Resolve Business Outsourcing Income Fund
TSX : RBO.UN

Resolve Business Outsourcing Income Fund

April 25, 2007 17:07 ET

Resolve Business Outsourcing Income Fund Reports First Quarter 2007 Results

Stable and Consistent Performance Provides a Base to Fuel Growth

TORONTO, ONTARIO--(CCNMatthews - April 25, 2007) -

Attention Business and Financial Editors:

Resolve Business Outsourcing Income Fund (the "Fund") (TSX :RBO.UN) today announced financial results for its first quarter results for the three months ended March 31, 2007. All amounts are in Canadian dollars.

Financial highlights:

- Revenues for Q1 - $63.8 million

- Net earnings (loss) for Q1 - $(0.2) million

- Net earnings (loss) per unit for Q1 - $(0.01) basic and diluted

- Distributable cash for Q1 - $19.0 million or $0.58 per unit

- Distributable cash for the trailing twelve month period - $43.3 million or $1.32 per unit

Revenues for the trailing twelve month period ended March 31, 2007, were $266.7 million. Net earnings for the same period were $4.6 million and earnings per unit basic were $0.19. Distributable cash for the trailing twelve month period was $43.3 million or $1.32 per unit.

Comparison of the trailing twelve month results to certain of the pro forma financial results included in the Prospectus of the Fund dated March 9, 2006, is included in the information attached to this press release.

"We are pleased with our results for the first quarter of 2007", said Lawrence Zimmering, president and chief executive officer. "They are consistent with our internal plans and expectations. We believe the results of Q1 F'07 keep us on track to meet our mid-term objective to grow revenue and earnings through a combination of organic growth and, if appropriate, selective acquisitions. Also, the Fund continues to expect to generate distributable cash in 2007 at a level equal to or greater than the annualized distributable cash generated in 2006."

About Resolve

Resolve works with businesses as an outsourced resource taking on critical processes and managing them better, faster and more cost-effectively. We have over 35 years experience managing processes for Fortune 500 clients in the financial services, retail, government, consumer goods and communications industries. Headquartered in Toronto, Canada, Resolve employs more than 4,000 people in 28 locations and is listed on the Toronto Stock Exchange as Resolve Business Outsourcing Income Fund, symbol RBO.UN. For more information, visit www.resolve.com.

Conference Call

A conference call hosted by Lawrence Zimmering, president and CEO, and Jamie Hyde, executive vice president and CFO, will be held at 10:00 a.m. (EST) on April 26, 2007, to review these results and answer any questions.

To participate in the conference call, please dial 416-695-6622 or 1-800-769-8320. A live audio webcast will also be available at www.vcall.com/IC/CEPage.asp?ID=115242.

For anyone unable to access the scheduled call, a taped rebroadcast will be available until May 10, 2007, by dialing 416-695-5275 or 1-888-509-0081. The access code for the rebroadcast is 642170.

CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION

This press release may include certain statements that constitute forward-looking information within the meaning of applicable securities laws ("forward-looking statements"). Such forward-looking information may involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Resolve, or industry results, to be materially different from any future results, performance, achievements or opportunities expressed or implied by such forward-looking information. This forward-looking information includes estimates, forecasts and statements as to management's and others' expectations with respect to, among other things, growth strategies and the outlook for Resolve and the business process outsourcing industry and may use words such as ''may'', ''will'', ''estimate'', ''expect'', ''anticipate'', ''believe'', ''intend'', ''plan'', ''could'', "continue" and other similar terminology. This information reflects current expectations regarding future events and operating performance and speaks only as of the date of this press release. Forward-looking information involves significant risks and uncertainties and should not be read as a guarantee of future performance or results and will not necessarily be an accurate indication of whether or not such results will be achieved. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking information, including, but not limited to, loss of key customer contracts or reduction of services purchased by key customers, foreign exchange rates, increases in costs to Resolve that cannot be passed on to customers, disputes with key customers, competition, the ability of Resolve to manage operations and execute growth strategies, stability of internal and government information systems and technology, technological changes, the ability to maintain software licenses, changes in privacy laws, and risks inherent in bidding on government contracts. These risk factors are discussed in greater detail under ''Risks'' on page 14 of Resolve's MD&A for the period ended December 31, 2006, which is available on SEDAR at www.sedar.com. Although the forward-looking information contained in this press release is based upon what management believes are reasonable assumptions, Resolve cannot assure that actual results will be consistent with this forward-looking information. This forward-looking information is made as of the date of this press release, and Resolve assumes no obligation to update or revise it to reflect new events or circumstances.



