Counsel Announces Third Quarter 2012 Results

Revenues Increase 40%

TORONTO, Nov. 12, 2012 /CNW/ - Counsel Corporation ("Counsel" or the "Company") (TSX: CXS), a financial services company, today announced net income attributable to shareholders of $1.9 million, or $0.02 per basic and diluted share, for the third quarter of 2012 compared to $3.1 million, or $0.04 per basic and diluted share, for the same period in 2011. For the nine months ended September 30, 2012, Counsel had net income of $9.3 million, or $0.11 per basic and diluted share, compared to $2.5 million, or $0.03 per basic and diluted share, in the same period of 2011. The Company recorded revenues of $36.9 million and $107.0 million for the three and nine month periods ended September 30, 2012, respectively, compared to $26.3 million and $47.5 million for the three and nine month periods ended September 30, 2011, respectively. All amounts are stated in Canadian dollars, unless noted.

The significant year-over-year increase in Counsel's revenues and income for the nine months ended September 30, 2012 was primarily attributable to having a full period of contributions from Counsel's mortgage lending business, Street Capital Financial Corporation ("Street Capital"), which was acquired on May 31, 2011. The mortgage lending business has made up approximately 80% of Counsel's year-to-date revenues.

Mortgage Lending Business

Street Capital generated $4.9 million in income from continuing operations in the third quarter of 2012 on $28.9 million in revenues compared to $3.5 million on $19.9 million revenues in the same period of 2011. For the nine months ended September 30, 2012, Street Capital had $16.2 million in income from continuing operations on $85.0 million in revenues (a comparative period is not available as Street Capital was only acquired May 31, 2011). For the three and nine months ended September 30, 2012, Street Capital generated earnings before interest, depreciation, amortization and income taxes of $6.8 million and $22.8 million, respectively.

The company originated and sold $1.7 billion and $4.4 billion of mortgages in the three and nine months ended September 30 (it sold $3.7 billion in the full year 2011), and is now among the top mortgage underwriters operating through the broker channel in Canada. Street Capital increased its portfolio of mortgages under administration to $10.7 billion as at September 30, 2012, compared with $9.5 billion at June 30, 2012 and $6.5 billion at September 30, 2011.

"We are excited about the growth of Street Capital's mortgage portfolio, which has increased about 65% over the past year," said Allan Silber, Counsel's Chairman and CEO. "As this portfolio matures, Street Capital will also be able to benefit from higher margin mortgage renewals."

In September 2012, Street Capital announced its intention to apply 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 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. The company expects 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.

Asset Liquidation Business

Counsel's asset liquidation business is carried on by wholly owned subsidiaries of Counsel's 71.3%-owned publically traded subsidiary, Counsel RB Capital Inc. ("CRBCI"): Counsel RB Capital LLC ("Counsel RB"), EP USA, LLC ("Equity Partners") and Heritage Global Partners, Inc. ("HGP").

In the third quarter of 2012, loss from continuing operations from the asset liquidation business was $0.7 million on $3.2 million in revenues, compared to income from continuing operations of $2.1 million on $2.6 million in revenues in the same quarter in 2011. The increase in revenues is primarily due to a significant increase in commission and fee revenue, stemming from CRBCI's acquisition of its industrial auction division, HGP, in February, 2012. The decrease in income from continuing operations is primarily due to higher SG&A expenses related to additional costs from the acquisition and integration of HGP, costs stemming from the expansion of the business to Latin America and Europe, and a one-time expense of approximately $1.0 million as a result of the issuance of 800,000 shares of CRBCI to its Co-CEOs as consideration for an exclusive, perpetual license to use their names in connection with CRBCI and its affiliates. Also, an income tax recovery of $1.2 million was recorded by the segment in the third quarter of 2011 compared to a recovery of $0.6 million in the third quarter of 2012.

For the nine months ended September 30, 2012, income from continuing operations was $0.3 million on $11.4 million in revenues, versus $4.8 million in income from continuing operations on $16.3 million in revenues in the same period of 2011. The higher revenues in 2011 were mainly due to a significant asset liquidation transaction in the second quarter, specifically the sale of a paper mill in New Hampshire. Asset liquidation earnings in 2012 have been impacted by the incremental costs associated with the integration of HGP and the investment in international expansion (as described below); however, recurring benefits from these initiatives are expected to positively impact future operating results.

In July 2012, CRBCI and HGP entered into an exclusive agreement with Asset Remarketing S. De R.L. de C.V. ("Asset Remarketing") to form a strategic alliance that expands the companies' worldwide operations into key Latin American markets. Asset Remarketing specializes in the monetization of manufacturing assets and related real estate throughout Latin America with branches in Mexico, Costa Rica, the Dominican Republic and Venezuela amongst several others.  On October 1, 2012, CRBCI and HGP opened Heritage Global Partners Europe with 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.

