GROwiNG FOR wARD
GENESIS
Land Development Corporation
A N N U A L R E P O R T 2 0 1 0
tabLE of CoNtENtS
TABLE OF CONTENTS
CompaNy profILE ................................................................................................................................ 1
oVErVIEw .............................................................................................................................................. 2
prESIDENt’S mESSaGE .......................................................................................................................... 4
ChIEf fINaNCIaL offICEr’S mESSaGE ................................................................................................. 6
ChIEf opEratING offICEr’S mESSaGE ................................................................................................ 8
GENESIS LaND DEVELopmENt Corp. ................................................................................................... 11
thE CorporatIoN ................................................................................................................................ 13
ExECutIVE Summary ........................................................................................................................... 13
kEy fINaNCIaL pErformaNCE INDICatorS ...................................................................................... 14
NoN-Gaap mEaSurES .......................................................................................................................... 17
rESuLtS of opEratIoNS ...................................................................................................................... 18
rESIDENtIaL homE buILDING .............................................................................................................. 21
LIquIDIty aND CapItaL rESourCES ................................................................................................... 30
Summary of quartErLy rESuLtS .................................................................................................... 33
joINt VENturE ...................................................................................................................................... 34
off baLaNCE ShEEt arraNGEmENtS ................................................................................................ 34
rELatED party ...................................................................................................................................... 35
CrItIaL aCCouNtING EStImatES aND poLICIES ................................................................................ 35
INtErNatIoNaL fINaNCIaL rEportING StaNDarDS (“IfrS”) .......................................................... 36
rISkS aND uNCErtaINtIES ................................................................................................................... 40
DISCLoSurE CoNtroLS aND proCEDurES ........................................................................................ 42
INtErNaL CoNtroLS oVEr fINaNCIaL rEportING ........................................................................... 43
outLook ............................................................................................................................................... 45
othEr ..................................................................................................................................................... 45
maNaGEmENt’S rEport ...................................................................................................................... 46
INDEpENDENt auDItorS’ rEport ....................................................................................................... 47
CoNSoLIDatED baLaNCE ShEEt .......................................................................................................... 48
CoNSoLIDatED StatEmENtS of EarNINGS, ComprEhENSIVE INComE aND rEtaINED EarNINGS ...49
CoNSoLIDatED StatEmENtS of CaSh fLowS ................................................................................... 50
NotES to CoNSoLIDatED fINaNCIaL StatEmENtS .......................................................................... 51
fIVE yEar Summary ............................................................................................................................ 74
ON ThE COvER Vibrant green foliage represents the steady, healthy business growth experienced
by Genesis Land Development Corporation over the last two decades and is symbolic of our enduring
commitment to responsibly plan our communities with the least environmental impact to natural
landform.
COmPANy PROFiLE
Genesis Land Development Corp. is a fully integrated community development company with land
development, single-family and multi-family home building and commercial development and
leasing components.
our mission is to be the strongest and most proficient community developer in Canada through
acquisition, re-zoning, development, management and sale of our properties through various
divisions. we are committed to pursuing this strategy while maintaining a strong financial position.
Genesis common shares trade on the toronto Stock Exchange under the symbol GDC.
the management team of Genesis Land Development Corp.
GROwiNG FOR wARD l aNNuaL rEport 2010 1
OvER viEw
CoNSoLIDatED rEVENuE
.
9
7
3
1
.
9
8
9
.
8
3
8
.
6
6
8
140
120
100
80
60
40
20
0
0
.
2
5
7
.
1
5
0
.
6
3
7
.
5
3
6
.
3
1
$ in millions
02
03
04
05
06
07
08
09
10
“The real estate sector worldwide has faced major challenges
since 2008, but as in the past throughout our 20 year history,
Genesis quickly responded to the challenges with timely
adjustments to financing and operating strategies.”
CoNSoLIDatED EarNINGS pEr SharE
2
8
.
0
0
5
.
0
0
2
0
.
8
1
0
.
0
2
0
.
5
1
0
.
5
1
0
.
1
1
0
.
2
0
0
.
0.90
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
$ in millions
02
03
04
05
06
07
08
09
10
2 Genesis Land Development Corporation
LarGE LaND INVENtory
Sustainable 15 year Inventory*
1,038 CommErCIaL/INDuStrIaL acres
20,020 muLtI-famILy units
18,088 SINGLE-famILy units
*approximately 70% of Development Land has approvals.
*this estimate is based on existing and anticipated land use.
CANALS
FOWLER LANDS (LP)
CITY OF AIRDRIE
BAYSIDE
25 min drive
MITFORD CROSSING
(WEST OF COCHRANE)
SAGE HILL CROSSING
SAGE MEADOWS
CrossIron
CrossIron
Mills
Mills
KINWOOD
KINWOOD
SHERWOOD
SHERWOOD
KINCORA
KINCORA
DELACOUR
DELACOUR (LP)
CALGARY
CALGARY
INTERNATIONAL
INTERNATIONAL
AIRPORT
AIRPORT
SADDLESTONE
SADDLESTONE
N.E. LANDS (LP)
TERAVISTA / TERALAKE
TARAVISTA / TARALAKE
CALGARY CITY CENTRE
CALGARY CITY CENTRE
CCALGARY CITY CENTR
CALGARY CITY CENTRE
20 min drive
15 min drive
MOUNTAIN VIEW VILLAGE
MOUNTAIN VIEW VILLAGE
25 min drive
Current Land Holdings
Calgary and metropolitan area
CaLGary aND arEa totaL 4,245 aCrES
EDmoNtoN totaL 122 aCrES
brItISh CoLumbIa totaL 2,916 aCrES
GROwiNG FOR wARD l aNNuaL rEport 2010 3
prESIDENt’S
mESSaGE
Dear fellow Shareholders,
on behalf of the board of directors, senior management and staff of Genesis, I am pleased to report
that 2010 was a year of record results for Genesis. In fact, 2010 was probably the year of greatest
accomplishments in the history of the Company. as a consolidated company we achieved total
revenues of $137.9 million leading to our highest level of earnings ever of $36.4 million or $0.82
per share. Equally important is the fact that Genesis significantly reduced its debt levels since year
end 2009 by $33.9 million. we continued to maintain value of our land base and advanced our
commercial and multi-family operations in addition to our already mature land development and
single-family home building operations.
“Our ability to emerge from difficult economic times
to a strong market position is a credit to the leadership,
resolve and expertise of our management team.”
I am particularly fulfilled by these achievements on the heels of the worst economic times in
recent history. the real estate sector worldwide has faced major challenges since 2008, but as in
the past throughout our 20 year history, Genesis quickly responded to the challenges with timely
adjustments to financing and operating strategies. our ability to emerge from difficult times into a
strong market position is a credit to the leadership, resolve and expertise of the management team.
Looking ahead, we will focus on continuing to strengthen our balance sheet and move towards the
development and retention of cash flow generating properties such as retail, office, industrial and
residential multi-family rental properties. we are currently evaluating developing a portion of our
inventory of approximately 19,000 multi-family units into cash flow generating rental product. the
conditional sale of 27 acres of commercial lands at Sage hill Crossing to rioCan in 2010 is an exciting
step forward towards the future development of that property which has approvals for 1.2 million
square feet of retail, 1 million square feet of office space, over 4,000 multi-family units and a city
transit hub.
4 Genesis Land Development Corporation
our land inventories in Calgary and airdrie are very well positioned and should continue to
yield strong sales levels for years to come in relatively stable market conditions. our strategy of
maintaining a sizable land inventory of short, medium and longer term lands has served Genesis
well through the various real estate cycles by permitting flexibility in business decision-making.
Genesis` significant inventory of valuable lots and immediate and longer term development lands
has mitigated the need to acquire new lands.
although our single-family home building division saw closings come down in the latter half of
2010, we continued to maintain focus on strong margins inspite of a marketplace that experienced
periods of reduced demand. we closely monitor the marketplace to assess what products are best
tailored to the changing needs of our home buyers and are relentlessly assessing our operations to
ensure that our builder group can increase production while maintaining its target margins.
I remain optimistic on the future prospects for the Calgary metropolitan area. the strong
resurgence of the energy sector has once again made the alberta economy among the strongest in
North america. fundamental drivers of new home demand, such as job growth, in-migration and
unemployment levels are positive for our city.
“We remained focused and committed to maintaining the value
of our land base by advancing our commercial and multi-family
operations along with our already mature land development and
single-family home building operations.”
for 2011 and beyond, we remain committed to adding shareholder value through the continued
generation of strong profits, reduced and improved quality of debt, ongoing land approvals,
development of new sustainable revenue streams, and the possibility of implementing strategies
which include share buybacks and dividend payouts. we will continue to maintain a conservative
balance sheet through the uncertain macro-economic environment while emphasizing construction
and development efficiencies to ensure that we preserve our historically strong margins. we expect
to achieve all of these targets through strict adherence to our key performance Indicators.
In conclusion, I would like to express my immense gratitude to all of our staff, trade partners,
financial providers, customers and shareholders who have supported us during these last few years.
I am also very proud of our current board of directors who I believe will play an important role in
assisting Genesis to move forward. while there will likely continue to be challenges and uncertainty
in 2011, I am excited as ever about the prospects for Genesis this year and into the future as we
leverage our strengths and build on the profitable foundation that we established in 2010.
Gobi Singh,
President & Chief Executive Officer,
Genesis Land Development Corporation
GROwiNG FOR wARD l aNNuaL rEport 2010 5
ChIEf fINaNCIaL
offICEr’S mESSaGE
Genesis generated extraordinary results in 2010, establishing a new high-water mark for revenue
and earnings. Net income of $36.4 million and earnings per share of $0.82 are increases of greater
than 435% as compared to 2009; a testament to the significant value nestled within our land base.
fiscal 2010 was also a watershed year for us. after the broad economic challenges of 2008 and
2009, we welcomed 2010 as an opportunity to normalize operations, strengthen our balance sheet
and reposition the Company for growth into 2011 and beyond.
In 2010, we were able to generate record profits in addition to $44,136 of funds from operations
(ffo) (net income, net of non-cash items). we then applied $33,940 of the ffo to the corporation’s
debt financings. Debt repayments of $162,057 exceeded advances of $137,900 and reduced the
Debt to Equity ratio from 0.76:1 at December 31, 2009 to 0.54:1 at December 31, 2010.
we continue to enjoy a strong relationship with our lenders. Even in the depths of the recent
recession, we had access to capital to sustain us through the difficult times. as the Canadian economy
continues to strengthen, we have experienced a reduction in the cost of financing. our average
cost of borrowing decreased from 9.68% in 2009 to 8.21% in 2010. as we continue to repay our
land acquisition loans, we anticipate these financing costs to approach normalized development
loan levels.
“Our continued discipline and a long term focus throughout the
recent economic downturn have demonstrated our capacity to
rise above challenges.”
6 Genesis Land Development Corporation
the closing stock price of $3.35 at December 31, 2010 is a $1.37 increase as compared to the
December 31, 2009 closing price of $1.98, which is a 69% return to investors. with an estimated
after-tax NaV of $355,508 or $8.01 per share (see page 15 of the mD&a enclosed), at December
31, 2010 we are trading at a significant 58% discount to NaV. while land development companies
typically trade at a discount to NaV, we are working towards closing the gap by repaying high
coupon debt, and secondly by considering a share buy-back or dividend payments.
moving into 2011, we intend to continue to bring on additional phases and lots in our existing
communities. New mortgage qualification rules, potential increases in interest rates, and significant
proposed increases to development levies within the City of Calgary may put downward pressures
on the margins of the land development division as well as the home building division. however,
we have the proven ability to adjust the range of lots and homes we produce to accommodate
shifting demands and cost sensitivities in the market.
“We have the proven ability to adjust the types of lots and
homes we produce to accommodate shifting demands
and cost sensitivities in the market.”
Increasing price sensitivity of the single family housing market may also increase demand for multi-
family sites and potentially make rental properties economical. we have the opportunity to either
develop these sites ourselves or, in certain circumstances, sell them outright.
the pending deal with rioCan is also an important milestone for us. a firm sale to rioCan, with an
announced shadow anchor in place, would allow us to begin to unlock the potential of the Sage hill
Crossing site. In addition to the large land sale, we plan to pursue recurring revenue opportunities.
I look forward to 2011 and beyond, and continuing to be part of a management team who are
focused on delivering value to our shareholders. my appreciation goes to our board of directors,
staff, financial and trade partners, customers and our shareholders who all help contribute to our
success.
the annual meeting will be held on june 28, 2011 at 10 am at the Sandman Inn at 25 hopewell
Drive NE.
Simon fletcher
Chief Financial Officer,
Genesis Land Development Corporation
GROwiNG FOR wARD l aNNuaL rEport 2010 7
ChIEf opEratING
offICEr’S mESSaGE
2010 was an interesting and challenging year in the area of development and building operations.
the year commenced with positive signs of the market emerging from the trials that arose from the
failures and uncertainties in the financial markets. the market correction resulted in the easing of
labour shortages and price adjustments in the inputs required for our development and construction
operations. the right pricing and stabilization of input costs was a necessary and welcome outcome
of the economic down turn. while market conditions created challenges as well as opportunity,
our greatest frustration came in the form of an unseasonably wet 2010 construction season that
resulted in delays in our construction and development program. Despite these delays, we were
able to complete the majority of our 2010 construction program. this results in us entering 2011
with a healthy supply of serviced land inventory.
we also continue our commitment to supporting the social and recreational need of the communities
where we are involved. this is through our sponsorship of major recreation facilities such as the
Genesis Centre of Community wellness in North East Calgary and Genesis place recreation facility
in airdrie.
“We have made a long term investment in Airdrie with a land base
that will support ongoing development for many years to come.”
Land
During 2011, the land division completed the servicing and development work in existing and new
subdivision areas. as the initial phases of the kincora and Sherwood subdivisions in Symons Valley
approach full build out, servicing and development has been completed on the first two phases of
the Sage meadows, providing continued lot inventory in the Symons Valley area. this lot production
will be supplemented in 2011 by further lot production arising through the kinwood joint Venture,
which is carrying out further development in the communities of Sherwood and kincora.
8 Genesis Land Development Corporation
our long term involvement in North East Calgary continues as the taralake development wraps up
and the servicing of Saddlestone phases 1&2 is completed. Saddlestone incorporates a pedestrian
friendly street layout and an innovative storm water management system. this subdivision will
provide ongoing land inventory over a five to six year period.
airdrie is a young and vibrant community where we have a significant land inventory with two
active communities – the Canals and bayside. In 2010, servicing of bayside phase 7 was completed
and work continued on the completion of pathways, landscaping and construction of a pedestrian
bridge, which are enhancing the appearance and connectivity within these unique and growing
communities. we have made a long term investment in airdrie with a land base that will support
ongoing development for many years to come.
In addition to the areas outlined above, we continue to advance planning and approvals for
additional land holdings in the provinces of alberta and british Columbia.
home Building
Genesis builders Group (GbG) continues to take an active role in the construction of single family
and row house product in Genesis developments. In 2010, GbG made its first foray into a non
Genesis subdivision with the acquisition of 68 lots in the Evans ridge Community in Symons Valley.
GbG completed the sale of 101 homes in 2010 and carried forward 40 homes into 2011, which
were either under design or construction. the year 2011 looks very promising for GbG, with show
homes opening in Spring 2011 in the communities of Saddlestone, Sage meadows, Evans ridge and
bayside.
multi-Family
Generations, our multi-family division, ended 2010 having successfully completed the construction
of the 125 unit breeze development in the City of airdrie. Generations enters 2011 with a mandate
to add value to and advance the development of the considerable multi-family inventory contained
in the Genesis Land Development portfolio. In addition to the activities of Generations, we are
negotiating the sale of select multi-family sites to third party developers.
Commercial
2010 was an interesting and exciting year for the commercial land division. Commercial land
sales occurred in the communities of taralake and Saddlestone in North East Calgary. Increased
interest and enthusiasm was evident in the Sage hill Commercial development in North Calgary
as demonstrated by a conditional sale of a portion of that site to a large commercial developer.
the 2011 outlook for the commercial division appears very positive; we have a well positioned
commercial land inventory at a time of renewed market interest in commercial projects.
I look forward to 2011 with anticipation. In spite of the recent economic adversity, the progress
we have achieved over the many years has enabled us to emerge more focused and determined
than ever. I thank our board of directors, management team, financial providers, trade partners,
customers and shareholders who support us in being able to carry out our mission to be the strongest
and most proficient community developer in Canada.
jeff blair
Chief Operating Officer,
Genesis Land Development Corporation
GROwiNG FOR wARD l aNNuaL rEport 2010 9
10 Genesis Land Development Corporation
GENESiS LAND DEvELOPmENT CORP.
mANAGEmENT’S DiSCUSSiON AND ANALySiS OF FiNANCiAL CONDiTiON
AND RESULTS OF OPERATiONS
for the three-month period and year ended December 31, 2010
(all tabular and table footnotes dollar amounts are in thousands except per share amounts
and as noted in %)
DatED marCh 3, 2011
the following discussion and analysis of financial condition and results of operations of Genesis
Land Development Corp. (“Genesis” or the “Corporation”) should be read in conjunction with the
audited consolidated financial statements and the notes thereto for the years ended December
31, 2010 and 2009. these financial statements have been reviewed by the Corporation’s audit
Committee, consisting of three independent external directors and adopted by the board of
Directors. additional information, including the Corporation’s annual Information form, is available
on SEDar at www.sedar.com.
