2013 ANNUAL REPORT / GENESIS LAND DEVELOPMENT CORP.
DEBT HAS DECREASED TO
$50,373,000(2013)
$97,224,000(2012)
We create inspired communities:
one home, one family,
one neighbourhood at a time.
WE DESIGNWE DREAMWE BUILD TABLE OF
CONTENTS
5
8
PRESIDENT’S MESSAGE
SENIOR MANAGEMENT AND
BOARD OF DIRECTORS
14 GENESIS COMMUNITIES
22 MANAGEMENT’S
DISCUSSION & ANALYSIS
10 COMMUNITY INVOLVEMENT
45 CONSOLIDATED FINANCIAL STATEMENTS
12 GENESIS PROJECTS
83 CONTACT INFORMATION
4
MESSAGE
TRANSFORMATION TOWARDS A BRIGHTER FUTURE
The past year was transformative for Genesis and its stakeholders. A number of
significant changes were implemented to build a strong foundation upon which
we can create our future.
In 2013, we focused on reviewing and re-engineering Genesis: investigating and
evaluating our assets, businesses and markets in order to move forward strategically.
We began the year with the execution of a three-point business initiative: to
profitably grow our business; develop a people plan; and simplify our organization.
(continued on page 6)
4
PRESIDENT’SBRUCE RUDICHUKPresident & Chief Executive Officer We have delivered on this initiative,
is the first time in several years that a
• Grow land development operations,
and I’m proud to report on our
multi-year strategy has been developed for
securing approvals and advancing
accomplishments. During 2013, we:
Genesis, and is a significant positive step
development of our prime mixed-use
• Achieved a turnaround in the home
building business, increasing house
sales from 91 to 164, managing costs
and reaching profitability for the first
time in several years;
• Simplified the organization through
various initiatives, including identifying
non-core assets. We implemented a
sales process and closed on one parcel
in March 2014, which represents the
bulk of our non-core book value; and
• Began the development of our “People
Plan” in order to align key values with
staff throughout the organization.
A STRATEGIC DIRECTION,
A STRONGER COMPANY
of significant shareholders, allowing
for a stronger voice. It is much more
involved, guiding our strategic direction.
What’s most evident is that there is more
collaboration within the Board and with
Management now, pulling in one direction
for the company’s future.
Together with the Board, we created
a new strategic plan in late 2013. This
towards our future success. We now have
land holdings while acquiring mid-term
a coherent and cohesive direction to head
land for future development;
towards for the next 12 to 24 months. Our
goals are to:
1. Maximize shareholder value by
increasing long-term sustainable
• Sell non-core assets that are either
outside the Calgary Metropolitan
Area or do not have development
characteristics that fit within our core
earnings (inclusive of appreciation),
business;
shareholder liquidity, operating capacity
and capability, and by implementing
communication with stakeholders
that builds trust, confidence and
understanding; and
2. Position the platform through clean-
up of the balance sheet, growth of
our land development business and
the establishment of profitable home
building operations.
• Simplify and streamline the organization
to manage costs and improve efficiency;
• Improve communication with our
investors;
• Focus on financing strategies to ensure
the optimal allocation and use of our
capital resources;
• Create liquidity by considering various
alternatives for the return of capital to
shareholders;
• Capitalize on new opportunities
involving potential land acquisitions, our
multi-family home building business and
multi-use development projects; and
pursuing several objectives throughout the
organization. In 2014, we plan to:
• Create a strategy to build a multi-
• Continue to build a sustainable
and highly profitable home building
business, with a near-term goal of
increasing home sales toward 300
per year to improve net margin and
profitability;
family home building business in order
to benefit from our large land base,
which equates to a multi-year supply of
product.
All of these things will position us for
future profitable growth.
6
One of the most significant events over the
past year has been the transformation of
our Board of Directors. Our Board is now
Once these steps are complete, we will
consider longer-term strategies to identify
additional opportunities for future growth.
more aligned through its representation
In order to achieve these goals, we are
PRESIDENT’S
MESSAGE
We couldn’t achieve these things without
working on improving operating metrics,
shareholders for their continuing support.
a strong staff and management team
increasing the size/growth of our company
I look forward to communicating our
focused on growing the business. We have
and improving product quality. Such
results, accomplishments and success
that. I’m proud of the team’s commitment
growth often taxes resources. To date,
as we execute our plan, delivering on
and their response to driving Genesis
we have managed this well and expect to
our promises to build the platform and
forward. Our team has welcomed change,
continue to do so in the future.
maximize shareholder value. It’s time to
embracing the strategic plan and creating
a company with higher value. In addition,
we continue to focus on improving our
customers’ experience, knowing that if
we do the right things by our customers,
profitability will follow.
WHAT LIES AHEAD
One of our major challenges is to close
the gap between our net asset value and
common share trading price. The last two
years have been difficult for shareholders
as we’ve undergone various changes to
transition Genesis to where it is today. We
are committed to improving shareholder
communication, better explaining our
build our future.
BRUCE RUDICHUK
President & Chief Executive Officer
We believe that 2014 is going to be a year
assets, business and potential to the
March 28, 2014
of growth and profitability. We are land
market to gain their understanding, trust
rich in a market where land development
and, eventually, the appropriate valuation.
is being constrained and prices are
increasing. Vertical integration and
I expect shareholders will see a significant
improvement in communications, enabling
efficient operations will allow us to benefit
better decisions to be made regarding
from a growing economy. These factors
Genesis and its future opportunity.
should give us a number of wins over the
next few years.
This is not to say we won’t have some
challenges to deal with. The approval
Our future is bright and I believe that
a greater possibility can unfold for
our company. I base this belief on a
combination of the things that provide
process for land development is becoming
our underlying value: our people, our
more complicated and longer. Continuing
teamwork, our assets, the growing
to find mid-term viable development
economy and the marketplace in general.
land opportunities is becoming harder.
All of these are solid or improving and will
Fortunately, we have ample land for
result in a good year for Genesis and its
several years of development, but we do
stakeholders.
need to add to our portfolio for the future.
Our pace of growth presents unique
challenges. We are simultaneously
Once again, I’d like to thank our
employees and directors for all their
hard work over the past year, and the
7
BRUCE RUDICHUK, CA, CIRP
President & Chief Executive Officer
MARK SCOTT
Executive Vice President & Chief Financial Officer
RAUF MUHAMMAD, CPA
Corporate Controller
With 20 years of diverse experience in the real
estate industry Bruce has been involved in a
variety of markets and product offerings, but with
an emphasis on home building. Prior to joining
Genesis, Bruce was the CEO at Intracorp Projects
Ltd., a privately held real estate company. He also
served on the executive committee of BILD (Building
Industry and Land Development Association) for the
Greater Toronto Area. He is a Chartered Accountant
(member of the Institute of Chartered Accountants
of Ontario) and a Chartered Insolvency and
Mark has nearly 30 years of experience in real
Rauf is a CPA (Certified as CPA in Colorado, USA)
estate, investment banking and international
with 18 years of experience in financial reporting,
business. His real estate experience is in finance,
internal controls, creating sustainable processes
mergers and acquisitions, asset sales, and property
and controllership in Canada and abroad. He has
asset management. Mark spent 17 years at Scotia
experience in the public practice, media, oil and gas,
Capital in Toronto, Hong Kong, and most recently,
and real estate sectors. Prior to joining Genesis,
as Managing Director & Office Head in their
Rauf worked with Spectra Energy, KPMG, Middle
Vancouver office. Prior to joining Genesis, he was a
East Broadcasting Centre, Ernst and Young, and
private investor and director. Mark earned a B.A. in
Arthur Andersen. He joined Genesis in November
Management and Economics from the University of
2011 and served as Manager of Financial Reporting
Guelph and has served on the Board of Trustees of
and Assistant Controller prior to becoming Controller
Restructuring Professional (member of the Canadian
the Fraser Institute and various public companies.
in 2013.
Association of Insolvency and Restructuring
Professionals). Bruce earned an Honours Bachelor of
Economics and Business from York University.
BOARD OF DIRECTORS
STEPHEN J. GRIGGS, B.A., J.D.
Chair of the Board of Directors
WILLIAM (“BILL”) PRINGLE, B.Comm., C.A.
Vice Chair of the Board of Directors
YAZDI BHARUCHA, C.A., ICD.D
Director
MICHAEL BRODSKY, B.A., I.D., M.B.A.
Director
8
SENIOR
MANAGEMENT
PS SIDHU, MBA
General Manager, Home Building
ARNIE STEFANIUK, P.ENG.
General Manager of Land Development
KRISTEN WILKINSON
General Manager, Sales & Marketing
Since his appointment as General Manager of
With over two decades of experience in land
Kristen brings more than 15 years of strategic
Home Building in 2008, PS has tripled division
development and municipal engineering, Arnie has
marketing and communications expertise to her role
revenues. An MBA graduate who is enrolled in
served as General Manager of Land Development
as General Manager of Sales & Marketing with
the Professional Home Builders Institute, PS has a
at Genesis since 2010. His experience as a
Genesis. Her extensive experience in the real estate
strong background in organizational leadership and
professional engineer, working in the field, led to a
and land development sector includes marketing
residential construction operations. He has been
passion for community development. Arnie provides
positions with the renowned North America resort
working with Genesis since 2005.
expertise in land investment, community design and
real estate company, Intrawest, and the Lora Bay
construction.
Corporation. Prior to joining Genesis in 2012, Kristen
served as VP of Marketing & Communications with
an energy solutions and renewables company.
In 2013, Kristen helped facilitate the successful
redevelopment of Genesis’ strategic vision and
was able to deliver eighty percent growth of the
home building division. She currently oversees the
company’s corporate brand assets.
STEVEN GLOVER, M.B.A., FCA
Chair of the Audit Committee
MARK W. MITCHELL, B.A., M.B.A.
Director
LOUDON OWEN, B.A., J.D., M.B.A.
Director
IAIN STEWART, B.Comm., C.A.
Director
9
THE GENESIS CENTRE OF COMMUNITY WELLNESS
CALGARY, AB
COMMUNITY
INVOLVEMENT
A SPECIAL EVENT AT THE GENESIS CENTRE
OF COMMUNITY WELLNESS
GENESIS PLACE -
AQUATIC AREA
GENESIS PLACE
SAM AWARDS FINALIST FOR 2013
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 Northeast 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
Northeast 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 as a perfect
alignment of our core values. The dream
quickly started to take shape, gaining
support and funding from the City of
Calgary and YMCA, along with a generous
naming sponsorship from Genesis.
Genesis continues to play a part in
the support of the Genesis Centre of
Community Wellness – a 225,000 square
foot, $120 million multi-purpose complex
Best Moving Media
Canals Landing
Show Home
Grand Opening
Best New Design Villa/Duplex/Townhome
up to 1,199 sq. ft.
The Roxbury
58 Sage Meadows Terrace NW, Calgary
Best Townhomes $350,000 and over
The Brownstones at Sage Meadows
57 Sage Meadows Terrace NW, Calgary
Best New Home $270,000 - $309,999
The Roosevelt in EvansRidge
789 Evanston Drive NW, Calgary
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 what it means to
built to enrich the health, wellness, and
the quality of life for the community of
unity of communities in Northeast Calgary.
Airdrie.
MAIN LOBBY - THE GENESIS CENTRE
OF COMMUNITY WELLNESS
GENESIS PLACE
AIRDRIE, AB
11
LANDS UNDER DEVELOPMENT
FOWLER
NW CALGARY
AIRDRIE
AIRDRIE
CITY OF AIRDRIE
FOWLER
CITY LIMITS
NE CALGARY
DELACOUR
NW CALGARY
CITY OF AIRDRIE
STONEY TRAIL
CALGARY
INTERNATIONAL
AIRPORT
NORTH CONRICH
TRANS-CANADA HWY
CITY OF CALGARY
S
T
O
N
E
Y
T
R
A
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L
S
T
I
M
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L
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T
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MOUNTAINVIEW
SAGE HILL
CROSSING
S
T
I
M
I
L
Y
T
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C
S
T
I
M
I
L
Y
T
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CITY LIMITS
NE CALGARY
DELACOUR
STONEY TRAIL
CALGARY
INTERNATIONAL
AIRPORT
NORTH CONRICH
TRANS-CANADA HWY
CITY OF CALGARY
S
T
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N
E
Y
T
R
A
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S
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MOUNTAINVIEW
SAGE HILL
CROSSING
S
T
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S
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RESIDENTIAL DEVELOPMENT
MIXED USE DEVELOPMENT
RESIDENTIAL DEVELOPMENT
MIXED USE DEVELOPMENT
CITY LIMITS
CITY LIMITS
12
GENESIS
PROJECTS
LANDS HELD FOR FUTURE DEVELOPMENT
AIRDRIE
“FOWLER”
AIRDRIE
CITY OF AIRDRIE
NW CALGARY
CITY LIMITS
SAGE HILL
CROSSING
STONEY TRAIL
NE CALGARY
CALGARY
INTERNATIONAL
AIRPORT
NORTH
CONRICH LANDS
S
T
I
M
I
L
Y
T
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C
CITY OF CALGARY
TRANS-CANADA HWY
S
T
O
N
E
Y
T
R
A
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S
T
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M
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MOUNTAINVIEW
S
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CITY LIMITS
13
1,631 HOMESBAYSIDE1,386 HOMESBAYVIEW 1,631 HOMESBAYSIDE1,386 HOMESBAYVIEW 1,689 HOMESTHE CANALS 1,689 HOMESTHE CANALS 1,056 HOMESSADDLESTONE 1,056 HOMESSADDLESTONE 2,441 HOMESSAGE MEADOWS 2,441 HOMESSAGE MEADOWS MANAGEMENT’S DISCUSSION & ANALYSIS 2013
FOR THE THREE MONTHS AND YEAR ENDED DECEMBER 31, 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, 2013 and 2012 prepared in accordance with International Financial Reporting Standards (“IFRS”).
The consolidated financial statements and comparative information have been prepared in accordance with 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.
All amounts are in thousands of Canadian dollars, except per share amounts or unless otherwise noted. This MD&A is dated as of March 28, 2014.
NON-GAAP FINANCIAL MEASURES AND ADVISORIES
This MD&A includes references to certain financial measures which do not have standardized meanings prescribed by IFRS. As such, these financial measures
are considered additional GAAP or non-GAAP financial measures and therefore are unlikely to be comparable with similar financial measures presented by
other issuers. These additional GAAP and non-GAAP financial measures include, Net Asset Value, Gross Margin before impairment and Adjusted earnings
per share. For a full description of these and other non-GAAP financial measures and a reconciliation of these measures to their most directly comparable
GAAP measures, please refer to “Non-GAAP Financial Measures” and “Forward Looking Statements” advisories contained at the end of this MD&A.
22
OVERVIEW
Genesis Land Development Corp.
(“Genesis” or the “Corporation”) is an
integrated, award-winning land developer
and residential homebuilder creating
innovative and successful communities in
the Calgary Metropolitan Area. Genesis is
committed to supporting its communities
through partnerships like the Genesis
Centre of Community Wellness, and
Genesis Place Recreational Centre.
We report our activities as two business
segments: land development and home
building. Land development involves
the acquisition of land held for future
development, and the planning, servicing
and marketing of residential, commercial,
industrial and urban communities. Home
building includes the acquisition of lots,
and the construction and sale of single-
and multi-family homes.
The common shares of the Corporation
We own a large portfolio of entitled
are listed for trading on the Toronto Stock
residential and mixed-use land, which
Exchange (the “Exchange” or “TSX”) under
is well positioned to benefit from the
continued robust activity in the Alberta
economy. Land values in Calgary are
rising for both entitled land and home
building lots, reflecting the tightening of
entitled land supply and the continuing
strong demand for homes in the Calgary
Metropolitan Area.
the symbol “GDC”.
MARKET OVERVIEW
Alberta’s general economic conditions
continue to be strong, supporting
expectations of a robust pace of activity
in Calgary’s home building industry
throughout the balance of 2014. Solid
economic fundamentals include low
unemployment and interest rates, low
and stable inflation rates, positive net
migration to Alberta and above average
earnings by Albertans. These market
dynamics provide a continued healthy
environment for development and growth
of our core land positions, sale of lots and
expansion of our home building activities.
23
GENESIS LAND DEVELOPMENT CORP. MANAGEMENT’S DISCUSSION & ANALYSIS FOR THE THREE MONTHS AND YEAR ENDED DECEMBER 31, 2013
CORPORATE HIGHLIGHTS
Key financial results and operating data for the Corporation were as follows:
Three months ended
December 31,
Year ended
December 31,
2013
2012(1)
2013
2012(1)
26,331
(23,978)
2,353
(4,155)
6,508
24.7%
2,485
4,980
0.11
0.12
0.12
94
-
62
36
-
154
-
42
396
54
57,377
(76,768)
(19,391)
(34,215)
14,824
25.8%
(24,529)
(7,126)
(0.16)
0.15
0.15
(17,245)
(0.39)
46
25
37.59
184
929
34
409
37
96,077
129,460
(86,230)
(120,409)
9,847
(16,282)
26,129
27.2%
(1,850)
5,713
0.13
0.31
0.31
53,473
1.19
150
110
11.28
171
591
164
387
189
9,051
(33,146)
42,197
32.6%
(2,661)
8,861
0.20
0.51
0.50
(2,794)
(0.06)
238
56
49.37
184
921
91
433
152
As at December 31,
2013
2012(1)
17,678
10,005
313,846
374,341
50,373
95,920
195,483
217,926
7.18
6.67
16.1%
97,224
148,032
189,590
226,309
7.23
6.70
26.0%
Key Financial Data
Total revenues (2)
Cost of sales (3)
Gross margin
Impairment
Gross margin before impairment (4)
Gross margin before impairment (%) (4)
Earnings (loss) before income taxes
Net earnings (loss) (5) attributable to equity shareholders
Net earnings (loss) (5) per share - basic and diluted
Adjusted earnings per share - basic (4),(6)
Adjusted earnings per share - diluted (4),(6)
Cash flows from (used in) operating activities
Cash flows from (used in) operating activities per share (7)
Key Operating Data
Residential lots sold to third parties (units)
Residential lots sold through the home building business segment (units)
Development land sold (acres)
Average revenue per lot sold to third parties
Average revenue per acre
Homes sold (units)
Average revenue per home sold
Net new home orders (units)
Key Balance Sheet Data
Cash and cash equivalents
Total assets
Loans and credit facilities
Total liabilities
Shareholders’ equity
Total equity
Pre-tax net asset value per share (4)
After-tax net asset value per share (4)
Debt to total assets
(1) The figures for 2012 have been restated to incorporate the impact of adopting IFRS 11 Joint Arrangements
(2) Includes other revenues
(3) Includes impairment of real estate held for development and sale
(4) Non-GAAP financial measure. Refer to page 40
(5) Net of income tax expense
(6) Before impairment related to equity shareholders and before proxy contest costs
(7) Basic and diluted amounts per share
24
HIGHLIGHTS
Improved cash flows from operations:
• Cash flows from (used in) operating
activities for year ended December 31,
2013 were $53,473 or $1.19 per share
compared to ($2,794) or ($0.06) per
share in 2012.
