax losses, the Company does not expect
to pay any significant cash taxes until after 2013.
The income tax expense for 2012 was partially offset by a tax recovery
related to liabilities recognized in connection with the acquisition of
Mortgagebot.
Income tax expense for 2011 was reduced by a tax recovery related to the
recognition of a deferred tax asset attributable to losses of certain
U.S. subsidiaries that are now expected to be realized as a result of
the acquisition of Mortgagebot, as well as the recognition of a
deferred tax asset related to intangible assets that are now expected
to be realized as a consequence of the corporate conversion and an
internal reorganization, but partially offset by the de-recognition of
certain previously recorded tax attributes. The deferred tax expense
was also partially offset by a recovery related to changes in timing
and permanent differences between tax and accounting balances.
NET INCOME
Consolidated net income of $69.1 million, was lower by $20.8 million, or
23.1%, compared to $89.9 million for 2011. Net income for 2012
benefited from higher EBITDA and unrealized gains of $2.0 million
related to fair value changes on interest-rate swaps, compared to an
unrealized mark-to-market loss of $3.4 million recognized in 2011. The
increases in 2012 were more than offset by higher depreciation of
capital assets and amortization of acquisition and non-acquisition
intangibles described earlier. Net income for 2011 benefited from the
inclusion of non-cash tax recoveries of $20.8 million attributable to
D+H's conversion to a corporation and a non-cash tax recovery relating
to losses within certain US subsidiaries that were not previously
recognized in connection with the acquisition of Mortgagebot.
Consolidated net income of $89.9 million for 2011 increased by $11.1
million, or 14.1%, compared to 2010. The increase was primarily
attributable to the impacts of the ASSET and Mortgagebot acquisitions,
the changes in the tax status of the Business as a result of the
conversion from an income trust to a corporation, the non-cash
unrealized loss on interest-rate swaps and the various impacts of
acquisition-related items and tax recoveries as previously described.
ADJUSTED NET INCOME
Effective January 1, 2011, as a result of the conversion from an income
trust structure to a corporate structure, the Business commenced using
Adjusted net income as a measure for evaluating its results. Adjusted
net income is a non-IFRS financial measure. See Non-IFRS Financial
Measures for a more complete description of this term. Periods prior
to January 1, 2011 do not have a comparable measure for Adjusted net
income.
Consolidated Adjusted net income for 2012 was $108.1 million, an
increase of $4.5 million, or 4.3%, compared to $103.7 million for
2011. Consolidated Adjusted net income for 2012 excluded a non-cash
tax recovery of $1.2 million related to liabilities recognized in
connection with the acquisition of Mortgagebot. Consolidated Adjusted
net income for 2011 excluded non-cash tax recoveries of $20.8 million
related to (i) the changes in the tax status of D+H as a result of the
conversion from an income trust to a corporation and (ii) the
acquisition of Mortgagebot in relation to losses within certain U.S.
subsidiaries that were not previously recognized.
CONSOLIDATED CASH FLOW AND LIQUIDITY
The following table is derived from, and should be read in conjunction
with, the Consolidated Statements of Cash Flows. Management believes
this disclosure provides useful additional information related to the
cash flows of the Corporation, repayment of debt and other investing
activities.
Consolidated Summary of Cash Flows
(in thousands of Canadian dollars, unaudited)
|
|
|
Year ended December 31,
|
|
|
|
2012
|
2011
|
2010
|
|
Cash and cash equivalents provided by (used in):
|
|
|
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
69,137
|
$
|
89,788
|
$
|
82,034
|
|
Depreciation and amortization of assets
|
|
|
73,821
|
|
64,631
|
|
48,592
|
|
Amortization and fair value adjustment of derivative instruments
|
|
|
(2,016)
|
|
3,386
|
|
(803)
|
|
Income from investment in an associate, net of tax
|
|
|
(68)
|
|
-
|
|
-
|
|
Business combination adjustments
|
|
|
-
|
|
-
|
|
2,257
|
|
Difference in interest expense and cash interest paid
|
|
|
2,096
|
|
1,567
|
|
993
|
|
Non-cash income tax and options expenses
|
|
|
23,992
|
|
943
|
|
3,300
|
|
|
|
|
166,962
|
|
160,315
|
|
136,373
|
|
Changes in non-cash working capital items
|
|
|
(3,881)
|
|
(23,021)
|
|
423
|
|
Changes in other operating assets and liabilities and discontinued
operations
|
|
|
105
|
|
1,387
|
|
457
|
|
Net cash from operating activities
|
|
|
163,186
|
|
138,681
|
|
137,253
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net change in long-term indebtedness
|
|
|
(3,415)
|
|
149,505
|
|
(11,000)
|
|
Issuance costs, equity and debt
|
|
|
(902)
|
|
(9,928)
|
|
(2,564)
|
|
Proceeds from issuance of shares
|
|
|
-
|
|
121,800
|
|
-
|
|
Distributions and dividends paid during the year
|
|
|
(74,042)
|
|
(70,640)
|
|
(97,928)
|
|
Net cash from (used in) financing activities
|
|
|
(78,359)
|
|
190,737
|
|
(111,492)
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(33,317)
|
|
(35,356)
|
|
(30,264)
|
|
Acquisition of investment in an associate
|
|
|
(10,058)
|
|
-
|
|
-
|
|
Acquisition of subsidiaries
|
|
|
(37,946)
|
|
(292,993)
|
|
167
|
|
Sale of discontinued operations
|
|
|
-
|
|
-
|
|
1,602
|
|
Net cash used in investing activities
|
|
|
(81,321)
|
|
(328,349)
|
|
(28,495)
|
|
Increase (decrease) in cash and cash
|
|
|
|
|
|
|
|
|
|
equivalents for the year
|
|
|
3,506
|
|
1,069
|
|
(2,734)
|
|
Cash and cash equivalents, beginning of year
|
|
|
2,213
|
|
1,144
|
|
3,878
|
|
Cash and cash equivalents, end of year
|
|
$
|
5,719
|
$
|
2,213
|
$
|
1,144
|
As at December 31, 2012, cash and cash equivalents totalled $5.7
million, compared to $2.2 million at December 31, 2011.
Operating Activities
For 2012, operating activities provided $163.2 million, compared to
$138.7 million during 2011, an increase of $24.5 million, or 17.7%. The
changes in net cash from operating activities for 2012 compared to 2011
was due to strong growth in EBITDA compared to 2011 reflecting the
annualization of Mortgagebot's results and the inclusion of Avista.
Net cash from operating activities for 2011 increased by $1.4 million,
or 1.0%, compared to 2010.
