Annual Report 2016
2016 Highlights
$88.4M $18.9M
Free Cash Flow
Revenue
Appointed to manage and operate
the Common Business Identifier
Program and the Business Registration
Saskatchewan Program.
33.4%
EBITDA
Margin
37.9%
Adjusted EBITDA
Margin
Launched new system for the Corporate
Registry, providing a more convenient
service to search, register and maintain
corporate entities in Saskatchewan.
$0.89
Earnings
Per Share
(basic)
$0.80
Annual Dividend
Per Share
Completed the integration of ESC
Corporate Services Ltd.
Refreshed the ISC and ESC brands.
2016 Revenue by Line of Business
Land Titles Registry
Land Titles Registry
Geomatics
Geomatics
Land Surveys Directory
Land Surveys Directory
Personal Property Registry
Personal Property Registry
Corporate Registry
Corporate Registry
Services
Services
Other
Other
15%
15%
10%
10%
11%
11%
2%
2%
3%
3%
1%
1%
58%
58%
About Us
Headquartered in Canada, ISC is the leading provider of registry and information management
services for public data and records. Throughout our history we have delivered value to our
clients by providing solutions to manage, secure and administer information through our
Registry and Services segments.
ISC acquired ESC Corporate Services Ltd. (ESC) in 2015, followed by Enterprise Registry
Solutions (ERS) in early 2017, both of which operate as wholly owned subsidiaries of ISC.
ESC provides services to law firms, financing companies, financial institutions, legal
professionals and others to fulfill a wide variety of clients’ public records due diligence,
filings and corporate supply requirements in connection with public business registries in
Canada and certain other countries. ESC has offices in Toronto, ON and Montreal, QC.
Located in Dublin, Ireland, ERS is a provider of registry technology solutions and expertise,
specializing in the implementation and support of systems related to the corporate registry
domain. Its suite of registry software solutions serves 33 register types and supports 20
registries in Europe, North America and Asia.
Contents
About Us ........................................................................ 1
Management’s Discussion & Analysis ............................... 7
Our Story ....................................................................... 2
Consolidated Financial Statements ................................ 4 1
Our Brand ...................................................................... 3
Board of Directors & Officers ........................................ 70
Letter From Our Chair ..................................................... 4
Corporate Information ................................................... 7 1
Letter From Our CEO ...................................................... 5
1
2016 ISC® Annual Report
Our Story
The world revolves around information, and ISC is at the
forefront of information management.
We are the partner of choice for governments and private sector organizations seeking
solutions across the information management spectrum.
We understand it's not just the information
that matters. It’s what that information
can do for you.
We have built a legacy of trust with those we serve. Our
operating philosophy is characterized by a focus on people:
the families, entrepreneurs, and professionals who depend
on us as an entrusted manager and administrator of valuable
information. This approach has fostered a rich, customer
service-driven culture, an industry-leading service offering,
and has positioned ISC as a significant contributor to
our communities.
We help our clients optimize how they do business by providing
service and technology solutions to secure, manage and
administer their most valuable information. These capabilities
are anchored by an industry-leading customer experience, and
our commitment to providing personal, professional service
and support – in-person and online.
We are committed to putting the right
information, in the right hands, at the
right time.
2
2016 ISC® Annual Report Our Brand
The New Look of ISC
In 2016, we set out to differentiate ourselves among
our competitors by creating a brand specific enough to
help articulate our current state – that ISC is more than
a registry company – yet broad enough to accommodate
our future direction.
Our new brand represents ISC as an experienced and
trusted organization founded on a complete understanding
of the needs of government, but confident and ambitious
in its outlook on the future and its ability to serve a much
wider audience.
Our Logo
The square represents ISC’s heritage – whether it’s seen as
boundaries, a parcel of land, four walls with roof overhead,
or a window. The square also represents stability. The
strong bold lines speak to strength, which represents ISC’s
role as a protector and steward of valuable information.
Our Tagline
The information managed by ISC is inherently valuable.
Its potential depends on accurate and timely delivery to
the people who need it, and its protection is of paramount
importance to the organizations who have entrusted ISC
with its care. The line also creates a sense of trust and
adds a personal element to the services and expertise
we provide, with ‘in the right hands’.
Our Pillars
A Reliable Foundation: There’s a responsibility that comes
along with being a steward of information that people value
most. That’s why we hold ourselves to a higher standard,
treating security, accuracy and integrity as our cost of entry.
We are reliable.
A Dedicated Spirit: ISC invests in people, providing the
industry’s highest level of personal service to guarantee
the best customer experience. We are dedicated.
An Enterprising Outlook: We don’t specialize in just one
area of the information management spectrum – we
specialize in the spectrum itself. We are enterprising.
3
2016 ISC® Annual Report
Letter From Our Chair
Joel Teal
Chair, Board of Directors
In my letter to you last year, I noted that 2015 had been a tough
year for businesses globally. This theme continued into 2016.
ISC continued to meet this challenge head-on and performed
admirably at a time when businesses in other sectors in
our home province of Saskatchewan have been faced with
substantial declines in revenue and with tough decisions.
by his professional and committed
executive team: Ken Budzak, Kathy
Hillman-Weir and Shawn Peters. It is this
team that will continue to forge the path
ahead, ensuring that we never lose sight
on delivering shareholder value from
our existing business while pursuing
suitable new growth opportunities in
Canada and internationally.
Yours sincerely,
Joel Teal
Chair, Board of Directors
There is no question that our primary
commitment continues to be to the
Province of Saskatchewan, and the
customers we serve on its behalf.
Saskatchewan is at the heart of ISC and
its success thus far, complemented by
our Services business in the form of our
wholly owned subsidiary, ESC Corporate
Services Ltd. We will, of course,
continue to focus on the growth of our
business, but not growth at any cost.
Any opportunities we pursue must be
strategically beneficial to the Company
and ultimately accretive to shareholders.
In the past, I have commented on the
return to shareholders in the form of the
dividend. At the time of our Initial Public
Offering (IPO), our annual dividend was
set at $0.80, where it has remained.
When we established the annual
dividend in 2013, it was done with
flexibility in mind; that is, the flexibility
to weather any economic difficulties
that we could face in the future. This
is the path we will continue to follow.
Since the IPO, ISC has distributed
$45 million in dividends to shareholders
and, while our free cash flow has
declined marginally year-over-year due
to economic conditions, we continue
to generate healthy free cash flow as
demonstrated by free cash flow of
$18.9 million in 2016.
As far as total returns are concerned,
I am very pleased to report that,
since the IPO, ISC has had a total
return of 44 per cent (this assumes a
reinvestment of the dividend). When
compared to the TSX (42 per cent)
and S&P 500 (51 per cent) over the
same time period, this represents
a solid performance. Over the last
twelve months, our performance has
been particularly good, with a return
of 48.6 per cent, compared to the TSX
(33 per cent) and S&P 500 (28 per cent)
over the same time period. History is
often the best judge, and it is clear that
our strategy has served us well so far.
The year 2016, much like 2015, 2014
and 2013, was a year of steady progress
for your Board and the Company. This
progress would not have been possible
without the leadership of our President
& CEO, Jeff Stusek, ably supported
4
2016 ISC® Annual Report Letter From Our CEO
Jeff Stusek
President and Chief Executive Officer
As our Chair noted, 2016 was another year of economic
challenge. This naturally had an impact on our consolidated
results, particularly on our core Registries business. Fewer
housing starts and completions, compared to 2015, resulted
in lower land transfer volumes, fewer mortgage registrations
and title searches.
However, the Saskatchewan Corporate
Registry and Saskatchewan Personal
Property Registry continued to perform
well year-over-year. As important, ESC
Corporate Services Ltd., our Services
business, started to demonstrate its
value with a meaningful contribution to
our consolidated results as well as on a
quarterly basis in 2016.
Similar to 2015, ISC achieved healthy
EBITDA and adjusted EBITDA margins
in 2016, although slightly lower than
the previous year. It is important to
note that, despite economic conditions,
the Company posted its fourteenth
consecutive quarter of profitability as at
December 31, 2016. This is the result of
our continued focus on our customers
as well as our costs.
On the customer front, I am pleased
to report that the results of our
biennial Registries business customer
satisfaction survey were highly
encouraging and comparable to
previous years. In 2016, approximately
80 per cent of customers rated ISC 8, 9
or 10 out of 10 compared to 81 per cent
in 2015. What is even more encouraging
to me is that ISC ranks among top
customer service providers. Compared
to those companies, on average we
scored 4 out of 5 on the provision of
products or services in a timely manner,
offering excellent customer service
in person or over the telephone, and
offering excellent online tools and
services for customers. These results
are a testament to our people who, day-
in, day-out, strive to provide the best
customer service. These results would
not be possible without their dedication.
When ISC transitioned from a Crown
corporation to a publicly traded
company in 2013, one of my goals was
to ensure we could continue to build
on a long history of excellent customer
service. History has now shown that
we have achieved this goal, but we will
always strive to improve wherever we
can. This is critical to ensure not only
that we surpass our Master Service
Agreement service levels with our
existing client, the Government of
Saskatchewan, but demonstrate to
potential clients that ISC is committed
to providing the best service to
our customers.
Customer satisfaction is not only about
the personal interaction we have with
the customers we serve, it is also about
the other interactions we have, such as
the online services we provide. In July
2016, we successfully launched our
new technology platform to support
the Saskatchewan Corporate Registry.
As customers continue to adapt to
the new system, I would like to thank
them for their support. Any transition
can be difficult, but the support of our
customers has been overwhelming and
is reflected positively in the results of
our biennial customer satisfaction survey.
We also undertook a review of our
brands to address the evolution of our
business and, in November 2016, ISC
and ESC launched their new brand
identities. In both cases, we have
brand identities which are well-known
and highly respected. The new brand
identities help articulate the current
state of each brand, yet are broad
enough to accommodate our future
5
2016 ISC® Annual Report position to compete as governments
and private sector organizations explore
ways to improve the delivery of their
registry services. This acquisition quite
neatly ties into the third avenue of our
overall growth strategy and is a clear
reflection of it.
Going forward, you can continue to
expect much the same from ISC. We
intend to stay the course with our
focus on our existing business while
looking for opportunities that position
our Company for the future. Of course,
none of what we have achieved, or hope
to achieve, would be possible without
the dedicated spirit and enterprising
outlook of our people. I would like to
convey my wholehearted thanks to
them and to all our stakeholders for
their support in 2016.
Yours sincerely,
Jeff Stusek
President and Chief Executive Officer
direction. Most important, ISC’s new tag
line “Information in the right hands”
fulfills a very important purpose – it
quickly and efficiently sums up what
our company is all about. It expresses
confidence in our ability to hold the
information we are entrusted to manage
– with security, accuracy and integrity.
Our brand will continue to evolve with
us over time. Proud of where we are
from, we are equally proud of how we
have evolved.
Growth is quite naturally at the forefront
of my mind at all times. At the time
of the IPO, we noted that there were
three avenues for growth. The first is
to extend current services to other
jurisdictions and private industries;
the second is to add new services
or features to expand business from
existing clients, and the third is to
acquire companies with competencies
or operations in our industry. Our
strategy for growth has not changed,
and we have stuck to it with purpose.
As I have always said, the first avenue
for growth has a long sales cycle
and a variety of complex factors to
consider, but we are actively pursuing
opportunities where they exist in
Canada and internationally.
We have, however, enjoyed success
in the other two avenues. In 2016,
we executed an amendment to the
Master Service Agreement with the
Government of Saskatchewan for
ISC’s continued management and
operation of the Common Business
Identifier Program and the Business
Registration Saskatchewan Program
until 2033. This demonstrates that the
Province continues to trust in our ability
to manage and operate registries and
programs effectively and efficiently
on its behalf. More important, this
service makes it easier to do business
in Saskatchewan.