• Accounts receivable decreased to
$23,342 at December 31, 2013 from
$73,239 at December 31, 2012 primarily
due to the Sage Hill Crossing proceeds
($27,713) received in January 2013
Improved management of balance
sheet:
• Significantly reduced Loans and Credit
Facilities from $97,224 at December 31,
2012 to $50,373 at December 31, 2013
• This was largely due to the proceeds
from the sale of development land
at Sage Hill Crossing and other cash
flow from operating activities
• Debt to equity ratio decreased to
0.44 at December 31, 2013 from
0.65 at December 31, 2012
• Debt to total assets dropped by 10%
to 16% for 2013 from 26% in 2012
• Total interest expense reduced by 34%
to $3,771 in 2013 from $5,686 in 2012
Achieved turnaround in the home
building business segment:
• This business segment achieved
essentially a breakeven outcome for
2013
• Sales volume increased by 80% to 164
units in 2013 from 91 units in 2012
• Revenues increased to $63,570 from
$39,497 for the year ended December
31, 2013 compared to 2012
Implemented comprehensive planning
and control:
• Completed the sale of the largest
portion for proceeds of $14,000 in
• The new management team
and renewed board have led the
establishment of sophisticated planning
and control policies, systems and
procedures that affect all aspects
of the organization from accounting,
administration, compensation to
governance
February 2014
• Remaining non-core assets
represent only 3.3% (2012 – 7.9%)
of Genesis’ land portfolio with an
appraised value of $7,210 (2012
– $17,490) and carrying value of
$5,843 (2012 – $14,015)
• All aspects of the administrative
• Made significant progress on design
infrastructure and systems have
been reviewed and necessary
changes made or pending
and planning for the development
of the Sage Hill Crossing mixed use
development
• Home building sales and
Further information on the Corporation’s
administrative infrastructure and
performance is presented in the land
systems are substantially in place to
development and home building sections
support our continued turnaround
• A comprehensive and focused strategic
plan is in place and we are executing
related business plans with careful
attention to economy, efficiency and
effectiveness
• The interests of the new CEO and CFO
are aligned with those of shareholders
through a new compensation structure
that includes an equity based incentive
plan
• Performance targets cover all
aspects of operations, with a
determined effort to close the gap
between our net asset value and
share value
Substantially completed asset
rationalization:
• Identified non-core assets and appraised
such assets accordingly, resulting in the
majority of the impairment write-down
of $26,453 on lands directly owned by
Genesis over the last two years (plus
$22,975 applicable to lands owned by
the limited partnerships)
• Established a process to sell all non-
core assets:
25
of this MD&A. These sections are
to be read in conjunction with note
19 (segmented information) in the
consolidated financial statements for the
year ended December 31, 2013 and 2012.
These sections of the MD&A present the
business segment revenues and expenses
before inter-company eliminations.
STRATEGY AND BUSINESS FOCUS
We will continue to focus on our two
core businesses of land development and
home building in the Calgary Metropolitan
Area, where our three primary residential
communities continue to generate
attractive earnings and cash flows. In
addition to our residential strength,
we own several major mixed-use land
holdings in the greater Calgary area,
which are expected to contribute future
earnings and cash flows as the projects
mature and sites are sold or developed.
Over the course of 2013, management
and the Board of Directors (“Board”)
developed a comprehensive strategic plan
focused towards building our existing
land development and home building
GENESIS LAND DEVELOPMENT CORP. MANAGEMENT’S DISCUSSION & ANALYSIS FOR THE THREE MONTHS AND YEAR ENDED DECEMBER 31, 2013
businesses to maximize shareholder
value and position the platform for future
2. Grow Land Development
Operations
growth. This plan will drive our focus
and activities in 2014 and beyond. We
made substantial progress on the plan’s
strategies in 2013, which are outlined as
follows:
1. Build a Sustainable and Highly
Profitable Home Building Business
Home building unit volume grew 80% from
91 homes sold in 2012 to 164 in 2013,
and we are well-advanced in meeting our
objective of growing this by a further 41%
to 231 home closings in 2014 and beyond.
We have assembled a strong production
team and sufficient infrastructure capable
of building 300 homes per year, improving
net margin and profitability of our home
building business segment as volume
rises.
As volume in the home building business
segment rises, we expect improvements
in both gross and net margins as a
result of more efficient use of our home
building platform. The land business
generates regular revenue from the sale
of home building lots, which is a relatively
predictable business in normal market
conditions. As mixed-use sites mature and
are sold, Genesis will generate large, but
irregular, increases in earnings and cash
flow. The timing of these sales depends
on the progress of development for these
large, mixed-use land positions
We hold a valuable bank of residential
land in our three primary communities in
Airdrie, Calgary NE and Calgary NW in
Alberta, which continues to fuel growth in
our lot sales and home building business
segment. Residential lot sales are
expected to grow by 7% from 260 lots
in 2013 to 277 lots in 2014. In addition,
we are aggressively securing approvals
and advancing development for our
prime mixed-use land holdings at Sage
Hill Crossing and North Conrich. These
development lands represent some of the
best located and developable mixed-use
land in the Calgary Metropolitan Area.
3. Sell Non-core Assets
We have identified seven properties
that are either outside the Calgary
Metropolitan Area or do not have
software systems. The implementation of
a new accounting and operations software
system is underway and planned to be
fully operational in the third quarter of
2014. We will continue to examine our
operations to identify future opportunities
to improve efficiencies.
We are committed to improving
communication with our shareholders and
the market. In 2014, our shareholders can
expect management to further increase its
focus on investor communication through
a variety of investor relations activities.
We believe that better explaining our
assets, business and potential to the
market will help gain understanding,
trust and, eventually, improved market
valuation.
5. Focus on Financing Strategies
Genesis strengthened its balance sheet
by reducing debt by $46,851 in 2013 (2012
development characteristics that fit within
- $8,993). Subsequent to the year end,
our core business. The appraised value
of these properties is $21,150. In order
to more efficiently deploy our capital, we
have decided to pursue the sale of these
Genesis’ highest interest loan (excluding
limited partnerships) was prime +2.5%.
A comprehensive financing focus is being
applied to ensure the optimal allocation
properties. We have largely met our
and use of our capital resources, and
short-term sale objectives with the sale of
achieve a prudent capital structure and
the first and largest of these properties for
long-term returns. Going forward, our
$14,000 in February 2014, and now have
98% of our real estate assets within the
objective is to better match the term of
financing with the underlying land asset
Calgary Metropolitan Area. The balance
as follows:
of the non-core properties is expected to
be sold over the next 12 to 24 months.
Part of our strategy to increase growth
We continue to evaluate several other
and profitability is to use our developed lot
ancillary parcels to determine whether
supply primarily in our own home building
they fit into our long-term development
business segment. This provides a reliable
and building program.
long-term supply of land to grow the home
building business segment and enables us
to capture additional margin from the sale
of homes.
4. Simplify and Streamline
the Organization
To provide cost savings and operating
efficiencies, we are in the process of
eliminating redundant and inefficient
26
• Obtain the maximum amount of
financing available for land servicing
and home building, which is generally
at a lower rate due to the nature of the
assets’ short-term earnings potential
and lower risk; and
• Finance long term land with equity,
except in certain cases when
acquisition financing is obtained from a
vendor or other advantageous sources.
6. Create Liquidity for Shareholders
There three factors that affect the results
In management’s opinion, Genesis’
of our operations:
share price does not currently reflect
1. The strategic decision to reserve a
the underlying net asset value of the
significant portion of developed lots
Corporation. In an effort to help reduce
for home building defers the related
this significant gap and improve trading
revenues and earnings from those lots
liquidity of our common shares, we will
until the house and lot are sold. When
be considering various alternatives for
lots are sold to a third party home
the return of capital to shareholders. Any
builder, lot sale revenue is recognized
strategy would be implemented if, and
pursuant to the terms of the contract
when, appropriate with sufficient retained
and corporate accounting policies. The
cash flow to sustain and grow earnings
impact on reported results will be less
pronounced once housing volumes
achieve optimal levels.
2. The development and sale of
development land (typically multi-family,
industrial or commercial developments)
is a lengthy business cycle. The sales
of such parcels do not occur on a
predictable or regular schedule as is
the general pattern for residential lots.
Consequently, the sale of development
land creates significant volatility in the
revenues, earnings and cash flows from
operating activities of Genesis.
3. The seasonal implications to land
development and home construction in
the Calgary Metropolitan Area impacts
when costs are incurred and sales
are generated, which again creates
quarterly volatility.
over the long-term.
7. Capitalize on New Opportunities
We actively identify and evaluate
potential, and appropriate, land
acquisitions to sustain and grow the
land development and home building
businesses in the Calgary Metropolitan
Area. We plan to create a strategy to enter
the multi-family home building business in
order to benefit from our large land base,
which equates to a multi-year supply.
In addition, our multi-use development
projects present potentially significant
opportunities to extend our development
capabilities and enter joint venture
arrangements to capitalize on potential
profitable commercial opportunities.
RESULTS OF OPERATIONS
Genesis evaluates its land development
and home building businesses internally
on a segmented basis. The home building
business segment is also evaluated
against external industry benchmarks for
other home builders in the City of Calgary.
All costs are segmented, including selling
costs, general and administrative costs
and finance expense.
27
GENESIS LAND DEVELOPMENT CORP. MANAGEMENT’S DISCUSSION & ANALYSIS FOR THE THREE MONTHS AND YEAR ENDED DECEMBER 31, 2013
Land Development
Our strategy is to profitably grow housing
operations and sell more lots through our
home building segment, thus realizing
both the land development margin and the
home building margin. In the short-term,
home is built and sold. Future quarters will
land development revenue is expected
benefit once the homes are built, and the
to decline as those lots sold through the
home and lot sold to a third party.
home building business segment, and
related profits, are not recognized until the
Three months ended December 31,
Year ended December 31,
Residential lot sales (2)
Development land sales
Cost of sales
Gross margin before impairment (3)
Gross margin before impairment (%) (3)
Impairment (4)
Equity income from joint venture
Proxy contest costs
Other net expenses (6)
Segmented EBIT (7)
Residential lots sold to third parties
Residential lots sold through the
home building business segment
Total residential lots sold
Development land sold (acres)
Average revenue per lot sold
Average revenue per acre sold
2013
14,421
-
(8,698)
5,723
39.7%
(4,155)
3,213
(64)
2012(1)
13,705
34,910
(32,551)
16,064
33.0%
%
5.2%
-
(73.3%)
(64.4%)
2013
40,817
6,668
2012(1)
55,360
45,460
(27,912)
(60,832)
19,573
39,988
41.2%
39.7%
%
(26.3%)
(85.3%)
(54.1%)
(51.1%)
(34,215)
(87.9%)
(16,282)
(33,146)
(50.9%)
(277)
-
N/R (5)
N/R (5)
(2,369)
(4,810)
(50.7%)
2,348
(23,238)
62
36
98
-
154
-
46
25
71
37.59
193
929
N/R (5)
34.8%
44.0%
38.0%
-
(20.2%)
-
6,038
(2,889)
(8,544)
(2,104)
150
110
260
11.28
155
591
4,505
-
(12,318)
(971)
238
56
294
49.37
188
921
34.0%
N/R (5)
(30.6%)
116.7%
(37.0%)
96.4%
(11.6%)
(77.2%)
(17.6%)
(35.8%)
(1) The figures for 2012 have been restated to incorporate the impact of adopting IFRS 11 Joint Arrangements
(2) Includes residential lot sales and other revenue
(3) Non-GAAP financial measure. Refer to page 40
(4) Impairment of real estate held for development and sale
(5) Not reflective due to percentage increase
(6) Other expenses includes general and administrative, selling and marketing, finance expense and finance income
(7) Segmented earnings (loss) before income taxes (“EBIT”)
Revenues for the three months and year
The gross margin percentage before
On July 26, 2013, Smoothwater Capital
ended December 31, 2013 were lower
impairment increased for the three
Corporation (“Smoothwater”) announced
than those compared to 2012 due to our
months and year ended December 31,
that it would propose a slate of seven
strategy of selling more lots through our
2013 compared to 2012. Gross margin on
nominees for election to the Board of
home building business segment, thus
single family lots varies by community
the Corporation, and would file and mail
realizing both the land development
based on the nature of the development
a dissident proxy circular in response to
margin and the home building margin.
In addition, the fourth quarter of 2012
work to be undertaken before the lots are
ready for sale. Gross margins from the
the Management Information Circular
dated July 17, 2013, previously sent
included development land revenues from
sale of development lands also vary and
to shareholders of the Corporation.
the sale of phases 1 and 2 in Sage Hill
are dependent on a variety of factors such
Subsequently, Smoothwater filed its
Crossing phases while there were lower
as supply of land, zoning regulations and
dissident proxy circular on July 29, 2013,
development land sales in 2013.
interest rates.
and a proxy contest ensued between
28
Genesis and Smoothwater. On August 19,
agreement are available under the
2012. The decrease was due to the higher
2013, the Corporation and Smoothwater
Corporation’s profile at www.sedar.com.
allocation of costs to the home building
announced that they arrived at a
settlement in respect of Smoothwater’s
proposal to nominate an alternate slate
of directors at the 2013 annual general
and special meeting of shareholders.
Pursuant to a settlement agreement (the
“Settlement Agreement”), the Corporation
and Smoothwater entered into a standstill
agreement on August 28, 2013, whereby
we agreed, subject to certain assumptions
and the coverage of reasonable costs
related to the proxy contest, to certain
standstill provisions and to the support of
Board nominees for election to the Board
through to the close of the 2015 annual
meeting of shareholders. A copy of the
Settlement Agreement and the standstill
As a result of the proxy contest, Genesis
incurred $64 and $2,889 towards proxy
contest costs for the three months
and year ended December 31, 2013,
respectively. This included an amount of
$996 paid to cover the costs incurred by
Smoothwater as part of the Settlement
Agreement. The impact on basic and
diluted earnings per share due to proxy
contest costs for the three months and
year ended December 31, 2013 were $Nil
and $0.05 per share, respectively. Refer to
the table on page 42 for the calculation of
adjusted earnings per share.
Other expenses decreased during the three
months and year ended December 31,
2013 as compared to the same periods in
business segment and the decrease in
selling and marketing costs, and finance
expense. The selling and marketing
costs decreased as we achieved greater
efficiencies due to integration of the
selling and marketing operations, which
resulted in a decrease in combined costs
for both segments. This decrease in costs
was partially offset by an increase in the
land development segment and corporate
personnel to 27 at the end of 2013 from 25
in 2012, and severance paid to the former
Chief Executive Officer.
Home Building
Revenues (2)
Cost of sales
Gross margin
Gross margin (%)
Other expenses (3)
Segmented EBIT (4)
Homes sold
Average revenue per home sold
Three months ended December 31,
Year ended December 31,
2013
2012(1)
16,668
13,904
(14,700)
(12,525)
1,968
11.8%
(1,831)
137
42
396
1,379
9.9%
(2,670)
(1,291)
34
409
%
19.9%
17.4%
42.7%
31.4%
N/R (5)
23.5%
(3.2%)
2013
2012(1)
63,570
39,497
(55,831)
(34,817)
7,739
12.2%
(7,485)
254
164
387
4,680
11.8%
(6,370)
(1,690)
91
433
%
60.9%
60.4%
65.4%
17.5%
N/R (5)
80.2%
(10.6%)
(1) The figures for 2012 have been restated to incorporate the impact of adopting IFRS 11 Joint Arrangements
(2) Revenues include residential home sales and other revenue
(3) Other expenses includes general and administrative, selling and marketing and net finance expense
(4) Segmented earnings before income taxes
(5) Not reflective due to percentage increase
The increased revenues was due to a
date, and more growth is expected in the
periods in 2012. Margins are expected to
higher number of homes sold for the three
future as the strategic plan is implemented
increase gradually as higher volumes and
months and year ended December 31,
and benefits are gradually realized.
greater efficiencies are realized as part of
2013 and reflected the growth that was
achieved in the home building business
segment during 2012 and early 2013.
Revenues and volumes have increased to
Gross margin percentage for the three
the new operational strategy.
months and year ended December 31,
Average revenue per home sold was lower
2013 increased compared to the same
in 2013 compared to 2012 for both the
29
GENESIS LAND DEVELOPMENT CORP. MANAGEMENT’S DISCUSSION & ANALYSIS FOR THE THREE MONTHS AND YEAR ENDED DECEMBER 31, 2013
year and three month period due to the
During the fourth quarter of 2013,
in 2013 from 25 in the previous year in
sales mix of homes sold during the period.
other expenses decreased due to a
order to support increased home building
During the three months ended December
lower allocation of costs from the land
operations. The increase in other expenses
31, 2013, we sold 29 single-family and 13
development segment, which were
was partially offset by lower selling and
multi-family homes compared to 34 single-
offset by severance costs and increased
marketing costs due to integration of
family homes and no multi-family homes
personnel costs. On an annual basis,
selling and marketing operations, resulting
in 2012. In 2013, a larger number of multi-
other expenses increased during 2013
in a decrease in combined costs for both
family homes were sold as compared to
compared to the same period in 2012
segments.
2012. We sold 113 single-family and 51
due to severance costs, higher personnel
multi-family homes during 2013 compared
costs and higher finance expense from
to 90 single-family and one multi-family
increased home building activity. The
home during 2012.
number of employees increased to 36
Impairment of Real Estate Held for Development and Sale
Impairment related to Genesis
Impairment related to limited partnerships
Three months ended December 31,
Year ended December 31,
2013
(314)
(3,841)
(4,155)
2012
(18,561)
(15,654)
(34,215)
%
98.3%
75.5%
87.9%
2013
(8,185)
(8,097)
2012
(18,268)
(14,878)
(16,282)
(33,146)
%
55.2%
45.6%
50.9%
During 2013, we completed the appraisal
The impairment in value related to Genesis
for the three months and year ended
of our portfolio of properties. As a result,
assets relates to properties that have been
December 31, 2013 is $0.01 and $0.18 per
a provision for impairment of $4,155 and
identified by management for disposal in
share (2012 - $0.41 and $0.41 per share).