RESOLVE BUSINESS OUTSOURCING INCOME FUND
CONDENSED CONSOLIDATED INTERIM BALANCE SHEET

As at March 31 December 31
2007 2006
---------------------------------------------------------------------------
(in thousand of dollars, unaudited) $ $

ASSETS
Current
Cash and cash equivalents 16,712 8,796
Accounts receivable 52,082 65,387
Assets related to settlement 800 1,900
Income taxes recoverable - 386
Inventories 2,788 2,038
Prepaid expenses and other assets 6,137 5,668
Future income taxes 479 479
---------------------------------------------------------------------------
Total current assets 78,998 84,654
Capital assets 23,362 22,820
Future income taxes 17,741 14,529
Intangible assets and deferred charges 218,936 224,736
Goodwill 187,265 187,617
---------------------------------------------------------------------------
Total assets 526,302 534,356
---------------------------------------------------------------------------
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LIABILITIES AND UNITHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities 32,234 28,248
Fair value of derivatives 777 675
Distribution payable 2,714 2,714
Customer deposits 15,107 17,921
Future income taxes 3,875 3,626
Deferred revenue 12,192 10,265
Liabilities related to settlement 800 1,900
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Total current liabilities 67,699 65,349
Long-term debt - non-current 85,168 86,000
Deferred revenue - non-current 16,810 15,278
Future income taxes 75,529 77,227
Other non-current liabilities 633 674
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Total liabilities 245,839 244,528
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Non-controlling interest 85,846 88,911
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Unitholders' equity
Fund units 214,742 214,175
Accumulated distributions (24,110) (18,272)
Accumulated earnings 4,481 4,634
Accumulated other comprehensive income (loss) (496) 380
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Total unitholders' equity 194,617 200,917
---------------------------------------------------------------------------
Total liabilities, non-controlling interest
and unitholders' equity 526,302 534,356
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RESOLVE BUSINESS OUTSOURCING INCOME FUND
CONDENSED CONSOLIDATED INTERIM STATEMENT OF EARNINGS


Three months 15-day period
ended March 31 ended March 31
2007 2006
---------------------------------------------------------------------------
(in thousands of dollars, except unit $ $
and per unit amounts, unaudited)

Revenues 63,799 11,860
Direct costs 46,251 7,636
---------------------------------------------------------------------------
Gross profit 17,548 4,224
Operating expenses 14,041 2,244
Depreciation 1,846 303
Amortization 5,851 949
Interest expense - long-term 1,313 217
Mark-to-market on derivative instruments (364) 1,006
---------------------------------------------------------------------------
Loss before income taxes and
non-controlling interest (5,139) (495)
Recovery of income taxes (4,771) (401)
---------------------------------------------------------------------------
Loss before non-controlling interest (368) (94)
Non-controlling interest (214) (29)
---------------------------------------------------------------------------
Net loss from continuing operations (154) (65)
Net loss from discontinued operations, net
of income taxes and non-controlling interest - (54)
---------------------------------------------------------------------------
Net loss for the period (154) (119)
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Basic and diluted earnings (loss) per unit (0.01) 0.00
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---------------------------------------------------------------------------



RESOLVE BUSINESS OUTSOURCING INCOME FUND
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS

Three months 15-day period
ended March 31 ended March 31
2007 2006
---------------------------------------------------------------------------
(in thousands of dollars, unaudited) $ $

OPERATING ACTIVITIES
Net earnings (loss) from continuing
operations (154) (65)
Items not affecting cash:
Depreciation 1,846 303
Amortization 5,851 949
Amortized financing costs 71 -
Future income taxes (4,585) (418)
Non-controlling interest (214) (51)
Mark-to-market on derivative instruments (364) 1,016
Changes in operating assets and
liabilities:
Accounts receivable 13,304 (3,834)
Inventories (749) (325)
Prepaid expenses and other assets 211 2,240
Accounts payable and accrued liabilities 1,205 2,871
Deferred revenues 3,459 724
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Cash provided by operating activities 19,881 3,410
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INVESTING ACTIVITIES
Acquisitions of businesses - (191,871)
Addition to deferred charges (1,320) -
Purchase of capital assets (2,415) (198)
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Cash (used in) investing activities (3,735) (192,069)
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FINANCING ACTIVITIES
Initial public offering of Fund units, net
of expenses - 207,918
Repayment of acquired Resolve and CSRS debt - (93,870)
Increase in long-term debt - 86,000
Decrease in capital lease obligation (14) -
Distributions paid to unitholders (5,793) -
Distributions paid to non-controlling
interest (2,350) -
Payment of bank financing fees - (1,125)
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Cash (used in) provided by financing
activities (8,157) 198,923
---------------------------------------------------------------------------