GROwiNG FOR wARD l aNNuaL rEport 2010 11
GENESiS LAND DEvELOPmENT CORP.
forwarD-LookING StatEmENtS
this mD&a contains certain statements which constitute forward-looking statements or information
(“forward-looking statements”) within the meaning of applicable securities legislation concerning
the business, operations and financial performance and condition of Genesis. forward-looking
statements include, but are not limited to, statements with respect to the estimated pre-tax net asset
value of the Company, the estimated after tax net asset value of the Company and estimated corporate
tax rate and the number of dwelling sites that Genesis will actually develop and sell. Generally,
these forward-looking statements can be identified by the use of forward-looking terminology such
as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”,
“forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such
words and phrases or state that certain actions, events or results “may”, “could”, “would”, “might”
or “will be taken”, “occur” or “be achieved”. although Genesis believes that the anticipated future
results, performance or achievements expressed or implied by the forward-looking statements are
based upon reasonable assumptions and expectations, the reader should not place undue reliance
on forward-looking statements because they involve assumptions, known and unknown risks,
uncertainties and other factors which may cause the actual results, performance or achievements of
Genesis to differ materially from anticipated future results, performance or achievement expressed
or implied by such forward-looking statements. accordingly, Genesis cannot give any assurance that
its expectations will in fact occur and cautions that actual results may differ materially from those
in the forward-looking statements. factors that could cause actual results to differ materially from
those set forth in the forward-looking statements include, but are not limited to, general economic
conditions; local real estate conditions, including the development of properties in close proximity to
Genesis’ properties; timely leasing of newly-developed properties and re-leasing of occupied square
footage upon expiration; dependence on tenants’ financial condition; the uncertainties of real
estate development and acquisition activity; the ability to effectively integrate acquisitions; interest
rates; availability of equity and debt financing; the impact of newly-adopted accounting principles
on Genesis’ accounting policies and on period-to-period comparisons of financial results; economic
conditions in western Canada, not realizing on the anticipated benefits from the transaction or not
realizing on such anticipated benefits within the expected time frame and other risks and factors
described from time to time in the documents filed by Genesis with the securities regulators in Canada
available at www.sedar.com, including this mD&a under the heading “risks and uncertainties” and
the annual Information form under the heading “risk factors”. furthermore, the forward-looking
statements contained in this mD&a are made as of the date of this mD&a and, except as required
by applicable law, Genesis does not undertake any obligation to publicly update or to revise any of
the forward-looking statements, whether as a result of new information, future events or otherwise.
Caution should be exercised in the evaluation and use of the appraisal results. the appraisal is
an estimate of market value at specific dates and not a precise measure of value, being based on
subjective comparison of related activity taking place in the real estate market. the appraisal is based
on various assumptions of future expectations and while the appraiser’s assumptions are considered
to be reasonable at the current time, some of the assumptions may not materialize or may differ
materially from actual experience in the future.
this mD&a refers to certain financial measurements that do not have any standardized meaning
within Canadian Generally accepted accounting principles (“Gaap”) and therefore may not be
comparable to similar measures provided by other companies. these measures are provided to assist
investors in determining the Corporation’s ability to generate cash from various operations. the
funds from operations (“ffo”) provide a longer term perspective of the expected cash flows than
Gaap measures as it takes out the short term cash flow volatility from timing differences in revenue
recognition and cash receipts.
12 Genesis Land Development Corporation
ThE CORPORATiON
Genesis is a Calgary-based real estate development corporation focusing primarily on the
development and sale of residential, commercial and light industrial properties. the Corporation’s
vertically integrated operations include:
•
•
•
the acquisition of raw land held for future development, including the planning, servicing and
marketing of urban communities and resort destinations in western Canada;
the construction and sale of single- and multi-family homes through Genesis Builders Group
(“GbG”), a wholly-owned subsidiary of the Corporation; and
the development of commercial, industrial and office properties.
the Corporation owns development lands primarily in and around the City of Calgary, the City of
Edmonton, the City of airdrie and the town of Cochrane in alberta, and also has land holdings
within the City of prince George as well as the kamloops and radium areas in the province of british
Columbia.
the Corporation is listed for trading on the toronto Stock Exchange (the “Exchange” or “tSx”)
under the symbol “GDC”.
EXECUTivE SUmmAR y
the year ended December 31, 2010 has been the most profitable year in Genesis’ history with a net
profit of $0.82 per share compared to $0.15 per share for the year ended December 31, 2009.
the record earnings were a result of the sale of residential development land parcels in the city of
Calgary, alberta for a combined total of $42,512. the Corporation also sold 184 lots for $35,569 and
150 single and multi-family units for $58,569. total revenue for the year ended December 31, 2010
was $137,900.
a key focus of the Corporation has been to reduce the debt levels. the Corporation reduced its debt
by $33,890 during the year ended December 31, 2010. this included loan repayments of $162,057
and additional financing of $128,167.
the land portfolio of the Corporation was independently appraised as of December 31, 2010 by an
independent valuation and advisory services firm, Cushman & wakefield Ltd. (“Cushman”). based
on the valuation, the Corporation estimates its after-tax net asset value (“NaV”) at December 31,
2010 to be $8.01 per outstanding share as compared to $8.25 per outstanding share as at December
31, 2009.
as of December 31, 2010 Genesis had 65 employees.
GROwiNG FOR wARD l aNNuaL rEport 2010 13
KEy FiNANCiAL PERFORmANCE iNDiCATORS
the key financial performance Indicators that management of Genesis uses to measure performance
of the Corporation are as follows:
1. funds from operations, and funds from operations per share, Earnings per Share and price
Earnings ratio are earnings measures.
2. weighted average Cost of Debt and Debt to Equity ratio are leverage measures.
3. Net asset Value per share is a measure of asset value.
4. return on Equity is a measure of return on shareholders’ capital at risk.
5. return on assets is a measure of return on asset value.
Some of the key performance Indicators calculated for the three-month period and year ended
December 31, 2010 are as follows:
Funds From Operations
Funds From Operations Per Share
Earnings Per Share
Price Earnings Ratio
Weighted Average Cost of Debt
Debt to Equity Ratio
Net Asset Value Per Share
Return on Equity
Return on Assets
Three Months Ended December 31,
Year Ended December 31,
2010
2009
2010
2009
14,067
0.32
0.24
1,582
0.04
(0.02)
7.0%
3.0%
(0.6%)
(0.2%)
44,136
0.99
0.82
4.09
8.2%
0.54
8.01
23.9%
10.3%
8,451
0.19
0.15
13.20
9.7%
0.76
8.25
5.2%
2.0%
the price earnings ratio is based on closing stock price as of December 31, 2010 of $3.35 per share
(December 31, 2009 – $1.98 per share)
the decrease in NaV is mainly attributable to a decrease in real estate held for development and
sale resulting from sales of residential lots and development land parcels, coupled with payments of
interest on financings, taxes and other general and administrative expenses during the year ended
December 31, 2010, while partially offset by an increase in the valuation of the remaining lands.
the estimated NaV was calculated using the Cushman total pre-tax Land Value plus additional
balance sheet assets less balance sheet liabilities and a 28% corporate tax rate as at December 31,
2010. the book value of all remaining assets and liabilities as set forth in the audited consolidated
financial statements of the Corporation for the year ended December 31, 2010 has been added to
the total pre-tax Land Value to calculate the pre-tax “Net” asset Value. Estimated taxes have been
deducted from the pre-tax Net asset Value as if all properties were sold at their December 31, 2010
market values to determine NaV.
14 Genesis Land Development Corporation
NEt aSSEt VaLuE CaLCuLatIoN
($’s)
Appraised values (see note 1 and 2 below)
Serviced Single-Family Lot Inventory
Serviced Multi-Family Sites
Fully Approved Commercial/Industrial Sites – Calgary, Airdrie & Edmonton
Fully Approved Developable Lands – Calgary & Airdrie
Other Raw and Partially Approved Links
Total Pre-Tax Land Value
Other Balance Sheet Assets (see note 3 below)
Balance Sheet Liabilities (see note 4 below)
Add Amount Due From Non-Controlling Interest (“NCI”)
Pre-Tax NAV
Estimated Tax
After Tax NAV
Total Shares Outstanding as at December 31, 2010
After-Tax NAV Per Share Outstanding
2010
84,950
47,133
80,385
167,032
95,245
474 ,745
54,302
(124,776)
23,436
427,707
(72,199)
355,508
44,379
8.01
aSSumptIoNS:
1. appraised values represent 100% Genesis owned lands. Limited partnership lands owned by
other limited partnership investors (and the corresponding NCI liability) are excluded from the
calculation.
2. Cushman’s appraised values of lands represents market value based on comparative figures of
similar market transactions, except for single-family lots currently under development, which
are valued as if serviced and subdivided with adjustment for estimated future costs to complete.
Lot inventory has been valued on a per lot basis, multi-family sites have been valued on a per
door basis and all other lands were valued on a per acre basis.
GROwiNG FOR wARD l aNNuaL rEport 2010 15
3. other balance sheet assets and liabilities in the NaV Calculation includes the following:
($’s)
Assets
Housing Projects Under Development Excluding Land Value
Accounts Receivable
Other Operations Assets
Cash
Total
Liabilities
Financings
Customer Deposits
Accounts Payable and Accrued Liabilities
Income Taxes Payable
Future Income Taxes
Land Development Service Costs
Total
2010
8,470
27,021
16,356
2,455
54,302
81,320
8,388
13,024
8,310
3,387
10,347
124,776
4. Genesis has used a 2010 Corporate tax rate of 28% to calculate taxes in determining its NaV.
16 Genesis Land Development Corporation
NON-GAAP mEASURES
this mD&a refers to certain financial measurements that do not have any standardized meaning
within Canadian Generally accepted accounting principles (“Gaap”) and therefore may not be
comparable to similar measures provided by other companies. these measures are provided to assist
investors in determining the Corporation’s ability to generate cash from various operations. the
funds from operations (“ffo”) provide a longer term perspective of the expected cash flows than
Gaap measures as it takes out the short term cash flow volatility from timing differences in revenue
recognition and cash receipts.
the specific measures being referred to are: i) gross margin, calculated as revenues less cost of sales;
and ii) funds from operations calculated as follows:
Three Months Ended December 31,
Year Ended December 31,
($’s)
2010
2009
Change
%
2010
2009
Change %
Cash Provided (Used) by
Operating Activities (GAAP)
Changes in Non-Cash
Working Capital
(16,771)
282
(17,053)
(6,047%) 36,541
21,881
14,660
67%
30,838
(1,300)
32,138
2,472%
7,595
(13,430)
21,025 157%
Funds From Operations
14,067
(1,018)
15,085
1,482% 44,136
8,451
35,685 422%
the Corporation saw a strong increase in the ffo for 2010 compared to 2009. the increase has
mainly been driven by sales of development land parcels and lots in the Corporation’s recently
developed phases, off-set by a decline in sales of single-family and multi-family homes.
GROwiNG FOR wARD l aNNuaL rEport 2010 17
RESULTS OF OPERATiONS
Three Months Ended December 31,
Year Ended December 31,
($’s)
2010
2009 Change %
2010
2009
Change %
Net Earnings After Tax and
Non-Controlling Interest
10,624
(714)
11,338 1,588%
36,404
6,756
29,648 439%
Basic Net Earnings Per Share
0.24
(0.02)
0.26 1,300%
0.82
0.15
0.67 447%
rEVENuE, CoSt of SaLES aND GroSS marGIN
the revenue mix for the years ended December 31, 2010 and 2009 is as follows:
rEVENuE 2010
rEVENuE 2009
42% residential homes
1% other
26% residential Lots
31% Development Land
72% residential homes
1% other
26% residential Lots
18 Genesis Land Development Corporation
rESIDENtIaL LotS
rEVENuE, CoSt of SaLES aND GroSS marGIN – rESIDENtIaL LotS
REVENUES
COST OF SALES
GROSS MARGIN
60,000
50,000
40,000
30,000
20,000
10,000
0
$ in thousands
07
08
09
10
GROwiNG FOR wARD l aNNuaL rEport 2010 19
Three Months Ended December 31,
Year Ended December 31,
($’s)
2010
2009
Change
%
2010
2009
Change %
Residential Lot Revenue
24,955
3,974 20,981
528%
35,569
23,138
12,431
54%
Cost of Sales
(10,251)
(4,034)
(6,217)
154%
(14,001)
(12,729)
(1,272)
10%
Gross Margin
Gross Margin %
14,704
(60) 14,764 24,607%
21,568
10,409
11,159 107%
59%
(2%)
61%
45%
Number of Lots Sold
128
23
105
457%
184
124
60
48%
Average Revenue Per Lot
195
173
22
13%
193
187
6
3%
Average Cost of Sales Per Lot
80
175
(95)
(54%)
76
103
(27)
(26%)
revenues from residential lots for the year ended December 31, 2010 were higher than for the
year ended December 31, 2009 due to higher number of lots sold in the current year and higher lot
pricing due to improving economic conditions.
the negative gross margin for the three months ended December 31, 2009 is due to a one-time
true-up of the cost to complete, booked in the three-month period ended December 31, 2009 in
respect of the entire year 2009.
while cost of sales increased primarily due to higher sales volume driven by sales in the community
of Saddlestone, the average cost per lot sold decreased for 2010, compared to last year mainly due
to a comparatively lower cost base of the non-amenity lots sold this year as compared to amenity
lots sold in Calgary’s northeast community of taralake in 2009. this contributed to the increase in
gross margins in 2010 compared to last year.
DEVELopmENt LaND
Three Months Ended December 31,
Year Ended December 31,
($’s)
2010
2009 Change
%
2010
2009
Change
%
Development Land Revenue
2,800 —
2,800
Cost of Sales
(1,060) —
(1,060)
100%
100%
42,512
(14,860)
—
—
42,512
(14,860)
100%
100%
Gross Margin
Gross Margin %
1,740 —
1,740
100%
27,652
—
27,652
100%
62% —
65%
for the year ended December 31, 2010, the sale of development land included two residential
development land parcels in the city of Calgary, alberta for $39,062, a land for fire hall for $2,800,
as well as a commercial land parcel (through one of its limited partnerships) in the city of airdrie,
alberta for $650.
20 Genesis Land Development Corporation
RESiDENTiAL hOmE BUiLDiNG
SINGLE famILy homES
rEVENuE, CoSt of SaLES aND GroSS marGIN – SINGLE famILy homES
REVENUES
COST OF SALES
GROSS MARGIN
60,000
50,000
40,000
30,000
20,000
10,000
0
$ in thousands
07
08
09
10
GROwiNG FOR wARD l aNNuaL rEport 2010 21
Three Months Ended December 31,
Year Ended December 31,
($’s)
2010
2009
Change
%
2010
2009
Change %
Single-Family Revenue
6,897
10,089
(3,192)
(32%)
46,297
45,025
1,272
Cost of Sales
(4,803)
(5,823)
1,020
(18%)
(31,561)
(30,778)
(783)
3%
3%
Gross Margin
Gross Margin %
2,094
4,266
(2,172)
(51%)
14,736
14,247
489
3%
30%
42%
32%
32%
Number of Homes Sold
15
Average Revenue Per Home
460
Average Cost of Sales Per Home
320
24
420
243
(9)
40
77
(38%)
10%
32%
101
458
312
118
382
261
(17)
(14%)
76 20%
51 20%
the average selling price per home has increased over last year as a result of the sales mix favoring
the Communities of kincora and Sherwood, which are typically mid-range homes. the margins
however did not increase proportionately due to pressure on selling prices. management believes
the housing market has stabilized in Calgary and airdrie for the near term, which should help
maintain margins at current levels. the drop in new homes sales in 2010 compared to 2009 was due
to wet weather conditions which delayed the availability of lots to commence construction work.
home sales recorded for the three months and year ended December 31, 2010 in Calgary and airdrie
are as follows:
Three Months Ended December 31, 2010
Year Ended December 31, 2010
# of Single-Family Average Amount
Per Home ($’s)
Homes Sold
# of Single-Family Average Amount
Per Home ($’s)
Homes Sold
Community
2010
2009
2010
2009
2010
2009
2010
2009
CALGARY
Kincora
Sherwood
Taralake
AIRDRIE
Bayside
Canals
TOTAL
—
6
—
9
—
15
7
3
8
4
2
—
617
—
355
—
416
546
461
309
308
33
25
3
40
—
8
7
63
13
27
441
590
519
386
—
413
541
412
314
292
24
460
420
101
118
458
382
22 Genesis Land Development Corporation
Sales for the last four quarters were as follows:
Quarter Ended
December 31
September 30
June 30
March 31
Total
muLtI-famILy
# of Homes Closed/Sold
2010
2009
15
29
39
18
101
24
34
34
25
118
Three Months Ended December 31,
Year Ended December 31,
($’s)
2010
2009
Change
%
2010
2009
Change
%
Multi-Family Revenue
812
3,943
(3,131)
Cost of Sales
(762)
(3,874)
3,112
(79%)
(80%)
12,272
17,687
(5,415)
(11,703)
(17,767)
6,064
(31%)
(34%)
Gross Margin
Gross Margin %
50
6%
Number of Homes Sold
Average Revenue Per Home
Average Cost of Sales Per Home
4
203
191
69
2%
16
246
242
(19)
(28%)
(12)
(43)
(51)
(75%)
(17%)
(21%)
569
5%
49
250
239
(80)
0%
72
246
247
649
811%
(23)
(32%)
4
(8)
2%
(3%)
the Corporation currently has only one active multi-family project, the breeze, a 125-unit
condominium project in airdrie, which is a joint venture with Genesis Limited partnership #6 (“Lp6”).