$16,282 was made for the three months
the near term.
and year ended December 31, 2013
compared to $34,215 and $33,146 in the
comparative periods in 2012, respectively.
The pre-tax impact due to impairment
on basic and diluted earnings per share
Refer to the table on page 42 for the
calculation of adjusted earnings per share.
Finance Expense
Interest incurred
Financing fees accretion
Interest and financing fees capitalized
Three months ended December 31,
Year ended December 31,
2013
896
378
(1,042)
232
2012(1)
1,589
508
(1,036)
1,061
%
(43.6%)
(25.6%)
0.6%
(78.1%)
2013
3,771
1,518
(3,763)
1,526
2012(1)
5,686
1,438
(4,464)
2,660
%
(33.7%)
5.6%
(15.7%)
(42.6%)
(1) The figures for 2012 have been restated to incorporate the impact of adopting IFRS 11 Joint Arrangements
Interest incurred relates to operating loans
loan balances, lower weighted average
of sites 1 and 2 in the Sage Hill Crossing
secured by land and single-family home
interest rates and lower fees paid on new
commercial development and from lot
building operations. The lower interest
and renewed loans. In January 2013, we
payouts received.
incurred during 2013 compared to 2012
repaid outstanding loan balances with the
was due to lower average outstanding
$31,411 proceeds received from the sale
30
SEGMENTED BALANCE SHEETS
Assets
Land Development
2013
Home
2012
Genesis
LPs
Building* Eliminations Consolidated Consolidated
Real estate held for development and sale
175,086
52,625
33,170
(3,461)
257,420
264,184
Amounts receivable
Cash and cash equivalents
Other assets
Total assets
Liabilities
Loans and credit facilities
Provision for future development costs
Other liabilities
Total liabilities
Net assets
23,305
9,013
13,886
-
552
419
37
8,113
6,018
221,290
53,596
47,338
31,543
18,829
(322)
50,050
7,843
-
590
8,433
171,240
45,163
10,987
1,619
29,748
42,354
4,984
-
-
(4,917)
(8,378)
-
-
(4,917)
(4,917)
23,342
17,678
15,406
73,239
10,005
26,913
313,846
374,341
50,373
20,448
25,099
95,920
97,224
18,220
32,588
148,032
(3,461)
217,926
226,309
*Other liabilities under the home building business segment includes $19,187 due to the land segment
LIQUIDITY AND CAPITAL RESOURCES
Real Estate Held for Development and Sale
Real estate held for development and sale
Accumulated impairment
(1) The figures for 2012 have been restated to incorporate the impact of adopting IFRS 11 Joint Arrangements
December 31,
2013
2012(1)
317,602
308,084
(60,182)
(43,900)
257,420
264,184
%
3.1%
37.1%
(2.6%)
31
GENESIS LAND DEVELOPMENT CORP. MANAGEMENT’S DISCUSSION & ANALYSIS FOR THE THREE MONTHS AND YEAR ENDED DECEMBER 31, 2013
Real estate held for development and sale decreased by $6,764 during the year ended December 31, 2013. This was due to the sale of real
estate and a provision for impairment, which were partially offset by the development of lands.
The following table presents our real estate held for development and sale at December 31, 2013:
Land under development
Land held for future development
Total
Land Development Segment
Net book Appraised
value
value
Acres
Net book Appraised
value
value
Lots
Net book Appraised
value
value
Acres
Acres
Lots
Residential
Airdrie (1)
Calgary NW (2)
Calgary NE (3)
Mixed use (4)
Other assets (5)
Total Land
development segment (6)
Home Building
Business Segment (6),(8)
Total land and home
building segments
Limited Partnerships (7)
Real estate held for
development and sale
36,134
91,974
14,247
14,596
16,922
33,797
67,303
140,367
51,856
65,400
15,212
16,334
134,371
222,101
207
24
27
258
71
236
565
192
42
138
372
-
14
8,055
5,868
7,717
24,799
119
44,189
116,773
7,804
13,080
20
46
20,115
22,400
24,639
46,877
21,640
45,683
185
88,943
186,050
18,268
26,552
5,002
6,976
1,788
1,990
70,124
91,952
20,214
23,310
386
44,910
79,211
3,963
179,281
301,312
326
44
73
443
1,859
2,226
4,528
30,895
30,895
-
210,176
332,207
4,528
47,244
55,136
257,420
387,343
2,387
6,915
192
42
138
372
-
14
386
147
533
-
533
(1) Airdrie comprises the communities of Bayside, Bayview and Canals
(2) Calgary NW comprises the communities of Sherwood, Sage Meadows and Evansridge
(3) Calgary NE comprises the community of Saddlestone
(4) Mixed use comprises Sage Hill Crossing, Delacour and North Conrich
(5) Other assets comprises Acheson, Kamloops, Brooks, Dawson Creek, Mitford Crossing, Mountain View Village, Prince George and
Spur Valley
(6) Lots include 199 lots that have been reserved/contracted for sale to the home building business segment from the land segment
(7) Comprises Land held for future development and land under development. Refer to note 5 in the consolidated financial statements for the year ended December 31, 2013
(8) Housing projects under development. Refer to note 5 in the consolidated financial statements for the year ended December 31, 2013
The following table presents home building business segment’s lot supply at December 31, 2103:
Project
Airdrie
Bayside
Canals
Calgary NW
Evansridge
Kinwood
Sage Meadows
Sherwood
Calgary NE
Saddlestone
Total
Lot
purchases
Lots at
Jan 1, 2013 during 2013
Homes
made sold during Lots at Dec
31, 2013(1)
2013
Breakdown of unsold lots
Lots with Unsold lots
at Dec 31,
firm sale
2013
contracts
Vacant
Spec. homes
for quick
lots possession
Show-
homes
Price
range of
homes
sold
13
50
63
42
82
35
5
164
119
346
(4)
(11)
(15)
(12)
(39)
(8)
(3)
(62)
(41)
(118)
9
39
48
30
43
27
2
102
78
228
5
3
8
10
41
25
2
78
63
149
4
33
37
18
1
-
-
19
13
69
-
3
3
2
1
2
-
5
$267-$742
$552-$552
$267-$742
$301-$514
$418-$569
$452-$661
$301-$661
2
$235-$561
10
$235-$742
66
-
66
67
49
57
-
173
85
324
-
51
51
-
44
8
5
57
(53)
(1)
(54)
(25)
(11)
(30)
-
(66)
78
186
(44)
(164)
32
Amounts Receivable
Amounts receivable
December 31,
2013
23,342
2012(1)
73,239
%
(68.1%)
(1) The figures for 2012 have been restated to incorporate the impact of adopting IFRS 11 Joint Arrangements
Amounts receivable decreased by $49,897
In addition, the lower number of lots sold
Genesis generally retains title to lots and
in 2013 compared to 2012 mainly due
during the period and repayment of certain
homes until full payment is received in
to the receipt of payment of $27,713 for
vendor take-back mortgages contributed to
order to mitigate credit exposure.
the sale of sites 1 and 2 in the Sage Hill
the reduction.
Crossing commercial use development.
LIABILITIES AND SHAREHOLDERS’ EQUITY
Loans and credit facilities
Customer deposits
Accounts payable and accrued liabilities
Land development service costs
Income taxes payable
Deferred tax liabilities
Non-controlling interest
Shareholders’ equity
December 31,
2013
% of Total
2012(1) % of Total
50,373
5,228
16,759
20,448
3,112
-
22,443
195,483
313,846
16%
2%
5%
7%
1%
0%
7%
62%
100%
97,224
4,352
23,559
18,220
4,617
60
36,719
189,590
374,341
26%
1%
6%
5%
1%
0%
10%
51%
100%
(1) The figures for 2012 have been restated to incorporate the impact of adopting IFRS 11 Joint Arrangements
Loans and Credit Facilities
met by using project-specific loans and
facilities, to meet the above obligations
We require funds to meet operating
expenses, service debt, complete on-going
land development projects, purchase
lands and construct single- and multi-
family homes. These requirements are
credit facilities, and cash generated from
as they become due. We regularly review
operations.
Management believes that Genesis has
sufficient liquidity from its operating
activities, supplemented by credit
credit facilities and manage requirements
in accordance with project development
plans and operating requirements.
33
GENESIS LAND DEVELOPMENT CORP. MANAGEMENT’S DISCUSSION & ANALYSIS FOR THE THREE MONTHS AND YEAR ENDED DECEMBER 31, 2013
The following is a summary of drawn and outstanding loan and credit facility balances as at December 31, 2013 and as at this time period
and as at the end of the previous four quarters:
Land development loans
Home building loans
Deferred financing fees
Balance, end of period
Q4 2013
Q3 2013
Q2 2013
Q1 2013
Q4 2012
40,609
11,021
51,630
(1,257)
50,373
42,658
7,668
50,326
(1,420)
48,906
43,956
5,575
49,531
(1,589)
47,942
48,062
4,039
52,101
(1,967)
50,134
90,767
8,769
99,536
(2,312)
97,224
(1) The figures for 2012 have been restated to incorporate the impact of adopting IFRS 11 Joint Arrangements.
The change in the Corporation’s loans and credit facilities was are follows:
Balance, beginning of period
Advances
Repayments
Finance expense
Interest and financing fees paid and capitalized
Balance, end of period
December 31,
2013
97,224
46,511
2012(1)
86,066
89,941
(94,214)
(77,906)
1,143
(291)
50,373
2,540
(3,417)
97,224
(1) The figures for 2012 have been restated to incorporate the impact of adopting IFRS 11 Joint Arrangements
During the year ended December 31, 2013, Genesis received $46,511 (2012 - $89,941) in advances and made repayments of $94,214
($77,906) on loans and credit facilities (see ‘Related Party Transactions’ on page 38).
The debt to equity ratio was as follows:
Total liabilities
Total equity
Debt to equity ratio (2)
(1) The figures for 2012 have been restated to incorporate the impact of adopting IFRS 11 Joint Arrangements
(2) Calculated as total liabilities divided by total equity
December 31,
2013
95,920
217,926
0.44
2012
148,032
226,309
0.65
The Corporation’s debt decreased
to equity ratio to 0.44 (2012 – 0.65)
on completion of sales. Provision for future
substantially in 2013 as funds received
at December 31, 2013, substantially
land development costs increased by
from the sale of sites 1 and 2 in the Sage
improving our financial strength.
$2,228 at December 31, 2013 over those at
Hill Crossing commercial use development
and from lot payouts were used to pay
down related project debt. This reduced
loans and credits facilities outstanding
to $50,373 (2012 – 97,224) and the debt
Provision for Future Land Development Costs
Genesis sells lots where all the associated
costs to service such lands have not been
incurred. We recognize these obligations
December 31, 2012 mainly due to the sale
of lots in the communities of Saddlestone,
Sage Meadows and Bayside. The overall
increase in the provision for future land
development costs was partially offset by
34
the completion of previously accrued land
distributions made by a limited partnership
Return on equity was 3.0% at December
development service costs, mainly in Sage
and expenses incurred by the limited
31, 2013 compared to 4.8% at December
partnerships and paid by Genesis.
31, 2012, calculated on a rolling 12 month
Hill Crossing.
Income Tax Payable
Refer to note 22 in the consolidated
financial statements for the year ended
Income tax payable decreased by $1,505
December 31, 2013 and 2012 for additional
(2012 - $8,353) to $3,112 at December 31,
information on the limited partnerships.
2013 (2012 - $4,617) . We paid $3,925 of
tax liability (2012 - $9,520), which was
Shareholders’ Equity
offset by a current tax provision of $2,420
(2012 - $1,167).
Non-Controlling Interest
Non-controlling interest decreased
As at March 28, 2014, the Corporation had
44,861,200 common shares issued and
outstanding. In addition, options to acquire
2,332,500 common shares of Genesis were
issued and outstanding under our stock
for the three months and year ended
option plan.
December 31, 2013 due to impairment,
basis. Return on equity is calculated
by dividing net income by average
shareholders’ equity. Return on equity
decreased in 2013 due to lower sales
revenues and impairment booked on real
estate held for development and sale,
resulting in lower net income.
Cash Flows from Operating Activities
Cash flows from operating activities
Cash flows from operating activities per share
Three months ended
December 31,
Year ended
December 31,
2013
94
-
2012
(17,245)
(0.39)
2013
53,473
1.19
2012
(2,794)
(0.06)
Cash flows from (used in) operating
($0.06) for the same periods in 2012. The
development and receipt of payments from
activities per share for the three months
increase was mainly due to the receipt
purchasers of residential lots and homes
and year ended December 31, 2013 were
$27,713 from the sale of sites 1 and 2 in
for the three months and year ended
$Nil and $1.19 compared to ($0.39) and
the Sage Hill Crossing commercial use
December 31, 2013.
Contractual Obligations and Debt Repayment
Our contractual obligations as at December 31, 2013 were as follows, excluding accounts payable, income taxes payable, customer deposits
and land development service costs:
Current
Years 2015 and 2016
Years 2017 and 2018
Thereafter
(1) Excludes deferred financing fees
Loans and
Credit Facilities(1)
Naming
Rights
Lease
Obligations
36,159
15,471
-
-
51,630
700
1,400
1,200
1,500
4,800
870
1,738
484
-
3,092
Total
37,729
18,609
1,684
1,500
59,522
35
GENESIS LAND DEVELOPMENT CORP. MANAGEMENT’S DISCUSSION & ANALYSIS FOR THE THREE MONTHS AND YEAR ENDED DECEMBER 31, 2013
Management believes that Genesis has
contribute $2,000 for the naming rights
31, 2013, a liability of approximately
sufficient liquidity from its operating
to “Genesis Place”, a recreation complex
$3,298 was recorded (December 31, 2012
activities, supplemented by credit
in the city of Airdrie ($200 each year,
- $3,051). Genesis is selling lots in the last
facilities, to pay for operating expenses,
terminating June 1, 2017). The first six
phase covered under this development.
incur development and construction costs,
installments totaling $1,200 were made
The payout of the 20% participation to the
pay principal and interest on loans and
through 2013.
credit facilities, and purchase lands.
Investment in naming rights demonstrates
Genesis has entered into a memorandum
our commitment to the communities we
of understanding with the Northeast
are involved in, and helps in the positive
participants will be made on completion
of the sale of lots in the last phase and
collection of related proceeds along with
an accounting of all related costs.
Community Society, whereby we will
recognition of our brand - not only in these
As a normal part of business, we have
contribute $5,000 for the naming rights
communities, but also throughout the
entered into arrangements and incurred
to the “Genesis Centre for Community
cities of Calgary and Airdrie.
obligations that will impact future
Wellness”, a recreation complex in
northeast Calgary ($500 each year,
terminating October 31, 2021). The first
two installments totaling $1,000 were
made through 2013.
Pursuant to the terms of a participating
mortgage, the principal of which
was repaid during 2002, the former
mortgage holders have the right to a
20% participation in the profits from the
Genesis entered into an agreement with
development of approximately 39 acres
the City of Airdrie, whereby we will
of land under development. At December
operations and liquidity, some of which
are reflected as short-term liabilities and
commitments in the consolidated financial
statements.
Current Contractual Obligations
Loans and credit facilities, excluding deferred financing fees
Accounts payable and accrued liabilities
Total short-term liabilities
Commitments (2)
December 31,
2013
36,159
16,759
52,918
1,570
54,488
2012(1)
19,091
23,559
42,650
1,406
44,056
(1) The figures for 2012 have been restated to incorporate the impact of adopting IFRS 11 Joint Arrangement.
(2) Commitments are composed of naming rights and lease obligations
At December 31, 2013, we had obligations
receivables and sales proceeds; or (ii)
to continue to renew or repay its financial
due within the next 12 months of $54,488,
due at maturity. Based on our operating
obligations as they come due.
of which $36,159 relates to loans and
history, our relationship with lenders and
credit facilities. Repayment is either (i)
committed sales contracts, management
linked directly to the collection of lot
is confident that Genesis has the ability
36
SELECTED ANNUAL INFORMATION
Total revenues
Gross margin
Net earnings attributable to equity shareholders
Net earnings per share - basic and diluted
Total assets
Loans and credit facilities
2013
96,077
9,847
5,713
0.13
2012(1)
129,460
9,051
8,861
0.20
313,846
374,341
50,373
97,224
2011
95,760
29,792
11,060
0.25
378,018
88,231
(1) The figures for 2012 have been restated to incorporate the impact of adopting IFRS 11 Joint Arrangements. The figures for 2011 are not affected as that year is prior to the effects of adoption
of IFRS 11
Revenues were lower in 2013 compared
in 2013 and 2011 mainly due to the sale
compared to the previous years due to the
to 2012 and similar to those in 2011 due
of sale of sites 1 and 2 in the Sage Hill
sale of real estate and due to impairment
to lower residential lot and development
Crossing commercial development. Gross
of real estate held for development and
land sales. These lower sales were offset
margins in 2013 and 2012 were affected
sale. Loans and credit facilities decreased
by higher residential home sales in 2013
by higher impairment of real estate held
in 2013 as the sale proceeds from Sage
compared to 2012 and 2011. Development
for development and sale compared to
Hill Crossing were used to pay down debt.
land sales in 2012 were higher than those
2011. Total assets decreased in 2013 when
SUMMARY OF QUARTERLY RESULTS
Q4 2013
Q3 2013
Q2 2013
Q1 2013
Q4 2012(1)
Q3 2012(1)
Q2 2012(1)
Q1 2012(1)
Revenues (1),(2)
EBIT (3)
Net earnings (4)
EPS (5)
26,223
2,485
4,980
0.11
19,678
(10,488)
(4,644)
(0.10)
22,327
27,560
1,500
1,697
0.04
4,653
3,680
0.08
57,281
(24,529)
(7,126)
(0.16)
23,281
29,708
18,378
7,788
4,956
0.11
6,240
4,839
0.11
7,840
6,192
0.14
(1) The figures for 2012 have been restated to incorporate the impact of adopting IFRS 11 Joint Arrangements
(2) Revenues exclude other revenue
(3) Earnings (loss) before income taxes and non-controlling interest
(4) Net earnings (loss) attributable to equity shareholders
(5) Net earnings (loss) per share - basic and diluted
Seasonality affects the land development
to 17 residential lots and 40 homes in the
The development and sale of the real
and home building industry in Canada
third quarter. Lower impairment of real
estate pertaining to the JV is expected to
particularly as a result of weather
estate, higher gross margins on residential
be completed by 2015.
conditions during winter operations. As a
lots, lower general and administrative
result, we will typically realize higher home
costs and proxy contest costs in the fourth
building revenues in the summer and fall
quarter contributed to improved EBIT, net
months when home building activity is at
earnings and EPS.
its peak. Revenues can be impacted by the
timing of lot sales, which is less weather
dependent.
