Constellation Software Inc.
TSX : CSU

Constellation Software Inc.

March 02, 2011 17:00 ET

Constellation Software Inc. Announces Results for the Fourth Quarter and Year Ended December 31, 2010 and Declares Annual Dividend

TORONTO, ONTARIO--(Marketwire - March 2, 2011) - Constellation Software Inc. (TSX:CSU) ("Constellation" or the "Company") today announced its financial results for the fourth quarter and fiscal year ended December 31, 2010, and declared a $2.00 per share dividend payable on March 31, 2011 to all common shareholders and class A non-voting shareholders of record at close of business on March 17, 2011. Please note that all dollar amounts referred to in this press release are U.S. Dollars unless otherwise stated.

The following press release should be read in conjunction with the Company's audited annual Consolidated Financial Statements, prepared in accordance with Canadian GAAP and our annual MD&A for the year ended December 31, 2010 which can be found on SEDAR at www.sedar.com and on the Company's website www.csisoftware.com. Additional information about the Company is also available on SEDAR at www.sedar.com.

2010 Highlights:
  • Revenue grew 44% to $631 million compared to $438 million in 2009. Organic revenue growth was negative 4% in 2010 versus negative 3% in 2009. Excluding the impact of the Public Transit Solutions business ('PTS') acquired in Q4 2009, organic growth was 2% in 2010 compared to nil in 2009.
  • Adjusted EBITDA increased $28 million or 32% to $116 million as compared to 2009
  • Adjusted net income increased by $25 million or 40% to $87 million ($4.12 on a fully diluted per share basis) from $62 million ($2.95 on a fully diluted per share basis) in 2009
  • $91 million was deployed on 21 acquisitions and $8 million in net acquisition settlement payments relating to prior acquisitions was received
  • Cash flow from operations increased $24 million or 29% to $105 million in 2010 as compared to $82 million in 2009
  • Dividend declared of $2.00 per share
  • Negotiating an increase to our credit facility to $250 million from $160 million
 
Q4 2010 Highlights:
  • Revenue grew 30% to $171 million compared to $132 million in Q4 2009. Organic revenue growth was 1% compared to negative 4% in Q4 2009
  • Adjusted EBITDA grew 47% to $33 million compared to $22 million in Q4 2009
  • Adjusted net income grew 57% to $23 million compared to $15 million in Q4 2009
  • Five acquisitions were completed in the quarter for net cash consideration of $45 million, and net acquisition settlement payments of $13 million were received
  • Subsequent to December 31, 2010, the Company completed two acquisitions for total cash consideration of $11 million.

Fourth quarter 2010 revenue was $171 million, an increase of 30%, or $39 million, compared to $132 million for the comparable period in 2009. For the 2010 fiscal year, total revenues were $631 million, an increase of 44% over 2009. The increases for both the fourth quarter and the full year compared to the same periods in the prior year were mainly attributable to growth from acquisitions, as organic growth from our existing business was estimated at approximately 1% for the fourth quarter and negative 4% for the full year.

Constellation acquired the Public Transit Solutions business ('PTS') from Continental Automotive AG ('Continental') on November 2, 2009. Given the substantial amount of non-recurring revenue historically earned by PTS, gross revenue from PTS has fluctuated significantly in the past and may continue to do so in the future. Revenue from PTS declined significantly in the twelve months following acquisition compared to revenue in the corresponding financial period preceding acquisition as PTS recognized substantial non-recurring revenue in the twelve months prior to acquisition. As such, management has chosen to provide supplemental organic growth disclosure to provide greater clarity regarding the impact of PTS on Constellation's consolidated financial results. Excluding PTS, organic growth for Constellation was 1% in Q4 2010 and 2% for 2010. The following table provides a summary of the impact of PTS on Constellation's organic revenue growth:

Organic Revenue Growth  
   
  Three months ended December 31, 2010   Fiscal year ended December 31, 2010  
         
Constellation 1 % -4 %
   
Constellation excluding PTS 1 % 2 %

Adjusted EBITDA for the fourth quarter 2010 was $33 million, a 47% increase compared to the prior year's fourth quarter Adjusted EBITDA of $22 million. Fourth quarter Adjusted EBITDA per share on a fully diluted basis increased 48% to $1.55, compared to $1.05 for the same period last year. Adjusted EBITDA for the year ended December 31, 2010 was $116 million, an increase of 32% over last year's Adjusted EBITDA of $88 million for the same period. Adjusted EBITDA per share on a fully diluted basis for the year increased 32% to $5.49, compared to $4.16 for the same period in 2009.

