Counsel Announces 2012 Fiscal Year Results Revenues Increase 75% Over 2011

TORONTO, March 28, 2013 /CNW/ - Counsel Corporation ("Counsel" or the "Company") (TSX: CXS), a financial services company, today announced net income attributable to shareholders of $10.0 million, or $0.12 per basic and $0.11 per diluted share, for the fiscal year ended December 31, 2012 compared to $25.5 million, or $0.32 per basic and $0.30 per diluted share, in fiscal 2011. 2012 net income attributable to shareholders, excluding a $5.7 million impairment charge taken on the Company's case goods business segment in the fourth quarter, was $14.1 million, or $0.17 per basic and $0.16 per diluted share. For the fourth quarter of 2012, Counsel had net income of $0.7 million ($4.7 million excluding the goodwill impairment charge), or $0.01 ($0.06 excluding the goodwill impairment charge) per basic and diluted share, compared to $23.0 million, or $0.21 per basic and $0.20 per diluted share, in the same period of 2011. Counsel recorded revenues of $32.4 million and $139.5 million for the three and twelve month periods ended December 31, 2012, respectively, compared to $32.3 million and $79.8 million for the respective corresponding periods ended December 31, 2011. All amounts are stated in Canadian dollars, unless noted.

The decrease in net income in both the fourth quarter and full year fiscal 2012 was primarily due to an income tax recovery of $26.3 million recorded in the fourth quarter of fiscal 2011, compared to a recovery of $5.3 million in the fourth quarter of fiscal 2012, as well as the goodwill impairment charge noted above.. (Income from continuing operations before fair value adjustments and income taxes was $10.6 million in fiscal 2012 compared to $2.8 million in 2011.) The year-over-year increase in Counsel's revenues in fiscal 2012 was primarily attributable to having a full year of contributions from Counsel's residential mortgage lending business, Street Capital Financial Corporation ("Street Capital"), which was acquired on May 31, 2011. The mortgage lending business made up approximately 80% of Counsel's 2012 revenues.

"2012 was an exceptional year for Counsel's mortgage lending business," said Allan Silber, Chairman and CEO of Counsel Corporation. "Street Capital sold almost 40% more mortgages than in 2011 and is now one of the top lenders working through the mortgage broker channel. Additionally, the size of its mortgage portfolio increased by 60% during the year, which is an important measure of future success and profitability as the business benefits from higher margin mortgage renewals when its portfolio matures. Looking ahead, we expect to see mortgage renewals grow in importance as Street Capital launched its current business approximately five years ago, which corresponds to the length of term for the bulk of its mortgage loans.

Mortgage Lending Business

Counsel carries on its mortgage lending business through its wholly owned subsidiary Street Capital. The company sources its mortgages solely through a network of independent, high quality mortgage brokers across Canada with whom it has built relationships. The company offers a broad lineup of high ratio and conventional mortgages, predominantly to prime borrowers, and sells the mortgages it underwrites to top-tier financial institutions. Business revenues are almost entirely from the gain on sale of mortgages.

The business generated $17.7 million in after tax income from continuing operations on $111.3 million in revenues in 2012 compared to $8.2 million on $51.8 million in revenues in 2011 (the period from June 1 to December 31, 2011 following its acquisition by Counsel).

The business originated and sold $1.6 billion and $6.0 billion of mortgages in the three and twelve months ended December 31, 2012, compared to $0.6 billion and $3.7 billion in the respective corresponding periods in 2011. The business increased its portfolio of mortgages under administration to $12.0 billion as at December 31, 2012, compared to $10.7 billion at September 30, 2012 and $7.5 billion at December 31, 2011.

In December 2012, Street Capital applied to Canada's Minister of Finance for approval to operate as a federally regulated Schedule I bank with its banking business primarily focused on residential mortgage lending as well as allowing it to expand into consumer lending and related services. Street Capital's application requires approvals from the Office of the Superintendent of Financial Institutions (OSFI) and the Minister of Finance and there is no assurance these will be received. As was noted when the company announced its intention to file the application in September, it is expected the application process will take an extended period of time, likely at least two years.  If approved, the bank will carry on business in Canada under the name of Street Capital Bank of Canada in English and Street Capital Banque du Canada in French with its head office being located in Toronto.