Cash (used in) discontinued operations (73) (54)
---------------------------------------------------------------------------

Effect of exchange rate changes - 128
---------------------------------------------------------------------------

Increase in cash and cash equivalents
during the period 7,916 10,338
Cash and cash equivalents, beginning of
period 8,796 -
---------------------------------------------------------------------------
Cash and cash equivalents, end of period 16,712 10,338
---------------------------------------------------------------------------
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Interest paid 1,390 511



RESOLVE BUSINESS OUTSOURCING INCOME FUND
DISTRIBUTABLE CASH


Trailing
Three months 15-day period 12-month
ended ended period ended
March 31, March 31, March 31,
2007 2006 2007
---------------------------------------------------------------------------
$ $ $

Cash provided by operating
activities 19,881 3,410 48,849
Less: Maintenance capital
expenditures (923) (198) (5,535)
---------------------------------------------------------------------------
Cash available for
distribution 18,958 3,212 43,314
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Distributable cash per unit 0.58 0.10 1.32
---------------------------------------------------------------------------
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Distributions declared per unit 0.25 0.00 1.04
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---------------------------------------------------------------------------
Distribution percentage 79%
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RESOLVE BUSINESS OUTSOURCING INCOME FUND
CONDENSED MANAGEMENT'S DISCUSSION AND ANALYSIS


INTRODUCTION

The following is Management's Discussion and Analysis (MD&A) of Resolve Business Outsourcing Income Fund's (the "Fund") results of operations, changes in cash flow and distributable cash(1) for the three months ended March 31, 2007, and of its financial position as at March 31, 2007. The MD&A should be read in conjunction with the audited consolidated financial statements and the MD&A for the period March 17, 2006, to December 31, 2006. The consolidated financial statements are prepared in accordance with Canadian generally accepted accounting principles (GAAP). All financial information provided in this MD&A is also in accordance with Canadian GAAP unless otherwise noted. All dollar amounts referred to are in Canadian dollars unless otherwise noted. All dollar amounts are in thousand of dollars, except per unit amounts.

(1) Distributable cash is a non-GAAP measure. See Non-GAAP Financial Measures section for a definition.

DESCRIPTION OF BUSINESS

Resolve Business Outsourcing Income Fund was established on February 12, 2006. On March 17, 2006, the Fund completed an initial public offering (IPO) of units and through Resolve Business Outsourcing Limited Partnership (the "Partnership") acquired two businesses, Resolve Corporation and CSRS Holdings, Ltd. for cash and a 29.5% interest in the Partnership. The interests of the prior shareholders of Resolve Corporation and CSRS Holdings, Ltd. in the Partnership may be exchanged for units of the Fund pursuant to the terms of the Exchange Agreement.

The Partnership has integrated the business operations of Resolve Corporation and CSRS Holdings, Ltd. The integrated operations are collectively referred to as "Resolve" or the "Business".

Resolve operates in one business segment - business process outsourcing (BPO). The Business provides customized BPO solutions primarily to large businesses and governments in North America. The solutions provided by Resolve increasingly include a combination of the business core competencies in transaction or transaction related processing, customer relationship management and supply chain management.

OVERALL PERFORMANCE OF THE BUSINESS

The first quarter results in 2006 covered a period from the date of the initial public offering of March 17, 2006, to March 31, 2006, or 15 days and therefore are not readily comparable to the first quarter of 2007 ("Q1 2007"). The Q1 2007 results do provide the opportunity to compare the results of operations and distributable cash, on a trailing twelve month period, to the pro forma results presented in the prospectus.

The first quarter historically generates the lowest revenue of all the quarters. Q1 2007 revenue was negatively impacted by purchase accounting for deferred revenue adopted in March 17, 2006, and by the wind down, which started in late 2006, of certain programs with a customer. New business generation has been strong, but the impact will not be realized until the second quarter and beyond.

