Genesis Land Development Corporation
L A N D - H O M E S - C O M M E R C I A L - C O M M U N I T I E S
Dream a Big Dream
Once upon a time, you were an architect, an
engineer, an interior designer, a carpenter and a
landscaper with a bold vision of how you would
live. You spent hours in the sand, bucket and
shovel in hand, pouring over every detail. You
built sturdy towers, each taller than the last.
Vast halls for royal processions. Walls armored
with dazzling shells. Expansive grounds for your
cavalry. And a driftwood drawbridge crossing the
crocodile-infested moat.
And when it was done, when your sandcastle
was perfect, all that was left was to show your
parents your handiwork: “Mom! Dad! Come see
what I made!”
We invite you to relive those days of wonder, a
time of unfettered imagination and excitement.
It’s a time and place that’s at the very heart
of who we are as an organization. It fuels
our creativity as we conceive of the ultimate
community and the ultimate new home. Sure,
the materials have changed (we don’t build
with sand anymore), but the sense of infinite
possibilities, our desire to surprise and delight
and our pride remain the same.
We dream. We design. We build.
We create inspired communities
– one home, one family, one
neighbourhood at a time.
Genesis
Come dream with us.
G ENESIS LAND DE VELOP ME NT CORPOR AT ION
TABLE O F
CONTE NTS
CEO's Message
Calgary Projects Map
Community Involvement
Management’s Discussion and Analysis
Consolidated Financial Statements
02
06
10
12
38
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G ENESIS LAND DE VELOP ME NT CORPOR AT ION
■ Residential home building sales increased by 38% to
earnings. The Alberta economy has evolved from the
■ Profitably grow our existing businesses in land
90 homes, representing the first step in a return to
boom/bust cycle of petroleum drilling to larger, longer-term
development, commercial development and home
profitability for the home building business; and
oil sands projects that are capturing international attention
building;
■ A landmark $32.5 million commercial sale was
completed in the 150 acre Sage Hill Crossing
and investment. This evolution has significant ramifications
■ Develop a comprehensive “people plan”; and
for our business, resulting in a more stable market in which
■ Simplify the Genesis organization.
development project.
to grow.
G ENE SIS 2012 A NNUAL REP ORT
CEO ’S
MESSAGE
Refocusing Direction &
Building on Strengths
Genesis is an established
real
estate
company
with over 15
years
of experience
in
the
land development and
home building industry.
Throughout
this
time,
we’ve experienced both
the ups and downs of
the real estate market,
and have persevered
in our goal to grow our
core businesses. As a result, the Corporation today has a
number of key assets and strengths, as well as challenges,
as we move forward with the next step in our growth.
"This is only the beginning of things
to come for Genesis."
I joined Genesis because I saw great potential and
opportunity in what could be created from the Corporation’s
extensive land base, current economic fundamentals, and
the Board of Directors’ commitment to enhance long-term
value. With that goal in mind, we’re moving forward with
the creation and implementation of a strategic plan aligning
Genesis with its key strengths and core businesses.
Genesis continues to evolve and adapt as highlighted by
A STRONG FOUNDATION
a number of significant changes over the past 18 months.
In February 2012, the Board concluded a strategic review
process that determined it was in the best interest of
shareholders to continue to develop and grow the company.
In response, the Board was revitalized with the addition of
several new and well respected business leaders, while a
new Executive team was engaged in February 2013, with
the objective of refocusing and redefining the organization
and its objectives.
There are many reasons why I believe that Genesis offers
its stakeholders significant opportunity. First, our asset
base includes some of the best located development lands
in the Calgary region that provides many years of inventory
and development potential. This is important since it is
becoming increasingly difficult to bring new developments
on stream in a timely manner. Second, we have a passionate
team of professionals. In the past few months we have
adjusted and further augmented the team to capitalize on
These changes were put in place to build a strong foundation
existing strengths, while adding skills in areas that required
upon which we can create the Corporation’s future. Despite
development. We will continue to do so as requirements
a year of transition, we achieved solid operational results in
dictate. Third, we have the financial resources to be able
2012, highlighted as follows:
to invest in our future growth as strategic development
■ Earnings (attributable to shareholders, before
opportunities appear.
impairment charges and net of related income tax
In addition, positive general economic conditions are
effects) increased to $22.6 million, revenues increased
expected through 2013 with solid fundamentals, including
by 48%, and gross margin (before extraordinary items)
low unemployment and interest rates, low and stable
was 33%;
inflation rates, positive net in-migration and above average
The combination of these and other factors provides
Profitably grow our existing businesses.
Genesis with a healthy environment to produce strong
Land development is the historical backbone of Genesis
returns from its core land development and homebuilding
and we have significant holdings in a diverse group of lands
activities. Our goal is to access the value in our assets
in terms of geography, use and approvals status. It is one
going forward while staying open to opportunities as they
of our core strengths and as such, we will continue to
appear, effectively conveying our accomplishments to
methodically expand our activities in this area to the benefit
stakeholders.
of our stakeholders. As our development activities are
refocused and redefined, we may identify non-core assets
ALIGNING STRATEGY WITH STRENGTHS
for disposal, provided we obtain a fair price that reflects
In order to unlock the Corporation’s full value, we need to
focus on the right things – our strengths and opportunities.
Our overall goal is to align Genesis with its key areas of
full value. In return, additional capital could be utilized to
judiciously acquire new assets that serve our core market
in and around the Calgary area.
strength and maximize its potential in accordance with our
Home building is a natural extension of land development,
core values.
We will accomplish this through the successful execution
of a three-point business strategy:
GROWTH
PEOPLE
VALUE
SIMPLIFY
offering financial benefits from vertical integration. In order
to maximize its value, we are focused on increasing the
profitability of this business, managing and growing our
residential building activities better than we have in the past.
We are striving to continuously improve results through
increased volume and our ability to lever such volume to
better manage costs, targeting our core market where we
have strengths of land base and expertise. We realize we
help make dreams a reality for our home buyers and their
families, and a positive purchase experience is critical to
our success. In that regard, we are working to improve
our customers’ experience through better communication,
quality control and on-time delivery, every time. The result
is a quality product and a satisfied customer.
Finally, our commercial projects offer significant long-term
potential. In addition to considering outright land sales, we
will look to establish strategic relationships that provide
complementary expertise in order to maximize their
potential.
02
03
G ENE SIS 2012 A NNUAL REP ORT
G ENESIS LAND DE VELOP ME NT CORPOR AT ION
We help make dreams a reality.
Underlying our success will be a heightened focus on our
POISED FOR THE FUTURE
capital management. We will strive to accelerate the use
of our existing capital and financial resources, recognizing
returns from investment more quickly.
Develop a Comprehensive “People Plan”.
As Genesis continues to grow its business, its human
resource requirements will evolve. We recognize recruiting
and keeping the best people in the industry is a must
in order to reach our full potential. We are developing
a comprehensive human resource management plan
that addresses planning,
recruitment, performance
management, training and development and staff relations.
Simplify the Genesis Organization.
We recognize our current corporate structure can be
confusing to our shareholders due to our many non-
controlling entities. We plan to simplify our structure,
making our financial results more transparent and allowing a
better understanding of our business. We are streamlining
our information systems and work processes to increase
efficiency. Such improvements are intended to benefit the
quality and timeliness of information on which decisions
are made, enhance communication with our customers
and reduce costs.
I’d like to thank our employees and directors for all their
hard work over the past year, and shareholders for their
continuing support. Genesis is in a great position for the
future and is working to become a more significant player
in the industry. We have sustainable value from both a
substantial and diversified land base and the time required
to access its potential, combined with the financial capital to
add to our portfolio of opportunities. We have the expertise
of a strong board, management and staff focused on long-
term value accretion. In addition, the Alberta economy and
industry trends continue to provide positive support for the
Corporation’s future growth.
Looking forward, we will continue to meet our promises,
delivering on our strategy for growth and our opportunities.
I’m confident the market will better recognize our assets
and potential over time, resulting in improved value and
return for shareholders. I look forward to the future and
delivering on the Corporation’s potential for the benefit of
all its stakeholders.
BRUCE RUDICHUK, CA, CIRP
President & Chief Executive Officer
July 2013
04
G ENE SIS 2012 A NNUAL REP ORT
GENE SIS COMMUNITI ES & COMME R CIA L S IT ES
CA L GA RY AND ARE A
BAYSIDE IN AIRDRIE
West Airdrie Lands (LP)
Bayview
CITY OF AIRDRIE
Genesis Place (Airdrie Rec Centre)
CITY LIMITS
STONEY TRAIL
Delacour (LP)
Delacour
CALGARY
INTERNATIONAL
AIRPORT
North Conrich
Taravista/Taralake
Genesis Centre of Community Wellness
(Calgary NE Rec Centre)
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TRANS CANADA HWY
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Mountain View
Village
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CITY LIMITS
06
GE NESI S L AND DEVELOPME NT CORPORATION
G ENESIS 2 01 2 ANN UAL RE P OR T
COM MUN ITY
INVOLVEMENT
We create inspired communities
- one home, one family, one
neighbourhood at a time.
2012 SAM AWARDS WINNER
THE GENESIS CENTRE OF
COMMUNITY WELLNESS
From Dream to Reality
The Genesis Centre of Community Wellness is a great
example of our role as a community builder. Community
leaders in North East Calgary were determined to bring
the dynamic and diverse cultures of the local communities
together to promote safe, cooperative and actively healthy
neighbourhoods. To realize their dream, these visionary
leaders founded the North East Centre of Community
Society (NECCS), an organization dedicated to the challenge
of building a facility that would serve the sport, recreation,
educational and cultural needs of the northeast. We saw
the opportunity to support and fund this incredible facility
MAIN LOBBY THE GENESIS CENTRE
OF COMMUNITY WELLNESS
A SPECIAL EVENT AT
THE GENESIS CENTRE OF
COMMUNITY WELLNESS
as a perfect alignment of our core values. The dream
Genesis continues to play a part in the support of the
quickly started to take shape, gaining support and funding
Genesis Centre of Community Wellness – a 225,000
GENESIS PLACE
from the City of Calgary and YMCA, along with a generous
square foot, $120 million multi-purpose complex built to
CHBA - Calgary Region
Northeast Calgary.
naming sponsorship from Genesis.
enrich the health, wellness, and unity of communities in
Genesis Place, the amazing recreation facility in Airdrie,
acts as a gathering place, hub of activity and true heart of
the community. We are proud of our commitment and on-
going support of Genesis Place and the what it means to
the quality of life for the community of Airdrie.
We dream. We design. We build.
We create inspired communities - one home,
one family, one neighbourhood at a time.
GENESIS PLACE
AIRDRIE, AB
THE GENESIS CENTRE
OF COMMUNITY WELLNESS
2012
AN AWARD WINNING
HOME BUILDER
We are proud to announce the Genesis Builders Group is a
2012 SAM Award Winner
The Canadian Home Builders’ Association – Calgary Region
presented The 26th Annual SAM Awards, celebrating
innovation and excellence in the Calgary and area’s
residential construction industry at a Gala event held on
April 13, 2013. There were more than 1,600 people in
attendance.
Genesis Builders Group, the home building arm of Genesis
Land Corporation, was awarded the winner of the SAM
Award for best new home (up to $199,900).
The award process is very detailed with volunteer industry
peers judging the submissions and awarding points in each
category. A record number of entries were submitted from
members vying for the prestigious awards. The results are
authenticated by an independent auditing firm.
10
11
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
For the three months and year ended December 31, 2012
(All amounts are in thousands Canadian dollars, except per share amounts or unless otherwise noted. )
DATED MARCH 20, 2013
The following management’s discussion and analysis (MD&A) of the financial condition and results
of operations of Genesis Land Development Corp. (“Genesis” or the “Corporation”) should be
read in conjunction with the consolidated financial statements and the notes thereto for the year
ended December 31, 2012 prepared in accordance with International Financial Reporting Standards
(“IFRS”). Readers should also read the “Forward-Looking Statements” legal advisory contained at
the end of this document.
The audited consolidated financial statements and comparative information have been prepared in
Adjusted earnings per share (adding back after-tax write-down) - basic and diluted
accordance with International Financial Reporting Standards (“IFRS”). They have been reviewed
by the Corporation’s Audit Committee, consisting of three independent directors, and adopted by
the Board of Directors. Additional information, including the Corporation’s Annual Information Form
(“AIF”), is available on SEDAR at www.sedar.com.
Total assets
Loans and credit facilities
(1) Net of income tax expense.
G ENE SIS LAN D DE VE LOP M EN T CORP ORATION
BUSINESS OF GENESIS
Genesis is a real estate development and home building
corporation headquartered in Calgary, Alberta. It is engaged
in the acquisition, development and sale of land, residential
lots and homes in Alberta and British Columbia. The
commercial, industrial and urban communities, and
resort destinations; and
■ the construction and sale of single- and multi-family
homes through Genesis Builders Group (“GBG”), a
wholly-owned subsidiary of the Corporation.
Corporation reports its activities as two business segments:
All business activities of Genesis are conducted in Western
land development and residential home building. Within
Canada, with active development primarily in and around
land development are two areas: development of land and
the cities of Calgary and Airdrie.
residential lots. Genesis’ vertically integrated operations
include:
The Corporation is listed for trading on the Toronto Stock
Exchange (the “Exchange” or “TSX”) under the symbol
■ the acquisition of land held for future development,
“GDC”.
including the planning, servicing and marketing of
EXECUTIVE SUMMARY
Total revenues
Gross margin
Impairment (recovery) of real estate held for development and sale
Gross margin, before write-downs (recoveries)
Gross margin, before write-downs (%)
Net earnings(1) attributable to shareholders
Net earnings(1) per share - basic
Net earnings(1) per share - diluted
2012
2011
2010
141,582
14,171
33,146
47,317
33%
8,861
0.20
0.20
0.51
95,760
29,792
2,474
32,266
34%
11,060
0.25
0.25
0.29
137,383
68,972
(3,714)
65,258
48%
33,514
0.76
0.75
0.75
383,317
102,242
378,018
88,231
350,466
81,320
General economic conditions were positive in 2012 in
The gross margin percentage before write-downs
Canada and in the land development/housing industry,
decreased slightly by 1% due to a different mix of properties
resulting in an improved market over 2011. Genesis
sold during 2012, particularly the sales mix of single-family
realized a 48% increase in revenues to $141,582, largely
homes that included a higher number of entry level homes.
due to a major sale of 34.35 acres in the Sage Hill Crossing
Genesis expects single-family home gross margins to
property (amounting to $32,526), and higher lot and
improve as the volume of home sales increases and sites
residential home sales. The Corporation participated in
continue development in 2013. Refer to pages 18-25 for
multiple active projects during the year ended December
detailed analysis of revenue, cost and gross margin.
31, 2012. Approximately 13 phases/sites were under
development and 15 phases/sites were in the process of
being sold (see table on page 19).
