TORONTO, Nov. 8, 2011 /CNW/ - Davis + Henderson Corporation ("D+H" or
the "Business" or the "Company" or the "Corporation" or "Davis +
Henderson") today reported solid financial results for the three and
nine months ended September 30, 2011 that were consistent with
expectations and we are satisfied with these results in the context of
activities undertaken related to our strategic agenda. On January 18,
2011, Davis + Henderson completed the acquisition of substantially all
the assets of ASSET Inc. ("ASSET"), followed by the acquisition of
Mortgagebot LLC ("Mortgagebot") on April 12, 2011 and accordingly, the
results of the acquired businesses have been included in the
consolidated results since those dates.
Third Quarter Highlights
-
Revenue was $186.3 million, an increase of $22.0 million, or 13.4%,
compared to the same quarter in 2010.
-
EBITDA1 was $46.2 million, an increase of $10.1 million, or 27.8%, compared
to $36.2 million for the same quarter in 2010. EBITDA for the third
quarter of 2011 included acquisition-related costs of $0.6 million and,
for the third quarter of 2010, included a restructuring charge and
acquisition-related costs, totalling $4.4 million.
-
Adjusted net income1 was $26.2 million ( $0.4429 per share) for the third quarter of 2011. There is no comparable measure for the same period in 2010.
-
Net income was $15.1 million ( $0.2542 per share), a year-over-year
decrease of $3.6 million, or 19.4%, compared to $18.7 million (
$0.3512 per unit) for the same quarter in 2010. This change reflected
the positive contribution from acquisitions and also the impacts
related to acquisition-related items, the change in taxation with the
conversion to a corporation in January 2011 and a non-cash, unrealized
mark-to-market loss related to reduced interest rates occurring during
the third quarter of 2011.Net income per share for both the quarter
ended September 30, 2011 and the first nine months of 2011 was also
impacted by the issuance of 6 million shares in April 2011 to partially
fund the Mortgagebot acquisition.
-
During the quarter, D+H increased its target annual dividend by 4 cents
per share (approximately 3%) from $1.20 per share to $1.24 per share
annualized.
-
On September 30, 2011 the Company paid a dividend of $0.31 per share to
its shareholders of record on August 31, 2011.
-
In September 2011, the Company announced succession plans related to the
Chief Executive Officer ("CEO"), with Gerrard Schmid, currently the
President and Chief Operating Officer ("COO"), becoming the CEO
effective February 2012 concurrent with the retirement of the current
CEO, Bob Cronin.
Nine-Month Highlights
-
Revenue was $540.9 million, an increase of $53.7 million, or 11.0%,
compared to the same nine-month period in 2010.
-
EBITDA was $131.8 million, an increase of $14.2 million, or 12.0%,
compared to the same period in 2010. EBITDA for the first nine months
of 2011 included acquisition-related costs of $3.1 million and for the
first nine months of 2010 included a restructuring charge and
acquisition-related costs totalling $4.4 million.
-
Adjusted net income was $83.8 million for the first nine months of 2011,
and there is no comparable measure for the same period in 2010.
-
Net income was $74.6 million ( $1.3077 per share), a year-over-year
increase of $7.8 million, or 11.7% compared to $66.8 million (
$1.2541 per unit) for the same period in 2010. The increase in net
income reflected the inclusion from the first quarter of 2011 of a
non-cash tax recovery primarily attributable to D+H's conversion to a
corporation and IFRS adjustments and in the second quarter of 2011, in
connection with the acquisition of Mortgagebot a non-cash tax recovery,
relating to losses within certain US subsidiaries that were not
previously recognized and the various impacts of acquisition-related
items as described.
-
During the first nine months of 2011, $0.9133 per share was paid to the
shareholders of D+H.
________________________________________
1 D+H financial results are prepared in accordance with IFRS. D+H reports
several non-IFRS financial measures, including EBITDA and Adjusted net
income used above. Adjusted net income is calculated as net income,
adjusted to remove certain non-cash items and certain items of note
such as acquisition-related expenses and discontinued operations. These
items are excluded in calculating adjusted net income as they are not
considered indicative of the financial performance of the Business for
the period being reviewed. Any non-IFRS financial measures should be
considered in context with the IFRS financial presentation and should
not be considered in isolation or as a substitute for IFRS net income
or cash flow. 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 unaudited consolidated financial statements for the third quarter
of 2011 and accompanying notes to the financial statements and
management's discussion & analysis (MD&A) along with the supplementary
financial information will be available tomorrow on www.sedar.com and at www.dhltd.com.
For a more detailed discussion of the results and management's outlook,
please see Management's Discussion and Analysis 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 and EBITDA targets; 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 the acquisition of Mortgagebot on the financial
performance of D+H; and the expected benefits arising as a result of
the acquisition of Mortgagebot. 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 the actual results,
performance or achievements of the Business, or developments in D+H's
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 cheques by consumers;
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; 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
nine months ended September 30, 2011 via conference call at 10:00 a.m.
EST (Toronto time) on Wednesday, November 9, 2011. 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 Bob Cronin, 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/webcast/. 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 17263564. The rebroadcast will be available until
Wednesday, November 23, 2011. 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
Management's Discussion and Analysis ("MD&A") for the third quarter of
2011 for Davis + Henderson Corporation (the "Company" or the
"Corporation" or the "Business" or "Davis + Henderson" or "D+H" or "we"
or "our"), which was formerly known as Davis + Henderson Income Fund
(the "Fund"), has been prepared with an effective date of November 8,
2011 and should be read in conjunction with the MD&A in the Annual
Report for the year ended December 31, 2010, dated March 8, 2011, and
the attached interim unaudited consolidated financial statements for
the three and nine months ended September 30, 2011. External economic
and industry factors remain substantially unchanged from those
described in the annual MD&A and the Corporation's most recently filed
Annual Information Form, except as described herein.
Adoption of IFRS
For fiscal years beginning on or after January 1, 2011, Canadian public
companies are required to prepare their financial statements in
accordance with International Financial Reporting Standards ("IFRS"),
as issued by the International Accounting Standards Board ("IASB"). Due
to the requirement to present comparative financial information, the
effective transition date was January 1, 2010. Effective January 1,
2011, the Company's financial statements have been prepared in
accordance with IFRS, with 2010 comparative figures restated to conform
to IFRS.
Conversion from an Income Trust to a Corporation
Effective January 1, 2011, pursuant to a plan of arrangement ("the
Arrangement"), the Fund's income trust structure was converted to a
corporate structure and the publicly traded corporation is now named
Davis + Henderson Corporation (the "Corporation"). Under the
Arrangement, unitholders of the Fund received, on a tax deferred,
roll-over basis, one common share of the Corporation, for each unit of
the Fund held. Common shares of Davis + Henderson Corporation commenced
trading on the Toronto Stock Exchange on January 4, 2011, under the
symbol DH.
In conjunction with the conversion, the Company also undertook an
internal reorganization to simplify its business operations by
consolidating the various businesses it had previously operated as
separate legal entities. The combined business now primarily operates
within D+H Limited Partnership. The conversion was treated as a change
in business form and was accounted for as a continuity of interests. As
such, the carrying amounts of assets, liabilities and unitholders'
equity in the consolidated financial statements of the Fund immediately
before the conversion remained the same as the carrying values of Davis
+ Henderson Corporation immediately after the conversion. Effective
January 1, 2011, the share capital of Davis + Henderson Corporation in
respect of the common shares were reduced by the deficit balance of the
Fund as at December 31, 2010.
Notwithstanding the structural and distribution changes described
herein, the strategies and objectives of the Business remain unchanged.
STRATEGY
D+H is a leading solutions provider to the financial services
marketplace. We have several market-leading service offerings within
Canada, including: our cheque supply program; the servicing of student
loans; the provision of registration, recovery and related services for
secured loan products; and the delivery of lending technology solutions
within the mortgage market. Additionally, with the recent acquisition
of Mortgagebot, D+H is a market-leading provider of web-based,
point-of-sale solutions in the United States and provides a wide range
of consumer direct, loan officer and branch and call centre mortgage
origination solutions for over 1,000 banks and credit unions. We also
offer broader technology solutions in the commercial lending, small
business lending and leasing area, as well as servicing solutions
within the credit card market and other outsourced services in a number
of specialty areas.
D+H's strategy is to establish market-leading positions within well
defined and growing service areas in the financial services marketplace
and to further expand our service offerings by enhancing the activities
that we perform on behalf of our customers. We expect to advance this
strategy through internal (or organic) initiatives, as well as by
partnering with third parties and by way of 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. The Business has three primary strategies to
meet its objectives. These are to: (i) evolve and enhance the value of
our programs to the chequing and credit card accounts; (ii) extend our
technology supported services related to personal, student and
commercial lending and leasing markets; and (iii) pursue opportunities
in other areas within the financial services marketplace.
Over the past several years, D+H has executed this strategy by evolving
our programs to the chequing account, completing several acquisitions,
including Resolve Business Outsourcing Income Fund ("Resolve") in 2009,
substantially all the assets of ASSET Inc. ("ASSET") in January 2011,
and Mortgagebot LLC ("Mortgagebot") in April 2011, and by further
enhancing our services and capabilities. As a result, we offer a
diverse range of market-leading services.
For a detailed discussion of the third quarter 2011 results,
management's outlook, risk factors and caution concerning forward-
looking statements, please see below.
ACCOUNTING PRINCIPLES AND FINANCIAL INFORMATION PRESENTATION
All financial information presented in this MD&A is determined and
presented in accordance with IFRS, as issued by the IASB, unless
otherwise noted. All information relating to 2010 reporting periods
presented as comparatives have been reclassified to reflect the IFRS
presentation, unless otherwise noted. All amounts are in Canadian
dollars, unless otherwise specified.
Effective January 1, 2011, the Corporation commenced preparing its
consolidated financial statements in accordance with IFRS. Prior to
January 1, 2011, the consolidated financial statements were prepared in
accordance with Canadian generally accepted accounting principles
("Canadian GAAP"), and therefore, comparative periods for 2010 have
been restated to be in accordance with IFRS. Comparative periods
presented in this MD&A that are prior to January 1, 2010, have not been
restated for IFRS and have been presented in accordance with Canadian
GAAP.
Comparative information presented for periods prior to January 1, 2011
relate to those of the Fund, and the results for the 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.