During the year ended December 31, 2010 a total of 49 units have closed (2009 - 72). Subsequently,
no additional unit sales have closed for the project. the project was constructed at peak construction
costs in 2007 and 2008, but has been selling in a depressed multi-family housing segment in 2009 and
2010. the margins are low because the carrying value of the project has been written down to an
estimate of net realizable value. the project financing was repaid from unit sales in September 2010,
any additional units sold will be split with Lp 6 approximately 3:1 in favor of Lp6.
the Corporation currently has an additional nine multi-family projects which have undergone
planning and approvals but have not commenced construction. management is currently evaluating
the opportunities to develop or divest itself of certain of these project sites.
GROwiNG FOR wARD l aNNuaL rEport 2010 23
othEr rEVENuE
Three Months Ended December 31,
Year Ended December 31,
($’s)
2010
2009
Change
%
2010
2009
Change
%
Interest and Other Income
145
211
(66)
(31%)
1,250
711
539
76%
Increase in interest and other income for the year ended December 31, 2010 compared to last year
was driven primarily by interest income on outstanding mortgage loan receivables and customer
deposit forfeitures on purchases of real estate.
GENEraL aND aDmINIStratIVE ExpENSE
Three Months Ended December 31,
Year Ended December 31,
($’s)
2010
2009
Change
%
2010
2009
Change %
General and Administrative
Expense – Gross
3,223
2,603
Limited Partnership Allocations
(264)
369
620
(633)
24%
12,263
10,946
1,317
12%
(172%)
(1,513)
(711)
(802)
113%
General and Administrative
Expense – Net
2,959
2,972
(13)
(0%)
10,750
10,235
515
5%
Increase in general and administrative expense, net of the limited partnership allocations, for the
year ended December 31, 2010 compared to last year was mainly driven by higher fees incurred
for professional services and by higher salaries and benefits driven by an increase in the number
of employees reflecting management’s efforts to strengthen the Corporation’s internal controls
environment. the positive allocation for the three months ended December 31, 2009 is due to
reversals related to the VIE.
24 Genesis Land Development Corporation
wrItE-DowN of rEaL EStatE hELD for DEVELopmENt, SaLE aND othEr
Three Months Ended December 31,
Year Ended December 31,
($’s)
2010
2009 Change %
2010
2009 Change %
Write-down (Recovery) of Real Estate
Held for Development and Sale
and Other
(3,860)
3,489
(7,349)
(211%)
(1,284)
7,643
(8,927)
(117%)
the improvement in economic conditions during 2010 resulted in an increase in the appraised values
of properties. as at December 31, 2010, the value of certain previously written down properties
recovered compared to the last valuation and write-downs amounting to $4,855 were reversed.
the reversal combined with write-down of $3,571 booked during the year resulted in net recovery
of $1,284. the reversals were the result of independent appraisal of all the properties held by the
Corporation as at December 31, 2010.
INtErESt ExpENSE
Three Months Ended December 31,
Year Ended December 31,
($’s)
2010
2009
Change
%
2010
2009
Change %
Interest Capitalized
Interest Expensed
1,320
2,126
(806)
(38%)
59
26
33
127%
7,172
804
7,035
1,470
137
2%
(666)
(45%)
Total Interest Incurred
1,379
2,152
(773)
(36%)
7,976
8,505
(529)
(6%)
Interest expense relates to single-family home building operations and certain operating loans
secured by land.
the decrease in interest expense for the year ended December 31, 2010 compared to last year was
mainly due to lower average outstanding loan balances relating to working capital (non-project)
financings which in turn is driven by management’s continuing efforts to reduce the Corporation’s
non-project debt levels. this trend is expected to continue as management continues to target non-
project loans for repayment.
INComE tax ExpENSE
Three Months Ended December 31,
Year Ended December 31,
($’s)
2010
2009
Change
%
2010
2009
Change
%
Income Tax Expense
4,160
31
4,129
13,319%
14,166
3,579
10,587
296%
Income tax expense increased for the year ended December 31, 2010 compared to year 2009 primarily
due to higher taxable earnings driven by residential development and commercial land parcel sales
recognized during 2010.
GROwiNG FOR wARD l aNNuaL rEport 2010 25
fINaNCIaL poSItIoN
aSSEtS
As of December 31,
($’s)
2010
%
2009
%
Real Estate Held for Development and Sale
Amounts Receivable
Cash and Cash Equivalents
Future Income Taxes
Other Operating Assets
309,034
27,021
2,455
—
16,356
87%
8%
1%
—
4%
302,598
15,384
4,578
2,213
17,568
88%
4%
1%
1%
6%
354,866
100%
342,341
100%
rEaL EStatE hELD for DEVELopmENt aND SaLE
As of December 31,
($’s)
2010
2009
Change
Real Estate Held for Development and Sale
309,034
302,598
6,436
%
2%
During the year ended December 31, 2010, carrying value of real estate held for development and
sale increased primarily as a result of on-going residential land development and home construction
expenditures relating to the first two phases in the Calgary communities of Sage meadows and
Saddlestone where Genesis substantially completed servicing in 2010, while offset by sales of
development land parcels and housing inventory, reflecting the real estate market’s stabilization
in 2010. the increase is also attributable to partial reversals of previous write-downs amounting to
$4,855 as a result of independent appraisal of the Corporation’s land portfolio.
real estate held for development and sale changed during the year ended December 31, 2010 as follows:
($’s)
December 31, 2009
Acquisitions & Transfers
Development
Sold
Recovery (Write-down)
Land
Under
Land Held
for Future
Development Development
Housing
Projects
Intersegment
Elimination
Total
128,304
24,649
29,665
(20,654)
(1,415)
156,557
(23,351)
2,770
—
3,510
17,737
18,229
26,057
(52,684)
(340)
—
302,598
(19,527)
19,527
—
—
—
78,019
(73,338)
1,755
December 31, 2010
160,549
139,486
8,999
—
309,034
26 Genesis Land Development Corporation
the Corporation’s land holding mix was as follows:
LaND hoLDING mIx
45% Land held for future Development
52% Land under Development
3% housing projects
the Corporation had 631 single-family lots in inventory as at December 31, 2010. the lot inventory
by community was as follows:
totaL NumbEr of SINGLE-famILy LotS IN INVENtory by CommuNIty
31% Sage meadows 200 Lots
4% Canals 24 Lots
50% bayside 314 Lots
5% other 28 Lots
10% Saddlestone 65 Lots
In airdrie, Genesis is completing servicing of 150, primarily, entry-level lots in phase 7 of its bayside
Community. management believes that price point continues to be a major influence over new-home
purchase decisions, particularly for first-time buyers, so these lots will be priced in the $100 range.
the Corporation has contracts for the sale of 75 lots in Sage meadows for approximately $13,971.
the sales under these contracts are expected to be recognized in 2011.
GROwiNG FOR wARD l aNNuaL rEport 2010 27
amouNtS rECEIVabLE
As of December 31,
($’s)
Amounts Receivable
Allowance for Doubtful Accounts
2010
2009
Change
%
27,021
—
28,275
(12,891)
(1,254)
12,891
(4%)
(100%)
27,021
15,384
11,637
76%
amounts receivable, net of allowance for doubtful accounts, increased at December 31, 2010
compared to December 31, 2009 mainly due to increase in lot sales achieved for the Saddlestone
community making up 60% of the receivable balance, Vtb mortgage issued for the sale of a land
parcel and partially offset by decrease in miscellaneous receivables. the allowance for doubtful
receivables amounting to $12,891 as of December 31, 2009 decreased to $Nil balance in 2010 mainly
due to reclaiming lots back into the inventory relating to doubtful receivables of insolvent customers.
Credit exposure associated with land division lot receivables is mitigated as the Corporation retains
title to the lot until payment is received. In the event that a customer is unable to pay the balance of
the purchase price owing, the Corporation would retain the collected non-refundable deposit and
the developed lot. Credit risk associated with accounts receivable for single- and multi-family homes
is mitigated as payment is received upon title transfer of homes.
LIabILItIES, NoN-CoNtroLLING INtErESt & SharEhoLDErS’ EquIty
As of December 31,
($’s)
Financings
Customer Deposits
Accounts Payable and Accrued Liabilities
Income Taxes Payable
Future Income Taxes
Land Development Service Costs
Non-Controlling Interest
Shareholders’ Equity
2010
%
2009
%
81,320
8,388
13,024
8,310
3,387
10,347
58,920
171,170
23%
2%
4%
2%
1%
3%
17%
48%
115,210
4,985
8,350
11,139
—
8,301
61,084
133,272
34%
1%
2%
3%
—
2%
18%
40%
354,866
100%
342,341
100%
financings from lending institutions, excluding deferred financing fees, at December 31, 2010
totaled $82,963 of which $45,006 or 54% relates to short-term project financing, repayment of
which is either (i) linked directly to the collection of lot receivables and sales proceeds; (ii) regularly
scheduled principal installments; or (iii) due at maturity. During the year ended December 31, 2010,
Genesis received $128,167 of financing proceeds and made repayments of $162,057. the multi-
family division has financed $Nil of construction costs at December 31, 2010 as compared to $10,253
at December 31, 2009, which represented repayments of the financing for the breeze project while
offset by the remaining construction cost of the project. repayment of the financing was through
sales proceeds from closings of individual units to third party purchasers.
28 Genesis Land Development Corporation
LaND DEVELopmENt SErVICE CoStS
As of December 31,
($’s)
2010
2009
Change
%
Land Development Service Costs
10,347
8,301
2,046
25%
accrued land development service costs increased at December 31, 2010 compared to December 31,
2009 mainly due to increased lot sales in the communities of Saddlestone, Sherwood and bayside, sale
of land for fire hall in the community of Sage meadows, increase in estimated budgets for certain
properties, while off-set by performing planned service work thus incurring previously budgeted
completion costs.
NoN-CoNtroLLING INtErESt
As of December 31,
($’s)
2010
2009
Change
%
Non-Controlling Interest Liability
58,920
61,084
(2,164)
(4%)
Non-controlling interest liability decreased primarily due to cash paid to limited partnership unit
holders and de-recognition of a variable interest entity (“VIE”) that was previously consolidated into
the Corporation’s accounts.
SharEhoLDErS’ EquIty
as at march 3, 2011, the Corporation had 44,418,511 common shares issued and outstanding. In
addition, there were options to acquire 2,162,871 common shares of the Corporation issued under
the Corporation’s stock option plan.
GROwiNG FOR wARD l aNNuaL rEport 2010 29
LiqUiDiTy AND CAPiTAL RESOURCES
During the year ended December 31, 2010, the Corporation generated net earnings of $36,404 and
generated $44,136 for funding its operating activities. at December 31, 2010, the consolidated cash
balance was $2,455 as compared to $4,578 as at December 31, 2009.
the current liabilities include:
($’s)
Financings, Excluding Deferred Financing Fee
Customer Deposits
Accounts Payable and Accrued Liabilities
Income Taxes Payable
Total Current Liabilities
Commitments
Year Ended
December 31,
2010
2009
45,006
8,388
13,024
8,310
74,728
4,977
101,802
4,985
8,350
11,139
126,276
741
79,705
127,017
at December 31, 2010, Genesis has obligations due within the next 12 months of $79,705. If Genesis is
unable to generate sufficient sales and renew existing credit facilities or secure additional financing,
it will impact the Corporation’s ability to meet its obligations as they become due. based on Genesis’
operating history, its relationship with its lenders and committed sales contracts, management
believes that the Corporation has the ability to continue to renew or repay its financial obligations
as they come due.
the following is a summary of the Corporation’s divisional financings balances at quarter-end:
Financings
($’s)
Land & Land Project Loans
Home Building Operations
Other
Deferred Financing Fees
Fourth
Quarter
2010
Third
Quarter
2010
Second
Quarter
2010
First
Quarter
2010
Fourth
Quarter
2009
81,862
65,169
84,993
106,435
106,547
442
659
—
714
1,617
705
4,943
10,253
688
839
82,963
(1,643)
65,883
(1,445)
87,315
(1,570)
112,066
117,639
(1,863)
(2,429)
81,320
64,438
85,745
110,203
115,210
30 Genesis Land Development Corporation
the movement in Corporation’s financing was as follows:
($’s)
Balance, Beginning of Year
Advances
Repayments
Balance, End of Year
Year Ended
December 31,
2010
2009
115,120
132,704
128,167
84,828
(162,057)
(102,322)
81,230
115,210
through strategic sales of assets as well as ongoing principal repayments, the Corporation’s
financings have decreased to $81,320 from the December 31, 2009 balance of $115,210. management
is continuing its efforts to reduce the Corporation’s non-project and high-interest debt levels. the
following table shows the debt to equity ratio calculated as total debt excluding non-controlling
interest divided by total equity including non-controlling interest.
($’s)
Total Liabilities (Excluding Non-Controlling Interest)
Total Equity (Including Non-Controlling Interest)
Debt to Equity Ratio
Year Ended
December 31,
2010
2009
124,776
230,090
0.54
147,985
194,356
0.76
Certain of the Corporation’s financing agreements include terms related to material adverse change,
covenants and cross default. If loan defaults occur and management is unable to negotiate terms,
and any one lender takes steps to exercise its rights and remedies under loan default provisions,
which may include full repayment, the Corporation may face similar actions from its other lenders.
If this occurs, management believes that the Corporation may not have sufficient liquidity to satisfy
any such demand for repayments. additionally, the terms of the short-term debt arrangements in
many cases require that cash collected from future sales is dedicated to partial discharges of the
debt, resulting in a limitation on net free cash available to cover operational requirements.
the Corporation uses a combination of project specific credit facilities and limited partnership
capital to fund development costs and land acquisitions. Generally, Genesis repays its project specific
debt from the proceeds of sale of homes and lots. the Corporation presently maintains lending
relationships with several lenders who provide financings at interest rates ranging from prime +
1.5% to 10%. there is a risk that lot closings and property sales could be delayed which would impact
the Corporation’s ability to repay these project oriented financings at the contracted discharge prices
or in a timely fashion. In such an instance the Corporation would attempt to refinance and/or extend
the term of the financing.
GROwiNG FOR wARD l aNNuaL rEport 2010 31
CoNtraCtuaL obLIGatIoNS
the Corporation’s contractual obligations, other than accounts payable, income taxes payable,
customer deposits and land development service costs, stated as of December 31, 2010 are as
follows:
($’s)
Current
Years 2 and 3
Years 4 and 5
Thereafter
Financings
(Excl. Deferred)
Financing Fees)
Purchase
of Land
Naming
Rights
Lease
Obligations
45,006
37,957
—
—
4,216
4,217
—
—
200
400
400
400
561
354
57
—
Total
49,983
42,928
457
400
82,963
8,433
1,400
972
93,768
Genesis has entered into a memorandum of understanding with a community society in north east
Calgary, whereby Genesis will contribute $5,000 over the next ten years for the naming rights to
a recreation complex. Negotiations are underway to determine when payments will commence;
therefore this obligation is not reflected in the table above.
Genesis has entered into an agreement with the City of airdrie, whereby Genesis will contribute
$200 per year for ten years, commencing june 1, 2008, for the naming rights to a recreation complex.
the first three payments have been remitted as scheduled and recorded as part of general and
administrative expense.
32 Genesis Land Development Corporation
REVENUES
EARNINGS (loss) before income taxes and non-controlling interest
NET EARNINGS
SUmmAR y OF qUARTERL y RESULTS
65,000
55,000
45,000
35,000
25,000
15,000
5,000
-5,000
$ in thousands
1st Quarter
09
2nd Quarter
09
3rd Quarter
09
4th Quarter
09
REVENUES
EARNINGS (loss) before income taxes and non-controlling interest
NET EARNINGS
65,000
55,000
45,000
35,000
25,000
15,000
5,000
-5,000
$ in thousands
1st Quarter
10
2nd Quarter
10
3rd Quarter
10
4th Quarter
10
GROwiNG FOR wARD l aNNuaL rEport 2010 33
($’s)
Third
Fourth
Fourth
Second
Quarter Quarter Quarter Quater Quarter
2010
2010
2010
2010
2009
First
Third
Second
Quarter Quarter Quarter
2009
2009
2009
First
Revenues
35,609
17,793
66,440
18,058
18,219
20,621
31,119
16,603
Earnings (Loss) Before
Income Taxes and
Non-Controlling Interest
18,970
488
31,119
2,835
(1,868)
(239)
3,792
3,920
Net Earnings (Loss)
10,624
994
22,802
1,984
(714)
721
4,387
2,362
Net Earnings (Loss) Per Share:
Basic
Diluted
0.24
0.24
0.02
0.02
0.52
0.52
0.04
0.04
(0.02)
(0.02)
0.02
0.02
0.10
0.10
0.05
0.05
jOiNT vENTURE
on april 30, 2010, Genesis entered into a joint venture agreement with another real estate
development corporation to form a joint venture corporation (“jV”) with a purpose of conducting
residential development of certain real estate holdings. Genesis contributed 75 acres (net of jV
interests) and has a 50% interest in the jV. Development servicing is expected to commence in 2011.