The Corporation holds some of
the best
located
development lands in the Calgary region that provide
many years of inventory and development potential. This is
13
MANAGEMENT’S DISCUSSION AND ANALYSIS 2012 A NN UA L REPORT
G ENE SIS LAN D DE VE LOP M EN T CORP ORATION
important since it is becoming increasingly difficult to bring
positioning itself for future growth. With a diversified and
new developments on stream in a timely manner. Partially
substantial land base, the Corporation is well positioned
as a result of these conditions, there has been some
to focus on developing those projects that offer the best
impairment of real estate held for development and sale,
return in the market going forward.
which increased in 2012 for certain properties, primarily:
Delacour, Rocky View County; Acheson, Parkland County;
OUTLOOK
4. Strengthening the Corporation’s relationships within
4. Debt to gross book value: a leverage measure that
the lending and investment community with a view to
calculate the percentage that a company’s value would
maximizing access to competitively priced capital.
cover its debt obligations. A lower percentage indicates
With a diversified and substantial land base, the Corporation
a greater ability for the company to repay its debt.
is well positioned to focus on developing those projects
5. Debt (total liabilities) to equity ratio: a leverage
and Spur Valley, Regional District of East Kootenay. The
The positive trend
in general economic conditions
that offer the best return in the market going forward.
measure that indicates what proportion of equity and
decline in value resulted from specific market conditions,
and the industry is expected through 2013 with solid
geographical locations and estimated monetization horizons
economic fundamentals, including low unemployment
of each of the properties. The Corporation’s portion of
and interest rates, low and stable inflation rates, positive
the impairment (net of joint venture and non-controlling
net in-migration and above average earnings, among other
interests) was $18,268 of the $33,146 write-down. The
factors. The combination of these factors provides Genesis
impairment impacted overall results for the Corporation,
with a healthy environment for its core development and
KEY FINANCIAL PERFORMANCE
INDICATORS
Genesis measures the performance of the Corporation
through the following Key Financial Performance Indicators
(“KPIs”):
including gross margin and net earnings. Despite this, net
homebuilding activities in the coming year. During this time,
1. Cash flows from operating activities: a measure that
debt a company is using to finance its assets. A high
debt to equity ratio indicates that a company has utilized
a higher amount of debt to finance its growth.
6. Return on equity: a measure of return of a company’s
profitability by indicating how much profit a company
generates with shareholders’ invested capital. The
higher the number, the better return from use of
earnings attributable to shareholders, before impairment
Genesis will continue to pursue a strategy of positioning
represents a company’s ability to generate cash through
shareholder funds.
charges and net of related income tax effects, were
itself for future growth, focusing its activities in Alberta
operations in order to finance capital programs and
$22,562, which is a substantial improvement over 2011 for
and, more particularly, the greater Calgary area.
repay debt.
which the comparable amount was $13,010.
Subsequent to the end of the year, Genesis announced the
The Corporation achieved net earnings of $0.20 per share
appointment of a new President and Chief Executive Officer,
for the year and incurred a loss of $0.16 per share for the
Bruce Rudichuk, as well as Executive Vice-President and
2. Cash flows from operating activities per share: a
measure that represents the portion of a company’s
cash flows allocated to each outstanding share of
three months ended December 31, 2012, compared to
Chief Financial Officer, Mark Scott. These appointments are
common stock flows.
7. Return on assets: a measure of return that indicates
how profitable a company is relative to its total assets,
and how efficient it is at using assets to generate
earnings. This measure can vary substantially between
industries. The higher the number, the better the
company is at earning more money on less investment.
net earnings of $0.05 and $0.25 per share for the three
intended to build the Corporation’s capacity to organically
months and year ended December 31, 2011, respectively.
grow its operations in the future as well as drive improved
Setting aside these impairment charges, Genesis achieved
financial results through operational efficiencies and fiscal
solid results in 2012 with earnings per share attributable
discipline. In that regard, management will dedicate a
to shareholders (before impairment charges and net of
substantial amount of its efforts for 2013 in the following
related income tax effects) of $0.51, as compared with
areas:
$0.29 in 2011.
Loans and credit facilities increased in 2012 due to seven
new credit facilities secured for servicing of land in Sage
1. Growing the Corporation’s approved and well-located
core land positions and expand its development
activities, primarily within the City of Calgary and
Hill Crossing, Saddlestone Phase 6, Canals phase 6 and for
Airdrie;
the home building division. The proceeds from the sale of
2. Building a stronger and more profitable homebuilding
sites 1 and 2 in Sage Hill Crossing were used to repay credit
operation that measures its success in terms of brand
facilities subsequent to year end, reducing the balance of
recognition, customer satisfaction, and volume in
loans and credit facilities by $31,411. This reduced the
addition to improved financial performance;
loans and credits facilities outstanding to $70,831 and
the debt to equity ratio to 0.55. Refer to pages 28-29 for
detailed analysis of liquidity and capital resources.
3. Assessing the Corporation’s long-term land holdings,
specifically its long term land development and
homebuilding requirements, and implementing the
The positive trend in general economic conditions and
appropriate strategic acquisition and /or divestiture
the housing industry is expected through 2013. During
plans to increase management’s focus on adding
this time, Genesis will continue to pursue a strategy of
shareholder value; and
3. Net earnings per share: an earnings measure that
8. Net Asset Value per share (“NAV”): a measure that
serves as an indicator of a company’s profitability. It
represents the portion of a company’s profit allocated to
the weighted average outstanding shares of common
stock.
indicates the value of Corporation’s assets allocated to
each outstanding share of common stock flows.
Three Months Ended December 31
Year Ended December 31
Cash flows from operating activities
Cash flows from operating activities per share
Net earnings per share - basic and diluted
2012
(18,166)
(0.40)
(0.16)
2011
(4,548)
(0.10)
0.05
Net Asset Value per share
Return on equity
Return on assets
Debt to equity ratio
Debt to gross book value
2012
(1,672)
(0.04)
0.20
6.61
4.8%
2.3%
0.69
27.1%
2011
13,656
0.31
0.25
7.44
6.4%
3.0%
0.60
23.6%
Cash out flows from operating activities increased for the
construction as at December 31, 2012 compared with 70
three months and year ended December 31, 2012 as a result
homes at December 31, 2011. As a result, the revenues
of funding requirements to support the growth in the home
from the 2012 sales will be recognized upon home
building division. The home building division experienced
completion, increasing cash flows from operating activities
strong growth in sales over 2012 with 156 homes under
at that time.
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MANAGEMENT’S DISCUSSION AND ANALYSIS 2012 A NN UA L REPORT
G ENE SIS LAN D DE VE LOP M EN T CORP ORATION
Debt to gross book value is calculated as follows:
Debt
Loans and credit facilities excluding deferred financing fees
104,554
89,989
December 31,
2012
December 31,
2011
Gross Book Value(1)
Real estate held for development and sale
Property and equipment
Other assets(2)
Deferred financing fees
Gross book value
Debt to gross book value
271,845
688
110,994
2,312
385,839
27.1%
299,916
2,062
77,654
1,758
381,390
23.6%
(1) Gross book value is calculated as total assets before depreciation on property and equipment, net of impairment losses. Gross book value is a non-IFRS measure as
described in the ‘Advisories’ section of this document.
(2) Other assets consist of amounts receivable, other operating assets, deferred income taxes and cash and cash equivalents.
The debt to equity ratio is calculated as total liabilities divided by total equity as follows:
Total liabilities
Total equity
Debt to equity ratio
December 31,
2012
December 31,
2011
157,008
226,309
0.69
141,399
236,619
0.60
The Corporation’s debt decreased by $31,411 subsequent
received on January 10, 2013. This reduced the loans and
to year end 2012, when proceeds from sale of sites 1 and
credits facilities outstanding to $70,831 and the debt to
2 in the Sage Hill Crossing commercial development were
equity ratio to 0.55.
NET ASSET VALUE CALCULATION
Independent appraised value(2)
Serviced Single-family lot Inventory
Serviced Multi-family sites
Fully approved Commercial/Industrial Sites
Fully approved developable lands - Calgary & Airdrie
Other raw and partially approved lands
Total pre-tax land value
Other balance sheet assets (see page 12 for details)
Balance sheet liabilities (see page 12 for details)
Add amount due from related entities
Estimated pre-tax NAV
Estimated tax(3)
Estimated after-tax NAV
Total shares outstanding as at December 31
Estimated after-tax NAV per share outstanding
2012
2011
51,150
11,130
55,600
145,480
55,271
318,631
141,676
(157,008)
26,834
330,133
(34,403)
295,730
44,767
6.61
92,963
24,700
76,194
136,568
82,066
412,491
88,231
(141,399)
25,133
384,456
(53,329)
331,127
44,484
7.44
(1) NAV is a non-IFRS measure as described in the ‘Advisories’ section of this document.
(2) Appraised value represents 100% Genesis owned lands. Limited partnership lands owned by other limited partnership investors (and the corresponding NCI liability) are
excluded from the calculation. Appraised values of lands represents market value based on comparative figures of similar market transactions.
(3) Genesis has used corporate income tax rate of 25% for 2012 and 26.5% for 2011 to calculate taxes in determining its NAV.
The decrease in estimated NAV to $6.61 in 2012 from $7.44
sheet assets less balance sheet liabilities and corporate
in 2011 is mainly attributable to a decline in value of real
income tax as at December 31, 2012 and 2011. The book
estate (primarily raw and partially approved lands outside
value of all remaining assets and liabilities as set forth in
of the cities of Airdrie and Calgary), net of non-controlling
the consolidated financial statements of the Corporation
interest. In addition it is attributable to the payments
for the year ended December 31, 2012 and 2011 has been
of interest on financings, taxes and other general and
added to calculate the pre-tax NAV. Estimated taxes have
administrative expenses during the year ended December
been deducted as if all properties were sold at their market
31, 2012.
values to determine NAV.
The estimated NAV was calculated using the independent
appraiser’s total pre-tax land value plus additional balance
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MANAGEMENT’S DISCUSSION AND ANALYSIS 2012 AN NU AL R EPO RT
G ENE SIS LAN D DE VE LOP M EN T CORP ORATION
Other balance sheet assets and liabilities in the NAV Calculation include the following:
YEAR ENDED DECEMBER 31, 2012
YEAR ENDED DECEMBER 31, 2011
($’s)
Assets
Housing projects under development
Accounts receivable
Deferred tax assets
Other operations assets
Cash
Total
Liabilities
Loans and credit facilities
Customer deposits
Accounts payable and accrued liabilities
Income taxes payable
Deferred tax liabilities
Land development service costs
Total
2012
2011
30,204
85,230
-
16,237
10,005
141,676
102,242
4,352
21,309
4,617
60
24,428
10,129
43,451
2,859
20,942
10,850
88,231
88,231
7,582
16,415
12,970
-
16,201
157,008
141,399
RESULTS OF OPERATIONS
REVENUE, COST OF SALES AND GROSS MARGIN
Revenues
Cost of sales
Gross margin
Gross margin, before write-downs
Gross margin, before write-downs (%)
Three months ended December 31,
Year ended December 31,
2012
57,706
(77,308)
(19,602)
14,614
25%
2011
25,668
(19,712)
5,956
9,559
37%
%
125%
292%
(429%)
53%
2012
141,582
(127,411)
14,171
47,317
33%
2011
95,760
(65,968)
29,792
32,266
34%
%
48%
93%
(52%)
47%
The revenue mix for the three months and year ended December 31, 2012 and 2011 is as follows:
THREE MONTHS ENDED DECEMBER 31, 2012
THREE MONTHS ENDED DECEMBER 31, 2011
24%
Residential Homes
61%
Development Land(1)
15%
Residential Lots
58%
Residential Lots
(1) Development land sales increased substantially in the fourth quarter of 2012 due to the sale of commercial land in Sage Hill Crossing.
19%
Development Land
23%
Residential Homes
35%
Development Land
37%
Residential Lots
28%
Residential Homes
23%
Development Land
43%
Residential Lots
Genesis’ active projects during 2012 follow:
34%
Residential Homes
Community
Bayside
Canals
Sage Meadows
Kinwood
Sage Hill Crossing
Saddlestone
(1) Multi-family.
Location
Airdrie
Airdrie
NW Calgary
NW Calgary
NW Calgary
NE Calgary
Phases/Sites
Under Development
Phases/Sites
Being Sold
-
6
4
2
1, 2, 3, 4, 5, 6, 7
5A, 6, 12(1)
7, 9
-
1, 2
2
3, 4, 5, 6, 7
1, 2, 3, 4, 12(1)
For a complete list of all properties please refer to the AIF for the year ended December 31, 2012.
LAND DEVELOPMENT
Residential Lots
Residential lot revenue
Cost of sales
Gross margin
Gross margin, before write-downs
Gross margin, before write-downs (%)
Number of lots sold
Average revenue per lot
Average cost of sales per lot
Three months ended December 31,
Year ended December 31,
2012
8,470
(3,542)
4,928
4,928
58%
46
184
77
2011
15,138
(7,206)
7,932
7,932
52%
93
163
77
%
(44%)
(51%)
(38%)
(38%)
(51%)
13%
0%
2012
51,933
(24,412)
27,521
27,521
53%
287
181
85
2011
40,739
(24,083)
16,656
16,721
41%
255
160
94
%
27%
1%
65%
65%
13%
13%
(10%)
18
19
MANAGEMENT’S DISCUSSION AND ANALYSIS 2012 A NN UA L REPORT
G ENE SIS LAN D DE VE LOP M EN T CORP ORATION
$19,729
$19,729
Airdrie were as follows:
Residential lot revenues decreased during the three
in 2012. The timely development of such phases and
months ended December 31, 2012 compared to the same
resulting lot sales reflect the improvement of Calgary’s
period in 2011 as revenues for the newly released phase
housing market in general year over year.
1 of the Calgary community of Kinwood were included in
2011. Lot revenues for the year ended December 31, 2012
were higher due primarily to strong sales in newly released
The revenue per lot for the year ended December 31, 2012
was higher than 2011 due to the sales mix of properties
in 2011, which contained duplex houses with lower sales
phases 3 and 4 of the Calgary community of Saddlestone,
price.
phase 2 of the Calgary community of Kinwood, and phase 6
of the Airdrie community of Canals, which were completed
The number of lots sold by community during the three months and year ended December 31, 2012 and 2011 in Calgary and
Community
Calgary
Sherwood
Saddlestone
Sage Meadows
Kinwood
Airdrie
Bayside
Canals
Total
Three months ended December 31,
Year ended December 31,
# of lots sold
Average revenue per lot
# of lots sold
Average revenue per lot
2012
2011
2012
2011
2012
2011
2012
2011
-
5
1
-
-
40
46
-
8
2
53
29
1
93
-
226
163
-
-
179
184
-
209
241
167
139
226
163
-
88
31
49
56
63
287
3
10
82
53
103
4
255
-
197
198
167
156
183
181
209
211
187
165
128
191
160
Development Land
Development land revenues
Cost of sales(1)
Gross margin
Gross margin, before write-downs
Gross margin, before write-downs (%)
Three months ended December 31,
Year ended December 31,
2012
35,239
(62,831)
(27,592)
6,623
19%
%
687%
663%
633%
N/R(2)
2011
4,475
(8,239)
(3,764)
(188)
(4%)
2012
49,389
(71,840)
(22,451)
10,695
22%
%
119%
302%
(584%)
52%
2011
22,523
(17,885)
4,638
7,020
31%
THREE MONTHS ENDED DECEMBER 31,
($ in thousands)
REVENUE
COST OF SALES
GROSS MARGIN
GM%
$3,974
$4,034
$5,226
$24,955
79%
$15,138
$15,138
#0%
$35,570
52%
$7,206
$7,932
$8,470
$3,542
$4,928
58%
YEAR ENDED DECEMBER 31,
($ in thousands)
REVENUE
COST OF SALES
GROSS MARGIN
GM%
$12,729
$10,409
$8,985
$23,128
45%
$35,570
$26,585
75%
-2%
-2%
9
0
0
2
$-60
0
1
0
2
1
1
0
2
2
1
0
2
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
$40,739
(2) Not reflective due to percentage increase.
(1) Includes impairment losses for the three month ended December 31, 2012 of $34,215 (2011 - $3,576) and for the year ended December 31, 2012 of $33,146 (2011 - $2,382)
$24,019
41%
$16,720
$24,412
$27,521
20
$51,933
53%
21
MANAGEMENT’S DISCUSSION AND ANALYSIS 2012 A NN UA L REPORT
G ENE SIS LAN D DE VE LOP M EN T CORP ORATION
THREE MONTHS ENDED DECEMBER 31,
($ in thousands)
REVENUE
COST OF SALES
GROSS MARGIN
GM%
0
1
0
2
$2,800
$1,059
$1,741
1
1
0
2
-4%
$-188
2
1
0
2
$4,475
$4,663
19%
$6,623
YEAR ENDED DECEMBER 31,
($ in thousands)
62%
$10,089
$35,239
$28,616
REVENUE
COST OF SALES
GROSS MARGIN
GM%
0
1
0
2
1
1
0
2
2
1
0
2
$14,859
$27,653
$22,523
$15,503
31%
$7,020
22%
$10,695
$42,512
65%
$49,389
$38,694
The increase in development land sales for the three
months ended December 31, 2011 was due to a cost to
months and year ended December 31, 2012 compared to
complete adjustment for a development land parcel sold
the same periods in 2011 was a result of the sale of sites
during three months ended September 30, 2011. The
1 and 2 in the commercial development project of Sage Hill
gross margin before the adjustment was $401 or 9%.