Changes in Non-Cash Working Capital and Other Items
(in thousands of Canadian dollars, unaudited)
|
|
Year ended December 31,
|
|
|
2012
|
2011
|
2010
|
|
|
|
|
|
|
Changes in non-cash working
|
|
|
|
|
capital items
|
$
|
(3,881)
|
$
|
(23,021)
|
$
|
423
|
|
Changes in other operating assets and
|
|
|
|
|
liabilities and discontinued operations
|
105
|
1,387
|
457
|
|
Decrease (increase) in non-cash working capital and
|
|
|
|
|
other items
|
$
|
(3,776)
|
$
|
(21,634)
|
$
|
880
|
The net increase in non-cash working capital for 2012 was primarily
attributable to an increase in trade receivables related to
year-over-year revenue growth, partially offset by an increase in
deferred revenue attributable to growth in enhancement services that is
part of the payment solutions service area.
The net increase in non-cash working capital items during 2011 was
attributable to several items including increases in trade receivables
and prepaid expenses in connection with enhancement services. The net
increase in working capital was also attributable to the receivables
related to the apprenticeship tax credits program during 2011.
Payables remained relatively unchanged from 2010.
The Company expects to experience continued variability of non-cash
working capital due to the nature and timing of services rendered in
connection with the businesses acquired.
Financing Activities
Net cash used for financing activities during 2012 was $78.4 million
compared to $190.7 million provided by financing activities during
2011. Net cash used for 2012 reflects drawings on credit facilities to
fund the Compushare investment and the Avista acquisition in April and
May 2012, respectively, increased dividend payments, and debt
repayments during the year. In 2012, D+H drew $50.6 million to finance
the acquisition of Avista and the minority investment in Compushare and
also made net debt repayments of $54.0 million. Increased dividend
payments during the current year were a result of D+H increasing its
target annual dividend from $1.24 per share to $1.28 per share
annualized. A quarterly dividend at the higher prescribed rate of $0.32
was paid on December 31, 2012 to shareholders of record as of November
30, 2012.
Net cash provided by financing activities during 2011 reflected net
proceeds from the issuance of equity and debt to fund the Mortgagebot
and ASSET acquisitions in 2011.
Dividends
During 2012, D+H paid $1.25 per share to its shareholders ($0.31 for the
first three quarters and $0.32 for the fourth quarter). During 2011,
$1.2233 per share was paid. Dividends paid during 2011 were comprised
of a $0.1533 per unit distribution that was paid on January 31, 2011
(declared on December 31, 2010 when D+H was an income trust), a $0.15
per share special dividend paid on March 31, 2011, a $0.30 per share
dividend paid on June 30, 2011 and $0.31 per share paid on September
30, 2011 and December 31, 2011.
In 2010, cash distributions paid were $1.8396 per unit.
Investing Activities
For 2012, investing activities used $81.3 million compared to $328.3
million in 2011.
Amounts for 2012 reflected the acquisition of Avista in May 2012 and the
acquisition of a minority investment in Compushare in April 2012, and
amounts for 2011 reflected the ASSET and Mortgagebot acquisitions in
January and April 2011 respectively.
Capital Expenditures
Consolidated capital expenditures were $33.3 million, a decrease of $2.0
million, compared to 2011, due to timing of capital expenditures.
Expenditures in 2012 and 2011 included investment in integration and
upgrade activities as well as development of technology products and
capability.
Capital expenditures for 2011 increased by $5.1 million compared to 2010
primarily due to increased integration and upgrade activities,
consistent with the higher capital spend commencing in the latter part
of 2010, and investments in building technology products and
capability.
EIGHT QUARTER CONSOLIDATED STATEMENT OF INCOME - SUMMARY1
(in thousands of Canadian dollars, except per share amounts, unaudited)
|
|
|
|
|
|
2012
|
2011
|
|
|
Q4
|
Q3
|
Q2
|
Q1
|
Q4
|
Q3
|
Q2
|
Q1
|
|
Revenue
|
$
|
187,175
|
$
|
191,807
|
$
|
197,068
|
$
|
181,613
|
$
|
183,777
|
$
|
186,275
|
$
|
185,120
|
$
|
169,548
|
|
Expenses2
|
|
145,904
|
|
143,811
|
|
143,962
|
|
140,780
|
|
138,202
|
|
140,050
|
|
137,023
|
|
132,045
|
|
EBITDA 2, 3
|
|
41,271
|
|
47,996
|
|
53,106
|
|
40,833
|
|
45,575
|
|
46,225
|
|
48,097
|
|
37,503
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related and other charges 2
|
|
6,558
|
|
3,265
|
|
4,378
|
|
737
|
|
637
|
|
610
|
|
707
|
|
1,799
|
|
Adjusted EBITDA 3
|
$
|
47,829
|
$
|
51,261
|
$
|
57,484
|
$
|
41,570
|
$
|
46,212
|
$
|
46,835
|
$
|
48,804
|
$
|
39,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA 2, 3
|
$
|
41,271
|
$
|
47,996
|
$
|
53,106
|
$
|
40,833
|
$
|
45,575
|
$
|
46,225
|
$
|
48,097
|
$
|
37,503
|
|
Depreciation of capital assets and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of non-acquisition intangibles
|
|
7,956
|
|
7,030
|
|
7,360
|
|
6,837
|
|
6,749
|
|
5,820
|
|
5,827
|
|
5,504
|
|
Amortization of intangibles from acquisitions
|
|
11,519
|
|
10,930
|
|
11,250
|
|
10,939
|
|
11,009
|
|
11,040
|
|
10,590
|
|
8,092
|
|
Interest expense
|
|
4,629
|
|
4,943
|
|
4,821
|
|
4,821
|
|
4,909
|
|
4,792
|
|
5,272
|
|
3,989
|
|
Income from investment in an associate, net of tax
|
|
23
|
|
(53)
|
|
(38)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Amortization and fair value adjustment of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
derivative instruments4
|
|
(542)
|
|
(445)
|
|
616
|
|
(1,645)
|
|
(145)
|
|
3,991
|
|
1,227
|
|
(1,687)
|
|
Income tax expense (recovery)
|
|
3,975
|
|
5,986
|
|
8,210
|
|
4,947
|
|
7,684
|
|
5,522
|
|
1,717
|
|
(14,290)
|
|
Income from continuing operations
|
|
13,711
|
|
19,605
|
|
20,887
|
|
14,934
|
|
15,369
|
|
15,060
|
|
23,464
|
|
35,895
|
|
Income from discontinued operations, net of tax 5
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
140
|
|
Net income
|
$
|
13,711
|
$
|
19,605
|
$
|
20,887
|
$
|
14,934
|
$
|
15,369
|
$
|
15,060
|
$
|
23,464
|
$
|
36,035
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangibles from acquisitions
|
$
|
11,519
|
$
|
10,930
|
$
|
11,250
|
$
|
10,939
|
$
|
11,009
|
$
|
11,040
|
$
|
10,590
|
$
|
8,092
|
|
|
|
Amortization and fair value adjustment of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
derivative instruments 4
|
|
(542)
|
|
(445)
|
|
616
|
|
(1,645)
|
|
(145)
|
|
3,991
|
|
1,227
|
|
(1,687)
|
|
|
Other items of note:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related and other charges 2
|
|
6,558
|
|
3,265
|
|
4,378
|
|
737
|
|
637
|
|
610
|
|
707
|
|
1,799
|
|
|
|
Discontinued operations, net of tax 5
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(140)
|
|
|
Tax effect of above adjustments (excluding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
discontinued operations) 6
|
|
(5,603)
|
|
(4,051)
|
|
(4,758)
|
|
(2,998)
|
|
(3,391)
|
|
(4,465)
|
|
(3,256)
|
|
(2,133)
|
|
|
Tax effect of corporate conversion and acquisitions 7
|
|
-
|
|
(1,156)
|
|
-
|
|
-
|
|
2,080
|
|
-
|
|
(3,628)
|
|
(19,209)
|
|
Adjusted net income3
|
$
|
25,643
|
$
|
28,148
|
$
|
32,373
|
$
|
21,967
|
$
|
25,559
|
$
|
26,236
|
$
|
29,104
|
$
|
22,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income per share, basic and diluted 3, 8
|
$
|
0.4329
|
$
|
0.4752
|
$
|
0.5465
|
$
|
0.3709
|
$
|
0.4315
|
$
|
0.4429
|
$
|
0.4974
|
$
|
0.4275
|
|
Income from continuing operations per share,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
basic and diluted 8
|
$
|
0.2315
|
$
|
0.3310
|
$
|
0.3526
|
$
|
0.2521
|
$
|
0.2595
|
$
|
0.2542
|
$
|
0.4010
|
$
|
0.6743
|
|
Net income per share, basic and diluted 8
|
$
|
0.2315
|
$
|
0.3310
|
$
|
0.3526
|
$
|
0.2521
|
$
|
0.2595
|
$
|
0.2542
|
$
|
0.4010
|
$
|
0.6769
|
|
1
|
Results include those of Avista, effective from the date of acquisition
of May 3, 2012, Mortgagebot effective from the date of acquisition of
April 12, 2011 and ASSET, effective from the date of acquisition of
January 18, 2011.