Adjusted net income for the fourth quarter 2010 was $23 million, compared to the prior year's fourth quarter Adjusted net income of $15 million, a 57% increase. Fourth quarter Adjusted net income per share on a fully diluted basis increased 58% to $1.09 compared to $0.69 for the prior year's fourth quarter. Adjusted net income for the year ended December 31, 2010 was $87 million, an increase of 40% over last year's Adjusted net income of $62 million for the same period. Adjusted net income per share on a fully diluted basis for the year increased 40% to $4.12 compared to $2.95 for the same period in 2009.

Net income for the fourth quarter 2010 was $18 million compared to the prior year's fourth quarter net income of nil. On a fully diluted per share basis, this translates into net income per share of $0.84 for the fourth quarter of 2010, compared to nil in the same period of 2009. For the year ended December 31, 2010 net income was $42 million or $1.97 per diluted share compared to $10 million or $0.48 per share last year.

The Company recorded an extraordinary gain of $9 million for the quarter ended December 31, 2010 and $13 million for the year ended December 31, 2010 compared to nil for the same periods in the previous year. The extraordinary gain recorded in 2010 primarily relates to negative goodwill associated with the PTS acquisition. Negative goodwill arose on acquisition because the fair value of the separately identifiable assets acquired net of the liabilities acquired exceeded the total consideration paid.

The following table displays our revenue by reporting segment and the percentage change for the three and twelve months ended December 31, 2010 compared to the same periods in 2009:

  Three months ended December 31, Period-Over-Period Change     Fiscal year ended December 31, Period-Over-Period Change  
  2010 2009 $ %     2010 2009 $ %  
  ($000, except percentages)     ($000, except percentages)  
Public Sector                      
Licenses 11,109 9,759 1,350 14 %   37,782 33,954 3,828 11 %
Professional services and other:                      
  Services 35,119 31,603 3,516 11 %   138,379 97,234 41,145 42 %
  Hardware and other 20,065 9,908 10,157 103 %   66,075 30,008 36,067 120 %
Maintenance 61,494 51,992 9,502 18 %   229,488 175,423 54,065 31 %
  127,787 103,262 24,525 24 %   471,724 336,619 135,105 40 %
                       
Private Sector                      
Licenses 4,907 2,561 2,346 92 %   15,181 8,716 6,465 74 %
Professional services and other:                      
  Services 7,309 3,379 3,930 116 %   28,250 12,461 15,789 127 %
  Hardware and other 2,451 1,044 1,407 135 %   8,526 3,789 4,737 125 %
Maintenance 29,014 21,648 7,366 34 %   107,176 76,355 30,821 40 %
  43,681 28,632 15,049 53 %   159,133 101,321 57,812 57 %

Public Sector

For the quarter ended December 31, 2010, total revenue in the public sector segment increased 24%, or $25 million, to $128 million, compared to $103 million for the quarter ended December 31, 2009. For the year ended December 31, 2010, total revenue increased by 40%, or $135 million, to $472 million, compared to $337 million for the comparable period in 2009. The increases for both the three months and the full year were significant across all revenue types. Revenue growth from acquired businesses was significant for both the three and twelve month periods as we completed fifteen acquisitions since the beginning of 2009 in our public sector segment. It is estimated that acquisitions completed since the beginning of 2009 contributed approximately $26 million to our Q4 2010 revenues and $156 million to our revenues in the year ended December 31, 2010. Revenues decreased organically by 1% or $1 million in Q4 2010 and by 6% or $21 million in the year ended December 31, 2010 compared to the same periods in 2009. Excluding PTS, organic growth for the public sector was negative 2% in Q4 2010 and 1% for 2010.