Crossing for $32,526 in December 2012.
The increase in gross margin for the three months ended
The decrease in gross margin before write downs from 31%
to 22% for the year ended December 31, 2012 compared
to 2011 is due to the comparatively lower margin in Sage
Hill Crossing sites 1 and 2. The margin on the project is
expected to improve with an increase in the value due to
development of sites 1 and 2 by the purchaser.
The negative gross margin before write-downs for three
December 31, 2012 was due to sale of sites 1 and 2 of
the Sage Hill Crossing commercial development in 2012,
compared to sale of a multi-family site in the Calgary
community of Kincora, which had a 10% gross margin. The
multi-family parcel sold in 2011 had unique characteristics
that required additional on-site development costs, which
affected its selling price.
RESIDENTIAL HOME BUILDING
Single-family
Single-family revenues
Cost of sales
Gross margin
Gross margin, before write-downs
Gross margin, before write-downs (%)
Number of homes sold
Average revenue per home
Average cost of sales per home
Three months ended December 31,
Year ended December 31,
2012
13,901
(10,934)
2,967
2,967
21%
34
409
322
2011
6,002
(4,237)
1,765
1,765
29%
11
546
385
%
132%
158%
68%
68%
209%
(25%)
(16%)
2012
39,312
2011
31,477
(31,037)
(23,429)
8,275
8,275
21%
90
437
345
8,048
8,048
26%
65
484
360
%
25%
32%
3%
3%
38%
(10%)
(4%)
22
23
MANAGEMENT’S DISCUSSION AND ANALYSIS 2012 A NN UA L REPORT
G ENE SIS LAN D DE VE LOP M EN T CORP ORATION
THREE MONTHS ENDED DECEMBER 31,
($ in thousands)
REVENUE
COST OF SALES
GROSS MARGIN
GM%
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
$10,089
42%
$5,823
$4,266
$6,897
$4,803
30%
$6,002
$4,237
$35,570
#0%
29%
$2,094
$1,765
21%
$10,984
$13,901
$2,917
YEAR ENDED DECEMBER 31,
($ in thousands)
REVENUE
COST OF SALES
GROSS MARGIN
GM%
$45,025
$46,297
$30,778
32%
$31,561
32%
$14,247
$14,736
$31,477
$23,429
26%
21%
$31,037
$39,312
$8,048
$8,275
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
The increase in the number of single-family homes sales
decreased by five percentage points in 2012. Genesis
closed during the three months and year ended December
expects single-family home gross margins to improve as
31, 2012 compared to the same period in 2011 was due to
the volume of home sales increases and sites continue
a focused effort by the home building division to strengthen
development in 2013.
sales. Genesis realized a 38% increase in the number of
residential home unit sales closed in 2012. The revenue
per home declined for the three months and year ended
December 31, 2012 due to increase in number of entry
level home sales closed. Overall, gross margin percentage
In addition, the sale of a custom home at a price of $959
and eight other homes with an average selling price of
$533 in the communities of Bayside and Sage Meadows
in Airdrie and Calgary resulted in a higher average price for
the three months ended December 31, 2011.
The number of home sales closed by community during the three months and year ended December 31, 2012 and 2011 in
Calgary and Airdrie were as follows:
Three months ended December 31,
Year ended December 31,
# of single-family
homes closed
Average amount
per home
# of single-family
homes closed
Average amount
per home
2012
2011
2012
2011
2012
2011
2012
2011
9
-
-
10
3
-
12
34
-
-
1
2
3
-
5
11
390
-
-
414
547
-
385
409
-
-
959
401
759
-
397
547
32
2
-
17
9
-
30
90
-
-
4
25
12
1
23
65
377
524
-
414
566
-
469
437
-
-
659
440
648
461
417
484
Community
Calgary
Evansridge
Kinwood
Sherwood
Saddlestone
Sage Meadows
Taralake
Airdrie
Bayside
Total
Multi-family
The last unit in The Breeze multi-family project sold in
community of Saddlestone, and Brownstones in the
the first quarter of 2012. Currently, Genesis has two row
community of Sage Meadows.
housing projects in development: Saffron in the Calgary
Impairment of real estate held for development and sale
Land
LP
Total
(1) Not reflective due to percentage increase.
Three months ended December 31,
Year ended December 31,
2012
18,562
15,654
34,216
2011
2,588
1,015
3,603
%
617%
1442%
850%
2012
18,268
14,878
33,146
2011
2,653
(179)
2,474
%
589%
N/R(1)
1240%
24
25
MANAGEMENT’S DISCUSSION AND ANALYSIS 2012 A NN UA L REPORT
G ENE SIS LAN D DE VE LOP M EN T CORP ORATION
Valley, Regional District of East Kootenay.
prefer a mixed-use development, resulting in a lower value
Real estate held for development and sale
The impairment of land held for future development for the
The increase is primarily attributable to Delacour, amounting
three months and year ended December 31, 2012 increased
to $29,561 of which $13,488 is attributable to real estate
as a result of specific market conditions, geographical
held in a limited partnership. The main driver for this is the
locations and estimated monetization horizons of those
anticipated change in growth strategy of the county under
properties. The properties mainly affected were: Delacour,
which this property is located. The county may not allow for
Rocky View County; Acheson, Parkland County; and Spur
residential development on the entire site since they would
GENERAL AND ADMINISTRATIVE EXPENSE
of the property.
Corporate administration
Compensation and benefits
Professional services
Three months ended December 31,
Year ended December 31,
2012
493
1,199
601
2,293
2011
454
1,574
980
3,008
%
9%
(24%)
(39%)
(24%)
2012
2,054
4,982
3,028
2011
1,806
5,173
4,322
10,064
11,301
%
14%
(4%)
(30%)
(11%)
The general and administrative expense for the three
associated with settlements of certain legal disputes and
months and year ended December 31, 2012 compared to
fees paid for professional services incurred in 2011.
the same period in 2011 decreased mainly due to costs
SELLING AND MARKETING
ASSETS
During the year ended December 31, 2012, the Corporation
activities. At December 31, 2012, the consolidated cash
generated net earnings of $8,861 for funding its operating
balance was $10,005 as compared to $10,850 as at
Amounts receivable
Other operating expenses
Deferred income taxes
Cash and cash equivalents
December 31, 2011.
December 31, 2012
271,845
85,230
16,237
-
10,005
383,317
%
71%
22%
4%
-
3%
100%
December 31, 2011
299,916
43,451
20,942
2,859
10,850
%
79%
11%
6%
1%
3%
378,018
100%
REAL ESTATE HELD FOR DEVELOPMENT AND SALE
Real estate held for development and sale
Provision for write-down
December 31, 2012
December 31, 2011
315,759
(43,914)
271,845
310,670
(10,754)
299,916
%
2%
308%
(9%)
During the year ended December 31, 2012, the carrying
in home division inventory due to ongoing development
value of real estate held for development and sale
work and ongoing residential land development relating to
Three months ended December 31,
Year ended December 31,
decreased, primarily as a result of impairment of certain
the Calgary communities of Sage Meadows, Saddlestone,
Advertising and marketing
Commission on sale of development land
2012
652
976
1,628
2011
151
-
151
%
332%
-
978%
2012
2,863
1,085
3,948
2011
1,178
-
%
143%
-
1,178
235%
The increase for the three months and year ended
which commenced in 2012, and costs for higher marketing
properties resulting from specific market conditions,
Kinwood and Sage Hill Crossing, as well as the Airdrie
geographical locations and estimated monetization horizons
community of Canals.
of each of the properties. In addition, sales of residential
lots, development land parcels and housing inventory
contributed to the reduction. This was offset by an increase
December 31, 2012, was mainly due to the commission on
efforts by the home building division to strengthen sales.
Real estate held for development and sale changed during the year ended December 31, 2012 was as follows:
the sale of sites 1 and 2 in Sage Hill Crossing commercial
development, the addition of a $500 expense for naming
rights to the “Genesis Centre for Community Wellness”
FINANCE EXPENSE
Interest incurred
Financing fees accretion
Interest and financing fees capitalized
Three months ended December 31,
Year ended December 31,
2012
1,590
507
(1,036)
1,061
2011
1,416
394
(825)
985
%
12%
29%
26%
8%
2012
5,669
1,438
(4,464)
2,643
2011
6,549
1,557
(2,937)
5,169
%
(13%)
(8%)
52%
(49%)
Interest expense relates to certain operating loans secured
and fees paid on new and renewed loans. The increase in
by land and single-family home building operations. The
interest expense for the three months ended December
decrease in interest expense for the year ended December
31, 2012 reflects new loans secured and drawn on during
31, 2012 compared to 2011 was mainly due to lower
that period.
average outstanding loan balances and lower interest rates
December 31, 2011
Acquisitions & Transfers
Development
Sold
Impairment adjustments
December 31, 2012
Land Under
Development
Land Held for
Future Development
149,188
1,938
39,137
(55,739)
(1,087)
133,437
140,599
(1,938)
1,616
-
(32,073)
108,204
Housing
Projects
10,129
19,331
34,151
(33,407)
-
30,204
Intersegment
Elimination
-
(8,447)
8,447
-
-
-
Total
299,916
10,884
83,351
(89,146)
(33,160)
271,845
Genesis held a total of 425 single-family lots in both 2011 and 2012. The Corporation acquires land for new communities as
existing land is developed and sold.
26
27
MANAGEMENT’S DISCUSSION AND ANALYSIS 2012 A NN UA L REPORT
G ENE SIS LAN D DE VE LOP M EN T CORP ORATION
The inventory mix of single-family lots by community based on the book value was as follows:
The Corporation requires funds to meet operating expenses,
from its operating activities, supplemented by credit
DECEMBER 31, 2012
DECEMBER 31, 2011
18%
Sage Meadows
77 Lots
13%
Saddlestone
57 Lots
25%
Canals
108 Lots
8%
Kinwood
33 Lots
7%
Saffron
29 Lots
5%
Others
19 Lots
24%
Bayside
102 Lots
AMOUNTS RECEIVABLE
Amounts receivable
7%
Saddlestone
30 Lots
14%
Kinwood
59 Lots
5%
Canals
23 Lots
25%
Sage Meadows
106 Lots
5%
Other
19 Lots
44%
Bayside
188 Lots
December 31, 2012
December 31, 2011
85,230
43,451
%
96%
Amounts receivable increased at December 31, 2012
to Sage Hill Crossing was received subsequent to the year
compared to December 31, 2011 mainly due to the
end on January 10, 2013, reducing the balance of loans and
receivable for sites 1 and 2 in the Sage Hill Crossing
credit facilities by $31,411.
commercial development. In addition, sales achieved in the
communities of Bayside, Canals, Saddlestone and Kinwood
contributed to the increase. The amount receivable related
The Corporation generally retains title to lots and homes
until full payment is received in order to mitigate credit
exposure.
LIQUIDITY AND CAPITAL RESOURCES
Loans and credit facilities
Customer deposits
Accounts payable and accrued liabilities
Land development service costs
Non-controlling interest
Shareholders' equity
December 31, 2012
102,242
4,352
21,309
24,428
36,719
189,590
378,640
%
27%
1%
6%
6%
10%
50%
100%
December 31, 2011
88,231
7,582
16,415
16,201
56,771
179,848
365,048
%
24%
2%
4%
4%
16%
50%
100%
service debt, complete on-going land development projects,
facilities where needed, to pay for operating expenses,
purchase lands, and construct single- and multi-family
incur development and construction costs, pay principal
homes. These requirements are met by using project-
and interest on loans and credit facilities, and purchase
specific loans and credit facilities, limited partnership
lands. The Corporation regularly reviews its credit facilities
capital and cash generated from operations.
and manages the requirements in accordance with project
Management believes that Genesis has sufficient liquidity
development plans and operating requirements.
LOANS AND CREDIT FACILITIES
Loans and credit facilities from lending institutions, gross
of deferred financing fees of $2,312, at December 31,
2012 totaled $104,554. The following is a summary of the
Corporation’s drawn and outstanding loan and credit facility
balances as at December 31, 2012 and as at the end of the
previous four quarters:
Land and land project loans
Home building operations
Other
Deferred financing fees
Fourth Quarter
2012
Third Quarter
2012
Second Quarter
2012
First Quarter
2012
Fourth Quarter
2011
95,785
8,769
-
104,554
(2,312)
102,242
78,138
338
216
78,692
(1,451)
77,241
79,212
-
-
79,212
(1,232)
77,980
82,546
112
696
83,354
(1,446)
81,908
88,047
1,254
688
89,989
(1,758)
88,231
The loans and credit facilities increased mainly due to the
new credit facilities secured for servicing properties
seven new project loans offset by the payment of project
including the Sage Hill Crossing commercial development,
loans by lot closings achieved in the Calgary communities
phase 6 in the community of Canals, phase 5 in the
of Saddlestone and Sage Meadows. The project loans were
community of Saddlestone and construction of single and
obtained to complete servicing of properties including the
multi-family projects. The proceeds from the sale of sites
Sage Hill Crossing commercial development, phase 6 of
1 and 2 in Sage Hill Crossing were used to repay credit
Canals, phase 5 of Saddlestone, and construction of home
facilities related to servicing of that property subsequent to
building projects.
year end, reducing the balance of loans and credit facilities
Loans and credit facilities increased in 2012 due to seven
by $31,411.
The change in the Corporation’s loans and credit facilities was as follows:
Balance, beginning of year
Advances
Repayments
Finance expense
Interest and financing fees paid and capitalized
Balance, end of year
Year ended
December 31,
2012
Year ended
December 31,
2011
88,231
102,303
(87,396)
2,521
(3,417)
102,242
81,320
91,023
(83,613)
5,169
(5,668)
88,231
During the year ended December 31, 2012, Genesis received $102,303 in loans and credit facilities and made repayments of
$87,396 (see ‘Related Party Transactions’ on page 34)s.
28
29
MANAGEMENT’S DISCUSSION AND ANALYSIS 2012 A NN UA L REPORT
G ENE SIS LAN D DE VE LOP M EN T CORP ORATION
CUSTOMER DEPOSITS
of planned service work, thus incurring previously accrued
Customer deposits are received from third party builders
completion costs.
Annual current contractual obligations were as follows:
for the sale of lots. On completion of a sale, land service
obligations are recognized as per the Corporation’s
accounting policy. The decrease in customer deposits in
2012 is primarily due to a $4,754 deposit on site 1 and 2 of
Sage Hill Crossing commercial development being realized
from the completion of a sale.
INCOME TAX PAYABLE
NON-CONTROLLING INTEREST
Non-controlling
interest
liability decreased primarily
Loans and credit facilities, excluding deferred financing fees
due to impairment of real estate assets owned by the
Accounts payable and accrued liabilities
partnerships. In addition, distributions to unit holders of
a limited partnership driven by the sale of a commercial
parcel in the community of Bayside contributed to this
reduction.
Total short-term liabilities
Commitments(1)
December 31,
2012
December 31,
2011
24,109
21,309
45,418
1,406
46,824
16,807
16,415
33,222
10,035
43,257
Refer note 4 to the consolidated financial statement for
further details on non-controlling interest.
SUMMARY OF QUARTERLY RESULTS
(1) Commitments are composed of naming rights and lease obligations.
