EX-4.5


  Exhibit 4.5
  
 

 
  

 
  

 
  

 
  

 
 FIRSTSERVICE CORPORATION

 
  

INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  

 
  

 
  

 
 Third Quarter

September 30, 2019

  



	 	Page
2
 of 16	 



 
 FIRSTSERVICE CORPORATION
 CONSOLIDATED
STATEMENTS OF EARNINGS
 (Unaudited)

(in thousands of US dollars, except per share amounts) - in accordance with accounting principles
generally accepted in the 
 United States of America
  


	 	 	Three months	 	 	Nine months	 
	 	 	ended September 30	 	 	ended September 30	 
	 	 	2019	 	 	2018	 	 	2019	 	 	2018	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Revenues	 	$	672,253	 	 	$	506,356	 	 	$	1,731,816	 	 	$	1,428,160	 
	Cost of revenues	 	 	451,671	 	 	 	343,026	 	 	 	1,181,025	 	 	 	972,995	 
	Selling, general and administrative expenses	 	 	145,210	 	 	 	105,137	 	 	 	385,848	 	 	 	317,754	 
	Depreciation	 	 	11,152	 	 	 	7,934	 	 	 	28,798	 	 	 	23,970	 
	Amortization of intangible assets	 	 	13,029	 	 	 	4,343	 	 	 	22,235	 	 	 	12,993	 
	Settlement of long-term incentive arrangement (note 14)	 	 	-	 	 	 	-	 	 	 	314,379	 	 	 	-	 
	Acquisition-related items	 	 	1,493	 	 	 	618	 	 	 	5,373	 	 	 	1,727	 
	Operating earnings (loss)	 	 	49,698	 	 	 	45,298	 	 	 	(205,842	)	 	 	98,721	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Interest expense, net	 	 	12,719	 	 	 	3,101	 	 	 	21,060	 	 	 	9,185	 
	Other (income) expense, net (note 7)	 	 	(229	)	 	 	25	 	 	 	(6,353	)	 	 	(78	)
	Earnings (loss) before income tax	 	 	37,208	 	 	 	42,172	 	 	 	(220,549	)	 	 	89,614	 
	Income tax (note 8)	 	 	10,872	 	 	 	10,508	 	 	 	20,650	 	 	 	19,121	 
	Net earnings (loss)	 	 	26,336	 	 	 	31,664	 	 	 	(241,199	)	 	 	70,493	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Non-controlling interest share of earnings (note 11)	 	 	2,057	 	 	 	3,653	 	 	 	6,262	 	 	 	8,888	 
	Non-controlling interest redemption increment (note 11)	 	 	4,419	 	 	 	2,172	 	 	 	9,386	 	 	 	7,077	 
	Net earnings (loss) attributable to Company	 	$	19,860	 	 	$	25,839	 	 	$	(256,847	)	 	$	54,528	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net earnings (loss) per common share (note 12)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Basic	 	$	0.51	 	 	$	0.72	 	 	$	(6.93	)	 	$	1.52	 
	Diluted	 	$	0.50	 	 	$	0.70	 	 	$	(6.93	)	 	$	1.49	 

  
 

The accompanying notes are an integral part of these financial statements.  

  



	 	Page
3
 of 16	 



 FIRSTSERVICE CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

(Unaudited)

(in thousands of US dollars) - in accordance with accounting principles generally accepted in the United
States of America
  

	 	 	Three months	 	 	Nine months	 
	 	 	ended September 30	 	 	ended September 30	 
	 	 	2019	 	 	2018	 	 	2019	 	 	2018	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net earnings (loss)	 	$	26,336	 	 	$	31,664	 	 	$	(241,199	)	 	$	70,493	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Foreign currency translation gain (loss)	 	 	(277	)	 	 	476	 	 	 	1,129	 	 	 	(967	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Comprehensive earnings	 	 	26,059	 	 	 	32,140	 	 	 	(240,070	)	 	 	69,526	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Less: Comprehensive earnings attributable to non-controlling	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	interests	 	 	6,476	 	 	 	5,825	 	 	 	15,648	 	 	 	15,965	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Comprehensive earnings (loss) attributable to Company	 	$	19,583	 	 	$	26,315	 	 	$	(255,718	)	 	$	53,561	 

  
 

The accompanying notes are an integral part of these financial statements.    
           

  



	 	Page
4
 of 16	 



 FIRSTSERVICE CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands of US dollars) - in accordance with accounting principles generally accepted in the United
States of America
              
  

	 	 	September 30, 2019	 	 	December 31, 2018	 
	Assets	 	 	 	 	 	 	 	 
	Current Assets	 	 	 	 	 	 	 	 
	Cash and cash equivalents	 	$	106,276	 	 	$	66,340	 
	Restricted cash	 	 	16,126	 	 	 	13,504	 
	Accounts receivable, net of allowance of $10,719 (December 31, 2018 -	 	 	 	 	 	 	 	 
	$9,177)	 	 	384,465	 	 	 	239,925	 
	Income tax recoverable	 	 	15,768	 	 	 	9,337	 
	Inventories	 	 	81,109	 	 	 	48,227	 
	Prepaid expenses and other current assets	 	 	39,763	 	 	 	37,739	 
	 	 	 	643,507	 	 	 	415,072	 
	 	 	 	 	 	 	 	 	 
	Other receivables	 	 	4,026	 	 	 	4,212	 
	Other assets	 	 	5,073	 	 	 	6,135	 
	Fixed assets	 	 	127,742	 	 	 	98,102	 
	Operating lease right-of-use assets (note 6)	 	 	113,437	 	 	 	-	 
	Intangible assets	 	 	374,870	 	 	 	148,798	 
	Goodwill	 	 	623,209	 	 	 	335,155	 
	 	 	 	1,248,357	 	 	 	592,402	 
	 	 	$	1,891,864	 	 	$	1,007,474	 
	 	 	 	 	 	 	 	 	 