The strength of the new business generation in the quarter is expected to utilize current customer relationship capacity and therefore expansion plans both offshore and onshore are being advanced.

The PC Financial implementation has proceeded over a short implementation period. Elements of the solution are being tested prior to full implementation. Revenue from this new contract will commence in the second quarter.

The quarter met expectations and continues to provide a strong foundation for future growth in revenue, earnings and distributable cash.

The following is an overview of Resolve's financial position as at March 31, 2007, compared to December 31, 2006. The results of operations and distributable cash for the three month period and for the trailing twelve month period ended March 31, 2007, have been compared to the pro forma 2005 financial information included in the prospectus. Further details, comments and analysis are included under "Results of Operations", "Liquidity" and "Capital Resources".



Financial Position

March 31, December 31,
2007 2006 Change
---------------------------------------------------------------------------
$ $ $

Working capital, excluding deferred
revenue 23,491 29,570 (6,079)
Intangible assets and deferred charges 218,936 224,736 (5,800)
Deferred revenue, current and long-term (29,002) (25,543) (3,459)
Future income tax liability, net (61,184) (65,845) 4,661
Unitholders' equity 194,617 200,917 (6,300)


Working capital, excluding the current portion of deferred revenue decreased by $6,079 since year-end. The major component of the change was a reduction in accounts receivable of $13,305 offset by an increase in cash and cash equivalents of $7,916.

Intangible assets and deferred charges decreased by $5,800. Amortization of intangible assets of $5,851 for the quarter was offset by approximately $963 of deferred start-up cost that primarily related to the PC Financial contract.

Deferred revenue increased by $3,459 from December 31, 2006, from $25,543 to $29,002 million. Deferred revenue is expected to increase to approximately $44,000 by December 31, 2007.

The future income tax liability, net decreased by $4,661 from year-end. The increase is primarily the result of loss carry forwards recognized in the underlying businesses that can be utilized in the future to reduce income taxes payable.

Unitholders' equity has decreased by $6,300 since year-end. The components of the change are an increase of $567 resulting from the conversion of Class B LP units to Fund units, a net loss for the three month period of $153, distributions to Fund unitholders of $5,836 and accumulated other comprehensive income of $876.



Results of Operations

Three months 15-day period
ended ended
March 31, March 31,
2007 2006 Change
---------------------------------------------------------------------------
$ $ $

Revenues 63,799 11,860 51,939
Direct costs (46,251) (7,636) (38,615)
Gross profit 17,548 4,224 13,324
Operating expenses (14,041) (2,244) (11,797)
Operating profit or EBITDA(1) 3,507 1,980 1,527
Loss before income taxes and
non-controlling interest (5,139) (495) (4,644)
Net (loss) earnings for the period (154) (119) (35)




Trailing 12- Pro forma
month period 12-month
ended period ended
March 31, December 31,
2007 2006 Change
---------------------------------------------------------------------------
$ $ $

Revenues 266,693 282,486 (15,793)
Direct costs (189,666) (197,381) 7,715
Gross profit 77,027 85,105 (8,078)
Operating expenses (53,980) (54,705) 725
Operating profit or EBITDA 23,047 30,400 (7,353)
Loss before income taxes and
non-controlling interest (12,990) (2,368) (10,622)
Net (loss) earnings for the period 4,599 1,378 3,221

(1) EBITDA is a non-GAAP measure. See Non-GAAP Financial Measures section
for a definition.


The results for the three month period ended March 31, 2007, cannot be readily compared to the same period last year as the period only included 15 days from the date of the IPO. Therefore, the comments will be primarily focused on the comparison of the results of operation for the trailing twelve month ("T12") period ended March 31, 2007, to the pro forma results of operations for the twelve month period ended December 31, 2005, as presented in the prospectus.

Revenue declined $15,793 on a T12 basis from the pro forma 2005 revenue. The primary normalizing components of the change are $2,552 related to purchase accounting for deferred revenue, $8,671 related to the travel business disposed of in May 2006 and $4,924 related to textbook distribution in Texas. The business distributes text books in Texas each year. In certain years new textbooks are adopted that substantially replace certain textbooks in all the public schools in the state. The revenue generated in the adoption years is substantially greater than the revenue in non-adoption years. The pro forma period included an adoption year and the T12 period did not. The 2007 fiscal year is a planned adoption year for Texas and incremental sales are expected in the second and third quarters under this contract, if the Texas legislative fully funds the adoption in its budget.