At December 31, 2012, Genesis had obligations due within
operating history, its relationship with its lenders and
the next 12 months of $46,824 of which $24,109 relates to
committed sales contracts, management is confident that
loans and credit facilities, repayment of which is either (i)
Genesis has the ability to continue to renew or repay its
linked directly to the collection of lot receivables and sales
financial obligations as they come due.
proceeds; or (ii) due at maturity. Based on the Corporation’s
Revenues
Earnings (loss) before income
taxes and non-controlling interest
Net (loss) earnings
Net earnings per share
- Basic and Diluted
Fourth
Third
Second
First
Fourth
Third
Second
First
Quarter 2012 Quarter 2012 Quarter 2012
Quarter 2012 Quarter 2011 Quarter 2011 Quarter 2011
Quarter 201
57,610
(24,529)
30,108
7,788
31,074
6,240
21,978
25,615
7,840
1,666
21,590
2,462
20,368
4,637
27,743
4,877
(7,126)
4,956
4,839
6,192
2,057
1,877
3,604
3,522
(0.16)
0.11
0.11
0.14
0.05
0.04
0.08
0.08
Income
tax payable decreased significantly as the
The Corporation paid the following cash distributions to
Corporation paid its 2011 tax liability of $9,500 in full, which
unit holders of the limited partnerships:
was offset by a current tax provision amounting to $1,166.
Refer to note 7 to the consolidated financial statements for
further details.
LAND DEVELOPMENT SERVICE COSTS
Accrued land development service costs increased at
December 31, 2012 compared to December 31, 2011
mainly due to increased lot and home sales during 2012.
The overall increase was partially offset by performance
Limited Partnership #6 and
Limited Partnership #7
Limited Partnership #8
2012
4,445
-
4,445
2011
140
328
468
CONTRACTUAL OBLIGATIONS AND DEBT REPAYMENT
The Corporation’s contractual obligations, other than accounts payable, income taxes payable, customer deposits and land
development service costs, were as follows as of December 31, 2012:
Current
Years 2014 and 2015
Years 2016 and 2017
Thereafter
(1) Excludes deferred financing fees.
Loans and
Credit Facilities(1)
Naming
Rights
Lease
Obligations
24,109
80,445
-
-
104,554
700
1,400
1,400
2,000
5,500
706
1,450
1,244
-
3,400
Total
25,515
83,295
2,644
2,000
113,454
Genesis entered into an agreement with a community
the City of Airdrie. Five of ten required payments have been
society in northeast Calgary, whereby the Corporation will
made and recorded as part of general and administrative
contribute $500 per year for ten years commencing January
expense, including the amount for 2012.
1, 2012, for the naming rights to the “Genesis Centre for
Community Wellness”, a recreation complex in northeast
Calgary. The amount for 2012 has been paid.
As a normal part of business, Genesis has entered into
arrangements and incurred obligations that will impact
future operation and liquidity, some of which are reflected as
Genesis has an agreement with the City of Airdrie, whereby
short-term liabilities and commitments in the consolidated
Genesis will contribute $200 per year for ten years for the
financial statements.
naming rights to “Genesis Place”, a recreation complex in
30
31
MANAGEMENT’S DISCUSSION AND ANALYSIS 2012 A NN UA L REPORT
G ENE SIS LAN D DE VE LOP M EN T CORP ORATION
Seasonality affects the land development and residential
higher due to the sale of sites 1 and 2 in the Sage Hill
home building industry in Canada due to weather conditions
Crossing property for $32,526 in December 2012. Gross
during winter operations. As a result, Genesis will typically
margins and earnings decreased due to an impairment of
realize higher revenues in the summer and fall months at
land held for future development, resulting from specific
which time home building is at its maximum. Revenues
market conditions, geographical locations and estimated
can be impacted by the timing of land sales, which is less
monetization horizons of each of the properties.
cyclical and weather dependent.
The results of the fourth quarter of 2012 were impacted
by two significant items. Revenues were significantly
TRADING AND SHARE STATISTICS
As at March 20, 2013, the Corporation had 44,798,538 common shares issued and outstanding. In addition, there were options
to acquire 1,117,412 common shares of the Corporation issued under Genesis’ stock option plan.
Average daily trading volume
Share price ($/share)
High
Low
Close
2012
42,147
3.70
2.87
3.26
2011
40,647
2010
53,443
5.07
2.30
2.88
5.39
1.97
3.35
($ in thousands)
REVENUES
EARNINGS (Loss) before income taxes
and non-controlling interest
NET EARNINGS
Market capitalization at December 31
145,936
128,115
148,671
Shares outstanding
44,765,728
44,484,287
44,379,448
$-22,742
$-6915
2
1
0
2
r
t
Q
h
t
4
2
1
0
2
r
t
Q
d
r
3
2
1
0
2
r
t
Q
d
n
2
2
1
0
2
r
t
Q
t
s
1
1
1
0
2
r
t
Q
h
t
4
1
1
0
2
r
t
Q
d
r
3
1
1
0
2
r
t
Q
d
n
2
1
1
0
2
r
t
Q
t
s
1
$7,788
$4,956
$6,240
$4,839
$7,840
$6,192
$3,196
$2,057
$2,462
$1,877
$4,637
$3,604
$4,877
$3,523
$57,610
JOINT VENTURE
$30,108
$66,042
$31,074
On April 30, 2010, Genesis entered into a joint venture
(‘JV’) agreement with another real estate development
corporation for the purpose of conducting residential
development of certain northwest Calgary lands known as
the community of Kinwood. Genesis contributed 75 acres
(net of JV interests) and has a 50% interest in the JV. The
development is comprised of six phases. The first phase
purchased these lots for its home building operations. The
Corporation’s transactions with the JV are limited to the
purchase of lots.
On July 15, 2011, the JV obtained a credit facility in the
amount of $17,000. The Corporation and the JV partner
provided a guarantee for this facility. At December 31, 2012,
the balance of the facility was $10,036 (2011 - $4,330). The
Corporation recognized its proportionate 50% share in the
$21,978
$25,615
$21,590
$20,368
$27,743
contained 192 lots and two multi-family sites, which were
2012 financial statements.
all sold. Phase 2 is comprised of 126 single-family lots and
The Corporation deferred $13,167 of margin on contribution
one multi-family site.
During 2012, the JV sold two multi-family sites and 119
single-family lots, including 21 to the Corporation’s home
building division. The JV sold 135 lots in 2011, including 30
lots sold to the home building division. As part of the joint
venture agreement, Genesis has the right to purchase 50%
of the lots available for sale in these communities. Genesis
of land to the JV in 2010. As at December 31, 2012, Genesis
realized $5,605 of that amount as a result of sales to third
parties (2011 – $2,409). Approximately $3,196 (2011 –
$2,409) was recognized during 2012 with the remaining
amount of $7,562 to be realized on the future sale and
development of lots and lands by the JV.
The amounts in the following table include the Corporation's proportionate share of the assets, liabilities, revenue, earnings
and cash flow information of the JV that is proportionately consolidated in these financial statements.
As at and for the year ended
December 31, 2012
As at and for the year ended
December 31, 2011
Cash Flow From (Used In)
Assets
Liabilities
Revenue
Earnings
Activities
30,563
12,321
14,062
1,819
1,147
Operating
29,232
8,827
11,575
1,403
(2,290)
Investing
Activities
-
-
Financing
Activities
(1,147)
2,280
32
33
MANAGEMENT’S DISCUSSION AND ANALYSIS 2012 A NN UA L REPORT
G ENE SIS LAN D DE VE LOP M EN T CORP ORATION
OFF BALANCE SHEET
ARRANGEMENTS
LETTERS OF CREDIT
date. The Corporation continues to analyze these standards
project specific basis. An impairment loss is recognized
designed under their direct supervision, Genesis’ DC&P to
to determine the impact on financial statements. Refer to
to the extent that the carrying value of a project exceeds
provide reasonable assurance that:
note 2(v) to the consolidated financial statements for a
the fair value of that project. Cost includes land acquisition
description of changes in accounting policies effective in
costs, other direct costs of development and construction,
The Corporation has an ongoing requirement to provide
future years.
letters of credit to municipalities as part of the subdivision
plan registration process. As at December 31, 2012, these
CHANGES IN MANAGEMENT
letters of credit totalled approximately $3,801, and provide
a source of funds to the municipalities for completion
of construction and maintenance improvements to the
subdivision should the Corporation be unable 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
On February 11, 2013, Genesis appointed a new senior
executive team. Bruce Rudichuk joined Genesis as
President and Chief Executive Officer and Mark Scott as
Executive Vice President and Chief Financial Officer.
The former Chief Financial Officer of the Corporation
resigned effective September 18, 2012 and the former
Chief Executive Officer resigned effective February 8,
2013.
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
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 filings are being prepared;
and
ii. information required to be disclosed in the annual
filings, interim filings or other reports filed or
submitted under securities legislation is recorded,
processed, summarized and reported on a timely
basis.
costs remaining to be incurred for each project phase
The CEO and CFO have also designed, or caused to be
currently under development to the extent that revenue
designed under their direct supervision, the Corporation’s
has been recognized. The liability to complete sold lots
ICFR to provide reasonable assurance regarding the
is recognized when the first revenue is recognized in the
reliability of financial reporting and the preparation of
The Corporation has certain lease agreements that are
CRITICAL ACCOUNTING ESTIMATES
phase. The liability includes all direct construction costs
financial statements for external purposes in accordance
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, 2012.
RELATED PARTY TRANSACTIONS
The preparation of consolidated financial statements
requires management to make judgments, estimates and
assumptions that affect the reported amounts of revenues,
and indirect costs including interest and property taxes
with IFRS. The ICFR have been designed using the control
expected to be incurred during the remainder of the
framework established in ‘Internal Control – Integrated
construction period.
Framework’ published by the Committee of Sponsoring
expenses, assets and
liabilities, and the disclosure
Changes in the estimated future development cost directly
Organizations of the Treadway Commission.
of contingent liabilities at the reporting date. Certain
impact the amount recorded for the future development
The CEO and CFO have limited the scope of the design of
estimates are necessary due to the timing of transactional
liability, cost of sales, gross margin and, in some cases,
DC&P and ICFR to exclude controls, policies and procedures
or legal proceedings until amounts are finalized. On an
the value of real estate under development and held for
of Kinwood Communities Inc., a joint venture in which the
ongoing basis, management evaluates its judgments and
sale. This liability is subject to significant measurement
Corporation has 50% interest. The design was excluded
Sandy Poklar, a director of Genesis appointed on July 12,
estimates in relation to revenue, expenses, assets and
uncertainty as it is based on estimated budgeted numbers
from evaluation as the Corporation does not have the ability
2012, is an officer of a lender, Firm Capital Corporation. At
liabilities. Due to the inherent uncertainty involved in
prepared by independent consultants. Recent market
to design and evaluate controls, policies and procedures
December 31, 2012, the Corporation had loans totaling
making estimates, actual results reported in future periods
conditions in Alberta have been volatile, thereby increasing
carried out by that entity. Genesis’ assessment is limited to
$28,448 (December 31, 2011 – $53,196) outstanding with
could differ significantly from those estimates.
the risk of estimation errors.
the internal controls over the inclusion of the Corporation’s
this lender. During the year ended December 31, 2012,
Genesis paid interest and fees to the lender of $3,504
(2011 – $4,523). During the year ended December 31,
2012, the Corporation obtained no new financing or re-
financing on existing loans with the lender (2011 – $70,185).
All transactions are under normal commercial terms and
conditions.
CHANGES TO FUTURE ACCOUNTING
POLICIES
There were various accounting standards issued as at
December 31, 2012 that were not yet effective as of that
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
DISCLOSURE CONTROLS AND
PROCEDURES AND INTERNAL
CONTROL OVER FINANCIAL
REPORTING
share of the joint venture and its results in the consolidated
financial statements.
The CEO and CFO have evaluated the design and operating
effectiveness of Genesis' DC&P and ICFR and concluded
that Genesis' DC&P and ICFR were effective as at
The Chief Executive Officer (“CEO”) and Chief Financial
December 31, 2012. While Genesis’ CEO and CFO believe
Officer (“CFO”) are responsible for establishing and
that the Corporation’s internal controls and procedures
maintaining disclosure controls and procedures (“DC&P”)
provide a reasonable level of assurance that such controls
and internal control over financial reporting (“ICFR”), as
and procedures are reliable, an internal control system
those terms are defined in National Instrument 52-109
cannot prevent all errors and fraud. It is management’s
‘Certification of Disclosure in Issuers’ Annual and Interim
belief that any control system, no matter how well
Filings’. The CEO and CFO have designed, or caused to be
conceived or operated, can provide only reasonable, not
34
35
MANAGEMENT’S DISCUSSION AND ANALYSIS 2012 A NN UA L REPORT
G ENE SIS LAN D DE VE LOP M EN T CORP ORATION
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.
absolute, assurance that the objectives of the control
looking terminology such as “plans”, “expects” or “does
system are met.
There were no changes in Genesis' ICFR during the three
months and year ended on December 31, 2012 that have
materially affected, or are reasonably likely to materially
affect, the Corporation’s ICFR.
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. Risks and uncertainties
faced by Genesis are disclosed in the Corporations AIF
for the year ended December 31, 2012. There may be
additional risks that management may need to consider as
circumstances require. For a more detailed discussion on
the Corporation’ risk factors refer to the AIF, available on
www.sedar.com.
ADVISORIES
NON-IFRS FINANCIAL MEASURES
Net Asset Value per share and Gross book value are non-
IFRS measure that do not have any standardized meaning
as prescribed by IFRS and therefore they may not be
comparable to similarly titled measures reported by other
companies. These measures have been described and
presented in this document in order to provide shareholders
and potential investors with additional information regarding
the Corporation’s liquidity and value.
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 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-
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 transactions
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
36
37
F INANC IAL STATEMENTS 2012 ANNUAL REPORT
MANAG EMENT’S REPO RT
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 International Financial Reporting
opinion.
Standards (“IFRS”) appropriate in the circumstances. The
financial information in the Management’s Discussion and
Analysis has been reviewed by management to ensure
consistency with 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.
BRUCE RUDICHUK, CA, CIRP
President & Chief Executive Officer
March 20, 2013
MARK SCOTT
Executive Vice President &
Chief Financial Officer
IN DEP ENDENT AUDITORS ’ REP OR T
G ENE SIS LAN D DE VE LOP M EN T CORP ORATION
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
TO THE SHAREHOLDERS OF
GENESIS LAND DEVELOPMENT CORP.:
An audit
involves performing procedures to obtain
audit evidence about the amounts and disclosures in
the consolidated financial statements. The procedures
management to review the activities of each. The Audit
We have audited the accompanying consolidated financial
selected depend on the auditors’ judgment, including
Committee is composed of three independent directors,
statements of Genesis Land Development Corp. and its
the assessment of the risks of material misstatement
and reports to the Board of Directors.
subsidiaries, which comprise the consolidated balance
of the consolidated financial statements, whether due
MNP LLP, an independent firm of chartered accountants,
was engaged to audit the consolidated financial statements
in accordance with Canadian generally accepted auditing
standards and IFRS to provide an independent auditors’
sheets as at December 31, 2012 and 2011, and the
to fraud or error. In making those risk assessments, the
consolidated statements of comprehensive (loss) income,
auditor considers internal control relevant to the entity’s
changes in equity and cash flows for the years then ended
preparation and fair presentation of the consolidated
and notes comprising a summary of significant accounting
financial statements in order to design audit procedures
policies and other explanatory information.
MANAGEMENT’S RESPONSIBILITY FOR
CONSOLIDATED FINANCIAL STATEMENTS
Management is responsible for the preparation and fair
presentation of these consolidated financial statements in
accordance with International Financial Reporting Standards,
and for such internal control as management determines is
necessary to enable the preparation of 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.
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, 2012 and 2011, and their financial
performance and their cash flows for the years then
ended in accordance with International Financial Reporting
Standards.