Note 24 of the Corporation's financial statements for the three and nine
months ended September 30, 2011 contain reconciliations and
descriptions of the effect of the transition from Canadian GAAP to IFRS
on equity, earnings and comprehensive income, including line-by-line
reconciliations of the statement of financial position as at September
30, 2010 as well as the statement of income for the three and nine
months ended September 30, 2010. The Company previously described the
adjustments that were anticipated in converting from Canadian GAAP to
IFRS; with the completion of the IFRS implementation project, the final
adjustments have been determined, revised where appropriate, and are
reported in Note 24.
OPERATING RESULTS FOR THE THIRD QUARTER - CONSOLIDATED
The following table is derived from, and should be read in conjunction
with, the Consolidated Statements of Income and includes non-IFRS
financial measures. Management believes this supplementary disclosure
provides useful additional information. See Non-IFRS Financial Measures
section for a description of non-IFRS terms used.
The consolidated results include those of ASSET, effective January 18,
2011, and Mortgagebot effective April 12, 2011.
Operating and Financial Results1
(in thousands of Canadian dollars, except per share amounts, unaudited)
|
|
Quarter ended September 30,
|
|
Nine months ended September 30,
|
|
|
2011
|
2010
|
|
2011
|
2010
|
|
Revenue
|
$ 186,275
|
$ 164,319
|
|
$ 540,943
|
$ 487,241
|
|
Expenses 2
|
140,050
|
128,147
|
|
409,118
|
369,586
|
|
EBITDA 2, 3
|
46,225
|
36,172
|
|
131,825
|
117,655
|
|
|
|
|
|
|
|
|
Amortization of capital assets and non-acquisition intangibles
|
5,820
|
5,030
|
|
17,151
|
14,661
|
|
Amortization of intangibles from acquisitions
|
11,040
|
6,925
|
|
29,722
|
21,180
|
|
Interest expense
|
4,792
|
3,517
|
|
14,053
|
10,583
|
|
Amortization and fair value adjustment of derivative instruments4
|
3,991
|
1,566
|
|
3,531
|
1,993
|
|
Income tax expense (recovery) 7
|
5,522
|
(1,447)
|
|
(7,051)
|
(148)
|
|
Income from continuing operations
|
15,060
|
20,581
|
|
74,419
|
69,386
|
|
Income (loss) from discontinued operations, net of tax 5
|
-
|
(1,886)
|
|
140
|
(2,627)
|
|
Net income
|
15,060
|
18,695
|
|
74,559
|
66,759
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
Non-cash items:
|
|
|
|
|
|
|
|
|
Amortization of intangibles from acquisitions
|
11,040
|
|
|
29,722
|
|
|
|
|
Amortization and fair value adjustment of derivative instruments 4
|
3,991
|
|
|
3,531
|
|
|
|
Other items of note:
|
|
|
|
|
|
|
|
|
Acquisition-related items2
|
610
|
|
|
3,116
|
|
|
|
|
Discontinued operations, net of tax 5
|
-
|
|
|
(140)
|
|
|
|
Tax effect of above adjustments (excluding discontinued operations) 7
|
(4,465)
|
|
|
(9,854)
|
|
|
|
Tax effect of corporate conversion, acquisitions and IFRS adjustments 6
|
-
|
|
|
(17,137)
|
|
|
|
|
|
|
|
|
|
Adjusted net income3
|
$ 26,236
|
|
|
$ 83,797
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income per share, basic and diluted 3, 8, 9
|
$ 0.4429
|
n/m
|
|
$ 1.4698
|
n/m
|
|
Net income per share, basic and diluted 8, 9
|
$ 0.2542
|
$ 0.3512
|
|
$ 1.3077
|
$ 1.2541
|
|
|
Quarter ended September 30,
|
|
Nine months ended September 30,
|
|
|
|
2011 vs. 2010
|
|
|
2011 vs. 2010
|
|
|
|
% change
|
|
|
% change
|
|
Revenue
|
|
13.4%
|
|
|
11.0%
|
|
EBITDA 2, 3
|
|
27.8%
|
|
|
12.0%
|
|
Adjusted net income per share 3, 6, 8
|
|
n/m
|
|
|
n/m
|
n/m = not measurable
1 The results for both the quarter and nine months ended September 30,
2011 include those of ASSET and Mortgagebot, effective from the dates
of acquisition of January 18, 2011 and April 12, 2011, respectively.
2 Expenses for 2011 include acquisition-related items such as transaction
costs and certain retention and incentive payments related to the
Mortgagebot acquisition and for 2010, a restructuring charge and
acquisition-related costs, totalling $4.4 million recorded in the third
quarter.
3 EBITDA and Adjusted net income are non-IFRS terms. See Non-IFRS
Financial Measures for a more complete description of these terms.
Periods prior to January 1, 2011, do not have a comparable measure for
Adjusted net income due to the differences in taxation for D+H as an
income trust prior to January 1, 2011 and as a corporation subsequent
to that date.
4 Includes (i) mark-to-market adjustments of interest-rate swaps that
existed as at September 30, 2011 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 income; and (ii) amortization of
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 used by the Company.
5 The Business sold a non-strategic component of its contact centre
business in October 2010 and entered into a transition agreement with
the buyer which ended on April 1, 2011. The results of these
operations are presented as discontinued operations.
6 Adjustments for the first nine months of 2011 included the following:
(i) in connection with the acquisition of Mortgagebot, a non-cash
income tax recovery recorded in the second quarter of 2011 related to
losses within certain US subsidiaries that had been previously
recognized; and (ii) non-cash income tax recoveries recorded in the
first quarter of 2011 in connection with the conversion to a
corporation and implementation of IFRS, among other items.
7 The following adjustments to net income are tax effected at their
respective tax rates: (i) amortization of acquisition intangibles;
(ii) mark-to-market adjustment of derivative instruments; and (iii)
acquisition-related costs.
8 Diluted Net income per share and Diluted Adjusted net income per share
(non-IFRS term) reflect impacts of outstanding options. If the option
price is below the average market price during the period, then the
options are not included in the dilution calculation.
9 Weighted average number of shares outstanding during the three months
ended September 30, 2011 was 59.2 million shares and during the nine
months ended September 30, 2011 was 57.0 million shares.
Overview
D+H had solid operating performance in the third quarter of 2011 that
was consistent with our expectations and we are satisfied with these
results in the context of activities undertaken related to our
strategic agenda. Overall, in the first nine months of 2011, the
Business had growth in revenues and EBITDA, compared to the same period
in 2010, due primarily to the inclusion of ASSET and Mortgagebot and
additionally from the impacts of acquisition-related costs and
restructuring charges. For a more detailed description on revenues and
expenses, see the comments below.
Revenue
The following table reflects the current relative size of each of the
major service areas as a percentage of total revenue based on a
12-month rolling period:
|
Allocation of Revenue by Service Area1
|
|
% Revenue
|
|
Revenue
|
|
|
|
|
Programs to the chequing account
|
|
42%
|
|
|
Loan registration and recovery services
|
|
21%
|
|
|
Loan servicing
|
|
19%
|
|
|
Lending technology services
|
|
13%
|
|
|
Other
|
|
5%
|
|
|
|
|
100%
|
1 Allocation is based on 12- month rolling revenue from Q4 2010 to Q3
2011.
Programs to the chequing account include: (i) our cheque program which
is directed towards the personal and small business account holders of
our financial services customers; and (ii) various other smaller
service offerings directed towards account opening activities, identity
protection services and other enhancement services, including services
directed toward credit card holders. These smaller 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. In general,
cheque order volumes in this area have historically declined as
consumers and small businesses choose other payment methods.
Loan registration and recovery services are directed toward supporting
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 service areas within this
revenue category are registration services which currently account for
approximately 55% to 65% of revenue and recovery services which account
for approximately 25% to 35% of revenue. 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 impacted
by both economic cyclicality and seasonality, while recovery services
are, in general, counter cyclical. Other services within this revenue
category include mortgage discharge services and various search-related
services, both of which we do on behalf of our financial institution
customers.
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 offerings
currently account for approximately 75% to 85% of revenues within this
revenue category.
Lending technology services include services directed towards mortgage
markets in both Canada and, more recently with the acquisition of
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 the mortgage area currently represent approximately 85% to
95% of the revenue within this category and within this area
approximately 65% to 75% are transaction based fees related to Canadian
mortgage origination. Mortgage origination fees can be variable and are
impacted by many factors including the economy, the housing market and
interest rates, among others.
Other revenues include a number of smaller service offerings that are
primarily outsourced activities we perform on behalf of a variety of
customers including non-financial services customers.
Revenue - Third Quarter and Year-to-Date
Consolidated revenue for the third quarter of 2011 was $186.3 million,
an increase of $22.0 million, or 13.4%, compared to the same quarter
in 2010. For the first nine months of 2011, consolidated revenue was
$540.9 million, an increase of $53.7 million, or 11.0%, compared to the
same period in 2010. The increases were primarily due to the inclusion
of ASSET acquired January 18, 2011 and Mortgagebot, acquired April 12,
2011, with both increases and decreases in other service areas as
described below.
Services delivered by the Business 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.
(in thousands of Canadian dollars, unaudited)
|
|
|
|
Quarter ended September 30,
|
Nine months ended September 30,
|
|
|
|
|
2011
|
2010
|
2011
|
2010
|
|
Revenue
|
|
|
|
|
|
|
|
|
Programs to the chequing account
|
|
|
$ 74,095
|
$ 72,994
|
$ 222,564
|
$ 220,819
|
|
|
Loan registration and recovery services
|
|
|
42,002
|
29,646
|
121,417
|
85,736
|
|
|
Loan servicing
|
|
|
32,426
|
32,738
|
97,771
|
92,772
|
|
|
Lending technology services
|
|
|
29,026
|
19,392
|
70,883
|
57,334
|
|
|
Other1
|
|
|
8,726
|
9,549
|
28,308
|
30,580
|
|
|
|
|
$ 186,275
|
$ 164,319
|
$ 540,943
|
$ 487,241
|
1 Excluded from the amounts reported are discontinued operations
Programs to the chequing account revenue for the third quarter of 2011
was $74.1 million, an increase of $1.1 million, or 1.5%, compared to
the same quarter in 2010. Revenue from this service area for the first
nine months of 2011 was $222.6 million, an increase of $1.7 million, or
0.8%, compared to the same period in 2010. Revenue for the third
quarter of 2011 benefitted from a recovery in order volume previously
impacted by the postal strike in the second quarter of 2011 and from
the continued positive impact of higher average order values, partially
offset by volume decreases. The modest increase in the first nine
months of 2011 was also primarily attributable to program changes and
product and service enhancements that provided increased average order
values partially offset by cheque order volume reductions. Management
believes that the long-term historical trend related to current cheque
order decline is relatively unchanged and continues to be in the low
single digit range, however, there has been more volatility in order
volumes in recent periods.