On the acquisitions front, we
successfully completed the integration
of ESC Corporate Services, which we
acquired on October 1, 2015. In my
letter to you last year, I mentioned we
would be investing in human capital in
this business to position us for future
growth in 2017 and beyond. During
the course of 2016, we strengthened
the leadership team at ESC with the
addition of a Vice President, Business
Development and Director of Program
Development. ESC continues to be led
by Chris Valentine, the former owner
of ESC, and I look forward to reporting
on the results from these investments
during the course of 2017.
Subsequent to the end of the year,
we announced the acquisition of
Enterprise Registry Solutions (ERS), a
global leader in the development and
implementation of registry technology.
As I commented at the time, this is a
strategic acquisition and one which
I believe puts us in a much stronger
6
2016 ISC® Annual Report Management’s Discussion & Analysis
For the Fourth Quarter and Year Ended December 31, 2016
Table of Contents
Introduction
1
2
3
4
5
6
7
8
9
Responsibility for Disclosure
Caution Regarding Forward-Looking Statements
Consolidated Highlights
Business Overview
Business Strategy
Results of Operations
Summary of Consolidated Quarterly Results
Financial Measures and Key Performance Indicators
10 Outlook
11
12
13
Liquidity and Capital Resources
Share-Based Compensation Plan
Commitments
14 Off-Balance Sheet Arrangements
15
16
17
18
19
20
21
22
Related Party Transactions
Critical Accounting Estimates
Changes in Accounting Policies
Financial Instruments and Financial Risks
Business Risks and Risk Management
Internal Controls over Financial Reporting
Disclosure Controls and Procedures
Non-IFRS Financial Measures
8
8
8
10
12
17
17
30
31
32
33
35
36
36
36
36
37
37
37
39
39
40
7
2016 ISC® Annual Report | Management’s Discussion and Analysis 1 Introduction
This Management’s Discussion and Analysis (“MD&A”) for
Information Services Corporation (“ISC”) discusses our financial
and operating performance, business indicators and outlook
from management’s viewpoint. This document should be read
in its entirety and is intended to complement and supplement
ISC’s Consolidated Financial Statements for the years ended
December 31, 2016, and 2015. Additional information,
including our Annual Information Form for the year ended
December 31, 2016, is available on the Company’s website at
www.company.isc.ca and in the Company’s profile on SEDAR
at www.sedar.com.
2 Responsibility for Disclosure
This MD&A contains information from our audited Consolidated
Financial Statements (the “Financial Statements”) for the
years ended December 31, 2016, 2015, and 2014, prepared in
accordance with International Financial Reporting Standards
(“IFRS”), as issued by the International Accounting Standards
Board. The financial information that appears throughout our
MD&A is consistent with the Financial Statements.
Unless otherwise noted, or unless the context indicates
otherwise, “ISC”, the “Company”, “we”, “us” and “our” refer
to Information Services Corporation, its subsidiaries and its
predecessors. Any statements in this MD&A made by, or on
behalf of, management are made in such persons’ capacities
as officers of ISC and not in their personal capacities.
ISC presents its Financial Statements in Canadian (“CAD”)
dollars. In this MD&A, all references to “$” or “dollars” are to
Canadian dollars and amounts are stated in Canadian dollars
unless otherwise indicated.
This MD&A is current as of March 14, 2017. The Board of
Directors (“Board”) carries out its responsibility for review of
this disclosure primarily through the Audit Committee, which
is comprised exclusively of independent directors.
The Audit Committee reviews and approves the fiscal year-end
MD&A and recommends it to the Board for approval. Interim
MD&As are reviewed and approved by the Audit Committee.
Other key responsibilities of the Audit Committee include
reviewing our existing internal control procedures and planned
revisions to those procedures, and advising the directors on
auditing matters and financial reporting issues.
This MD&A contains forward-looking statements and should
be read in conjunction with the “Caution Regarding Forward-
Looking Statements” section below.
3 Caution Regarding Forward-
Looking Statements
Certain statements in this MD&A about ISC’s current and future
plans, expectations and intentions, results, levels of activity,
performance, goals or achievements, or any other future events
or developments constitute forward-looking statements. The
words “may”, “will”, “would”, “should”, “could”, “expect”, “plan”,
“intend”, “trend”, “indicate”, “anticipate”, “believe”, “estimate”,
“predict”, “project”, “targets”, “strive”, “strategy”, “continue”,
“likely” or “potential”, or the negative or other variations of these
words or other comparable words or phrases, are intended
to identify forward-looking statements. By their nature, these
statements involve assumptions, known and unknown risks and
uncertainties and other factors, which may cause actual results,
levels of activity and achievements to differ materially from
those expressed or implied by such statements.
Discussions containing forward-looking statements may be
found in this MD&A. Forward-looking statements including,
without limitation, those contained in the “Outlook” section
hereof, management’s expectations, intentions and beliefs
concerning the registry services, corporate services and
information products industry, its competitive landscape,
the general economy and the real estate market, prices
for agricultural commodities, oil and potash, fluctuations
in the Canadian dollar, statements regarding the future
financial position or results of ISC, the long-term impact of
certain payments of the Government of Saskatchewan,
seasonality, ISC’s business and service offerings outside of
Saskatchewan and the competitiveness of such businesses
and service offerings, business strategy, customer growth
and diversification, investment in human capital, dividend
expectations, creation of shareholder value, recent and
proposed acquisitions, growth opportunities, development
and completion of projects, capital and operating expectations,
access to financing on satisfactory terms, debt levels, free
cash flow, expectations for meeting future cash requirements,
potential litigation, projected costs, and plans and objectives of
or involving ISC are based on estimates and assumptions made
by us in light of ISC’s experience and perception of historical
trends, current conditions and expected future developments,
as well as other factors that ISC believes are appropriate and
reasonable in the circumstances. There can be no assurance
that such estimates and assumptions will prove to be correct.
Certain assumptions with respect to the Canadian economy
and, in particular, the Saskatchewan, Ontario, and Quebec
economies, the impact of commodity prices, such as agricultural
commodities, oil and potash and the value of the Canadian
dollar on the Saskatchewan economy, consumer confidence,
8
2016 ISC® Annual Report | Management’s Discussion and Analysis interest rates, level of unemployment, inflation, real estate
market in Saskatchewan, claim liabilities, income taxes, our
ability to attract and retain skilled staff, the compensation and
benefits that will be paid or provided to employees and our
level of customer service, as well as goodwill and intangibles,
are material factors in connection with our forward-looking
statements and management’s expectations.
Many factors could cause actual results, levels of activity,
performance or achievements, or future events or
developments to differ materially from those expressed or
implied by the forward-looking statements, including, without
limitation, the following factors:
• potential disagreements with the Government of
Saskatchewan;
•
ISC’s limited ability to set fees;
•
legislative changes that affect our business;
• the Canadian economy and, in particular, the Saskatchewan
economy, including conditions within the real estate market,
inflation, interest rate levels, unemployment levels and
consumer behaviour;
• the level of search and registration activities, principally
as related to the Land, Personal Property and Corporate
Registries in Saskatchewan (collectively, the “Saskatchewan
Registries”);
• reliance on key personnel;
• our ability to execute our growth strategy, including the ability
to complete and integrate new acquisitions and to secure
contracts to provide new service offerings;
• our ability to realize growth opportunities, including the
potential benefits that are anticipated to result from new
acquisitions or service offerings we pursue from time to time;
• our ability to generate revenue and effectively manage
costs in our Services segment, including our reliance on
key customers;
• any undisclosed liabilities acquired pursuant to past or
future acquisitions;
• any compromise to the integrity or security of our
information assets;
• our reliance on information technology systems or a
material disruption in our computer systems;
• our reliance on third-party service providers or other
contractors under key contractual arrangements;
• competition for service offerings (other than our exclusive
service offerings to the Government of Saskatchewan);
• our ability to obtain future financing;
• our insurance may not provide adequate coverage;
•
litigation and tax matters;
• our liability to the Government of Saskatchewan under the
Master Service Agreement (“MSA”) is unlimited, except in
certain specified circumstances;
• any adverse changes in labour relations;
• any failure to protect ISC’s intellectual property rights;
• the potential for a volatile market price for our Class A Limited
Voting Shares (“Class A Shares”); and
• our ability to pay dividends, which is dependent on our ability
to generate sufficient income and cash flow.
These factors should be considered carefully. We caution that
the foregoing listing of important assumptions and factors is
not exhaustive. Other events or circumstances could cause
actual results to differ materially from those estimated or
projected and expressed in, or implied by, these forward-looking
statements. The purpose of the forward-looking statements
is to provide the reader with a description of management’s
expectations regarding ISC’s financial performance and may not
be appropriate for other purposes. Readers should not place
undue reliance on forward-looking statements made herein.
Furthermore, unless otherwise stated, the forward-looking
statements contained in this MD&A are as of the date of this
MD&A, and we have no intention and undertake no obligation
to update or revise any forward-looking statements, whether as
a result of new information, future events or otherwise, except
as required by law. The forward-looking statements contained in
this MD&A are expressly qualified by this cautionary statement.
Market and Industry Data
We have obtained some of the market and industry data
presented in this MD&A through market research, publicly
available information, reports of governmental agencies, and
industry publications and surveys, including various forecasts.
While the Company’s management generally believes such
market and industry data to be reliable, the Company has
not verified such market and industry data through other
independent sources or other means.
9
2016 ISC® Annual Report | Management’s Discussion and Analysis 4 Consolidated Highlights
4.1 Fourth Quarter Consolidated Highlights
• Revenue was $21.2 million for the three months ended
December 31, 2016, a decrease of 6.1 per cent, compared to
$22.6 million for the three months ended December 31, 2015.
• EBITDA (earnings before interest, taxes, depreciation and
amortization expense) for the fourth quarter of 2016 was
$6.8 million compared to $8.2 million in the same quarter of
last year, a decrease of $1.4 million.
• The EBITDA margin for the fourth quarter of 2016 was
32.2 per cent compared to 36.3 per cent in the fourth quarter
of 2015.
• Adjusted EBITDA was $7.3 million for the fourth quarter 2016
compared to $8.6 million in the same quarter last year, with
an adjusted EBITDA margin of 34.6 per cent for the quarter
compared to 38.2 per cent in the fourth quarter of 2015.
EBITDA was adjusted for stock-based compensation expense
or income, stock option expense, transactional gains and
losses on assets, and acquisition and integration costs.
• Net income and total comprehensive income for the three
months ended December 31, 2016, was $2.9 million, or $0.17
per basic and diluted share. In the fourth quarter of 2015, net
income was $4.6 million, or $0.26 per basic and diluted share.
• On November 2, 2016, our Board declared a quarterly cash
dividend of $0.20 per Class A Share, payable on or before
January 15, 2017, to shareholders of record as of
December 31, 2016.
4.2 Year-End Consolidated Highlights
• Revenue was $88.4 million for the year ended December 31,
2016, an increase of 12.8 per cent compared to $78.3 million
for the year ended December 31, 2015.
• EBITDA for the year ended December 31, 2016, was
$29.5 million compared to $28.4 million for the year ended
December 31, 2015, an increase of $1.1 million.
• Our EBITDA margin for the year ended December 31, 2016,
was 33.4 per cent compared to 36.2 per cent in the year
ended December 31, 2015.
• Adjusted EBITDA was $33.5 million for the year ended
December 31, 2016, compared to $30.4 million in the same
period last year, with an adjusted EBITDA margin of 37.9 per
cent for the year ended December 31, 2016, compared
to 38.8 per cent in the same period of 2015. EBITDA was
adjusted for stock-based compensation expense or income,
stock option expense, transactional gains and losses on
assets, and acquisition and integration costs.