OFF BALANCE ShEET ARRANGEmENTS
LEttErS of CrEDIt
the Corporation has an ongoing requirement to provide letters of credit to municipalities as part of
the subdivision plan registration process. as at December 31, 2010, these letters of credit totaling
approximately $15,343, would provide a source of funds to the municipalities that would allow
them to complete the construction and maintenance of improvements to the subdivision should
the Corporation not be able to. the amount of any particular letter of credit is reduced at various
stages of construction. once the municipality issues a certificate acknowledging completion of the
improvements to the project, the letter of credit is returned and cancelled.
LEaSE aGrEEmENtS
the Corporation has certain lease agreements that are entered into in the normal course of operations.
all leases are treated as operating leases whereby lease payments are included in operating expenses
or general and administrative expenses depending on the nature of the lease. No asset or liability
value has been assigned to these leases in the balance sheet as of December 31, 2010.
34 Genesis Land Development Corporation
RELATED PARTy
the Corporation engaged a former officer (“former officer”) of the Corporation as a Senior financial
advisor. the amount of payments made to the former officer in 2010 were $202 (December 31, 2009
– $91). the former officer was granted 70,000 stock options on December 10, 2009. on october
2, 2009, the Corporation entered into a contract to construct a single-family home (“residential
property”) for the former officer at a cost-plus agreed percentage basis, for the total value of
the residential property of $970 representing terms offered to employees and measured at the
exchange amount. as of march 3, 2011, the transaction has not closed.
CRiTiCAL ACCOUNTiNG ESTimATES AND POLiCiES
Certain estimates are necessary until amounts are finalized pursuant to transactional or legal
proceedings. Due to the inherent uncertainty involved in making estimates, actual results reported
in future periods could differ significantly from those estimates.
GENEraL LItIGatIoN
the Corporation is subject to various legal proceedings and claims that arise in the ordinary course
of business operations. the Corporation periodically reviews these claims to determine if amounts
should be accrued in the financial statements or if specific disclosure is warranted.
VaLuatIoN of LaND
Land under development, land held for future development and housing projects under development
are recorded at the lower of cost and estimated net realizable value on a project specific basis. an
impairment loss is recognized to the extent that the carrying value of a project exceeds the fair
value of that project. Cost includes land acquisition costs, other direct costs of development and
construction, interest on debt used to finance specific projects, property taxes and legal costs. Land
acquisition costs are prorated to a phase of a project on an acreage basis.
CoStS to CompLEtE
Genesis’ most significant estimates relate to future development costs for lot sales which are
recognized prior to all costs being committed or known. the future development costs liability
represents the construction costs remaining to be incurred for each project phase currently under
development to the extent that revenue has been recognized. the liability to complete lots sold
is recognized when the first revenue is recognized in the phase. the liability includes all direct
construction costs and indirect costs including interest and property taxes expected to be incurred
during the remainder of the construction period.
Changes in the estimated future development cost directly impact the amount recorded for the
future development liability, cost of sales, gross margin and in some cases, the value of real estate
under development and held for sale. this liability is subject to significant measurement uncertainty
as it is based on estimated budgeted numbers prepared by independent consultants. recent market
conditions in alberta have been volatile thereby increasing the risk of estimation errors.
GROwiNG FOR wARD l aNNuaL rEport 2010 35
iNTERNATiONAL FiNANCiAL REPORTiNG STANDARDS (“iFRS”)
the accounting Standards board (“acSb”) requires publicly accountable enterprises to adopt IfrS
in place of Canadian Gaap for interim and annual reporting purposes for fiscal years beginning on
or after january 1, 2011. the Corporation’s IfrS adoption date of january 1, 2011 will require the
restatement, for comparative purposes, of amounts reported by the Corporation for the year ended
December 31, 2010, including the opening statement of financial position as at january 1, 2010.
management has commenced and substantially completed its IfrS conversion project which consists
of the following three phases:
1. Preliminary impact and assessment – this phase commenced with a review of the Corporation’s
significant accounting policies relative to current and proposed IfrS. the results of this analysis
were priority ranked according to the complexity and the extent of the impact in adoption of
IfrS accounting policies.
2. Detailed analysis – the Corporation is now in the process of preparing draft analysis for the
impact and evaluation phase, where items identified in the preliminary phase are addressed
according to the priority levels assigned to them. this phase involves analysis of policy choices
allowed under IfrS, drafting IfrS position papers for areas requiring significant judgment,
assessing impact on systems and controls and drafting IfrS compliant consolidated financial
statements.
3.
implementation phase – this final phase involves implementing all changes approved in the
impact and evaluation phase.
the Corporation completed the preliminary impact and assessment phase. the Corporation is
currently in the detailed analysis phase which is expected to be completed within the reasonable
timeframe to allow for further disclosure and filing as required and applicable. for the second phase
the Corporation’s IfrS advisor has completed drafting and finalizing IfrS position papers, decision
on optional exemptions have been made, and draft analysis of impact has been calculated. the
Corporation is currently preparing IfrS compliant consolidated financial statements and drafting the
first set of IfrS financial statements. the implementation phase will commence upon completion of
the detailed analysis phase.
management determined that the differences most likely to have the greatest degree of complexity
and impact on the Corporation’s consolidated financial statements were as follows:
36 Genesis Land Development Corporation
fIrSt-tImE aDoptIoN
IfrS 1 Grants first time adopters:
• Optional exemptions, from retrospective application of certain standards, that the Corporation
may choose to elect in preparation of its opening statement of financial position; and
• Mandatory exceptions to retrospective application of certain standards.
Elections made upon transition to IfrS can have a significant impact on the level of time and effort
needed for IfrS conversion. the following optional exemptions appear to be the most applicable to
the Corporation:
(a) fair value or revaluation as deemed cost - this exemption provides the Corporation with the
option to elect specific fair values for the deemed cost of any qualifying item of property, plant
and equipment. the Corporation has elected to use the historical cost bases under Canadian
Gaap as deemed cost at the transition date;
(b) Share-based payments - this exemption provides the Corporation with the option of not
applying IfrS 2 Share-based payments to equity-settled share-based payment transactions issued
after November 7, 2002 and which have vested before the date of transition. the Corporation
has elected to apply IfrS 2 to equity instruments granted after November 7, 2002 that have been
vested as of january 1, 2010 and all liabilities arising from the share-base payment transactions
that existed at january 1, 2010; and
(c) Capitalization of borrowing costs - this exemption provides the Corporation with the option
of applying IaS 23 borrowing Costs (“IaS 23”) prospectively from the transition date. the
Corporation has elected to apply IaS 23 prospectively.
furthermore, IfrS 1 requires extensive disclosure in the Corporation’s first set of IfrS compliant interim
and annual consolidated financial statements. this includes the disclosure of several reconciliations
that explain how the transition from Canadian Gaap to IfrS affected the reported financial position,
financial performance and cash flows of the Corporation.
borrowING CoStS
IaS 23 borrowing Costs (“IaS 23”) requires the capitalization of borrowing costs that are directly
attributable to the acquisition, construction or production of a qualifying asset (i.e. an asset that
takes a long period of time to construct). Interest costs may only be capitalized to a property when an
entity incurs expenditures for the asset, incurs borrowing costs, and begins development to prepare
the asset for its intended use or sale. as a result, borrowing costs on land held for development may
not qualify. borrowing costs must cease being capitalized to a project in cases of extended delays in
development or once the property is substantially complete for its intended use, regardless of level
of occupancy.
furthermore, to the extent that the Corporation borrows funds generally and uses them for the
purpose of obtaining a qualifying asset, the Corporation must determine the amount of borrowing
costs eligible for capitalization by applying a capitalization rate to the expenditures on that asset.
the capitalization rate is the weighted average of the borrowing costs applicable to the borrowings
that are outstanding during the period.
the Corporation has elected under the optional exemption provided by IfrS 1 to apply IaS 23,
borrowing Costs, prospectively, consequently there is no impact on opening statement of financial
position as of january 1, 2010.
GROwiNG FOR wARD l aNNuaL rEport 2010 37
ImpaIrmENt of aSSEtS
pp&E is tested for impairment in accordance with IaS 36 Impairment of assets which requires that
the Corporation assesses, at the end of each reporting period, whether there is any indication that
these assets may be impaired. an asset is impaired when the recoverable amount of the asset is less
than the carrying amount. If there is any indication that an asset may be impaired, the recoverable
amount should be estimated for individual assets. the recoverable amount is defined as the higher
of the fair value less costs to sell and the value in use. fair value less costs to sell is the amount
obtainable from the sale of an asset in an arm’s length transaction between knowledgeable and
willing parties. the value in use is the present value of the future cash flows (i.e. discounted cash
flows) expected to be derived from an asset.
If it is not possible to estimate the recoverable amount for the individual asset, the Corporation must
determine the recoverable amount for the cash-generating unit (“CGu”) to which that asset can be
allocated. a CGu is the smallest group of assets that generates cash flows largely independent of
other assets or groups of assets.
as a result of the above changes, impairment may be recognized more frequently under IfrS as
Canadian Gaap does not require the discounting of cash flows when assessing the recoverability
of an asset’s carrying value. IaS 36 does, however, require the reversal of an impairment loss where
there is an indication that circumstances have changed and that the impairment loss no longer exists
or may have decreased. this is not allowed under Canadian Gaap.
the Corporation’s fixed assets are mainly composed of office equipment, computer equipment,
automobiles, furniture, software and landscaping equipment. the net book value of these assets
as of December 31, 2010 is $544. the management does not anticipate any material change to this
balance for the opening statement of financial position as of january 1, 2010.
INComE taxES
IaS 12 Income taxes (“IaS 12”) is similar to Canadian Gaap in that the Corporation has to recognize
deferred (future) taxes on temporary differences between the carrying value of assets and liabilities
and their tax base. the adoption of IfrS may have a significant impact on the Corporation’s tax
accounting in the period of adoption and in subsequent periods for new temporary differences
arising on the conversion to IfrS as a result of changes in carrying values of assets, differences in
depreciation and depletion expense, residual values, capitalization of borrowing and direct costs and
impairment charges and reversals.
ImpaCt oN SharEhoLDErS’ EquIty
based on detailed analysis in second phase of the IfrS conversion, the following tables present the
identified differences between Canadian Gaap and IfrS and their impact on shareholders’ equity as
of january 1, 2010 and 2011. this un-audited information reflects our most recent views, assumptions
and expectations. the identified differences are intended to highlight the most significant areas and
should not be regarded as complete or final.
38 Genesis Land Development Corporation
the summary of expected changes that we believe will be most significant when the Corporation
transitions to IfrS as of january 1, 2010 are as noted in the following table:
(Un-Audited) Description
Financial Statement Line
Item Impacted
Increase / (Decrease) in
Shareholders’ Equity
Share Based Payments – IFRS 2
Contibuted Capital
Total Impact Before Taxes
Net After-Tax Impact on Shareholders’
Equity at January 1, 2010
595
595
595
the expected change to the shareholders’ equity as at january 1, 2011 based on detailed analysis is
expected to be as summarized in the following table:
(Un-Audited) Description
Financial Statement Line
Item Impacted
Increase / (Decrease) in
Shareholders’ Equity
Borowing Cost – IAS 23
Real Estate Held for Development and Sale
(6,830)
Borrowing Cost – IAS 23
Non-Controlling Interest
Share Based Payments – IFRS 2
Contributed Capital
Total Impact Before Taxes
Net After-Tax Impact on
Shareholders’ Equity at January 1, 2011
fINaNCIaL StatEmENtS
1,512
786
(4,532)
(2,936)
the disclosure requirements under IfrS are more extensive than Canadian Gaap. the Corporation
is in the process of completing draft financial statements which will be reviewed with the audit
Committee in march 2011. the Corporation has retained its auditors to audit the opening statement
of financial position as at january 1, 2010 included in these financial statements.
GROwiNG FOR wARD l aNNuaL rEport 2010 39
ImpaCt oN SyStEmS aND CoNtroLS
the changeover to IfrS has minimal impact on the accounting system. operational processes around
the system have been updated to capture information for IfrS reporting purposes and to allow
for comparative reporting in 2011. as part of the implementation stage, the management plans to
adjust general ledger with the IfrS adjustment balances at the conversion date.
the Corporation has reviewed the impact of IfrS on certain agreements, such as debt agreements,
compensation agreements, other matters such as capital requirements and debt covenants. the
review has been completed and we have not identified any material issues arising due to conversion
to IfrS.
the impact on internal control over financial reporting and disclosure controls and procedures has
been assessed. the changes identified are not material and have been documented and all policies
and procedures have been updated.
the Corporation has completed the assessment of the impact to investor relations and external
communication plans and does not anticipate any changes due to conversion to IfrS.
NExt StEpS
the Corporation plans to complete the following steps as part of phase 2 and 3 of its IfrS conversion
plan in order to issue its first IfrS compliant financial statements:
• Preparation of draft IFRS compliant financial statements and review with audit committee;
• Completion of an audit of opening statement of financial position as at January 1, 2010; and
• Adjust general ledger with IFRS adjustments at the conversion date.
RiSKS AND UNCERTAiNTiES
In the normal course of business, the Corporation is exposed to certain risks and uncertainties
inherent in the real estate development industry. real estate development is a cyclical business; as
a result, the profitability of the Corporation could be adversely affected by external factors beyond
the control of management. Currently, the Corporation is seeing gradual market stabilization from
the general downturn of 2008 and 2009 in the national and local economies. although Genesis had
experienced a slowdown in lot sales, it is using this economic correction to strongly position itself
when the market turns around. with a diversified land base, the Corporation is well positioned to
focus on the real estate projects offering the best return in the market place going forward.
the risks identified below are not an exhaustive listing of all possible risks faced by the Corporation.
there may be additional risks that management may need to consider as circumstances require.
40 Genesis Land Development Corporation
Genesis is exposed to a number of risks including:
GENEraL ECoNomIC rISkS:
Real Estate industry Risk: real estate investments are generally subject to varying degrees of risk,
depending on the nature of the property. these risks include (i) changes in general economic conditions,
(ii) changes in local conditions (such as an oversupply of land or a reduction in demand for real estate
in the area), (iii) changes to government regulations (such as new or revised building codes) and
(iv) competition from other developers or builders. raw land is relatively illiquid. Such illiquidity will
tend to limit Genesis’ ability to rebalance its portfolio promptly in response to changing economic or
investment conditions. In addition, financial difficulties of other developers and landowners, resulting
in distressed sales, may depress real estate values in the markets in which the Corporation operates.
Environmental Risk: as an owner of real estate, Genesis is subject to federal, provincial and municipal
environmental regulations. these regulations may require the Corporation to fund the costs of
removal and remediation of certain hazardous substances on its properties or releases from its
properties. the failure to remediate such properties, if any, could adversely affect the Corporation’s
ability to borrow using the property as collateral or sell the real estate. Genesis is not aware of any
material noncompliance with environmental laws at any of its properties. the Corporation has made,
and will continue to make, the necessary capital expenditures to comply with environmental laws
and regulations. Environmental laws and regulations can change rapidly, and the Corporation may
become subject to more stringent environmental laws and regulations in the future.
Competition Risk: Each segment of the real estate business is competitive. Numerous other residential
developers and builders compete for potential customers. although it is Genesis’ strategy to be the
premier land developer or builder in the marketplaces in which it operates, some of the Corporation’s
competitors may provide a better product or may be better located or better capitalized. the existence
of alternative lots, housing or commercial properties could have a material adverse effect on Genesis’
ability to sell lots, single and multi-family homes or commercial properties and thus could adversely
affect Genesis’ revenues and ability to meet its obligations.
General Uninsured Losses: Genesis carries comprehensive insurance with policy specifications, limits
and deductibles customarily carried for similar companies. there are, however, certain types of risks
(generally of a catastrophic nature) that are either uninsurable or not economically insurable.
SpECIfIC rISkS:
Credit Risk: this arises from the possibility that builders that acquire lots from Genesis may experience
financial difficulty and be unable to fulfill their lot payout commitments. the corporation does sell to a
variety of builders to alleviate this risk. as well, thorough credit assessments are conducted with respect
to all new builders and the Corporation also obtains a non-refundable deposit and maintains title to lots
that are sold until payment is received in full.
interest Risk: this is the combined risk that the Corporation would experience a loss as the result of its
exposure to a higher interest rate environment (Interest rate risk) and the possibility that at the time
of maturity of a mortgage the Corporation would be unable to renew the maturing debt either with
the existing lender or with a new lender (renewal risk). the Corporation structures its debt so as to
stagger the maturity dates, thus reducing exposure to any short-term fluctuations in rates. to mitigate
against renewal risk, the Corporation has established relationships with a number of different lenders.
the Corporation has historically been successful in obtaining refinancing on maturing debt where it
has sought it. In addition, Genesis has been able to finance at loan-to-fair values of 50% to 60%, as
applicable.