	Liabilities and shareholders' equity	 	 	 	 	 	 	 	 
	Current Liabilities	 	 	 	 	 	 	 	 
	Accounts payable	 	$	72,716	 	 	$	41,709	 
	Accrued liabilities	 	 	159,268	 	 	 	132,572	 
	Unearned revenues	 	 	63,135	 	 	 	36,746	 
	Operating lease liabilities - current (note 6)	 	 	29,114	 	 	 	-	 
	Long-term debt - current (note 9)	 	 	6,130	 	 	 	3,915	 
	Contingent acquisition consideration - current (note 10)	 	 	6,637	 	 	 	12,005	 
	 	 	 	337,000	 	 	 	226,947	 
	 	 	 	 	 	 	 	 	 
	Long-term debt - non-current (note 9)	 	 	943,610	 	 	 	330,608	 
	Operating lease liabilities - non-current (note 6)	 	 	93,334	 	 	 	-	 
	Contingent acquisition consideration (note 10)	 	 	4,841	 	 	 	1,281	 
	Unearned revenues	 	 	13,097	 	 	 	13,453	 
	Other liabilities	 	 	43,637	 	 	 	40,797	 
	Deferred income tax	 	 	69,236	 	 	 	6,577	 
	 	 	 	1,167,755	 	 	 	392,716	 
	Redeemable non-controlling interests (note 11)	 	 	157,321	 	 	 	151,585	 
	 	 	 	 	 	 	 	 	 
	Shareholders' equity	 	 	229,788	 	 	 	236,226	 
	 	 	$	1,891,864	 	 	$	1,007,474	 

  
 

The accompanying notes are an integral part of these financial statements.    
 
  

  



	 	Page
5
 of 16	 



 

FIRSTSERVICE CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Unaudited)

(in thousands of US dollars, except share information)

                                           

 

	 	 	Common shares	 	 	 	 	 	 	 	 	Accumulated	 	 	 	 
	 	 	Issued and	 	 	 	 	 	 	 	 	 	 	 	other	 	 	 	 
	 	 	outstanding	 	 	 	 	 	Contributed	 	 	 	 	 	comprehensive	 	 	 	 
	 	 	shares	 	 	Amount	 	 	surplus	 	 	Deficit	 	 	loss	 	 	Total	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance, December 31, 2018	 	 	35,980,047	 	 	$	148,707	 	 	$	45,097	 	 	$	45,537	 	 	$	(3,115	)	 	$	236,226	 
	Net earnings	 	 	-	 	 	 	-	 	 	 	-	 	 	 	2,329	 	 	 	-	 	 	 	2,329	 
	Other comprehensive earnings	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	328	 	 	 	328	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Impact of ASC 842 - Leases	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(338	)	 	 	-	 	 	 	(338	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Subsidiaries’ equity transactions	 	 	-	 	 	 	-	 	 	 	(19	)	 	 	-	 	 	 	-	 	 	 	(19	)
	Common Shares:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	   Stock option expense	 	 	-	 	 	 	-	 	 	 	2,855	 	 	 	-	 	 	 	-	 	 	 	2,855	 
	   Stock options exercised	 	 	134,650	 	 	 	5,342	 	 	 	(1,338	)	 	 	-	 	 	 	-	 	 	 	4,004	 
	   Dividends	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(5,418	)	 	 	-	 	 	 	(5,418	)
	Balance, March 31, 2019	 	 	36,114,697	 	 	$	154,049	 	 	$	46,595	 	 	$	42,110	 	 	$	(2,787	)	 	$	239,967	 
	Net earnings (loss)	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(279,036	)	 	 	-	 	 	 	(279,036	)
	Other comprehensive earnings	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	1,078	 	 	 	1,078	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Impact of ASC 842 - Leases	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(52	)	 	 	-	 	 	 	(52	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Subsidiaries’ equity transactions	 	 	-	 	 	 	-	 	 	 	39	 	 	 	-	 	 	 	-	 	 	 	39	 
	Common Shares:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	   Stock option expense	 	 	-	 	 	 	-	 	 	 	1,755	 	 	 	-	 	 	 	-	 	 	 	1,755	 
	   Stock options exercised	 	 	188,400	 	 	 	5,401	 	 	 	(959	)	 	 	-	 	 	 	-	 	 	 	4,442	 
	   Dividends	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(5,883	)	 	 	-	 	 	 	(5,883	)
	   Issued (note 14)	 	 	2,918,860	 	 	 	251,503	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	251,503	 
	Balance, June 30, 2019	 	 	39,221,957	 	 	$	410,953	 	 	$	47,430	 	 	$	(242,861	)	 	$	(1,709	)	 	$	213,813	 
	Net earnings	 	 	-	 	 	 	-	 	 	 	-	 	 	 	19,860	 	 	 	-	 	 	 	19,860	 
	Other comprehensive earnings	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(277	)	 	 	(277	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Subsidiaries’ equity transactions	 	 	-	 	 	 	-	 	 	 	(33	)	 	 	-	 	 	 	-	 	 	 	(33	)
	Common Shares:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	   Stock option expense	 	 	-	 	 	 	-	 	 	 	1,772	 	 	 	-	 	 	 	-	 	 	 	1,772	 
	   Stock options exercised	 	 	22,500	 	 	 	539	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	539	 
	   Dividends	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(5,886	)	 	 	-	 	 	 	(5,886	)
	Balance, September 30, 2019	 	 	39,244,457	 	 	$	411,492	 	 	$	49,169	 	 	$	(228,887	)	 	$	(1,986	)	 	$	229,788	 

  

  



	 	Page
6
 of 16	 



 

FIRSTSERVICE CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (continued)

(Unaudited)

(in thousands of US dollars, except share information)
  