In the fourth quarter of 2013, we sold 62
residential lots and 42 homes compared
JOINT VENTURE
Genesis formed a joint venture (“JV”) on
April 30, 2010, for the purpose of acquiring,
developing and selling certain real estate.
Refer to note 3 of the consolidated
financial statements dated December 31,
2013 and 2012 for the effects of change
in accounting policy. Refer to note 18 of
the consolidated financial statements
dated December 31, 2013 and 2012 for the
summarized financial information of the
JV and reconciliation of the summarized
financial information to the carrying amount
37
GENESIS LAND DEVELOPMENT CORP. MANAGEMENT’S DISCUSSION & ANALYSIS FOR THE THREE MONTHS AND YEAR ENDED DECEMBER 31, 2013
of the Corporation’s interest in the JV,
which $4,748 of interest and fees were
SUMMARY OF ACCOUNTING CHANGES
which is accounted for using the equity
paid to the lender. Of this amount, $1,244,
method.
OFF BALANCE SHEET ARRANGEMENTS
Letters of Credit
We have an ongoing requirement to
provide irrevocable letters of credit to
municipalities as part of the subdivision
plan registration process. As at December
31, 2013, these letters of credit totalled
approximately $6,279, 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 fulfill these obligations. 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
We have certain lease agreements that
are entered into in the normal course
of operations. All leases are treated as
operating leases whereby lease payments
are included in operating expenses or
general and administrative expenses,
depending on the nature of the lease. No
asset or liability value has been assigned
to these leases in the balance sheet as of
December 31, 2013.
RELATED PARTY TRANSACTIONS
Mr. Sandy Poklar, an officer of a lender,
Firm Capital Corporation, served as
a director from July 12, 2012 until
September 4, 2013. The lender and the
Corporation were consequently considered
related parties for this period during
relates to 2013 and $3,504 relates to
2012. The related debt was in place prior
to the director assuming office on July 12,
2012, and no new financing or refinancing
occurred subsequent to July 12, 2012. All
transactions were agreed to under normal
commercial terms and conditions.
Genesis is the general partner in four
limited partnership arrangements (refer
to note 22 of the consolidated financial
The Corporation adopted IFRS 11 Joint
Arrangements effective January 1, 2013.
Under IFRS 11, the Corporation’s joint
arrangements that are classified as joint
ventures are now accounted for under the
equity method of accounting, whereas
they were previously proportionately
consolidated. This change in accounting
policy reduced total assets, total
liabilities, revenues and expenses but
had no impact on the Corporation’s net
statements for the years ended December
assets, net earnings or earnings per
31, 2013 and 2012) and a 50% partner in
the JV, as described above (refer to note
share. Comparative data for 2012 has
been restated and the effects of these
18 of the consolidated financial statements
changes on the Corporation’s consolidated
for the years ended December 31, 2013
results for the three months and year
and 2012).
SUBSEQUENT EVENTS
The Corporation was named as a co-
defendant in a statement of claim filed on
May 10, 2011 in the province of Ontario
for $10,700 plus punitive damages
(the “Action”). The Action against the
Corporation has been discontinued
pursuant to a court order in the Action
ended December 31, 2012 are summarized
in note 3 of the consolidated financial
statements for the year ended December
31, 2013 and 2012. For additional
information, refer to note 3, note 4,
note 18 and note 23 of the consolidated
financial statements for the year ended
December 31, 2013 and 2012.
CHANGES TO FUTURE ACCOUNTING POLICIES
dated February 12, 2014 and issuance of a
There were various accounting standards
signed release from all claims relating to
issued as at December 31, 2013 that
the Action by the plaintiff. Refer to note 16
were not yet effective as of that date.
(a) in the consolidated financial statements
for the year ended December 31, 2013 and
2012 for further details.
The Corporation closed the sale of a
121.91 acre industrial site (Acheson)
located in Parkland County, west of
We continue to analyze these standards
to determine the impact on our financial
statements. Refer to note 3 of the
consolidated financial statements for the
year ended December 31, 2013 and 2012
for a description of changes in accounting
Edmonton, Alberta for $14,000 on February
policy effective in future periods.
28, 2014. The proceeds from the sale
were used to retire approximately $6.5
CRITICAL ACCOUNTING ESTIMATES
million of related property debt and the
balance was used for general corporate
purposes.
The preparation of consolidated financial
statements requires management to make
judgments and estimates that affect the
reported amounts of revenues, expenses,
38
assets and liabilities, and the disclosure
as it is based on estimates prepared by
(ii) information required to be disclosed
of contingent liabilities at the reporting
independent consultants and management.
in the annual filings, interim filings or
date. On an ongoing basis, management
evaluates its judgments and estimates in
relation to revenues, expenses, assets and
liabilities. Management uses historical
experience and various other factors
it believes to be reasonable under the
given circumstances as the basis for its
judgments and estimates. Actual outcomes
may differ from these estimates under
different assumptions and conditions.
General Litigation
We are subject to various legal
Income taxes
The Corporation applies judgment in
determining the total provision for
current and deferred taxes. There are
many transactions and calculations for
other reports filed or submitted under
securities legislation is recorded,
processed, summarized and reported
on a timely basis.
The CEO and CFO have also designed, or
caused to be designed under their direct
which the ultimate tax determination and
supervision, Genesis’ ICFR to provide
timing of payment is uncertain due to the
reasonable assurance regarding the
interpretation of complex tax regulations,
reliability of financial reporting and the
changes in tax laws, and the amount and
preparation of financial statements for
timing of future taxable income. Given the
external purposes in accordance with IFRS.
long-term nature and complexity of the
business, differences arising between the
proceedings and claims that arise in the
actual results and the assumptions made,
ordinary course of business operations.
or future changes to such assumptions,
We periodically review these claims to
could necessitate future adjustments
determine if amounts should be accrued
to taxable income and expense already
in the financial statements or if specific
recorded.
disclosure is warranted.
Impairment of real estate held for future
development and sale
We estimate the net realizable value
(‘NRV’) of real estate held for future
development and sale at least annually
for impairment or whenever events or
changes in circumstances indicate the
carrying value may exceed NRV. The
estimate is 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.
DISCLOSURE CONTROLS AND PROCEDURES
AND INTERNAL CONTROL OVER FINANCIAL
REPORTING
The Chief Executive Officer (“CEO”)
and Chief Financial Officer (“CFO”)
are responsible for establishing and
maintaining disclosure controls and
procedures (“DC&P”) and internal control
over financial reporting (“ICFR”), as those
terms are defined in National Instrument
52-109 Certification of Disclosure in
Issuers’ Annual and Interim Filings. The
CEO and CFO have designed, or caused to
be designed under their direct supervision,
Genesis’ DC&P to provide reasonable
Provision for future land development costs
assurance that:
Changes in the estimated future
development costs directly impact
the amount recorded for the future
development liability, cost of sales, gross
margin and, in some cases, the value of
real estate under development and held for
sale. This liability is subject to uncertainty
(i) material information relating to the
Corporation, 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
39
The ICFR have been designed using the
control framework established in Internal
Control – Integrated Framework (1992)
published by the Committee of Sponsoring
Organizations of the Treadway Commission
(“COSO”). In May 2013, the COSO released
an updated Internal Control – Integrated
Framework: 2013. The Corporation
currently uses the COSO 1992 original
framework and will transition to the
updated framework during the transition
period which extends to December 15,
2014. Management is currently assessing
the impact of this transition and will
report any significant changes to the
Corporation’s internal control over financial
reporting that may result.
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 December 31, 2013.
While Genesis’ CEO and CFO believe
that the Corporation’s internal controls
and procedures provide a reasonable
level of assurance that such controls and
procedures are reliable, an internal control
system cannot prevent all errors and fraud.
It is management’s belief that any control
system, no matter how well conceived or
operated, can provide only reasonable, not
GENESIS LAND DEVELOPMENT CORP. MANAGEMENT’S DISCUSSION & ANALYSIS FOR THE THREE MONTHS AND YEAR ENDED DECEMBER 31, 2013
absolute, assurance that the objectives of
RISKS AND UNCERTAINTIES
the control system are met.
In the normal course of business, we are
There were no changes in the Corporation’s
exposed to certain risks and uncertainties
ICFR during the three months and year
ended December 31, 2013 that have
inherent in the real estate development
industry. Risks and uncertainties faced by
materially affected, or are reasonably likely
Genesis are disclosed in the Corporation’s
to materially affect the Corporation’s ICFR.
AIF for the year ended December 31,
2013. There may be additional risks that
TRADING AND SHARE STATISTICS
Trading and share statistics for the Corporation for 2013 and 2012 are provided below.
management may need to consider as
circumstances require. For a more detailed
discussion on the Corporation’s risk factors,
refer to the AIF available on SEDAR at
www.sedar.com.
Average daily trading volume
Share price ($/share)
High
Low
Close
Market capitalization at December 31
Shares outstanding
2013
35,436
2012
42,147
3.85
3.26
3.41
3.70
2.87
3.26
152,977
145,936
44,861,200
44,765,728
NON-GAAP MEASURES
Non-GAAP measures do not have any
standardized meaning according to IFRS,
and therefore may not be comparable
to similar measures presented by other
companies.
Net Asset Value (“NAV”) including
pre-tax net asset value per share and
after-tax net asset value per share is
a non-GAAP financial measure and
therefore may not be comparable to similar
measures presented by other companies.
The estimated NAV is calculated using
independent appraisers total pre-tax land
There is no comparable IFRS financial
value plus additional balance sheet assets
measure presented in the Corporation’s
less balance sheet liabilities and corporate
consolidated financial statements and thus
income tax as at December 31, 2013 and
no applicable quantitative reconciliation
2012. The book value of all remaining
for such non-GAAP financial performance
assets and liabilities as set forth in the
measure has been provided. Management
consolidated financial statements of the
believes this measure provides information
Corporation for the year ended December
31, 2013 and 2012 has been added to
useful to its shareholders in understanding
the Corporation’s value, and may assist
calculate the pre-tax NAV. Estimated taxes
in the evaluation of the Corporation’s
have been deducted as if all properties
business relative to that of its peers.
were sold at their market values to
determine NAV.
40
Independent appraised value of land (2)
Housing projects under development
Other balance sheet assets
Balance sheet liabilities
Add amount due from related entities
Estimated pre-tax NAV
Estimated pre-tax NAV per share
Estimated tax (3)
Estimated after-tax NAV
Estimated after-tax NAV per share
Total shares outstanding as at December 31
2013
301,312
30,895
332,207
56,426
2012(1)
303,071
30,630
333,701
110,157
(95,920)
(148,032)
29,039
321,752
7.18
26,834
322,660
7.23
(22,784)
(23,532)
298,968
299,128
6.67
44,861
6.70
44,766
(1) The figures for 2012 have been restated to incorporate the impact of adopting IFRS 11 Joint Arrangements
(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 2013 and 2012 to calculate taxes
Estimated pre-tax and after-tax NAV at
in the NAV in 2013 can be attributed to a
December 31, 2013 were $7.18 and $6.67,
small decrease in the appraised value of
respectively, compared to $7.23 and $6.70
lands.
at December 31, 2012. The slight decrease
Details of other balance sheet assets and balance sheet liabilities used in the calculation of NAV are given below.
Other balance sheet assets
Accounts receivable
Investment in joint venture
Deferred tax assets
Other operations assets
Cash
Total
Balance sheet liabilities
Loans and credit facilities
Customer deposits
Accounts payable and accrued liabilities
Income taxes payable
Deferred tax liabilities
Land development service costs
Total
(1) The figures for 2012 have been restated to incorporate the impact of adopting IFRS 11 Joint Arrangements
41
2013
2012(1)
23,342
7,894
397
7,115
17,678
56,426
50,373
5,228
16,759
3,112
-
20,448
95,920
73,239
10,680
-
16,233
10,005
110,157
97,224
4,352
23,559
4,617
60
18,220
148,032
GENESIS LAND DEVELOPMENT CORP. MANAGEMENT’S DISCUSSION & ANALYSIS FOR THE THREE MONTHS AND YEAR ENDED DECEMBER 31, 2013
Gross margin before impairment is a
non-GAAP measure, and therefore may
to the gross margin. Gross margin
potentially distort the analysis of trends
before impairment is used to assess the
in business performance. Excluding this
not be comparable to similar measures
performance of the business without
item does not imply it is non-recurring. The
presented by other companies. Gross
the effects of impairment. Management
most comparable IFRS financial measure is
margin before impairment is calculated
believes it is useful to exclude impairment
gross margin.
by adding back impairment of real
from the analysis as it could affect the
estate held for development and sale
comparability of financial results and could
The table below shows the calculation of gross margin before impairment, which is derived from gross margin.
Total revenues
Gross margin
Add back impairment (2)
Gross margin, before impairment
Gross margin, before impairment (%)
(1) The figures for 2012 have been restated to incorporate the impact of adopting IFRS 11 Joint Arrangements
(2) Impairment of real estate held for development and sale
Three months ended
December 31,
Year ended
December 31,
2013
26,331
2,353
4,155
6,508
24.7%
2012(1)
57,377
(19,391)
34,215
14,824
25.8%
2013
96,077
9,847
16,282
26,129
27.2%
2012(1)
129,460
9,051
33,146
42,197
32.6%
Adjusted earnings per share is a non-
GAAP measure, and therefore may not be
contest costs, divided by the weighted
as it could affect the comparability of
average number of common shares (basic
financial results and could potentially
comparable to similar measures presented
or diluted) outstanding at a specific date.
distort the analysis of trends in business
by other companies. Adjusted earnings
Adjusted earnings per share is used to
performance. Excluding these items does
per share is calculated as net earnings
assess the performance of the business
not imply that they are non-recurring. The
attributable to shareholders before
without the effects of impairment and
most comparable IFRS financial measure is
impairment attributable to shareholders
proxy contest costs. Management believes
earnings per share.
and proxy contest costs and net of income
it is useful to exclude impairment and
taxes relating to the impairment and proxy
proxy contest costs from the analysis
42
The following table shows the calculation of adjusted earnings per share which is derived from net earnings attributable to equity
shareholders.
Net earnings (loss) (2)
Add back impairment (3)
Proxy contest costs
Tax effect of additions @ 25%
Adjusted earnings
Basic number of shares (4)
Diluted number of shares (4)
Adjusted earnings per share - basic (5)
Adjusted earnings per share - diluted (5)
(1) The figures for 2012 have been restated to incorporate the impact of adopting IFRS 11 Joint Arrangements
(2) Net earnings (loss) attributable to equity shareholders
(3) Excludes impairment (recovery) related to properties held by limited partnerships
(4) Weighted average number of shares
(5) Adjusted earnings per share – basic and diluted after adding back after-tax impairment and proxy contest costs
Three months ended
December 31,
Year ended
December 31,
2013
4,980
314
64
(95)
5,263
2012(1)
(7,126)
18,561
-
(4,640)
6,795
2013
5,713
8,185
2,889
(2,769)
14,018
2012(1)
8,861
18,268
-
(4,567)
22,562
44,861,200
44,763,214
44,838,401
44,664,086
44,917,233
44,890,662
44,900,321
44,774,623
0.12
0.12
0.15
0.15
0.31
0.31
0.51
0.50
OTHER
Additional information relating to the
Corporation can be found on SEDAR at
www.sedar.com.
funds from operations (“FFO”), return on assets and
earnings in Alberta and the anticipated impact on
debt to gross book value are not good performance
Genesis’ development and home building activities,
indicators of a land development company and
the positive trend in the general economic conditions
therefore the presentation of FFO, return on assets
and the industry through 2014; the future development
and debt to gross book value in the MD&A has been
of raw lands held by LPLP 2007 which were annexed
discontinued. Debt to gross book value has been
by the City of Airdrie in 2012; Genesis’ business
ADVISORIES
Non-GAAP Financial Measures
replaced by debt to total assets.
Forward-Looking Statements
Net asset value, gross margin before impairment
and adjusted earnings per share are non-GAAP
measures 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. Refer to pages 40-42 for an
explanation on calculation of the net asset value,
This MD&A contains certain statements which
constitute forward-looking statements or information
(“forward-looking statements”) within the meaning of
applicable securities legislation, , including Canadian
Securities Administrators’ National Instrument 51-102
‘Continuous Disclosure Obligations’, concerning the
business, operations and financial performance and
gross margin before impairment and adjusted earnings
condition of Genesis.
per share. Net asset value has no comparable IFRS
measure presented in the Corporation’s financial
statements and therefore no applicable quantitative
reconciliation for such non-GAAP measure exists.