Organic Revenue Growth  
   
  Three months ended December 31, 2010   Fiscal year ended December 31, 2010  
         
Public Sector -1 % -6 %
   
Public Sector excluding PTS -2 % 1 %

The organic revenue change was primarily driven by the following:

  • Trapeze operating group (increase of approximately $2 million for Q4 and a decrease of $23 million for the full year). For the full year, the negative organic growth was primarily caused by the PTS business as PTS recognized substantial non-recurring revenue in the twelve months prior to acquisition that did not re-occur in the corresponding financial period following acquisition. Excluding the impact of PTS, Trapeze experienced 3% organic growth in Q4 and 2% organic growth for the full year.

    Effective March 3, 2011, Trapeze Operating Group will be renamed the Volaris Operating Group.

  • Harris operating group (decrease of approximately $3 million for Q4 and an increase of approximately $3 million for the full year). For Q4, Harris experienced decreased revenue in a few business units principally due to a delay in orders and due to a slowdown in the progression to contract completion on a few large contracts. For the full year, Harris had increased revenue from existing clients and new customers in their utility, local government and school business units.

Private Sector

For the quarter ended December 31, 2010, total revenue in the private sector segment increased 53%, or $15 million, to $44 million, compared to $29 million for the quarter ended December 31, 2009. For the year ended December 31, 2010 total revenue increased by 57%, or $58 million, to $159 million, compared to $101 million for the comparable period in 2009. Revenue growth from acquired businesses was significant for both the three and twelve month periods as we completed nineteen acquisitions since the beginning of 2009 in our private sector segment. It is estimated that acquisitions completed since the beginning of 2009 contributed approximately $12 million to our Q4 2010 revenues and $51 million to our revenues in the year ended December 31, 2010. Revenues increased organically by 9% or $3 million in Q4 2010 and 5% or $5 million in the year ended December 31, 2010 compared to the same periods in 2009. The organic revenue change was primarily driven by the following:

  • Jonas operating group (increase of approximately $2 million for Q4 and $4 million for the full year). For both the quarter and full year, Jonas' organic growth was driven by strong sales to both existing and new customers primarily in its' fitness, construction, and food service verticals.

  • Homebuilder operating group (increase of approximately $2 million for Q4 and $3 million for the full year). For both the quarter and full year, Homebuilders' organic growth was driven by strong sales to both existing and new customers primarily in its' pulp and paper and homebuilding verticals.

During the quarter, Constellation completed five acquisitions for total net cash consideration of approximately $45 million, and received acquisition settlement payments, net of holdbacks paid, of $13 million relating to prior acquisitions. At December 31, 2010, Constellation's cash position (net of borrowings on our line of credit) decreased to negative $16 million, from negative $10 million at December 31, 2009. Subsequent to December 31, 2010, the Company completed two acquisitions for total cash consideration of $11 million. The Company is currently negotiating a new $250 million credit facility with a syndicate of lenders that will replace its existing $160 million facility.

"2010 was an exceptional year as revenue, Adjusted net income and cash flow from operations reached all-time highs and the Company also improved its organic growth over the prior year, excluding the impact of PTS", said John Billowits, CFO of Constellation. "As a result of the strong performance, the Company declared a dividend of $2 per share, reflecting our confidence in the future performance of our businesses."

Conference Call and Webcast

Management will host a conference call at 8:30 a.m. (ET) on Thursday, March 3, 2011 to answer questions regarding the results. The teleconference numbers are 416-695-7848 or 800-769-8320. The call will also be webcast live and archived on Constellation's web site at www.csisoftware.com.

A replay of the conference call will be available as of 11:30 a.m. ET the same day until 11:59 p.m. ET on March 18, 2011. To access the replay, please dial 905-694-9451 or 800-408-3053 followed by the passcode 1514365#.