• Net income and total comprehensive income for the year
ended December 31, 2016, was $15.5 million or $0.89 per
basic share and $0.87 per diluted share. For the year ended
December 31, 2015, net income was $15.9 million or $0.91 per
basic and $0.90 per diluted share.
• On February 19, 2016, and April 6, 2016, the Company
subscribed to additional shares of Dye & Durham Corporation,
formerly OneMove Technologies Inc. (“Dye & Durham”)
and contributed additional capital of $990 thousand and
$215 thousand, respectively, representing its pro rata share
of an equity raise by Dye & Durham. These investments
maintained the Company’s 30 per cent ownership in Dye &
Durham and the funds were used to finance certain growth
activities of the company.
• On March 7, 2016, we announced that, with effect from
December 1, 2015, the Master Service Agreement (“MSA”) was
amended and a Programs Operating Agreement was entered
into between the Government of Saskatchewan and ISC.
Under the terms of this new agreement, ISC was appointed
to manage and operate the Common Business Identifier
Program and the Business Registration Saskatchewan
Program for the same term as the MSA. The Province
of Saskatchewan will pay ISC an annual operating fee of
$825 thousand.
• On July 11, 2016, ISC launched its new system for the
Corporate Registry, providing a more convenient service
to search, register and maintain corporate entities in
Saskatchewan.
• Successfully completed the integration of ESC Corporate
Services Ltd. (“ESC”).
• On July 25, 2016, ISC announced that the membership of the
Saskatchewan Government and General Employees’ Union
Local 2214 ratified a new collective agreement with respect
to its in-scope employees. The new four-year agreement,
ending September 30, 2019, includes annual wage increases
effective October 1 of each year, consisting of 2.0 per cent
retroactive to 2015, 1.75 per cent in 2016, 1.75 per cent in 2017
and 2.0 per cent in 2018.
• Refreshed the ISC and ESC brands.
10
2016 ISC® Annual Report | Management’s Discussion and Analysis 4.3 Subsequent Events
• On January 23, 2017, the Company announced that it had
successfully completed the acquisition of all of the issued
and outstanding common shares of Enterprise Registry
Solutions Ltd. (“ERS“), a global leader in the development
and implementation of registry technology. This
acquisition enhances ISC’s core registry offering by adding
leading registry technology solutions and consultancy
services. The Company completed the transaction with
CAD$14.0 million of the purchase price paid on closing
of the transaction and up to €5.0 million in consideration
is contingent on the retention of existing leadership and
realization of future business. The purchase price was
financed through a combination of $4.0 million in cash
and the balance drawn down from our existing credit
facility, pursuant to the September 28, 2015, amended
and restated Credit Facilities. The acquisition of ERS is not
expected to be immediately accretive to ISC’s earnings
per share in 2017.
• On March 14, 2017, our Board declared a quarterly cash
dividend of $0.20 per Class A Share, payable on or
before April 15, 2017, to shareholders of record as of
March 31, 2017.
Consolidated Revenue
for the year ended December 31,
(CAD$ millions)
.
5
0
8
2014
.
3
8
7
2015
.
4
8
8
2016
Consolidated EBITDA1 and Adjusted Consolidated EBITDA1
for the year ended December 31,
(CAD$ millions)
EBITDA
Adjusted EBITDA
37.6%
39.2%
38.8%
36.2%
33.4%
37.9%
.
2
0
3
6
.
1
3
.
4
8
2
.
4
0
3
.
5
9
2
.
5
3
3
2014
2015
2016
1 EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBITDA margin are not
recognized as measures under IFRS and do not have a standardized meaning
prescribed by IFRS and, therefore, they may not be comparable to similar
measures by other corporations. Refer to section “Non-IFRS Financial Measures”.
Note: Percentages expressed represent the EBITDA and adjusted EBITDA margin
percentages, respectively.
Consolidated Free Cash Flow
for the year ended December 31,
(CAD$ millions)
.
9
3
2
2014
5
.
1
2
2015
.
9
8
1
2016
90.0
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
11
2016 ISC® Annual Report | Management’s Discussion and Analysis 4.4 Select Consolidated Financial Information
The select annual financial information set out for the years ended December 31, 2016, 2015, and 2014, is derived from the
Company’s Consolidated Financial Statements and has been prepared on a consistent basis. In the opinion of the Company’s
management, such financial data reflects all adjustments necessary for a fair presentation of the results for those periods. It should
be noted that the 2016 results include a full financial year of results for ESC which was acquired on October 1, 2015, compared to
2015, which only included results for ESC for the fourth quarter.
(thousands of CAD dollars)
Revenue
Net income and total comprehensive income
EBITDA 1
Adjusted EBITDA 1
EBITDA margin (% of revenue) 1
Adjusted EBITDA margin (% of revenue) 1
Free cash flow 1
Dividend declared per share
Earnings per share, basic 2
Earnings per share, diluted 2
Total assets
Total non-current liabilities
2016
$ 88,375
15,503
$ 29,529
33,454
33.4%
37.9%
18,865
0.80
0.89
0.87
$
$
2016
131,321
$
$ 25,637
Year Ended December 31,
2014
2015
$
78,318
15,917
$ 28,364
30,386
36.2%
38.8%
21,489
0.80
0.91
0.90
$
$
$ 80,459
18,360
$ 30,240
31,578
37.6%
39.2%
23,914
0.80
1.05
1.05
$
$
As at December 31,
2014
2015
$
$
136,277
27,345
$ 109,536
10,417
$
1 EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBITDA margin and free cash flow are not recognized as measures under IFRS and do not have a standardized meaning
prescribed by IFRS and, therefore, they may not be comparable to similar measures by other corporations. Refer to section “Non-IFRS Financial Measures”.
2 The calculation of earnings per share was based on net income after tax and the weighted average number of shares outstanding during the period.
5 Business Overview
Headquartered in Canada, ISC is the leading provider of registry
and information management services for public data and
records. Throughout our history, we have delivered value to our
clients by providing solutions to manage, secure and administer
information through our Registries and Services segments.
In 2013, ISC made the transition from a provincial Crown
corporation, owned by the Government of Saskatchewan, to
a publicly traded company with shares that began trading on
July 9, 2013, on the Toronto Stock Exchange under the
symbol “ISV”.
ISC operates two reportable segments, defined by their primary
type of service offerings, namely Registries and Services. The
balance of our corporate activities and shared services functions
are reported as Corporate.
Our registries business involves the provision of registry and
information services and software solutions to governments
and private sector organizations. We work with our clients to
support their policies and execute procedures to ensure the
integrity of the data, manage the information technology, data
management and authentication processes.
Our services business includes our wholly owned subsidiary,
ESC Corporate Services Ltd. (“ESC”), which was acquired
October 1, 2015. ESC provides services to law firms,
corporations, financial institutions and others to fulfill a wide
variety of clients’ public records due diligence, filings and
corporate supply requirements in connection with public
business registries in Canada and certain other countries.
ESC has offices in Toronto, ON and Montreal, QC.
In addition, ISC also has an investment in Dye & Durham
(formerly OneMove Technologies Inc.). On September 2, 2015,
ISC completed its investment of 30 per cent of the issued and
outstanding voting common shares of Dye & Durham. On
February 19, 2016, and April 6, 2016, the Company contributed
additional capital representing its pro rata share of equity
raises by Dye & Durham, maintaining ISC’s 30 per cent
ownership interest.
Subsequent to the end of this reporting period, ISC acquired
Enterprise Registry Solutions Ltd. (“ERS”) in January 2017, which
operates as a wholly owned subsidiary. With offices in Dublin,
Ireland, ERS is a provider of registry technology solutions and
expertise, specializing in the implementation and support of
12
2016 ISC® Annual Report | Management’s Discussion and Analysis
systems related to the corporate registry domain. Its suite
of registry software solutions serves 33 register types and
supports 20 registries in Europe, North America and Asia.
As a subsequent event, ERS is not part of the reporting period
for the year ended December 31, 2016, but is included to ensure
a full understanding of our business. For more information on
ERS, please refer to our latest Annual Information Form available
on www.sedar.com.
ISC continues to examine and pursue growth initiatives in
Canada and internationally, including other potential strategic
acquisitions and opportunities to provide registry and other
services in additional jurisdictions.
5.1 Segment Information
Operating segments are identified as components of a company
where separate discrete financial information is available for
evaluation by the chief operating decision maker regarding
allocation of resources and assessment of performance.
ISC operates two reportable segments, defined by their primary
type of service offerings, namely Registries and Services. The
balance of our corporate activities and shared services functions
are reported as Corporate.
5.2 Our Registries Segment
Our registries business involves the provision of registry and
information services and software solutions to governments
and private sector organizations. We work with our clients to
support their policies and execute procedures to ensure the
integrity of the data and manage the information technology,
data management and authentication processes. We deliver a
strong customer service experience online, by telephone and in
person. Currently, ISC provides registry and information services
to the Province of Saskatchewan and is the exclusive provider of
the Land Titles Registry, Land Surveys Directory, Geomatics, the
Personal Property Registry, the Corporate Registry, the Common
Business Identifier Program and the Business Registration
Saskatchewan Program in Saskatchewan.
The Land Registry includes the Land Titles Registry, the Land
Surveys Directory (“Land Surveys”) and Geomatics:
• The Land Titles Registry issues titles to land and registers
transactions affecting titles, including changes of ownership
and the registration of interests in land;
• Land Surveys registers land survey plans and creates a
representation of Saskatchewan land parcels in the cadastral
parcel mapping system; and
• Geomatics services manages geographic data in relation to
the cadastral parcel mapping system that is integrated with
the Land Titles Registry and Land Surveys. In addition, there
are stand-alone services such as topographical maps and
aerial photos.
The Personal Property Registry is a notice-based public registry
where individuals, corporations, lenders and others can register
security interests (liens) and certain other interests in personal
property on movable types of personal property such as
automobiles, farm equipment, trailers, boats, etc.
The Corporate Registry is a province-wide system for registering
business corporations, non-profit corporations, co-operatives,
sole proprietorships, partnerships and business names.
The Common Business Identifier Program allows for the use
of the Canada Revenue Agency Business Number as the
common business identifier for business entities that interact
with participating public sector programs in Saskatchewan.
This number is assigned when a business is registered through
the Saskatchewan Corporate Registry. Business Registration
Saskatchewan provides a single online point of access that
enables new businesses to integrate with other government
agencies and complete the initial steps to register in the
Corporate Registry, register as an employer with Saskatchewan
Workers’ Compensation Board and register for Provincial Sales
Tax with the Saskatchewan Ministry of Finance.
In each of these Saskatchewan Registries, there are three
common revenue components. Revenue is primarily generated
by earning fees from our end-use customers for:
1. Registrations;
2. Searches; and
3. Maintenance transactions.
Registrations in Saskatchewan are conducted primarily online
or through staff-assisted services that facilitate the submission
and registration of interests in land or property, or registrations
related to business entities. Our customers typically submit
registration requests electronically and registrations are
completed through automated or manual processes.
Searches for current or historical information are conducted
online by customers or in person at an ISC Customer Service
Centre. Customized services are also available for searches of
larger volumes of records or consolidated information from
multiple registries and other sources.
Maintenance transactions are also conducted online or through
our Customer Service Centres and include maintenance of
registry information, mineral certifications and the annual filings
required for corporate entities.