In April, 2012, Street Capital entered the near prime segment of the Canadian residential mortgage market, which is comprised of borrowers, such as the self-employed and new immigrants, who may be unable to obtain financing through traditional sources. Near prime mortgages offer potentially higher profit margins as the company can charge higher interest rates than on prime mortgages along with an acceptance fee. The company's strategy is to prudently expand this business over time, but it expects its prime business will account for the vast majority of mortgages originated for the foreseeable future.

Asset Liquidation Business

Counsel's asset liquidation business is carried on by Counsel's 71.3%-owned publically traded subsidiary, Counsel RB Capital Inc. ("CRBCI") through its subsidiaries: Counsel RB Capital LLC ("Counsel RB"), EP USA, LLC ("Equity Partners") and Heritage Global Partners, Inc. ("HGP"). Counsel RB acquires and disposes of distressed and surplus manufacturing facilities primarily in the United States and Canada. HGP, acquired at the end of February 2012, provides industrial auction and asset appraisal services globally. Equity Partners provides M&A advisory services and other advice, arranges for funding in the form of debt refinancing and equity investments, and organizes both going concern and liquidation sales of business assets.

In 2012, income from continuing asset liquidation operations was $1.1 million on $16.1 million in revenues, compared to $5.0 million on $18.9 million in revenues in 2011. 2012 revenues were comprised of the proceeds of asset sales of $7.9 million (2011 - $14.3 million), earnings from equity accounted joint ventures of $2.0 million (2011 - $2.1 million) and commissions and fees of $6.2 million (2011 - $2.5 million). The decrease in revenues in 2012 was primarily due to the sale of a paper mill in New Hampshire in the second quarter of 2011, a significant transaction recorded in asset sales, partially offset by higher commissions and fees in 2012 stemming from the acquisition of HGP in February, 2012. The decrease in income from continuing operations in 2012 was primarily due to higher SG&A expenses, comprised primarily of additional personnel expenses from the acquisition and integration of HGP and costs stemming from the international expansion of the business in order to create additional global opportunities. On October 1, 2012, the business opened three new European-based offices in the UK, Germany and Spain, all led by seasoned industry veterans with expertise in the field of surplus capital asset valuations and dispositions on behalf of many European-based subsidiaries of global entities. These investments were necessary for HGP to successfully compete for forward flow accounts from large, global companies for the disposition of their surplus assets.

Other

On December 31, 2012, Counsel's management contract with Terra Firma Capital Corporation ("Terra Firma") (TSX-V: TII) ended, pursuant to the Company's announcement in September, 2012 that it was terminating the contract effective at the end of the calendar year. The decision is consistent with Counsel's strategy to focus on its financial services business. Subsequent to year end in January, 2013, the Company paid a special dividend-in-kind (valued at approximately $1.9 million) of its entire holding of common shares in Terra Firma, which represented an approximately 20% stake. Counsel founded Terra Firma in 2007 and was its Manager from the time it began commercial operations in 2008 until December 31, 2012. During this time, Counsel took Terra Firma public and grew it into a profitable real estate finance company.

Counsel's Management's Discussion and Analysis and Financial Statements for the year ended December 31, 2012 will be available on SEDAR (www.sedar.com).

About Counsel Corporation (www.counselcorp.com)

Counsel Corporation (TSX: CXS) is a financial services company that operates through its individually branded businesses in residential mortgage lending, distressed and surplus capital asset transactions and private equity investment.

Forward-Looking Statements

The statements made in this release that are not historical facts contain forward-looking information that involves risks and uncertainties. All statements, other than statements of historical facts, which address Counsel Corporation's expectations, should be considered as forward-looking statements. Such statements are based on knowledge of the environment in which Counsel Corporation currently operates, but because of the factors listed herein, as well as other factors beyond Counsel Corporation's control, actual results may differ materially from the expectations expressed in the forward-looking statements. Important factors that may cause actual results to differ from anticipated results include, but are not limited to, obtaining necessary approvals and other risks detailed from time to time in the Company's securities and other regulatory filings.