Forward Looking Statements

Certain statements herein may be "forward looking" statements that involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Constellation or the industry to be materially different from any future results, performance or achievements expressed or implied by such forward- looking statements. Forward looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. A number of factors could cause actual results to vary significantly from the results discussed in the forward looking statements. These forward looking statements reflect current assumptions and expectations regarding future events and operating performance and are made as of the date hereof and Constellation assumes no obligation, except as required by law, to update any forward looking statements to reflect new events or circumstances.

Non-GAAP Measures

The term "Adjusted EBITDA" refers to net income before deducting interest, taxes, depreciation, other expenses (income), extraordinary gain, amortization, and foreign exchange loss (gain). The Company believes that Adjusted EBITDA is useful supplemental information as it provides an indication of the results generated by the Company's main business activities prior to taking into consideration how those activities are financed and taxed and also prior to taking into consideration asset depreciation and the other items listed above. "Adjusted EBITDA margin" refers to the percentage that Adjusted EBITDA for any period represents as a portion of total revenue for that period.

"Adjusted net income" means net income plus non-cash expenses (income) such as amortization of intangible assets, future income taxes, and certain other expenses (income). The Company believes that Adjusted net income is useful supplemental information as it provides an indication of the results generated by the Company's main business activities prior to taking into consideration amortization of intangible assets, future income taxes, and certain other non-cash expenses (income) incurred by the Company from time to time. "Adjusted net income margin" refers to the percentage that Adjusted net income for any period represents as a portion of total revenue for that period.

Adjusted EBITDA and Adjusted net income are not recognized measures under GAAP and, accordingly, shareholders are cautioned that Adjusted EBITDA and Adjusted net income should not be construed as alternatives to net income determined in accordance with GAAP. The Company's method of calculating Adjusted EBITDA and Adjusted net income may differ from other issuers and, accordingly, Adjusted EBITDA and Adjusted net income may not be comparable to similar measures presented by other issuers. See "Results of Operations —Adjusted EBITDA" and "— Adjusted net income" for a reconciliation of Adjusted EBITDA and Adjusted net income to net income.

The following table reconciles Adjusted EBITDA to net income: 

  Three months ended December 31,     Fiscal year ended December 31,  
  2010   2009     2010   2009  
  ($000, except percentages)     ($000, except percentages)  
           
Total revenue $ 171,468   $ 131,894     $ 630,857   $ 437,940  
                           
Net income (loss)   17,893     (10 )     41,766     10,224  
Add back:                          
Income taxes   (1,984 )   2,523       5,043     7,237  
Extraordinary gain   (9,021 )   -       (12,538 )   -  
Foreign exchange loss   2,347     1,944       2,387     2,568  
Interest expense, net   1,353     794       3,847     2,702  
Other expenses (income)   218     (445 )     (175 )   996  
Amortization of intangible assets   20,050     16,317       70,064     60,588  
Depreciation   1,888     1,105       6,036     3,811  
                           
Adjusted EBITDA   32,744     22,228       116,430     88,126  
Adjusted EBITDA margin   19 %   17 %     18 %   20 %

The following table reconciles Adjusted net income to net income: 

  Three months ended December 31,     Fiscal year ended December 31,  
  2010   2009     2010   2009  
  ($000, except percentages)     ($000, except percentages)  
               
Total revenue $ 171,468   $ 131,894     $ 630,857   $ 437,940  
                           
Net income (loss)   17,893     (10 )     41,766     10,224  
Add back:                          
Amortization of intangible assets   20,050     16,317       70,064     60,588  
Extraordinary gain   (9,021 )   -       (12,538 )   -  
Future income taxes (recovery)   (5,911 )   (1,649 )     (11,918 )   (8,398 )
                           
Adjusted net income   23,011     14,658       87,374     62,414  
Adjusted net income margin   13 %   11 %     14 %   14 %

The following tables provide supplemental statement of operations and cash flow information of PTS and certain assets and liabilities acquired from MAXIMUS Inc.'s Asset, Justice, and Education businesses ('MAJES'):