Direct costs declined $7,715 in the T12 period from the pro forma period. Excluding direct costs of $7,675 related to the travel business from the pro forma period, the direct costs were the same period over period. The incremental costs of distribution of text books during an adoption year are not material. The gross profit percentage for the T12 period was 29% compared to 30% for the pro forma period. The decline is related to the deferred revenue purchase price adjustment and the lack of adoption year revenue during the T12 period.

Operating expenses decreased $725 in the T12 period from the pro forma period. Incremental public company costs were offset by savings in consulting, travel, premises and other costs.

Operating profit or EBITDA for the T12 period decreased by $7,353 as discussed above.

Loss before income taxes and non-controlling interest decreased by $10,622 for the T12 period from the pro forma period. The difference comprises $7,353 related to the change in EBITDA as discussed above and $3,351 related to the amortization of intangibles. The amortization of intangibles included in the pro forma period was based on preliminary estimates. Subsequent to the closing of the IPO, a formal valuation of the intangible assets acquired was undertaken by an independent third-party valuator. This resulted in differences in the amortization to be recorded on an ongoing basis.

Net income for the T12 period increased $3,221 over the pro forma period. The primary difference relates to the accounting for income taxes between the two periods. The reasons for the change in net income and earnings per unit are the same.




DISTRIBUTABLE CASH


Trailing
Three months 15-day period 12-month
ended ended period ended
March 31, March 31, March 31,
2007 2006 2007
---------------------------------------------------------------------------
$ $ $

Cash provided by operating
activities 19,881 3,410 48,849
Less: Maintenance capital
expenditures (923) (198) (5,535)
---------------------------------------------------------------------------
Cash available for
distribution 18,958 3,212 43,314
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Distributable cash per unit 0.58 0.10 1.32
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Distributions declared per unit 0.25 0.00 1.04
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Distribution percentage 79%
---------------------------------------------------------------------------
---------------------------------------------------------------------------


As discussed in the MD&A for the period ended December 31, 2006, distributable cash generated in any quarter is impacted by working capital changes and the timing of capital expenditures.

Distributable cash of $18,958 was generated during the quarter. A positive change in operating assets and liabilities since year-end contributed $17,430 of which $13,305 was generated from a reduction in accounts receivable. This compares to a $1,676 positive change in operating assets and liabilities for the 15-day period ended March 31, 2006 and an average of $4,523 for the second, third and fourth quarters of 2006. The purchase of maintenance capital expenditures for the quarter was $923. The maintenance capital expenditure budget for 2007 is $7,000.

Distributable cash on a trailing twelve months basis was $43,314 or $1.32 per unit. This compares to distributable cash of $36,205 or $1.11 per unit, as presented in the prospectus.



SUMMARY OF QUARTERLY RESULTS

Consolidated Statement of Earnings


Trailing
12-month
period
ended
March
Q1 Q1 Q2 Q3 Q4 31,
2007 2006(i) 2006 2006 2006 2007
---------------------------------------------------------------------------
$ $ $ $ $

Revenues 63,799 11,860 69,147 68,432 65,315 266,693
Direct costs 46,251 7,636 49,381 47,274 46,760 189,666
---------------------------------------------------------------------------
Gross profit 17,548 4,224 19,766 21,158 18,555 77,027
Operating expenses 14,041 2,244 13,704 12,130 14,105 53,980
---------------------------------------------------------------------------
Operating profit 3,507 1,980 6,062 9,028 4,450 23,047
Depreciation and
amortization 7,697 1,252 7,733 7,735 7,722 30,958
Interest expense 1,313 217 1,162 1,449 1,226 5,079
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Earnings (loss) before
the following: (5,503) 511 (2,833) (156) (4,498) (12,990)
Mark-to-market on
derivatives (364) 1,006 (2,484) 263 1,890 (695)
---------------------------------------------------------------------------
Earnings (loss) before
income taxes (5,139) (495) (349) (419) (6,388) (12,295)
Provision for (recovery
of) income taxes (4,771) (401) (6,039) (3,098) (3,386) (17,294)
---------------------------------------------------------------------------
Earnings (loss) before
non-controlling
interest (368) (94) 5,690 2,679 (3,002) 4,999
Non-controlling interest (214) (29) 1,680 513 (818) 1,161
---------------------------------------------------------------------------
Net earnings (loss) from
continuing operations (154) (65) 4,010 2,166 (2,184) 3,838
Net earnings (loss) from
discontinued operations - (54) 677 84 - 761
---------------------------------------------------------------------------
Net earnings (loss) for
the period (154) (119) 4,687 2,250 (2,184) 4,599
---------------------------------------------------------------------------
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Earnings (loss) per
unit from continuing
operations
Basic (0.01) 0.00 0.17 0.10 (0.10) 0.16
Diluted (0.01) 0.00 0.17 0.08 (0.09) 0.15
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Net earnings (loss) per
unit
Basic (0.01) 0.00 0.20 0.10 (0.10) 0.19
Diluted (0.01) 0.00 0.20 0.08 (0.09) 0.18
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(i) 15-day period (March 17, 2006, to March 31, 2006)