	 	 	Common shares	 	 	 	 	 	 	 	 	Accumulated	 	 	 	 
	 	 	Issued and	 	 	 	 	 	 	 	 	 	 	 	other	 	 	 	 
	 	 	outstanding	 	 	 	 	 	Contributed	 	 	Retained	 	 	comprehensive	 	 	 	 
	 	 	shares	 	 	Amount	 	 	surplus	 	 	earnings	 	 	loss	 	 	Total	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance, December 31, 2017	 	 	35,916,383	 	 	$	143,770	 	 	$	41,463	 	 	$	9,027	 	 	$	(492	)	 	$	193,768	 
	Net earnings	 	 	-	 	 	 	-	 	 	 	-	 	 	 	6,083	 	 	 	-	 	 	 	6,083	 
	Other comprehensive earnings	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(860	)	 	 	(860	)
	Common Shares:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	   Stock option expense	 	 	-	 	 	 	-	 	 	 	1,997	 	 	 	-	 	 	 	-	 	 	 	1,997	 
	   Stock options exercised	 	 	88,200	 	 	 	2,453	 	 	 	(1,300	)	 	 	-	 	 	 	-	 	 	 	1,153	 
	   Dividends	 	 	-	 	 	 	 	 	 	 	-	 	 	 	(4,850	)	 	 	-	 	 	 	(4,850	)
	   Purchased for cancellation	 	 	(85,408	)	 	 	(355	)	 	 	-	 	 	 	(5,586	)	 	 	-	 	 	 	(5,941	)
	Balance, March 31, 2018	 	 	35,919,175	 	 	$	145,868	 	 	$	42,160	 	 	$	4,674	 	 	$	(1,352	)	 	$	191,350	 
	Net earnings	 	 	-	 	 	 	-	 	 	 	-	 	 	 	22,606	 	 	 	-	 	 	 	22,606	 
	Other comprehensive earnings	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(583	)	 	 	(583	)
	   Stock option expense	 	 	-	 	 	 	-	 	 	 	1,317	 	 	 	-	 	 	 	-	 	 	 	1,317	 
	   Stock options exercised	 	 	37,100	 	 	 	1,103	 	 	 	(210	)	 	 	-	 	 	 	-	 	 	 	893	 
	   Dividends	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(4,853	)	 	 	-	 	 	 	(4,853	)
	Balance, June 30, 2018	 	 	35,956,275	 	 	$	146,971	 	 	$	43,267	 	 	$	22,427	 	 	$	(1,935	)	 	$	210,730	 
	Net earnings	 	 	-	 	 	 	-	 	 	 	-	 	 	 	25,839	 	 	 	-	 	 	 	25,839	 
	Other comprehensive earnings	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	477	 	 	 	477	 
	Common Shares:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	   Stock option expense	 	 	-	 	 	 	-	 	 	 	1,233	 	 	 	-	 	 	 	-	 	 	 	1,233	 
	   Stock options exercised	 	 	16,400	 	 	 	762	 	 	 	(185	)	 	 	-	 	 	 	-	 	 	 	577	 
	   Dividends	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(4,856	)	 	 	-	 	 	 	(4,856	)
	Balance, September 30, 2018	 	 	35,972,675	 	 	$	147,733	 	 	$	44,315	 	 	$	43,410	 	 	$	(1,458	)	 	$	234,000	 

  


 The
accompanying notes are an integral part of these financial statements.  

  



	 	Page
7
 of 16	 



 FIRSTSERVICE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands of US dollars) - in accordance with accounting principles generally accepted in the United
States of America
  

	 	 	Three months ended	 	 	Nine months ended	 
	 	 	September 30	 	 	September 30	 
	 	 	2019	 	 	2018	 	 	2019	 	 	2018	 
	Cash provided by (used in)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Operating activities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net earnings (loss)	 	$	26,336	 	 	 	31,664	 	 	$	(241,199	)	 	$	70,493	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Items not affecting cash:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Depreciation and amortization	 	 	24,182	 	 	 	12,277	 	 	 	51,033	 	 	 	36,963	 
	Non-cash settlement of long-term incentive arrangement (note 14)	 	 	-	 	 	 	-	 	 	 	289,721	 	 	 	-	 
	Deferred income tax	 	 	(22	)	 	 	40	 	 	 	1,443	 	 	 	386	 
	Other	 	 	2,058	 	 	 	1,509	 	 	 	1,000	 	 	 	5,540	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Changes in non-cash working capital:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Accounts receivable	 	 	3,010	 	 	 	(10,932	)	 	 	(16,218	)	 	 	(23,113	)
	Inventories	 	 	2,090	 	 	 	633	 	 	 	3,298	 	 	 	(5,735	)
	Prepaid expenses and other current assets	 	 	(8	)	 	 	1,949	 	 	 	798	 	 	 	(1,249	)
	Payables and accruals	 	 	(37,878	)	 	 	4,417	 	 	 	(42,800	)	 	 	(8,087	)
	Unearned revenues	 	 	(6,262	)	 	 	(11,912	)	 	 	8,438	 	 	 	532	 
	Other liabilities	 	 	6,729	 	 	 	4,451	 	 	 	10,069	 	 	 	6,598	 
	Contingent acquisition consideration	 	 	-	 	 	 	(281	)	 	 	(962	)	 	 	(939	)
	Net cash provided by operating activities	 	 	20,235	 	 	 	33,815	 	 	 	64,621	 	 	 	81,389	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Investing activities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Acquisitions of businesses, net of cash acquired (note 5)	 	 	(9,585	)	 	 	(9,349	)	 	 	(555,116	)	 	 	(52,528	)
	Disposal of business, net of cash disposed (note 7)	 	 	-	 	 	 	-	 	 	 	13,030	 	 	 	-	 
	Purchases of fixed assets	 	 	(11,821	)	 	 	(10,113	)	 	 	(34,108	)	 	 	(29,733	)
	Other investing activities	 	 	(724	)	 	 	(2,996	)	 	 	135	 	 	 	(4,980	)
	Net cash used in investing activities	 	 	(22,130	)	 	 	(22,458	)	 	 	(576,059	)	 	 	(87,241	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Financing activities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Increase in long-term debt	 	 	30,117	 	 	 	17,995	 	 	 	620,867	 	 	 	82,699	 
	Repayment of long-term debt	 	 	(6,531	)	 	 	(2,000	)	 	 	(8,402	)	 	 	(24,618	)
	Sale (purchases) of non-controlling interests, net	 	 	(199	)	 	 	200	 	 	 	(33,409	)	 	 	(1,932	)
	Contingent acquisition consideration	 	 	-	 	 	 	(2,705	)	 	 	(8,035	)	 	 	(4,947	)
	Proceeds received on exercise of options	 	 	539	 	 	 	577	 	 	 	8,985	 	 	 	2,623	 
	Financing fees paid	 	 	(167	)	 	 	-	 	 	 	(3,863	)	 	 	(575	)
	Dividends paid to common shareholders	 	 	(5,883	)	 	 	(4,675	)	 	 	(16,158	)	 	 	(13,924	)
	Distributions paid to non-controlling interests	 	 	(1,995	)	 	 	(1,466	)	 	 	(6,264	)	 	 	(5,808	)
	Repurchases of Common Shares	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(5,941	)
	Net cash provided by financing activities	 	 	15,881	 	 	 	7,926	 	 	 	553,721	 	 	 	27,577	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Effect of exchange rate changes on cash, cash equivalents and restricted cash	 	 	586	 	 	 	89	 	 	 	275	 	 	 	(254	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Increase in cash, cash equivalents and restricted cash	 	 	14,572	 	 	 	19,372	 	 	 	42,558	 	 	 	21,471	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Cash, cash equivalents and restricted cash, beginning of period	 	 	107,830	 	 	 	68,993	 	 	 	79,844	 	 	 	66,894	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Cash, cash equivalents and restricted cash, end of period	 	$	122,402	 	 	 	88,365	 	 	$	122,402	 	 	$	88,365	 