Loan registration and recovery services revenue for the third quarter of
2011 was $42.0 million, an increase of $12.4 million, or 41.7%,
compared to the same quarter in 2010. Revenue for the nine months
ended September 30, 2011 was $121.4 million, an increase of $35.7
million, or 41.6%, compared to the same period in 2010. In both
periods, this increase was due primarily to the inclusion of ASSET,
acquired on January 18, 2011. Volumes in this area can be variable due
to changes in the economy, changes in the auto and auto lending market
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. Generally, the recovery fees related to
ASSET have been as expected.
Loan servicing programs revenue for the third quarter was $32.4 million,
a decrease of $0.3 million, or 1.0%, compared to the same quarter in
2010. Transaction revenue from student loan administrative services,
which comprises the largest portion of revenues within this service
area, was relatively unchanged for both periods as compared to 2010.
For the first nine months of 2011, revenue was $97.8 million, an
increase of $5.0 million, or 5.4% compared to the same period in
2010. The majority of the year-to-date revenue increase in this
service area is attributed to the credit card servicing area, and in
turn, primarily related to specific customer initiatives that increased
both revenues and expenses with minimal impact on profitability.
Volumes in this area are expected to be relatively stable and modestly
growing in the short-term and cost management activities are being
directed towards lowering the impact of reduced pricing and fees
related to particular customers, including reduced fees we will earn as
one of our customers integrates the servicing of their portfolio into
that of another one of our customers.
Lending technology services revenue for the third quarter of 2011 was
$29.0 million, an increase of $9.6 million, or 49.7%, compared to the
same quarter in 2010. For the first nine months of 2011, revenue from
this service area was $70.9 million, an increase of $13.5 million, or
23.6% compared to the same period in 2010. The increase during the
third quarter of 2011 was largely due to the inclusion of Mortgagebot
partially offset by reduced fees in other areas. Fees related to
origination volumes were impacted by the repatriation by a customer of
certain services we historically performed for them. For the
nine-month period, the net revenue increase was due to the inclusion of
Mortgagebot, partially offset by reduction in several other areas. In
general, industry analysts expect the Canadian housing markets to be
relatively stable through 2012.
Other revenue for the third quarter of 2011 was $8.7 million, as
compared to $9.5 million for the same period in 2010. For the first
nine months of 2011, revenue within this category was $28.3 million, as
compared to $30.6 million for the same period in 2010. In general, we
have recently experienced and expect to continue to experience some
reductions in this area as certain customers repatriate certain
outsourced activities. 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.
Expenses1
On a consolidated basis, expenses of $140.1 million for the third
quarter of 2011 increased by $11.9 million, or 9.3%, compared to the
same quarter in 2010. For the first nine months of 2011, consolidated
expenses were $409.1 million, an increase of $39.5 million, or 10.7%,
compared to the same period in 2010. The increase primarily reflects
the inclusion of ASSET and Mortgagebot expenses and the ongoing costs
associated with the transformation and integration activities,
including in the technology area, partially reduced by cost management
and other net savings, including reduced restructuring and
acquisition-related expenses.
|
|
|
Quarter ended September 30,
|
|
Nine months ended September 30,
|
|
(in thousands of Canadian dollars, unaudited)
|
|
2011
|
2010
|
2011
|
2010
|
|
Employee compensation and benefits 2
|
|
$ 57,810
|
$ 51,166
|
$ 165,057
|
$ 146,502
|
|
Non-compensation direct expenses 3
|
|
59,290
|
52,387
|
174,805
|
153,919
|
|
Other operating expenses 4
|
|
22,950
|
24,594
|
69,256
|
69,165
|
|
|
|
$ 140,050
|
$ 128,147
|
$ 409,118
|
$ 369,586
|
1 Excluded from the reported amounts are the discontinued operations.
2 Employee compensation and benefits include acquisition-related costs
such as retention and incentive payments related to the acquisition of
Mortgagebot and are net of certain employee-related tax benefits and
amounts capitalized related to software product development. Certain
comparative figures have been reclassified and adjusted to conform to
current period's presentation. There was no change in total expenses
related to this reclassification.
3 Non-compensation direct expenses include materials, shipping, selling
expenses and third party direct disbursements. Certain comparative
figures have been reclassified and adjusted to conform to current
period's presentation. There was no change in total expenses related
to this reclassification.
4 Other operating expenses include occupancy costs, communication costs,
licensing fees, professional fees, contractor fees, transaction costs
related to acquisitions and expenses not included in other categories.
Certain comparative figures have been reclassified and adjusted to
conform to current period's presentation. There was no change in total
expenses related to this reclassification.
Employee compensation and benefits costs of $57.8 million for the third
quarter of 2011 increased by $6.6 million, or 13.0%, compared to the
same quarter in 2010. For the first nine months of 2011, employee
compensation and benefits costs were $165.1 million, an increase of
$18.6 million, or 12.7%, compared to the same period in 2010. The
increase was primarily related to the inclusion of ASSET and
Mortgagebot expenses, and a general increase in compensation levels,
partially offset by apprenticeship program benefits. As well, the third
quarter of 2010 included a restructuring charge related to
transformation and integration activities. Additionally, we have been
replacing contract labour (recorded as other operating expenses) with
full-time staff as the nature and certainty of work within certain
service areas mature.
Non-compensation direct expenses were $59.3 million for the third
quarter of 2011, an increase of $6.9 million, or 13.2%, compared to the same quarter in 2010. For the first nine months of 2011,
non-compensation direct expenses of $174.8 million, increased by $20.9
million, or 13.6%, compared to the same period in 2010. The increase is
primarily attributable to the third party direct disbursements relating
to the ASSET business. In general, these expenses directionally change
with revenue changes.
Other operating expenses for the third quarter of 2011 of $23.0 million,
decreased by $1.6 million, or 6.7% compared to the same quarter in
2010 and for the first nine months of 2011, increased by $0.1 million,
or 0.1%, to $69.3 million, compared to the same period in 2010. The
decrease in other operating expenses reflected decreases in several
cost areas, including costs savings realized related to transformation
and integration project initiatives.
EBITDA
EBITDA during the third quarter of 2011 was $46.2 million, an increase
of $10.1 million, or 27.8%, compared to the same quarter in 2010. The
majority of the increase was attributable to the acquisitions of ASSET
and Mortgagebot and to the impact on EBITDA in the third quarter of
2010 of the restructuring charge and acquisition-related expenses.
EBITDA for the first nine months of 2011 was $131.8 million, an
increase of $14.2 million, or 12.0%, compared to the same period of
2010, relatively consistent with the increase in revenue. EBITDA for
both the third quarter of 2011 and the first nine months of 2011 was
reduced by acquisition-related costs of $0.6 million and $3.1 million,
respectively, and for the third quarter and the first nine months of
2010, was reduced by a restructuring charge and acquisition-related
expenses totalling $4.4 million.
Amortization of Capital and Non-acquisition Intangibles
Amortization of capital and non-acquisition intangible assets during the
third quarter of 2011 increased by $0.8 million, or 15.7% compared to
the third quarter of 2010 and for the first nine months of 2011,
increased by $2.5 million, or 17.0% compared to the first nine months
of 2010. These increases were primarily related to capital additions
and the inclusion of the ASSET and Mortgagebot businesses.
Amortization of Intangibles from Acquisitions
Amortization of acquisition-related intangibles for the third quarter of
2011 increased by $4.1 million, and for the first nine months of 2011
increased by $8.5 million, as compared to the same periods in 2010 due
to the addition of intangibles related to the acquisitions of ASSET and
Mortgagebot.
Interest Expense
Interest expense for the third quarter of 2011 increased by $1.3
million, compared to the same quarter in 2010, and for the nine months
ended September 30, 2011, increased by $3.5 million, compared to the
first nine months of 2010, due to increased borrowings in relation to
the acquisitions of ASSET and Mortgagebot.
Amortization and Fair Value Adjustment of Derivative Instruments
Interest-rate swaps
A net unrealized loss of $4.0 million on interest-rate swaps was
recognized in the third quarter of 2011 (Q3 2010 - net unrealized loss
of $1.6 million) reflecting mark-to-market adjustments related to
changes in market interest rates at September 30, 2011 as compared to
June 30, 2011. Amounts for the nine months ended September 30, 2011 as
well as the same periods in 2010 also include the amortization related
to the cumulative gains and losses that were deferred prior to January
1, 2007 when hedge accounting was used by D+H.
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 income as the related swaps mature. The Company has
historically held its derivative contracts to maturity.
Effective January 1, 2011, the Company's policy is to adopt hedge
accounting prospectively on any new derivative instruments entered into
subsequent to January 1, 2011. As of September 30, 2011, the Company
had not entered into any new interest-rate swaps and the fair value
adjustments of the existing interest-rate swaps continue to be
recognized in the Consolidated Statement of Income.
Foreign exchange forward contracts
During the third quarter of 2011, the Company entered into four foreign
exchange forward contracts with one of its lenders, aggregating US
$12.0 million. In accordance with D+H's policy effective January 1,
2011 to adopt hedge accounting prospectively on any new derivative
instruments entered into subsequent to January 1, 2011, these foreign
exchange contracts have been designated as hedges in accordance with
IFRS, for hedge accounting purposes, and the Company accounts for these
hedges as cash flow hedges as per IAS 39. The fair value change of the
hedging instrument (Currency Forwards), to the extent it is effective,
is recorded in Other Comprehensive Income ("OCI"). The ineffective
portion of the gain or loss on the hedging instrument is recognized in
profit or loss. During the third quarter of 2011, the fair value
changes were recorded in OCI, as the hedging relationship was
considered to be effective both at inception of these hedges and at the
reporting date.
Income Tax Expense (Recovery)
In the third quarter of 2011, a non-cash income tax expense of $5.5
million was recorded (Q3 2010 - $1.4 million recovery). The Company
continues to benefit from certain tax losses and unamortized tax
balances such that no current taxes are expected in 2011. Due to the
corporate structure, certain available tax losses, and no tax
instalment base, the Company does not expect to pay cash taxes in 2012.
In 2013, we expect to pay 2012 taxes and commence regular tax
instalments. The deferred tax expense was partially offset by a
recovery related to changes in timing and permanent differences between
tax and accounting balances. The income tax recovery for the first nine
months included a tax recovery related to the recognition of a deferred
tax asset attributable to losses of certain US subsidiaries that are
now expected to be realized in connection with 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.