These non-GAAP measures have been described
and presented in this document in order to provide
shareholders and potential investors with additional
information regarding the Corporation’s performance,
liquidity and value. Management is of the view that
Forward-looking statements include, but are not
limited to, statements with respect to the nature of
development lands held and the anticipated inventory
and development potential of such lands, ability
to bring new developments to market, anticipated
general economic and business conditions in 2014
including low unemployment and interest rates,
low stable inflation rates, positive net migration,
petroleum commodity prices and above average
strategy, including the geographic focus of its
activities in 2014, the expected capital contribution
of future earnings and cash flow from land holdings
in the Greater Calgary area, the ability to meet the
objective to increase the closing of home builds in
2014 as compared to 2013, including the ability to
significantly increase home builds per year without
substantial addition to costs to our production team
or infrastructure so as to increase the effect on net
margin and profitability, the timing and operation of
newaccounting and operating software, anticipated
areas of focus for Genesis in 2014; and the ability of
Genesis to develop projects (and the nature of such
projects). Generally, these forward-looking statements
can be identified by the use of forward-looking
terminology such as “plans”, “expects” or “does
not expect”, “is expected”, “budget”, “scheduled”,
“estimates”, “forecasts”, “intends”, “anticipates” or
“does not anticipate”, or “believes”, or variations of
such words and phrases or state that certain actions,
43
GENESIS LAND DEVELOPMENT CORP. MANAGEMENT’S DISCUSSION & ANALYSIS FOR THE THREE MONTHS AND YEAR ENDED DECEMBER 31, 2013
events or results “may”, “could”, “would”, “might” or
of contractual arrangements and incurred obligations
this MD&A and, except as required by applicable
“will be taken”, “occur” or “be achieved”. Although
on future operations and liquidity; local real estate
law, Genesis does not undertake any obligation to
Genesis believes that the anticipated future results,
conditions, including the development of properties in
publicly update or to revise any of the forward-looking
performance or achievements expressed or implied
close proximity to Genesis’ properties; timely leasing
statements, whether as a result of new information,
by the forward-looking statements are based upon
of newly-developed properties and re-leasing of
future events or otherwise.
reasonable assumptions and expectations, the reader
occupied square footage upon expiration; dependence
should not place undue reliance on forward-looking
on tenants’ financial condition; the uncertainties of
statements because they involve assumptions, known
real estate development and acquisition activity; the
and unknown risks, uncertainties and other factors
ability to effectively integrate acquisitions; fluctuations
many of which are beyond the Corporation’s control,
in interest rates; ability to raise capital on favourable
which may cause the actual results, performance or
terms; the impact ofnewly-adopted accounting
achievements of Genesis to differ materially from
principles on Genesis’ accounting policies and on
anticipated future results, performance or achievement
period-to-period comparisons of financial results; not
expressed or implied by such forward-looking
realizing on the anticipated benefits from transactions
statements. Accordingly, Genesis cannot give any
or not realizing on such anticipatedbenefits within
assurance that its expectations will in fact occur and
the expected time frame; and other risks and factors
cautions that actual results may differ materially from
described from time to time in the documents filed
those in the forward-looking statements.
by Genesis with the securities regulators in Canada
Factors that could cause actual results to differ
materially from those set forth in the forward-looking
statements include, but are not limited to: the impact
or unanticipated impact of general economic conditions
in Canada, the United States and globally; the impact
available at www.sedar.com, including this MD&A
under the heading “Risks and Uncertainties” and the
Annual Information Form under the heading “Risk
Factors”. Furthermore, the forward-looking statements
contained in this MD&A are made as of the date of
Caution should be exercised in the evaluation
and use of the appraisal results. Theappraisal 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.
44
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012
45
MANAGEMENT’S
REPORT
Bruce Rudichuk
President & Chief Executive Officer
Mark Scott
Executive Vice President &
Chief Financial Officer
March 28, 2014
To the Shareholders of
Genesis Land Development Corp.:
The consolidated financial statements
and all information in the Management’s
Discussion and Analysis (“MD&A”)
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
reasonable assurance that transactions
are properly authorized, assets are
safeguarded and financial records properly
maintained to provide reliable information
for the preparation of consolidated
financial statements.
The consolidated financial statements
have been further examined by the Board
of Directors and by its Audit Committee,
which meets regularly with the auditors
and management to review the activities
of each. The Audit Committee is composed
of three independent directors, and reports
limits of materiality, and are in accordance
to the Board of Directors.
with International Financial Reporting
MNP LLP, an independent firm of Chartered
Standards (“IFRS”) appropriate in the
Accountants, was engaged to audit
circumstances. The financial information
the consolidated financial statements
in the MD&A has been reviewed by
in accordance with Canadian generally
management to ensure consistency with
accepted auditing standards and IFRS to
the consolidated financial statements.
provide an independent auditors’ opinion.
Management maintains appropriate
systems of internal control. Policies
and procedures are designed to give
46
INDEPENDENT
AUDITORS’
REPORT
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.
the appropriateness of accounting
principles used and the reasonableness
of accounting estimates made by
management, as well as evaluating the
overall presentation of the consolidated
financial statements.
Those standards require that we comply
We believe the audit evidence obtained in
with ethical requirements and plan and
our audits is sufficient and appropriate to
perform an audit to obtain reasonable
provide a basis for our audit opinion.
assurance whether the consolidated
financial statements are free of material
Opinion
misstatement.
To the Shareholders of
Genesis Land Development Corp.:
We have audited the accompanying
consolidated financial statements of
Genesis Land Development Corp. and its
subsidiaries, which comprise the balance
sheets as at December 31, 2013 and 2012
and January 1, 2012, and the consolidated
statement of earnings, comprehensive
income and retained earnings, and
consolidated statement of cash flows
for the years ended December 31, 2013
and 2012, and a summary of significant
An audit involves performing procedures
accounting policies and other explanatory
to obtain audit evidence about the
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.
amounts and disclosures in the
consolidated financial statements.
The procedures selected depend on
the auditors judgment, including the
assessment of the risks of material
misstatement of the consolidated financial
statements, whether due to fraud or error.
In making those risk assessments, the
auditor considers internal control relevant
to the entity’s preparation an presentation
of the consolidated financial statements in
order to design audit procedures that are
appropriate in the circumstances, but not
for the purpose of expressing an opinion
on the effectiveness of the entity’s internal
control. An audit also includes assessing
47
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, 2013
and 2012 and January 1, 2012, and their
financial performance and their cash flows
for the years ended December 31, 2013
and December 31, 2012 in accordance
with International Financial Reporting
Standards.
CHARTERED ACCOUNTANTS
Calgary, Alberta
March 28, 2014
December 31,
Notes
2013
2012(1)
2012(1)
January 1,
257,420
264,184
290,512
7,894
10,680
23,342
73,239
7,115
16,233
397
-
9,648
34,386
20,936
2,859
17,678
10,005
10,850
313,846
374,341
369,191
50,373
97,224
86,066
5,228
4,352
16,759
23,559
3,112
-
4,617
60
7,582
14,383
12,970
-
20,448
18,220
11,571
95,920
148,032
132,572
5
3, 18
6
7
8
9
8
8
16
10, 11
56,122
55,844
5,011
5,109
55,122
4,950
134,350
128,637
119,776
195,483
189,590
179,848
22
22,443
36,719
56,771
217,926
226,309
236,619
313,846
374,341
369,191
GENESIS LAND DEVELOPMENT CORP. CONSOLIDATED BALANCE SHEETS
(In thousands of Canadian dollars)
Assets
Real estate held for development and sale
Investment in joint venture
Amounts receivable
Other operating assets
Deferred tax assets
Cash and cash equivalents
Total assets
Liabilities
Loans and credit facilities
Customer deposits
Accounts payable and accrued liabilities
Income taxes payable
Deferred tax liabilities
Provision for future land development costs
Total liabilities
Commitments and contingencies
Equity
Share capital
Contributed surplus
Retained earnings
Shareholders’ equity
Non-controlling interest
Total equity
Total liabilities and equity
See accompanying notes to the consolidated financial statements
Loans and credit facilities (note 9)
Subsequent events (note 9, note 24)
(1) Refer to note 3 and note 23 for change in accounting policy
ON BEHALF OF THE BOARD:
Stephen Griggs
Chair of the Board
Steven Glover
Chair of the Audit Committee
48
Year ended December 31,
Notes
2013
2012(1)
95,788
128,648
289
812
96,077
129,460
(69,948)
(87,263)
(16,282)
(33,146)
(86,230)
(120,409)
9,847
6,038
(11,172)
(2,358)
(3,187)
9,051
4,505
(9,294)
(3,948)
(1,039)
(16,717)
(14,281)
(832)
508
(1,526)
(1,850)
(1,963)
(3,813)
(725)
724
(2,660)
(2,661)
(4,086)
(6,747)
(9,526)
(15,608)
5,713
0.13
8,861
0.20
3,18
12
13
14
15
8
22
GENESIS LAND DEVELOPMENT CORP. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands of Canadian dollars except per share amounts)
Revenues
Sales revenue
Other revenue
Cost of sales
Direct cost of sales
Write-down of real estate held for development and sale
Gross margin
Income from joint venture
General and administrative
Selling and marketing
Other expenses
Operating loss from continuing operations
Finance income
Finance expense
Loss before income taxes
Income tax expense
Net loss being comprehensive loss
Attributable to non-controlling interest
Attributable to equity shareholders
Net earnings per share - basic and diluted
See accompanying notes to the consolidated financial statements
(1) Refer to note 3 and note 23 for change in accounting policy
49
GENESIS LAND DEVELOPMENT CORP. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012
(In thousands of Canadian dollars except number of shares)
Equity attributable to Corporation’s shareholders
Common shares - Issued
Number
of Shares
Amount
Contributed
Surplus
Total
Retained Shareholders’
Equity
Earnings
Non-
Controlling
Interest
Total
Equity
At January 1, 2012 (1)
44,484,287
55,122
4,950
119,776
179,848
56,771
236,619
Share-based payments
281,441
722
159
Distributions (2)
Net earnings (loss) (3)
-
-
-
-
-
-
-
-
881
-
-
(4,444)
8,861
8,861
(15,608)
881
(4,444)
(6,747)
At December 31, 2012 (1)
44,765,728
55,844
5,109
128,637
189,590
36,719
226,309
Share-based payments
95,472
278
(98)
Distributions (2)
Net earnings (loss) (3)
-
-
-
-
-
-
-
-
180
-
5,713
5,713
At December 31, 2013
44,861,200
56,122
5,011
134,350
195,483
-
180
(4,750)
(9,526)
22,443
(4,750)
(3,813)
217,926
See accompanying notes to the consolidated financial statements
(1) Refer to note 3 and note 23 for change in accounting policy
(2) Distributions to unit holders of Limited Partnership 6/7
(3) Net earnings (loss) being comprehensive earnings (loss)
50
GENESIS LAND DEVELOPMENT CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of Canadian dollars)
Year ended December 31,
Notes
2013
2012(1)
87,532
67,029
1,210
49,077
40,545
6,856
(39,143)
(41,560)
(40,995)
(38,863)
(18,743)
(10,053)
508
(3,925)
53,473
(317)
479
9,500
-
9,662
724
(9,520)
(2,794)
(449)
(3,730)
4,000
36
(143)
46,511
89,941
(94,214)
(77,906)
(2,983)
(4,750)
(237)
211
(55,462)
7,673
10,005
17,678
(6,043)
(4,444)
-
544
2,092
(845)
10,850
10,005
Operating activities
Receipts from residential lot and development land sales
6
Receipts from residential home sales
Other receipts
Paid to suppliers for land development
Paid to suppliers for residential home construction
Paid to other suppliers and employees
Interest received
Income taxes paid
Cash flows from (used in) operating activities
Investing activities
Acquisition of property and equipment
Change in restricted cash
Distribution received from joint venture
Proceeds on disposal of property and equipment
Cash from (used in) investing activities
Financing activities
Advances from loans and credit facilities
Repayments of loans and credit facilities
Interest and fees paid on loans and credit facilities
Distributions to unit holders of limited partnerships
Settlement of options
Issue of share capital
Cash (used in) from financing activities
Change in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
See accompanying notes to the consolidated financial statements
(1) Refer to note 3 and note 23 for change in accounting policy
51
GENESIS LAND DEVELOPMENT CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
1. DESCRIPTION OF BUSINESS
cost convention except for the financial
Non-controlling interests represent the
Genesis Land Development Corp.
(the “Corporation” or “Genesis”) was
incorporated as Genesis Capital Corp.
under the Business Corporation Act
(Alberta) on December 2, 1997. Genesis
Land Development Corp. resulted from an
amalgamation on January 1, 2002.
assets classified as fair value through
portion of profit or loss and net assets not
profit or loss that have been measured
held by the Corporation and are presented
at fair value. The consolidated financial
separately from shareholders’ equity in the
statements are presented in Canadian
consolidated statements of comprehensive
dollars, and all values are rounded to the
income (loss) and within equity in the
nearest thousand, except per share values
consolidated balance sheets. Losses
and where otherwise indicated.
within a subsidiary are attributed to the
non-controlling interest even if that results
in a deficit balance.
The Corporation is engaged in the
c) Basis of consolidation
acquisition, development, and sale of land,
residential lots and homes primarily in
the greater Calgary area. The Corporation
reports its activities as two business
segments: land development and home
building.
The Corporation is listed for trading on
the Toronto Stock Exchange under the
symbol “GDC”. Genesis’ head office and
registered office is located at 7315 - 8th
Street N.E., Calgary, Alberta T2E 8A2.
The consolidated financial statements of
Genesis were approved for issuance by
the Board of Directors on March 28, 2014.
The consolidated financial statements
include the accounts of the Corporation
d)
Interest in joint venture
and its wholly-owned subsidiaries, as well
The Corporation has an interest in a joint
as the consolidated revenues, expenses,
assets, liabilities and cash flows of limited
venture, Kinwood Communities Inc.,
which is a jointly controlled entity, by
partnership entities that the Corporation
virtue of a contractual arrangement with
controls. When the Corporation has
another party. The Corporation recognizes
less than 50% equity ownership in
its interest in the joint venture using
these limited partnership entities, the
the equity method of accounting. Under
Corporation may still have control over
the equity method of accounting the net
these entities’ activities, projects, financial
assets of the joint venture are presented
and operating policies due to contractual
in a single line “Investment in Joint
arrangements. As such, the relationship
Venture”. The financial statements of the
between the Corporation and the limited
joint venture are prepared for the same
partnership entities indicates that
reporting period as the Corporation.
2. SIGNIFICANT ACCOUNTING POLICIES
they are controlled by the Corporation.
The significant accounting policies of
the Corporation are set out below. These
policies have been consistently applied
Accordingly, the accounts of the limited
partnerships have been consolidated in
the Corporation’s financial statements.
All unrealized gains and losses resulting
from transactions between the Corporation
and the joint venture are eliminated on
consolidation. Losses on transactions
to each of the years presented, unless
Subsidiaries are fully consolidated from
are recognized immediately if the loss
otherwise indicated.
the date of acquisition, being the date on
which the Corporation obtains control,
provides evidence of a reduction in the net
realizable value of current assets or an
a) Statement of compliance
and continues to be consolidated until the
impairment loss.
The consolidated financial statements
of the Corporation are prepared in
accordance with International Financial
Reporting Standards (“IFRS”) as issued by
the International Accounting Standards
Board (“IASB”).
b) Basis of presentation
The consolidated financial statements
have been prepared under historical
date when such control ceases. Control
exists when the Corporation has the
power, directly or indirectly, to govern
the financial and operating policies of
an entity so as to obtain benefit from its
activities. All intra-group transactions,
balances, dividends and unrealized
gains and losses resulting from intra-
group transactions are eliminated on
consolidation.
Profits and losses resulting from the
transactions with the joint venture
are recognized in the Corporation’s
consolidated financial statements only to
the extent of interests in the joint venture
that are not related to the Corporation.
52
e) Revenue recognition
(i) Residential lot and
development land sales
Deposits forfeited are recognized as
Borrowing costs consist of interest and
income.
other costs incurred in connection with the
Land and lot sales to third parties are
recognized when the risks and rewards
of ownership have been transferred,
the agreed-to services pertaining to
the property have been substantially
performed, a minimum 15% non-
refundable deposit has been received,
and the collection of the remaining
unpaid balance is reasonably assured.
Deposits received upon signing of
contracts for purchases of lots on
which revenue recognition criteria
have not been met are recorded as
customer deposits.
f) Real estate held for development
and sale
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 development and
construction, borrowing costs, property
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
(ii) Residential home sales
Revenue is recognized when title to
marketing agents on the sale of real estate
property is expensed when incurred.
the completed home is conveyed to the
Real estate held for development and
purchaser, at which time all proceeds
sale is reviewed at least annually for
borrowing of the funds.
The borrowing costs capitalized
are determined first by reference to
borrowings specific to the project, where
relevant, and secondly by applying
a weighted average interest rate for
the Corporation’s non-project specific
borrowings, less any investment income
arising on temporary investing of funds,
to eligible capital assets. Borrowing
costs are not capitalized on real estate
held for development and sale where
no development activity is taking place.
Borrowing costs are capitalized from the
date 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.
are received or collection is reasonably
impairment or whenever events or
h) Property and equipment
assured.
Deposits received from customers
upon signing of contracts for
purchases of completed homes for
which revenue recognition criteria
have not been met are recorded as
changes in circumstances indicate the
carrying value may exceed NRV. An
impairment loss is recognized in the
consolidated statements of comprehensive
income (loss) when the carrying value
exceeds its NRV.
Property and equipment is stated at cost,
net of any accumulated depreciation
and accumulated impairment losses.
Depreciation is provided on all operating
property and equipment based on the
straight-line method over the estimated
customer deposits.
NRV is the estimated selling price in the
useful lives of the property and equipment.
(iii) Interest income
Interest income is recognized as it
accrues using the effective interest
rate method.
(iv) Other revenue
Rental income is recognized on a
straight-line basis over the term of the
rental agreement. Rental income is
incidental to ownership of real estate
and does not result in classification of
real estate as investment property. All
real estate is classified as inventory.
ordinary course of the business at the
balance sheet date, less costs to complete
The useful lives of the properties are as
follows:
• Vehicles and other equipment
5 years
• Office equipment and furniture
7 years
• Computer equipment
3 years
• Leasehold improvements
Lesser of 5 years or remaining
term of the lease
and estimated selling costs.
g) Borrowing costs
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
other borrowing costs are expensed in
the period in which they are incurred.
53
GENESIS LAND DEVELOPMENT CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
An item of property and equipment is
between the tax bases of assets and
m) Share-based payments
no longer recognized as an asset upon
liabilities and their carrying amounts
disposal, when held for sale or when no
for financial reporting purposes.
The Corporation provides equity-settled
share-based payments in the form of
future economic benefits are expected to
arise from the continued 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 consolidated statements
of comprehensive income (loss).
All minor repair and maintenance costs are
recognized in the consolidated statements
of comprehensive income (loss) as
incurred. The assets’ residual values,
useful lives and methods of depreciation
are reviewed at each financial year end
and adjusted prospectively, if appropriate.
i)
Income taxes
The Corporation’s consolidated financial
statements include some entities that
are limited partnerships (note 22) and are
not subject to income taxes. The income
attributable to the taxable income of the
partners in accordance with the provisions
of the Income Tax Act (Canada). The
calculation of income tax expense reflects
the exclusion of taxable income allocated
to partners that form part of the non-
controlling interest.
(i) Current income tax
Current income tax assets and
Deferred tax assets are recognized
a share option plan to its employees,
to the extent that it is probable
officers and directors. The costs of the
that taxable profit will be available,
share-based payments are calculated by
against which deductible temporary
reference to the fair value of the options
differences, carried forward tax credits
at the date on which they are granted.
or tax losses can be utilized.
The fair values are determined using
Deferred tax assets and liabilities are
measured at the tax rates that are
expected to apply to the year when
the asset is realized or the liability
is settled, based on tax rates and
tax laws that have been enacted or
substantively enacted at the balance
sheet date.
the Black-Scholes Option-Pricing Model.