March 20, 2013
Calgary, Canada
Chartered Accountants
38
39
F INANC IAL STATEMENTS 2012 ANNUAL REPORT
G ENE SIS LAN D DE VE LOP M EN T CORP ORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
For the years ended December 31, 2012 and 2011
(In thousands of Canadian dollars except per share amounts)
2012
2011
CONSOLIDATED BALANCE SHEETS
(In thousands of Canadian dollars)
Assets
Real estate held for development and sale3
Amounts receivable5
Other operating assets6
Deferred tax assets7
Cash and cash equivalents
Total assets
Liabilities
Loans and credit facilities11
Customer deposits
Accounts payable and accrued liabilities
Income taxes payable
Deferred tax liabilities7
Land development service costs
Total liabilities
Commitments and contingencies14
Equity
Share capital12
Contributed surplus
Retained earnings
Shareholders’ equity
Non-controlling interest4
Total equity
December 31, December 31,
2011
2012
271,845
85,230
16,237
-
10,005
383,317
102,242
4,352
21,309
4,617
60
24,428
157,008
55,844
5,109
128,637
189,590
36,719
226,309
299,916
43,451
20,942
2,859
10,850
378,018
88,231
7,582
16,415
12,970
-
16,201
141,399
55,122
4,950
119,776
179,848
56,771
236,619
Revenues
Residential lot sales
Development land sales
Residential home sales
Other revenue
Cost of sales
Residential lots
Development lands
Residential homes
Impairment of real estate held for development and sale
Gross margin
General and administrative8
Selling and marketing
Other expense9
Gain on sale of land to joint venture16
Operating earnings from continuing operations
Finance income
Finance expense10
(Loss) earnings before income taxes
Income taxes7
51,933
49,389
39,448
812
141,582
24,412
38,694
31,159
33,146
127,411
14,171
10,064
3,948
1,039
-
15,051
(880)
(862)
2,643
(2,661)
4,086
(6,747)
(15,608)
8,861
0.20
40,739
22,523
32,054
444
95,760
24,019
15,503
23,972
2,474
65,968
29,792
11,301
1,178
1,335
(2,201)
11,613
18,179
(631)
5,169
13,641
4,264
9,377
(1,683)
11,060
0.25
Total liabilities and equity
383,317
378,018
Net (loss) earnings being comprehensive (loss) income
Related party transactions (note 16 and 18)
Subsequent events (note 19)
See accompanying notes to the consolidated financial statements
Attributable to non-controlling interest4
Attributable to equity shareholders
Net earnings per share - basic and diluted12
See accompanying notes to the consolidated financial statements
On behalf of the Board
BRUCE RUDICHUK, CA, CIRP
President & Chief Executive Officer
MARK SCOTT
Executive Vice President &
Chief Financial Officer
40
41
F INANC IAL STATEMENTS 2012 ANNUAL REPORT
G ENE SIS LAN D DE VE LOP M EN T CORP ORATION
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the years ended December 31, 2012 and 2011
(In thousands of Canadian dollars except number of shares)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2012 and 2011
(In thousands of Canadian dollars)
COMMON SHARES - ISSUED
Number of
Shares
Amount
Contributed
Surplus
Total
Retained Shareholders’ controlling
Interest
Equity
Earnings
Non-
Total Equity
At December 31, 2010
44,379,448
54,798
4,575
108,716
168,089
58,922
227,011
Share-based payment transactions
104,839
324
375
Distributions to unit holders of
limited partnerships
Net (loss) earnings being
comprehensive (loss) income
-
-
-
-
-
-
-
-
699
-
-
(468)
699
(468)
11,060
11,060
(1,683)
9,377
At December 31, 2011
44,484,287
55,122
4,950
119,776
179,848
56,771
236,619
Share-based payment transactions
281,441
722
159
Distributions to unit holders of
limited partnerships
Net (loss) earnings being
comprehensive (loss) income
-
-
-
-
-
-
-
-
881
-
-
881
(4,444)
(4,444)
8,861
8,861
(15,608)
(6,747)
At December 31, 2012
44,765,728
55,844
5,109
128,637
189,590
36,719
226,309
See accompanying notes to the consolidated financial statements
Operating activities
Cash receipts from residential lot and development land sales
Cash receipts from residential home sales
Other cash receipts
Cash paid to suppliers for land development
Cash paid to suppliers for residential home construction
Cash paid to other suppliers and employees
Interest received
Income taxes paid
Investing activities
Acquisition of property and equipment
Change in restricted cash
Proceeds on disposal of property and equipment
Financing activities
Advances from loans and credit facilities11
Repayments of loans and credit facilities
Interest and loans and credit facilities fees paid
Distributions to unit holders of limited partnerships
Issue of share capital
Change in cash and equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
See accompanying notes to the consolidated financial statements
2012
2011
61,933
40,545
6,856
(51,360)
(37,909)
(13,079)
862
(9,520)
(1,672)
(449)
(3,724)
36
(4,137)
102,303
(87,396)
(6,043)
(4,444)
544
(4,964)
(845)
10,850
10,005
52,235
32,009
667
(35,676)
(17,626)
(14,056)
631
(4,528)
13,656
(68)
(4,324)
4
(4,388)
91,023
(83,613)
(8,056)
(468)
241
(873)
8,395
2,455
10,850
42
43
F INANC IAL STATEMENTS 2012 ANNUAL REPORT
G ENE SIS LAN D DE VE LOP M EN T CORP ORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2012 and 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2012 and 2011
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
(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
all values are rounded to the nearest thousand, except per
arrangement with another party. Genesis recognizes
contracts for purchases of completed units for which
share values and where otherwise indicated.
its interest in the joint venture using the proportionate
revenue recognition criteria have not been met are recorded
“Genesis”) was incorporated as Genesis Capital Corp.
(c) Basis of consolidation
under the Business Corporation Act (Alberta) on December
2, 1997. Genesis Land Development Corp. resulted from
an amalgamation on January 1, 2002.
The Corporation is engaged in the acquisition, development,
and sale of land, residential lots and homes in Alberta and
British Columbia. The Corporation reports its activities as
two business segments: land development and residential
home building. All business activities of Genesis are
conducted in Western Canada, with development lands
held primarily in and around the cities of Calgary and Airdrie.
The consolidated financial statements include the accounts
of the Corporation and its wholly-owned subsidiaries, as
well as the consolidated revenues, expenses, assets,
liabilities and cash flows of limited partnership entities
that Genesis controls. The Corporation has less than 50%
equity ownership in these limited partnership entities;
however, Genesis has control over these entities’ activities,
projects, financial and operating policies due to contractual
arrangements. As such, the relationship between the
Corporation and the limited partnership entities indicates
The Corporation is listed for trading on the Toronto Stock
that they are controlled by the Corporation. Accordingly,
Exchange under the symbol “GDC”. Genesis’ head office
the accounts of the limited partnerships have been
and registered office is located at 7315 - 8th Street N.E.,
consolidated in the Corporation’s financial statements.
Calgary, Alberta T2E 8A2.
2. SIGNIFICANT ACCOUNTING POLICIES
Subsidiaries are fully consolidated from the date of
acquisition, being the date on which the Corporation
obtains control, and continues to be consolidated until
The significant accounting policies of the Corporation
the date when such control ceases. Control exists when
are set out below. These policies have been consistently
the Corporation has the power, directly or indirectly, to
consolidation method. The Corporation combines
its
as customer deposits.
proportionate share of each of the assets, liabilities,
income and expenses of the joint venture with similar
items, line by line, in the consolidated financial statements.
The financial statements of the joint venture are prepared
(iii) Interest income
Interest income is recognized as it accrues using the
effective interest rate method.
for the same reporting period as the Corporation. All intra-
(iv) Other revenue
group transactions, balances, and unrealized gains and
Rental income is recognized on a straight-line basis
losses resulting from transactions between Genesis and
over the term of the rental agreement. Rental income is
the joint venture are eliminated on consolidation. Losses
incidental to ownership of real estate and does not result
on transactions are recognized immediately if the loss
in classification of real estate as investment property. All
provides evidence of a reduction in the net realizable value
real estate is classified as inventory. Deposits forfeited are
of current assets or an impairment loss.
recognized as income.
Regarding transactions with the joint venture, profits and
(f) Real estate held for development and sale
losses resulting from the transactions are recognized in the
Corporation’s consolidated financial statements only to the
extent of interests in the joint venture that are not related
to Genesis.
(e) Revenue recognition
Land under development, land held for future development
and housing projects under construction are measured
at the lower of cost and estimated net realizable value
(“NRV”).
Cost includes land acquisition costs, other direct costs of
(i) Residential lot and development land sales
development and construction, borrowing costs, property
applied to each of the years presented, unless otherwise
govern the financial and operating policies of an entity
Land and lot sales to third parties are recognized when the
indicated.
so as to obtain benefit from its activities. All intra-group
risks and rewards of ownership have been transferred, the
(a) Statement of Compliance
transactions, balances, and unrealized gains and losses
agreed-to services pertaining to the property have been
resulting from intra-group transactions and dividends are
substantially performed, a minimum 15% non-refundable
taxes and legal costs. These costs are allocated to each
phase of the project in proportion to saleable acreage. Non-
refundable commission paid to sales or marketing agents
on the sale of real estate property is expensed when
The consolidated financial statements represent the financial
eliminated on consolidation.
deposit has been received, and the collection of the
incurred.
statements of the Corporation prepared in accordance with
International Financial Reporting Standards (“IFRS”) as
issued by the International Accounting Standards Board
(“IASB”).
Non-controlling interests represent the portion of profit or
loss and net assets not held by the Corporation and are
presented separately from shareholders’ equity in the
statement of comprehensive (loss) income and within
remaining unpaid balance is reasonably assured. Deposits
Real estate held for development and sale is reviewed
received upon signing of contracts for purchases of lots on
annually for impairment or whenever events or changes
which revenue recognition criteria have not been met are
in circumstances indicate the carrying value may exceed
recorded as customer deposits.
NRV. An impairment loss is recognized in the statement
of comprehensive (loss) income when the carrying value
(b) Basis of presentation
equity in the consolidated balance sheet. Losses within
(ii) Residential home sales
The consolidated financial statements have been prepared
under historical cost convention, except for the financial
a subsidiary are attributed to the non-controlling interest
even if that results in a deficit balance.
assets classified as fair value through profit or loss that
(d) Interest in joint venture
Revenue is recognized when title to the completed unit is
exceeds its NRV.
conveyed to the purchaser, at which time all proceeds are
NRV is the estimated selling price in the ordinary course
received or collection is reasonably assured.
of the business at the balance sheet date, less costs to
have been measured at fair value. The consolidated
financial statements are presented in Canadian dollars, and
The Corporation has an interest in a joint venture, which
Deposits received from customers upon signing of
complete and estimated selling costs.
is a jointly controlled entity, by virtue of a contractual
44
45
F INANC IAL STATEMENTS 2012 ANNUAL REPORT
G ENE SIS LAN D DE VE LOP M EN T CORP ORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2012 and 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2012 and 2011
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
(g) Borrowing costs
economic benefits are expected to arise from the continued
(j) Cash and cash equivalents
related vesting period of each tranche of the grant as an
Borrowing costs directly attributable to the acquisition or
construction of an asset that necessarily takes a substantial
period of time to prepare for its intended use or sale are
capitalized as part of the cost of the respective assets. This
generally entails a time period of 12 months or more. All
use of the asset. Any gain or loss arising on the disposal of
the asset, determined as the difference between the net
disposal proceeds and the carrying amount of the asset,
is recognized in the statement of comprehensive (loss)
income.
Cash and cash equivalents consist of cash held with
banks and short-term deposits of original maturity of three
months or less.
(k) Restricted cash
expense with recognition of the corresponding increase in
contributed surplus. Any consideration paid on the exercise
of stock options, together with any contributed surplus at
the date the options vested, is credited to the share capital.
There is no expense recognized for options that do not
other borrowing costs are expensed in the period in which
All minor repair and maintenance costs are recognized in
Restricted cash represents funds owed to the Corporation
ultimately vest. The dilutive effect of outstanding options
they are incurred. Borrowing costs consist of interest and
the statement of comprehensive (loss) income as incurred.
at a future indeterminable date, when development of
is reflected as additional dilution in the computation of
other costs incurred in connection with the borrowing of
The assets’ residual values, useful lives and methods of
the funds.
depreciation are reviewed at each financial year end and
The borrowing costs capitalized are determined first by
reference to borrowings specific to the project, where
relevant, and secondly by applying a weighted average
capitalization
rate
for
the Corporation’s non-project
specific borrowings, less any investment income arising
on temporary investing of funds, to eligible expenditures.
Borrowing costs are not capitalized on real estate held for
development and sale where no development activity is
adjusted prospectively, if appropriate.
(i)
Income taxes
(i) Current income tax
Current income tax assets and liabilities are measured at
the amount expected to be paid to tax authorities, net of
recoveries, using tax rates and laws that are enacted or
substantively enacted at the balance sheet date.
taking place. Borrowing costs are capitalized from the date
(ii) Deferred tax
specific lands commences.
(l) Provisions
earnings per share.
(o) Financial assets
A provision is a liability of uncertain timing or amount.
All financial assets are initially recognized on the balance
Provisions are recognized when the Corporation has a
sheet at fair value and designated at inception into one
present legal or constructive obligation as a result of past
of the following classifications: at fair value through profit
events, it is probable that an outflow of resources will be
or loss (“FVTPL”); and loans and receivables. All financial
required to settle the obligation, and the amount can be
assets are recognized initially on the trade date at which the
reliably estimated. Provisions are not recognized for future
Corporation becomes a party to the contractual provisions
operating losses. If the effect of the time value of money is
of the instrument.
material, provisions are discounted using a current pre-tax
rate that reflects the risks specific to the liability. Where
of commencement of development work until the date
of completion. The capitalization of interest is suspended
if the project development is suspended for a prolonged
period.
(h) Property and equipment
Property and equipment is stated at cost, net of any
accumulated depreciation and accumulated impairment
Deferred tax is provided using the liability method on all
discounting is used, the increase in the provision due to
temporary differences at the balance sheet date between
the passage of time is recognized as a finance cost in the
the tax bases of assets and liabilities and their carrying
statement of comprehensive (loss) income.
amounts for financial reporting purposes.
Deferred tax assets are recognized to the extent that it is
probable that taxable profit will be available, against which
deductible temporary differences, carried forward tax
(m) Leases
Operating lease payments are recognized as an operating
expense in the statement of comprehensive (loss) income
on a straight-line basis over the lease term.
losses. Depreciation is provided on all operating property
credits or tax losses can be utilized.
and equipment based on the straight-line method over the
Deferred tax assets and liabilities are measured at the tax
(n) Share-based payments
estimated useful lives of the property and equipment. The
rates that are expected to apply to the year when the asset
useful lives of the properties are as follows:
is realized or the liability is settled, based on tax rates and
■
Vehicles and other equipment
5 years
tax laws that have been enacted or substantively enacted
■ Office equipment and furniture 7 years
at the balance sheet date.
■
■
Computer equipment
Leasehold improvements
3 years
5 years
Current and deferred tax relating to items that are directly
recognized in equity is recognized in equity and not in the
An item of property and equipment is no longer recognized
statement of comprehensive (loss) income.
upon disposal, when held for sale or when no future
The Corporation provides equity-settled share-based
payments in the form of a share option plan to its
employees, officers and directors. The costs of the share-
based payments are calculated by reference to the fair
value of the options at the date on which they are granted.
The fair values are determined using the Black-Scholes
Option-Pricing Model. The costs of the share-based
payments are recognized on a proportionate basis over the
46
47
Transaction costs related to financial assets classified as
FVTPL are expensed, and for all other financial assets
included in the initial carrying amount.
Financial assets at FVTPL include financial assets held
for trading and financial assets designated upon initial
recognition at fair value through profit or loss. Financial
assets at FVTPL are carried on the balance sheet at
fair value with changes in fair value recognized in the
statement of comprehensive (loss) income. The financial
assets classified as FVTPL are cash and cash equivalents,
and deposits and restricted cash.