Net Income
Net income of $15.1 million for the third quarter of 2011 decreased by
$3.6 million, or 19.4%, compared to the same period in 2010. For the
first nine months of 2011, net income of $74.6 million increased by
$7.8 million, or 11.7% compared to the same period in 2010. The change
in results in the third quarter of 2011 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 as previously described. For the nine-month period in 2011, net
income increased primarily due to the factors described above as well
to non-cash tax recoveries also 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 financial 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.
Adjusted net income excludes both: (i) non-cash impacts of items such as
mark-to-market gains and losses on derivative instruments, amortization
of intangibles from acquisitions (and for the first nine months of
2011, an income tax recovery related to the recognition of a deferred
tax asset attributable to losses of certain US subsidiaries that were
not previously recognized and to tax recoveries related to the
corporate conversion and IFRS adjustments); and (ii) other items of
note such as acquisition-related costs referred to below and
discontinued operations. Adjusted net income was $26.2 million for the
third quarter of 2011 and $83.8 million for the first nine months of
2011. Net income is also adjusted for the tax impact of these
adjustments to arrive at Adjusted net income.
Acquisition-related Costs
During the third quarter of 2011, the Corporation recorded
acquisition-related costs of $0.6 million, which included certain
retention and incentive payments related to Mortgagebot. For the
first nine months of 2011, acquisition-related costs were $3.1 million,
which, in addition to the retention and incentive payments, also
included transaction costs.
During the third quarter of 2010, the purchase accounting for the
Resolve acquisition was finalized under Canadian GAAP. Under IFRS
certain costs did not qualify for equivalent recognition. As such,
acquisition-related costs of $2.3 million were recorded as part of
continuing operations and $1.9 million (before taxes) was recorded as
part of discontinued operations.
EIGHT QUARTER CONSOLIDATED STATEMENT OF INCOME - SUMMARY 1, 9
(in thousands of Canadian dollars, except per share amounts, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IFRS
|
Canadian
GAAP
|
|
|
|
|
2011
|
2010
|
2009
|
|
|
|
|
Q3
|
Q2
|
Q1
|
Q4
|
Q3
|
Q2
|
Q1
|
Q4
|
|
Revenue
|
$ 186,275
|
$ 185,120
|
$ 169,548
|
$ 162,474
|
$ 164,319
|
$ 167,093
|
$ 155,829
|
$ 151,521
|
|
Expenses2
|
140,050
|
137,023
|
132,045
|
133,018
|
128,147
|
123,319
|
118,120
|
114,467
|
|
EBITDA 2, 3
|
46,225
|
48,097
|
37,503
|
29,456
|
36,172
|
43,774
|
37,709
|
37,054
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of capital assets and non-acquisition intangibles
|
5,820
|
5,827
|
5,504
|
5,643
|
5,030
|
4,962
|
4,669
|
4,514
|
|
Amortization of intangibles from acquisitions
|
11,040
|
10,590
|
8,092
|
7,108
|
6,925
|
7,158
|
7,097
|
7,330
|
|
Interest expense
|
4,792
|
5,272
|
3,989
|
3,405
|
3,517
|
3,692
|
3,374
|
3,326
|
|
Amortization and fair value adjustment of derivative instruments4
|
3,991
|
1,227
|
(1,687)
|
(2,796)
|
1,566
|
1,797
|
(1,370)
|
(1,517)
|
|
Income tax expense (recovery)
|
5,522
|
1,717
|
(14,290)
|
3,448
|
(1,447)
|
395
|
904
|
(2,605)
|
|
Income from continuing operations
|
15,060
|
23,464
|
35,895
|
12,648
|
20,581
|
25,770
|
23,035
|
26,006
|
|
Income (loss) from discontinued operations, net of tax 5
|
-
|
-
|
140
|
(620)
|
(1,886)
|
(531)
|
(210)
|
(405)
|
|
Net income
|
$15,060
|
$ 23,464
|
$ 36,035
|
$ 12,028
|
$ 18,695
|
$ 25,239
|
$ 22,825
|
$ 25,601
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
Non-cash items:
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangibles from acquisitions
|
11,040
|
10,590
|
8,092
|
|
|
|
|
|
|
|
|
Amortization and fair value adjustment of derivative instruments 4
|
3,991
|
1,227
|
(1,687)
|
|
|
|
|
|
|
|
Other items of note:
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related items2
|
610
|
707
|
1,799
|
|
|
|
|
|
|
|
|
Discontinued operations, net of tax 5
|
-
|
-
|
(140)
|
|
|
|
|
|
|
|
Tax effect of above adjustments (excluding discontinued operations) 7
|
(4,465)
|
(3,256)
|
(2,133)
|
|
|
|
|
|
|
|
Tax effect of corporate conversion, acquisitions and IFRS adjustments 6
|
-
|
(3,628)
|
(13,509)
|
|
|
|
|
|
|
Adjusted net income3
|
$ 26,236
|
$ 29,104
|
$ 28,457
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income per share, basic and diluted 3, 8
|
$ 0.4429
|
$ 0.4974
|
$ 0.5346
|
n/m
|
n/m
|
n/m
|
n/m
|
n/m
|
|
Net income per share, basic and diluted 8
|
$ 0.2542
|
$ 0.4010
|
$ 0.6769
|
$ 0.2260
|
$ 0.3512
|
$ 0.4741
|
$ 0.4288
|
$ 0.4809
|
n/m = not measurable
1 The 2011 results include those of ASSET, effective from the date of
acquisition of January 18, 2011 and those of Mortgagebot effective from
the date of acquisition of April 12, 2011. Certain comparative figures
have been reclassified and adjusted to conform to the current period's
presentation.
2 Expenses for 2011 include acquisition-related items such as transaction
costs and certain retention and incentive payments related to the
Mortgagebot acquisition and for 2010, a restructuring charge and
acquisition-related costs totalling $4.4 million, recorded in the third
quarter.
3 EBITDA and Adjusted net income are non-IFRS terms. See Non-IFRS
Financial Measures for a more complete description of these terms.
Periods prior to January 1, 2011, do not have a comparable measure for
Adjusted net income due to the differences in taxation for D+H as an
income trust prior to January 1, 2011 and as a corporation subsequent
to that date.
4 Includes: (i) amortization of mark-to-market adjustment of
interest-rate swaps relating to the amortization of cumulative net
gains and losses that were deferred prior to January 1, 2007 when hedge
accounting was used by the Company; and (ii) mark-to-market adjustments
of interest-rate swaps that existed as at September 30, 2011 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
income.
5 The Business 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 for the comparative
periods presented.
6 Adjustments for the second quarter of 2011 included, a non-cash income
tax recovery related to losses within certain US subsidiaries that were
not previously recognized, in connection with the acquisition of
Mortgagebot. Adjustments for the first quarter of 2011 included
non-cash income tax recoveries recorded in connection with the
conversion to a corporation and implementation of IFRS, among other
items.
7 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 costs.
8 Diluted Net income per share and Diluted Adjusted net income per share
(non-IFRS term) reflect impacts of outstanding options. If the option
price is below the average market price during the period, then the
options are not included in the dilution calculation.
9 With the adoption of IFRS, 2010 comparative figures have been restated.
The reconciliations from Canadian GAAP to IFRS for all four quarters of
2010 have been provided below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1 2010
|
Q2 2010
|
Q3 2010
|
Q4 2010
|
|
Cdn GAAP
|
Effect of
Transition
to IFRS
|
IFRS
|
Cdn GAAP
|
Effect of
Transition
to IFRS
|
IFRS
|
Cdn GAAP
|
Effect of
Transition
to IFRS
|
IFRS
|
Cdn GAAP
|
Effect of
Transition
to IFRS
|
IFRS
|
|
Revenue 1
|
$ 153,698
|
$ 2,131
|
$ 155,829
|
$ 164,319
|
$ 2,774
|
$ 167,093
|
$ 161,900
|
$ 2,419
|
$ 164,319
|
$ 160,457
|
$ 2,017
|
$ 162,474
|
|
Expenses 1
|
115,989
|
2,131
|
118,120
|
120,545
|
2,774
|
123,319
|
121,311
|
6,836
|
128,147
|
124,733
|
8,285
|
133,018
|
|
Restructuring Charges 2
|
-
|
-
|
-
|
-
|
-
|
-
|
2,160
|
(2,160)
|
-
|
6,268
|
(6,268)
|
-
|
|
EBITDA 5
|
37,709
|
-
|
37,709
|
43,774
|
-
|
43,774
|
38,429
|
(2,257)
|
36,172
|
29,456
|
-
|
29,456
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of capital assets and non-acquisition intangibles
|
4,669
|
-
|
4,669
|
4,962
|
-
|
4,962
|
5,030
|
-
|
5,030
|
5,643
|
-
|
5,643
|
|
Amortization of intangibles from acquisitions
|
7,097
|
-
|
7,097
|
7,158
|
-
|
7,158
|
6,925
|
-
|
6,925
|
7,108
|
-
|
7,108
|
|
Interest expense
|
3,374
|
-
|
3,374
|
3,692
|
-
|
3,692
|
3,517
|
-
|
3,517
|
3,405
|
-
|
3,405
|
|
Amortization and fair value adjustment of derivative instruments
|
(1,370)
|
-
|
(1,370)
|
1,797
|
-
|
1,797
|
1,566
|
-
|
1,566
|
(2,796)
|
-
|
(2,796)
|
|
Income tax expense (recovery) 3
|
661
|
243
|
904
|
603
|
(208)
|
395
|
(645)
|
(802)
|
(1,447)
|
2,620
|
828
|
3,448
|
|
Income from continuing operations
|
23,278
|
(243)
|
23,035
|
25,562
|
208
|
25,770
|
22,036
|
(1,455)
|
20,581
|
13,476
|
(828)
|
12,648
|
|
Income (loss) from discontinued operations, net of tax 4
|
(210)
|
-
|
(210)
|
(531)
|
-
|
(531)
|
(465)
|
(1,421)
|
(1,886)
|
(620)
|
-
|
(620)
|
|
Net income
|
$ 23,068
|
$ (243)
|
$ 22,825
|
$ 25,031
|
$ 208
|
$ 25,239
|
$ 21,571
|
$ (2,876)
|
$ 18,695
|
$ 12,856
|
$ (828)
|
$ 12,028
|
|
Net income per unit, basic and diluted
|
$ 0.4333
|
$ (0.0046)
|
$ 0.4288
|
$ 0.4702
|
$ 0.0039
|
$ 0.4741
|
$ 0.4052
|
$ (0.0540)
|
$ 0.3512
|
$ 0.2415
|
$ (0.0156)
|
$ 0.2260
|
1 IFRS requires that uniform policies be used for like transactions and
events throughout the Company. The Company determined that revenue
transactions related to loan registration and recovery services should
be presented on the basis of gross amount billed to customers. A
subsidiary previously accounted for these transactions on a net basis.