Distributable Cash

Trailing
12-month
period
ended
March
Q1 Q1 Q2 Q3 Q4 31,
2007 2006(i) 2006 2006 2006 2007
---------------------------------------------------------------------------
$ $ $ $ $

Cash provided by
operating activities 19,881 3,410 7,143 17,048 4,777 48,849
Less: Maintenance
capital expenditures (923) (198) (1,034) (947) (2,631) (5,535)
---------------------------------------------------------------------------
Cash available for
distribution 18,958 3,212 6,109 16,101 2,146 43,314
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Distributable cash per
unit 0.58 0.10 0.19 0.49 0.06 1.32
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Distributions declared
per unit 0.25 0.00 0.29 0.25 0.25 1.04
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Distribution percentage 79%
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(i) 15-day period (March 17, 2006, to March 31, 2006)



LIQUIDITY

Summary Statement of Cash Flows


Three months 15-day period
ended March 31 ended March 31
2007 2006
---------------------------------------------------------------------------
$ $

Cash provided by operating activities 19,881 3,410
Distributions paid to unitholders and
non-controlling interest (8,143) -
---------------------------------------------------------------------------
Cash from operations in excess of
distributions paid 11,738 3,410
Addition to deferred charges (1,320) -
Purchase of maintenance capital assets (923) (198)
Purchase of growth capital assets (1,492) -
Decrease in capital lease obligation (14) -
Cash used in investing activities to
acquire the businesses - (191,871)
Cash provided by financial activities
related to the public offering and
refinancing of the businesses - 198,923
Other (73) 74
---------------------------------------------------------------------------
Net cash provided during the period 7,916 10,338
---------------------------------------------------------------------------
---------------------------------------------------------------------------


The Business generated cash from operations in excess of distributions paid to unitholders and to non-controlling interests of $11,738 for the three month period ended March 31, 2007. A portion of the excess was used to acquire maintenance capital expenditures in the amount of $923. Therefore, the Fund was able to meet its expected obligations for the three month period ended March 31, 2007.

Cash was used to acquire growth capital expenditures related to the PC Financial contract implementation and to fund deferred charges related to the implementation.

Cash was also used to decrease a capital lease obligation and to settle liabilities of the discontinued operations.

Net cash provided during the three month period ended March 31, 2007 was $7,916.

For the period from March 17, 2006, to March 31, 2006 the Business generated cash from operations of $3,410. There were no distributions paid during the first 15 days of operations in 2006. Maintenance capital expenditures for the period were $198.

Cash of $198,922 was provided by financing activities during this period directly related to the issuance of units of the Fund to the public and the refinancing of debt related to the acquired businesses. Cash of $191,871 was used in investing activities during the period directly related to the acquisition of the business.

CONTRACTUAL OBLIGATIONS

There have been no material changes in the contractual obligations presented by the Fund as at December 31, 2006 that are outside the ordinary course of business.

FINANCIAL INSTRUMENTS AND OTHER INSTRUMENTS

The Fund uses financial instruments as part of its strategy to manage the risk associated with currency exchange rates and interest rate risks. The Fund does not use financial instruments for trading or speculative purposes. Forward foreign exchange contracts are used primarily to fix the value of estimated US-dollar-denominated revenue generated by operations located in Canada. As at March 31, 2007, the Fund had outstanding contracts to purchase $32,500 over a period from April 2007 to April 2009, at an average rate of 1.1350. An unrealized loss of $311 on these contracts has been recorded in the consolidated statement of earnings. The Fund entered into an interest rate swap to fix the interest rate on $65,000 of its variable rate term debt at 6.49%. The interest rate swap is considered highly effective. At March 31, 2007, the fair value of the interest rate swap agreement is an unrealized loss of $466.