These transactions are primarily Core Registry Services as
defined by the MSA, and the fees associated with these core
services are set pursuant to the MSA. ISC also has the ability
to set and generate fees from non-core ancillary services,
13
2016 ISC® Annual Report | Management’s Discussion and Analysis an example of which would be priority mineral certification
services and geomatics-related services.
ISC earns an annual operating fee under the Programs
Operating Agreement for the Common Business Identifier
and Business Registration Saskatchewan Programs, entered
into under the new amendment to the MSA announced on
March 7, 2016.
Land Registry
As noted earlier, from a reporting perspective, the Land Registry
includes the Land Titles Registry, Land Surveys Directory and
Geomatics services.
Land Titles Registry
The Land Titles Registry issues titles to land and registers
transactions affecting titles, including changes of ownership
and the registration of interests in land. The Land Titles
Registry provides access to timely and reliable land ownership
information to support new and used home sales, land
and home development transfer, and other value-added
transactions. Its primary users are legal firms, financial
institutions, developers and resource companies.
Because the Land Titles Registry revenue is comprised of both
residential and non-residential activity, mortgage rates and
business lending rates may affect revenue. Changes in provincial
population also affect the housing market which, in turn,
influences vacancy rates, changes of ownership and revenue.
Revenue for the Land Titles Registry is earned through
registration, search and maintenance fees. Registration fees are
either a flat fee or value-based fee calculated as a percentage
of the value of the land and/or property being registered. The
Company typically charges a flat fee per transaction for search
and maintenance transactions. However, in certain instances,
we may charge a negotiated fee for a customized search or
maintenance transaction such as certain mineral certification
or bulk data requests. Approximately 78.7 per cent of all Land
Titles Registry registration transactions were submitted online
in 2016.
Land Surveys and Geomatics
Land Surveys registers land survey plans and creates
a representation of Saskatchewan land parcels in the
cadastral parcel mapping system. Land survey plans define
the geographic boundaries of land parcels throughout
Saskatchewan, while the cadastral parcel mapping system
depicts the land survey system with surface and mineral
ownership parcel boundaries.
Land Surveys services include registrations, searches and
related survey services. Revenue related to all services is earned
as a flat fee per transaction.
Our customers include surveyors, developers, resource
companies and other businesses that require our mapping
systems and survey plans to support their development plans.
Geomatics manages geographic data related to the cadastral
parcel mapping system which is integrated with the Land Titles
Registry and Land Surveys. Geomatics data is searchable by
the public and provides the cadastral and derived data used
to produce the Saskatchewan provincial base map for land-
related activities within the province. The services provided
vary considerably.
Unlike the other services offered within the Land Registry,
Geomatics does not derive revenue from registration or
maintenance services; rather, it generates revenue through
searches and value-added services. Fees for Geomatics services
are typically negotiated per transaction based on the type and
nature of services required. For example, ISC receives a service
fee from the Saskatchewan Ministry of Government Relations
for hosting the Saskatchewan Civic Address Registry (“CAR”), a
province-wide civic address registry and an online maintenance
system, but does not receive transaction-based fees related to
use of the portal.
The Company also provides Geomatics services for land-
related data and applications. For example, ISC developed the
Mineral Administration Registry Saskatchewan (“MARS”) for
the Saskatchewan Ministry of the Economy, which provides an
online system for issuing and administering Crown land mineral
dispositions throughout Saskatchewan and eliminates the need
to physically stake Crown mineral claims. The Company has
been hosting and supporting MARS since 2015 in exchange for
a service fee.
The GeoSask portal, a service for which ISC received an annual
fee from certain Government of Saskatchewan ministries and
agencies for operating the portal, was discontinued in May 2016.
ISC did not receive transaction-based fees related to the use of
the portal.
Personal Property Registry
The Personal Property Registry is a notice-based public
registry in which security interests and other certain interests
in personal property (property other than land, buildings and
other property affixed to land) may be registered. The Personal
Property Registry enables lenders as well as buyers of personal
property (e.g., motor vehicles) to search for information such
as security interests registered against an individual, business
or personal property used as collateral. Buyers and lenders
search the Personal Property Registry to verify there are no
outstanding notices of third-party interests in personal property.
14
2016 ISC® Annual Report | Management’s Discussion and Analysis Our customers include third-party providers to the financial
industry, financial institutions, insurance companies, law firms,
equipment and auto dealers, and auctioneers.
General provincial economic drivers, including automotive sales,
interest rates and the strength in commercial activity across the
province, influence the revenue in the Personal Property Registry.
Customers are charged flat fees per transaction, and the
automated web-based system enables real-time completion
of search and registration services and minimizes operational
effort to deliver services. Approximately 99.7 per cent of
searches in the registry are completed online. The high online
usage is stable, with minimal numbers of end-use consumers
needing staff assistance to complete their transactions.
Corporate Registry
The Corporate Registry is a province-wide system for registering
business corporations, non-profit corporations, co-operatives,
sole proprietorships, partnerships and business names. Every
corporation must be registered in the Corporate Registry
to maintain its legal status and carry on business within
Saskatchewan. Records on all Saskatchewan businesses are
maintained and made available to the public through the
Corporate Registry.
Our customers include law firms, financial institutions,
accountants, non-profit and co-operative associations
and entrepreneurs.
Services are billed as flat fees for each transaction. Unlike other
registries, the Company earns the majority of its fees in relation to
maintenance services provided to entities that file annual returns
or wish to make changes to their structure or business profile.
On July 11, 2016, ISC launched its new technology system for
the Corporate Registry, updating the registry’s technology
platform and providing customers a more convenient
service to search, register and maintain corporate entities in
Saskatchewan. The new system has many benefits, including
online submission of all filings and immediate registration for
most transactions. The online application also offers access to
digitally verified registry documents and options for customers
to self-manage staff access. A number of permanent changes
to the services and fee structure were implemented with the
launch of the new system.
Common Business Identifier and
Business Registration Saskatchewan
The Common Business Identifier Act (Saskatchewan) provides
the framework and authority for Saskatchewan to expand the
use of the Canada Revenue Agency Business Number as the
common business identifier for business entities that interact
with participating public sector programs in Saskatchewan.
This number is assigned when a business is registered through
the Saskatchewan Corporate Registry. Business Registration
Saskatchewan provides a single online point of access that
enables new businesses to integrate with other government
agencies and complete the initial steps to register in the
Corporate Registry, register as an employer with Saskatchewan
Workers’ Compensation Board and register for Provincial Sales
Tax with the Saskatchewan Ministry of Finance.
Under the terms of the MSA with the Government of
Saskatchewan, ISC was appointed to manage and operate the
Common Business Identifier and the Business Portal services
for an initial period of 36 months.
On March 7, 2016, we announced that, taking effect from
December 1, 2015, the MSA was amended to appoint ISC
to continue to manage and operate the Common Business
Identifier Program and the Business Registration Saskatchewan
Program (formerly referred to as the Business Portal) for
the same term as the MSA. The Province of Saskatchewan
will pay ISC an annual operating fee of $825 thousand, for
such programs, subject to an annual Consumer Price Index
adjustment calculated in accordance with the MSA. We do not
currently charge any additional fees for business owners who
register through Business Registration Saskatchewan.
Saskatchewan Asbestos Registry
On November 7, 2013, Saskatchewan proclaimed legislation
requiring mandatory reporting of public buildings known to
contain asbestos. The Saskatchewan Asbestos Registry of Public
Buildings has been created to share information about public
buildings containing asbestos.
In 2015, we completed the development and implementation
of the Saskatchewan Asbestos Registry, which was launched
on May 4, 2015, and we entered into an agreement with the
Ministry of Labour Relations and Workplace Safety to host and
support the Asbestos Registry. ISC receives a monthly service
fee for hosting and managing this registry.
5.3 Our Services Segment
Our Services segment includes our wholly owned subsidiary
ESC Corporate Services Ltd. (“ESC”).
ESC provides services to law firms, corporations, financial
institutions and others to fulfill a wide variety of clients’ public
records due diligence, filings and corporate supply requirements
in connection with public business registries in Canada and
certain other countries. ESC has offices in Toronto, ON and
Montreal, QC.
15
2016 ISC® Annual Report | Management’s Discussion and Analysis ESC provides its Canadian financial institution clients with
customized, automated and proven solutions to validate the
status of business entities. For its law firm customers that range
from large firms to sole practitioners, this segment also provides
a complete suite of corporate services and supplies.
Services provided through ESC have two revenue components:
transactional fees and per-unit charges. ESC earns revenue
through transaction fees charged for all search and registration
products as well as Know-Your-Customer services. All
government fees associated with the service are either
embedded in the search fee or charged in addition to the
service transaction fee. ESC does not earn any subscription-
based fees relating to any of its products. Corporate supplies
are charged a per-unit fee in the same manner as a product
in a retail transaction.
Search and Registration Services
ESC provides search services, including corporate, business
name, personal property, real property, corporate name search
reports (also known as NUANS 1 reports), trademark, the Bank
Act (Canada) (“Bank Act”) and other search services, primarily
to legal professionals. ESC provides corporate, business name,
personal property, trademark, Bank Act and other registration
and filing services (e.g., business incorporations, amendments,
amalgamations, etc.), primarily to lawyers and law firms.
ESC’s search and registration services focus on legal
professionals with a mix of small and large law firms based
primarily in Ontario and Quebec. ESC has built an online
workflow platform to service legal customers through a team
of experienced law clerks in both Ontario and Quebec able
to provide full- service public registry solutions to support
business and complex legal transactions. ESC also provides
nationwide search and registration services for its customers
directly or indirectly.
Know-Your-Customer Services
While all banks operating in Canada have to follow the same
Anti-Money Laundering (“AML”) laws and regulations, financial
institutions each structure their AML efforts somewhat
differently. Financial institutions and many non-financial
institutions are required to identify and report transactions
of a suspicious nature to the Financial Transactions Reports
Analysis Centre of Canada (“FINTRAC”). FINTRAC is Canada’s
financial intelligence unit and plays a central role in Canada’s
fight against money laundering and terrorism. For example,
a bank must verify a customer’s identity and, if necessary,
monitor transactions for suspicious activity. This is often termed
as Know-Your-Customer (“KYC”). The term KYC also refers
to the bank regulation which governs these activities. The
objective of KYC guidelines is to prevent banks from being used,
intentionally or unintentionally, by criminal elements for money
laundering activities. Related procedures also enable banks to
better understand their customers and their financial dealings.
This helps them manage their risks prudently.
ESC supports customers’ due diligence activities for compliance
purposes and credit service solutions through the verification,
storage and retrieval of corporate and business information
compiled and obtained from public registry sources (e.g.,
corporate registry, personal property registry, land registry,
litigation, and bankruptcy and Bank Act searches). These
services are provided primarily to financial institutions.
ESC has developed a proprietary platform for financial
institutions to on-board new commercial accounts while
remaining compliant with Canadian KYC and AML regulations
captured under the federal Proceeds of Crime (Money
Laundering) and Terrorist Financing Act (Canada). The customer
on-boarding verification report generated by ESC leverages its
search service to provide financial institutions a process and
system to verify, retrieve and store information about corporate
clients to meet these regulatory requirements.
Corporate Supplies and Accessories
The corporate supplies provided by ESC help companies
to effectively organize and maintain their corporate legal
documents. A corporation is legally required to maintain
records of important corporate documents (its certificate
of incorporation or letters patent, articles of incorporation,
by-laws, unanimous shareholder agreement, meeting minutes
and resolutions of the shareholders, among other information).
These records are typically kept in a minute book. Other items
typically include a corporate seal and share certificates.
These products are sold and distributed primarily to legal
professionals and include customized corporate minute books,
corporate seals, share certificates, legal supplies and related
ancillary accessories for businesses and corporations.