|
|
2
|
Expenses include acquisition-related and other charges relating to
transaction costs incurred in connection with acquisition of
businesses, certain retention and incentive costs related to the Avista
and Mortgagebot acquisitions, charges related to cost re-alignment
initiatives,
corporate development expenses related to strategic acquisition
initiatives, and business integration costs.
|
|
3
|
EBITDA, Adjusted EBITDA and Adjusted net income are non-IFRS terms. See
Non-IFRS Financial Measures for a more complete description of these
terms.
|
|
4
|
Includes: (i) mark-to-market adjustments of interest-rate swaps that are
not designated as hedges for hedge accounting purposes, and for which
any change in the fair value of these contracts is recorded through the
Consolidated Statement of Income; and (ii) amortization of the
mark-to-market adjustment of interest-rate swaps relating to cumulative
net gains and losses that were deferred prior to January 1, 2007 when
hedge accounting was discontinued for these swaps.
|
|
5
|
D+H sold a non-strategic component of its contact centre business in
October 2010 and entered into a transition agreement with the buyer,
which expired on April 1, 2011. The results of these operations are
presented as discontinued operations.
|
|
6
|
The following adjustments to net income are tax effected at their
respective tax rates: (i) amortization of acquisition intangibles; (ii)
amortization and fair value adjustment on derivative instruments; and
(iii) acquisition-related and other charges.
|
|
7
|
Adjustments for the third quarter of 2012 included a non-cash tax
recovery related to liabilities recognized in connection with the
acquisition of Mortgagebot. Adjustments for the first and second
quarters of 2011 included non-cash income tax recoveries recorded in
connection with the conversion to a corporation and acquisitions.
Adjustments for the fourth quarter of 2011 related to de-recognition of
previously recognized tax attributes.
|
|
8
|
Diluted net income from continuing operations per share, Diluted net
income per share and Diluted Adjusted net income per share (non-IFRS
term) reflect impacts of outstanding options. If the average market
price during the period is below the option price plus the fair market
value of the option, then the options are not included in the dilution
calculation.
|
D+H has generally reported quarterly revenues that are relatively stable
and growing when measured on a year-over-year basis, however more
recent changes in the economic environment, specifically the housing
and mortgage markets and the auto lending markets, have increased
volatility. Also, there has been more volatility in personal cheque
order volumes. Measured on a sequential quarter-to-quarter basis,
revenues can also vary due to seasonality and are generally stronger in
the second and third quarters. The acquisitions of ASSET on January 18,
2011, Mortgagebot on April 12, 2011, and Avista on May 3, 2012
increased revenues and expenses. EBITDA was impacted by
acquisition-related and other charges during the quarters, including
transaction costs, business integration costs, and certain retention
and incentive costs related to acquisitions as well as other charges
attributable to cost-realignment initiatives and strategic acquisition
initiatives that are not considered to be incurred in the normal course
of operations. Adjusted EBITDA removes the impacts of these charges as
these are not indicative of the underlying business performance and
management believes that excluding these items is more reflective of
ongoing operating results.
Per share amounts were also impacted by the issuance of 6,000,000
additional shares of Davis + Henderson Corporation in April 2011 to
partially fund the acquisition of Mortgagebot.
Net income has been more variable as it has been affected by non-cash
items such as fair value adjustments of interest-rate swaps,
amortization of intangibles from acquisitions, acquisition-related and
other charges and changes in other non-cash tax items.
Common Shares Outstanding
As at December 31, 2012, and February 26, 2013, common shares
outstanding were 59,233,373, the same as at December 31, 2011.
Normal Course Issuer Bid ("NCIB")
On September 10, 2012, D+H announced that it received regulatory
approval from the Toronto Stock Exchange ("TSX") to carry out a NCIB,
pursuant to which the Corporation, during the period from September 12,
2012 to September 11, 2013, would be authorized to purchase up to
1,777,000 common shares, representing approximately 3% of the
Corporation's issued and outstanding common shares as at September 4,
2012. Daily purchases will be limited to 37,491 common shares, other
than block purchase exemptions.
Purchases will be made by the Company in accordance with the
requirements of the TSX and the price which the Company will pay for
any such common shares will be the market price of any such common
shares at the time of acquisition, or such other price as may be
permitted by the TSX. Any tendered shares taken up and paid for by the
Company will be cancelled.
The Company intends to fund these purchases through available cash. D+H
believes that the market price of its common shares, from time to time,
may not reflect their underlying value based on the Company's business
and strong financial position. As a result, D+H believes that an
investment in its outstanding common shares represents an attractive
investment and a desirable use of a portion of its corporate funds.
Automatic Share Purchase Plan
D+H also announced that it entered into an automatic share purchase plan
with a broker in order to facilitate repurchases of its common shares
under its NCIB, and under which the broker may repurchase common shares
under the NCIB at any time including without limitation when D+H would
ordinarily not be permitted to due to regulatory restrictions or
self-imposed blackout periods, based upon the parameters prescribed by
the TSX and the terms of the parties' agreement. The automatic share
purchase plan has been reviewed and approved by the TSX.