CAPITAL RESOURCES

The Fund has cash on hand at March 31, 2007, of $16,712. The Partnership has an available credit facility of $25,000 that was undrawn at March 31, 2007. Letters of credit outstanding at March 31, 2007, in the amount of $5,350 reduce availability under the credit facility.

The Partnership has a drawn term facility in the amount of $86,000 that matures March 16, 2010. The term facility has a variable interest rate but the Partnership has entered into an interest rate swap agreement that fixes the interest rate on $65,000 of the term debt.

The Fund has budgeted maintenance capital expenditures of $7,000 for the 2007 fiscal year. Maintenance capital expenditures for the three month period ended March 31, 2007, were $923.

In addition, the Fund has budgeted growth capital expenditures of $7,100 and other implementation costs of $2,400 related to the new contract announcements in December 2006. For the three month period ended March 31, 2007, $1,492 and $1,320 of growth capital expenditures and other implementation costs respectively were incurred.

The Fund expects to generate cash from operating activities in excess of distributions at current distribution levels and the planned maintenance capital expenditures. Cash generated in excess of distributions and maintenance capital expenditures will be used to assist in financing growth capital expenditures and implementation costs.

The Fund expects to use its credit facility during the coming year as the timing of cash inflows is not expected to fully match cash outflows for capital expenditures and implementation costs.

CRITICAL ACCOUNTING ESTIMATES

The preparation of consolidated financial statements, in conformity with Canadian generally accepted accounting principles, requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes. These estimates are based on management's assessment of available information. Actual results could differ from these estimates. Management has identified service fee revenue, goodwill and intangible asset valuation, amortization of intangible assets, accounts receivable allowances and accounting for income taxes as critical accounting estimates.

NON-GAAP FINANCIAL MEASURES

EBITDA or earnings before interest, taxes, depreciation and amortization is not a recognized financial measure under Canadian GAAP and does not have a standardized meaning prescribed by GAAP. The Fund's definition of EBITDA may not be comparable to similar measures presented by other funds. The Fund defines EBITDA as earnings or loss before income taxes plus interest expense, amortization, depreciation and unrealized loss on mark-to-market derivative instruments and less unrealized gain on mark-to-market derivative instruments. Management believes EBITDA is a reasonable operating measure as it looks at earnings prior to certain significant non-cash expenses.

Distributable Cash is not a recognized financial measure under Canadian GAAP and does not have a standardized meaning prescribed by GAAP. Canadian open-ended trusts, such as the Fund, use distributable cash and distributable cash per unit as indicators of financial performance. Distributable cash and distributable cash per unit may differ from similar computations reported by other entities and, accordingly, may not be comparable to similar distributable cash and distributable cash per unit reported by such entities. Management believes that distributable cash and distributable cash per unit are useful supplemental measures that may assist investors in assessing financial performance and cash generated by the Fund that is available to unitholders for distribution.

RELATED-PARTY TRANSACTIONS

There are no changes to the nature or description of the related-party transactions described in the annual MD&A. For the three months ended March 31, 2007, rent paid on the Burnaby property was $141, search and registration services purchased was $140 and search and registration revenue was $12. Rent paid for the period on three Ontario properties was $161.

OUTLOOK

The Fund continues to expect to generate distributable cash in 2007 at a level equal to or greater than the annualized distributable cash generated in 2006.

The Fund intends to pursue selective strategic acquisitions that will expand and enhance the existing operations of the Business.

The Fund's mid-term objective is to significantly grow revenue and earnings through a combination of organic growth and selective acquisitions. This will better position the Fund to consider alternatives as the date for implementation of the proposed tax on distributions by income trusts approaches.