1 NUANS (Newly Updated Automated Name Search) is a registered trademark of the Government of Canada and is a computerized search system that compares a proposed
corporate name or trademark with databases of existing corporate bodies and trademarks.
16
2016 ISC® Annual Report | Management’s Discussion and Analysis 6 Business Strategy
Strategic Priorities
ISC’s goal is to deliver value to shareholders through the consistent performance of its existing business and the execution of
appropriate growth opportunities. The Company has identified three strategic priorities to support the achievement of this goal,
as outlined in the table below.
Earnings Growth
& Sustainable Cost Management
Organizational Effectiveness
& Compliance
Growth Identification
& Execution
• Deliver consistent EBITDA growth with
a focus on increased margins through
the generation of permanent cost
efficiencies
•
Implement systems and process renewal
to support earnings growth and the
evolving needs of current and potential
customers
• Focus on critical cost lines to manage
• Deliver on credible, efficient registry
expenditures and prioritize investments
services and compliance with the Master
Service Agreement
• Replication of ISC core service offerings
in other Canadian and international
jurisdictions
•
Incremental growth through service
enhancements and new products
• Acquisition of companies, systems and
assets to enhance ISC’s competitive
advantage in current or new business
lines, industries or expanded product
offerings
7 Results of Operations
Consolidated Statements of Comprehensive Income
(thousands of CAD dollars)
Revenue
Expenses
Wages and salaries
Information technology services
Depreciation and amortization
Occupancy costs
Professional and consulting services
Cost of goods sold
Financial services
Project initiatives
Other
Income before net finance expense (income)
Finance expense (income)
Interest income
Interest expense
Net finance expense (income)
Share of profit in associate 1
Change in contingent consideration
Income before tax
Income tax expense
Net income and total comprehensive income
Three Months Ended December 31,
2015
2016
Year Ended December 31,
2015
2016
$ 21,201
$ 22,579
$ 88,375
$
78,318
8,214
2,432
2,955
1,284
1,607
779
510
(298)
765
18,248
2,953
(68)
142
74
925
–
3,804
885
2,919
$
7,318
2,474
1,776
1,239
1,161
940
426
476
409
16,219
6,360
(70)
129
59
52
–
6,353
1,786
4,567
$
28,008
9,602
8,429
4,992
5,564
3,586
2,362
3,214
2,172
67,929
20,446
(256)
577
321
1,654
(1,000)
20,779
5,276
15,503
$
24,846
9,688
5,713
4,563
3,569
955
2,362
2,521
1,513
55,730
22,588
(331)
236
(95)
62
–
22,745
6,828
15,917
$
1 As a result of the acquisition of 30 per cent of the issued and outstanding voting common shares of Dye & Durham Corporation (formerly OneMove Technologies Inc.) on
September 2, 2015, ISC records its share of the results of Dye & Durham Corporation in accordance with the equity method of accounting.
17
2016 ISC® Annual Report | Management’s Discussion and Analysis
7.1 Fourth Quarter Results
Consolidated Revenue
Revenue was $21.2 million for the three months ended December 31, 2016, a $1.4 million decrease compared to the same period
in 2015.
(thousands of CAD dollars)
Registries
Services
Corporate
Land Registry (Land Titles Registry,
Land Surveys, and Geomatics)
Personal Property Registry
Corporate Registry
Registries
Services
Other
$
$
13,038
2,273
2,254
17,565
–
–
17,565
$
$
–
–
–
–
3,427
–
3,427
$
$
–
–
–
–
–
209
209
Three Months Ended December 31,
2015
2016
$
13,038
2,273
2,254
17,565
3,427
209
$ 21,201
$
14,816
2,407
2,038
19,261
3,166
152
$ 22,579
Registries
Overall
Revenue for all Registries was $17.6 million for the three months ended December 31, 2016, a decrease of $1.7 million, or 8.8 per
cent, compared to the three months ended December 31, 2015. Our results were lower mainly due to decreased revenues from
the Land Titles Registry.
On December 7, 2016, ISC experienced a broad technology service disruption affecting the availability of Saskatchewan registry
services and support. Upon resumption of registry services on December 13, 2016, ISC addressed the backlog that may have
accumulated. Any discretionary transactions, such as searches which were not completed during the service disruption, did not
have a material impact on registry revenue.
Land Registry
Revenue was $13.0 million for the quarter ended December 31, 2016, decreasing by 12.0 per cent compared to the three months
ended December 31, 2015.
(i) Land Titles Registry
Land Titles Registry revenue for the three months ended December 31, 2016, was $12.2 million, a decline of 11.8 per cent compared
to the same period in December 31, 2015.
Overall transaction volumes fell by 15.0 per cent for the three months ended December 31, 2016, compared to the same period
last year, primarily due to declines in key transaction types. Regular land transfers in the fourth quarter of 2016 fell by 9.3 per
cent compared to the fourth quarter of 2015. Year-over-year, the volume of mortgage registrations and title searches declined by
7.9 per cent and 12.7 per cent, respectively.
The majority of the revenue in the Land Titles Registry is derived from value-based fees. Average land values for regular land
transfers in the fourth quarter of 2016, although 12.8 per cent above the 2010-2015 average, were flat compared to those in the
fourth quarter of 2015. A softening of housing prices is noted by the most recent data from Statistics Canada New Housing Price
Index for Saskatchewan. Results for November 2016 indicate a decline of 1.7 per cent, compared to November 2015 2.
High-value property registration revenue for the three months ended December 31, 2016, was lower at $1.0 million, compared to
$1.6 million for the same period in 2015. Each high-value registration generated revenue of $10,000 or more.
The following charts show the Land Title Registry’s revenue by type of transaction and the overall transaction volume, respectively.
The fourth quarter is typically a weaker quarter compared to the third quarter, which is consistent year-over-year. For more
information on seasonality, please refer to the “Summary of Consolidated Quarterly Results”.
2 Statistics Canada. Table 327-0046 – New housing price indexes, monthly (index, 2007=100), CANSIM (database), accessed January 13, 2017.
18
2016 ISC® Annual Report | Management’s Discussion and Analysis
Land Titles Registry Revenue by Type
(CAD$ millions)
Registration
Search
14.4
2.0
12.4
14.0
2.0
12.1
13.8
2.0
11.8
14.4
2.1
12.3
14.1
1.9
12.2
12.2
1.7
10.4
10.6
1.8
8.8
10.8
1.7
9.0
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q1 2016
Q2 2016
Q3 2016
Q4 2016
Note: Values may not total due to rounding from Maintenance transactions that were too small to display in chart.
Land Titles Registry Transaction Volume
(Number of transactions)
,
1
9
9
9
0
2
,
8
7
4
6
4
2
,
1
4
6
6
2
2
9
0
0
6
3
2
,
8
5
1
,
2
2
2
5
2
7
,
4
3
2
6
3
3
,
1
3
2
,
0
6
5
0
0
2
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q1 2016
Q2 2016
Q3 2016
Q4 2016
18.0
15.0
12.0
9.0
6.0
3.0
0.0
280,000
250,000
220,000
190,000
160,000
130,000
100,000
(ii) Land Surveys and Geomatics
Collectively, the revenue from Land Surveys and Geomatics was $0.9 million for the three months ended December 31, 2016,
a decrease of $0.1 million, or 14.5 per cent, compared to the same period in 2015. The decline is due to the weaker economic
conditions in Saskatchewan. Revenue from Land Surveys was down 11.9 per cent due to declines in registration and search
transaction volumes for the fourth quarter in 2016 when compared to the same period in 2015. These declines were partially offset
by growth in service transactions, up 89.4 per cent quarter-over-quarter. Geomatics revenue declined 15.9 per cent compared to the
same quarter in 2015 due to lower requests for geomatics services, bulk data and sales.
Personal Property Registry
Revenue for the Personal Property Registry for the three months ended December 31, 2016, was $2.3 million, which represents a
decrease of 5.6 per cent, or $0.1 million, from the same period in 2015.
The main driver of revenue for this registry – personal property security registration setups – has shown a decline in revenue of
9.7 per cent compared to the same period last year. Volumes of setups in the fourth quarter of 2016 shrunk 5.6 per cent compared
to the same quarter of 2015. As well, scheduled registry fee changes effective July 1, 2016, which rebalanced fees across several
categories, resulted in a decrease in the average price per setup.
The following graph depicts the revenue by type of transaction. Year-over-year, registration revenue fell due to the decrease in
personal property security registration setups, while search and maintenance revenue was stable when comparing the three months
ended December 31, 2016, to the same period in 2015. Quarterly revenue continues to reflect the typical pattern of seasonality.
19
2016 ISC® Annual Report | Management’s Discussion and Analysis Personal Property Registry Revenue by Type
(CAD$ millions)
Registration
Search
Maintenance
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
2.1
0.3
0.4
1.5
2.7
0.3
0.4
2.0
2.8
0.3
0.5
2.1
2.4
0.2
0.4
1.8
2.2
0.3
0.4
1.5
2.8
0.4
0.5
1.9
2.7
0.3
0.5
1.9
2.3
0.2
0.4
1.6
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q1 2016
Q2 2016
Q3 2016
Q4 2016
Transaction volumes for the fourth quarter of 2016 edged up by 0.6 per cent compared to the same period last year. This was
primarily due to an increase in search, up 2.6 per cent, and maintenance volumes, up 4.6 per cent, which offset the 4.2 per cent
decrease in registration volumes.
The following graph shows the transaction volumes by quarter for 2015 and 2016 for comparison.
Personal Property Registry Transaction Volume
(Number of transactions)
130,000
110,000
90,000
70,000
50,000
1
5
7
,
1
0
1
7
9
9
9
1
1
,
2
6
5
9
1
1
,
8
7
4
6
0
1
,
2
2
4
5
0
1
,
3
3
0
3
2
1
,
0
0
4
0
2
1
,
4
1
1
,
7
0
1
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q1 2016
Q2 2016
Q3 2016
Q4 2016
Corporate Registry
Revenue for the Corporate Registry for the quarter ended December 31, 2016, was $2.3 million, an increase of $0.2 million, or
10.6 per cent, compared to the same period in 2015.
On July 11, 2016, ISC launched its new system for the Saskatchewan Corporate Registry, updating the registry’s technology platform
and providing customers a more convenient service to search, register and maintain corporate entities in Saskatchewan. The new
system has many new benefits, including online submission of all filings and immediate registration for most transactions. The online
application also offers access to digitally verified registry documents and options for customers to self-manage staff access.
A number of permanent changes to the services and fee structure were implemented with the launch of the new system. The new
fee schedule resulted in structural changes to how volumes are recorded.
With that in mind, revenue from the filing of annual returns and renewals, classified as maintenance transactions, was flat compared
to the fourth quarter of 2015. Revenue from the incorporation and registration of new business entities, classified as registration,
decreased by 4.0 per cent compared to the fourth quarter 2015. This decline was more than offset by increases in search revenue
which was up 41.6 per cent when compared to the fourth quarter of 2015, due to pricing changes.
The following graph depicts the revenue by type of transaction. Corporate Registry revenue for the fourth quarter of 2016 improved
compared to the same period in 2015 due to new revenue from operating the Common Business Identifier Program and Business
Registration Saskatchewan Program (classified as maintenance revenue).