Statement of Operations
For the three months and year ended December 31, 2010
 
  For the three months ended December 31, 2010   For the year ended December 31, 2010  
(Unaudited) Constellation Software Inc. (excluding MAJES and PTS)   MAJES   PTS   Consolidated   Constellation Software Inc. (excluding MAJES and PTS)   MAJES   PTS   Consolidated  
Revenue $ 122,917   $ 19,079   $ 29,472   $ 171,468   $ 444,066   $ 76,687   $ 110,104   $ 630,857  
Cost of revenue   44,614     5,949     21,156     71,719     164,755     24,385     73,429     262,569  
Gross Profit   78,303     13,130     8,316     99,749     279,311     52,302     36,675     368,288  
Total Expenses (excluding amortization)   53,235     8,090     5,680     67,005     198,589     28,840     24,429     251,858  
Adjusted EBITDA   25,068     5,040     2,636     32,744     80,722     23,462     12,246     116,430  
  EBITDA as % Total Revenue   20 %   26 %   9 %   19 %   18 %   31 %   11 %   18 %
                                                   
  Depreciation   1,262     100     526     1,888     4,328     420     1,288     6,036  
Income before the undernoted   23,806     4,940     2,110     30,856     76,394     23,042     10,958     110,394  
                                                 
Amortization of intangible assets   18,604     1,446     -     20,050     64,274     5,790     -     70,064  
Other expenses (income), net   4,060     (33 )   (109 )   3,918     6,326     (8 )   (259 )   6,059  
Income before exceptional items and income taxes   1,142     3,527     2,219     6,888     5,794     17,260     11,217     34,271  
                                                 
Extraordinary gain   1,746     -     7,275     9,021     1,745     -     10,793     12,538  
                                                 
Income taxes   (1,868 )   542     (657 )   (1,984 )   (1,457 )   4,302     2,198     5,043  
Net Income $ 4,756   $ 2,985   $ 10,151   $ 17,893   $ 8,996   $ 12,958   $ 19,812   $ 41,766  
 
 
Cash flow from operating activities
For the three months and year ended December 31, 2010
 
  For the three months ended December 31, 2010   For the year ended December 31, 2010  
(Unaudited) Constellation Software Inc. (excluding MAJES and PTS)   MAJES   PTS   Consolidated   Constellation Software Inc. (excluding MAJES and PTS)   MAJES   PTS   Consolidated  
Cash flows from operating activities:                                                
  Net income $ 4,756   $ 2,985   $ 10,151   $ 17,893   $ 8,996   $ 12,958   $ 19,812   $ 41,766  
  Adjustments to reconcile net income to net cash flows from operations:                                                
    Depreciation   1,262     100     526     1,888     4,328     420     1,288     6,036  
    Amortization of intangible assets   18,604     1,446     -     20,050     64,274     5,790     -     70,064  
    Extraordinary gain   (1,746 )   -     (7,275 )   (9,021 )   (1,745 )   -     (10,793 )   (12,538 )
    Future income taxes   (2,928 )   (1,887 )   (1,096 )   (5,911 )   (8,212 )   (2,670 )   (1,037 )   (11,918 )
    Other non-cash items   2,886     1     (329 )   2,558     2,493     22     (407 )   2,108  
  Change in non-cash operating working capital   3,660     1,462     9,311     14,433     4,161     1,079     4,283     9,523  
Cash flows from operating activities $ 26,495   $ 4,107   $ 11,289   $ 41,890   $ 74,295   $ 17,599   $ 13,146   $ 105,041  

The following table reconciles Adjusted EBITDA to net income for PTS and MAJES:

Adjusted EBITDA to net income reconciliation
For the three months and year ended December 31, 2010
 
  For the three months ended December 31, 2010   For the year ended December 31, 2010  
(Unaudited) Constellation Software Inc. (excluding MAJES and PTS)   MAJES   PTS   Consolidated   Constellation Software Inc. (excluding MAJES and PTS)   MAJES   PTS   Consolidated  
Total revenue $ 122,917   $ 19,079   $ 29,472   $ 171,468   $ 444,066   $ 76,687   $  110,104   $ 630,857  
                                                 