GROwiNG FOR wARD l aNNuaL rEport 2010 41
management Risk: relates to the continuity of management. the success of the Corporation is largely
dependent on the quality of its management and personnel. Loss of such personnel or the inability
to attract personnel of equivalent ability could materially affect the operations and prospects
of the Corporation. the Corporation continuously provides coaching, training and educational
opportunities to its employees, as well as periodically evaluates a need to attract human resources of
high professional quality and appropriate experience.
other factors which effect Genesis’ ability to operate successfully include:
Shifts in population patterns;
•
• Delays in regulatory approvals;
• Availability of land; and
• Availability of labor;
to generally mitigate risks, Genesis has taken the following steps:
•
•
•
Constant monitoring of market trends and conditions.
Substantial pre-sales are in place before commencing a project where prudent to do so.
Raw land acquisitions generally financed with equity and development costs funded with short-
term financing. all regulatory requirements are met on time.
• Adequate financing is established prior to commencement of project development.
•
Strategic planning of current and future land development projects.
DiSCLOSURE CONTROLS AND PROCEDURES
the Chief Executive officer (“CEo”) and Chief financial officer (“Cfo”) have designed, or caused to
be designed under their direct supervision, Genesis’ disclosure controls and procedures (as defined
by National Instrument 52-109 – Certification of Disclosure in Issuers’ annual and Interim filings,
adopted by the Canadian Securities administrators) to provide reasonable assurance that:
(i) material information relating to Genesis, including its consolidated subsidiaries, is made known
to them by others within those entities, particularly during the period in which the annual and
interim filings are being prepared; and
(ii) material information required to be disclosed in the annual and interim filings is recorded,
processed, summarized, and reported on a timely basis.
In conformance with National Instrument 52-109 (“52-109”), the Corporation has filed certificates
signed by the CEo and Cfo that deal with the matter of disclosure controls and procedures and have
concluded that as of December 31, 2010 the design and operating effectiveness of these disclosure
controls and procedures are effective in providing reasonable assurance that material information
required to be disclosed by the Corporation in reports filed with Canadian securities regulators is
accurate and complete and filed within the periods required.
42 Genesis Land Development Corporation
iNTERNAL CONTROLS OvER FiNANCiAL REPORTiNG
the CEo and Cfo have also designed, or caused to be designed under their direct supervision,
Genesis’ internal controls over financial reporting to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with Canadian Gaap. further, using the criteria established in Internal Control – Integrated
framework published by the Committee of Sponsoring organizations of the treadway Commission,
they have evaluated, or caused to be evaluated under their direct supervision, the effectiveness of
Genesis’ internal controls over financial reporting as of December 31, 2010 and concluded that the
design and operating effectiveness of these internal controls over financial reporting are effective.
matErIaL ChaNGES to INtErNaL CoNtroLS oVEr fINaNCIaL rEportING
aND DISCLoSurE CoNtroL aND proCEDurES for thE yEar ENDED
DECEmbEr 31, 2010
During the nine month period ended September 30, 2010, management of the Corporation with
the participation of CEo and Cfo, concluded that as of September 30, 2010 Corporation’s disclosure
control and procedures and internal controls over financial reporting were not effective. the
management of the Corporation under the supervision of CEo and Cfo has remediated the material
weaknesses identified as part of the evaluation according to the remediation plan designed by the
management:
•
In May of 2010, Special Committee and the Corporate Governance Committee issued two news
releases. Neither of these news releases were discussed with, nor circulated to the certifying officers
prior to their release. Subsequent to these actions, the board of Directors have implemented the
following remedies:
• The board created an Executive Committee of the Board to oversee financing, land sale or
purchase above certain financial limits, and press releases.
• All board Mandates & Polices have been reviewed, updated and approved by the Board of
Directors.
During the nine month period ending September 30, 2010, management, with the participation
of CEo and Cfo, concluded that the internal controls over financial reporting were not operating
effectively. During the evaluation certain material weaknesses in internal controls over financial
reporting were identified. Due to the limited number of staff and complexity of certain accounting
transactions relating to items such as costs to complete and future development costs liability,
instances of control weaknesses relating to insufficient segregation of duties and lack of independent
review have been noted.
GROwiNG FOR wARD l aNNuaL rEport 2010 43
management has taken the following measures and remediated the material weaknesses in internal
controls over financial reporting:
• Management has amended the process to calculate for estimates of “Cost to complete” and
“future Developments Cost liability” by involving operational managers and Consultants in the
estimation and assumptions made during the course of production. Genesis is also implementing
new software that will help track costs and provide real-time data that help in providing current
and actual data. Estimates are made with the best available data at the time the financial
statements are being prepared. management has also hired a Senior Cost accountant to help in
providing better estimates as well as ensure proper segregation of duties within the process.
• Management has put in place a segregation of duties matrix and updated the procedures and
processes to separate key duties where possible. as such, lack of segregation and their related risks
are not uncommon in smaller companies with a limited number of employees in the accounting
function. management has added new employees at management and non-management level
to help clearly segregate duties. In order to provide a compensating control for these weaknesses,
the Corporation is also employing the services of external consultants, and has hired an internal
auditor to enhance its internal controls.
while Genesis’ CEo and Cfo believe that the Corporation’s internal controls and procedures provide
a reasonable level of assurance that such controls and procedures are reliable, an internal control
system cannot prevent all errors and fraud. It is management’s belief that any control system, no
matter how well conceived or operated, can provide only reasonable, not absolute, assurance that
the objectives of the control system are met.
management will continue to monitor the effectiveness of its internal controls over financial
reporting and disclosure framework and may make modifications from time to time as considered
necessary or desirable.
the CEo and Cfo oversee all material transactions and related accounting record. In addition,
the audit Committee reviews on a quarterly basis the financial statements and key risks of the
Corporation and queries management about significant transactions, and there is daily oversight by
the senior management of the Corporation.
44 Genesis Land Development Corporation
OUTLOOK
In 2010, Genesis set new records for revenues and earnings, and also paid down its financings
by nearly $34,000. In 2011, Genesis will look to build on these results. reductions in non-project
debt, optimizing current operations and exploring recurring revenue streams will be the focus of
management in 2011.
the land division brought on two new projects in 2010, the communities of Saddlestone and Sage
meadows, both in Calgary. for 2011, Genesis expects to continue to bring on additional phases and
lots in these areas by the end of the year. additionally, now that the Nw Calgary communities of
kincora and Sherwood are nearing the final stages of completion, Genesis and its jV partner, will
commence the development of the first phase of its kinwood community, which is located just north
of Genesis’ existing Sherwood project.
In 2011, new mortgage qualification rules, increased interest rates, and significant increases to
development levies within the city of Calgary will likely put downward pressures on the margins
of the land development division as well as the home building division. It is expected the amended
qualification rules will impact first-time home buyers most of all, and act as a barrier to entry. In
response, Genesis will have to adjust its lot production within the city of Calgary to focus on smaller,
more affordable lots and new home models for its entry level product.
as the impact of these changes filter through the Calgary market, it should also increase the demand
for housing within Calgary’s outlying areas, such as Genesis’ airdrie communities of bayside and the
Canals.
the increasing costs for single family home sales and lots could also have a positive impact on the
demand for multi-family homes as they have a lower entry point for consumers. Genesis currently has
a number of approved multi-family sites and will investigate the potential for additional land sales
or the feasibility of the construction and sale of a multi-family project in its existing communities.
Increased costs for home purchasers may also increase demand for rental units within the city of
Calgary. Genesis is examining the feasibility of pursuing this side of the multi-family market as well.
on january 5, 2011, Genesis announced a pending commercial land sale to rioCan real Estate
Investment trust (“rioCan”) for +/-27 acres of land within its Sage hill crossing site. If rioCan’s due
diligence condition is waived or satisfied, Genesis then has up to 720 days to complete the servicing
of the site. a firm sale, pending completion of servicing, would be an important first to step to
unlocking the potential for this site. otherwise, Genesis has +9 acre mixed-use site within its Sage
meadows community which it is currently evaluating for development or sale.
OThER
additional information relating to the Corporation can be found on SEDar at www.sedar.com
GROwiNG FOR wARD l aNNuaL rEport 2010 45
mANAGEmENT’S REPORT
to the Shareholders of
Genesis Land Development Corp.
the consolidated financial statements and all information in the management’s Discussion and
analysis are the responsibility of management. the consolidated financial statements have been
prepared by management in accordance with the accounting policies in the notes to the consolidated
financial statements. In the opinion of management, the consolidated financial statements have
been prepared within acceptable limits of materiality, and are in accordance with Canadian generally
accepted accounting principles appropriate in the circumstances. the financial information elsewhere
in the management’s Discussion and analysis has been reviewed to ensure consistency with that in
the consolidated financial statements.
management maintains appropriate systems of internal control. policies and procedures are designed
to give reasonable assurance that transactions are properly authorized, assets are safeguarded
and financial records properly maintained to provide reliable information for the preparation of
consolidated financial statements.
the consolidated financial statements have been further examined by the board of Directors and
by its audit Committee which meets regularly with the auditors and management to review the
activities of each. the audit Committee, which is comprised of three independent directors, reports
to the board of Directors.
meyers Norris penny LLp, an independent firm of chartered accountants, was engaged to audit
the consolidated financial statements in accordance with Canadian generally accepted auditing
standards and provide an independent auditors’ opinion.
Gobi Singh
prESIDENt aND ChIEf ExECutIVE offICEr
Simon fletcher
ChIEf fINaNCIaL offICEr
march 3, 2011
46 Genesis Land Development Corporation
iNDEPENDENT AUDiTORS’ REPORT
to thE SharEhoLDErS of GENESiS LAND DEvELOPmENT CORP.
we have audited the accompanying consolidated financial statements of Genesis Land Development
Corp. and its subsidiaries, which comprise the consolidated balance sheets as at December 31, 2010 and
December 31, 2009, and the consolidated statements of earnings, retained earnings, comprehensive
income and cash flows for the years then ended, and a summary of significant accounting policies
and other explanatory notes.
maNaGEmENt’S rESpoNSIbILIty for thE CoNSoLIDatED fINaNCIaL
StatEmENtS
management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with Canadian Generally accepted accounting principles, and for such
internal control as management determines is necessary to enable the preparation of consolidated
financial statements that are free from material misstatement, whether due to fraud or error.
auDItorS’ rESpoNSIbILIty
our responsibility is to express an opinion on these consolidated financial statements based on our
audits. we conducted our audits in accordance with Canadian generally accepted auditing standards.
those standards require that we comply with ethical requirements and plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial statements are free from
material misstatement.
an audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the consolidated financial statements. the procedures selected depend on the auditors’ judgment,
including the assessment of the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error. In making those risk assessments, the auditor considers
internal control relevant to the entity’s preparation and fair presentation of the consolidated financial
statements in order to design audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the entity’s internal control. an audit
also includes evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements.
we believe that the audit evidence we have obtained in our audits is sufficient and appropriate to
provide a basis for our audit opinion.
opINIoN
In our opinion, the consolidated financial statements present fairly, in all material respects, the
financial position of Genesis Land Development Corp. and its subsidiaries as at December 31, 2010
and December 31, 2009, and the results of their operations and cash flows for the years then ended
in accordance with Canadian Generally accepted accounting principles.
march 3, 2011
Calgary, Canada
ChartErED aCCouNtaNtS
GROwiNG FOR wARD l aNNuaL rEport 2010 47
GENESiS LAND DEvELOPmENT CORP .
CoNSoLIDatED baLaNCE ShEEtS
as at December 31, 2010 and 2009
(In Thousands of Canadian Dollars)
Assets
Real Estate Held for Development and Sale (note 4)
Amounts Receivable (note 6)
Other Operating Assets (note 7)
Future Income Taxes (note 8)
Cash and Cash Equivalents
Total Assets
Liabilities and Non-Controlling Interest
Financings (note 9)
Customer Deposits
Accounts Payable and Accrued Liabilities
Income Taxes Payable
Future Income Taxes (note 8)
Land Development Service Costs
Non-Controlling Interest (note 5)
Total Liabilities and Non-Controlling Interest
Commitments and Contingencies (note 13)
Shareholders’ Equity
Share Capital (note 10)
Contributed Surplus (note 11)
Retained Earnings
Total Shareholders’ Equity
Total Liabilities, Non-Controlling Interest and Shareholders’ Equity
See accompanying notes to the consolidated financial statements
Gobi Singh
prESIDENt aND ChIEf ExECutIVE offICEr
Simon fletcher
ChIEf fINaNCIaL offICEr
48 Genesis Land Development Corporation
2010
$
309,034
27,021
16,356
—
2,455
354,866
81,320
8,388
13,024
8,310
3,387
10,347
58,920
183,696
54,798
4,913
111,459
171,170
354,866
2009
$
302,598
15,384
17,568
2,213
4,578
342,341
115,210
4,985
8,350
11,139
—
8,301
61,084
209,069
54,097
4,120
75,055
133,272
342,341
GENESiS LAND DEvELOPmENT CORP .
CoNSoLIDatED StatEmENtS of EarNINGS, ComprEhENSIVE INComE aND rEtaINED EarNINGS
years Ended December 31, 2010 and 2009
(In Thousands of Canadian Dollars Except Per Share Amounts)
Revenues
Residential Lot Sales
Development Land Sales
Residential Home Sales
Interest and Other Income
Expenses
Cost of Sales:
Residential Lots
Development Land
Residential Homes
Write-Down (Recovery) of Real Estate Held for Development and Sale and Other (note 4)
General and Administrative
Bad Debt Expense (Recovery) (note 14)
Interest
Stock-Based Compensation (note 12)
Amortization
Gain on De-Recognition of VIE (note 5(b))
Loss on Disposal of Property and Equipment
Earnings Before Income Taxes and Non-Controlling Interest
Provision for Income Taxes (note 8)
Current
Future
Earnings Before Non-Controlling Interest
Non-Controlling Interest (note 5)
Net Earnings, Being Comprehensive Income
Retained Earnings, Beginning of Year
Retained Earnings, End of Year
Net Earnings Per Share – Basic and Diluted (note 10)
See accompanying notes to the consolidated financial statements
2010
$
35,569
42,512
58,569
1,250
137,900
14,001
14,860
43,264
(1,284)
12,263
6
804
1,004
173
(613)
10
84,488
53,412
8,566
5,600
14,166
39,246
2,842
36,404
75,055
111,459
0.82
2009
$
23,138
—
62,713
711
86,562
12,729
—
48,546
7,643
10,946
(594)
1,470
(6)
218
—
5
80,957
5,605
5,014
(1,435)
3,579
2,026
(4,730)
6,756
68,299
75,055
0.15
GROwiNG FOR wARD l aNNuaL rEport 2010 49
GENESiS LAND DEvELOPmENT CORP .
CoNSoLIDatED StatEmENtS of CaSh fLowS
years Ended December 31, 2010 and 2009
(In Thousands of Canadian Dollars)
Funds Provided From (Used For):
Operating Activities
Net Earnings
Items Not Involving Cash:
Stock-Based Compensation
Amortization
Write-Down (Recovery) of Real Estate Held for Development and Sale and Other
Gain on De-Recognition of VIE
Loss on Disposal of Property and Equipment
Future Income Taxes
Non-Controlling Interest
Increase (Decrease) in Non-Cash Working Capital (note 17)
Financing Activities
Advances from Financings
Repayments of Financings
Increase (Decrease) in Non-Controlling Interest
Non-Controlling Interest Capital Repayments
Purchase of Share Capital
Issue of Share Capital
Investing Activities
Acquisition of Property and Equipment
Change in Restricted Cash
Proceeds on Disposal of Property and Equipment
Net change in Cash and Cash Equivalents
Cash and Cash Equivalents, Beginning of Year
Cash and Cash Equivalents, End of Year
Supplemental Cash Flow Information:
Interest Paid
Interest Received
Income Taxes Paid
See accompanying notes to the consolidated financial statements
50 Genesis Land Development Corporation
2010
$
36,404
1,004
173
(1,284)
(613)
10
5,600
2,842
44,136
(7,595)
36,541
128,167
(162,057)
(1,507)
(2,886)
—
490
2009
$
6,756
(6)
218
7,643
—
5
(1,435)
(4,730)
8,451
13,430
21,881
84,828
(102,322)
2,834
(1,316)
(61)
—
(37,793)
(16,037)
(206)
(712)
47
(871)
(2,123)
4,578
2,455
4,622
518
11,395
(35)
(5,734)
—
(5,769)
75
4,503
4,578
9,884
267
2,953
GENESiS LAND DEvELOPmENT CORP .