Financial instruments classified as loans and receivables
are subsequently measured at amortized cost using the
effective interest rate method, less impairment. The
amortization and losses arising from impairment are
recognized in the statement of comprehensive (loss)
income. Financial assets classified as loans and receivables
are amounts receivable.
F INANC IAL STATEMENTS 2012 ANNUAL REPORT
G ENE SIS LAN D DE VE LOP M EN T CORP ORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2012 and 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2012 and 2011
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
Financial assets are no longer recognized when the
The financial liabilities classified as other financial liabilities
equity holders by the weighted average number of shares
different assumptions and conditions.
contractual rights to the cash flows from the asset
are accounts payable and accrued liabilities, and loans and
outstanding during the period. The diluted earnings per
realize the asset and settle the liability simultaneously.
(s) Land development service costs
expire, or the Corporation transfers the rights to receive
credit facilities.
the contractual cash flows on the financial asset in a
transaction in which substantially all the risks and rewards
of ownership of the financial assets are transferred. Any
interest in transferred financial assets that is created or
retained is recognized as a separate asset or liability.
Financial assets are assessed at each reporting date in
order to determine whether objective evidence exists that
the assets are impaired as a result of one or more events
Financial liabilities are no longer recognized when the
contractual obligations are discharged, cancelled or expire.
Financial assets and financial liabilities are offset and the
net amount presented in the balance sheet when, and
only when, the Corporation has a legal right to offset the
amounts and intends either to settle on a net basis or to
that have had a negative effect on the estimated future
(q) Impairment of non-financial assets
cash flows of the asset.
The Corporation assesses at each balance sheet date
If there is objective evidence that a financial asset has
whether there is an indication that a non-financial asset
become impaired, the amount of the impairment loss is
may be impaired. If any indication exists, or when annual
calculated as the difference between its carrying amount
impairment testing for the asset is required, Genesis
and the present value of the estimated future cash flows
estimates the asset’s recoverable amount. Where it is not
from the asset, discounted at its original effective interest
possible to estimate the recoverable amount of an individual
rate. Impairment losses are recorded in earnings. If the
asset, the Corporation estimates the recoverable amount
amount of the impairment loss decreases in a subsequent
of the cash generating unit (“CGU”) to which the asset
period and the decrease can be objectively related to an
belongs. Recoverable amount is the higher of fair value less
event occurring after the impairment was recognized, the
costs to sell and value in use. In assessing the value in use,
impairment loss is reversed up to the original carrying value
the estimated future cash flows are discounted to their
of the asset. Any reversal is recognized in earnings.
present value using a pre-tax discount rate that reflects
All financial liabilities are initially recognized on the balance
less costs to sell, recent market transactions are taken into
sheet at fair value less directly attributable transaction costs,
account, if available; if no such transactions are available,
and designated at inception as other financial liabilities.
an appropriate valuation model is used. These calculations
Other financial
liabilities are subsequently measured
at amortized cost using the effective interest method.
The effective interest method is a method of calculating
the amortized cost of a financial liability and of allocating
interest expense over the relevant period. The effective
interest rate is the rate that exactly discounts estimated
future cash payments through the expected life of the
financial liability, or, where appropriate, a shorter period.
are corroborated by valuation multiples or other available
fair value indicators. Where the carrying amount of an
asset or CGU exceeds its recoverable amount, the asset is
considered impaired and is written down to its recoverable
amount.
(r) Earnings per share
The amount of basic earnings per share is calculated
by dividing the comprehensive earnings attributable to
share amount is 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
The
following are
the most significant accounting
judgments and estimates made by the Corporation in
applying accounting policies:
JUDGEMENTS
assumes that proceeds received from the exercise of in-
(i) Revenue Recognition
the-money stock options are used to repurchase common
Revenue recognition for development lands requires
shares at the average market price over the year.
judgment to determine when the risks and rewards of
ownership have been transferred. The Corporation reviews
each contract and evaluates all the factors to determine the
The land development service costs liability represents
the construction costs expected to be incurred for each
project phase currently under development to the extent
appropriate transfer date.
(ii) Consolidation
that revenue has been recognized. The liability includes
The Corporation applies judgment in determining control
all direct construction costs and indirect costs, including
over certain limited partnerships where Genesis holds less
interest and property taxes expected to be incurred
than 50% equity ownership. The judgment is based on a
during the remainder of the construction period. The land
review of all contractual agreements to determine if the
development service costs are reviewed on a phase by
Corporation has control over financial and operating policies
phase basis. When the estimate is known to be different
of these limited partnerships.
from the actual costs incurred or expected to be incurred,
(iii) Taxes
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.
The preparation of consolidated financial statements
requires management to make judgments and estimates
that affect the reported amounts of revenues, expenses,
assets and liabilities, and the disclosure of contingent
liabilities at the reporting date. On an ongoing basis,
management evaluates its judgments and estimates
The Corporation applies judgment in determining the total
provision for current and deferred taxes. There are many
transactions and calculations for which the ultimate tax
determination and timing of payment is uncertain due to
the interpretation of complex tax regulations, changes
in tax laws, and the amount and timing of future taxable
income. Given the long-term nature and complexity of the
business, differences arising between the actual results
and the assumptions made, or future changes to such
assumptions, could necessitate future adjustments to tax
income and expense already recorded.
in relation to revenue, expenses, assets and liabilities.
(iv) Net realizable value
Management uses historical experience and various
NRV for land parcels and housing projects held for
other factors it believes to be reasonable under the given
development and sale is estimated with reference to
circumstances as the basis for its judgments and estimates.
market prices and conditions existing at the balance
Actual outcomes may differ from these estimates under
sheet date. This is determined by the Corporation having
(p) Financial liabilities
current market assessments of the time value of money
(t) Significant accounting judgments and
and the risk specific to the asset. In determining fair value
estimates
48
49
F INANC IAL STATEMENTS 2012 ANNUAL REPORT
G ENE SIS LAN D DE VE LOP M EN T CORP ORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2012 and 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2012 and 2011
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
considered suitable external advice from independent real
rates, dividend yields, forfeiture rates and expected life of
the multiple classification options in IAS 39. The Corporation
standard is effective for annual periods beginning on or after
estate appraisers and in light of recent market transactions
the units issued. Fair value inputs are subject to market
is currently evaluating the impact of IFRS 9 on its financial
January 1, 2013. The new standard requires information
of similar and adjacent lands and housing projects in the
factors as well as internal estimates. The Corporation
statements.
same geographic area.
(v) Legal contingencies
considers historic trends together with any new information
to determine the best estimate of fair value at the date of
The Corporation applies judgment as to the outcome of
legal proceedings to determine a need for a provision and
grant.
(iv) Valuation of amounts receivables
(ii) IFRS 10, “Consolidated Financial Statements”
IFRS 10, “Consolidated Financial Statements”, issued
by
IASB on May 12, 2011, will replace Standing
Interpretations Committee 12, "Consolidation – Special
disclosure in the consolidated financial statements. Among
Amounts receivable are reviewed on a regular basis
Purpose Entities" and the consolidation requirements of
the factors considered in making such judgments are the
to estimate recoverability of balances. Any amounts
IAS 27, "Consolidated and Separate Financial Statements".
nature of litigation, claim or assessment, the legal process
becoming overdue and any known issues about the
The standard is effective for annual periods beginning on
that will assist financial statement users to evaluate the
nature, risks and financial effects associated with an
entity’s interests in subsidiaries and joint arrangements.
The Corporation has substantially completed analysis of
IFRS 12 and expects to include additional disclosures in
the annual consolidated financial statements for the year
ended December 31, 2013.
(v) IFRS 13, "Fair Value Measurement"
and potential level of damages, the progress of the case,
financial condition of builders are taken into account when
or after January 1, 2013. The new standard eliminates the
IFRS 13, "Fair Value Measurement", issued by IASB on
the opinions or views of legal advisers and any decision of
estimating recoverability.
current risk and rewards approach and establishes control
May 12, 2011, is effective for annual periods beginning
the Corporation’s management as to how it will respond to
the litigation, claim or assessment.
ESTIMATES
(i) Costs to complete
(u) Change in accounting estimates
The Corporation changed its depreciation method for
property and equipment from the declining balance
method to the straight-line basis ranging from three to
Changes in the estimated future development costs directly
seven years useful life, depending on asset category. The
impact the amount recorded for the future development
change was effective January 1, 2012. This change was
liability, cost of sales, gross margin and, in some cases,
made to better reflect the systematic amortization of the
the value of real estate under development and held for
assets over the economic useful life and their consumption
sale. This liability is subject to uncertainty as it is based
by the Corporation. Under IFRS, this change is considered
on estimates prepared by independent consultants and
a change in accounting estimate and accounted for
management.
(ii) Impairment of real estate held for future
development
The Corporation estimates the net realizable value on
prospectively by amortizing the cumulative changes over
the remaining useful life of the related assets. At January
1, 2012, property and equipment decreased by $232 as a
result of this change.
an annual basis to assess impairment. The estimate is
(v) Changes to future accounting policies
based on valuation conducted by independent real estate
appraisers and in light of recent market transactions of
similar and adjacent lands and housing projects in the same
geographic area.
(iii) Share-based payments
(i)
IFRS 9, “Financial Instruments”
On November 12, 2009, the IASB issued IFRS 9, “Financial
Instruments” (“IFRS 9”), which will replace IAS 39. The
standard is effective for annual periods beginning on
or after January 1, 2015. It applies to classification and
The Corporation uses an option pricing model to determine
measurement of financial assets as defined in IAS 39. It
the fair value of share-based payments. Inputs to the model
uses a single approach to determine whether a financial
are subject to various estimates about volatility, interest
asset is measured at amortized cost or fair value, replacing
as the single basis for determining the consolidation of
on or after January 1, 2013. The new standard provides a
an entity. The Corporation does not expect any significant
common definition of fair value, establishes a framework
effect on the consolidated financial statements as a result
for measuring fair value under IFRS and enhances the
of adopting this standard.
disclosures required for fair value measurements. The
(iii) IFRS 11, “Joint Arrangements”
IFRS 11, "Joint Arrangements", issued on May 12, 2011, will
replace IAS 31, “Interest in Joint Ventures”. The standard is
effective for annual periods beginning on or after January 1,
2013. The new standard redefines joint operations and joint
standard applies where fair value measurements are
required and does not require new fair value measurements.
The Corporation is currently evaluating the impact of IFRS
13 on its financial statements.
(vi) IFRS 32, "Financial Instruments: Presentation"
ventures, requiring joint operations to be proportionately
IFRS 32, “Financial Instruments: Presentation”, was
consolidated and joint ventures to be equity accounted.
amended May 2012 to address inconsistencies when
Under IAS 31, joint ventures could be proportionately
applying offsetting requirements. It is effective for annual
accounted. The Corporation will apply IFRS 11 beginning
periods beginning on or after January 1, 2013.
on January 1, 2013 with retrospective application from the
date of earliest period presented which will be January 1,
2012. The Corporation has analyzed its joint arrangement
to determine appropriate accounting treatment under the
new IFRS. The extent of the impact of adoption of IFRS 11
has not yet been determined.
(iv) IFRS 12, “Disclosure of Interests in Other Entities”
IFRS 12, "Disclosure of Interests in Other Entities", issued
by IASB on May 12, 2011, outlines the required disclosures
for interests in subsidiaries and joint arrangements. The
50
51
F INANC IAL STATEMENTS 2012 ANNUAL REPORT
G ENE SIS LAN D DE VE LOP M EN T CORP ORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2012 and 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2012 and 2011
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
3. REAL ESTATE HELD FOR DEVELOPMENT AND SALE
The expense related to impairment of real estate held for development and sale is as follows:
Gross book value
As at January 1, 2011
Acquisitions and transfers
Development
Sold
As at December 31, 2011
Acquisitions and transfers
Development
Sold
As at December 31, 2012
Provision for write-down
As at January 1, 2011
Write-downs (recoveries) for the year
Adjustments from existing provision to
carrying value of asset
As at December 31, 2011
Write-downs (recoveries) for the year
As at December 31, 2012
Net book value
As at December 31, 2011
As at December 31, 2012
Land Under
Development
Land Held
for Future
Development
Housing
Projects
Total
Provision for write-down
(Recovery) write-down directly against carrying value of assets
2012
33,160
(14)
33,146
2011
2,398
76
2,474
158,266
5,243
29,220
(39,483)
145,725
(3,551)
5,121
11,015
15,410
13,967
315,006
17,102
48,308
-
(30,263)
(69,746)
153,246
147,295
1,938
39,137
(55,739)
(1,938)
1,616
10,129
19,331
34,151
310,670
19,331
74,904
-
(33,407)
(89,146)
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, 2012 and 2011, which were included in cost of
sales:
Land held for future development
Land under development
Write-down (recovery) of real estate held for
development and sale and other
Land
16,419
1,849
18,268
2012
LP
15,564
(762)
14,892
Total
32,073
1,087
33,160
Land
620
1,941
2,561
2011
LP
(163)
-
(163)
Total
457
1,941
2,398
138,582
146,973
30,204
315,759
Adjustment from existing provisions to
-
-
-
(2,016)
-
(2,016)
carrying value of asset
Change in provision for write-down
18,268
14,892
33,160
545
(163)
382
2,117
1,941
-
4,058
1,087
5,145
6,239
457
2,016
-
10,372
2,398
-
(2,016)
(2,016)
6,696
32,073
38,769
-
-
-
10,754
33,160
43,914
149,188
133,437
140,599
108,204
10,129
30,204
299,916
271,845
4. NON-CONTROLLING INTEREST –
The limited partnership units are non-redeemable and share
LIMITED PARTNERSHIPS
As shown in note 20, Genesis owns less than 50% of
various entities and consequently, does not control more
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.
than half of the voting power of those shares. However,
Details of each of the limited partnerships are as follows:
based on contractual arrangement between the Corporation
Limited partnerships 4/5 (LP 4/5):
and these entities, Genesis has the power to direct the
activities of their projects and hence, has control over
financial and operating policies of these entities. Therefore,
these entities may be controlled, at the option of Genesis
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 has a nominal ownership interest in LP 4 and
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):
During the year ended December 31, 2012, interest of
development of $8,212 (December 31, 2011 - $10,584)
and are consolidated in these financial statements.
$4,464 (2011 - $2,937) and other carrying costs of $5 (2011
were held in the limited partnerships controlled by Genesis
- $448) were capitalized.
(see note 4(a)).
As at December 31, 2012, land held for future development
of $52,411 (December 31, 2011 - $67,952) and land under
The Corporation is the general partner in limited partnership
arrangements described below. 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
LP 6/7 holds land under development located in Taralake
partnerships are eliminated on consolidation.
and Airdrie. All required capital repayments have been
made to unit holders in LP 6/7.
52
53
F INANC IAL STATEMENTS 2012 ANNUAL REPORT
G ENE SIS LAN D DE VE LOP M EN T CORP ORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2012 and 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2012 and 2011
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
Genesis is entitled to management fees of 10% of the
Additionally, Genesis has a nominal ownership interest
The limited partnerships earnings and distributions were as follows:
gross proceeds of the LP 6 offering memorandum payable
in LP 8 and is responsible for securing financing for the
to Genesis as lands and lots are sold. Genesis also owns
project development.
11.75% of LP 6/7’s units and participates proportionately in
Limited Partnership Land Pool 2007 (LPLP 2007):
the profits of the partnership.
Limited partnerships 8/9 (LP 8/9):
On June 29, 2007, LPLP 2007 was created to raise funds
to secure funding for various land acquisitions. At the
L/P 8/9 holds 1,140 acres of raw land near Radium, British
conclusion of the offering on February 28, 2009, LPLP 2007
Columbia. Genesis held a purchase right to acquire all LP
had raised insufficient funds to close out the purchase of
8/9 units by February 28, 2009, which it did not exercise.
the lands and settle the land acquisition loan the entity
Therefore, all LP unit holders are entitled to share in the
used to acquire the Delacour Lands. As a result, Genesis
profits of the development.
completed the transaction with its own funds and assumed
Balance, January 1, 2011
Net (loss) earnings
Distributions
Balance - December 31, 2011
Net (loss) earnings
Distributions
Balance - December 31, 2012
The project lands have approval for 272 single-family home
the loan obligations of LPLP 2007.