  
 

The accompanying notes are an integral part of these financial statements.    
     
 

  



	 	Page
8
 of 16	 



 FIRSTSERVICE CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 September 30, 2019

(Unaudited)
 (in thousands of US dollars, except per share
amounts)
  
  

1.       DESCRIPTION OF THE BUSINESS – FirstService Corporation (the “Company”) is a North American provider of
residential property management and other essential property services to residential and commercial customers. The Company’s operations are conducted in two segments: FirstService Residential and FirstService Brands. The segments are grouped
with reference to the nature of services provided and the types of clients that use those services.
  

FirstService Residential is a full-service property manager and in many markets provides a full range of ancillary services primarily in the following areas:
on-site staffing, including building engineering and maintenance, full-service amenity management, security, concierge and front desk personnel; proprietary banking and insurance products; and energy conservation and management solutions.

 
 FirstService Brands provides a range of essential property
services to residential and commercial customers in North America through franchise networks and company-owned locations. The principal brands in this division include Paul Davis Restoration, Global Restoration, California Closets, Century Fire
Protection, Certa Pro Painters, Pillar to Post Home Inspectors, Floor Coverings International, and College Pro Painters.
  

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – These condensed consolidated financial statements have been
prepared by the Company in accordance with the disclosure requirements for the presentation of interim financial information pursuant to applicable Canadian securities law. Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States of America have been condensed or omitted in accordance with such disclosure requirements, although the Company
believes that the disclosures are adequate to make the information not misleading. These interim financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2018.

 
 These interim financial statements follow the same accounting
policies as the most recent audited consolidated financial statements, with the exception of the change described below. In the opinion of management, the condensed consolidated financial statements contain all adjustments necessary to present
fairly the financial position of the Company as at September 30, 2019 and the results of operations and its cash flows for the three and nine month periods ended September 30, 2019 and 2018. All such adjustments are of a normal recurring nature. The
results of operations for the three and nine month periods ended September 30, 2019 are not necessarily indicative of the results to be expected for the year ending December 31, 2019.

 
 Leases

The Company adopted ASU 842, Leases, as of January 1, 2019, using the modified retrospective approach. In addition, the Company elected the package of
practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the Company to carry forward the historical lease classification.

 
 The Company has lease agreements with lease and non-lease
components, and has elected to account for each lease component (e.g., fixed rent payments) separately from the non-lease components (e.g., common-area maintenance costs). The Company has also elected not to recognize the right-of-use assets and
lease liabilities for short-term leases that have a lease term of 12 months or less. Leases are recognized on the balance sheet when the lease term commences, and the associated lease payments are recognized as an expense on a straight-line basis
over the lease term.
  
 The standard had a material impact on
the Company’s consolidated balance sheet, the primary impact being the recognition of right-of-use (“ROU”) assets and lease liabilities for operating leases, while its accounting for finance leases remained substantially
unchanged.
  

  



	 	Page
9
 of 16	 



 

3.       REVENUE RECOGNITION STANDARD – On January 1, 2018, the Company adopted the new accounting standard ASC 606,
Revenue from Contracts with Customers and all the related amendments (“new revenue standard”) to all open contracts using the full retrospective method. The Company recognized the cumulative effect of initially applying the new revenue
standard as an adjustment to retained earnings on January 1, 2017.
  

Within the FirstService Brands segment, franchise fee revenue recognized during the nine months ended September 30, 2019 that was included in deferred revenue at
the beginning of the period was $4,271 (2018 - $2,544). These fees are recognized over the life of the underlying franchise agreement, usually between 5 - 10 years.

 
 External broker costs and employee sales commissions in
obtaining new franchisees are capitalized in accordance with the new revenue standard and are amortized over the life of the underlying franchise agreement. Costs amortized during the nine months ended September 30, 2019 were $1,435 (2018 - $915).
The closing amount of the capitalized costs to obtain contracts on the balance sheet as at September 30, 2019 was $6,392 (December 31, 2018 - $7,032). There were no impairment losses recognized related to those assets in the quarter.