Consolidated Statements of Operations
For the year ended December 31
(in thousands of Canadian Dollars, except per share amounts)
(Audited)

			2012		2011
			$		$
Revenues			139,459		79,810
Expenses (exclusive of depreciation, amortization and interest expense shown below) and other (income) losses
	Operating costs		81,899		48,084
	Selling, general and administrative expense		42,331		25,800
	Foreign exchange (gain) loss		5		(622)
	Depreciation and amortization		1,824		739
	Interest expense		3,456		3,033
	Other		(625)		(50)
			128,890		76,984
Income (loss) before fair value adjustments			10,569		2,826
Fair value adjustments			3,449		2,044
Goodwill impairment			(5,700)		-
Income (loss) before income taxes and discontinued operations			8,318		4,870
Income tax provision (recovery)			(1,828)		(27,853)
Income (loss) from continuing operations			10,146		32,723
Less: Income (loss) attributable to non-controlling interest			454		7,740
Income (loss) attributable to shareholders			9,692		24,983
Income from discontinued operations			311		561
Less: Income (loss) attributable to non-controlling interest			-		33
Income (loss) attributable to shareholders			311		528
Net income (loss) attributable to shareholders			10,003		25,511
Basic net income (loss) per share :
Continuing operations			0.11		0.31
Discontinued operations			0.01		0.01
Basic net income (loss) per share			0.12		0.32
Weighted average number of common shares
outstanding (in thousands) - basic			85,525		80,603
Diluted net income (loss) per share:
Continuing operations			0.11		0.29
Discontinued operations			0.00		0.01
Diluted net income (loss) per share			0.11		0.30
Weighted average number of common shares
outstanding (in thousands) - diluted			96,608		87,285

The notes contained in the Company's consolidated financial statements are an integral part of these statements.

Consolidated Statements of Financial Position
As at
(in thousands of Canadian Dollars)
(Audited)

			December 31, 2012 $	December 31, 2011 $
Assets
	Current assets
		Cash and cash equivalents	12,196	15,212
		Marketable securities	109	255
		Mortgages, accounts and deferred interest receivable	26,360	15,643
		Inventory	6,863	3,197
		Prepaid expenses, deposits and deferred charges	4,637	2,262
		Investment held for sale	1,851	-
		Income tax receivable	70	-
		Assets of discontinued operations	91	180
			52,177	36,749
	Non-current assets
		Deferred interest receivable	17,086	12,483
		Deferred charges	24,692	15,880
		Investment properties	3,969	-
		Properties under development	6,739	11,502
		Property, plant and equipment	3,216	3,502
		Interests in joint ventures	3,600	3,514
		Investment in associates	20	2,482
		Portfolio investments	53,454	47,460
		Intangible assets	11,324	6,654
		Goodwill	43,837	44,844
		Deferred income tax assets	27,438	29,271
		Other assets	64	67
Total assets			247,616	214,408
Liabilities
	Current liabilities
		Accounts payable and accrued liabilities	30,395	21,441
		Customer deposits	587	1,641
		Income taxes payable	19	284
		Current portion of mortgages and loans payable	24,659	8,728
		Convertible preferred shares	2,757	-
		Liabilities of discontinued operations	575	629
			58,992	32,723
	Non-current liabilities
		Mortgages and loans payable	16,144	20,035
		Convertible debenture	11,937	11,893
		Contingent consideration	9,264	10,715
		Deferred income tax liabilities	3,608	4,463
		Derivative liability	27	131
		Other liabilities	643	2,353
Total liabilities			100,615	82,313
Shareholders' equity			147,001	132,095
Total liabilities and shareholders' equity			247,616	214,408

 

 The notes contained in the Company's consolidated financial statements are an integral part of these statements.

SOURCE: Counsel Corporation

Counsel Corporation
Stephen Weintraub
EVP, Secretary & CFO
[email protected]
Tel: [phone]

The Equicom Group
Tim Foran
[email protected]
Tel: [phone] ext. 251