As of February 26, 2013, no shares were purchased under the NCIB.
Financial Instruments
The Company utilizes interest-rate swaps to hedge interest rate exposure
and foreign exchange forward contracts to hedge foreign currency.
Interest-rate swaps
In respect of interest-rate swap contracts with its lenders, as of
December 31, 2012, the Company's borrowing rates on 55.1% of
outstanding long-term indebtedness under the Seventh Amended and
Restated Credit Agreement ("Credit Agreement") are effectively fixed at
the interest rates and for the time periods ending as outlined in the
following table:
(in thousands of Canadian dollars, unaudited)
|
|
|
Fair value of interest-rate
swaps
|
|
|
Maturity Date
|
Notional amount
|
Asset
|
Liability
|
Interest Rate ¹
|
|
|
December 18, 2014
|
$
|
25,000
|
$
|
-
|
$
|
648
|
2.720%
|
|
|
March 18, 2015
|
|
25,000
|
|
-
|
|
836
|
2.940%
|
|
|
March 18, 2017
|
|
25,000
|
|
-
|
|
1,772
|
3.350%
|
|
|
March 20, 2017
|
|
20,000
|
|
-
|
|
1,430
|
3.366%
|
|
|
$
|
95,000
|
$
|
-
|
$
|
4,686
|
|
|
1
|
The listed interest rates exclude bankers' acceptance fees and
prime-rate spreads currently in effect. Such fees and spreads could
increase or decrease depending on the Company's financial leverage
compared to certain levels specified in the Credit Agreement.
Based on the financial leverage as at December 31, 2012, the Company's
long-term bank indebtedness will be subject to bankers'
acceptance fees of 1.50% over the applicable BA rate and prime rate
spreads of 0.50% over the prime rate.
|
As at December 31, 2012, the Company would have to pay the fair value of
$4.7 million if it were to close out all of its interest-rate swap
contracts as set out in the Consolidated Statement of Financial
Position. It is not the present intention of management to close out
these contracts and the Company has historically held its derivative
contracts to maturity.
Foreign exchange forward contracts
The Company enters into foreign exchange contracts from time to time to
fix foreign exchange rates on its foreign currency transactions.
Under these contracts, the Company is required to deliver the agreed
U.S. dollar amount and in return receive the contracted Canadian dollar
amount set forth in each contract. The Company has historically held
its derivative contracts to maturity.
These foreign exchange contracts are designated as hedges of the
Corporation's net investment in foreign operations for which U.S.
dollar is the functional currency, in accordance with IFRS for hedge
accounting purposes. The Company accounts for these hedges as net
investment hedges as per IAS 39. The unrealized gains or losses arising
from recording the foreign exchange contracts at fair value at each
reporting date, to the extent that the hedging relationship is
effective, are recorded in other comprehensive income or loss ("OCI")
and presented in the foreign currency translation reserve within
equity, and are limited to the translation gain or loss on the net
investment. When the hedged net investment is disposed of, the relevant
amounts in the translation reserve is transferred to profit or loss as
part of the gain or loss on disposal.
The Company had no foreign exchange forward contracts in place as at
December 31, 2012.
SELECTED BALANCE SHEET INFORMATION
|
|
|
Year ended December 31,
|
|
(in thousands of Canadian dollars, unaudited)
|
|
2012
|
2011
|
2010
|
|
Total assets
|
|
$
|
1,289,390
|
$
|
1,283,325
|
$
|
933,037
|
|
Total long-term liabilities
|
|
$
|
474,089
|
$
|
466,800
|
$
|
271,461
|
Total assets of $1.3 billion at December 31, 2012 increased by $6.1
million compared to December 31, 2011. The increase mainly relates to
an increase in cash and accounts receivable balances as at December 31,
2012 compared to December 31, 2011. The increase in cash was
attributable to timing of payments and the increase in accounts
receivable balance at December 31, 2012 related to higher revenues in
2012 compared to 2011.
Total assets of $1.3 billion at December 31, 2011 increased by $350.3
million compared to December 31, 2010, primarily as a result of
goodwill and acquisition intangibles from the ASSET and Mortgagebot
acquisitions.
Long-term liabilities at December 31, 2012 increased by $7.3 million
compared to 2011, mainly due to an increase in deferred tax liabilities
attributable to intangibles related to acquisitions, temporary
differences related to capitalized software development expenses and
increased deferred partnership income. This increase was partially
offset by a decrease in long-term indebtedness attributable to
significant debt repayments during 2012, and a decrease in derivative
liabilities related to the interest-rate swaps as a result of lower
interest rates. Long-term liabilities at December 31, 2011 increased
by $195.3 million compared to 2010 primarily due to the increase in
long-term borrowings related to the ASSET and Mortgagebot acquisitions
and adjustments to deferred tax liabilities related to the
acquisitions.
CONTRACTUAL OBLIGATIONS
The table below presents the contractual obligations of the Business as
at December 31, 2012 and the timing of the expected payments.
|
|
|
|
|
|
|
|
Less than
|
1 - 3
|
4 - 5
|
After 5
|
|
(in thousands of Canadian dollars, unaudited)
|
Total
|
1 year
|
years
|
years
|
years
|
|
Long-term indebtedness
|
$
|
346,324
|
$
|
-
|
$
|
-
|
$
|
252,306
|
$
|
94,018
|
|
Operating leases
|
|
32,257
|
|
8,440
|
|
11,853
|
|
6,007
|
|
5,957
|
|
Employee future benefits
|
|
2,938
|
|
184
|
|
367
|
|
367
|
|
2,020
|
|
Obligations relating to deferred compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
program
|
|
|
|
|
|
|
4,691
|
|
2,154
|
|
2,537
|
|
-
|
|
-
|
|
Other obligations
|
|
5,666
|
|
5,024
|
|
642
|
|
-
|
|
-
|
|
|
$
|
391,876
|
$
|
15,802
|
$
|
15,399
|
$
|
258,680
|
$
|
101,995
|
Long-Term Indebtedness
As at December 31, 2012, the Company had $529.0 million of committed
funds available. The Company also had $279.8 million of additional
uncommitted arrangements available, subject to prior approval of the
relevant lenders with any fees, spreads and other additional terms to
be negotiated at that time. Total committed funds consisted of $355.0
million under the credit facility and $174.0 million, which was drawn
from bonds, as described below. Total uncommitted funds consisted of
$150.0 million under the credit facility and $129.8 million from the
bonds, also as described below.
Long-term indebtedness is recorded on the Consolidated Statement of
Financial Position, net of unamortized deferred financing fees.
Long-term indebtedness as at December 31, 2012, before deducting
unamortized deferred finance fees of $5.7 million, was $346.3 million,
compared to $352.1 million at December 31, 2011.