Net income   4,756     2,985     10,151     17,893     8,996     12,958     19,812     41,766  
Add back:                                                
Income tax expense   (1,868 )   542     (657 )   (1,984 )   (1,457 )   4,302     2,198     5,043  
Extraordinary gain   (1,746 )   -     (7,275 )   (9,021 )   (1,745 )   -     (10,793 )   (12,538 )
Other expenses (income), net   4,060     (33 )   (109 )   3,918     6,326     (8 )   (259 )   6,059  
Amortization of intangible assets   18,604     1,446     -     20,050     64,274     5,790     -     70,064  
Depreciation   1,262     100     526     1,888     4,328     420     1,288     6,036  
                                                 
Adjusted EBITDA   25,068     5,040     2,636     32,744     80,722     23,462     12,246     116,430  
Adjusted EBITDA margin   20 %   26 %   9 %   19 %   18 %   31 %   11 %   18 %

About Constellation Software Inc.

Constellation's common shares are listed on the Toronto Stock Exchange under the symbol "CSU". Constellation Software is an international provider of market leading software and services to a number of industries across both the public and private sectors. The Company acquires, manages and builds vertical market software businesses that provide mission-critical software solutions to address the specific needs of its customers in those industries.

CONSTELLATION SOFTWARE INC.
Consolidated Balance Sheets (In thousands of U.S. dollars)
December 31, 2010 and 2009
      2010     2009  
Assets            
             
Current assets:            
  Cash $ 30,911   $ 33,249  
  Short-term investments and marketable securities available for sale   23,723     22,323  
  Accounts receivable   92,097     91,244  
  Work in progress   24,408     21,349  
  Inventory   15,945     12,702  
  Prepaid expenses and other current assets   22,052     19,606  
  Notes receivable   -     3,833  
  Investment tax credits recoverable   3,929     2,250  
  Future income taxes   3,471     4,445  
      216,536     211,001  
             
Restricted cash   857     2,229  
Property and equipment   16,430     10,539  
Future income taxes   22,919     10,155  
Investment tax credits recoverable   3,410     2,133  
Other long-term assets   19,002     7,169  
Intangible assets   223,503     187,788  
Goodwill   50,756     40,977  
    $ 553,413   $ 471,991  
Liabilities and Shareholders' Equity            
             
Current liabilities:            
  Bank indebtedness $ 47,291   $ 43,100  
  Accounts payable and accrued liabilities   118,066     111,307  
  Acquisition holdbacks   6,920     3,587  
  Deferred revenue   157,240     128,359  
  Income taxes payable   1,424     3,751  
      330,941     290,104  
             
Future income taxes   30,915     28,121  
Other long-term liabilities   41,630     45,708  
             
Shareholders equity:            
  Capital stock   99,283     99,283  
  Shareholder loans   (482 )   (646 )
  Accumulated other comprehensive income (loss)   5,292     (157 )
  Retained earnings   45,834     9,578  
      149,927     108,058  
Commitments and contingencies            
Subsequent events            
    $ 553,413   $ 471,991  
               
               
CONSTELLATION SOFTWARE INC.
Consolidated Statements of Operations
(In thousands of U.S. dollars, except per share amounts)
Years ended December 31, 2010 and 2009
      2010     2009  
   
Revenue $ 630,857   $ 437,940  
Cost of revenue   262,569     166,607  
      368,288     271,333  
             
Research and development   84,880     65,632  
Sales and marketing   58,310     45,174  
General and administration   108,668     72,401  
Depreciation   6,036     3,811  
      257,894     187,018  
Income before the undernoted   110,394     84,315  
             
Amortization of intangible assets   70,064     60,588  
Other (income) expenses   (175 )   996  
Interest expense, net   3,847     2,702  
Foreign exchange (gain) loss   2,387     2,568  
             
Income before extraordinary gain and income taxes   34,271     17,461  
Extraordinary gain (taxes - nil)   12,538     -  
Income taxes (recovery):            
  Current   16,961     15,635  
  Future   (11,918 )   (8,398 )
      5,043     7,237  
Net income $ 41,766   $ 10,224  
Income per share:            
  Basic $ 1.97   $ 0.48  
  Diluted   1.97     0.48  
             