20
2016 ISC® Annual Report | Management’s Discussion and Analysis Corporate Registry Revenue by Type
(CAD$ millions)
Registration
Search
Maintenance
3.0
2.5
2.0
1.5
1.0
0.5
0.0
2.2
1.4
0.2
0.6
2.1
1.2
0.2
0.6
1.8
1.1
0.2
0.6
2.0
1.2
0.2
0.6
2.6
1.8
0.2
0.6
2.4
1.5
0.2
0.6
1.9
1.1
0.3
0.5
2.3
1.4
0.3
0.6
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q1 2016
Q2 2016
Q3 2016
Q4 2016
The transaction volumes for the Corporate Registry for the fourth quarter of 2016 are shown below. As a result of the new fee
schedule as well as the Corporate Registry system implementation in July 2016, the recording of volumes for fee generating
transactions has changed. Historical trending in the graph below has been adjusted to approximate expected comparative
volumes under the current structure.
Corporate Registry Transaction Volume
(Number of transactions)
120,000
100,000
80,000
60,000
40,000
20,000
0
1
3
7
,
9
6
3
6
9
6
7
,
Q1 2015*
Q2 2015*
Q3 2015*
Q4 2015*
Q1 2016*
Q2 2016*
Q3 2016
Q4 2016
* Note: As noted above, historical trending has been adjusted to approximate expected comparative volumes under the current structure.
As of December 31, 2016, there were approximately 74,939 active Saskatchewan Business Corporations registered with the
Corporate Registry compared to 72,011 as of December 31, 2015. Positive active entity growth helps support revenue stability due
to the filing of annual returns and business name renewals included in maintenance transactions.
Services
The revenue in our Services segment for the fourth quarter, which consists of revenue earned by our wholly owned subsidiary ESC,
was $3.4 million. This is an increase of $0.3 million, or 8.2 per cent, compared to the fourth quarter of 2015.
Revenue from search and registration services was $1.4 million for the three months ended December 31, 2016, which represents
42.0 per cent of total revenue, and declined by 2.2 per cent compared to the same period in 2015. Search and registration services
revenue includes corporate, business name, personal property, real property, corporate name search reports (also known as NUANS 3
reports), trademark, Bank Act and other search and registration services. These services are provided primarily to lawyers and law firms.
Revenue from Know-Your-Customer services for the three months ended December 31, 2016, was $1.2 million, or 35.0 per cent
of total revenue and grew by $0.3 million or 27.3 per cent compared to the fourth quarter of 2015. This includes KYC services that
support customers’ due diligence activities for compliance purposes and credit service solutions through the verification, storage
3 NUANS (Newly Updated Automated Name Search) is a registered trademark of the Government of Canada and is a computerized search system that compares a proposed
corporate name or trademark with databases of existing corporate bodies and trademarks.
21
2016 ISC® Annual Report | Management’s Discussion and Analysis and retrieval of corporate and business information compiled
and obtained from public registry sources (e.g., corporate
registry, personal property registry, land registry, litigation,
and bankruptcy and Bank Act searches). These services are
provided primarily to financial institutions.
Revenue from corporate supplies for the three months ended
December 31, 2016, was $0.8 million, representing 23.0 per cent
of the total Services revenue, improved by a modest 5.0 per
cent compared to the three months ended December 31,
2015. This includes corporate supplies and accessories for the
manufacturing, sale and distribution of customized corporate
minute books, corporate seals, share certificates, legal
supplies and related ancillary accessories for businesses and
corporations. These services are provided primarily to lawyers
and law firms.
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Consolidated Expenses
Services Revenue by Type
(CAD$ millions)
Search and Registration
Know-Your-Customer
Corporate Supplies
3.2
0.8
0.9
3.3
0.8
1.0
1.5
1.5
3.6
0.8
1.2
1.6
3.3
0.7
1.2
1.4
3.4
0.8
1.2
1.4
Q4 2015
Q1 2016
Q2 2016
Q3 2016
Q4 2016
For the three months ended December 31, 2016, consolidated expenses (all segments) were $18.2 million, an increase of 12.5 per
cent, compared to $16.2 million for the same period of 2015.
(thousands of CAD dollars)
Expenses
Wages and salaries
Information technology services
Depreciation and amortization
Occupancy costs
Professional and consulting services
Cost of goods sold
Financial services
Project initiatives
Other
Three Months Ended December 31,
2015
2016
$
$
8,214
2,432
2,955
1,284
1,607
779
510
(298)
765
18,248
$
$
7,318
2,474
1,776
1,239
1,161
940
426
476
409
16,219
The increase in expenses was due to a combination of the following:
• Wages and salaries were $8.2 million, up $0.9 million, for the three months ended December 31, 2016, compared to the same
period of 2015. The increase was primarily the result of normal salary and performance management increases across all
segments and the impact of the new collective bargaining agreement in the Registries segment which came into effect in 2016.
• Depreciation and amortization costs were $3.0 million for the three months ended December 31, 2016, compared to $1.8 million
in the same period of 2015. The increase was mainly due to an acceleration of depreciation of certain assets replaced by the new
technology system for the Saskatchewan Corporate Registry, due to a reassessment of their useful lives.
• Professional and consulting services were $1.6 million for the three months ended December 31, 2016, compared to $1.2 million in
2015. The increase was due to costs associated with the exploration and implementation of growth initiatives.
• Project initiatives were lower by $0.8 million from the fourth quarter of 2015 as a result of a number of costs associated with an
ongoing project meeting our capitalization requirements and therefore being transferred to assets under development.
• Other costs increased to $0.8 million in 2016 from $0.4 million in the same quarter of 2015. The increase was mainly due to the
Company’s rebranding initiative.
22
2016 ISC® Annual Report | Management’s Discussion and Analysis
Net Finance Expense (Income)
Net finance expense (income) for the three months ended December 31, 2016, was an expense of $74 thousand compared to
$59 thousand for the same period in 2015. The increase was due to a slightly higher interest rate on our revolving term facility as
compared to 2015.
Share of Profit in Associate
For the three months ended December 31, 2016, ISC recorded its share of profit in associate (Dye & Durham, formerly OneMove)
of $925 thousand compared to $52 thousand in 2015. The increase was due to the larger overall net income that resulted from
OneMove’s purchase and amalgamation of Dye & Durham in March 2016.
Net Income and Earnings per Share
Net income and total comprehensive income for the three months ended December 31, 2016, was $2.9 million, or $0.17 per basic
and diluted share, compared to $4.6 million, or $0.26 per basic and diluted share, for the same period in 2015.
Adjusted EBITDA
Adjusted EBITDA was $7.3 million, a 34.6 per cent margin, for the three months ended December 31, 2016, compared to
$8.6 million, a 38.2 per cent margin, for the same period in 2015. The decrease was primarily due to the lower revenue
experienced in our Registries segment (primarily the Land Registry), combined with higher employee and professional services
expenses as previously described.
7.2 Year-End Results
Consolidated Revenue
Revenue was $88.4 million for the year ended December 31, 2016, compared to $78.3 million in 2015, an increase of 12.8 per cent.
(thousands of CAD dollars)
Registries
Services
Corporate
Land Registry (Land Titles Registry,
Land Surveys, and Geomatics)
Personal Property Registry
Corporate Registry
Registries
Services
Other
$
54,921
9,947
9,082
73,950
–
–
$ 73,950
$
$
–
–
–
–
13,639
–
13,639
$
$
–
–
–
–
–
786
786
Year-Ended December 31,
2015
2016
$ 54,921
9,947
9,082
73,950
13,639
786
$ 88,375
$
56,871
9,981
8,133
74,985
3,166
167
$ 78,318
Registries
Overall
Revenue for all Registries was $74.0 million for the year ended
December 31, 2016, a decrease of $1.0 million, or 1.4 per cent,
compared to the year ended December 31, 2015. Our results
were lower mainly due to decreased revenues from the
Land Registry.
The Company’s top five customers for the Registries segment
represent 18.7 per cent of the total Registry segment revenue
for the year ended December 31, 2016. Of those customers, no
single customer represented more than 10.0 per cent of total
Registries segment revenue.
Total Registries Revenue
for the year ended December 31,
(CAD$ millions)
100.0
Land Titles Registry
Geomatics
Personal Property Registry
Land Surveys Directory
Corporate Registry
80.0
60.0
40.0
20.0
0.0
1
.
0
8
2014
.
0
5
7
2015
.
0
4
7
2016
23
2016 ISC® Annual Report | Management’s Discussion and Analysis
Land Registry
Land Registry revenue was $54.9 million for the year ended December 31, 2016, decreasing $2.0 million or 3.4 per cent compared
to the year ended December 31, 2015.
(i) Land Titles Registry
Land Titles Registry revenue for the year ended December 31, 2016, was $51.2 million, a decrease of 3.3 per cent or $1.8 million
compared to 2015.
The majority of the revenue in the Land Titles Registry is derived from value-based fees. Average land values for regular land were
lower in 2016 when compared to 2015, consistent with data from the Statistics Canada New Housing Price Index for Saskatchewan,
which shows year-over-year declines for each month of 2016 (most recent data only provides results up to November 2016),
compared to 2015 4.
Land Titles Registry Revenue by Type
for the year ended December 31,
(CAD$ millions)*
Land Titles Registry Transaction Volume
for the year ended December 31,
(Number of transactions)
Registration
Search
1,100,000
$58.2
13.9%
$53.0
14.5%
$51.2
14.6%
86.0%
85.5%
85.3%
2014
2015
2016
* Note: Values may not total due to rounding from Maintenance transactions that are
too small to display in chart.
1,000,000
900,000
800,000
700,000
600,000
500,000
,
3
1
6
9
2
0
,
1
2014
9
1
1
,
9
1
9
2015
9
7
7
,
8
8
8
2016
Saskatchewan housing starts declined in 2016, down 10.5 per cent year-over-year, while the number of completions was down
9.4 per cent 5. Housing completion volumes were higher than housing starts, contributing to buyers’ market conditions in parts of
the province. These are indicators of the slowdown in the Saskatchewan real estate market and have impacted revenue.
As a result, overall revenue generating transactions in the Land Titles Registry fell 3.3 per cent in 2016, which can be attributed to a
slower real estate market in Saskatchewan. The volume of regular land transfers, mortgage registrations and title searches declined
by 3.3 per cent, 9.8 per cent and 5.9 per cent, respectively, compared to 2015. These volume declines were partly negated by an
increase of resource sector interest transactions in 2016.
The Land Titles Registry continued to see a large number of high-value property transactions which generated a high fee per
transaction, although to a lesser degree than 2015. We received $3.6 million in revenue from these transactions in 2016, below the
$4.2 million in 2015. Between 2010 and 2015, we typically saw an average of $3.2 million on an annual basis.
The primary customers of the Land Titles Registry are legal firms, financial institutions, developers and resource companies. For
the year ended December 31, 2016, our top 20 Land Titles Registry customers represented about 39.3 per cent of our revenue and
our top 100 Land Titles Registry customers represented 76.0 per cent of revenue. Nearly 78.7 per cent of all Land Titles Registry
registration transactions were submitted online in 2016, an increase of 1.4 per cent compared to 2015.
4 Statistics Canada. Table 327-0046 – New housing price indexes, monthly (index, 2007=100), CANSIM (database), accessed January 13, 2017.
5 Statistics Canada CANSIM Table 027-0001: Canada Mortgage and Housing Corporation, housing starts, under construction and completions in centres 10,000 and over,
accessed January 13, 2017.
24
2016 ISC® Annual Report | Management’s Discussion and Analysis (ii) Land Surveys and Geomatics
Collectively, the revenue from Land Surveys and Geomatics was $3.7 million for the year ended December 31, 2016, a decrease of
$0.2 million, or 4.6 per cent, compared to the same period in 2015. The overall decrease was due to lower revenues from Geomatics,
down $0.2 million or 7.8 per cent for the year, which was impacted by the overall economy and lower requests for geomatics
services, bulk data and sales. Land Surveys revenue was relatively flat, up a modest 0.7 per cent compared to 2015.