NotES to thE CoNSoLIDatED fINaNCIaL StatEmENtS
for the years Ended December 31, 2010 and 2009
(All tabular Amounts and Amounts in Footnotes to Tables are in Thousands of Canadian Dollars Except Number of Shares)
1. DESCrIptIoN of buSINESS
Genesis Land Development Corp. (the “Corporation” or “Genesis”) was incorporated as Genesis
Capital Corp. under the business Corporation act (alberta) on December 2, 1997 and Genesis Land
Development Corp. resulted from an amalgamation on january 1, 2002.
the Corporation is engaged in the acquisition, development, subdivision, construction, sale
and leasing of land, residential lots and homes and commercial property in alberta and british
Columbia. the Corporation reports its activities as two business segments: land development
and home building, both operating in one geographic area. all business activities of Genesis
are conducted in western Canada and therefore are subject to local economic and weather
conditions. Seasonality affects the land development segment as construction activities during
freezing temperatures limit the completion of underground and surface work. within home
building, construction in winter months may be limited to situations where concrete foundations
are in place.
2. SIGNIfICaNt aCCouNtING poLICIES
the consolidated financial statements have been prepared by management in accordance with
Canadian generally accepted accounting principles. the preparation of consolidated financial
statements in accordance with Canadian generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and revenues and expenses during the reporting period. actual results could
differ from these estimates. Such estimates include the amounts relating to the determination
of liabilities and accruals, in particular the provision for land development service costs,
potential impairment of amounts receivable, future income tax assets and liabilities, stock based
compensation and real estate held for development and sale. by their nature these amounts
are subject to measurement uncertainty and changes in such estimates may affect the financial
statements in future years.
(a) principles of Consolidation
these consolidated financial statements include the accounts of the Corporation, its wholly-
owned subsidiaries, as well as the consolidated assets, liabilities, revenues, expenses and
cash flows of limited partnership entities which the Corporation controls; comparative
periods also include accounts of a variable interest entity (“VIE”). the investment in a joint
venture is accounted for using the proportionate consolidation method. all intra-group
transactions, balances, income and expenses are eliminated on consolidation.
where audited financial accounts are not coterminous with those of the Corporation’s
consolidated presentation, the financial information of the VIE has been derived from the
last audited accounts available and unaudited management accounts for the period up to
the Corporation’s balance sheet date.
GROwiNG FOR wARD l aNNuaL rEport 2010 51
GENESiS LAND DEvELOPmENT CORP .
NotES to thE CoNSoLIDatED fINaNCIaL StatEmENtS
for the years Ended December 31, 2010 and 2009
(All tabular Amounts and Amounts in Footnotes to Tables are in Thousands of Canadian Dollars Except Number of Shares)
2. SIGNIfICaNt aCCouNtING poLICIES (continued)
(b) revenue recognition
the Corporation’s revenue recognition policies for residential lot and home sales and
development land sales are:
(i) residential lot and development land sales
Land and lot sales to third parties are recognized when the Corporation has substantially
performed and supplied all of the agreed-to services pertaining to the property, the
Corporation has received a minimum 15% non-refundable deposit and the collection
of the remaining unpaid balance is reasonably assured. Deposits received from builders
upon signing of contracts for purchases of lots on which revenue recognition criteria
have not been met are recorded as customer deposits.
(ii) residential home sales
revenue is recognized when an agreement is signed and the completed unit is conveyed
to the purchaser, at which time all proceeds are received or collection is reasonably
assured. Deposits received from customers upon signing of contracts for purchases of
completed units for which revenue recognition criteria have not been met are recorded
as customer deposits.
(c) real Estate held for Development and Sale
Land under development, land held for future development and housing projects under
construction are recorded at the lower of cost and estimated net realizable value on a
project specific basis. an impairment loss is recognized to the extent that the carrying
value of a project exceeds the fair value of that project, or the cost of construction
exceeds the contracted sales price. Cost includes land acquisition costs, other direct costs of
development and construction, interest on debt used to finance specific projects, property
taxes and legal costs. fair value is estimated using comparisons of recent sales of similar or
adjacent lands in the same geographic area. Land acquisition costs are pro-rated to a phase
of a project on an acreage basis.
at the time that a lot sale from a phase is made, any remaining estimated servicing and
development costs in respect of the sold lot are recorded as costs of sale and a liability
is classified as “land development service costs.” the land development service costs are
reviewed on a phase by phase basis. when the estimate is known to be different from the
actual costs incurred or expected to be incurred, an adjustment is made to the provision for
estimated land development service costs and a corresponding adjustment is made to land
under development and/or cost of sales.
No other general and administration costs are capitalized to real estate held for development
and sale.
(d) property and Equipment
property and equipment consisting of office equipment, computer hardware, software and
vehicles is stated at cost less accumulated amortization. amortization is calculated on a
declining balance basis at annual rates ranging from 20% to 30% per annum.
52 Genesis Land Development Corporation
GENESiS LAND DEvELOPmENT CORP .
NotES to thE CoNSoLIDatED fINaNCIaL StatEmENtS
for the years Ended December 31, 2010 and 2009
(All tabular Amounts and Amounts in Footnotes to Tables are in Thousands of Canadian Dollars Except Number of Shares)
2. SIGNIfICaNt aCCouNtING poLICIES (continued)
(e) Income taxes
Income taxes are recorded using the asset and liability method of accounting. under this
method, income taxes are recorded for the effect of any difference between the accounting
and income tax basis of an asset or liability, using substantively enacted income tax rates.
accumulated future income tax balances are adjusted to reflect changes in income tax rates
that are substantively enacted with the adjustment being recognized in net earnings in the
period that the change occurs.
future income tax assets and liabilities are determined based on the tax laws and rates that
are anticipated to apply in the period of realization. a valuation allowance is recorded to
the extent that there is uncertainty regarding utilization of future tax assets.
(f) Cash and Cash Equivalents
Cash and cash equivalents consist of cash held with banks and lawyers’ trust accounts.
(g) Earnings per Share Calculations
basic net earnings per share are calculated by dividing the net earnings by the weighted
average number of shares outstanding for the year. Diluted net earnings per share amounts
are calculated giving effect to the potential dilution that would occur if stock options
were exercised. the treasury stock method is used to determine the dilutive effect of stock
options. the treasury stock method assumes that proceeds received from the exercise of in-
the-money stock options are used to repurchase common shares at the average market price
over the year.
(h) Stock-based Compensation
the Corporation has a share option plan for employees, officers, directors and contractors,
which is described in note 12. the Corporation calculates the fair value of stock-based
compensation using the black-Scholes option-pricing model. the fair value of options
granted are expensed and credited to contributed surplus over the related vesting period
of the options. any consideration paid on the exercise of stock options, together with any
contributed surplus recorded at the date the options vested, is credited to share capital.
(i) financial Instruments
a financial instrument is any contract that gives rise to a financial asset of one entity and a
financial liability or equity instrument to another entity. upon initial recognition all financial
instruments, including derivatives, are recognized on the balance sheet at fair value.
Subsequent measurement is then based on the financial instruments being classified into
one of five categories: held for trading, held to maturity, loans and receivables, available for
sale and other liabilities. the Corporation has designated its financial instruments into the
following categories:
Financial Instrument
Category
Measurement Method
Cash and Cash Equivalents
Deposits and Restricted Cash
Amounts Receivable
Accounts Payable and Accrued Liabilities
Financings
Held for Trading
Held for Trading
Loans and Receivables
Other Liabilities
Other Liabilities
Fair Value
Fair Value
Amortized Cost
Amortized Cost
Amortized Cost
GROwiNG FOR wARD l aNNuaL rEport 2010 53
GENESiS LAND DEvELOPmENT CORP .
NotES to thE CoNSoLIDatED fINaNCIaL StatEmENtS
for the years Ended December 31, 2010 and 2009
(All tabular Amounts and Amounts in Footnotes to Tables are in Thousands of Canadian Dollars Except Number of Shares)
2. SIGNIfICaNt aCCouNtING poLICIES (continued)
transaction costs for held-for-trading assets are immediately recognized in net income.
transaction costs of the loans and receivables and other financial liabilities are included in
net income or netted with the fair value of the financial instruments at initial measurement,
and tested for impairment.
the Corporation will assess at each reporting period whether there is a financial asset, other
than those classified as held for trading, that is impaired. an impairment loss, if any, is
included in net earnings. as at December 31, 2010, no impairment of amounts receivable
(December 31, 2009 - $12,891) has been recognized.
the Corporation does not have any contracts with embedded derivatives that require
separation.
the Corporation’s risk management policies are established to identify and analyze the risks
faced by the Corporation, to set risk limits and controls, and to monitor risks and adherence
to market conditions and the Corporation’s activities.
3. ChaNGES to futurE aCCouNtING poLICIES
Canadian publicly traded companies will be required to prepare their financial statements
in accordance with International financial reporting Standards (“IfrS”) as issued by the
International accounting Standards board, for the financial years beginning on or after january 1,
2011. Effective january 1, 2011, Genesis will adopt IfrS as the basis for preparing its consolidated
financial statements. financial results for the quarter ended march 31, 2011 and comparative
data shall be prepared on IfrS basis, including an opening balance sheet, as at january 1, 2010.
the Company is in the process of transitioning its financial statement reporting to IfrS in time
to meet the deadline. the process will be ongoing as new standards and recommendations are
issued by the International accounting Standards board and acSb. further details regarding the
Company’s transition to IfrS are included in the Company’s December 31, 2010 management’s
Discussion and analysis.
54 Genesis Land Development Corporation
GENESiS LAND DEvELOPmENT CORP .
NotES to thE CoNSoLIDatED fINaNCIaL StatEmENtS
for the years Ended December 31, 2010 and 2009
(All tabular Amounts and Amounts in Footnotes to Tables are in Thousands of Canadian Dollars Except Number of Shares)
4. rEaL EStatE hELD for DEVELopmENt aND SaLE
Land Held for Future Development
Land Under Development
Housing Projects Under Development
Gross
148,095
162,726
11,015
Provision for
Write-Down
(8,609)
(2,177)
(2,016)
Net
139,486
160,549
8,999
Balance – December 31, 2010
321,836
(12,802)
309,034
Land Held for Future Development
Land Under Development
Housing Projects Under Development
Gross
168,676
129,066
19,413
Provision for
Write-Down
(12,119)
(762)
(1,676)
Net
156,557
128,304
17,737
Balance – December 31, 2009
317,155
(14,557)
302,598
During the year ended December 31, 2010, interest of $1,888 (December 31, 2009 - $3,290) and
other carrying costs of $381 (December 31, 2009 - $1,753), respectively, were capitalized to land
held for future development.
as at December 31, 2010, land held for future development of $67,859 (December 31, 2009 -
$62,799) and land under development of $15,285 (December 31, 2009 - $15,796) are held in
limited partnerships controlled by Genesis (see note 5(a)).
the Corporation recognized the following write-downs (recoveries) relating to impairment of
carrying value of certain real estate held for development and sale during the years ended
December 31, 2010 and 2009:
Land Held for Future Development
Land Under Development
Housing Projects Under Development
Change in Provision for Write-Down
Miscellaneous Write-Offs Directly Against Carrying Value
Write-Down (Recovery) of Real Estate Held for
Development and Sale and Other
2010
2009
(3,510)
1,415
340
(1,755)
471
5,157
762
1,676
7,595
48
(1,284)
7,643
the Corporation recognized a partial reversal of $4,855 (December 31, 2009 - $Nil) of the write-
down of land held for future development of which $4,354 (December 31, 2009 - $Nil) related to
real estate held within Limited partnership Land pool 2007. the change in economic circumstances
has lead to an increase in the net realizable value of land held for future development.
GROwiNG FOR wARD l aNNuaL rEport 2010 55
GENESiS LAND DEvELOPmENT CORP .
NotES to thE CoNSoLIDatED fINaNCIaL StatEmENtS
for the years Ended December 31, 2010 and 2009
(All tabular Amounts and Amounts in Footnotes to Tables are in Thousands of Canadian Dollars Except Number of Shares)
5. NoN-CoNtroLLING INtErESt
(a) Limited partnerships
the Corporation is the general partner in four limited partnership arrangements. Genesis
ultimately controls each of the limited partnerships thereby requiring their consolidation
within the accounts of the Corporation and recognition of a non-controlling interest.
additionally, any profit or charges between the Corporation and the limited partnerships
are eliminated on consolidation.
the limited partnership units are non-redeemable and share in the profits, if any, of the
associated development held by the partnership. Limited partners cannot be cash-called
for further funding with respect to the development.
Details of each of the limited partnerships are as follows:
Limited partnerships 4/5 (Lp 4/5):
Lp 4/5 holds land held for future development located east of Calgary in the municipal
District of rocky View, adjacent to the Corporation’s taralake lands. No capital repayments
are required with respect to Lp 4/5.
Genesis is entitled to a management fee of 10% of the future development service costs
payable on a per-lot basis as lots are sold.
Limited partnerships 6/7 (Lp 6/7):
Lp 6/7 holds land under development located in taralake and airdrie. all required capital
repayments have been made to unit holders in Lp 6/7.
Genesis is entitled to management fees of 5% to 10% of land costs to Lp 6/7 payable to
Genesis as lands and lots are sold. Genesis also owns 11.65% of Lp 6/7’s units and participates
proportionately in the profits of the partnership.
Limited partnerships 8/9 (Lp 8/9):
L/p 8/9 holds, among other things, 1,140 acres of raw land near radium, british Columbia.
Genesis held a purchase right to acquire all Lp 8/9 units by february 28, 2009, which it
did not exercise. therefore, all Lp unit holders are entitled to share in the profits of the
development.
the project lands have approval for 272 single-family home sites on 53 acres and 143 acres
have been set aside for a golf course. upon achieving and exceeding 50% gross return to the
Lp 8/9 unit holders, Genesis is entitled to 50% of the remaining profits on the single-family
lots. Genesis is also entitled to 100% of the profit on the golf course, and retains the right
to purchase the balance of the lands at the conclusion of the project for a nominal amount.
additionally, Genesis is responsible for securing financing for the project development.
Limited partnerships 2007 (LpLp 2007):
on june 29, 2007, the Land pool Limited partnership 2007 was created to raise funds to
secure funding for various land acquisitions. at the conclusion of the offering on february
28, 2009, LpLp 2007 had raised insufficient funds to close out the purchase of the lands and
settle the land acquisition loan it used to acquire the Delacour Lands. as a result, Genesis
has completed the transaction with its own funds and assumed the loan obligations of
LpLp 2007.
56 Genesis Land Development Corporation
GENESiS LAND DEvELOPmENT CORP .
NotES to thE CoNSoLIDatED fINaNCIaL StatEmENtS
for the years Ended December 31, 2010 and 2009
(All tabular Amounts and Amounts in Footnotes to Tables are in Thousands of Canadian Dollars Except Number of Shares)
5. NoN-CoNtroLLING INtErESt (continued)
additionally, Genesis can earn management fees of up to 50% of the remaining profits of
the project upon achieving and exceeding 50% gross return to the LpLp 2007 external unit
holders.
as at December 31, 2010 and 2009, the Corporation recognized a non-controlling interest
liability comprised as follows:
LP 4/5
LP 6/7
LP 8/9
LPLP 2007
VIE
TOTAL LP
Balance – December 31, 2008
(8,098)
(19,287)
(7,055)
(29,855)
—
(64,295)
Contributions, Net of Capital
Repayments
Issuance Costs Incurred
Net Earnings Allocation on Sale
of Real Estate Held for
Development and Sale
—
—
—
298
(426)
(2,452)
(2,580)
—
—
43
—
43
—
(966)
—
(39)
—
(1,005)
Market Value Write-Down
—
2,438
—
2,586
—
5,024
Cash Paid Out
—
1,018
—
—
—
1,018
Net General and Administrative
Expenses (Recoveries)
64
81
61
173
332
711
Balance – December 31, 2009
(8,034)
(16,716)
(6,696)
(27,518)
(2,120)
(61,084)
De-Recognition of VIE
—
—
—
—
2,120
2,120
Net Earnings Allocation on Sale
of Real Estate Held for
Development and Sale
(14)
(869)
—
(68)
—
(951)
Market Value Write-Down (Recovery)
—
—
—
(3,404)
—
(3,404)
Cash Paid Out
—
2,886
—
—
—
2,886
Net General and Administrative
Expenses
27
510
40
936
—
1,513
Balance – December 31, 2010
(8,021)
(14,189)
(6,656)
(30,054)
—
(58,920)
GROwiNG FOR wARD l aNNuaL rEport 2010 57
GENESiS LAND DEvELOPmENT CORP .
NotES to thE CoNSoLIDatED fINaNCIaL StatEmENtS
for the years Ended December 31, 2010 and 2009
(All tabular Amounts and Amounts in Footnotes to Tables are in Thousands of Canadian Dollars Except Number of Shares)
5. NoN-CoNtroLLING INtErESt (continued)
the real estate held within the limited partnerships is as follows:
Gross
7,766
16,047
6,733
58,651
89,197
Gross
7,765
16,558
6,722
57,007
88,052
Provision for
Write-Down
—
(762)
—
(5,291)
(6,053)
Provision for
Write-Down
—
(762)
—
(8,695)
(9,457)
Net
7,766
15,285
6,733
53,360
83,144
Net
7,765
15,796
6,722
48,312
78,595
Limited Patnership 4 & 5
Limited Partnership 6 & 7
Limited Partnership 8 & 9
Limited Partnership Land Pool 2007
Balance – December 31, 2010
Limited Patnership 4 & 5
Limited Partnership 6 & 7
Limited Partnership 8 & 9
Limited Partnership Land Pool 2007
Balance – December 31, 2009
(b) Variable Interest Entity
on September 29, 2008, the Corporation entered into an agreement to sell 107 single family
lots under development in airdrie to an entity for gross proceeds totalling $23,000. the
entity paid an initial deposit of $4,500 which was financed through a loan in the amount of
$5,000.
on january 20, 2009, the Corporation and this entity amended the purchase agreement to
include an additional multi-family site in airdrie for $6,650 for total proceeds to Genesis of
$29,650. No additional deposits were received, but $1,000 of the original deposit of $4,500
was redistributed to this additional parcel of land.