The costs of the share-based payments
are recognized on a proportionate basis
over the related vesting period of each
tranche of the grant as an 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
Current and deferred tax, relating to
the date the options vested, is credited to
items that are directly recognized in
the share capital account.
equity, is recognized in equity and
not in the consolidated statements of
comprehensive income (loss).
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
Share-based payments may be settled in
cash at the discretion of the Corporation
and are accounted for as equity-settled
plans. When options are settled in cash,
the cash paid reduces the contributed
surplus to the extent of previously
recognized liability. Amounts paid in
excess of previously recognized liability
are expensed.
The dilutive effect of outstanding options
Restricted cash represents funds owed to
is reflected in the computation of earnings
the Corporation at a future indeterminable
per share.
date, when development of specific
lands commences. Cash is returned to
n) Financial assets
or loss for Canadian tax purposes is
j) Cash and cash equivalents
liabilities are measured at the amount
the Corporation upon completion of its
expected to be paid to tax authorities,
development obligation for that property.
net of recoveries, using tax rates and
laws that are enacted or substantively
l) Leases
All financial assets are initially recognized
on the consolidated balance sheet at fair
value and designated at inception into
one of the following classifications: at fair
enacted as at the balance sheet date.
(ii) Deferred tax
Deferred tax is provided using the
liability method on all temporary
differences at the balance sheet date
Operating lease payments are recognized
value through profit or loss (“FVTPL”); and
as an operating expense in the
loans and receivables. All financial assets
consolidated statements of comprehensive
are recognized initially on the trade date
income (loss) on a straight-line basis over
at which the Corporation becomes a
the lease term.
54
party to the contractual provisions of the
the assets are impaired as a result of one
Financial liabilities are no longer
instrument.
or more events that have had a negative
recognized as a liability when the
Transaction costs related to financial
assets classified as FVTPL are expensed,
effect on the estimated future cash flows
contractual obligations are discharged,
of the asset.
cancelled or expire.
and for all other financial assets they are
If there is objective evidence that a
Financial assets and financial liabilities
included in the initial carrying amount.
financial asset has become impaired,
are offset and the net amount presented in
The financial assets classified as FVTPL
are cash and cash equivalents, and
deposits and restricted cash. 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
consolidated balance sheet at fair value
with changes in fair value recognized
in the consolidated statements of
comprehensive income (loss).
Financial assets classified as loans and
receivables are amounts receivable.
Financial assets 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
consolidated statements of comprehensive
income (loss).
Financial assets are no longer recognized
when the contractual rights to the
cash flows from the asset expire, or
the Corporation transfers the rights to
the amount of the impairment loss is
the consolidated balance sheet when the
calculated as the difference between its
Corporation has a legal right to offset the
carrying amount and the present value
amounts and intends either to settle on a
of the estimated future cash flows from
net basis or to realize the asset and settle
the asset, discounted at its original
the liability simultaneously.
effective interest rate. Impairment losses
are recorded in earnings. If the amount
p) Earnings per share
of the impairment loss decreases in a
subsequent period and the decrease
can be objectively related to an event
occurring after the impairment was
recognized, the impairment loss is
reversed up to the original carrying value
of the asset. Any reversal is recognized in
earnings.
o) Financial liabilities
The amount of basic earnings per share is
calculated by dividing the comprehensive
earnings attributable to equity holders by
the weighted average number of shares
outstanding during the period. The diluted
earnings per 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
The financial liabilities classified as other
stock options. The treasury stock method
financial liabilities are accounts payable
assumes that proceeds received from the
and accrued liabilities, and loans and
exercise of in-the-money stock options are
credit facilities.
All financial liabilities are initially
recognized on the consolidated balance
sheet at fair value less directly attributable
transaction costs, and designated at
inception as other financial liabilities.
receive the contractual cash flows on the
Other financial liabilities are subsequently
financial asset in a transaction in which
measured at amortized cost using the
substantially all the risks and rewards
of ownership of the financial assets are
transferred. Any interest in transferred
effective interest method. The effective
interest method is a method of calculating
the amortized cost of a financial liability
financial assets that is created or retained
and of allocating interest expense over
is recognized as a separate asset or
the relevant period. The effective interest
liability.
Financial assets are assessed at each
reporting date in order to determine
whether objective evidence exists that
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.
55
used to repurchase common shares at the
average market price over the year.
q) Provision for future land
development costs
The provision for future land development
costs represents the construction costs
expected to be incurred for each project
phase currently under development to the
extent that revenue has been recognized.
The liability includes all direct construction
costs and indirect costs expected to be
incurred during the remainder of the
construction period net of expected
recoveries of certain development costs.
The provision for future land development
costs are reviewed on a phase by phase
basis. When the estimate is known to be
GENESIS LAND DEVELOPMENT CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
different from the actual costs incurred
limited partnerships where the
a provision and disclosure in the
or expected to be incurred, an adjustment
Corporation holds less than 50% equity
consolidated financial statements
is made to the provision for future land
ownership. The judgment is based on
is required. Among the factors
development costs and a corresponding
a review of all contractual agreements
considered in making such judgments
adjustment is made to land under
development and/or cost of sales.
to determine if the Corporation has
are the nature of litigation, claim
control over the activities, projects,
or assessment, the legal process
financial and operating policies of the
and potential level of damages, the
r) Significant accounting judgments
limited partnerships.
and estimates
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
in relation to revenues, expenses,
assets and liabilities. Management uses
historical experience and various other
factors it believes to be reasonable
under the given circumstances as the
basis for its judgments and estimates.
Actual outcomes may differ from these
estimates under different assumptions and
conditions.
The following are the most significant
accounting judgments and estimates made
by the Corporation in applying accounting
policies:
Judgments
(i) Revenue Recognition
Revenue recognition for development
lands requires 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 appropriate transfer date.
(ii) Consolidation
The Corporation applies judgment
in determining control over certain
(iii) Income Taxes
The Corporation applies judgment in
determining the total provision for
current and deferred taxes. There are
progress of the case, the opinions
or views of legal advisers and
any decision of the Corporation’s
management as to how it will respond
to the litigation, claim or assessment.
many transactions and calculations for
Estimates
which the ultimate tax determination
(i) Provision for future land development
and timing of payment is uncertain
costs
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 taxable income and expense already
Changes in the estimated future land
development costs directly impact
the amount recorded for the future
development liability, cost of sales,
gross margin and, in some cases, the
value of real estate under development
and held for sale. This liability is
subject to uncertainty as it is based
on estimates prepared by independent
consultants and management.
recorded.
(iv) Net realizable value
(ii) Impairment of real estate held for
future development and sale
NRV for land and housing projects held
The Corporation estimates the
for development and sale is estimated
NRV of real estate held for future
with reference to market prices and
conditions existing at the balance
development and sale at least annually
for impairment or whenever events
sheet date. This is determined by the
or changes in circumstances indicate
Corporation having considered suitable
the carrying value may exceed NRV.
external advice from independent real
The estimate is based on valuation
estate appraisers and in light of recent
conducted by independent real estate
market transactions of similar and
appraisers and in light of recent
adjacent lands and housing projects in
market transactions of similar and
the same geographic area.
(v) Legal contingencies
adjacent lands and housing projects in
the same geographic area.
The Corporation applies judgment
(iii) Share-based payments
as it relates to the outcome of legal
The Corporation uses an option pricing
proceedings to determine whether
model to determine the fair value of
56
share-based payments. Inputs to the
and expenses but had no impact on the
to variable returns from its involvement
model are subject to various estimates
Corporation’s net assets, net earnings,
with the investee and has the ability to
about volatility, interest rates, dividend
cash flows or earnings per share.
affect those returns through its power
yields, forfeiture rates and expected
life of the units issued. Fair value
inputs are subject to market factors
as well as internal estimates. The
Corporation considers historic trends
together with any new information to
determine the best estimate of fair
value at the date of grant.
(iv) Valuation of amounts receivables
Amounts receivable are reviewed on a
regular basis to estimate recoverability
of balances. Any amounts becoming
overdue and any known issues about
the financial condition of debtors are
Refer to note 23 for the summarized
adjustments made to the Corporation’s
consolidated balance sheets at January
1, 2012 and December 31, 2012, its
consolidated statements of comprehensive
income (loss) and cash flows for the year
ended December 31, 2012.
4. STANDARDS AND AMENDMENTS TO
EXISTING STANDARDS EFFECTIVE
JANUARY 1, 2013
over the investee. In accordance with
the transitional provisions of IFRS 10,
the Corporation has re-assessed the
control conclusion for its investees at
January 1, 2013 and concluded that the
new standard will not change its control
conclusion in respect of its investment in
its subsidiaries.
Impact of the application of IFRS 11
Refer to note 3, Change in Accounting
Policy, for a description of and the impact
The Corporation adopted new IFRSs and
of the adoption of IFRS 11.
interpretations as of January 1, 2013, as
noted below:
taken into account when estimating
i) Application of new and revised IFRSs
recoverability.
3. CHANGE IN ACCOUNTING POLICY
The Corporation changed accounting
for its interest in a joint venture from
on consolidation, joint arrangements,
associates and disclosures
The Corporation has applied the
requirements of IFRS 10 “Consolidated
Financial Statements” (“IFRS 10”), IFRS
the equity method of accounting beginning
January 1, 2013. This is required under
IFRS 11, “Joint Arrangements”, issued
on May 12, 2011, which replaces IAS 31,
“Interest in Joint Ventures”. The standard
is effective for annual periods beginning
in Other Entities” (“IFRS 12”) as well
as the consequential amendments to
IAS 27 (as revised in 2011) “Separate
Financial Statements” (“IAS 27”) and
IAS 28 (as revised in 2011) “Investments
in Associates” (“IAS 28”) in the current
on or after January 1, 2013. The new
period.
The impact of the application of these
standards is set out below.
Impact of the application of IFRS 12
IFRS 12 is a disclosure standard and is
applicable to entities that have interests
in subsidiaries, joint arrangements,
associates and/or unconsolidated
structured entities. In general, the
application of IFRS 12 has resulted in
additional disclosures in the consolidated
Impact of the application of IAS 28
IAS 28 was amended in 2011
and prescribes the accounting for
investments in associates and sets out
the requirements for the application
of the equity method when accounting
for investments in associates and joint
ventures. Under IFRS 11, the Corporation
determined that its joint venture has to
proportionately consolidated accounting to
11 and IFRS 12 “Disclosures of Interests
financial statements.
standard redefines joint operations and
joint ventures, requiring joint operations
to be proportionately consolidated and
joint ventures to be equity accounted.
Under IAS 31, joint ventures could
be proportionately consolidated. The
Corporation has applied IFRS 11 beginning
on January 1, 2013 with retrospective
application from the date of earliest period
presented which is January 1, 2012. This
change in accounting policy reduced
total assets, total liabilities, revenues
Impact of the application of IFRS 10
be consolidated under the equity method
As a result of the adoption of IFRS
10, the Corporation has changed its
accounting policies with respect to
determining whether it has control
over and consequently consolidates its
investees. IFRS 10 changes the definition
of control such that an investor controls an
investee when it is exposed, or has rights,
as described by IAS 28. This change in
accounting policy reduced total assets,
total liabilities, revenues and expenses
but had no impact on the Corporation’s
net assets, net earnings, cash flows or
earnings per share.
57
GENESIS LAND DEVELOPMENT CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
ii) Application of IFRS 13 “Fair Value
Measurement” (“IAS 39”). The standard
were amended and the definitions of
Measurement”
was to be effective for annual periods
‘performance condition’ and ‘service
improves consistency and reduces
complexity by providing a precise
definition of fair value and a single source
of fair value measurement and disclosure
requirements for use across IFRSs. The
requirements do not extend the use of fair
value accounting but provide guidance
on how it should be applied where its
use is already required or permitted by
other standards within IFRS. In general,
the application of IFRS 13 has resulted in
additional disclosures in the consolidated
financial statements as set out in note 17.
There are no other standards,
interpretations or amendments to existing
standards that are effective that would be
beginning on or after January 1, 2015.
condition’ were added. An entity is
In February 2014, the IASB tentatively
required to prospectively apply that
decided the mandatory effective date of
amendment to share-based payment
the final IFRS 9 would now be January 1,
transactions for which the grant date is on
2018. The final standard is expected in
or after 1 July 2014. The Corporation will
mid-2014. IFRS 9 applies to classification
apply the improvements on share-based
and measurement of financial assets
payment transactions, if any, made on or
as defined in IAS 39. It uses a single
after July 1, 2014.
approach to determine whether a financial
asset is measured at amortized cost or fair
value, replacing the multiple classification
options in IAS 39. The Corporation is
currently evaluating the impact of IFRS 9
on its financial statements.
ii) IAS 36, “Impairment of Assets” –
Amendments to IAS 36
iv) IFRIC 21, “Levies”
In May 2013, the IASB issued IFRIC 21,
“Levies” (“IFRIC 21”) which provides
guidance on accounting for levies in
accordance with the requirements of IAS
37, “Provisions, Contingent Liabilities and
Contingent Assets”. The interpretation
clarifies that an entity is to recognize
expected to have a significant impact on
The amended standard requires entities
a liability for a levy when the activity
the Corporation.
to disclose the recoverable amount of an
that triggers payment, as identified by
RECENT ACCOUNTING
PRONOUNCEMENTS
The Corporation has reviewed new and
revised accounting pronouncements that
have been issued but are not yet effective
and determined that the following may
impaired Cash Generating Unit (CGU).
the relevant legislation, occurs. The
The amendments to IAS 36 are effective
interpretation also clarifies that a levy
for annual periods beginning on or after
liability is to be accrued progressively
January 1, 2014 and require retrospective
only if the activity that triggers payment
application. This standard is not expected
occurs over a period of time, in accordance
to have an impact on the Corporation’s
with the relevant legislation. IFRIC 21 is
have an impact on the Corporation:
financial position or performance.
effective for annual period commencing
i) IFRS 9, “Financial Instruments”
iii) IFRS 2, “Share-based payment”
On November 12, 2009, the IASB
“Annual Improvements to IFRSs 2010–
issued IFRS 9, “Financial Instruments”
2012 Cycle” was issued in December
(“IFRS 9”), which will replace IAS 39
2013. The definitions of ‘vesting
“Financial Instruments: Recognition and
conditions’ and ‘market condition’
on or after January 1, 2014 and require
retrospective application. The Corporation
is currently evaluating the impact of IFRIC
21 on its financial statements.
58
5. REAL ESTATE HELD FOR DEVELOPMENT AND SALE
Gross book value
As at January 1, 2012 (1)
Transfers
Acquisitions
Development
Sold
As at December 31, 2012 (1)
Transfers
Acquisitions
Development
Sold
As at December 31, 2013
Provision for write-downs
As at January 1, 2012
Write-downs
As at December 31, 2012
Write-downs
As at December 31, 2013
Net book value
As at January 1, 2012 (1)
As at December 31, 2012 (1)
As at December 31, 2013
Land Held
for Future
Development Development
Land Under
Home
Building
Total Partnerships
Limited Consolidated
Total
135,956
(17,393)
-
57,743
(52,285)
77,820
(1,938)
-
3,055
10,422
19,331
23,914
10,370
224,198
77,068
301,226
-
23,914
71,168
-
-
882
-
23,914
72,050
-
(33,407)
(85,692)
(3,454)
(89,146)
233,588
74,496
308,084
124,021
78,937
(2,950)
(11,390)
-
40,998
(21,907)
-
4,403
30,630
14,340
6,521
34,699
-
6,521
80,100
-
(55,295)
(77,202)
-
-
99
-
-
6,521
80,199
(77,202)
140,162
71,950
30,895
243,007
74,595
317,602
3,296
1,849
5,145
646
5,791
132,660
118,876
134,371
4,072
16,419
20,491
7,539
28,030
73,748
58,446
43,920
-
-
-
-
-
10,422
30,630
30,895
7,368
18,268
25,636
8,185
33,821
216,830
207,952
209,186
3,386
14,878
18,264
8,097
26,361
73,682
56,232
48,234
10,754
33,146
43,900
16,282
60,182
290,512
264,184
257,420
(1) 2012 information has been restated to reflect the changes due to the adoption of IFRS 11 as summarized in note 3
During the year ended December 31, 2013, interest of $3,763 (2012 - $4,464) and other carrying costs of $Nil (2012 - $5), respectively, were
capitalized.
59
GENESIS LAND DEVELOPMENT CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
6. AMOUNTS RECEIVABLE
Agreements receivable
Mortgages receivable
Other receivables
Allowance for doubtful accounts
2013
21,796
1,524
314
23,634
(292)
23,342
2012
64,096
9,501
1,285
74,882
(1,643)
73,239
Agreements receivable for lot sales
balance owing for the purchased lots.
10, 2013. Certain agreements receivable
are secured by the underlying real
Agreements receivable as at December
and all mortgages receivable are interest
estate assets and have various terms of
31, 2012, include a receivable from one
bearing.
repayment. Purchasers generally have
customer amounting to $27,714 which was
between six and 24 months to pay the
realized in the current year on January
7. OTHER OPERATING ASSETS
Deposits
Prepayments
Restricted cash
Property and equipment
2013
5,004
151
1,324
636
7,115
2012
4,989
1,151
9,615
478
16,233
Deposits include amounts paid to
are refundable upon completion of the
security to guarantee the completion of
development authorities as security to
related projects and earn interest at rates
construction projects (see note 16 (d) for
guarantee the completion of construction
approximating those earned on guaranteed
further details). Restricted cash is held in
projects under development and deposits
investment certificates. The Corporation
trust accounts.
on future land acquisitions. The deposits
has further provided letters of credit as
8.