With the conversion to IFRS, the subsidiary has aligned its treatment
of these transactions with that of the Company and the effect is to
increase revenue and expenses with no impact on net income.
2 Under IFRS, non-recurring items are not classified as separate line
items. The effect in the third and fourth quarters of 2010 was to
reclassify the restructuring charges as expenses within relevant
categories with no impact on net income.
3 The effect of transition to IFRS on income tax expense (recovery)
relates to the tax rates used to calculate deferred tax asset and
liabilities under Canadian GAAP versus IFRS.
4 During the third quarter of 2010, the purchase accounting for Resolve
acquisition was finalized under Canadian GAAP. Under IFRS, certain
costs did not qualify for the equivalent recognition. Such costs
amounted to $4,177 of which $2,257 was recorded as part of the
continuing operations and $1,421 was recorded as part of the
discontinued operations ($1,920 before taxes) for IFRS purposes.
5 EBITDA is a non-IFRS term. See Non-IFRS Financial Measures for a more
complete description of this term.
The Business 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 generally, the
housing and mortgage markets and the auto lending markets specifically,
have increased volatility. 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 acquisition of the
Resolve business resulted in a substantial increase in all reported
balances since the acquisition on July 27, 2009, except per share
amounts, which were additionally impacted by the issuance of 9,286,581
additional units of Davis + Henderson Income Fund in the third quarter
of 2009 to fund the Resolve acquisition. Additionally, the acquisition
of ASSET on January 18, 2011 and the acquisition of Mortgagebot on
April 12, 2011 increased revenues and expenses. 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.
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.
Net income has been more variable as it has been affected by the
variability in non-cash items such as mark-to-market adjustments on
interest-rate swaps, amortization of intangibles from acquisitions and
changes in other non-cash tax items.
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 supplementary disclosure provides useful additional information
related to the cash flows of the Corporation, repayment of debt and
other investing activities.
Summary of Cash Flows
(in thousands of Canadian dollars, unaudited)
|
|
|
|
Quarter ended September 30,
|
Nine months ended September 30,
|
|
|
|
|
2011
|
2010
|
2011
|
2010
|
|
Cash and cash equivalents provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
Net income from continuing operations
|
|
|
$ 15,060
|
$ 20,581
|
$ 74,419
|
$ 69,386
|
|
Depreciation and amortization of assets
|
|
|
16,860
|
11,955
|
46,873
|
35,841
|
|
Amortization and fair value adjustment of derivative instruments
|
|
|
3,991
|
1,566
|
3,531
|
1,993
|
|
Business combination adjustments
|
|
|
-
|
2,257
|
-
|
2,257
|
|
Difference in interest expense and cash interest paid
|
|
|
282
|
(894)
|
1,015
|
767
|
|
Non-cash income tax and options expenses
|
|
|
5,627
|
(1,447)
|
(6,897)
|
(148)
|
|
|
|
|
41,820
|
34,018
|
118,941
|
110,096
|
|
Decrease (increase) in non-cash working capital items
|
|
|
1,036
|
2,789
|
(29,767)
|
(17,128)
|
|
Changes in other operating assets and liabilities and discontinued
operations
|
|
|
1,130
|
(64)
|
2,467
|
1,369
|
|
Net cash from operating activities
|
|
|
43,986
|
36,743
|
$ 91,641
|
$ 94,337
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
Net change in long-term indebtedness
|
|
|
(15,000)
|
(5,000)
|
169,505
|
(5,000)
|
|
Issuance costs, equity and debt
|
|
|
(103)
|
-
|
(9,900)
|
(2,564)
|
|
Proceeds from issuance of shares
|
|
|
-
|
-
|
121,800
|
-
|
|
Distributions and dividends paid during the period
|
|
|
(18,362)
|
(24,482)
|
(52,278)
|
(73,446)
|
|
Net cash from (used in) financing activities
|
|
|
(33,465)
|
(29,482)
|
229,127
|
(81,010)
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(7,073)
|
(7,079)
|
(24,724)
|
(16,348)
|
|
Acquisitions
|
|
|
-
|
167
|
(292,993)
|
167
|
|
Net cash used in investing activities
|
|
|
(7,073)
|
(6,912)
|
(317,717)
|
(16,181)
|
|
Increase (decrease) in cash and cash equivalents for the period
|
|
|
3,448
|
349
|
3,051
|
(2,854)
|
|
Cash and cash equivalents, beginning of period
|
|
|
747
|
675
|
1,144
|
3,878
|
|
Cash and cash equivalents, end of period
|
|
|
$ 4,195
|
$ 1,024
|
$ 4,195
|
$ 1,024
|
Capital Expenditures
Total capital expenditures remained consistent for the third quarter of
2011 compared to the same period in 2010 and increased by $8.4 million
to $24.7 million in the first nine months of 2011. Capital expenditures
also include certain contract payments which relate to payment
obligations under customer and partner contracts, including fixed
contract or program initiation payments and annual payments payable
over the life of the contract. These contract payments reflect, among
other things, the high degree of integration and sharing between D+H
and its customers and partners of the many activities related to
ordering, data handling, customer service, customer access and other
activities.
The increase in capital expenditures over the nine-month period in 2010
primarily reflected increased integration and upgrade activities,
consistent with the higher capital spend commencing in the latter part
of 2010, and investing in the building of technology products and
capability.
The Business' capital program provides for continued expenditures to be
funded by cash flows from operations.
Dividends
Consistent with the announcement in 2010 of our intention to pay
quarterly dividends commencing in 2011 at an initial annualized amount
of $1.20 per share, D+H paid approximately $0.30 per share during each
of the first and second quarters of 2011. For the third quarter of
2011, D+H paid $0.31 per share as it increased its target annualized
dividend amount by 4 cents to $1.24 per share effective for
shareholders of record as of August 31, 2011, paid on September 30,
2011.
For the third quarter of 2010, both cash distributions declared and paid
were $0.4599 per unit ( $24.5 million) and for the first nine months of
2010, both cash distributions declared and paid were $1.3797 per unit (
$73.4 million).
Dividends payable by D+H to its shareholders are recorded when
declared. Actual dividends declared will be subject to the discretion
of the D+H Board of Directors and may vary from the intentions stated.
Among other items, in determining actual dividends declared, the Board
of Directors will consider the financial performance, capital plans,
acquisition plans, expectations of future economic conditions and other
factors.
As at September 30, 2011, and November 8, 2011, 59,233,373 common shares
were outstanding, reflecting the additional 6 million common shares
issued in April 2011 to fund the Mortgagebot acquisition (as at
September 30, 2010 - 53,233,373 trust units).
Changes in Non-Cash Working Capital and Other Items
(in thousands of Canadian dollars, unaudited)
|
|
|
Quarter ended September 30,
|
Nine months ended September 30,
|
|
|
|
2011
|
2010
|
2011
|
2010
|
|
Decrease (increase) in non-cash working capital items
|
|
$ 1,036
|
$ 2,789
|
$ (29,767)
|
$ (17,128)
|
|
Decrease (increase) in other operating assets and liabilities and
discontinued operations
|
|
1,130
|
(64)
|
2,467
|
1,369
|
|
Decrease (increase) in non-cash working capital and other items
|
|
$ 2,166
|
$ 2,725
|
$ (27,300)
|
$ (15,759)
|
|
The net decrease in non-cash working capital items for the third quarter
of 2011 was attributable to several items, including a decrease in
trade receivables due to increased collections in the third quarter of
2011 related to the effect on payments from the postal strike during
the second quarter of 2011 and an increase in trade payables, partially
offset by an increase in prepaid expenses.
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 recently acquired.
Acquisitions
On April 12, 2011, D+H completed the acquisition of Mortgagebot for a
purchase price of US $232.7 million, excluding transaction costs. The
acquisition was funded through the issuance of $121.8 million new
equity (6 million common shares at $20.30 per share) and the balance
from borrowings. Mortgagebot is a leading provider of web-based
mortgage point-of-sale solutions in the United States and provides a
wide range of consumer direct, loan officer and branch and call centre
mortgage origination solutions for over 1,000 banks and credit unions.
On January 18, 2011, D+H acquired the assets and operations of ASSET for
$74.9 million, excluding transaction costs. This acquisition was funded
by utilizing an extension of the Company's secured credit facilities.
ASSET is Canada's largest provider of technology based asset recovery
and insolvency management solutions to the Canadian financial services
industry.
For additional information on the acquisitions, refer to Note 8 of the
consolidated financial statements of the Company for the three and nine
months ended September 30, 2011.
Management has not yet completed its assessment and valuation of the
assets acquired and liabilities assumed for these acquisitions, and as
a result, the presented purchase information may change.
Cash Balances and Long-Term Indebtedness
At September 30, 2011, cash and cash equivalents totalled $4.2 million,
compared to $1.1 million at December 31, 2010.
The long-term indebtedness is recorded on the Consolidated Statement of
Financial Position, net of unamortized deferred financing fees of $6.5
million as at September 30, 2011. The long-term indebtedness as at
September 30, 2011, before deducting unamortized deferred finance fees,
was $374.0 million compared to $199.0 million at December 31, 2010.
During the third quarter of 2011, the Business made a repayment of
$15.0 million on its credit facilities.
The long-term indebtedness includes drawings under a Seventh Amended and
Restated Credit Agreement ("Credit Agreement") dated April 12, 2011 of
$228.0 million. Total committed senior secured credit facilities under
this Credit Agreement at September 30, 2011 were $355.0 million,
consisting of a revolving credit facility that matures on April 12,
2016. The Business is permitted to draw on the revolving facility's
available balance of $127.0 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 income and capital that may be
distributed by Davis + Henderson Corporation 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. A copy of the Credit Agreement is
available at www.sedar.com.
As at September 30, 2011, and November 8, 2011, long-term indebtedness
also consists of fixed-rate Bonds of $80.0 million issued under a
Second Amended and Restated Note Purchase and Private Shelf Agreement
dated April 12, 2011 ("Note Purchase Agreement"), which include $50.0
million issued under the senior secured Note Purchase Agreement at a
fixed-interest rate of 5.99% and $30.0 million at 5.17%, both maturing
on June 30, 2017. In addition, the Business also entered into a Note
Purchase and Private Shelf Agreement pursuant to which the Company
issued US$ 63 million of senior secured guaranteed notes at 5.59%,
maturing on April 12, 2021 to partially fund the acquisition of
Mortgagebot.