 
 The Company’s backlog represents remaining performance
obligations and is defined as contracted work yet to be performed. As at September 30, 2019, the aggregate amount of backlog was $310,629. The Company expects to recognize revenue on the remaining backlog over the next 12 months.

 
 Disaggregated revenues are as follows:

 

	 	 	Three months	 	 	Nine months	 
	 	 	ended September 30	 	 	ended September 30	 
	 	 	2019	 	 	2018	 	 	2019	 	 	2018	 
	Revenues	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	FirstService Residential	 	$	375,196	 	 	$	331,712	 	 	$	1,064,911	 	 	$	942,839	 
	FirstService Brands company-owned	 	 	254,308	 	 	 	136,027	 	 	 	552,871	 	 	 	382,985	 
	FirstService Brands franchisor	 	 	41,531	 	 	 	37,667	 	 	 	110,754	 	 	 	99,098	 
	FirstService Brands franchise fee	 	 	1,218	 	 	 	950	 	 	 	3,280	 	 	 	3,238	 

  

The Company disaggregates revenue by segment, and within the FirstService Brands segment, further disaggregates its company-owned operations revenue; these
businesses primarily recognize revenue over time as they perform because of continuous transfer of control to the customer. As such, revenue is recognized based on the extent of progress towards completion of the performance obligation. The Company
generally uses the cost-to-cost measure of progress method. The extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenues,
including estimated fees or profits, are recorded proportionally as costs are incurred.
  

We believe this disaggregation best depicts how the nature, amount, timing and uncertainty of the Company’s revenue and cash flows are affected by economic
factors.
  
 4.       RECENTLY ISSUED ACCOUNTING
STANDARDS NOT YET ADOPTED – In June 2016, FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. In November 2018, FASB issued ASU 2018-19, Codification
Improvements to Topic 326, Financial Instruments – Credit Losses, which amends the scope and transition requirements of ASU 2016-13. The standard requires a financial asset (or a group of financial assets) measured at amortized cost basis to be
presented at the net amount expected to be collected. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that
affect the collectability of the reported amount. The standard will become effective for the Company beginning January 1, 2020 and will require a cumulative-effect adjustment to accumulated retained earnings as of the beginning of the first
reporting period in which the guidance is effective (that is, a modified-retrospective approach). The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

 

  



	 	Page
10
 of 16	 



 

5.       ACQUISITIONS – During the nine months ended September 30, 2019, the Company completed thirteen acquisitions,
including three in the FirstService Residential segment and ten in the FirstService Brands segment. In the FirstService Residential segment, the Company acquired controlling interests in regional firms operating in Chicago and western Canada.

 
 In the FirstService Brands segment, the Company acquired
Global Restoration, a leading commercial and large loss firm headquartered in Colorado and with operations across the U.S. and Canada. Also within the FirstService Brands segment, the Company acquired three independent restoration companies,
operating in Ohio, California and Quebec, as well as a Paul Davis Restoration franchise located in the mid-western U.S. The Company also acquired three California Closets franchises operating in Maryland, New Jersey, and Arizona and two fire
protection operations based in Houston and Atlanta.
  
 The
acquisition date fair value of consideration transferred for these transactions were as follows: cash of $555,116 (net of cash acquired of $10,082), and contingent consideration of $6,775 (2018 - cash of $52,528, and contingent consideration of
$4,200). The purchase price allocations are not yet complete, pending final determination of the fair value of assets and liabilities acquired. These acquisitions were accounted for by the purchase method of accounting for business combinations and
accordingly, the consolidated statements of earnings do not include any revenues or expenses related to these acquisitions prior to their respective closing dates.

 
 Below is a preliminary estimate of the fair values of assets
acquired and liabilities assumed for the Company’s significant Global Restoration acquisition, which closed in June 2019.
  

	 	 	 	Global	 	 
	 	 	 	Restoration	 	 
	 	 	 	 	 	 
	 	Current assets	 	$	153,595	 	 
	 	Long-term assets	 	 	40,140	 	 
	 	Current liabilities	 	 	(65,610	)	 
	 	Long-term liabilities	 	 	(17,398	)	 
	 	Deferred Tax Liabilities	 	 	(57,754	)	 
	 	Redeemable non-controlling interest	 	 	(25,433	)	 
	 	 	 	$	27,540	 	 
	 	 	 	 	 	 	 
	 	Cash consideration, net of cash acquired of $6,518	 	$	(506,680	)	 
	 	 	 	 	 	 	 
	 	Acquired intangible assets	 	$	222,130	 	 
	 	Goodwill	 	$	257,010	 	 

  
 Certain vendors, at
the time of acquisition, are entitled to receive a contingent consideration payment if the acquired businesses achieve specified earnings levels during the one- to two-year periods following the dates of acquisition. The ultimate amount of payment
is determined based on a formula, the key inputs to which are (i) a contractually agreed maximum payment; (ii) a contractually specified revenue or earnings level; and (iii) the actual revenue or earnings for the contingency period. If the acquired
business does not achieve the specified revenue or earnings level, the maximum payment is reduced for any shortfall, potentially to nil.
  

Contingent consideration is recorded at fair value each reporting period. The fair value recorded on the consolidated balance sheet as at September 30, 2019 was
$11,478 (see note 10). The estimated range of outcomes (undiscounted) for these contingent consideration arrangements is $11,280 to a maximum of $13,269. The contingencies will expire during the period extending to September 2023. During the nine
months ended September 30, 2019, $8,997 was paid with reference to such contingent consideration (2018 - $5,886).
  

 
  

  



	 	Page
11
 of 16	 



 
 6.       LEASES – The
Company has operating leases for corporate offices, copiers, and certain equipment. Its leases have remaining lease terms of 1 year to 10 years, some of which may include options to extend the leases for up to 8 years, and some of which may include
options to terminate the leases within 1 year. The Company evaluates renewal terms on a lease by lease basis to determine if the renewal is reasonably certain. The amount of operating lease expense recorded in the statement of earnings for the nine
months ended September 30, 2019 was $23,190 (2018 - $19,757).
  