For the year ended December 31, 2016, Land Surveys generated revenue of $1.5 million and was flat compared to the same period in
2015. In 2016, registrations accounted for 71.9 per cent of total revenue. Land Surveys transaction volume was lower by 6.1 per cent
year-over-year.
Land Surveys Revenue by Type
for the year ended December 31,
(CAD$ millions)
Land Surveys Transaction Volume
for the year ended December 31,
(Number of transactions)
Registration
Search
Services
40,000
$1.5
6.5%
12.2%
$1.5
7.7%
11.2%
81.3%
81.1%
$1.5
17.0%
11.1%
71.9%
2014
2015
2016
30,000
20,000
10,000
0
8
4
4
8
3
,
2014
5
1
8
5
3
,
2015
7
2
6
3
3
,
2016
Land Surveys customers include surveyors, developers, resource companies, government and other businesses that access our
mapping systems and survey plans to support their development plans. For the year ended December 31, 2016, our top 20 Land
Surveys customers represented 90.9 per cent of our revenue, whereas the top 100 customers accounted for 95.6 per cent.
Total revenue resulting from Geomatics was $2.2 million for the year ended December 31, 2016, a decline of 7.8 per cent
compared to 2015.
Geomatics Revenue
for the year ended December 31,
(CAD$ millions)
Geomatics customers include government departments
(provincial and municipal), resource companies, land
developers, other businesses and the general public. They
also include utility, pipeline and transportation companies. For
the year ended December 31, 2016, our top 20 Geomatics
customers comprised 86.5 per cent of our revenue, while our
top 100 customers represented 97.7 per cent of revenue.
.
3
2
2014
4
2
.
2015
2
2
.
2016
3.0
2.5
2.0
1.5
1.0
0.5
0.0
25
2016 ISC® Annual Report | Management’s Discussion and Analysis
Personal Property Registry
Revenue for the Personal Property Registry for the year ended December 31, 2016, was stable at $9.9 million, which represents a
negligible decrease of 0.3 per cent from the same period in 2015.
Personal Property Registry Revenue by Type
for the year ended December 31,
(CAD$ millions)
Personal Property Registry Transaction Volume
for the year ended December 31,
(Number of transactions)
Registration
Search
Maintenance
500,000
$9.9
10.6%
15.2%
$10.0
10.7%
16.6%
$9.9
11.6%
18.6%
400,000
74.2%
72.7%
69.9%
300,000
2014
2015
2016
200,000
4
3
2
,
7
4
4
2014
8
8
7
,
7
4
4
2015
9
6
9
5
5
4
,
2016
Registration revenue for this registry decreased by 4.3 per cent in 2016, largely due to a 4.2 per cent decline in personal property
security registration revenue compared to last year. This was mainly counterbalanced by increases in search revenue (up 11.5 per
cent) and maintenance revenue (up 8.1 per cent) for the year.
The graph above reflects year-over-year transaction volumes. Overall volumes improved by 1.8 per cent in 2016. Search volume grew
4.6 per cent while maintenance volume increased 7.3 per cent, more than offsetting the 4.6 per cent decline of registration volumes.
New motor vehicle sales in Saskatchewan is one of the activity drivers of the Personal Property Registry. Statistics Canada reported
that new motor vehicle sales (units) for Saskatchewan decreased by 5.5 per cent for 2016, when compared to 2015 6. This was
reflected in the declines we observed in personal property security registration setups in 2016.
Customers of the Personal Property Registry are primarily in the financial sector as well as legal firms. The top 20 Personal Property
Registry customers generated 81.4 per cent of the revenue for the year ended December 31, 2016, while the top 100 represented
93.4 per cent of our revenue.
6 Statistics Canada Table 079-0003 – New motor vehicle sales, Canada, provinces and territories, CANSIM (database), accessed February 21, 2017.
26
2016 ISC® Annual Report | Management’s Discussion and Analysis Corporate Registry
Revenue for the Corporate Registry for the year ended December 31, 2016, was $9.1 million, up 11.7 per cent or $0.9 million, which is due
to revenue from the Common Business Identifier Program.
Corporate Registry Revenue by Type
for the year ended December 31,
(CAD$ millions)
Corporate Registry Transaction Volume
for the year ended December 31,
(Number of transactions)
Maintenance
Registration
Search
400,000
$8.2
10.2%
30.8%
$8.1
10.8%
28.9%
$9.1
12.1%
24.6%
58.9%
60.3%
63.4%
300,000
200,000
100,000
2014
2015
2016
2014*
2015*
6
6
3
9
1
3
,
2016
* Note: As a result of the new fee schedule and Corporate Registry system
implementation in July 2016, the recording of volumes for fee generating
transations has changed. Historical trending in the graph above has been
adjusted to approximate expected comparative volumes under the
current structure.
As noted previously, on July 11, 2016, ISC launched its new system for the Saskatchewan Corporate Registry, updating the
registry’s technology platform and providing customers a more convenient service to search, register and maintain corporate
entities in Saskatchewan. A number of permanent changes to the services and fee structure were implemented with the launch
of the new system. The new fee schedule resulted in structural changes to how volumes are recorded.
Overall, revenue improved due to new revenue of $0.9 million from operating the Common Business Identifier Program in 2016.
With that in mind, there was some shifting in remaining types of revenue during the year. Revenue from the filing of annual returns
and renewals (classified as maintenance transactions) improved by 4.0 per cent in 2016 when compared to 2015. Revenue from the
incorporation and registration of new business entities, classified as registration, decreased by 4.6 per cent compared to 2015. Also
of note, search revenue jumped 24.6 per cent year-over-year, mainly due to pricing changes.
Compared to 2015, business confidence in Saskatchewan has declined for most months in 2016, according to the Canadian
Federation of Independent Business (“CFIB”) barometer index, resulting in the province ranking near the bottom nationally for
most of 2016 7. The decline in business confidence can contribute to the reduction in the rate of new entity creation, including
incorporation of new businesses.
For the Corporate Registry, customers largely include legal firms, companies in the financial sector, as well as the Government
of Saskatchewan. They also include businesses such as corporations, non-profit corporations, co-operatives and sole
proprietorships that were, or will be, registered in the Corporate Registry. The top 20 Corporate Registry customers accounted
for nearly 35.3 per cent of revenue for the nine months ended December 31, 2016, whereas the top 100 customers made up
about 52.9 per cent of revenue.
7 CFIB Economics Business Barometer and corresponding data table – December 2016
27
2016 ISC® Annual Report | Management’s Discussion and Analysis Services
The revenue in our Services segment for the year ended December 31, 2016, was $13.6 million, an increase of $10.5 million compared
to 2015. The increase was primarily due to ESC’s revenue contribution of 12 months in 2016 compared to three months in 2015.
Services Revenue by Type
for the year ended December 31, 2016
(CAD$ millions)
Search and Registration
Know-Your-Customer
Corporate Supplies
3.2
0.8
0.9
1.5
2015*
15.0
12.0
9.0
6.0
3.0
0.0
13.6
3.1
4.6
6.0
2016
* Note: 2015 revenue results for ESC, which ISC acquired on October 1, 2015, are
for the fourth quarter only.
Services Revenue
for the year ended December 31, 2016
Search and Registration
Know-Your-Customer
Corporate Supplies
22.9%
43.7%
33.4%
2016 was a strong year for ESC with solid organic growth in all of its lines of business. This was largely due to legal activity across
the country as well as strong compliance-driven activities in the financial services industry that triggered active due diligence on
companies throughout Canada.
Revenue from search and registration services was $6.0 million for the year ended December 31, 2016, representing 43.7 per cent of
the total revenue of the Services segment.
Revenue from Know-Your-Customer services for the year ended December 31, 2016, was $4.6 million, or 33.4 per cent of total
Services revenue.
Revenue from corporate supplies for the year ended December 31, 2016, was $3.1 million, representing 22.9 per cent of total
Services revenue.
The top 20 ESC customers comprised about 48.8 per cent of the revenue for the year ended December 31, 2016, while the top
100 ESC customers made up nearly 63.7 per cent of revenue. No single customer accounted for more than 25.0 per cent of ESC
revenue in the same period.
Consolidated Expenses
For the year ended December 31, 2016, consolidated expenses (all segments) were $67.9 million, an increase of 21.9 per cent,
compared to $55.7 million for the same period of 2015.
(thousands of CAD dollars)
Expenses
Wages and salaries
Information technology services
Depreciation and amortization
Occupancy costs
Professional and consulting services
Cost of goods sold
Financial services
Project initiatives
Other
28
Year Ended December 31,
2015
2016
$ 28,008
9,602
8,429
4,992
5,564
3,586
2,362
3,214
2,172
$ 67,929
$ 24,846
9,688
5,713
4,563
3,569
955
2,362
2,521
1,513
$ 55,730
2016 ISC® Annual Report | Management’s Discussion and Analysis
The increase in expenses was due to a combination of the following:
• Wages and salaries were $28.0 million, up $3.2 million, for the year ended December 31, 2016, compared to the same period in
2015. The increase was mainly the result of salaries related to our Services segment included for the full year in 2016 compared to
only three months in 2015.
• Depreciation and amortization costs were $8.4 million for the year ended December 31, 2016, compared to $5.7 million in the
same period of 2015. The increase was mainly due to the additional depreciation from capital assets of our Services segment
and the acceleration of depreciation of certain assets replaced by the new technology system for the Saskatchewan Corporate
Registry, due to a reassessment of their useful lives.
• Professional and consulting services were $5.6 million for the year ended December 31, 2016, compared to $3.6 million in 2015.
The increase was due to costs associated with the exploration and implementation of growth initiatives.
• Cost of goods sold was $3.6 million for the year ended December 31, 2016, compared to $1.0 million in 2015. The substantial
increase was due to the addition of our Services segment in 2015, which offers a corporate supplies product line.
• Project initiatives were $3.2 million for the year compared to $2.5 million in 2015. The increase was due to focused effort on
growth and technology maintenance initiatives.
• Other costs increased to $2.2 million for the year ended December 31, 2016, compared to $1.5 million in 2015. The increase
was due to costs associated with our corporate rebranding, as well as a full year of additional miscellaneous costs from our
Services segment.
Net Finance Expense (Income)
Net finance expense (income) for the year ended December 31, 2016, was an expense of $0.3 million compared to income of
$95 thousand for the same period in 2015. The change was due to the addition of a new, committed long-term debt facility at the
end of the third quarter of 2015 and the resulting increased interest paid in 2016 as compared to 2015.
Share of Profit in Associate
For the year ended December 31, 2016, ISC recorded its share of profit in associate (Dye & Durham) of $1,654 thousand compared
to $62 thousand in 2015. The increase was due to a full year of results in 2016 versus only a partial year in 2015 as well as the larger
overall net income that resulted from OneMove’s purchase and amalgamation of Dye & Durham in March 2016.
Tax Provision
The Company is subject to federal and provincial income taxes at an estimated combined statutory rate of 27.0 per cent (2015 –
27.0 per cent). Income tax expense varies from the amounts that would be computed by applying the statutory income tax rate to
earnings before taxes for the following reasons:
(thousands of CAD dollars, except where noted)
Income from operations before tax
Combined statutory income tax rate
Expected income tax expense
Increase (decrease) in income tax resulting from:
Non-deductible expenses/non-taxable income
(Over) under provision in prior years
Other
Income tax expense
Effective income tax rate
Year Ended December 31,
2015
2016
$ 20,779
27.0%
5,610
(72)
(264)
2
5,276
25.4%
$
$
22,745
27.0%
6,141
621
–
66
$
6,828
30.0%
The Company records future income tax assets and liabilities related to deductible temporary differences. The Company
assesses the value of these assets and liabilities based on their probability of being realized given management assessments of
future taxable income.