CAUTION CONCERNING FORWARD-LOOKING INFORMATION

This press release may include certain statements that constitute forward-looking information within the meaning of applicable securities laws ("forward-looking statements"). Such forward-looking information may involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Resolve, or industry results, to be materially different from any future results, performance, achievements or opportunities expressed or implied by such forward-looking information. This forward-looking information includes estimates, forecasts and statements as to management's and others' expectations with respect to, among other things, growth strategies and the outlook for Resolve and the business process outsourcing industry and may use words such as ''may'', ''will'', ''estimate'', ''expect'', ''anticipate'', ''believe'', ''intend'', ''plan'', ''could'', "continue" and other similar terminology. This information reflects current expectations regarding future events and operating performance and speaks only as of the date of this press release. Forward-looking information involves significant risks and uncertainties and should not be read as a guarantee of future performance or results and will not necessarily be an accurate indication of whether or not such results will be achieved. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking information, including, but not limited to, loss of key customer contracts or reduction of services purchased by key customers, foreign exchange rates, increases in costs to Resolve that cannot be passed on to customers, disputes with key customers, competition, the ability of Resolve to manage operations and execute growth strategies, stability of internal and government information systems and technology, technological changes, the ability to maintain software licenses, changes in privacy laws, and risks inherent in bidding on government contracts. These risk factors are discussed in greater detail under ''Risks'' on page 14 of Resolve's MD&A for the period ended December 31, 2006, which is available on SEDAR at www.sedar.com. Although the forward-looking information contained in this press release is based upon what management believes are reasonable assumptions, Resolve cannot assure that actual results will be consistent with this forward-looking information. This forward-looking information is made as of the date of this press release, and Resolve assumes no obligation to update or revise it to reflect new events or circumstances.

ADDITIONAL INFORMATION

Details of the Fund's authorized and outstanding unit data are as follows:

The Fund may issue an unlimited number of ordinary trust units and an unlimited number of special voting units. Each ordinary unit is transferable and represents an equal undivided beneficial interest in any distribution from the Fund. Except for the right to vote, each special voting unit does not confer any other rights.

As a March 31, 2007, there were 23,182,435 ordinary trust units and 9,402,065 special voting units outstanding.

As at March 31, 2007, the 9,402,065 special voting unitholders also held 9,402,065 Class B LP units of the Partnership. The Class B LP units can be exchanged on a one-for-one basis, subject to the terms of the Exchange Agreement. For each Class B LP unit exchanged, one special voting unit is cancelled. Assuming full conversion of the Class B LP units of the Partnership, the Fund will have 32,584,500 ordinary trust units outstanding and no special voting units. There have been no Class B LP units converted and no new ordinary trust units issued between April 1, 2007, and the date of the MD&A.

Additional information relating to the Fund, including the Fund's most recently filed Annual Information Form, is available on SEDAR at www.sedar.com.




SUPPLEMENTAL FINANCIAL INFORMATION

Distribution History


Month(1) Per Unit Per Unit
2007 2006
---------------------------------------------------------------------------
$ $
January 0.0833 -
February 0.0833 -
March 0.0833 -
April(2) 0.1237
May 0.0833
June 0.0833
July 0.0833
August 0.0833
September 0.0833
October 0.0833
November 0.0833
December 0.0833
---------------------------------------------------------------------------
0.2499 0.7901
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(1) Monthly distributions are made to unitholders of record on the last
business day of each month.
(2) Distribution paid in April 2006 is in respect of the period March 17,
2006, to April 30, 2006.


Tax Allocation of Distributions

2006
---------------------------------------------------------------------------
%
Foreign non-business income 7.6
Interest income 91.4
Return of capital 1.0
---------------------------------------------------------------------------
Total distributions for the period 100.0
---------------------------------------------------------------------------
---------------------------------------------------------------------------


2007 Trading Prices and Volume

Month High Low Volume
---------------------------------------------------------------------------
$ $

January 8.89 8.25 2,376,421
February 9.43 8.60 1,853,685
March 9.14 8.30 1,636,725


2006 Trading Prices and Volume

Month High Low Volume
---------------------------------------------------------------------------
$ $

March (from March 17) 9.75 8.71 4,855,669
April 9.38 8.28 1,716,718
May 9.00 7.71 1,194,709
June 8.29 7.00 2,543,432
July 9.20 8.10 1,785,642
August 8.88 8.40 1,013,245
September 8.97 8.20 2,448,680
October 8.90 8.01 1,495,659
November 7.98 5.85 2,182,267
December 8.50 6.45 2,375,797

Contact Information

  • Resolve Corporation
    Jamie Hyde
    Chief Financial Officer
    (416) 503-1800
    Website: www.resolve.com