Other information related to leases was as follows (in thousands, except lease term and discount
rate):
  

	Supplemental Cash Flows Information, nine months ended September 30	 	2019	 	 
	 	 	 	 	 
	Cash paid for amounts included in the measurement of operating lease liabilities	 	$	23,388	 	 
	Right-of-use assets obtained in exchange for operating lease obligation	 	$	33,893	 	 
	 	 	 	 	 	 
	Weighted Average Remaining Operating Lease Term	 	 	5 years	 	 
	Weighted Average Discount Rate	 	 	4.2	%	 

  
 Future minimum operating lease payments under non-cancellable leases as of September 30, 2019 were as follows:


  

	 	2019 (excluding the nine months ended September 30, 2019)	 	$	8,785	 	 
	 	2020	 	 	32,743	 	 
	 	2021	 	 	28,430	 	 
	 	2022	 	 	20,619	 	 
	 	2023	 	 	14,625	 	 
	 	Thereafter	 	 	31,295	 	 
	 	     Total future minimum lease payments	 	 	136,497	 	 
	 	Less imputed interest	 	 	(14,049	)	 
	 	     Total	 	 	122,448	 	 

  
  
 Future minimum operating lease payments under non-cancellable leases as of December 31, 2018 were as follows:


  

	 	2019	 	$	24,505	 	 
	 	2020	 	 	23,124	 	 
	 	2021	 	 	19,643	 	 
	 	2022	 	 	15,384	 	 
	 	2023	 	 	11,946	 	 
	 	Thereafter	 	 	21,446	 	 
	 	     Total future minimum lease payments	 	 	116,048	 	 

  
 7.       OTHER INCOME - Other income is comprised of the following:
  

	 	 	Three months ended	 	 	Nine months ended	 
	 	 	September 30	 	 	September 30	 
	 	 	2019	 	 	2018	 	 	2019	 	 	2018	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Gain on disposal of business	 	$	-	 	 	$	-	 	 	$	(6,082	)	 	$	-	 
	Other (income) expense	 	 	(229	)	 	 	25	 	 	 	(271	)	 	 	(78	)
	 	 	$	(229	)	 	$	25	 	 	$	(6,353	)	 	$	(78	)

  

 

  



	 	Page
12
 of 16	 



 
 During the second quarter, the Company completed the divestiture of
two non-core businesses. The Company sold its national accounts commercial painting operations for cash consideration of $3,386 and notes receivable of $2,800. The pre-tax gain on disposal was $1,406. The Company also completed the sale of its
Florida and Arizona-based landscaping operations for cash consideration of $9,644 (net of cash disposed of $600). The pre-tax gain on disposal was $4,676.
  

8.       INCOME TAX – The provision for income tax for the nine months ended September 30, 2019
reflected a negative effective tax rate of 9% (2018 - 21%) relative to the statutory rate of approximately 27% (2018 - 27%). The difference between the effective rate and the statutory rate relates primarily to the impact of the settlement of
long-term incentive arrangement, which is not deductible for tax purposes.
  

9.       LONG-TERM DEBT – The Company has $150,000 of senior secured notes (the “Senior
Notes”) bearing interest at a rate of 4.84%. The Senior Notes are due on January 16, 2025, with five annual equal repayments beginning on January 16, 2021.

 
 The Company has entered
into an amended and restated credit agreement (the “Credit Agreement”) with a syndicate of lenders. The Credit Agreement is comprised of a committed multi-currency revolving credit facility of $450,000 (the “Facility”) and a term
loan (drawn in a single advance) in the aggregate amount of $440,000 (the “Term Loan”). The Facility portion of the Credit Agreement has a term ending on January 17, 2023 and bears interest at 0.25% to 2.50% over floating preference rates,
depending on certain leverage ratios. The Term Loan portion of the Credit Agreement has a term ending on June 21, 2024, with repayments of 5% per annum, paid quarterly, beginning in September 2020, with the balance payable at maturity, and bears
interest at 0.25% to 2.50% over floating preference rates, depending on certain leverage ratios. The Credit Agreement requires a commitment fee of 0.25% to 0.50% of the unused portion, depending on certain leverage ratios. The Company may repay
amounts owing under the Credit Agreement at any time without penalty. The Facility is available to fund working capital requirements (including acquisitions and any associated contingent purchase consideration) and other general corporate purposes.
The Term Loan was implemented in order to substantially finance the purchase price for Global Restoration (aka Bellwether FOS Holdco, Inc.).

 
 The indebtedness under the
Credit Agreement and the Senior Notes rank equally in terms of seniority. The Company has granted the lenders under the Credit Agreement and the holders of the Senior Notes various security, including an interest in all of our assets. The Company is
prohibited under the Credit Agreement and the Senior Notes from undertaking certain acquisitions and dispositions, and incurring certain indebtedness and encumbrances, without prior approval of the lenders under the Credit Agreement and the holders
of the Senior Notes.
  

10.       FAIR VALUE MEASUREMENTS – The following table provides the financial assets and liabilities
carried at fair value measured on a recurring basis as of September 30, 2019:
  

	 	 	 	 	 	Fair value measurements at September 30, 2019	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Carrying value at	 	 	 	 	 	 	 	 	 	 
	 	 	 	September 30, 2019	 	 	 	Level 1	 	 	 	Level 2	 	 	 	Level 3	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Contingent consideration liability	 	$	11,478	 	 	$	-	 	 	$	-	 	 	$	11,478	 

  
 The
inputs to the measurement of the fair value of contingent consideration related to acquisitions are Level 3 inputs. The fair value measurements were made using a discounted cash flow model; significant model inputs were expected future operating
cash flows (determined with reference to each specific acquired business) and discount rates (which range from 8% to 10%). The range of discount rates is attributable to level of risk related to economic growth factors combined with the length of
the contingent payment periods; and the dispersion was driven by unique characteristics of the businesses acquired and the respective terms for these contingent payments. Within the range of discount rates, there is a data point concentration at 9%.
A 2% increase in the weighted average discount rate would not have a significant impact on the fair value of the contingent consideration balance.
  