INCOME TAXES
(a)
Income tax was recognized in the consolidated statements of comprehensive income as follows:
Current income tax
Deferred tax relating to origination and reversal of temporary differences
2013
2,420
(457)
1,963
2012
1,167
2,919
4,086
60
(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% (2012 – 25%) to loss before income taxes. The difference resulted from the following:
Loss before income taxes
Statutory tax rate
Expected income tax expense
Share-based payment transactions
Other non-deductible (recoveries) expenses
Non-controlling interest
Tax expense for the year
(c) The deferred tax assets (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 2028
2013
(1,850)
25.0%
(463)
52
(8)
2,382
1,963
2012
(2,661)
25.0%
(665)
84
765
3,902
4,086
2013
3,806
2012
6,420
(3,409)
(6,480)
397
(60)
2013
2,413
84
(3,409)
1,299
10
397
2012
2,845
497
(4,532)
1,090
40
(60)
The components of the deferred tax asset (liability) recognized in the consolidated statement of comprehensive income (loss) 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 2028
61
2013
(432)
(413)
2012
270
345
1,123
(4,421)
209
(30)
457
827
60
(2,919)
GENESIS LAND DEVELOPMENT CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
(e) The movement in income tax payable for the year was as follows:
Balance as at January 1
Provision
Payments
Balance as at December 31
9. LOANS AND CREDIT FACILITIES
Secured by land under development and agreements receivable
I. Land project loans, payable on collection of agreements receivable, bearing interest at
rates ranging from prime +1.25% to the greater of 7.2% or prime +4.2% (the loan bearing
interest at the greater of 7.2% or prime +4.2% was paid in full subsequent to the year end),
secured by land held for development and sale with a carrying value of $126,516, due between
March 1, 2014 and December 1, 2015.
Secured by housing projects under development
II. 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.
2013
4,617
2,420
(3,925)
3,112
2012
12,970
1,167
(9,520)
4,617
2013
32,759
2012(1)
82,918
2,305
2,281
III. Projects loans, payable on collection of closing proceeds, bearing interest of prime +1.50%,
8,716
6,487
secured by home building projects with a carrying value of $13,369, due by December 10, 2014.
Secured by land held for future development - Limited Partnership
7,850
7,850
IV. 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 $15,121 maturing March 1, 2014.
The loan was renewed subsequent to the year end.
Deferred loans and credit facilities fees
(1) 2012 information has been restated to reflect the changes due to the adoption of IFRS 11 as summarized in note 3
51,630
(1,257)
50,373
99,536
(2,312)
97,224
The weighted average interest rate of
of $46,511 (2012 - $89,941) relating
prime + 4.2% per annum, with due dates
loan agreements was 5.83% (December
to various new and renewed loan
ranging from March 1, 2014 to December
31, 2012 - 6.25%), based on December 31,
facilities secured by real estate held for
1, 2015.
2013 balances.
During the year ended December 31,
2013, the Corporation received advances
development and sale, and agreements
receivable, bearing interest ranging from
prime + 1.25% to the greater of 7.2% or
62
Based on the contractual terms, the Corporation’s loans and credit facilities are to be repaid within the following time periods (excluding
deferred financing fees):
January 1, 2014 to December 31, 2014
January 1, 2015 to December 31, 2015
36,159
15,471
51,630
The Corporation has various covenants
charges, material changes to project
non-IFRS financial measure, is defined
in place with its lenders with respect to
plans, and changes in the Corporation’s
as “Retained Earnings plus Shareholders
certain contracted credit facilities. Such
ownership structure. In addition, the
Loans plus Due to Related Parties
covenants include: other credit usage
Corporation has a secured revolving
(excluding lot payables to related parties)
restrictions; cancellation, prepayment,
operating line repayable on demand to
minus Due from Related Parties”.
confidentiality and cross default clauses;
be used for its construction and serviced
sales coverage requirements; conditions
lot operations. This line has a financial
precedent for funding; and other general
covenant requiring that Genesis Builders
As at December 31, 2013 and as at
December 31, 2012, the Corporation and
its subsidiaries were in compliance with
understandings such as, but not limited
Group Inc., the single-family home building
to, maintaining contracted lot prices,
business, maintain a net worth of at least
all covenants.
restrictions on encumbrances, liens and
$11.5 million at all times. Net worth, a
10. 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 year ended December 31, 2013 and 2012:
Year ended December 31,
2013
2012
44,838,401
44,664,086
61,920
110,537
44,900,321
44,774,623
Basic
Effect of dilutive securities - stock options
Diluted
In calculating diluted earnings per share
price of the Corporation’s shares during
for the year ended December 31, 2013,
those periods.
the Corporation excluded 235,000 options
(2012 – 760,500) as their exercise prices
were greater than the average market
The Corporation has not issued any
preferred shares.
63
GENESIS LAND DEVELOPMENT CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
11. STOCK OPTIONS
The Corporation has established a stock
option plan for employees, officers, and
directors of the Corporation to purchase
common shares. Vesting provisions and
exercise prices are set at the time of
The options must be issued at not less
issuance by the Board of Directors. Options
than the fair market value of the common
vest over a number of years on various
shares at the date of grant and are issued
anniversary dates from the date of the
with terms not exceeding five years from
original grant.
the date of grant.
Details of outstanding stock options were as follows:
Outstanding - beginning of period
Options granted
Options exercised
Options expired
Options forfeited
Options settled in cash
Outstanding - end of period
Year ended December 31,
2013
2012
Weighted
Average
Exercise
Price
$3.21
$3.43
$2.21
$6.97
$3.45
$2.77
$3.32
Number of
Options
1,788,221
400,000
(281,441)
(281,500)
(356,808)
(36,750)
1,231,722
Weighted
Average
Exercise
Price
$3.60
$3.35
$1.93
$6.63
$3.73
$2.01
$3.21
Number of
Options
1,231,722
435,000
(95,472)
(60,000)
(61,500)
(389,250)
1,060,500
Outstanding
Exercisable
Weighted Average
Range of
Exercise Prices ($)
Number at
December 31, 2013
Weighted Average
Exercise Price
Number at
December 31, 2013
Weighted Average
Exercise Price
Remaining
Contractual Life
in Years
0.01 - 3.00
3.01 - 4.00
51,500
1,009,000
1,060,500
$2.01
$3.39
$3.32
51,500
574,000
625,500
$2.01
$3.38
$3.27
0.91
3.45
3.33
There were 435,000 options granted during the year ended December 31, 2013 (2012 – 400,000) with an average fair value of $0.81 per
share (2012 - $1.03).
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
2013
2012
0.99 - 1.24%
1.12 - 1.16%
2.50
2.50
34.46 - 38.27%
45.44 - 51.40%
24.22%
19.42 - 24.22%
0.00%
0.00%
64
12. GENERAL AND ADMINISTRATIVE
The general and administrative expense of the Corporation consisted of the following:
Corporate administration
Compensation and benefits (note 20)
Professional services
13. SELLING AND MARKETING
Selling and marketing expenses of the Corporation consisted of the following:
Advertising and marketing
Showhome expenses
14. OTHER EXPENSES
Other expenses of the Corporation consisted of the following:
Proxy contest costs
Share-based payments
Depreciation
Bad debt (recovery) expense
Other expenses
15. FINANCE EXPENSE
The finance expense of the Corporation consisted of the following:
Interest expense
Loans and credit facilities fees
Interest and loans and credit facilities fees capitalized
65
2013
2,132
7,450
1,590
11,172
2013
2,023
335
2,358
2013
2,889
206
159
(82)
15
2012
1,967
4,981
2,346
9,294
2012
3,530
418
3,948
2012
-
337
336
314
52
3,187
1,039
2013
3,771
1,518
(3,763)
1,526
2012
5,686
1,438
(4,464)
2,660
GENESIS LAND DEVELOPMENT CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
16. COMMITMENTS AND CONTINGENCIES
($200 each year, terminating June 1,
and credit facilities balance in the
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 “Action”). 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 (note
22). The plaintiff is seeking $10,700
plus punitive damages relating to the
ownership interests of LPLP 2007. The
Corporation recognizes LPLP 2007’s
non-controlling interest in these
consolidated financial statements. The
Action against the Corporation has
been discontinued pursuant to a court
order in the Action dated February 12,
2014 and issuance of a signed release
from all claims relating to the Action
by the plaintiff. A cross claim against
the Corporation by the third party
co-defendant for $400 remains extant.
The amount of additional liability, if
any, which exceeds the non-controlling
interest, is currently indeterminate.
b) The Corporation has entered into
a memorandum of understanding
with the Northeast Community
Society, whereby the Corporation will
contribute $5,000 for the naming rights
to “Genesis Centre for Community
Wellness”, a recreation complex in
northeast Calgary ($500 each year,
terminating October 31, 2021). The first
two installments totaling $1,000 were
made through 2013.
c) On February 19, 2008, the Corporation
entered into an agreement with
the City of Airdrie, whereby the
Corporation will contribute $2,000 for
2017). The first six installments totaling
consolidated financial statements. The
$1,200 were made through 2013.
Corporation has provided a guarantee
d) The Corporation has issued letters of
for this facility.
credit pursuant to service agreements
with municipalities to indemnify them
in the event that the Corporation does
not perform its contractual obligations.
As of December 31, 2013, the letters of
credit amounted to $6,279 (December
31, 2012 – $3,801).
e) On July 15, 2011, a joint venture (note
18) obtained a credit facility in the
amount of $17,000. The Corporation
and a joint venture partner have each
provided guarantees for 50% of this
facility. The current balance of the
credit facility is $Nil (2012 - $10,036).
f) Pursuant to the terms of a participating
mortgage that was repaid during
2002, the former mortgage holders
have the right to a 20% participation
in the profits from the development of
approximately 39 acres of land under
development. At December 31, 2013,
a liability of approximately $3,298
(December 31, 2012 - $3,051) was
recorded. The Corporation is selling
lots in the last phase covered under
this development. The payout of the
20% participation to the participants
will be made on completion of the sale
of lots in the last phase and collection
of related proceeds along with an
accounting of all related costs.
g) The Corporation has office and other
operating leases with the following
annual payments: not later than one
year - $869; later than one year but not
later than five years - $2,222; and later
than five years - $Nil.
the naming rights to “Genesis Place”, a
h) LPLP 2007 has a credit facility in the
recreation complex in the city of Airdrie
amount of $7,850 included in loans
66
17. FINANCIAL INSTRUMENTS
$1,643) as allowance for doubtful
taken back into the Corporation’s lot
a) Risks associated with financial
instruments
(i) Credit risk
As at December 31, 2013, the
Corporation carried $292 (2012 -
accounts.
The Corporation 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
inventory. The difference between an
impaired amount receivable and the
related bad debt expense or recovery is
the cost of a lot for which impairment
has been assessed.
During the years ended December 31, 2013 and 2012, the Corporation recognized the following bad debt expense and change in allowance
for doubtful accounts relating to amounts receivable on sold lots, net of the return of the real estate held for development and sale:
Balance as at January 1
Recovery
Allowance
Bad debt (recovery) expense
As at December 31
2013
1,643
(1,269)
-
(82)
292
2012
-
-
1,329
314
1,643
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
Past due 91 - 120 days
Past due 121 - 270 days
> 270 days
Allowance for doubtful accounts
2013
20,405
1,700
387
850
292
23,634
(292)
23,342
2012
73,094
145
927
716
-
74,882
(1,643)
73,239
Individual balances due from customers as at December 31, 2013, which comprise greater than 10% of total amounts receivable, totaled
$19,877 from four customers (December 31, 2012 - $35,450 from two customers).
67
GENESIS LAND DEVELOPMENT CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
(ii) Liquidity risk
The following were the contractual maturities of financial liabilities and other commitments as at December 31, 2013:
Financial liabilities
Accounts payable and accrued liabilities
Loans and credit facilities excl. deferred fees (note 9)
Commitments
Lease obligations (note 16)
Naming rights (note 16)
< 1 Year
> 1 Year
Total
16,759
36,159
52,918
869
700
-
15,471
15,471
2,222
4,100
54,487
21,793
16,759
51,630
68,389
3,091
4,800
76,280
At December 31, 2013, the Corporation
certain loans and credit facilities
payable and accrued liabilities
had obligations due within the
are at a floating rate of interest. The
approximate their carrying values as
next 12 months of $54,487 (2012 -
Corporation is also exposed to fair
they are expected to be settled within
$46,824). Based on the Corporation’
value risk to the extent that certain
twelve months. The fair value of deposits
operating history, its relationship
loans and credit facilities, mortgages
approximates their carrying value as the
with its lenders and committed sales
receivable and loans receivable are at
terms of deposits are the comparable to
contracts, management believes that
a fixed rate of interest. A 1% change in
the market terms for similar instruments.
the Corporation has the ability to
interest rates would result in a change
continue to renew or repay its financial
in interest incurred of approximately
obligations as they come due.
$516 annually on floating rate loans.
(iii) Market risk
The Corporation is exposed to
interest rate risk to the extent that
certain agreements receivable and
b) Fair value of financial instruments
The fair values of cash and cash
equivalents, restricted cash, accounts
The fair values of the Corporation’s
deposits, loans and credit facilities and
amounts receivable were estimated based
on current market rates for loans of the
same risk and maturities.
Fair value through profit and loss
Cash and cash equivalents
Deposits
Restricted cash
Loans and receivables
Amounts receivable
Other financial liabilities
December 31,
2013
2012
Carrying
Value
Estimated
Fair Value
Carrying
Value
Estimated
Fair Value
17,678
17,678
10,005
5,004
1,324
5,004
1,324
4,990
9,615
10,005
4,990
9,615
23,342
22,750
73,239
71,668
Accounts payable and accrued liabilities
Loans and credit facilities, excl. deferred loans and credit facilities fees
16,759
51,630
16,759
51,554
23,559
99,536
23,559
98,385
68
Fair value measurements recognized
Cash and cash equivalents, deposits, and
During the year ended December 31, 2013
in the consolidated balance sheet are
restricted cash are classified under Level
no transfers were made between the
categorized using a fair value hierarchy
1 of the hierarchy and their fair value
levels in the fair value hierarchy.
that reflects the significance of inputs used
approximates the carrying value due to
in determining the fair values. The three
the short term nature of the financial
c) Capital management
fair value hierarchy levels are as follows:
instruments.
Level 1: Quoted prices (unadjusted) in
active markets for identical assets or
liabilities;
Level 2: Inputs other than quoted prices
included in Level 1 that are observable for
the asset or liability, either directly (i.e.,
as prices) or indirectly (i.e. derived from
prices); and
Level 3: Inputs for the asset or liability
that is not based on observable market
data (unobservable inputs).
The Corporation’s policy is to maintain a
sufficient capital base in order to maintain
The fair values of the Corporation’s
amounts receivable and of loans and credit
investor, creditor and market confidence
facilities were estimated based on current
and to sustain future development of the
market rates for loans of the same risk
and maturities. These are classified as
Level 2 of the hierarchy. Accounts payable
and accrued liabilities are classified under
Level 2 of the hierarchy and their fair
value approximates the carrying value due
to the short term nature of the financial
instruments.
business. The Corporation is not subject to
externally imposed capital requirements.
The Corporation manages its capital
structure and makes adjustments to it
in light of changes in regional economic
conditions and the risk characteristics of
the underlying real estate industry within
that region.
The Corporation considered its capital structure at the following dates to specifically include:
Loans and credit facilities
Shareholders’ equity
The Corporation continues to evaluate the
need to leverage its land assets to secure
sufficient loans and credit facilities to
ensure the Corporation is able to meet its
financial obligations as they come due.
December 31,
2013
50,373
195,483
245,856
2012
97,224
189,590
286,814
69
GENESIS LAND DEVELOPMENT CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
18. JOINT VENTURE
The Corporation formed a joint venture
(“JV”) on April 30, 2010, for the purpose of
acquiring, developing and selling certain
real estate. Refer to note 3 for the effects
reconcile the summarized financial
of change in accounting policy.
information to the carrying amount of the
The following tables summarize the
financial information of the JV and
Corporation’s interest in the JV, which is
accounted for using the equity method.
Assets
Real estate held for development and sale
Amounts receivable
Other operating assets
Cash and cash equivalents
Total assets
Liabilities
Loans and credit facilities
Accounts payable and accrued liabilities
Land development service costs
Total liabilities
Net assets
Corporation’s share of net assets (50%)
Deferred gain and JV profit
Carrying amount on the consolidated balance sheets
Revenues
Residential lot sales
Development land sales
Cost of sales
Residential lots
Development land
General and administrative
Finance income
Earnings being comprehensive income
Corporation’s share of earnings and comprehensive income (50%)
Deferred gain recognized
Deferred margin from JV on lots sold
Amount on consolidated statements of comprehensive income
70
December 31,
2013
2012
January 1,
2012
22,478
25,272
-
656
30,446
30,680
-
-
40,324
18,130
10
-
48,406
61,126
58,464
-
4,228
20,640
24,868
23,538
11,769
(3,875)
7,894
10,036
2,973
11,633
24,642
36,484
18,242
(7,562)
10,680
4,330
4,064
9,260
17,654
40,810
20,405
(10,757)
9,648
Year ended December 31,
2013
2012
36,276
-
36,276
(28,558)
-
(28,558)
(2,034)
368
6,052
3,026
3,688
(676)
6,038
20,266
7,860
28,126
(15,756)
(7,464)
(23,220)
(1,538)
306
3,674
1,837
3,196
(528)
4,505
Cash flows from operating activities
Cash flows (used in) financing activities
Net change in cash and cash equivalents
As at December 31, 2011
Gain deferred on lands sold to JV
Deferred gain recognized
At January 1, 2012
Share of net income in JV
Deferred gain recognized
Deferred margin from JV on lots sold
Distribution received
At December 31, 2012
At January 1, 2013
Share of net income in JV
Deferred gain recognized
Deferred margin from JV on lots sold
Distribution received
At December 31, 2013
Year ended December 31,
2013
29,693
(29,037)
656
2012
2,293
(2,293)
-
Investment
in JV
Income
from JV
20,405
(13,167)
2,410
9,648
1,837
3,195
-
(4,000)
10,680
10,680
3,026
3,688
-
(9,500)
7,894
-
-
-
-
1,837
3,196
(528)
-
4,505
-
3,026
3,688
(676)
-
6,038
The Corporation’s transactions with the
accrued liabilities as at December 31,
Corporation had realized $9,292 of that
JV are limited to the purchase of home
2013 included $6,477 (December 31, 2012
amount as a result of sales to third parties
building lots. During the year ended
- $6,740), related to the purchase of home
(2012 – $5,605). The remaining amount of
December 31, 2013 the JV sold 44 lots
building lots.
(2012 - 21) to Genesis Builders Group Inc.
(“GBG”), a wholly owned subsidiary of the
Corporation, for $8,096 (2012 - $3,880).
The Corporation’s accounts payable and
The Corporation deferred $13,167 when
it contributed its share of land to the JV
in 2010. As at December 31, 2013, the
$3,875 will be realized on future sale and
development of lots and lands by the JV.
71
GENESIS LAND DEVELOPMENT CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
19. SEGMENTED INFORMATION
units with distinct marketing strategies.