The Bonds rank equally in all respects with amounts outstanding under
the Credit Agreement, any related hedging contracts and cash management
facilities and benefit from the same financial covenants that exist
under the Credit Agreement described above. The Note Purchase
Agreements are available at www.sedar.com.
To reduce liquidity risk, management has historically renewed the terms
of the Company's long-term indebtedness in advance of its maturity
dates and the Company has maintained financial ratios that are
conservative compared to financial covenants applicable to the
financing arrangements. To enhance its liquidity position, in prior
years the Company has made numerous voluntary payments on its
outstanding long-term indebtedness and a portion of its committed
credit facilities remain undrawn.
As at September 30, 2011, and as at November 8, 2011, the Credit
Agreement provides for an additional uncommitted credit arrangement of
up to $150.0 million and the Note Purchase and Private Shelf Agreement
provides for an additional uncommitted arrangement of up to US$ 37
million with the use of these arrangements subject to the prior
approval of the relevant lenders with any fees, spreads and other
additional terms to be negotiated at that time.
The Company has historically hedged against increases in market interest
rates on certain of its debt by utilizing interest-rate swaps and more
recently by issuing fixed rate long-term bonds. In respect of
interest-rate swap hedge contracts with its lenders, as of September
30, 2011, the Company's borrowing rates on 41.7% of outstanding
long-term indebtedness under the 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
|
$-
|
$1,225
|
2.720%
|
|
|
March 18, 2015
|
25,000
|
-
|
1,464
|
2.940%
|
|
|
March 18, 2017
|
25,000
|
-
|
2,301
|
3.350%
|
|
|
March 20, 2017
|
20,000
|
-
|
1,858
|
3.366%
|
|
|
$ 95,000
|
$ -
|
$ 6,848
|
|
|
|
|
|
|
|
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 as
compared to certain levels specified in the Credit Agreement. As at
September 30, 2011, the Company's long-term bank indebtedness was
subject to bankers' acceptance fees of 2.25% over the applicable BA
rate and prime rate spreads of 1.25% over the prime rate.
As at September 30, 2011, the Company would have to pay the fair value
of $6.8 million if it were to close out all of the 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.
As at September 30, 2011, the average effective interest rate on the
Corporation's total indebtedness was approximately 4.8%.
The Company also enters into foreign exchange contracts to fix foreign
exchange rates on its foreign currency transactions, which are
relatively minor. During the third quarter of 2011, D+H entered into
four foreign exchange forward contracts with one of its lenders,
aggregating US $12.0 million as follows:
(in thousands of Canadian dollars, unless otherwise noted, unaudited)
|
|
|
|
|
|
|
Notional
|
Fair value of foreign exchange contracts
|
|
|
Maturity date
|
amount (USD)
|
Asset
|
Liability
|
Exchange rate
|
|
|
|
|
|
December 15, 2011
|
$ 3,000
|
$ -
|
$ 42
|
1.0324
|
|
|
March 15, 2012
|
3,000
|
-
|
42
|
1.0334
|
|
|
June 15, 2012
|
3,000
|
-
|
43
|
1.0339
|
|
|
September 14, 2012
|
3,000
|
-
|
42
|
1.0347
|
|
|
|
$ 12,000
|
$ -
|
$ 169
|
|
|
|
|
|
|
|
Under these contracts, the Company is required to deliver the agreed US
dollar amount and in return receive the contracted Canadian dollar
amount set forth in each contract. As at September 30, 2011, the fair
value that the Company would have paid if it were to have closed out
the foreign exchange contracts was $0.2 million. It is not the present
intention of management to close out these contracts. The Company has
historically held its derivative contracts to maturity. These foreign
exchange contracts have been designated as hedges in accordance with
IFRS, for hedge accounting purposes.
D+H believes that its customers, suppliers and lenders, while impacted
by economic volatility, will continue to operate with the Company on
similar terms to those currently in place. As well, while the
Company's products and services may be impacted by the changing
economic environment, the Company expects to remain profitable and
generate positive cash flows.
Cash flows from operations, together with cash balances on hand and
unutilized term credit facilities are expected to be sufficient to fund
the Business' operating requirements, asset expenditures, contractual
obligations and anticipated dividends.
NON-IFRS FINANCIAL MEASURES
The information presented within the tables in this MD&A include certain
adjusted financial measures such as "EBITDA" (Earnings before interest,
taxes, depreciation and amortization), "Adjusted net income" (net
income before certain non-cash charges and certain items of note such
as acquisition-related expenses and discontinued operations), and
"Adjusted net income per share", all of which are not defined terms
under IFRS. These non-IFRS financial measures are derived from, and
should be read in conjunction with, the Consolidated Statements of
Income. See the reconciliation of EBITDA and Adjusted net income to the
most directly comparable IFRS measure in the "Operating Results"
section of this MD&A.
Management believes these supplementary disclosures 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, 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 is used to measure (with adjustments) compliance
with certain financial covenants under the Company's credit facility.
EBITDA is also widely used by D+H and others in assessing performance
and 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 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, the Business commenced using
Adjusted net income and Adjusted net income per share as a measure for
evaluating its results. Periods prior to January 1, 2011, do not have
a comparable measure.
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 that are non-regularly recurring such as acquisition-related
expenses, discontinued operations and certain non-cash items such as
amortization of intangibles from acquisitions and mark-to-market
adjustments of interest-rate swaps. These items are excluded in
calculating Adjusted net income as they are not considered indicative
of the financial performance of the Business for the period being
reviewed.
CHANGES IN ACCOUNTING POLICIES
The Company actively monitors developments in standards as issued by the
IASB and the Canadian Accounting Standards Board ("AcSB"), as well as
regulatory developments as issued by the Canadian Securities
Administrators ("CSA").
As previously described, effective January 1, 2011, the Company's policy
is to adopt hedge accounting prospectively on any new derivative
instruments entered into subsequent to January 1, 2011.
Foreign Exchange Forward Contracts
Each of the Company's existing currency forwards has been designated in
its entirety at inception to hedge a set amount of the forecasted cash
inflows. The Company accounts for this hedge as a cash flow hedge as
per IAS 39. The fair value change of the hedging instrument (Currency
Forwards), to the extent it is effective, is recorded in other
comprehensive income ("OCI"). The ineffective portion of the gain or
loss on the hedging instrument is recognized in profit or loss.
In respect of each hedging relationship, at the end of each reporting
date during the term of that hedging relationship, the balance in
accumulated other comprehensive income ("AOCI") associated with the
hedged item will be adjusted to the lesser of the following (in
absolute amounts):
(i) the cumulative gain or loss on the hedging instrument from inception
of the hedge; and
(ii) the cumulative change in fair value (present value) of the expected
future cash flows on the hedged net cash inflows from inception of the
hedge.
To the extent that (i) is greater than (ii), there will be
ineffectiveness and this will be recognized in the income statement in
the respective reporting period.
At inception and during the life of the hedging relationship, an
eligible hedge is expected to be highly effective in offsetting the
changes in the hedging instrument's fair value and the variability in
cash flows attributable to the hedged item. D+H will conclude that the
hedge is effective if changes in the fair value of the currency forward
are between 80% and 125% of the present value of the changes in the
cash flows of the hedged cash-flows attributable to changes in
designated forward foreign exchange rate.
D+H will assess prospective effectiveness at the inception of each
hedge, and will perform prospective and retrospective testing on each
outstanding hedge at the end of every reporting period. All
effectiveness testing will be performed using regression analysis. At
each reporting date subsequent to the inception of the hedge, the
regression analysis performed for demonstrating effectiveness
retrospectively will also be used for assessing effectiveness
prospectively.
Interest-rate swaps
As of September 30, 2011, the Company had not entered into any new
interest-rate swaps and the mark-to-market adjustments of the existing
interest-rate swaps continue to be recognized in the Consolidated
Statement of Income.
Adoption of IFRS
Commencing January 1, 2011, the Corporation's financial statements have
been prepared in accordance with IFRS, with 2010 comparative figures
restated to conform to IFRS.
IFRS implementation plan
The Company has completed the final phase of its IFRS implementation
plan. The implementation project consisted of three primary phases:
(1) Scoping and Diagnostic Phase, (2) Impact Analysis and Design Phase,
and (3) Implementation and Review Phase. As part of this transition
plan, the Company completed the following:
-
Performed a detailed analysis of the current accounting policies and
practices with all relevant IFRS standards and applicable
interpretations;
-
Made accounting policy choices, including those under IFRS 1, First-Time
Adoption of International Financial Reporting Standards ("IFRS 1");
-
Identified and implemented changes to existing accounting policies, data
systems, business processes, internal controls over financial reporting
and disclosure controls;
-
These changes were adequately tested prior to reporting for the first
quarter of 2011.
-
We have completed the design, implementation and documentation of the
internal controls over the IFRS changeover process by applying our
existing control framework. All accounting policy selections and
changes and transitional impacts to the financial statements were
subject to review by senior management and the Audit Committee of the
Board of Directors.
Some of the key differences identified that were applicable to the
Company between Canadian GAAP and IFRS for the opening Consolidated
Statement of Financial Position include accounting for business
combinations, change in tax rates used to calculate deferred income tax
assets and liabilities and recognition of vested past service costs.
The differences identified did not have significant effects on the
business functions of the Company.
IFRS 1 Exemptions
Upon evaluation of the options under IFRS 1, D+H elected to use the
following exemptions:
Business Combinations
A first-time adopter of IFRS may elect not to apply IFRS 3
retrospectively to business combinations that occurred before the date
of transition to IFRSs. The retrospective basis would require
restatement of all business combinations that occurred prior to the
transition date. The Company has elected not to apply IFRS 3
retrospectively to business combinations that occurred prior to the
transition date and such business combinations will not be restated.
As a result of applying these exemptions, except as required under IFRS
1, any goodwill arising on such business combinations before the
transition date was not adjusted from the carrying value previously
determined under Canadian GAAP.
Fair value as deemed cost
IFRS 1 permits measuring, at the date of transition, an item of
property, plant and equipment or intangible assets that meet the
criteria specified in IAS 38 at either its fair value and using those
amounts as deemed cost, or using the historical valuation under
previous GAAP. The Company continues to apply the cost model to
property, plant and equipment and intangible assets and did not restate
to fair value under IFRS. The Company continues to use the historical
basis under Canadian GAAP as deemed cost under IFRS at transition date.
Employee Future Benefits
A first-time adopter of IFRS may elect to recognize all cumulative
actuarial gains and losses at the date of transition to IFRS, even if
it uses the corridor approach for future actuarial gains and losses.