  



	 	Page
13
 of 16	 



 
 Changes in the fair value of the contingent
consideration liability are comprised of the following:
  

	 	 	2019	 	 
	 	 	 	 	 
	Balance, January 1	 	$	13,286	 	 
	Amounts recognized on acquisitions	 	 	6,775	 	 
	Fair value adjustments	 	 	221	 	 
	Resolved and settled in cash	 	 	(8,997	)	 
	Other	 	 	193	 	 
	Balance, September 30	 	$	11,478	 	 
	 	 	 	 	 	 
	Less: Current portion	 	 	6,637	 	 
	Non-current portion	 	$	4,841	 	 

  
 The carrying amounts
for cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities approximate fair values due to the short maturity of these instruments, unless otherwise indicated. The inputs to the measurement of the
fair value of long term debt are Level 3 inputs. The fair value measurements were made using a net present value approach; significant model inputs were expected future cash outflows and discount rates (which range from 1.5% to 2.0%).

 

	 	 	September 30, 2019	 	 	December 31, 2018	 
	 	 	Carrying	 	 	Fair	 	 	Carrying	 	 	Fair	 
	 	 	amount	 	 	value	 	 	amount	 	 	value	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Other receivables	 	$	4,026	 	 	$	4,026	 	 	$	4,212	 	 	$	4,212	 
	Long-term debt	 	 	949,740	 	 	 	960,998	 	 	 	334,523	 	 	 	344,198	 

  

11.       REDEEMABLE NON-CONTROLLING INTERESTS – The minority equity positions in the Company’s subsidiaries are
referred to as redeemable non-controlling interests (“RNCI”). The RNCI are considered to be redeemable securities. Accordingly, the RNCI is recorded at the greater of: (i) the redemption amount; or (ii) the amount initially recorded as
RNCI at the date of inception of the minority equity position. This amount is recorded in the “mezzanine” section of the balance sheet, outside of shareholders’ equity. Changes in the RNCI amount are recognized immediately as they
occur. The following table provides a reconciliation of the beginning and ending RNCI amounts:
  

 

	 	 	2019	 	 
	 	 	 	 	 
	Balance, January 1	 	$	151,585	 	 
	RNCI share of earnings	 	 	6,262	 	 
	RNCI redemption increment	 	 	9,386	 	 
	Distributions paid to RNCI	 	 	(6,264	)	 
	Purchases of interests from RNCI, net	 	 	(33,409	)	 
	RNCI recognized on business acquisitions	 	 	29,651	 	 
	Other	 	 	110	 	 
	Balance, September 30	 	$	157,321	 	 

  
  

  



	 	Page
14
 of 16	 



 
 The Company has shareholders’ agreements
in place at each of its non-wholly owned subsidiaries. These agreements allow the Company to “call” the non-controlling interest at a price determined with the use of a formula price, which is usually equal to a fixed multiple of trailing
two-year average earnings before income taxes, interest, depreciation, and amortization, less debt. The agreements also have redemption features which allow the owners of the RNCI to “put” their equity to the Company at the same price
subject to certain limitations. The formula price is referred to as the redemption amount and may be paid in cash or in the Company’s Common Shares. The redemption amount as of September 30, 2019 was $153,761. The redemption amount is lower
than that recorded on the balance sheet as the formula prices of certain RNCI are lower than the amount initially recorded at the inception of the minority equity position. If all put or call options were settled with Common Shares as at September
30, 2019, approximately 1,500,000 such shares would be issued; this would be accretive to net earnings per common share.
  

Increases or decreases to the formula price of the underlying shares are recognized in the statement of earnings as the NCI redemption increment.

 
 12.       NET EARNINGS PER COMMON SHARE –
Earnings per share calculations cannot be anti-dilutive, therefore diluted shares are not used in the denominator when the numerator is in a loss position. The following table reconciles the basic and diluted common shares outstanding:

 
  

	 	 	Three months ended	 	 	Nine months ended	 
	(in thousands)	 	September 30	 	 	September 30	 
	 	 	2019	 	 	2018	 	 	2019	 	 	2018	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Basic shares	 	 	39,224	 	 	 	35,961	 	 	 	37,087	 	 	 	35,940	 
	Assumed exercise of Company stock options	 	 	467	 	 	 	700	 	 	 	455	 	 	 	626	 
	Diluted shares	 	 	39,691	 	 	 	36,661	 	 	 	37,542	 	 	 	36,566	 

  

13.       STOCK-BASED COMPENSATION

 
 Company stock
option plan
 The Company has a stock option plan for certain directors, officers and full-time employees of the Company and its
subsidiaries, other than its Founder and Chairman. The stock option plan came into existence on June 1, 2015. Options are granted at the market price for the underlying shares on the date of grant. Each option vests over a four-year term, expires
five years from the date granted and allows for the purchase of one Common Share. All Common Shares issued are new shares. Grants under the Company’s stock option plan are equity-classified awards. As at September 30, 2019, there were 689,500
options available for future grants.
  