In february 2010, Genesis entered into an agreement whereby the sale of the 107 single
family lots as stated above was effectively cancelled and the sale of the multi-family site was
retained. as part of the amended transaction, Genesis also agreed to take over the remaining
loan balance ($4,000 at December 31, 2009) that was originally obtained to finance the initial
deposit under the terms of the transaction. repayment of the remaining loan balance was
completed on march 26, 2010.
58 Genesis Land Development Corporation
GENESiS LAND DEvELOPmENT CORP .
NotES to thE CoNSoLIDatED fINaNCIaL StatEmENtS
for the years Ended December 31, 2010 and 2009
(All tabular Amounts and Amounts in Footnotes to Tables are in Thousands of Canadian Dollars Except Number of Shares)
5. NoN-CoNtroLLING INtErESt (continued)
at December 31, 2009, the entity was assessed a VIE to Genesis by virtue of subordinated
financial support provided by the Corporation. In accordance with accounting Guideline
15, Consolidation of Variable Interest Entities, of the CICa handbook, as a result of
the transaction that closed on march 26, 2010 (see above), Genesis has removed the
subordinated financial support from the entity and subsequently de-recognized the entity’s
financial accounts from its own consolidated accounts. as a result of this de-recognition,
the Corporation has removed the assets and liabilities of the entity from the accompanying
consolidated financial statements and any assets and liabilities of the entity that were
eliminated in consolidation are restored at fair value.
prior to march 26, 2010, the entity incurred losses of $945 and the Corporation has absorbed
such losses by consolidating the accounts of the entity. the Corporation however was only
liable for a portion of such losses in the amount of $332 as per the agreed upon terms
between the Corporation and the entity. this resulted in a net gain on de-recognition
of $613 recorded as a separate line item in the accompanying consolidated financial
statements.
6. amouNtS rECEIVabLE
Agreements Receivable
Mortgages Receivable
Other Receivables
2010
23,540
3,131
350
27,021
2009
27,521
—
754
28,275
Allowance for Doubtful Accounts
—
(12,891)
27,021
15,384
During the year ended December 31, 2010, the Corporation completed sales of two land
parcels for $35,000 and $6,263, respectively. total proceeds of $38,132 were collected, $35,000
of which was applied to the Corporation’s land debt; vendor take back mortgage (“Vtb”) due
april 30, 2011 in the amount of $3,131 was extended for the balance of the funds. the Vtb
carries interest of prime + 1.5% per annum payable at the due date.
GROwiNG FOR wARD l aNNuaL rEport 2010 59
GENESiS LAND DEvELOPmENT CORP .
NotES to thE CoNSoLIDatED fINaNCIaL StatEmENtS
for the years Ended December 31, 2010 and 2009
(All tabular Amounts and Amounts in Footnotes to Tables are in Thousands of Canadian Dollars Except Number of Shares)
7. othEr opEratING aSSEtS
Property and Equipment, Net
Deposits
Restricted Cash
2010
544
14,245
1,567
16,356
2009
568
16,145
855
17,568
at December 31, 2010, property and equipment is carried at a cost of approximately $2,004
(December 31, 2009 - $1,977), net of accumulated amortization of $1,460 (December 31, 2009 -
$1,409).
Deposits include amounts paid to development authorities as security to guarantee the
completion of construction projects under development and deposits on future land acquisitions.
the deposits are refundable upon completion of the related project and earn interest at rates
approximating those earned on guaranteed investment certificates.
restricted cash is held in trust accounts and also included in customer deposits liability and
represents funds owed to the Corporation, at a future indeterminable date, when development
of specific lands commences.
8. INComE taxES
(a) the components of the future income tax asset (liability) at December 31, 2010 and 2009 are
as follows:
Real Estate Held for Development and Sale
Non-Capital Loss Carry-Forwards*
Reserves From Land Sales
Unamortized Financing Costs
Other Temporary Differences
*Non-capital loss carry-forward amounts begin to expire in 2028.
2010
3,038
114
(6,659)
127
(7)
(3,387)
2009
3,551
103
(1,480)
50
(11)
2,213
60 Genesis Land Development Corporation
GENESiS LAND DEvELOPmENT CORP .
NotES to thE CoNSoLIDatED fINaNCIaL StatEmENtS
for the years Ended December 31, 2010 and 2009
(All tabular Amounts and Amounts in Footnotes to Tables are in Thousands of Canadian Dollars Except Number of Shares)
8. INComE taxES (continued)
(b) Income tax expense differs from that which would be expected from applying the combined
statutory Canadian federal and provincial income tax rates of 28% (December 31, 2009 -
29.5%) to income before income taxes.
the difference results from the following:
Expected Income Tax Expense
Change in Future Income Taxes Resulting from Tax Rate Reduction
Stock-Based Compensation
Other Non-Deductible Expenses
Non-Controlling Interest
9. fINaNCINGS
2010
2009
14,955
(569)
281
295
(796)
1,648)
(209)
106)
643)
1,391)
14,166
3,579)
2010
2009
Secured By Land Held for Future Development
I.
Land loans, maturing from June 1, 2011 to October 1, 2012, bearing interest
at rates between the greater of 9.75% and prime + 5% per annum, secured by
land held for development and sale with a carrying value of $64,420.
18,244
21,420
II. Other mortgages payable, bearing interest at rates between 7% and
14% per annum, payable on demand.
659
839
Secured By Land Under Development and Agreements Receivable
III.
Land project loans, payable on collection of agreements receivable, bearing
interest at rates ranging from prime + 2% to the greater of 10% or
prime + 5%, secured by land held for development and sale with a carrying
value of $107,828, due between July 1, 2011 and November 1, 2012.
IV. Other mortgage payable, bearing interest at the greater of 10.25% or
prime + 3.25% per annum, secured by land with a carrying value of $Nil due
October 1, 2010. The loan has been fully repaid.
63,618
81,127
—
4,000
Secured By Housing Projects Under Development
V. Demand operating line of credit up to $3,000 subject to certain levels of assets
with a sublimit of $761, bearing interest at prime + 1.5% per annum, secured
by a general security agreement over assets of the home building division.
442
—
VI. Project loan, payable on collection of closing proceeds, bearing interest at
prime + 2.5% per annum due September 30, 2010. The loan has been fully repaid.
—
10,253
Deferred Financing Fees
82,963
(1,643)
117,639
(2,429)
81,320
115,210
GROwiNG FOR wARD l aNNuaL rEport 2010 61
GENESiS LAND DEvELOPmENT CORP .
NotES to thE CoNSoLIDatED fINaNCIaL StatEmENtS
for the years Ended December 31, 2010 and 2009
(All tabular Amounts and Amounts in Footnotes to Tables are in Thousands of Canadian Dollars Except Number of Shares)
9. fINaNCINGS (continued)
During the year ended December 31, 2010, the Corporation received advances of
$128,167 (December 31, 2009 - $87,257) relating to various new and renewed loan
facilities secured by real estate held for development and sale and agreements receivable
bearing interest ranging from prime + 2% to a combined rate of 8% preferred and
12% regular coupon per annum with due dates ranging from october 1, 2010 to November 1,
2012.
the weighted average interest rate of loan agreements, based on December 31, 2010 balances,
is 8.21% (December 31, 2009 - 9.68%).
the Corporation’s financings are to be repaid, based on the contractual terms, within the
following time periods (excluding deferred financing fees):
January 1, 2011 to December 31, 2011
January 1, 2012 to December 31, 2012
Subsequent
45,006
37,957
—
82,963
the Corporation has various covenants in place with its lenders with respect to certain contracted
credit facilities. Such covenants include among other credit usage restrictions, cancellation,
prepayment, confidentiality and cross default clauses, as well as sales coverage requirements,
conditions precedent for funding, and other general understandings such as but not limited
to maintaining contracted lot prices, restrictions on encumbrances, liens and charges, material
changes to project plans, and changes in the Corporation’s ownership structure.
as at December 31, 2010, the Corporation is not in violation of any covenants with its lenders.
62 Genesis Land Development Corporation
GENESiS LAND DEvELOPmENT CORP .
NotES to thE CoNSoLIDatED fINaNCIaL StatEmENtS
for the years Ended December 31, 2010 and 2009
(All tabular Amounts and Amounts in Footnotes to Tables are in Thousands of Canadian Dollars Except Number of Shares)
10. SharE CapItaL
(a) authorized:
unlimited number of common shares
unlimited number of preferred shares
(b) Issued:
Common Shares
Balance – December 31, 2008
Purchased Through Normal Course Issuer Bid*
Balance – December 31, 2009
Issued For Cash From Options Exercised
Transferred From Contributed Surplus on Exercise of Options
Number
Stated Value
44,416,519
(304,762)
44,111,757
267,691
—
$54,164
(66,837)
54,097
490
211
Balance – December 31, 2010
44,379,448
54,798
*Includes 250,262 shares purchased in prior year, but not cancelled until 2009.
weighted average Number of Shares
the following table sets forth the weighted average number of shares outstanding for net
earnings per share purposes for the years ended December 31, 2010 and 2009:
Basic
Effect of Dilutive Securities – Stock Options
Diluted
2010
2009
44,241,497
188,491
44,123,071
15,126
44,429,988
44,138,197
In calculating diluted earnings per share for the year ended December 31, 2010, the Corporation
excluded 495,500 options (2009 - 699,563) as the exercise price was greater than the average
market price of its shares during those years.
11. CoNtrIbutED SurpLuS
Balance – Beginning of Year
Stock Based Compensation, Net of forfeitures
Normal Course Issuer Bid
Fair Value of Options Exercised
Balance – End of Year
2010
2009
4,120
1,004
—
(211)
4,913
4,120
(6)
6
—
4,120
GROwiNG FOR wARD l aNNuaL rEport 2010 63
GENESiS LAND DEvELOPmENT CORP .
NotES to thE CoNSoLIDatED fINaNCIaL StatEmENtS
for the years Ended December 31, 2010 and 2009
(All tabular Amounts and Amounts in Footnotes to Tables are in Thousands of Canadian Dollars Except Number of Shares)
12. StoCk optIoNS
the Corporation has established a stock option plan for certain employees, officers, directors and
contractors of the Corporation to purchase common shares. Vesting provisions and exercise prices
are set at the time of issuance by the board of Directors. options vest over a number of years on
various anniversary dates from the date of the original grant.
the options must be issued at not less than the fair market value of the common shares at the
date of grant and are issued with terms generally not exceeding 5 years from the date of grant.
Details of outstanding stock options are as follows:
2010
2009
Number of
Options
Weighted
Average
Exercise Price
Outstanding – Beginning of Year
1,962,750
Options Granted
Options Exercised
Options Forfeited
Outstanding – End of Year
Exercisable – End of Year
868,500
(267,691)
(300,625)
2,262,934
1,070,815
$3.51
$3.46
$1.83
$3.20
$3.73
$3.95
Number of
Options
1,976,000
1,196,250
—
(1,209,500)
1,962,750
774,563
Range of
Exercise
Prices ($)
0.90 – 4.00
4.01 – 8.00
8.01 – 10.48
Outstanding
Exercisable
Number at
December 31,
2010
Weighted
Average
Exercise Price
Number at
December 31,
2010
Weighted
Average
Exercise Price
1,691,434
426,500
145,000
$2.66
$6.16
$9.05
675,315
341,500
54,000
$2.53
$5.97
$8.85
2,262,934
$3.73
1,070,815
$3.95
Weighted
Average
Exercise Price
$5.54
$1.85
—
$5.18
$3.51
$3.79
Weighted
Average
Remaining
Contractual
Life in Years
3.98
1.32
1.73
3.33
the weighted average fair market value of options granted during the year ended December
31, 2010 was $1.68 (December 31, 2009 - $0.99) per option.
64 Genesis Land Development Corporation
GENESiS LAND DEvELOPmENT CORP .
NotES to thE CoNSoLIDatED fINaNCIaL StatEmENtS
for the years Ended December 31, 2010 and 2009
(All tabular Amounts and Amounts in Footnotes to Tables are in Thousands of Canadian Dollars Except Number of Shares)
12. StoCk optIoNS (continued)
the fair value of each option granted was estimated on the date of grant using the black-Scholes
option-pricing model with the following assumptions:
2010
2009
Risk-Free Interest Rate
Estimated Term Period Prior to Exercise (Years)
1.42% – 1.55%
1.78% – 2.57%
2.5
5.0
Volatility in the Price of the Corporation’s Common Shares
71.1% – 83.6%
56.6% – 61.8%
Forfeiture Rate
Dividend Yield Rate
0.00%
0.00%
0.00%
0.00%
13. CommItmENtS aND CoNtINGENCIES
(a) the Corporation has been named as a co-defendant to a lawsuit that commenced on
December 6, 2001. the lawsuit seeks damages of $8,000 plus punitive damages of $1,000.
the statement of claim asserts the share price used to convert certain debts of the
Corporation into common shares of the Corporation was overstated. the outcome of the
claim is unknown at this time and no amounts have been accrued in these consolidated
financial statements relating to this matter.
(b) In 2009, the Corporation was served with a statement of claim in the amount of $250.
the statement of claim asserts that the Corporation did not take any steps to cover its
property, which is adjacent to the plaintiffs’ property, to prevent spread of dust and soil to
the plaintiffs’ property; as a result, the plaintiffs have suffered loss and damage. the matter
is agreed to be set down for a hearing to determine if the matter can be settled before trial.
the outcome of the claim is unknown at this time and no amounts have been accrued in
these consolidated financial statements relating to this matter.
(c) at December 31, 2010, the Corporation has certain obligations and commitments pursuant
to service agreements with municipalities totaling $17,251 (December 31, 2009 - $14,161)
of which $10,347 (December 31, 2009 - $8,300) have been accrued in the consolidated
financial statements as land development service costs. pursuant to these obligations, the
Corporation has granted irrevocable standby letters of credit, issued by financial institutions,
to the municipalities to indemnify them in the event the Corporation does not perform its
contractual obligations. as of December 31, 2010, the letters of credit amounted to $15,343
(December 31, 2009 - $17,259), of which $4,771 (December 31, 2009 - $4,771) is in respect of
the commitment disclosed in note 13(d).
GROwiNG FOR wARD l aNNuaL rEport 2010 65
GENESiS LAND DEvELOPmENT CORP .
NotES to thE CoNSoLIDatED fINaNCIaL StatEmENtS
for the years Ended December 31, 2010 and 2009
(All tabular Amounts and Amounts in Footnotes to Tables are in Thousands of Canadian Dollars Except Number of Shares)
13. CommItmENtS aND CoNtINGENCIES (continued)
(d) In respect of the commitments disclosed in note 13(c) to the municipalities, the Corporation
has agreed to finance and pay for certain transportation improvements undertaken by a
municipality. the Corporation has agreed to advance funds to the municipality to allow it
to undertake certain additional transportation improvements. the advance is refundable
without interest no later than june 30, 2012 up to a maximum of $4,346 with any excess
thereto being non-refundable. the municipality has commenced construction of the
improvements and it is anticipated that the Corporation will provide upfront financing to
the municipality not exceeding $4,346.
(e) the Corporation has a commitment pursuant to an agreement to pay $8,433 for purchase
of certain lands due in two equal installments on November 25, 2011 and june 30, 2012.
(f) pursuant to the terms of a participating mortgage that was repaid during 2002, the former
mortgage holders have the right to a 20% participation in the profits from the development
of approximately 39 acres of land under development. at December 31, 2010, a liability
of approximately $1,772 (December 31, 2009 - $1,697) has been accrued in the records of
Genesis in respect of this liability.
(g) Genesis has entered into a memorandum of understanding with a community society,
whereby Genesis will contribute $5,000 over ten years for the naming rights to a recreation
complex. Negotiations are underway to determine when payments will commence.
(h) on february 19, 2008 Genesis entered into an agreement with the City of airdrie, whereby
Genesis will contribute $2,000 ($200 each year, terminating june 1, 2017) for the naming
rights to a recreation complex. the first three installments totaling $600 were made through
2010.
(i) the Corporation has office and other operating leases with the following annual payments:
2011 - $561; 2012 - $315; thereafter - $96.
66 Genesis Land Development Corporation
GENESiS LAND DEvELOPmENT CORP .
NotES to thE CoNSoLIDatED fINaNCIaL StatEmENtS
for the years Ended December 31, 2010 and 2009
(All tabular Amounts and Amounts in Footnotes to Tables are in Thousands of Canadian Dollars Except Number of Shares)
14. fINaNCIaL INStrumENtS
(a) risks associated with financial Instruments
(i) Credit risk
as at December 31, 2010, the Corporation carried an allowance for doubtful accounts
of $Nil (December 31, 2009 - $12,891).