Weighted average number of shares outstanding:            
  Basic   21,179     21,165  
  Diluted   21,192     21,192  
  Outstanding at the end of the period   21,192     21,192  
         
         
CONSTELLATION SOFTWARE INC.        
Consolidated Statements of Retained Earnings        
(In thousands of U.S. dollars)        
         
Years ended December 31, 2010 and 2009        
         
  2010   2009  
         
Retained earnings, beginning of year $ 9,578   $ 3,931  
             
Net income   41,766     10,224  
             
Dividends   (5,510 )   (4,577 )
             
Retained earnings, end of year $ 45,834   $ 9,578  
             
             
Consolidated Statements of Comprehensive Income            
(In thousands of U.S. dollars)            
             
Years ended December 31, 2010 and 2009            
             
    2010     2009  
       
             
Net income $ 41,766   $ 10,224  
             
Other comprehensive net income:            
             
  Net unrealized mark-to-market adjustment gain (loss) on available-for-sale financial assets during the period   6,071     4,853  
             
  Net unrealized foreign exchange gain (loss) on available-for-sale financial assets during the period   61     426  
             
  Reclassification of unrealized gain upon derecognition of available-for-sale investments   (733 )   -  
             
  Amounts reclassified to net income during the period related to other than temporary losses in available-for-sale investments   -     1,474  
             
  Future tax expense on unrealized net gains   (1,260 )   -  
             
  Foreign currency translation adjustment   1,310     (9 )
             
Comprehensive income $ 47,215   $ 16,968  
         
         
CONSTELLATION SOFTWARE INC.        
Consolidated Statements of Cash Flows        
(In thousands of U.S. dollars)        
         
Years ended December 31, 2010 and 2009        
         
  2010   2009  
         
Cash flows from operating activities:        
  Net income $ 41,766   $ 10,224  
  Adjustments to reconcile net income to net cash flows from operations:            
    Depreciation   6,036     3,811  
    Amortization of intangible assets   70,064     60,588  
    Extraordinary gain   (12,538 )   -  
    Non-cash interest   (217 )   (167 )
    Future income taxes   (11,918 )   (8,398 )
    Other   (62 )   1,486  
    Foreign exchange loss   2,387     2,568  
  Change in non-cash operating working capital   9,523     11,415  
  Cash flows from operating activities   105,041     81,527  
             
Cash flows from (used in) financing activities:            
  Increase (decrease) in other long-term liabilities   326     (661 )
  Increase (decrease) in bank indebtedness, net   4,191     (17,100 )
  Credit facility financing fees   (13 )   (1,070 )
  Dividends paid   (5,510 )   (4,577 )
  Repayment of shareholder loans   207     362  
  Cash flows from (used in) financing activities   (799 )   (23,046 )
             
Cash flows from (used in) investing activities:            
  Acquisition of businesses, net of cash acquired   (90,627 )   (37,905 )
  Post acquisition settlement (payments) receipts   7,697     (4,166 )
  Repayment of notes receivable   4,085     -  
  Acquisitions of short-term investments, marketable securities and other assets, net   (20,035 )   (7,032 )
  Decrease (increase) in restricted cash   1,372     (1,479 )
  Decrease (increase) in other assets   52     (112 )
  Property and equipment purchased   (7,092 )   (3,506 )
  Cash flows used in investing activities   (104,548 )   (54,200 )
             
Effect of foreign currency translation adjustment on cash and cash equivalents   (2,032 )   (1,437 )
             
Increase (decrease) in cash and cash equivalents   (2,338 )   2,844  
             
Cash, beginning of period   33,249     30,405  
             
Cash, end of period $ 30,911   $ 33,249  
             
Supplemental cash flow information:            
  Income taxes paid $ 19,695   $ 15,526  
  Interest paid   4,558     3,663  
  Investment tax credits received   1,038     1,780  
  Interest received   723     752  

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