(1)LPLP2007 refers to Limited Partnership Land Pool 2007
sites on 53 acres, and 143 acres have been set aside for
Genesis has no ownership interest in LPLP 2007. However,
a golf course. Upon achieving and exceeding a 50% gross
as manager of LPLP 2007 properties, Genesis is entitled to
return to the LP 8/9 unit holders, Genesis is entitled to 50%
a management fee of 50% of the proceeds from the sale
of the remaining profits on the single-family lots. Genesis
of any land parcels owned by LPLP 2007, provided that the
is also entitled to 100% of the profit on the golf course,
limited partners receive sale proceeds equal to 150% of
and retains the right to purchase the balance of the lands
the acquisition cost of that land parcel.
5. AMOUNTS RECEIVABLE
Agreements receivable
Mortgages receivable
Other receivables
at the conclusion of the project for a nominal amount.
Allowance for doubtful accounts
The real estate held within the limited partnerships is as follows:
4&5
8,021
(341)
-
7,707
43
-
7,750
Limited Partnership
6&7
8&9
LPLP2007(1)
Total
14,190
645
(140)
14,695
1,788
(4,444)
12,039
6,657
(47)
(328)
6,282
30,054
(1,967)
-
58,922
(1,683)
(468)
28,087
56,771
(2,175)
(15,264)
-
-
(15,608)
(4,444)
4,107
12,823
36,719
2012
2011
73,659
11,025
2,189
86,873
(1,643)
85,230
32,805
9,863
783
43,451
-
43,451
2012
Limited Partnership 4&5
Limited Partnership 6&7
Limited Partnership 8&9
Limited Partnership Land Pool 2007
Balance - December 31, 2012
2011
Limited Partnership 4&5
Limited Partnership 6&7
Limited Partnership 8&9
Limited Partnership Land Pool 2007
Balance - December 31, 2011
Gross
7,822
8,212
6,696
57,161
79,891
7,709
11,346
6,696
57,161
82,912
Provision for
Write-down
-
-
(2,166)
(17,102)
(19,268)
-
(762)
-
(3,614)
(4,376)
Net
7,822
8,212
4,530
40,059
60,623
7,709
10,584
6,696
53,547
78,536
During the year, the Corporation recognized write-downs of
development and sale held under limited partnership and is
$14,892 (2011 – recovery of $163) relating to impairment
included in cost of sales.
of the carrying value of certain real estate held for
Agreements receivables are secured by the underlying
receivable as at December 31, 2012, include a receivable
real estate assets and have various terms of repayment.
from one customer amounting to $27,714 (2011 – Nil)
Purchasers generally have between six and 24 months to
which was realized subsequent to the year end on January
pay the balance owing for the purchased lots. Agreements
10, 2013. Mortgages receivables are interest bearing.
6. OTHER OPERATING ASSETS
Deposits
Prepayments
Restricted cash
Property and equipment
2012
2011
4,989
1,155
9,615
478
11,830
2,773
5,891
448
16,237
20,942
Deposits include amounts paid to development authorities
approximating those earned on guaranteed investment
as security to guarantee the completion of construction
certificates. The Corporation has further provided letters
projects under development and deposits on future
of credit as security to guarantee the completion of
land acquisitions. The deposits are refundable upon
construction projects (see note 14 (d) for further details).
completion of the related projects and earn interest at rates
Restricted cash is held in trust accounts.
54
55
F INANC IAL STATEMENTS 2012 ANNUAL REPORT
G ENE SIS LAN D DE VE LOP M EN T CORP ORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2012 and 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2012 and 2011
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
7. INCOME TAXES
(a)
Income tax was recognized in the statement of comprehensive (loss) income as follows:
Current income tax
Deferred tax relating to origination and reversal of temporary differences
2012
2011
1,167
2,919
4,086
10,510
(6,246)
4,264
(b)
Income tax expense differed from that which would be expected from applying the combined statutory Canadian federal
and provincial income tax rates of 25% (2011 – 26.5%) to income before income taxes. The difference resulted from the
following:
(Loss) earnings before income taxes
Statutory tax rate
Expected income tax expense
Change in future income taxes resulting from tax rate reduction
Share-based payment transactions
Other non-deductible expenses
Non-controlling interest
Tax expense for the year
(c) The deferred tax assets and liabilities of the Corporation were as follows:
Deferred tax assets
Deferred tax liabilities
(d) The components of the deferred tax asset (liability) were 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.
2012
(2,661)
25.0%
(665)
-
84
765
3,902
4,086
2012
6,420
(6,480)
(60)
2012
2,845
497
(4,532)
1,090
40
(60)
2011
13,641
26.5%
3,615
69
122
12
446
4,264
2011
5,716
(2,857)
2,859
2011
2,575
152
(111)
263
(20)
2,859
(e) The components of the deferred tax asset (liability) recognized in the statement of comprehensive (loss) income were
as follows:
Real estate held for development and sale
Non-capital loss carry-forwards*
Reserves from land sales
Unamortized loan and credit facilities costs
Other temporary differences
*Non-capital loss carry-forward amounts begin to expire in 2028.
(f) The movement in income tax payable for the year was as follows:
Balance as at January 1
Provision
Payments
Balance as at December 31
8. GENERAL AND ADMINISTRATIVE
The general and administrative expense of the Corporation consisted of the following:
Corporate administration
Compensation and benefits
Professional services
9. OTHER EXPENSES
Other expenses of the Corporation consisted of the following:
Share-based payments
Depreciation
Bad debt expenses
Other recoveries
2012
270
345
2011
(463)
38
(4,421)
6,548
827
60
136
(13)
(2,919)
6,246
2012
12,970
1,167
(9,520)
4,617
2011
6,988
10,510
(4,528)
12,970
2012
2,054
4,982
3,028
2011
1,806
5,173
4,322
10,064
11,301
2012
337
413
314
(25)
2011
459
163
716
(3)
1,039
1,335
56
57
F INANC IAL STATEMENTS 2012 ANNUAL REPORT
G ENE SIS LAN D DE VE LOP M EN T CORP ORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2012 and 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2012 and 2011
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
10. FINANCE EXPENSE
The finance expense of the Corporation consisted of the following:
Interest expense
Loans and credit facilities fees accretion
Interest and loans and credit facilities fees capitalized
11. LOANS AND CREDIT FACILITIES
Secured by land held for future development
I.
Land loan, bearing interest at the greater of 7.2% or prime + 4.2% per annum,
secured by land held for development and sale with a carrying value of $18,963,
maturing March 1, 2014.
2012
5,669
1,438
(4,464)
2,643
2011
6,549
1,557
(2,937)
5,169
2012
2011
7,850
7,850
II. Other mortgages payable, bearing interest at 7% per annum, payable on demand.
-
688
Secured by land under development and agreements receivable
III. Land project loans, payable on collection of agreements receivable, bearing interest
87,936
80,197
at rates ranging from prime + 1.25% to the greater of 10.5% or prime + 7.5%, secured
by land held for development and sale with a carrying value of $142,743, due between
February 2, 2013 and December 1, 2015.
Secured by housing projects under development
IV. Demand operating line of credit up to $3,000, bearing interest at prime + 1.5% per
annum, secured by a general security agreement over assets of the home building division.
V. Project loans, payable on collection of closing proceeds, bearing interest ranging from prime
+ 1.25% to the greater of 5.25% or prime + 2% per annum, secured by home building projects
with a carrying value of $11,128, due between June 13, 2013 to October 30, 2013.
Deferred loans and credit facilities fees
2,281
1,254
6,487
-
104,554
(2,312)
102,242
89,989
(1,758)
88,231
Based on the contractural terms, the Corporation's loans and credit facilities are to be repaid within the following time periods
(excluding deferred financing fees):
January 1, 2013 to December 31, 2013
January 1, 2014 to December 31, 2014
January 1, 2015 to December 31, 2015
24,109
47,887
32,558
104,554
The Corporation has various covenants in place with its
on encumbrances, liens and charges, material changes to
lenders with respect to certain contracted credit facilities.
project plans, and changes in the Corporation’s ownership
Such covenants include: other credit usage restrictions;
structure.
cancellation, prepayment, confidentiality and cross default
clauses; sales coverage requirements; conditions precedent
for funding; and other general understandings such as, but
not limited to, maintaining contracted lot prices, restrictions
As at December 31, 2012 and 2011, the Corporation was in
compliance with all covenants.
12. SHARE CAPITAL
(a) Authorized
Unlimited number of common shares
Unlimited number of preferred shares
(b) Weighted average number of shares
The following table sets forth the weighted average number of common shares outstanding for the years ended December 31,
2012 and 2011:
Basic
Effect of dilutive securities - stock options
Diluted
2012
2011
44,664,086
44,462,869
110,537
301,914
44,774,623
44,764,783
During the year ended December 31, 2012, the Corporation
The weighted average interest rate of loan agreements was
In calculating diluted earnings per share for the year ended December 31, 2012, the Corporation excluded 760,500 options
received advances of $102,303 (2011 - $91,023) relating
6.25% (December 31, 2011 - 6.57%), based on December
(2011 – 1,142,000) as their exercise prices were greater than the average market price of the Corporation’s shares during those
to various new and renewed loan facilities secured by real
31, 2012 balances.
estate held for development and sale, and agreements
receivable, bearing interest ranging from the prime +
1.25% to the greater of 10.5% or prime + 7.5% per annum,
with due dates ranging from June 13, 2013 to December
1, 2015.
periods.
13. STOCK OPTIONS
number of years on various anniversary dates from the
date of the original grant.
The Corporation has established a stock option plan
for certain employees, officers, and directors of the
The options must be issued at not less than the fair
Corporation to purchase common shares. Vesting
market value of the common shares at the date of grant
provisions and exercise prices are set at the time of
and are issued with terms generally not exceeding five
issuance by the Board of Directors. Options vest over a
years from the date of grant.
58
59
F INANC IAL STATEMENTS 2012 ANNUAL REPORT
G ENE SIS LAN D DE VE LOP M EN T CORP ORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2012 and 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2012 and 2011
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
Details of outstanding stock options were as follows:
Twelve Months Ended
December 31, 2012
December 31, 2011
Outstanding - beginning of year
Options granted
Options exercised
Options expired
Options forfeited
Outstanding - end of year
Exercisable - end of year
Range of
Exercise Prices ($)
0.01 - 3.00
3.01 - 4.00
4.01 - 9.00
Number
of Options
1,788,221
400,000
(281,441)
(281,500)
(393,558)
1,231,722
923,222
Weighted
Average
Exercise Price
$3.60
$3.35
$1.93
$6.63
$3.57
$3.21
$3.17
Number
of Options
2,262,934
-
(104,839)
(116,000)
(253,874)
1,788,221
1,333,793
Outstanding
Exercisable
Number at
December 31,
2012
Weighted
Average
Exercise Price
Number at
December 31,
2012
Weighted
Average
Exercise Price
286,222
885,500
60,000
1,231,722
$2.01
$3.35
$6.97
$3.21
286,222
577,000
60,000
923,222
$2.01
$3.35
$6.97
$3.17
Weighted
Average
Exercise Price
$3.73
-
$2.30
$5.48
$4.47
$3.60
$3.81
Weighted
Average
Remaining
Contractual
Life in Years
1.91
3.31
0.11
2.83
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:
Risk-free interest rate
Estimated term period prior to exercise (years)
Volatility in the price of the Corporation's common shares
Forfeiture rate
Dividend yield rate
2012
1.12 - 1.16%
2.5
45.44 - 51.40%
19.42 - 24.22%
Nil
2011
N/A
N/A
N/A
N/A
N/A
14. COMMITMENTS AND CONTINGENCIES
plaintiff is seeking $10,700 plus punitive damages relating
(a) The Corporation has been named as a co-defendant in
a statement of claim filed on May 10, 2011 in the province
of Ontario. The plaintiff asserts that they contributed
funds to a third party entity (one of the co-defendants),
and through that entity, has an interest in LPLP 2007. The
to the ownership interests of LPLP 2007. The Corporation
recognizes LPLP 2007’s non-controlling interest in these
consolidated financial statements. The amount of additional
liability, if any, which exceeds the non-controlling interest,
is currently indeterminate.
(b) Genesis has entered
into a memorandum of
was recorded. The Corporation is selling lots in the last
understanding with the Northeast Community Society,
phase covered under this development. The payout to the
whereby the Corporation will contribute $5,000 for
participants would be made on completion of the sale of
the naming rights to “Genesis Centre for Community
lots in the last phase, which is expected in 2014.
Wellness”, a recreation complex in northeast Calgary
($500 each year, terminating October 31, 2021). The first
installment was paid in 2012.
(g) The Corporation has office and other operating leases
with the following annual payments: not later than one year
- $706; later than one year but not later than five years -
(c) On February 19, 2008, Genesis entered
into
$2,694; and later than five years - $Nil.
an agreement with the City of Airdrie, whereby the
Corporation will contribute $2,000 for the naming rights to
“Genesis Place”, a recreation complex in the City of Airdrie
($200 each year, terminating June 1, 2017). The first five
installments totaling $1,000 were made through 2012.
(h) LPLP 2007 has a credit facility in the amount of
$7,850 included in loans and credit facilities balance in the
consolidated financial statements. The Corporation has
provided a guarantee for this facility.
(d) The Corporation has issued letters of credit pursuant to
15. FINANCIAL INSTRUMENTS
service agreements with municipalities to indemnify them
(a) Risks associated with financial instruments
in the event that Genesis does not perform its contractual
obligations. As of December 31, 2012, the letters of credit
(i) Credit risk
amounted to $3,801 (December 31, 2011 – $4,739).
(e) On July 15, 2011, a joint venture (see note 16) obtained
a credit facility in the amount of $17,000. The Corporation
and a joint venture partner have provided guarantees for
this facility. The current balance of the credit facility is
$10,036 (2011 - $4,330).
As at December 31, 2012, the Corporation carried $1,643
(2011 - $Nil) as allowance for doubtful accounts.
Genesis recognizes bad debt expense or recovery relating
to amounts receivable on sold lots, net of the return of
the real estate held for development and sale. These lots
are taken back into the Corporation’s lot inventory. Lots
that have been recovered subsequent to impairment
(f) Pursuant to the terms of a participating mortgage
are removed from the Corporation’s lot inventory. The
that was repaid during 2002, the former mortgage holders
difference between an impaired amount receivable and the
have the right to a 20% participation in the profits from
related bad debt expense or recovery is the cost of a lot for
the development of approximately 39 acres of land
which impairment has been assessed.
under development. At December 31, 2012, a liability
of approximately $3,051 (December 31, 2011 - $1,876)
60
61
F INANC IAL STATEMENTS 2012 ANNUAL REPORT
G ENE SIS LAN D DE VE LOP M EN T CORP ORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2012 and 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2012 and 2011
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
During the years ended December 31, 2012 and 2011, the Corporation recognized the following bad debt expense and change
At December 31, 2012, Genesis had obligations due
loans, with approximately $554 impacting pre-tax net
in allowance for doubtful accounts relating to amounts receivable on sold lots, net of the return of the real estate held for
within the next 12 months of $46,824. Based on Genesis’
earnings.
development and sale:
Balance as at January 1
Allowance for lots deemed uncollectable
Bad debt expense
As at December 31
2012
-
1,329
314
1,643
2011
-
-
-
-
Further allowances may be necessary. In order to mitigate credit risk, the Corporation retains title to sold residential lots until
full payment is received.
Aging of amounts receivable was as follows:
Not past due
Past due 0-90 days but not impaired
Past due 91-120 days (impaired)
Past due 121-270 days (impaired)
Allowance for doubtful accounts
2012
85,085
145
927
716
86,873
(1,643)
85,230
2011
43,451
-
-
-
43,451
-
43,451
Individual balances due from customers as at December 31, 2012, which comprise greater than 10% of total amounts receivable,
totaled $35,450 from two customers (December 31, 2011 - $9,856 from three customers).