During the years ended December 31, 2010 and 2009, the Corporation recognized the
following bad debt expense (recovery) and change in allowance for doubtful accounts
relating to amounts receivable on sold lots net of the return of the real estate held for
development and sale:
2010
2009
Bad Debt
Expense
(Recovery)
Allowance
for Doubtful
Accounts
Bad Debt
Expense
(Recovery)
Allowance
for Doubtful
Accounts
Beginning of Year
Subsequent Collections of
Previously Allowed for Lots
Allowance for Lots Deemed
Uncollectable
Reversal of Partial Allowance
On Collections in Full
Reversal of Full Allowance
Due to Forfeitures
Miscellaneous Bad Debt
Expense Incurred
End of Year
(12,891)
(18,845)
(468)
728
(1,715)
2,571
—
—
—
474
6
—
100
12,063
—
—
720
(1,167)
—
—
401
—
4,550
—
(594)
(12,891)
further allowances may be necessary. In order to mitigate credit risk, the Corporation
retains title to sold residential lots until full payment is received.
GROwiNG FOR wARD l aNNuaL rEport 2010 67
GENESiS LAND DEvELOPmENT CORP .
NotES to thE CoNSoLIDatED fINaNCIaL StatEmENtS
for the years Ended December 31, 2010 and 2009
(All tabular Amounts and Amounts in Footnotes to Tables are in Thousands of Canadian Dollars Except Number of Shares)
14. fINaNCIaL INStrumENtS (continued)
aging of amounts receivable as at December 31, 2010 and 2009 is as follows:
Aging
Not Past Due
Past Due 0-90 Days
Past Due 91-120 Days
Past Due 121-270 Days
Past Due > 270 Days
Allowance for Doubtful Accounts
2010
26,812
209
—
—
—
27,021
—
27,021
2009
15,484
—
5,774
1,681
5,336
28,275
(12,891)
15,384
Individual balances due from customers as at December 31, 2010 which comprise greater
than 10% of total amounts receivable total to $18,767 from 4 customers (December 31,
2009 - $13,621 from 4 customers).
(ii) Liquidity risk
the following are the contractual maturities of financial liabilities and other
commitments as at December 31, 2010:
Financial Liabilities
Accounts Payable and Accrued Liabilities
Income Taxes Payable
Customer Deposits
Financings, Excl. Deferred Financing Fees (note 9)
Commitments
Purchase of Land
Lease Obligations
Naming Rights
< 1 Year
> 1 Year
Total
13,024
8,310
8,388
45,006
—
—
—
37,957
13,024
8,310
8,388
82,963
74,728
37,957
112,685
4,216
561
200
4,217
411
1,200
8,433
972
1,400
79,705
43,785
123,490
68 Genesis Land Development Corporation
GENESiS LAND DEvELOPmENT CORP .
NotES to thE CoNSoLIDatED fINaNCIaL StatEmENtS
for the years Ended December 31, 2010 and 2009
(All tabular Amounts and Amounts in Footnotes to Tables are in Thousands of Canadian Dollars Except Number of Shares)
14. fINaNCIaL INStrumENtS (continued)
Land development service costs of $10,347 (December 31, 2009 - $8,300) at December
31, 2010 have not been included in the table stated above due to uncertainties of timing
of the related payments.
at December 31, 2010, Genesis has obligations due within the next 12 months of $79,705.
If Genesis is unable to generate sufficient sales, renew existing or secure additional
financing, it will impact the Corporation’s ability to meet its obligations as they become
due. based on Genesis’ operating history, its relationship with its lenders and committed
sales contracts, management believes that the Corporation has the ability to continue
to renew or repay its financial obligations as they come due.
(iii) market risk
the Corporation is exposed to interest rate risk to the extent that certain agreements
receivable and certain financings are at a floating rate of interest. the Corporation is
also exposed to fair value risk to the extent that certain financings, mortgages receivable
and loans receivable are at a fixed rate of interest. a 1% change in interest rates would
result in a change in interest incurred of approximately $823 annually on floating rate
loans, with approximately $29 impacting pre-tax net earnings.
(b) fair value of financial Instruments
the fair value of cash and cash equivalents, amounts receivable, restricted cash, deposits
and accounts payable and accrued liabilities approximate their carrying values due to the
relatively short periods to maturity.
the fair value of the Corporation’s financings and accounts receivable were estimated based
on current market rates for loans of the same risk and maturities.
Held for Trading
Cash and Cash Equivalents
Deposits Excluding Prepayments
Restricted Cash
Loans and Receivables
Amounts Receivable
Other Liabilities
Accounts Payable and
Accrued Liabilities
Financings, Excl. Deferred
Financing Fees
2010
2009
Carrying
Value
Estimated
Fair Value
Carrying
Estimated
Value
Fair Value
2,455
11,307
1,567
2,455
11,307
1,567
4,578
12,127
855
4,578
12,127
855
27,021
25,213
15,384
14,882
13,024
`13,024
8,350
8,350
82,963
82,692
117,639
115,747
GROwiNG FOR wARD l aNNuaL rEport 2010 69
GENESiS LAND DEvELOPmENT CORP .
NotES to thE CoNSoLIDatED fINaNCIaL StatEmENtS
for the years Ended December 31, 2010 and 2009
(All tabular Amounts and Amounts in Footnotes to Tables are in Thousands of Canadian Dollars Except Number of Shares)
14. fINaNCIaL INStrumENtS (continued)
fair value measurements recognized in the balance sheet are categorized using a fair value
hierarchy that reflects the significance of inputs used in determining the fair values. the
three fair value hierarchy levels are as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2:
asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and
Inputs other than quoted prices included in Level 1 that are observable for the
Level 3:
(unobservable inputs).
Inputs for the asset or liability that are not based on observable market data
the following table shows an analysis of financial instruments recorded at fair value by level
of the fair value hierarchy as at December 31, 2010 and 2009:
2010
2009
Level 1
Level 2
Level 3
Level 1
Level 2 Level 3
Cash and Cash Equivalents
Deposits Excluding Prepayments
Restricted Cash
2,455
11,307
1,567
—
—
—
—
—
—
4,578
12,127
855
—
—
—
—
—
—
(c) Capital management
the Corporation manages its capital structure and makes adjustments to it in light of changes
in regional economic conditions and the risk characteristics of the underlying real estate
industry within that region. the Corporation considers its capital structure to specifically
include shareholders’ equity, non-controlling interest and financings. In order to maintain
or adjust its capital structure, the Corporation may adjust its capital spending to manage
current and projected debt levels.
the Corporation continues to evaluate the need to leverage its land assets to secure
sufficient financings to ensure the Corporation is able to meet its financial obligations as
they come due.
the Corporation is subject to externally imposed capital requirements. the Corporation
failed to have the audit of the annual financial statements for one of the limited partnerships
under its control performed on time in accordance with the requirements set forth in the
related offering memorandum due to delay in completing the audit; the audit has now
been completed. Nothing arising from this audit had a material effect on these consolidated
financial statements.
70 Genesis Land Development Corporation
GENESiS LAND DEvELOPmENT CORP .
NotES to thE CoNSoLIDatED fINaNCIaL StatEmENtS
for the years Ended December 31, 2010 and 2009
(All tabular Amounts and Amounts in Footnotes to Tables are in Thousands of Canadian Dollars Except Number of Shares)
15. SubSEquENt EVENtS
on january 20, 2011, the Corporation entered into a mortgage loan agreement for $2,000 to
provide working capital financing secured by existing real estate under development. the loan
bears interest at prime + 5% or 8% per annum whichever is greater with interest due monthly
and principal due february 29, 2012.
16. joINt VENturE
CASH FLOW FROM (USED IN)
Assets Liabilities Revenue
Earnings Operating
Activities
(losses)
Investing
Activities
Financing
Activities
As at and for the
Year Ended
December 31, 2010
18,914
27
—
(2)
(90)
—
100
the above table includes the Corporation’s proportionate share of the assets, liabilities,
revenue, earnings and cash flow information of a joint venture (December 31, 2009 - $Nil) that
is proportionately consolidated in these financial statements. the Corporation’s proportionate
interest of this joint venture is 50% ownership. a deferred gain of $2,201 (December 31, 2009 -
$Nil) recognized on initial contribution into the joint venture is included in the customer deposits
balance of $8,387 at December 31, 2010.
17. ChaNGES IN NoN-CaSh workING CapItaL
Operating Activities
Real Estate for Development and Sale
Amounts Receivable
Other Operating Assets
Accounts Payable and Accrued Liabilities and
Land Development Service Costs
Customer Deposits
Income Taxes Payable
2010
2009
(5,152)
(11,637)
1,900
6,720
3,403
(2,829)
11,222
14,114
(2,810)
(12,118)
1,470
1,552
(7,595)
13,430
GROwiNG FOR wARD l aNNuaL rEport 2010 71
GENESiS LAND DEvELOPmENT CORP .
NotES to thE CoNSoLIDatED fINaNCIaL StatEmENtS
for the years Ended December 31, 2010 and 2009
(All tabular Amounts and Amounts in Footnotes to Tables are in Thousands of Canadian Dollars Except Number of Shares)
18. SEGmENtED INformatIoN
the Corporation operates in two reportable segments, land development and home building,
which represent separately managed strategic business units with distinct marketing strategies.
the Corporation evaluates segment performance based on profit or loss from operations before
income taxes. Inter-segment sales are accounted for as if the sale were to third parties at current
market prices. Internal lot sales from the land division to the home building division or a limited
partnership have been eliminated and are not included in consolidated results, until the home is
sold to a third party purchaser.
the income producing business units of the Corporation report the following activities for the
years ended December 31, 2010 and 2009:
Year Ended
December 31, 2010
Revenues
Cost of Sales
Recover (Write-Down) of
Real Estate Held for
Development and Sale
and Other
Other Expenses*
Land
Development
Segment
Home
Building
Segment
Corporate
and Other
Segment
Intersegment
Elimination
Total
98,752
(37,588)
57,659
(52,422)
1,624
(9,964)
(340)
(4,309)
—
—
—
—
—
(18,511)
17,885
137,900
(72,125)
—
626
1,284
(13,647)
—
53,412
Earnings Before Income Taxes
and Non-Controlling Interest
52,824
588
Segmented Assets
(as at December 31, 2010)
342,893
15,064
2,455
(5,546)
354,866
Land
Development
Segment
Home
Building
Segment
Corporate
and Other
Segment
Intersegment
Elimination
Year Ended
December 31, 2009
Revenues
Cost of Sales
Write-Down of Real Estate
Held for Development
and Sale and Other
Other Expenses*
41,797
(23,035)
62,580
(57,289)
(7,643)
(7,272)
—
(3,533)
Earnings Before Income Taxes
and Non-Controlling Interest
3,847
1,758
Total
86,562
(61,275)
(17,815)
19,049
—
(1,234)
(7,643)
(12,039)
—
5,605
—
—
—
—
—
Segmented Assets
(as at December 31, 2009)
318,311
27,067
4,578
(7,615)
342,341
*other expense items include general and administrative, bad debt expense (recovery), interest, stock-based compensation,
amortization, gain on de-recognition of VIE and gain (loss) on disposal of property and equipment.
72 Genesis Land Development Corporation
GENESiS LAND DEvELOPmENT CORP .
NotES to thE CoNSoLIDatED fINaNCIaL StatEmENtS
for the years Ended December 31, 2010 and 2009
(All tabular Amounts and Amounts in Footnotes to Tables are in Thousands of Canadian Dollars Except Number of Shares)
19. rELatED party traNSaCtIoNS
a land loan with one of the Corporation’s former directors in the amount of $5,410 was repaid
on September 20, 2010.
the Corporation engaged a former officer (“former officer”) of the Corporation as a Senior
financial advisor. the amount of payments made to the former officer in 2010 were $202
(December 31, 2009 – $91). the former officer was granted 70,000 stock options on December
10, 2009. on october 2, 2009, the Corporation entered into a contract to construct a single-family
home (“residential property”) for the former officer at a cost-plus agreed percentage basis, for
the total value of the residential property of $970 representing terms offered to employees and
measured at the exchange amount. as of march 3, 2011, the transaction has not closed.
20. ComparatIVE fIGurES
Certain comparative figures have been reclassified to conform to the current period’s presentation.
GROwiNG FOR wARD l aNNuaL rEport 2010 73
FivE yEAR SUmmAR y
CoNSoLIDatED baLaNCE ShEEtS
(Expressed in thousands of Canadian dollars, except per share amounts)
2010
2009
2008
2007
2006
Assets
Real Estate Held for Development and Sale
Amounts Receivable
Cash and Cash Equivalents
Other Operating Assets
Future Income Taxes
Liabilities and Non-Controlling Interest
Financings
Customer Deposits
Accounts Payable and Accrued Liabilities
Income Taxes Payable
Land Development Service Costs
Future Income Taxes
Non-Controlling Interest
Shareholders’ Equity
Share Capital
Contributed Surplus
Retained Earnings
309,034
27,021
2,455
16,356
—
302,598
15,384
4,578
17,568
2,213
285,574
29,498
4,503
45,101
778
221,264
47,587
11,007
22,565
—
130,084
16,886
13,411
6,799
3,353
354,866
342,341
365,454
302,423
170,533
81,320
8,388
13,024
8,310
10,347
3,387
58,920
115,210
4,985
8,350
11,139
8,301
—
61,084
132,704
3,515
24,203
9,587
4,566
—
64,296
85,160
3,196
20,637
1,781
8,681
5,098
58,877
20,091
3,356
12,578
4,488
6,377
—
28,724
183,696
209,069
238,871
183,430
75,614
54,798
4,913
111,459
54,097
4,120
75,055
54,164
4,120
68,299
56,383
3,333
59,277
56,425
1,534
36,960
171,170
133,272
126,583
118,993
94,919
354,866
342,341
365,454
302,423
170,533
CoNSoLIDatED StatEmENt of EarNINGS (Comprehensive Income and retained Earnings)
(Expressed in thousands of Canadian dollars, except per share amounts)
2010
2009
2008
2007
2006
Revenues
Sales
Interest and Other Income
Expenses
Cost of Sales
Write-Down (Recovery) of Real Estate Held for and Sale and Other
General and Administrative
Interest
Stock-Based Compensation
Amortization
Gain on De-Recognition of VIE
Loss on Disposal of Property and Equipment
Bad Debt Expense (Recovery)
Earnings Before Income Taxes and NCI
Provision for Income Taxes
Non-Controlling Interest
136,650
1,250
85,851
711
82,558
1,273
97,776
1,198
50,913
756
137,900
86,562
83,831
98,974
51,669
72,125
(1,284)
12,263
804
1,004
173
(613)
10
6
61,275
7,643
10,946
1,470
(6)
218
—
5
(594)
43,025
6,962
11,026
639
814
271
—
33
13,408
52,613
387
11,425
432
1,815
265
—
7
—
28,531
250
7,528
256
1,612
160
—
3
—
84,488
80,957
76,178
66,944
38,340
53,412
14,166
2,842
5,605
3,579
(4,730)
7,653
(3,099)
4,730
32,030
(12,147)
3,335
13,329
(4,583)
(330)
Net Earnings, Being Comprehensive Income
36,404
6,756
9,284
23,218
8,416
Net Earning Per Share – Basic and Diluted
$ 0.82
$ 0.15
$ 0.20
$ 0.50
$ 0.18
74 Genesis Land Development Corporation
CorporatE INformatIoN
Senior management Team
Board of Directors
GobI SINGh, p. ENG.
president & Chief Executive officer
DouG N. bakEr, b.Comm., fCa
Chairman of the board of Directors
GobI kuLar SINGh, p. ENG.
Director, Chief Executive officer & president
StEVEN GLoVEr
Director, Chairman of the audit Committee
akhIL k. maNro
Director, Chairman of Corporate Governance
and Compensation Committee
yaZDI bharuCha
Director
ELIaS a. foSCoLoS
Director
mark w. mItChELL
Director
SImoN fLEtChEr, Ca
Chief financial officer
jEffrEy bLaIr, mCIp
Chief operational officer
fraNk DEVCICh, Ca
Senior financial advisor
VaL SaLoV, mba, Cpa
Corporate Controller
arNIE StEfaNIuk, p.ENG
General manager of Land Development
pS SIDhu, mba
General manager, Single family homes
Graham Duff, b.SC
General manager of Commercial
LaxmI raGhuram, b.arCh
project manager, Generations Group
of Companies
SaLLy SaLama, Cpa, CIa
manager of Internal Controls
Transfer Agent
Corporate Counsel
Compushare trust Company
600, 530 - 8 avenue Sw
Calgary, alberta t2p 3S8
Stock Exchange
toronto Stock Exchange
Stock Symbol - GDC
Auditors
meyers Norris penny LLp
7th floor, 715 5th avenue Sw
Calgary, alberta t2p 2x6
borden Ladner Gervais LLp
Legal Counsel
Centennial place, East tower 1900
520 3rd avenue
Calgary, alberta t2p 0r3
Corporate Office
200. 3115 - 12 Street NE
Calgary, alberta Canada t2E 7j2
ph: 403 265-8079
fax: 403 266-0746
Email: genesis@genesisland.com
uncommon Communities
www.genesisland.com