Grants under the Company’s stock option plan are equity-classified awards. There were no stock options granted during the three months
ended September 30, 2019 (2018 - nil). Stock option activity for the nine months ended September 30, 2019 was as follows:
  

	 	 	 	 	 	 	 	 	Weighted average	 	 	 	 
	 	 	 	 	 	Weighted	 	 	remaining	 	 	 	 
	 	 	Number of	 	 	average	 	 	contractual life	 	 	Aggregate	 
	 	 	options	 	 	exercise price	 	 	(years)	 	 	intrinsic value	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Shares issuable under options -	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Beginning of period	 	 	1,633,150	 	 	$	44.68	 	 	 	 	 	 	 	 	 
	Granted	 	 	438,000	 	 	 	83.89	 	 	 	 	 	 	 	 	 
	Exercised	 	 	(345,550	)	 	 	25.64	 	 	 	 	 	 	 	 	 
	Shares issuable under options -	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	End of period	 	 	1,725,600	 	 	$	58.44	 	 	 	2.73	 	 	$	76,145	 
	Options exercisable - End of period	 	 	685,702	 	 	$	44.66	 	 	 	1.82	 	 	$	39,708	 

  

  



	 	Page
15
 of 16	 



 
 The amount of compensation expense recorded in
the statement of earnings for the nine months ended September 30, 2019 was $6,382 (2018 - $4,547). As of September 30, 2019, there was $10,825 of unrecognized compensation cost related to non-vested awards which is expected to be recognized over the
next 5 years. During the nine month period ended September 30, 2019, the fair value of options vested was $4,591 (2018 - $11,279).
  

14.       CONTINGENCIES – In the normal course of operations, the Company is subject to routine claims and litigation
incidental to its business. Litigation currently pending or threatened against the Company includes disputes with former employees and commercial liability claims related to services provided by the Company. The Company believes resolution of such
proceedings, combined with amounts set aside, will not have a material impact on the Company’s financial condition or the results of operations.

 
 In May 2019, the Company settled the restated management
services agreement (“MSA”), including the long-term incentive arrangement (the “LTIA”), between the Company and Jay S. Hennick, the Company’s Founder and Chairman. As part of the settlement, the Multiple Voting Shares of the
Company were converted into Subordinate Voting Shares on a one-for-one basis for no consideration, thereby eliminating the Company’s dual class share structure. For consideration of $314,379, which is the purchase price determined with
reference to the LTIA formula provided in the restated MSA, FirstService acquired all of the shares in the company which indirectly held the MSA. The Company, under the terms of the transaction: (a) paid $62,900 (approximately C$84,300) in cash; and
issued a total of 2,918,860 Subordinate Voting Shares. Subsequent to the completion of the transaction, the MSA was terminated, thereby eliminating the LTIA and all future fees and other entitlements owing thereafter, and the Company filed an
amendment to its articles that re-classified its Subordinate Voting Shares as common shares.
  

15.       SEGMENTED INFORMATION – The Company has two reportable operating segments. The segments are grouped with
reference to the nature of services provided and the types of clients that use those services. The Company assesses each segment’s performance based on operating earnings or operating earnings before depreciation and amortization. FirstService
Residential provides property management and related property services to residential communities in North America. FirstService Brands provides franchised and company-owned essential property services to residential and commercial customers in
North America. Corporate includes the costs of operating the Company’s corporate head office.
  

OPERATING SEGMENTS

                     
  

	 	 	FirstService	 	 	FirstService	 	 	 	 	 	 	 
	 	 	Residential	 	 	Brands	 	 	Corporate	 	 	Consolidated	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Three months ended September 30	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	2019	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Revenues	 	$	375,196	 	 	$	297,057	 	 	$	-	 	 	$	672,253	 
	Depreciation and amortization	 	 	6,859	 	 	 	17,311	 	 	 	11	 	 	 	24,181	 
	Operating earnings	 	 	33,036	 	 	 	22,062	 	 	 	(5,400	)	 	 	49,698	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	2018	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Revenues	 	$	331,712	 	 	$	174,644	 	 	$	-	 	 	$	506,356	 
	Depreciation and amortization	 	 	5,631	 	 	 	6,634	 	 	 	12	 	 	 	12,277	 
	Operating earnings	 	 	29,945	 	 	 	19,749	 	 	 	(4,396	)	 	 	45,298	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

  

	 	 	FirstService	 	 	FirstService	 	 	 	 	 	 	 
	 	 	Residential	 	 	Brands	 	 	Corporate	 	 	Consolidated	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Nine months ended September 30	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	2019	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Revenues	 	$	1,064,911	 	 	$	666,905	 	 	$	-	 	 	$	1,731,816	 
	Depreciation and amortization	 	 	19,521	 	 	 	31,479	 	 	 	33	 	 	 	51,033	 
	Operating earnings	 	 	81,397	 	 	 	46,659	 	 	 	(333,898	)	 	 	(205,842	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	2018	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Revenues	 	$	942,839	 	 	$	485,321	 	 	$	-	 	 	$	1,428,160	 
	Depreciation and amortization	 	 	17,212	 	 	 	19,720	 	 	 	31	 	 	 	36,963	 
	Operating earnings	 	 	68,809	 	 	 	43,969	 	 	 	(14,057	)	 	 	98,721	 

  

  



	 	Page
16
 of 16	 



 

GEOGRAPHIC INFORMATION
  

	 	 	United States	 	 	Canada	 	 	Consolidated	 
	 	 	 	 	 	 	 	 	 	 
	Three months ended September 30	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	2019	 	 	 	 	 	 	 	 	 	 	 	 
	Revenues	 	$	598,311	 	 	$	73,942	 	 	$	672,253	 
	Total long-lived assets	 	 	988,030	 	 	 	251,228	 	 	 	1,239,258	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	2018	 	 	 	 	 	 	 	 	 	 	 	 
	Revenues	 	$	478,961	 	 	$	27,395	 	 	$	506,356	 
	Total long-lived assets	 	 	537,211	 	 	 	42,326	 	 	 	579,537	 
	 	 	 	 	 	 	 	 	 	 	 	 	 

  

	 	 	United States	 	 	Canada	 	 	Consolidated	 
	 	 	 	 	 	 	 	 	 	 
	Nine months ended September 30	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	2019	 	 	 	 	 	 	 	 	 	 	 	 
	Revenues	 	$	1,587,789	 	 	$	144,027	 	 	$	1,731,816	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	2018	 	 	 	 	 	 	 	 	 	 	 	 
	Revenues	 	$	1,349,005	 	 	$	79,155	 	 	$	1,428,160