(ii) Liquidity Risk
The following were the contractual maturities of financial liabilities and other commitments as at December 31, 2012:
Financial Liabilites
Accounts payable and accrued liabilities
Loans and credit facilities excl. deferred loan and credit facilities fees (note 11)
Commitments
Lease obligations
Naming rights
< 1 Year
> 1 Year
Total
21,309
24,109
45,418
706
700
46,824
-
80,445
80,445
2,694
4,800
87,939
21,309
104,554
125,863
3,400
5,500
134,763
operating history, its relationship with its lenders and
committed sales contracts, management believes that the
(b) Fair value of financial instruments
Corporation has the ability to continue to renew or repay its
The fair values of cash and cash equivalents, restricted cash,
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 loans
and credit facilities are at a floating rate of interest. The
accounts payable and accrued liabilities approximate their
carrying values as they are expected to be settled within
twelve months. The fair value of deposits approximates
their carrying value as the terms of deposits are comparable
to the market terms for similar instruments.
Corporation is also exposed to fair value risk to the extent
The fair values of the Corporation’s deposits, loans and
that certain loans and credit facilities, mortgages receivable
credit facilities and amounts receivable were estimated
and loans receivable are at a fixed rate of interest. A 1%
based on current market rates for loans of the same risk
change in interest rates would result in a change in interest
and maturities.
incurred of approximately $974 annually on floating rate
Fair value through profit and loss
Cash and cash equivalents*
Deposits*
Restricted cash*
Loans and receivables
Amounts receivable
Other financial liabilities
Accounts payable and accrued liabilities
Loans and credit facilities, excl. deferred loans
and credit facilities fees
December 31, 2012
December 31, 2011
Carrying
Value
Estimated
Fair Value
Carrying
Value
Estimated
Fair Value
10,005
4,989
9,615
10,005
4,989
9,615
10,850
11,830
5,891
10,850
11,830
5,891
85,230
85,026
43,451
41,500
21,309
104,554
21,309
103,455
16,415
89,989
16,415
86,943
*All of the Corporation’s financial instruments recorded at fair value are categorized under Level 1 as defined below.
Fair value measurements recognized in the balance sheet
Level 2: Inputs other than quoted prices included in Level
are categorized using a fair value hierarchy that reflects the
1 that are observable for the asset or liability, either directly
significance of inputs used in determining the fair values.
(i.e., as prices) or indirectly (i.e. derived from prices); and
The three fair value hierarchy levels are as follows:
Level 3: Inputs for the asset or liability that is not based on
Level 1: Quoted prices (unadjusted) in active markets for
observable market data (unobservable inputs).
identical assets or liabilities;
62
63
F INANC IAL STATEMENTS 2012 ANNUAL REPORT
G ENE SIS LAN D DE VE LOP M EN T CORP ORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2012 and 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2012 and 2011
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
(c) Capital management
The Corporation’s policy is to maintain a sufficient capital
The Corporation manages its capital structure and makes
base in order to maintain investor, creditor and market
adjustments to it in light of changes in regional economic
confidence and to sustain future development of the
conditions and the risk characteristics of the underlying real
business. The Corporation is not subject to externally
estate industry within that region.
imposed capital requirements.
The Corporation considered its capital structure at the following dates to specifically include:
Loans and credit facilities
Shareholders' equity
December 31,
2012
December 31,
2011
102,242
189,590
291,832
88,231
179,848
268,079
In order to maintain or adjust its capital structure, the
16. JOINT VENTURE
Corporation may adjust its gross margins to accelerate
sales or adjust capital spending to manage current and
projected debt levels.
Genesis formed a joint venture on April 30, 2010, for the
purpose of acquiring, developing and selling certain real
estate. The amounts in the following table represent the
The Corporation continues to evaluate the need to leverage
Corporation's 50% proportionate share of the assets,
its land assets to secure sufficient loans and credit facilities
liabilities, revenue, earnings and cash flow information
to ensure the Corporation is able to meet its financial
of the JV at various periods, which was proportionately
Assets
Liabilities
Revenue
Earnings
Cash Flow From (Used In)
Operating
Activities
Investing
Activities
Financing
Activities
As at and for the year ended,
December 31, 2012
As at and for the year ended,
December 31, 2011
30,563
12,321
14,062
1,819
1,147
29,232
8,827
11,575
1,403
(2,290)
-
-
(1,147)
2,280
The Corporation’s transactions with the JV are limited to the
Genesis deferred $13,167 when it contributed its share
purchase of lots. The JV sold 21 lots in 2012 (2011 - 30 lots)
of land to the JV in 2010. As at December 31, 2012, the
to Genesis Builders Group Inc. (“GBG”), a wholly owned
Corporation had realized $5,605 of that amount as a result
subsidiary of the Corporation, for $3,880 (2011 - $4,853).
of sales to third parties (2011 – $2,409). Approximately
The Corporation's accounts payable and accrued liabilities
$3,196 (2011 – $2,409) had been recognized during the
as at December 31, 2012 included $3,370 (December 31,
year ended December 31, 2012. The remaining amount of
2011 - $1,941), representing the proportionate amount
$7,562 will be realized on future sale and development of
owed to the JV for the lots purchased in 2011 and 2012.
lots and lands by the JV.
17. 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 reported the following activities for the years ended December 31,
2012 and 2011:
Year ended
December 31, 2012
Land Development Segment
LP
Genesis
Total
Corporate
and Other
Segment
Intersegment
Elimination
109,992
(70,016)
(18,268)
(7,257)
4,461
(3,504)
(14,878)
(1,766)
114,453
(73,520)
(33,146)
(9,023)
Home
Building
Segment
39,497
(34,910)
-
(6,012)
14,451
(15,687)
(1,236)
(1,425)
278,499
124,653
65,707
8,057
344,206
132,710
38,093
35,634
71,607
(44,859)
(2,626)
(9,909)
6,547
(5,660)
179
(1,559)
78,154
(50,519)
(2,447)
(11,468)
32,085
(28,414)
(27)
(3,723)
14,213
(493)
13,720
(79)
Total
141,582
(94,265)
(33,146)
(16,832)
(12,368)
14,165
-
(1,797)
-
(2,661)
(8,987)
(11,336)
383,317
157,008
(14,479)
15,439
-
(960)
95,760
(63,494)
(2,474)
(16,151)
-
13,641
-
-
-
-
-
10,005
-
-
-
-
-
-
Revenues
Cost of sales
Write-down of real estate
Other expenses(1)
Earnings (loss) before
income taxes and
non-controlling interest
As at December 31, 2012:
Segmented assets
Segmented liabilities
Revenues
Cost of sales
(Write-down) recovery
of real estate
Other expenses(1)
Earnings (loss) before
income taxes and
non-controlling interest
As at December 31, 2011
Segmented assets
Segmented liabilities
272,151
131,156
83,787
7,749
355,938
138,905
17,435
12,769
10,851
-
(6,206)
(10,275)
378,018
141,399
(1) Other expense items include general and administrative, other expenses, finance income and expense, gain from joint venture, and gain or loss on disposal of property and equipment.
obligations as they come due.
consolidated in the financial statements.
Year ended December 31, 2011
64
65
F INANC IAL STATEMENTS 2012 ANNUAL REPORT
G ENE SIS LAN D DE VE LOP M EN T CORP ORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2012 and 2011
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2012 and 2011
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
18. RELATED PARTY TRANSACTIONS
21. PRINCIPAL SUBSIDIARIES AND JOINT VENTURE
Remuneration of the directors and other members of the key management personnel were as follows:
Short-term benefits
Share-based payments
2012
1,433
190
1,623
2011
1,795
289
2,084
Payments to the former Chief Executive Officer under an
19. SUBSEQUENT EVENTS
advisory service agreement for the year ended December
31, 2012 were $29 (2011 - Nil). The agreement ended
March 31, 2012.
On February 11, 2013, Genesis appointed a new senior
executive team. Bruce Rudichuk joined Genesis as
President and Chief Executive Officer and Mark Scott as
A director of Genesis, appointed on July 12, 2012, is an
Executive Vice President and Chief Financial Officer.
officer of a lender. At December 31, 2012, the Corporation
had loans totaling $28,448 (December 31, 2011 – $53,196)
20. COMPARATIVE FIGURES
outstanding with this lender. During the year ended
Certain comparative figures have been reclassified to
December 31, 2012, Genesis paid interest and fees to the
conform to the current year’s presentation.
lender of $3,504 (2011 – $4,523), respectively. During the
year ended December 31, 2012, the Corporation obtained
no new financing or re-financing on existing loans (2011 –
$70,185) with the lender. All transactions are under normal
commercial terms and conditions.
Genesis is the general partner in four limited partnership
arrangements and a partner in a 50% real estate joint
venture, which is discussed in detail in notes 4 and 16,
respectively.
The financial statements include the financial statements of Genesis and its subsidiaries and entities controlled by the
Corporation. All entities are incorporated in Canada and are listed in the following table:
Name
Land Development
Genpol Inc.
Genpol LP
1504431 Alberta Ltd.
Genesis Sage Meadows Partnership
Polar Hedge Enhanced Income Trust
New View Consulting Ltd.
No.114 Corporate Ventures Ltd.
Buena Vista Ranches Ltd.
LP 4/5 Group
Genesis Limited Partnership #4
Genesis Limited Partnership #5
GLP5 GP Inc.
GLP5 NE Calgary Development Inc.
Genesis Northeast Calgary Ltd.
LP 6/7 Group
Genesis Limited Partnership #6
Genesis Limited Partnership #7
GP GLP7 Inc.
GLP7 Subco Inc.
LP 8/9 Group
Genesis Limited Partnership #8
Genesis Limited Partnership #9
GP GLP8 Inc.
GP GLP9 Inc.
GLP9 Subco Inc.
LPLP 2007 Group
Limited Partnership Land Pool (2007)
GP LPLP 2007 Inc.
GP RRSP 2007 Inc.
LPLP 2007 Subco Inc.
GP RRSP 2007 #2 Inc.
LPLP 2007 Subco #2 Inc.
LP RRSP Limited Partnership #1
LP RRSP Limited Partnership #2
Joint Venture
Kinwood Communities Inc.
Home Building
Single-family
Genesis Builders Group Inc.
Multi-family
The Breeze Inc.
Generations Group of Companies Inc.
Life at Solana Inc.
Life at Waterstone Inc.
Montura Inc. (previously Life at Skye Inc.)
% equity interest as at
December 31,
2012
December 31,
2011
100%
100%
0.0002%
99.9998%
100%
100%
100%
100%
0.001%
0%
0%
0%
100%
11.75%
0%
0%
0%
0.23%
0%
100%
0%
0%
0%
100%
0%
0%
0%
0%
0%
0%
50%
100%
100%
100%
100%
100%
100%
100%
100%
0.0002%
99.9998%
100%
100%
100%
100%
0.001%
0%
0%
0%
100%
11.65%
0%
0%
0%
0.23%
0%
100%
0%
0%
0%
100%
0%
0%
0%
0%
0%
0%
50%
100%
100%
100%
100%
100%
100%
66
67
F INANC IAL STATEMENTS 2012 ANNUAL REPORT
FIVE YEAR SUMMARY
CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of Canadian dollars, except per share amounts)
Assets
Real estate held for development and sale
Amounts receivable
Cash and cash equivalents
Property and equipment
Other operating assets
Deferred income taxes
Liabilities
Financings
Customer deposits
Accounts payable and accrued liabilities
Income taxes payable
Land development service costs
Deferred income taxes
Non-controlling interest
Equity
Share capital
Contributed surplus
Retained earnings
Shareholders’ equity
Non-controlling interest
2012
(IFRS)
271,845
85,230
10,005
478
15,759
–
383,317
102,242
4,352
21,309
4,617
24,428
60
–
157,008
55,844
5,109
128,637
189,590
36,719
226,309
383,317
2011
(IFRS)
299,916
43,451
10,850
448
20,494
2,859
378,018
88,231
7,582
16,415
12,970
16,201
–
2010
(IFRS)
304,634
27,021
2,455
544
15,812
–
350,466
81,320
8,388
13,025
6,988
10,347
3,387
141,399
123,455
55,122
4,950
119,776
179,848
56,771
236,619
378,018
54,798
4,575
108,716
168,089
58,922
227,011
350,466
2009
(GAAP)
2008
(GAAP)
302,598
15,384
4,578
17,568
2,213
342,341
115,210
4,985
8,350
11,139
8,301
–
61,084
209,069
54,097
4,120
75,055
133,272
133,272
342,341
285,574
29,498
4,503
45,101
778
365,454
132,704
3,515
24,203
9,587
4,566
–
64,296
238,871
54,164
4,120
68,299
126,583
126,583
365,454
CONSOLIDATED STATEMENT OF EARNINGS (LOSS)
(Expressed in thousands of Canadian dollars, except per share amounts)
2012
2011
2010
2009
2008
Revenue
Sales
Interest and other income
Expenses
Cost of sales
Write-down (recovery) of real estate held
for development and sale
G&A and Selling and Marketing
Other operating expense
Finance expense and other
(Loss) Earnings before income taxes
Provision for income taxes
Net (loss) earnings being
comprehensive (loss) earnings
Attributable to non-controlling interest
Attributable to equity shareholders
140,770
812
141,582
94,265
33,146
14,012
1,039
1,781
144,243
(2,661)
4,086
(6,747)
(15,608)
8,861
Net earnings Per Share - Basic and Diluted
$ 0.20
95,316
444
95,760
63,494
2,474
12,479
1,335
2,337
82,119
13,641
4,264
9,377
(1,683)
11,060
$ 0.25
136,651
732
137,383
68,411
12,267
992
6,510
88,180
49,203
12,845
36,358
2,844
33,514
$ 0.75
85,851
711
86,562
61,275
7,643
10,946
(377)
1,470
80,957
5,605
3,579
2,026
(4,730)
6,756
$ 0.15
82,558
1,273
83,831
43,025
6,962
11,026
14,493
672
76,178
7,653
3,099
4,554
(4,730)
9,284
$0.20
68
G ENE SIS LAN D DE VE LOP M EN T CORP ORATION
SENIOR MANAGEMENT TEAM
TRANSFER AGENT
Computershare Trust Company of Canada
BRUCE RUDICHUK, CA, CIRP
President and Chief Executive Officer
MARK SCOTT
Executive Vice President and
Chief Financial Officer
PS SIDHU, MBA
General Manager, Home Building
600, 530 - 8th Avenue SW
Calgary, Alberta T2P 3S8
STOCK EXCHANGE
Toronto Stock Exchange
Stock Symbol - GDC
AUDITORS
MNP LLP
ARNIE STEFANIUK, P.ENG.
1500, 640 - 5th Avenue SW
General Manager, Land Development
Calgary, Alberta T2P 3G4
KRISTEN WILKINSON
CORPORATE COUNSEL
General Manager, Sales & Marketing
Norton Rose Fulbright Canada LLP
BOARD OF DIRECTORS
MICHAEL BRODSKY
Chairman of the Board of Directors
STEVEN GLOVER, FCA
Director, Chairman of the Audit Committee
YAZDI BHARUCHA, CA
Legal Counsel
Suite 3700, 400 - 3rd Avenue SW
Calgary, Alberta T2P 4H2
CORPORATE OFFICE
7315 - 8th Street NE
Calgary, Alberta T2E 8A2
Ph: 403 265 8079
Fx: 403 266 0746
Director
Email: genesis@genesisland.com
MARK W. MITCHELL
Director
LOUDON OWEN
Director
SANDY POKLAR
Director
WILLIAM ("BILL") PRINGLE
Director
Genesis Land Development Corporation
7315 - 8th Street NE
Calgary, Alberta Canada T2E 8A2
P 403 265 8079 F 403 266 0746
www.genesisland.com