Credit Facility
The long-term indebtedness as at December 31, 2012 included drawings
under a Credit Agreement dated April 12, 2011 of $172.3 million. Total
committed senior secured credit facilities under this Credit Agreement
as at December 31, 2012 were $355.0 million, consisting of a revolving
credit facility. Effective July 5, 2012, the Credit Agreement was
amended in accordance with the First Amending Agreement to the Seventh
Amended and Restated Credit Agreement ("Credit Agreement Amendment") to
extend the maturity date by one year to April 12, 2017 and include more
favourable pricing as well as amendments to certain covenants. The
Business is permitted to draw on the revolving facility's available
balance of $182.7 million to fund capital expenditures or for other
general purposes. The Credit Agreement contains a number of covenants
and restrictions, including the requirement to meet certain financial
ratios and financial condition tests. The financial covenants include
a leverage test, a fixed charge coverage ratio test and a limit on the
maximum amount of distributions by D+H to its shareholders during each
rolling four-quarter period. The Company was in compliance with all of
its financial covenants and financial condition tests as of the end of
its latest quarterly period.
As at December 31, 2012, the Credit Agreement provides for an additional
uncommitted credit arrangement of up to $150.0 million with the use of
the funds subject to the prior approval of the relevant lenders with
any fees, spreads and other additional terms to be negotiated at that
time.
Bonds
As at December 31, 2012, committed funds of $174.0 million were drawn
and $129.8 million of uncommitted funds were available from bonds.
The bonds consisted of the following: (i) fixed-rate bonds of $80.0
million issued under a Second Amended and Restated Note Purchase and
Private Shelf Agreement ("Note Purchase Agreement") dated April 12,
2011, which included a $50.0 million bond issued under the senior
secured Note Purchase Agreement at a fixed-interest rate of 5.99% and a
$30.0 million bond at 5.17%, both maturing on June 30, 2017; (ii) a
Note Purchase and Private Shelf Agreement ("Prudential Note Purchase
Agreement") pursuant to which the Company issued US$ 63.0 million of
senior secured guaranteed notes at 5.59%, maturing on April 12, 2021 to
partially fund the acquisition of Mortgagebot. Effective July 5, 2012,
this Note Purchase Agreement was amended in accordance with the First
Amendment to Second Amended and Restated Note Purchase and Private
Shelf Agreement ("Amendment to Note Purchase Agreement") to make
consequential changes to certain covenants. Also effective July 5,
2012, the Prudential Note Purchase Agreement was amended in accordance
with the First Amendment to Note Purchase and Private Shelf Agreement
("Amendment to Prudential Note Purchase Agreement") to increase the
uncommitted shelf per the Prudential Note Purchase Agreement by US$
50.0 million (from US$ 37.0 million to US$ 87.0 million), including
amendments to certain covenants. In addition, D+H issued US$ 16.5
million of senior secured guaranteed notes at 3.94%, maturing on June
30, 2022 reducing the available shelf to US$ 70.5 million.
Effective July 5, 2012, the Company also entered into a new Note
Purchase and Private Shelf Agreement ("NY Life Note Purchase
Agreement"), ranking equally in all material respects with the Credit
Agreement and Prudential Note Purchase Agreement, pursuant to which the
Company issued US$ 15.0 million of senior secured guaranteed notes at
3.94% maturing June 30, 2022 leaving an additional uncommitted shelf of
up to US$ 60.0 million with the use of the shelf subject to the prior
approval of the relevant lenders with any fees, spreads and other
additional items to be negotiated at that time.
Also during 2012, the aggregate proceeds from the US$ 31.5 million of
senior secured guaranteed notes issued pursuant to the Amendment to
Prudential Note Purchase Agreement and NY Life Note Purchase Agreement
were used to refinance amounts drawn under the Credit Agreement to fund
the Avista acquisition and for the Compushare investment.
The Credit Agreement, Credit Agreement Amendment, Note Purchase
Agreement, Amendment to Note Purchase Agreement, Prudential Note
Purchase Agreement, Amendment to Prudential Note Purchase Agreement and
NY Life Note Purchase Agreement are available at www.sedar.com.
The Company has historically hedged against increases in market interest
rates on certain of its debt by utilizing interest-rate swaps and by
issuing fixed rate long-term bonds as described above. As at December
31, 2012, the average effective interest rate on the Corporation's
total indebtedness was approximately 4.5%, compared to 4.9% as at
December 31, 2011.
Operating Leases
The Business rents facilities, equipment and vehicles under various
operating leases. At December 31, 2012, minimum payments under these
operating leases totalled $32.3 million.
Employee Future Benefits
Obligations relating to employee future benefits relate to the Company's
non-pension post-retirement benefit plans. The latest actuarial
valuation of the post-retirement benefit plans was performed as of
December 31, 2012.
Other Obligations
Other obligations include retention and incentive obligations related to
the Avista and Mortgagebot acquisitions.
Deferred Compensation Program
Deferred Compensation Program consists of obligations under the
Company's medium-term incentive plans consisting of two components: (i)
restricted share units plan ("RSUs") and (ii) performance share units
plan ("PSUs") both of which are cash-settled. RSUs have a term of
three years and vest 1/3 each year. PSUs have a term of three years
and vest in the third year. The performance target for the PSUs is
based on the annual three-year change in per share earnings during the
three-year vesting period as measured against a performance grid set
for a specific period. The per share earnings is a derivative
calculation of pre-incentive net income before taxes, amortization of
acquisition intangibles and gains or losses on interest-rate swaps, as
well as certain other adjustments made from time to time as approved by
the Human Resources and Governance Committee. The fair value amount
payable is recognized as an expense with a corresponding increase in
liabilities over the three-year vesting period. The liability is
re-measured at each reporting date and at settlement date. Any changes
in the fair value of the liability are recognized in profit or loss.
SUBSEQUENT EVENT
On January 29, 2013, D+H announced that it has exercised its option to
purchase all outstanding shares of Santa Ana, California-based
Compushare Inc., a technology management and cloud computing provider
to financial institutions. Building on its initial minority investment
in the company announced on April 24, 2012, this transaction gives D+H
one hundred per cent ownership of Compushare. Compushare offers a full
suite of technology solutions that assist community banks, credit
unions and other financial services providers in controlling costs,
increasing efficiencies and preparing for increased compliance
requirements. The acquisition was financed through drawings from D+ H's
existing credit facilities.
OTHER
Please refer to the annual report for a detailed discussion on
management's annual report on disclosure controls and internal controls
over financial reporting, critical accounting estimates, future
accounting and reporting changes and business risks.
OUTLOOK
D+H's long-term financial objective is to deliver sustainable and
growing earnings through continued organic revenue growth and by way of
strategic acquisitions. ASSET and Mortgagebot acquisitions in 2011, the
acquisition of Avista in 2012 and the acquisition of Compushare in 2013
continue to: (i) strengthen our ability to deliver on our goal of being
a leading FinTech provider to the North American financial services
industry; (ii) provide revenue diversification; (iii) provide strong
and sustainable cash flows to fund future growth; and (iv) support our
long-term strategy.