Other

In September 2012, Counsel announced its intention to end its management contract with Terra Firma Capital Corporation ("Terra Firma") (TSX-V: TII) effective December 31, 2012. The decision is consistent with Counsel's strategy to focus on its key operating business platforms: its residential mortgage lending business and asset liquidation business. In addition, the Company decided to distribute its 20.2% shareholding of Terra Firma to shareholders, which meant that the investment had to be reclassified as "held for sale" and recorded at fair value. As a result of the reclassification, the Company recorded a fair value impairment of $0.4 million in the third quarter of 2012 compared to a fair value appreciation in the third quarter of 2011 of $3.6 million. The prior period's fair value appreciation was due to a $3.6 million appreciation in the Company's private equity portfolio, primarily from a foreign exchange gain.

On November 8, 2012, the Company announced a special dividend to shareholders of Counsel of the 6.1 million Terra Firma shares that it owns, which will be paid on January 1, 2013 to Counsel's shareholders of record on December 3, 2012.

Counsel's Management's Discussion and Analysis and Financial Statements for the quarter and nine months ended September 30, 2012 have been filed and 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.

Condensed Consolidated Interim Statements of Financial Position
As at September, 2012 and December 31, 2011
(in thousands of Canadian Dollars) (Unaudited)

		Three months ended September 30,			Six months ended September 30,
		2012 $	2011 $		2012 $	2011 $
Revenues		36,884	26,271		107,012	47,509
Expenses
	Operating costs	21,098	15,027		60,877	29,010
	Selling, general and administrative expense	12,380	7,646		30,365	16,579
	Foreign exchange (gain) loss	(119)	(64)		(64)	(37)
	Depreciation and amortization	604	260		1,356	315
	Interest expense	866	827		2,521	1,717
	Other	4	(5)		(270)	(20)
		34,833	23,691		94,785	47,564
Income (loss) before fair value adjustments		2,051	2,580		12,227	(55)
Fair value adjustments		(415)	3,564		756	1,540
Income before income taxes and discontinued operations		1,636	6,144		12,983	1,485
Income tax provision (recovery)		571	(168)		3,428	(1,576)
Income from continuing operations		1,065	6,312		9,555	3,061
Less: Income (loss) attributable to non-controlling interest		(699)	3,182		326	755
Income attributable to shareholders		1,764	3,130		9,229	2,306
Income from discontinued operations		91	16		102	195
Less: Income attributable to non-controlling interest		-	-		-	33
Income attributable to shareholders		91	16		102	162
Net income attributable to shareholders		1,855	3,146		9,331	2,468
Basic and diluted net income per share :
	Continuing operations	0.02	0.04		0.11	0.03
	Discontinued operations	0.00	0.00		0.00	0.00
Basic and diluted net income per share		0.02	0.04		0.11	0.03
Weighted average number of common shares
outstanding (in thousands) - basic  and diluted		85,783	85,138		85,433	79,075

 

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

Condensed Consolidated Interim Statements of Operations
For the three months and nine months ended September 30, 2012 and 2011
(in thousands of Canadian Dollars, except per share amounts)
(Unaudited)

				September 30, 2012 $		December 31, 2011 $
Assets
	Current assets
		Cash and cash equivalents		16,721		15,212
		Marketable securities		113		255
		Mortgages, accounts and deferred interest receivable		23,415		15,643
		Inventory		2,626		3,197
		Prepaid expenses, deposits and deferred charges		6,919		2,262
		Investment held for sale		2,093		-
		Income tax receivable		53		-
		Assets of discontinued operations		116		180
				52,056		36,749
Non-current assets
		Deferred interest receivable		15,335		12,483
		Deferred charges		23,338		15,880
		Investment properties		3,918		-
		Properties under development		6,750		11,502
		Property, plant and equipment		3,360		3,502
		Interests in joint ventures		1,743		3,514
		Investment in associates		19		2,482
		Portfolio investments		50,845		47,460
		Intangible assets		11,496		6,654
		Goodwill		49,475		44,844
		Deferred income tax assets		26,747		29,271
		Other assets		65		67
Total assets				245,147		214,408
Liabilities
	Current liabilities
		Accounts payable and accrued liabilities		30,112		21,441
		Customer deposits		201		1,641
		Income taxes payable		-		284
		Current portion of mortgages and loans payable		16,666		8,728
		Liabilities of discontinued operations		589		629
				47,568		32,723
Non-current liabilities
		Mortgages and loans payable		17,181		20,035
		Convertible debenture		11,926		11,893
		Contingent consideration		11,842		10,715
		Deferred income tax liabilities		8,498		4,463
		Derivative liability		47		131
		Other liabilities		844		2,353
Total liabilities				97,906		82,313
Shareholders' equity				147,241		132,095
Total liabilities and shareholders' equity				245,147		214,408

The notes contained in the Company's condensed consolidated interim 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