The Company elected to apply the exemption at transition date.
Key Differences Identified Between Canadian GAAP and IFRS
The key differences identified by the Company compared to the accounting
policies under Canadian GAAP are as follows (Refer to Note 24 of the
Corporation's financial statements for the three and nine months ended
September 30, 2011 which contains reconciliations and descriptions of
the effect of the transition from Canadian GAAP to IFRS on equity,
earnings and comprehensive income including line-by-line
reconciliations of the statement of financial position as at September
30, 2010 as well as statement of income for the three and nine months
ended September 30, 2010):
Business Combinations
As described above, the Company has elected under IFRS 1 not to apply
IFRS 3 Business Combinations retrospectively to business combinations
that occurred prior to the transition date of January 1, 2010.
Employee Future Benefits
Cumulative gains and losses: The Company has elected under IFRS 1 to
recognize all cumulative gains and losses related to employee benefits
deferred under Canadian GAAP in opening retained earnings at the
transition date.
Past service costs: Under IFRS, if past service cost entitlements are
not conditional on future service and thus vest immediately, then the
expense and the change in the obligation are recognized in full
immediately. Under Canadian GAAP, liabilities and expenses for both
vested and unvested past service cost are amortized on a straight-line
basis over the remaining service period of the employees.
Income Taxes
For the periods prior to January 1, 2011, prior to the conversion of the
income trust to a corporate structure, IAS 12 requires that current and
deferred tax assets and liabilities are measured at the tax rate
applicable to undistributed profits until such time that the
distribution becomes payable. Canadian GAAP allows an entity to
anticipate future distributions, provided certain conditions are met,
and therefore uses the tax rate applicable to distributed profits.
Under the tax rules applicable to income trusts, distributions from a
unit trust are taxed at corporate tax rates whereas undistributed
income is taxed at the top marginal individual income tax rate. As
such, the net deferred tax liability of the flow-through entities must
be recorded under IFRS at the top marginal tax rate for individuals in
Ontario, which is approximately 46.4%, as opposed to the corporate tax
rate, which is less than 30%.
Impact on internal controls over financial reporting and disclosure
controls
The Company completed the assessment of the impact of the conversion to
IFRS on internal controls over financial reporting and disclosure
controls and determined that its current information technology
infrastructure, data systems and reporting capabilities are sufficient
to support the Company during and after transition to IFRS.
Future Accounting and Reporting Changes
The Company will continue to monitor changes to IFRS in the upcoming
periods. The IFRS standard-setting bodies have significant ongoing
projects that could impact the IFRS accounting policies that D+H has
selected. In particular, there may be additional new or revised
standards in relation to revenue recognition, consolidation, financial
instruments, hedge accounting, discontinued operations, leases and
employee benefits. We have implemented processes to ensure that
potential changes to the IFRS are monitored, evaluated and implemented
in a timely manner.
DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROLS OVER FINANCIAL
REPORTING
The Corporation and its subsidiaries have designed and maintain a set of
disclosure controls and procedures designed to ensure that information
required to be disclosed in filings made pursuant to Multilateral
Instrument 52-109 is recorded, processed, summarized and reported
within the time periods specified in the Canadian Securities
Administrators' rules and forms.
The Corporation and its subsidiaries have also designed and maintain a
set of internal controls over financial reporting to provide reasonable
assurance regarding the reliability of financial reporting and
preparation of financial statements for external purposes in accordance
with IFRS for periods effective January 1, 2011.
D+H management has limited its certification with respect to the scope
of the design of disclosure controls and procedures and internal
control over financial reporting to exclude controls, policies and
procedures of the ASSET business acquired on January 18, 2011 and the
Mortgagebot business acquired on April 12, 2011.
The following is a summary of certain financial information relating to
the ASSET and Mortgagebot businesses:
|
|
|
As at September 30, 2011
|
|
Assets
|
|
|
|
|
Current assets
|
|
$16,079
|
|
|
Capital assets and Non-acquisition intangible assets
|
|
2,739
|
|
|
|
18,818
|
|
Liabilities
|
|
|
|
|
Current liabilities
|
|
11,060
|
|
|
|
|
|
|
|
$11,060
|
|
|
|
|
|
|
Commitments
|
|
$1,789
|
|
|
|
|
|
|
|
Three months ended
September 30, 2011
|
|
|
|
|
|
|
Revenue
|
|
$21,436
|
|
|
Expenses
|
|
14,501
|
|
|
Amortization
|
|
309
|
Except for the acquisition of Mortgagebot, there have been no other
changes in the Company's internal controls over financial reporting
during the quarter ended September 30, 2011 that have materially
affected, or are reasonably likely to materially affect, its internal
control over financial reporting.
BUSINESS RISKS
For a comprehensive discussion of the business risks, refer to the
Company's most recently filed Annual Information Form available on
SEDAR at www.sedar.com. In connection with the acquisition of Mortgagebot, for a comprehensive
discussion of the business and business risks refer to the Company's
Prospectus dated April 6, 2011 available on SEDAR at www.sedar.com. Other than the risks related to Mortgagebot referred to above, risks
and uncertainties related to the Corporation have not changed since the
filing of the 2010 Annual MD&A and the Annual Information Form.
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. In January and April 2011, respectively, the
Company completed the acquisitions of ASSET and Mortgagebot and these
acquisitions will increase revenues and expenses of future periods as
compared to previous periods. The acquisitions also provide further
revenue diversification and support our long-term strategy.
Additionally, in the immediate future, we will focus on executing our
organic growth initiatives, integrating the Business and continuing to
diligently manage costs through our transformational and integration
initiatives. 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 our Business
through a combination of organic initiatives, partnering with third
parties and by way of selective acquisitions. Our organic initiatives
are many and include: (i) the ongoing enhancement and evolution of
programs to the chequing and credit card accounts through the addition
of value-added service enhancements; (ii) the expansion of our current
services within the student lending, commercial and personal lending
areas (including the mortgage, credit card and personal property
markets); (iii) selling and delivering our lending technology services
to new customers; and (iv) combining the capabilities of D+H together
with those of the recently acquired businesses to develop new service
offerings for our financial institution customers. Our acquisition
strategy focuses on acquiring companies that extend or add to the
services that we provide within the financial services marketplace.
Our acquisition plans may continue to involve extending beyond the
Canadian market consistent with the expansion strategies of our major
Canadian customers.
With the inclusion of several new service areas over the last several
years, we expect to continue to experience some level of increase in
variability in year-over-year quarterly revenues, earnings and cash
flows, due to, among other items: (i) volume variances within the lien
registration and mortgage origination service areas; (ii) variability
in professional services work; and (iii) fees and expenses incurred in
connection with acquisitions and related business integration
activities. The Company believes that, in general, revenues in early
2010 benefited from stronger volumes as housing and mortgage markets,
and auto and personal lending markets increased following earlier
contractions. During the first nine months of 2011 and for the next
several quarters, our results will compare to these earlier periods
that featured strong activity in real estate, mortgage and other
lending markets where activity is now expected to moderate.
For 2011 and 2012, we anticipate that our capital spending will be in
the range of $32.0 million - $35.0 million and $35.0 million to $40.0
million, respectively, including the capital requirements for ASSET and
Mortgagebot.
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 and EBITDA targets; 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 the acquisition of Mortgagebot on the financial
performance of D+H; and the expected benefits arising as a result of
the acquisition of Mortgagebot. 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 the actual results,
performance or achievements of the Business, or developments in D+H's
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 cheques by consumers;
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; 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, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2011
|
|
December 31, 2010
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
4,195
|
$
|
1,144
|
|
Trade and other receivables
|
|
85,946
|
|
63,902
|
|
Inventories
|
|
5,131
|
|
6,006
|
|
Prepayments
|
|
10,598
|
|
7,552
|
|
Total current assets
|
|
105,870
|
|
78,604
|
|
Deferred tax assets
|
|
46,076
|
|
31,079
|
|
Property, plant and equipment
|
|
32,891
|
|
32,289
|
|
Intangible assets
|
|
455,640
|
|
266,837