Going forward, we will focus on executing our organic growth initiatives
and continuing to diligently identify efficiency opportunities to
better serve customers as our businesses evolve. Cost-realignment
initiatives executed in 2012 are expected to result in annualized
savings benefitting both current and future periods, and will be used
to offset an increase in expenses to support future growth. Beyond the
immediate term, we believe that our market leadership and combined
capabilities will solidly position D+H in the markets we serve and
allow us to grow, consistent with our long-term objectives.
As set out in our statement of strategy, we look to grow through a
combination of organic initiatives, partnering with third parties and
by way of selective acquisitions. Our organic initiatives include: (i)
continuing to expand our customer base of SaaS mortgage POS, LOS and
cloud-based offerings in the U.S.; (ii) the ongoing advancement of
payment solutions through growth in value-added consumer and business
services to financial institution customers; (iii) expanding our
current technology-enabled offerings within the mortgage, auto,
personal, student lending, commercial and leasing markets; and (iv)
selling and delivering our lending technology solutions to new
customers.
Our acquisition strategy focuses on acquiring companies that extend or
add to the services that we provide within the financial services
marketplace, with a bias for companies that have strong SaaS cloud
capabilities, defensible business models, growing revenues, capable
management and offer an extension to our existing businesses.
With the inclusion of several new service areas over the last several
years, we expect to continue to experience some increase in variability
in year-over-year quarterly revenues, earnings and cash flows, due to,
among other items: (i) personal cheque order volume declines; (ii)
competitive dynamics in Canadian lending; (iii) volume variances within
the mortgage origination and lien registration markets; (iv) timing
differences and variability in professional services work; and (v) fees
and expenses associated with acquisitions and related integration
activities. Within the Canadian Segment, D+H believes that revenues
from lending technology solutions in 2013 may be impacted by potential
price adjustments and more moderate housing prices and lower real
estate activity compared to the previous years, which is expected to be
offset by potential revenue increases from the launch of new products
in the Canadian lending market, including extension of our technology
solutions across various areas in the lending value chain. In the U.S.
Segment, a slight recovery in the U.S. housing market is expected to
somewhat offset a reduction in refinancing activity in 2013.
For 2013, capital spending of approximately $35 million is currently
anticipated, which may vary based on spending in support of new growth
opportunities if and as they arise.
As described earlier, the Corporation does not expect to pay any
significant cash taxes until after 2013.
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
This MD&A contains certain statements that constitute forward-looking
information within the meaning of applicable securities laws
("forward-looking statements"). Statements concerning D+H's objectives,
goals, strategies, intentions, plans, beliefs, expectations and
estimates, and the business, operations, financial performance and
condition of D+H are forward-looking statements. The words "believe",
"expect", "anticipate", "estimate", "intend", "may", "will", "would"
and similar expressions and the negative of such expressions are
intended to identify forward-looking statements, although not all
forward-looking statements contain these identifying words. These
forward-looking statements are subject to important assumptions,
including the following specific assumptions: the ability of D+H to
meet its revenue, "EBITDA", "Adjusted EBITDA" and "Adjusted net income"
targets (see Non-IFRS Financial Measures for a more complete
description of the terms EBITDA, Adjusted EBITDA and Adjusted net
income); general industry and economic conditions; changes in D+H's
relationship with its customers and suppliers; pricing pressures and
other competitive factors; the anticipated effect of acquisitions on
the financial performance of D+H; and the expected benefits arising as
a result of acquisitions. D+H has also made certain macroeconomic and
general industry assumptions in the preparation of such forward-looking
statements. While D+H considers these factors and assumptions to be
reasonable based on information currently available, there can be no
assurance that actual results will be consistent with these
forward-looking statements.
Forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause D+H's actual results,
performance or achievements, or developments in its industry, to differ
materially from the anticipated results, performance, achievements or
developments expressed or implied by such forward-looking statements.
Risks related to forward-looking statements include, among other things,
challenges presented by declines in the use of personal and business
cheques; the Company's dependence on a limited number of large
financial institution customers and dependence on their acceptance of
new programs; strategic initiatives being undertaken to meet the
Company's financial objective; stability and growth in the real estate,
mortgage and lending markets; increased pricing pressures and increased
competition which could lead to loss of contracts or reduced margins;
as well as general market conditions, including economic and interest
rate dynamics. Given these uncertainties, readers are cautioned not to
place undue reliance on such forward-looking statements. The documents
incorporated by reference herein also identify additional factors that
could affect the operating results and performance of the Company.
Forward-looking statements are based on management's current plans,
estimates, projections, beliefs and opinions, and D+H does not
undertake any obligation to update forward-looking statements should
assumptions related to these plans, estimates, projections, beliefs and
opinions change except as required by applicable securities laws.
All of the forward-looking statements made in this MD&A and the
documents incorporated by reference herein are qualified by these
cautionary statements and other cautionary statements or factors
contained herein, and there can be no assurance that the actual results
or developments will be realized or, even if substantially realized,
that they will have the expected consequences to, or effects on, the
Company.
ADDITIONAL INFORMATION
Additional information relating to the Company, including the Company's
most recently filed Annual Information Form, is available on SEDAR at www.sedar.com.