Internal lot sales from the land segment
The Corporation operates in two
reportable segments, land development
and home building, which represent
separately managed strategic business
The Corporation evaluates segment
to the home building segment or a limited
performance based on earnings or loss
partnership have been eliminated and are
before income taxes. Inter-segment sales
not included in consolidated results until
are accounted for as if the sale were to
the home is sold to a third party purchaser.
third parties at current market prices.
The income producing business units of the Corporation reported the following activities for the year ended December 31, 2013 and 2012:
Year ended December 31, 2013
Revenues
Cost of sales
Write-down of real estate
Gross margin
Income from JV
Proxy contest costs
G&A, selling & marketing, other expenses (1)
Earnings (loss) before income taxes and
non-controlling interest
Segmented assets
Segmented liabilities
Net assets
Year ended December 31, 2012 (2)
Revenues
Cost of sales
Write-down of real estate
Gross margin
Income from JV
Land Development Segment
Genesis
47,380
(27,902)
(8,185)
11,293
6,038
(2,889)
(6,863)
7,579
221,290
50,050
171,240
LP
105
(10)
(8,097)
(8,002)
-
-
(1,681)
(9,683)
53,596
8,433
45,163
Home
Building Intersegment
Elimination
Segment
63,570
(55,831)
-
7,739
-
-
(7,485)
254
47,338
42,354
4,984
(14,978)
13,795
-
(1,183)
-
-
1,183
-
(8,378)
(4,917)
(3,461)
Total
47,485
(27,912)
(16,282)
3,291
6,038
(2,889)
(8,544)
(2,104)
274,886
58,483
216,403
Total(3)
96,077
(69,948)
(16,282)
9,847
6,038
(2,889)
(14,846)
7,997
313,846
95,920
217,926
Land Development Segment
Genesis
96,042
(57,334)
(18,268)
20,440
4,505
LP
4,778
(3,498)
(14,878)
(13,598)
-
Total
100,820
(60,832)
(33,146)
6,842
4,505
Home
Building Intersegment
Elimination
Segment
Total(3)
39,497
(34,817)
-
4,680
-
(6,370)
(1,690)
42,165
39,110
3,055
(10,857)
129,460
8,396
-
(2,461)
-
(87,263)
(33,146)
9,051
4,505
2,471
(16,217)
-
(2,661)
(6,124)
(6,140)
16
374,341
148,032
226,309
G&A, selling & marketing, other expenses (1)
(10,547)
(1,771)
(12,318)
Earnings (loss) before income taxes and
non-controlling interest
Segmented assets
Segmented liabilities
Net assets
14,398
(15,369)
(971)
272,198
107,005
165,193
66,102
8,057
58,045
338,300
115,062
223,238
(1) Includes other expenses, finance expense and finance income
(2) 2012 information has been restated to reflect the changes due to the adoption of IFRS 11 as summarized in note 3
(3) In view of the current strategic direction, cash and cash equivalents are no longer managed as a corporate asset and are now presented under the relevant segment. The Corporate segment has
therefore been removed.
72
20. RELATED PARTY TRANSACTIONS
Remuneration of the directors and other members of the key management personnel were as follows:
Short-term benefits
Share-based payments
2013
2,848
204
3,052
2012
1,433
190
1,623
Short-term benefits for 2013 included an
for this period during which $4,748
transactions were agreed to under normal
amount of $609 paid out as severance to
of interest and fees were paid to the
commercial terms and conditions.
an-ex CEO of the Corporation.
lender. Of this amount $1,244 relates to
An officer of a lender and significant
shareholder served as a director from
July 12, 2012 until September 4, 2013.
The lender and the Corporation were
consequently considered related parties
2013 and $3,504 relates to 2012. The
related debt was in place prior to the
director assuming office on July 12, 2012
and no new financing or refinancing
occurred subsequent to July 12, 2012. All
The Corporation is the general partner
in four limited partnership arrangements
(note 22) and a 50% partner in the joint
venture (note 18).
73
GENESIS LAND DEVELOPMENT CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
21. COMPARATIVE FIGURES
Limited partnerships 8/9 (LP 8/9):
acquire the Delacour Lands. As a result,
Certain comparative figures have been
reclassified to conform to the current
year’s presentation.
L/P 8/9 holds 1,140 acres of raw land near
Radium, British Columbia. The Corporation
held a purchase right to acquire all LP 8/9
the Corporation completed the transaction
with its own funds and assumed the loan
obligations of LPLP 2007.
22. CONSOLIDATED ENTITIES
units by February 28, 2009, which it did not
The Corporation has no ownership interest
exercise. Therefore, all LP unit holders are
in LPLP 2007. However, as manager of
entitled to share in the profits and losses
LPLP 2007 properties, the Corporation is
Details of each of the limited partnerships
of the development.
The project lands have approval for 272
single-family home sites on 53 acres, and
143 acres have been set aside for a golf
course. Upon achieving and exceeding
a 50% gross return to the LP 8/9 unit
entitled to a management fee of 50% of
the proceeds from the sale of any land
parcels owned by LPLP 2007, provided that
the limited partners receive sale proceeds
equal to 150% of the acquisition cost of
that land parcel.
are as follows:
Limited partnerships 4/5 (LP 4/5):
LP 4/5 holds land held for future
development located east of Calgary in the
Municipal District of Rocky View, adjacent
to the Corporation’s Taralake lands. No
capital repayments are required with
respect to LP 4/5.
The Corporation 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):
LP 6/7 holds land under development
located in Airdrie. All required capital
repayments have been made to unit
holders in LP 6/7.
The Corporation is entitled to management
fees of 10% of the gross proceeds of the
LP 6 offering memorandum payable to the
Corporation as lands and lots are sold. The
Corporation also owns 11.75% of LP 6’s
units and participates proportionately in
the profits of the partnership.
holders, the Corporation is entitled to
LPLP 2007 has a loan amounting to
50% of the remaining profits on the
$21,167 (2012 - $19,481) due to the
single-family lots. The Corporation is
Corporation. The loan is secured by a
also entitled to 100% of the profit on
charge on land held by LPLP 2007.
the golf course, and retains the right to
purchase the balance of the lands at the
conclusion of the project for a nominal
amount. Additionally, the Corporation has
a nominal ownership interest in LP 8 and is
responsible for securing financing for the
project development.
Limited Partnership Land Pool 2007
(LPLP 2007):
On June 29, 2007, LPLP 2007 was created
to raise funds to secure funding for various
land acquisitions. At the conclusion of the
offering on February 28, 2009, LPLP 2007
had raised insufficient funds to close out
the purchase of the lands and settle the
land acquisition loan the entity used to
74
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.
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.)
Joint Venture
Kinwood Communities Inc.
Limited Partnerships
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 GLP9 Inc., GLP9 Subco Inc.
GP GLP8 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
0%
LP RRSP Limited Partnership #2
75
% equity interest as at
December 31,
2013
December 31,
2012
100%
100%
0.0002%
99.9998%
100%
100%
0.0002%
99.9998%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
0.001%
0%
100%
11.75%
0%
0.23%
0%
100%
0%
100%
0%
0%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
0.001%
0%
100%
11.75%
0%
0.23%
0%
100%
0%
100%
0%
0%
0%
GENESIS LAND DEVELOPMENT CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
The following tables summarize the information relating to the Corporation’s subsidiaries that have material non-controlling interests (NCI)
before any intra-group eliminations:
Assets
Real estate held for development and sale
Other operating assets
Cash and cash equivalents
Total assets
Liabilities
Loans and credit facilities
Customer deposits
Accounts payable and accrued liabilities
Due to related parties
Total liabilities
Net assets
Non-controlling interest (%)
Assets
Real estate held for development and sale
Amounts receivable
Other operating assets
Cash and cash equivalents
Total assets
Liabilities
Loans and credit facilities
Customer deposits
Accounts payable and accrued liabilities
Due to related parties
Total liabilities
Net assets
Non-controlling interest (%)
December 31, 2013
LP 4/5
LP 6/7
LP 8/9
LPLP 2007
Total
7,922
-
-
7,922
-
-
-
160
160
7,762
100%
6,615
418
439
7,472
-
-
418
201
619
6,853
88.25%
4,219
33,870
52,626
-
1
-
112
418
552
4,220
33,982
53,596
-
-
-
470
470
3,750
100%
7,843
2
169
21,167
29,181
4,801
100%
7,843
2
587
21,998
30,430
23,166
December 31, 2012
LP 4/5
LP 6/7
LP 8/9
LPLP 2007
Total
7,822
-
-
-
8,212
4,876
210
314
4,530
40,059
-
-
1
-
-
79
60,623
4,876
210
394
7,822
13,612
4,531
40,138
66,103
-
-
3
70
73
-
-
219
189
408
7,749
100%
13,204
88.25%
-
-
3
448
451
4,080
100%
7,798
2
34
19,481
27,315
12,823
100%
7,798
2
259
20,188
28,247
37,856
76
Assets
Real estate held for development and sale
Amounts receivable
Other operating assets
Cash and cash equivalents
Total assets
Liabilities
Loans and credit facilities
Customer deposits
Accounts payable and accrued liabilities
Due to related parties
Total liabilities
Net assets
Non-controlling interest (%)
Revenues
Net earnings (loss) being comprehensive income (loss)
Non-controlling interest (%)
January 1, 2012
LP 4/5
LP 6/7
LP 8/9
LPLP 2007
Total
7,709
-
-
-
10,584
5,248
-
698
6,696
54,537
-
2
2
2
-
32
79,526
5,250
2
732
7,709
16,530
6,700
54,571
85,510
7,694
7,694
-
1
-
1
2
-
-
25
650
675
7,707
100%
15,855
88.25%
-
-
-
444
444
6,256
100%
28
-
17,772
25,494
29,077
100%
Year ended December 31, 2013
LP 4/5
19
12
LP 6/7
265
(1,342)
100%
88.25%
LP 8/9
LPLP 2007
-
(331)
100%
86
(8,022)
100%
Year ended December 31, 2012
29
25
18,867
26,615
58,895
Total
370
(9,683)
Total
5,218
Revenues
Net earnings (loss) being comprehensive income (loss)
Non-controlling interest (%)
LP 4/5
50
43
LP 6/7
5,044
2,027
100%
88.25%
LP 8/9
LPLP 2007
124
-
(2,175)
100%
(15,265)
(15,370)
100%
Cash flows from operating activities
Cash flows used in financing activities
Net increase in cash and cash equivalents
Cash flows from operating activities
Cash flows used in financing activities
Net (decrease) increase in cash and cash equivalents
Year ended December 31, 2013
LP 6/7
5,134
(5,009)
125
LP 8/9
LPLP 2007
-
-
-
33
-
33
Year ended December 31, 2012
LP 6/7
4,292
(4,676)
(384)
LP 8/9
LPLP 2007
-
-
-
47
-
47
Total
5,167
(5,009)
158
Total
4,339
(4,676)
(337)
LP 4/5
-
-
-
LP 4/5
-
-
-
77
GENESIS LAND DEVELOPMENT CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
23. CHANGE IN ACCOUNTING POLICY – RECONCILIATIONS
The following tables summarize the adjustments made to the Corporation’s balance sheets at January 1, 2012 and December 31, 2012, its
statement of comprehensive income (loss) and cash flows for the year ended December 31, 2012.
CONSOLIDATED BALANCE SHEET (In thousands of Canadian dollars)
January 1, 2012
Previously
reported Adjustments As restated
299,916
-
43,451
20,942
2,859
10,850
(a), (b)
(9,404)
9,648
(9,065)
(6)
-
-
290,512
9,648
34,386
20,936
2,859
10,850
378,018
(8,827)
369,191
88,231
7,582
16,415
12,970
16,201
141,399
55,122
4,950
119,776
179,848
56,771
236,619
378,018
(2,165)
-
(2,032)
-
(4,630)
(8,827)
-
-
-
-
-
-
(8,827)
86,066
7,582
14,383
12,970
11,571
132,572
55,122
4,950
119,776
179,848
56,771
236,619
369,191
Assets
Real estate held for development and sale
Investment in joint ventures
Amounts receivable
Other operating assets
Deferred tax assets
Cash and cash equivalents
Total assets
Liabilities
Loans and credit facilities
Customer deposits
Accounts payable and accrued liabilities
Income taxes payable
Land development service costs
Total liabilities
Equity
Share capital
Contributed surplus
Retained earnings
Shareholders’ equity
Non-controlling interest
Total equity
Total liabilities and equity
78
CONSOLIDATED BALANCE SHEET (In thousands of Canadian dollars)
Assets
Real estate held for development and sale
Investment in joint ventures
Amounts receivable
Other operating assets
Cash and cash equivalents
Total assets
Liabilities
Loans and credit facilities
Customer deposits
Accounts payable and accrued liabilities
Income taxes payable
Deferred tax liabilities
Land development service costs
Total liabilities
Equity
Share capital
Contributed surplus
Retained earnings
Shareholders’ equity
Non-controlling interest
Total equity
Total liabilities and equity
December 31, 2012
Previously
reported Adjustments As restated
(a), (b)
271,845
(7,661)
264,184
-
85,230
16,237
10,005
10,680
(11,991)
(4)
-
10,680
73,239
16,233
10,005
383,317
(8,976)
374,341
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
383,317
(5,018)
-
2,250
-
-
(6,208)
(8,976)
-
-
-
-
-
-
(8,976)
97,224
4,352
23,559
4,617
60
18,220
148,032
55,844
5,109
128,637
189,590
36,719
226,309
374,341
79
GENESIS LAND DEVELOPMENT CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS (In thousands of Canadian dollars except per share amount)
Year ended December 31, 2012
Previously
reported Adjustments As restated
51,933
49,389
39,448
812
(a), (c)
(8,193)
(3,929)
-
-
43,740
45,460
39,448
812
141,582
(12,122)
129,460
(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
4,458
2,544
-
-
7,002
(5,120)
4,505
770
-
-
770
155
(138)
(17)
-
-
-
-
-
-
(19,954)
(36,150)
(31,159)
(33,146)
(120,409)
9,051
4,505
(9,294)
(3,948)
(1,039)
(14,281)
(725)
724
(2,660)
(2,661)
(4,086)
(6,747)
(15,608)
8,861
0.20
Revenues
Residential lot sales
Development land sales
Residential home sales
Other revenue
Cost of sales
Residential lots (1)
Development lands (1)
Residential homes (1)
Impairment of real estate held for development and sale (1)
Gross margin
Equity income from joint venture
General and administrative (1)
Selling and marketing (1)
Other expenses
Operating earnings from continuing operations
Finance income
Finance expense
Earnings before income taxes
Income taxes
Net earnings being comprehensive loss
Attributable to non-controlling interest
Attributable to equity shareholders
Net earnings per share - basic and diluted
(1) Certain comparative figures have been reclassified to conform to the current year’s presentation.
80
CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands of Canadian dollars except per share amount)
Operating activities
Cash receipts from residential lot and development land
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
Incomes taxes paid
Investing activities
Acquisition of property and equipment
Change in restricted cash
Distribution received from joint venture
Proceeds on disposal of property and equipment
Financing activities
Advances from loans and credit facilities
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 cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Year ended December 31, 2012
Previously
reported Adjustments As restated
61,933
40,545
6,856
(51,360)
(37,909)
(13,079)
862
(9,520)
(1,672)
(449)
(3,724)
-
36
(4,137)
(a), (d)
(12,856)
-
-
9,800
(954)
3,026
(138)
-
(1,122)
-
(6)
4,000
-
3,994
102,303
(12,362)
(87,396)
9,490
(6,043)
(4,444)
544
4,964
(845)
10,850
10,005
-
-
-
(2,872)
-
-
-
49,077
40,545
6,856
(41,560)
(38,863)
(10,053)
724
(9,520)
(2,794)
(449)
(3,730)
4,000
36
(143)
89,941
(77,906)
(6,043)
(4,444)
544
2,092
(845)
10,850
10,005
81
GENESIS LAND DEVELOPMENT CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
a) This change in accounting policy
in the net earnings or comprehensive
The Corporation closed the sale of a
reduced total assets, total liabilities,
income of the Corporation as a result
121.91 acre industrial site (Acheson)
revenues and expenses but had no
of adoption of IFRS 11.
located in Parkland County, west of
Edmonton, Alberta for $14,000 on February
28, 2014. The proceeds from the sale
were used to retire approximately $6.5
million of related property debt and the
balance was used for general corporate
purposes.
impact on the Corporation’s net assets,
net earnings, cash flows or earnings
per share.
d) The changes made to the consolidated
balance sheets and statements of
comprehensive income due to the
b) Equity accounting presents the net
adoption of IFRS 11 has resulted in
assets of the joint venture in a single
reclassification of various amounts on
line “Investment in Joint Venture”.
the consolidated statements of cash
The change from proportionate
flows but has no impact on actual cash
consolidation therefore results in the
flows of the Corporation.
reduction of various asset and liability
line items. There has been no change
in the Corporation’s shareholders’
24. SUBSEQUENT EVENTS
equity as a result of adoption of IFRS
The Corporation was named as a co-
11.
c) The changes made to the consolidated
statements of comprehensive income
has resulted in the removal of various
line items that were consolidated
under the proportionate method and by
bringing in the Corporation’s share of
the net income of the joint venture into
a single line, “Equity income from joint
venture”. There has been no change
defendant in a statement of claim filed on
May 10, 2011 in the province of Ontario
for $10,700 plus punitive damages
(the “Action”). The Action against the
Corporation has been discontinued
pursuant to a court order in the Action
dated February 12, 2014 and issuance of a
signed release from all claims relating to
the Action by the plaintiff. Refer to note 16
(a) for further details.
82
CONTACT
INFORMATION
TRANSFER AGENT
CORPORATE COUNSEL
Computershare Trust Company of Canada
600, 530 - 8th Avenue SW
Calgary, Alberta T2P 3S8
STOCK EXCHANGE
Toronto Stock Exchange
Stock Symbol - GDC
AUDITORS
MNP LLP
1500, 640 - 5th Avenue SW
Calgary, Alberta T2P 3G4
Norton Rose Fulbright Canada LLP
Legal Counsel
Suite 3700, 400 - 3rd Avenue SW
Calgary, Alberta T2P 4H2
CORPORATE OFFICE
Genesis Land Development Corp.
7315 - 8th Street NE
Calgary, Alberta T2E 8A2
Main 403 265 8079 Fax 403 266 0746
Email genesis@genesisland.com
83
GENESIS LAND DEVELOPMENT CORP.
7315 - 8th Street NE
Calgary, Alberta, Canada T2E 8A2
Main 403 265 8079 Fax 403 266 0746
www.genesisland.com