|
|
Goodwill
|
|
669,411
|
|
524,228
|
|
Total non-current assets
|
|
1,204,018
|
|
854,433
|
|
Total assets
|
$
|
1,309,888
|
$
|
933,037
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
Trade payable and accrued liabilities
|
$
|
90,824
|
$
|
79,569
|
|
Dividend (distribution) payable
|
|
-
|
|
8,161
|
|
Provisions
|
|
4,404
|
|
12,358
|
|
Deferred revenue
|
|
8,318
|
|
6,338
|
|
Total current liabilities
|
|
103,546
|
|
106,426
|
|
|
|
|
|
|
|
Loans and borrowings
|
|
367,573
|
|
196,215
|
|
Derivative liabilities held for risk management
|
|
7,017
|
|
3,403
|
|
Deferred revenue
|
|
9,633
|
|
9,226
|
|
Other long-term liabilities
|
|
8,722
|
|
7,290
|
|
Deferred tax liabilities
|
|
95,788
|
|
55,327
|
|
Total non-current liabilities
|
|
488,733
|
|
271,461
|
|
Total liabilities
|
|
592,279
|
|
377,887
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
Capital
|
|
673,007
|
|
-
|
|
Trust units
|
|
-
|
|
595,859
|
|
Retained earnings (deficit)
|
|
30,442
|
|
(40,623)
|
|
Accumulated other comprehensive income (loss)
|
|
14,160
|
|
(86)
|
|
Total equity
|
|
717,609
|
|
555,150
|
|
|
|
|
|
|
|
Commitments
|
|
|
|
|
|
Total liabilities and equity
|
$
|
1,309,888
|
$
|
933,037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
|
|
|
|
|
|
(in thousands of Canadian dollars, except per share amounts, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Nine months ended
|
|
|
|
September 30, 2011
|
|
September 30, 2010
|
|
September 30, 2011
|
|
September 30, 2010
|
|
Revenue
|
$
|
186,275
|
$
|
164,319
|
$
|
540,943
|
$
|
487,241
|
|
Employee compensation and benefits
|
|
57,810
|
|
51,166
|
|
165,057
|
|
146,502
|
|
Non-compensation direct expenses
|
|
59,290
|
|
52,387
|
|
174,805
|
|
153,919
|
|
Other operating expenses
|
|
22,950
|
|
24,594
|
|
69,256
|
|
69,165
|
|
|
|
46,225
|
|
36,172
|
|
131,825
|
|
117,655
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation of property, plant and equipment
|
|
2,570
|
|
2,391
|
|
7,504
|
|
6,751
|
|
Amortization of intangible assets
|
|
14,290
|
|
9,564
|
|
39,369
|
|
29,090
|
|
Results from operating activities
|
|
29,365
|
|
24,217
|
|
84,952
|
|
81,814
|
|
|
|
|
|
|
|
|
|
|
|
Finance expenses:
|
|
|
|
|
|
|
|
|
|
Amortization and fair value adjustment of derivative instruments
|
|
3,991
|
|
1,566
|
|
3,531
|
|
1,993
|
|
Interest expense
|
|
4,792
|
|
3,517
|
|
14,053
|
|
10,583
|
|
Income from continuing operations before income tax
|
|
20,582
|
|
19,134
|
|
67,368
|
|
69,238
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (recovery)
|
|
5,522
|
|
(1,447)
|
|
(7,051)
|
|
(148)
|
|
Income from continuing operations
|
|
15,060
|
|
20,581
|
|
74,419
|
|
69,386
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations, net of taxes
|
|
-
|
|
(1,886)
|
|
140
|
|
(2,627)
|
|
Net income
|
$
|
15,060
|
$
|
18,695
|
$
|
74,559
|
$
|
66,759
|
|
Net income per share (unit) from continuing operations, basic and
diluted
|
$
|
0.2542
|
$
|
0.3866
|
$
|
1.3053
|
$
|
1.3034
|
|
Net income (loss) per share (unit) from discontinued operations, basic
and diluted
|
$
|
-
|
$
|
(0.0354)
|
$
|
0.0025
|
$
|
(0.0493)
|
|
Net income per share (unit), basic and diluted
|
$
|
0.2542
|
$
|
0.3512
|
$
|
1.3077
|
$
|
1.2541
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
|
(in thousands of Canadian dollars, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Nine months ended
|
|
|
|
|
September 30, 2011
|
|
September 30, 2010
|
|
September 30, 2011
|
|
September 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
15,060
|
$
|
18,695
|
$
|
74,559
|
$
|
66,759
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
Amortization of mark-to-market adjustment
|
|
|
|
|
|
|
|
|
|
of derivative instruments
|
|
-
|
|
52
|
|
86
|
|
344
|
|
Translation gain
|
|
13,493
|
|
-
|
|
14,160
|
|
-
|
|
Total comprehensive income
|
$
|
28,553
|
$
|
18,747
|
$
|
88,805
|
$
|
67,103
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
|
|
(in thousands of Canadian dollars, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2011
|
|
|
|
Capital
|
|
Translation reserve
|
|
Unrealized gain
(loss) on cash flow
hedges
|
|
Retained earnings
(deficit)
|
|
Total equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2011
|
$
|
672,902
|
$
|
667
|
$
|
-
|
$
|
33,744
|
$
|
707,313
|
|
Net income for the period
|
|
-
|
|
-
|
|
-
|
|
15,060
|
|
15,060
|
|
Translation gain
|
|
-
|
|
13,493
|
|
-
|
|
-
|
|
13,493
|
Amortization of mark-to-market adjustment
of derivative instruments
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Dividends
|
|
-
|
|
-
|
|
-
|
|
(18,362)
|
|
(18,362)
|
|
Options
|
|
105
|
|
-
|
|
-
|
|
-
|
|
105
|
|
Balance at September 30, 2011
|
$
|
673,007
|
$
|
14,160
|
$
|
-
|
$
|
30,442
|
$
|
717,609
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2010
|
|
|
|
Capital
|
|
Translation reserve
|
|
Unrealized gain
(loss) on cash flow
hedges
|
|
Retained earnings
(deficit)
|
|
Total equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2010
|
$
|
595,859
|
$
|
-
|
$
|
(190)
|
$
|
(22,382)
|
$
|
573,287
|
|
Net income for the period
|
|
-
|
|
-
|
|
-
|
|
18,695
|
|
18,695
|
|
Amortization of mark-to-market adjustment
|
|
|
|
|
|
|
|
|
|
|
|
of derivative instruments
|
|
-
|
|
-
|
|
52
|
|
-
|
|
52
|
|
Distributions
|
|
-
|
|
-
|
|
-
|
|
(24,482)
|
|
(24,482)
|
|
Balance at September 30, 2010
|
$
|
595,859
|
$
|
-
|
$
|
(138)
|
$
|
(28,169)
|
$
|
567,552
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2011
|
|
|
|
Capital
|
|
Translation reserve
|
|
Unrealized gain
(loss) on cash flow
hedges
|
|
Retained earnings
(deficit)
|
|
Total equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2011
|
$
|
595,859
|
$
|
-
|
$
|
(86)
|
$
|
(40,623)
|
$
|
555,150
|
|
Net income for the period
|
|
-
|
|
-
|
|
-
|
|
74,559
|
|
74,559
|
|
Translation gain
|
|
-
|
|
14,160
|
|
-
|
|
-
|
|
14,160
|
|
Amortization of mark-to-market adjustment
|
|
|
|
|
|
|
|
|
|
|
|
of derivative instruments
|
|
-
|
|
-
|
|
86
|
|
-
|
|
86
|
|
Capital reduction pursuant to the Arrangement
|
|
(40,623)
|
|
-
|
|
-
|
|
40,623
|
|
-
|
|
Share issuance
|
|
117,617
|
|
-
|
|
-
|
|
-
|
|
117,617
|
|
Dividends
|
|
-
|
|
-
|
|
-
|
|
(44,117)
|
|
(44,117)
|
|
Options
|
|
154
|
|
-
|
|
-
|
|
-
|
|
154
|
|
Balance at September 30, 2011
|
$
|
673,007
|
$
|
14,160
|
$
|
-
|
$
|
30,442
|
$
|
717,609
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2010
|
|
|
|
Capital
|
|
Translation reserve
|
|
Unrealized gain
(loss) on cash flow
hedges
|
|
Retained earnings
(deficit)
|
|
Total equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2010
|
$
|
595,859
|
$
|
-
|
$
|
(482)
|
$
|
(21,482)
|
$
|
573,895
|
|
Net income for the period
|
|
-
|
|
-
|
|
-
|
|
66,759
|
|
66,759
|
|
Amortization of mark-to-market adjustment
|
|
|
|
|
|
|
|
|
|
|
|
of derivative instruments
|
|
-
|
|
-
|
|
344
|
|
-
|
|
344
|
|
Distributions
|
|
-
|
|
-
|
|
-
|
|
(73,446)
|
|
(73,446)
|
|
Balance at September 30, 2010
|
$
|
595,859
|
$
|
-
|
$
|
(138)
|
$
|
(28,169)
|
$
|
567,552
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
(in thousands of Canadian dollars, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Nine months ended
|
|
|
|
September 30, 2011
|
|
September 30, 2010
|
|
September 30, 2011
|
|
September 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations
|
$
|
15,060
|
$
|
20,581
|
$
|
74,419
|
$
|
69,386
|
|
Adjustments for:
|
|
|
|
|
|
|
|
|
|
|
Depreciation of property, plant and equipment
|
|
2,570
|
|
2,391
|
|
7,504
|
|
6,751
|
|
|
Amortization of intangible assets
|
|
14,290
|
|
9,564
|
|
39,369
|
|
29,090
|
|
|
Amortization of mark-to-market adjustment
|
|
|
|
|
|
|
|
|
|
|
of derivative instruments
|
|
-
|
|
52
|
|
86
|
|
344
|
|
|
Fair value adjustment of derivative instruments
|
|
3,991
|
|
1,514
|
|
3,445
|
|
1,649
|
|
|
Business combination adjustments
|
|
-
|
|
2,257
|
|
-
|
|
2,257
|
|
|
Finance costs
|
|
4,792
|
|
3,517
|
|
14,053
|
|
10,583
|
|
|
Cash interest paid
|
|
(4,510)
|
|
(4,411)
|
|
(13,038)
|
|
(9,816)
|
|
|
Non-cash income tax expense (recovery)
|
|
5,522
|
|
(1,447)
|
|
(7,051)
|
|
(148)
|
|
|
Options expense
|
|
105
|
|
-
|
|
154
|
|
-
|
|
|
|
41,820
|
|
34,018
|
|
118,941
|
|
110,096
|
|
|
|
|
|
|
|
|
|
|
|
Changes in non-cash working capital items
|
|
1,036
|
|
2,789
|
|
(29,767)
|
|
(17,128)
|
|
Changes in other operating assets and liabilities
|
|
1,130
|
|
524
|
|
2,278
|
|
2,881
|
|
Cash flows from (to) discontinued operations
|
|
-
|
|
(588)
|
|
189
|
|
(1,512)
|
|
Net cash from operating activities
|
|
43,986
|
|
36,743
|
|
91,641
|
|
94,337
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Repayment of long-term indebtedness
|
|
(15,000)
|
|
(5,000)
|
|
(232,000)
|
|
(77,900)
|
|
Proceeds from long-term indebtedness
|
|
-
|
|
-
|
|
401,505
|
|
72,900
|
|
Issuance costs of long-term indebtedness
|
|
(103)
|
|
-
|
|
(4,439)
|
|
(2,564)
|
|
Issuance of shares
|
|
-
|
|
-
|
|
121,800
|
|
-
|
|
Issuance costs of shares
|
|
-
|
|
-
|
|
(5,461)
|
|
-
|
|
Dividends (distributions) paid
|
|
(18,362)
|
|
(24,482)
|
|
(52,278)
|
|
(73,446)
|
|
Net cash from (used in) financing activities
|
|
(33,465)
|
|
(29,482)
|
|
229,127
|
|
(81,010)
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Expenditures on property, plant and equipment
|
|
(1,912)
|
|
(2,496)
|
|
(5,859)
|
|
(4,437)
|
|
Expenditures on intangible assets
|
|
(5,161)
|
|
(4,583)
|
|
(18,865)
|
|
(11,911)
|
|
Acquisition of subsidiaries and acquisition adjustments
|
|
-
|
|
167
|
|
(292,993)
|
|
167
|
|
Net cash used in investing activities
|
|
(7,073)
|
|
(6,912)
|
|
(317,717)
|
|
(16,181)
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
for the period
|
|
3,448
|
|
349
|
|
3,051
|
|
(2,854)
|
|
Cash and cash equivalents, beginning of period
|
|
747
|
|
675
|
|
1,144
|
|
3,878
|
|
Cash and cash equivalents, end of period
|
$
|
4,195
|
$
|
1,024
|
$
|
4,195
|
$
|
1,024
|
For further information:
Brian Kyle, Chief Financial Officer, Davis + Henderson Corporation, (416) 696-7700, extension 5690, brian.kyle@dhltd.com