|
Consolidated Statements of Financial Position
|
|
(in thousands of Canadian dollars)
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
December 31, 2011
|
|
ASSETS
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
5,719
|
|
$
|
2,213
|
|
Trade and other receivables
|
|
84,996
|
|
79,753
|
|
Prepayments
|
|
14,104
|
|
12,821
|
|
Inventories
|
|
4,181
|
|
4,946
|
|
Derivative assets held for risk management
|
|
-
|
|
126
|
|
Total current assets
|
|
109,000
|
|
99,859
|
|
Deferred tax assets
|
|
28,095
|
|
39,987
|
|
Property, plant and equipment
|
|
30,201
|
|
32,169
|
|
Investment in an associate
|
|
10,145
|
|
-
|
|
Intangible assets
|
|
421,366
|
|
444,575
|
|
Goodwill
|
|
690,583
|
|
666,735
|
|
Total non-current assets
|
|
1,180,390
|
|
1,183,466
|
|
Total assets
|
|
$
|
1,289,390
|
|
$
|
1,283,325
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
Trade payables, accrued and other liabilities
|
|
$
|
100,226
|
|
$
|
93,131
|
|
Deferred revenue
|
|
12,586
|
|
10,216
|
|
Provisions
|
|
381
|
|
3,480
|
|
Total current liabilities
|
|
113,193
|
|
106,827
|
|
Deferred revenue
|
|
9,419
|
|
9,492
|
|
Derivative liabilities held for risk management
|
|
4,686
|
|
6,703
|
|
Loans and borrowings
|
|
340,577
|
|
345,921
|
|
Deferred tax liabilities
|
|
113,291
|
|
97,350
|
|
Other long-term liabilities
|
|
6,116
|
|
7,334
|
|
Total non-current liabilities
|
|
474,089
|
|
466,800
|
|
Total liabilities
|
|
587,282
|
|
573,627
|
|
EQUITY
|
|
|
|
|
|
Capital
|
|
673,680
|
|
673,163
|
|
Retained earnings
|
|
22,544
|
|
27,449
|
|
Accumulated other comprehensive income
|
|
5,884
|
|
9,086
|
|
Total equity
|
|
702,108
|
|
709,698
|
|
Total liabilities and equity
|
|
$
|
1,289,390
|
|
$
|
1,283,325
|
|
Consolidated Statements of Income
|
|
|
|
|
|
|
|
|
(in thousands of Canadian dollars, except per share amounts, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
Twelve months ended
|
|
|
December 31, 2012
|
|
December 31, 2011
|
|
December 31, 2012
|
|
December 31, 2011
|
|
Revenue
|
$
|
187,175
|
|
$
|
183,777
|
|
$
|
757,663
|
|
$
|
724,720
|
|
Employee compensation and benefits
|
55,886
|
|
54,920
|
|
226,030
|
|
214,127
|
|
Other expenses
|
90,018
|
|
83,282
|
|
348,427
|
|
333,193
|
|
Income from operating activities before depreciation and amortization
|
41,271
|
|
45,575
|
|
183,206
|
|
177,400
|
|
Depreciation of property, plant and equipment
|
2,586
|
|
2,799
|
|
10,070
|
|
10,303
|
|
Amortization of intangible assets
|
16,889
|
|
14,959
|
|
63,751
|
|
54,328
|
|
Income from operating activities
|
21,796
|
|
27,817
|
|
109,385
|
|
112,769
|
|
|
|
|
|
|
|
|
|
|
Finance expenses:
|
|
|
|
|
|
|
|
|
|
Amortization and fair value adjustment of derivative instruments
|
(542)
|
|
(145)
|
|
(2,016)
|
|
3,386
|
|
|
Interest expense
|
4,629
|
|
4,909
|
|
19,214
|
|
18,962
|
|
Income from investment in an associate, net of income tax
|
23
|
|
-
|
|
(68)
|
|
-
|
|
Income from continuing operations before income tax
|
17,686
|
|
23,053
|
|
92,255
|
|
90,421
|
|
Income tax expense
|
3,975
|
|
7,684
|
|
23,118
|
|
633
|
|
Income from continuing operations
|
13,711
|
|
15,369
|
|
69,137
|
|
89,788
|
|
Income from discontinued operations, net of income tax
|
-
|
|
-
|
|
-
|
|
140
|
|
Net income
|
$
|
13,711
|
|
$
|
15,369
|
|
$
|
69,137
|
|
$
|
89,928
|
|
Net income per share from continuing
|
|
|
|
|
|
|
|
|
|
operations, basic and diluted
|
$
|
0.2315
|
|
$
|
0.2595
|
|
$
|
1.1672
|
|
$
|
1.5595
|
|
Net income per share from discontinued
|
|
|
|
|
|
|
|
|
|
operations, basic and diluted
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
0.0025
|
|
Net income per share, basic and diluted
|
$
|
0.2315
|
|
$
|
0.2595
|
|
$
|
1.1672
|
|
$
|
1.5620
|
|
Consolidated Statements of Comprehensive Income
|
|
|
|
|
|
|
|
|
(in thousands of Canadian dollars, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
Twelve months ended
|
|
|
December 31, 2012
|
December 31, 2011
|
|
December 31, 2012
|
|
December 31, 2011
|
|
Net income
|
$
|
13,711
|
$
|
15,369
|
|
$
|
69,137
|
|
$
|
89,928
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of mark-to-market adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of derivative instruments
|
-
|
-
|
|
-
|
|
86
|
|
|
Effective portion of changes in fair value
|
-
|
295
|
|
(126)
|
|
126
|
|
|
Net amount transferred to profit or loss
|
533
|
(366)
|
|
366
|
|
(366)
|
|
Foreign currency translation
|
1,819
|
(5,003)
|
|
(3,442)
|
|
9,326
|
|
Total comprehensive income
|
$
|
16,063
|
$
|
10,295
|
|
$
|
65,935
|
|
$
|
99,100
|
|
Consolidated Statements of Changes in Equity.
|
|
(in thousands of Canadian dollars, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
December 31, 2012
|
|
|
|
|
Accumulated other
comprehensive income (loss)
|
|
|
|
|
|
|
|
Share capital
|
|
Foreign
currency
translation
reserve
|
|
Hedging reserve
|
|
Retained
earnings /
(deficit)
|
|
Total equity
|
|
Balance at September 30, 2012
|
$
|
673,691
|
$
|
4,065
|
$
|
(533)
|
$
|
27,789
|
$
|
705,012
|
|
Net income for the period
|
|
-
|
|
-
|
|
-
|
|
13,711
|
|
13,711
|
|
Cash flow hedges
|
|
-
|
|
-
|
|
533
|
|
|
|
533
|
|
Foreign currency translation
|
|
-
|
|
1,819
|
|
-
|
|
-
|
|
1,819
|
|
Dividends
|
|
-
|
|
-
|
|
-
|
|
(18,956)
|
|
(18,956)
|
|
Options
|
|
(11)
|
|
-
|
|
-
|
|
-
|
|
(11)
|
|
Balance at December 31, 2012
|
$
|
673,680
|
$
|
5,884
|
$
|
-
|
$
|
22,544
|
$
|
702,108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
December 31, 2011
|
|
|
|
|
Accumulated other
comprehensive income (loss)
|
|
|
|
|
|
|
|
Share capital
|
|
Foreign
currency
translation
reserve
|
|
Hedging reserve
|
|
Retained
earnings /
(deficit)
|
|
Total equity
|
|
Balance at September 30, 2011
|
$
|
673,007
|
$
|
14,329
|
$
|
(169)
|
$
|
30,442
|
$
|
717,609
|
|
Net income for the period
|
|
-
|
|
-
|
|
-
|
|
15,369
|
|
15,369
|
|
Cash flow hedges
|
|
-
|
|
-
|
|
(71)
|
|
-
|
|
(71)
|
|
Foreign currency translation
|
|
-
|
|
(5,003)
|
|
-
|
|
-
|
|
(5,003)
|
|
Dividends
|
|
-
|
|
-
|
|
-
|
|
(18,362)
|
|
(18,362)
|
|
Options
|
|
156
|
|
-
|
|
-
|
|
-
|
|
156
|
|
Balance at December 31, 2011
|
$
|
673,163
|
$
|
9,326
|
$
|
(240)
|
$
|
$ 27,449
|
$
|
709,698
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve months ended
December 31, 2012
|
|
|
|
|
Accumulated other
comprehensive income (loss)
|
|
|
|
|
|
|
|
Share capital
|
|
Foreign
currency
translation
reserve
|
|
Hedging
reserve
|
|
Retained
earnings
|
|
Total equity
|
|
Balance at January 1, 2012
|
$
|
673,163
|
$
|
9,326
|
$
|
(240)
|
$
|
27,449
|
$
|
709,698
|
|
Net income for the year
|
|
-
|
|
-
|
|
-
|
|
69,137
|
|
69,137
|
|
Cash flow hedges
|
|
-
|
|
-
|
|
240
|
|
-
|
|
240
|
|
Foreign currency translation
|
|
-
|
|
(3,442)
|
|
-
|
|
-
|
|
(3,442)
|
|
Dividends
|
|
-
|
|
-
|
|
-
|
|
(74,042)
|
|
(74,042)
|
|
Options
|
|
517
|
|
-
|
|
-
|
|
-
|
|
517
|
|
Balance at December 31, 2012
|
$
|
673,680
|
$
|
5,884
|
$
|
-
|
$
|
22,544
|
$
|
702,108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve months ended
December 31, 2011
|
|
|
|
|
Accumulated other
comprehensive income (loss)
|
|
|
|
|
|
|
Share capital
|
|
Foreign
currency
translation
reserve
|
|
Hedging
reserve
|
|
Retained
earnings
|
|
Total equity
|
|
Balance at January 1, 2011
|
$
|
595,859
|
$
|
-
|
$
|
(86)
|
$
|
(40,623)
|
$
|
555,150
|
|
Net income for the year
|
|
-
|
|
-
|
|
-
|
|
89,928
|
|
89,928
|
|
Cash flow hedges
|
|
-
|
|
-
|
|
(154)
|
|
-
|
|
(154)
|
|
Foreign currency translation
|
|
-
|
|
9,326
|
|
-
|
|
-
|
|
9,326
|
|
Capital reduction pursuant to the Arrangement
|
|
(40,623)
|
|
-
|
|
-
|
|
40,623
|
|
-
|
|
Share issuance
|
|
117,617
|
|
-
|
|
-
|
|
-
|
|
117,617
|
|
Dividends
|
|
-
|
|
-
|
|
-
|
|
(62,479)
|
|
(62,479)
|
|
Options
|
|
310
|
|
-
|
|
-
|
|
-
|
|
310
|
|
Balance at December 31, 2011
|
$
|
673,163
|
$
|
9,326
|
$
|
(240)
|
$
|
27,449
|
$
|
709,698
|
|
Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
(in thousands of Canadian dollars, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
Twelve months ended
|
|
|
|
|
December 31, 2012
|
|
December 31, 2011
|
|
December 31, 2012
|
|
December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
$
|
13,711
|
$
|
15,369
|
$
|
69,137
|
$
|
89,788
|
|
Adjustments for:
|
|
|
|
|
|
|
|
|
|
|
Depreciation of property, plant and equipment
|
|
2,586
|
|
2,799
|
|
10,070
|
|
10,303
|
|
|
Amortization of intangible assets
|
|
16,889
|
|
14,959
|
|
63,751
|
|
54,328
|
|
|
Amortization of mark-to-market adjustment of derivative instruments
|
|
-
|
|
-
|
|
-
|
|
86
|
|
|
Fair value adjustment of derivative instruments
|
|
(542)
|
|
(145)
|
|
(2,016)
|
|
3,300
|
|
|
Interest expense
|
|
4,629
|
|
4,909
|
|
19,214
|
|
18,962
|
|
|
Deferred taxes
|
|
4,102
|
|
7,684
|
|
23,475
|
|
633
|
|
|
Options expense
|
|
(11)
|
|
156
|
|
517
|
|
310
|
|
|
Changes in non-cash working capital items
|
|
24,740
|
|
6,746
|
|
(3,881)
|
|
(23,021)
|
|
|
Changes in other operating assets and liabilities
|
|
(2,743)
|
|
(1,080)
|
|
105
|
|
1,198
|
|
|
Income from investment in an associate, net of income tax
|
|
23
|
|
-
|
|
(68)
|
|
-
|
|
Cash generated from operating activities
|
|
63,384
|
|
51,397
|
|
180,304
|
|
155,887
|
|
|
Interest paid
|
|
(4,248)
|
|
(4,357)
|
|
(17,118)
|
|
(17,395)
|
|
|
Cash flows from discontinued operations
|
|
-
|
|
-
|
|
-
|
|
189
|
|
Net cash from operating activities
|
|
59,136
|
|
47,040
|
|
163,186
|
|
138,681
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Repayment of long-term indebtedness
|
|
(26,187)
|
|
(20,000)
|
|
(106,467)
|
|
(252,000)
|
|
Proceeds from long-term indebtedness
|
|
-
|
|
-
|
|
103,052
|
|
401,505
|
|
Payment of issuance costs of long-term indebtedness
|
|
-
|
|
(28)
|
|
(902)
|
|
(4,467)
|
|
Proceeds from issuance of shares
|
|
-
|
|
-
|
|
-
|
|
121,800
|
|
Payment of issuance costs of shares
|
|
-
|
|
-
|
|
-
|
|
(5,461)
|
|
Dividends paid
|
|
(18,956)
|
|
(18,362)
|
|
(74,042)
|
|
(70,640)
|
|
Net cash from (used in) financing activities
|
|
(45,143)
|
|
(38,390)
|
|
(78,359)
|
|
190,737
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Acquisition of property, plant and equipment
|
|
(2,124)
|
|
(2,148)
|
|
(7,676)
|
|
(8,007)
|
|
Acquisition of intangible assets
|
|
(7,593)
|
|
(8,484)
|
|
(25,641)
|
|
(27,349)
|
|
Acquisition of subsidiaries
|
|
-
|
|
-
|
|
(37,946)
|
|
(292,993)
|
|
Acquisition of investment in an associate
|
|
-
|
|
-
|
|
(10,058)
|
|
-
|
|
Net cash used in investing activities
|
|
(9,717)
|
|
(10,632)
|
|
(81,321)
|
|
(328,349)
|
|
Increase in cash and cash equivalents for the period
|
|
4,276
|
|
(1,982)
|
|
3,506
|
|
1,069
|
|
Cash and cash equivalents, beginning of period
|
|
1,443
|
|
4,195
|
|
2,213
|
|
1,144
|
|
Cash and cash equivalents, end of period
|
$
|
5,719
|
$
|
2,213
|
$
|
5,719
|
$
|
2,213
|
About D+H
D+H is a leading solutions provider to the North American financial
services marketplace, providing innovative technology-based programs,
products and business services tailored to our customers' needs. A
deeply rooted tradition of developing and nurturing valued customer
relationships and a broad set of integrated solutions position D+H for
ongoing growth in our chosen markets. In 2012, D+H rose to 35th on the FinTech 100, a ranking of the top technology providers to the
global financial services industry.
Davis + Henderson Corporation is listed on the Toronto Stock Exchange
under the symbol DH. Further information can be found in the disclosure
documents filed by Davis + Henderson Corporation with the securities
regulatory authorities, available at www.sedar.com.
SOURCE: Davis + Henderson Corporation
Brian Kyle, Executive Vice President and Chief Financial Officer, Davis + Henderson Corporation, (416) 696-7700, investorrelations@dhltd.com or visit our website at www.dhltd.com.