29
2016 ISC® Annual Report | Management’s Discussion and Analysis
Net Income and Earnings per Share
Net income and total comprehensive income for the year ended December 31, 2016, was $15.5 million, or $0.89 per basic and $0.87
per diluted share, compared to $15.9 million, or $0.91 per basic and $0.90 per diluted share, for the same period in 2015.
(thousands of CAD dollars)
Registries
Services 1
Corporate
Net income and comprehensive income
Year Ended December 31,
2015
2016
$
$
17,856
(403)
(1,950)
15,503
$
$
16,930
274
(1.287)
15,917
1 Net income for the Services segment for the year ended December 31, 2016, was impacted by the $1.0 million adjustment to the contingent consideration (see “Change in
Contingent Consideration” on the consolidated statement of comprehensive income of the Financial Statements).
The calculation of earnings per share is based on net income after tax and the weighted average number of shares outstanding
during the period. Details of the earnings per share are set out below:
(thousands of CAD dollars, except number of shares and earnings per share)
Net income and total comprehensive income
Weighted average number of shares, basic
Potential dilutive shares resulting from stock options
Weighted average number of shares, diluted
Earnings per share ($ per share)
Total, basic
Total, diluted
Adjusted EBITDA
Year Ended December 31,
2015
2016
$
15,503
$
15,917
17,500,000
374,654
17,874,654
17,500,000
120,230
17,620,230
$
$
0.89
0.87
$
$
0.91
0.90
Adjusted EBITDA was $33.5 million, a 37.9 per cent margin, for the year ended December 31, 2016, compared to $30.4 million, a
38.8 per cent margin, for the same period in 2015. The increased adjusted EBITDA value was a result of additional spend on growth-
related activities in 2016, which is added back to the calculation; however, the margin as a percentage of revenue declined based on
higher overall revenue for 2016 versus 2015.
8 Summary of Consolidated Quarterly Results
The following table sets out select quarterly results for the past eight quarters.
Our Registries segment experiences moderate seasonality, primarily because Land Titles revenue fluctuates in line with real estate
transaction activity in Saskatchewan. Typically, our second and third quarters generate higher revenue during the fiscal year when
real estate activity is traditionally highest.
Our Services segment is sufficiently diversified with little seasonality to its revenue performance. However, some smaller categories
of products or services can have some seasonal variation, slightly increasing during the second and fourth quarters.
Expenses are generally consistent from quarter to quarter, but can fluctuate due to the timing of project-related expenses. As a
result of the above, our EBITDA margin fluctuates in line with some seasonality.
30
2016 ISC® Annual Report | Management’s Discussion and Analysis
Summary of Consolidated Quarterly Results
(thousands of CAD dollars)
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
2016
2015
Revenue
Expenses
Income before net finance
expense (income)
Net finance expense (income)
Share of profit (loss) in associate 1
Change in contingent consideration
Income before tax
Income tax expense
Net income and total
comprehensive income
EBITDA margin (% of revenue) 2
Adjusted EBITDA margin
$ 21,201
18,248
2,953
74
925
–
3,804
885
$ 2,919
32.2%
$ 22,894
16,854
$ 24,674
16,468
$ 19,606
16,359
$ 22,579
16,219
$ 19,675
12,830
$ 20,053
13,112
$ 16,011
13,568
6,040
78
479
(1,000)
5,441
1,631
8,206
83
263
–
8,386
1,808
3,247
85
(13)
–
3,149
953
6,360
59
52
–
6,353
1,786
6,845
(28)
10
–
6,883
2,227
6,941
(59)
–
–
7,000
2,027
2,443
(66)
–
–
2,509
789
$ 3,810
32.1%
$ 6,578
41.7%
$ 2,196
25.9%
$ 4,567
36.3%
$ 4,656
41.5%
$ 4,973
41.1%
$ 1,720
23.5%
(% of revenue) 2
Earnings per share, basic
Earnings per share, diluted
34.6%
$ 0.17
$ 0.17
41.5%
$ 0.22
$ 0.22
45.1%
$ 0.38
$ 0.37
27.9%
$ 0.13
$ 0.12
38.2%
$ 0.26
$ 0.26
48.6%
$ 0.27
$ 0.27
41.9%
$ 0.28
$ 0.28
23.6%
$ 0.10
$ 0.10
1 Share of profit (loss) in associate was a result of the acquisition of 30 per cent of the issued and outstanding voting common shares of Dye & Durham Corporation (formerly
OneMove Technologies Inc.) on September 2, 2015.
2 EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBITDA margin are not recognized as measures under IFRS and do not have a standardized meaning prescribed by IFRS
and, therefore, they may not be comparable to similar measures by other corporations. Refer to section “Non-IFRS Financial Measures”.
9 Financial Measures and Key Performance Indicators
Revenue, expenses, and net income are key performance indicators the Company uses to manage its business and evaluate its
financial results and operating performance.
In addition to these results, which are reported in accordance with IFRS, certain non-IFRS measures are supplemental indicators of
operating performance and financial position, as well as for internal planning purposes. The Company evaluates its performance
against these metrics by comparing actual results to management budgets, forecasts and prior period results. These non-IFRS
financial measures include EBITDA, EBITDA margin, adjusted EBITDA, adjusted EBITDA margin and free cash flow. Refer to section
“Non-IFRS Financial Measures”.
Consolidated Earnings Before Interest, Taxes, Depreciation and Amortization
(thousands of CAD dollars)
Three Months Ended December 31,
2015
2016
Year Ended December 31,
2015
2016
Net income and total comprehensive income
Depreciation and amortization
Net finance expense (income)
$
Income tax expense
EBITDA 1
Adjustments
Stock-based compensation expense
Stock option expense
Acquisition and integration costs
(Gain) loss on disposal of property, plant and
equipment assets
Loss on disposal of intangibles assets
Adjusted EBITDA 1
EBITDA margin (% of revenue) 1
Adjusted EBITDA margin (% of revenue) 1
2,919
2,955
74
885
6,833
46
95
362
$
–
–
7,336
32.2%
34.6%
$
$
4,567
1,776
59
1,786
8,188
56
88
293
–
–
8,625
36.3%
38.2%
$
15,503
8,429
321
5,276
29,529
418
376
3,132
(1)
–
$ 33,454
33.4%
37.9%
$
15,917
5,713
(95)
6,828
28,363
192
174
1,652
1
4
$ 30,386
36.2%
38.8%
1 EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBITDA margin are not recognized as measures under IFRS and do not have a standardized meaning prescribed by IFRS
and, therefore, they may not be comparable to similar measures by other corporations. Refer to section “Non-IFRS Financial Measures”.
31
2016 ISC® Annual Report | Management’s Discussion and Analysis
Consolidated Free Cash Flow
(thousands of CAD dollars)
Cash provided by operating activities
Cash additions to property, plant and equipment
Cash additions to intangible assets
Net change in non-cash working capital 1
Consolidated free cash flow 2
1 Refer to the Note 19 of the Financial Statements for reconciliation.
Three Months Ended December 31,
2015
2016
Year Ended December 31,
2015
2016
$ 6,052
(21)
(1,579)
(841)
3,611
$
$
$
7,604
(309)
(845)
239
6,689
$ 26,164
(851)
(5,848)
(600)
18,865
$
$ 30,738
(1,790)
(2,656)
(4,803)
21,489
$
2 Free cash flow is not recognized as a measure under IFRS and does not have a standardized meaning prescribed by IFRS and, therefore, may not be comparable to similar
measures by other corporations. Refer to section “Non-IFRS Financial Measures”.
10 Outlook
The following section includes forward-looking statements,
including statements related to prices charged for services,
the anticipated revenue outlook, changes in the economic
conditions in Canada and, in particular, Saskatchewan, Ontario
and Quebec, timing of any economic recovery, real gross
domestic product, economic impact of energy and resource
sectors, changes in transaction volumes, impact of pricing
changes, changes in high-value property registrations, changes
in housing re-sales, housing starts and motor vehicle sales
volume, growth of active business entities, expected level and
composition of capital expenditures, ability to fund capital
expenditures from cash flow, planned re-investment in the
business, integration of services and ability to realize synergies,
consolidated EBITDA margin, continued focus and impact of
cost management efforts, key drivers of expenses, anticipated
modest growth of active business entities in Saskatchewan,
impact of pricing adjustment to our Core Registry Services,
anticipated growth of our Services segment and maintaining
margins through cost efficiencies. Refer to the section “Caution
Regarding Forward-Looking Statements”.
Currently, the majority of the Company’s revenue is linked to
registry transaction volumes and values driven by economic
conditions in Saskatchewan. The remaining portion of our
revenue is linked to the overall economic conditions in Ontario
and Quebec.
At present, the Company expects the 2017 Saskatchewan
economy to be comparable to 2016, which drives our Registries
segment results, with stability or some softening of growth
anticipated for the central Canadian markets, impacting our
Services segment.
The key drivers of expenses will continue to be wages, salaries
and information technology costs. The Company will continue
to manage costs prudently, maintaining appropriate margins
in a challenging economy, while balancing re-investment in
the business in order to improve the customer experience or
integrate services and realize synergies. In 2017, the Company
will also be focused on the integration of ERS into both our
business and sales activities.
Based on these factors, ISC expects an EBITDA margin of
between 31.0 per cent and 33.0 per cent in 2017.
Management expects capital expenditure in 2017 to be in
the range of $5.0 to $6.0 million, funded from operating cash
flow. This expenditure is expected to continue to focus on the
maintenance, enhancement and upgrade of core technology
components and enterprise systems in both our Registries and
Services segments.
Registries
For the Registries segment in 2017, we expect the Saskatchewan
economy to continue to be challenged and, therefore, project
a neutral to slightly declining revenue environment. The delay
in the economic recovery has been longer than most expected,
resulting in extended difficulties in certain commodity sectors
such as oil and gas and mining. According to several external
forecasts, Saskatchewan’s real Gross Domestic Product growth
is expected to pick up in 2017 after a moderate contraction
in 2016.
Overall, our preliminary view is that we expect revenue for the
registries business to see some modest declines as a result of
the continued economic softness.
External forecasts for some of the key economic drivers of our
registries business, such as housing re-sales, housing starts and
new motor vehicle sales, are expected to show little positive
movement in 2017. The 2016 Saskatchewan Consumer Price
Index, used for expected pricing changes in 2017, is forecasted
to be 1.1 per cent. We currently expect registry segment revenue
to be down for 2017 compared to 2016 as a result of moderately
lower transaction volumes.
For the Land Registry (which includes revenue from the land
titles, survey and geomatics areas), housing re-sale volumes and
average land values in 2017 are expected to see softening
32
2016 ISC® Annual Report | Management’s Discussion and Analysis
Services
The revenue in our Services segment is tied to the economic
activity that its clients – law firms, financial institutions and
professional firms – are undertaking on behalf of companies
across Canada. The economic activity has spinoff effects in areas
such as credit lending, mergers, acquisitions, incorporations and
various new business startup activities that trigger activity for
our Services segment.
For 2017, our current view is that we expect a slowing economy
to deliver modest growth across most of the Services business,
with some new business in 2016 contributing to improving
margins and growing revenue in particular segments of the
business. We expect some increases in our overall expenses
as we continue to invest in additional sales and Information
Technology (“IT”) support, to address new customer solutions
and continuous improvement of our software solutions for all
aspects of our business.
compared to those in 2016. As well, we do not expect to see the
same volume of resource sector transactions as in 2016, which
may result in overall lower volumes.
Regarding the Corporate Registry, with a full year of revenue
related to the Common Business Identifier Program, revenue
for 2017 is expected to be near 2016 levels. While in 2016 we
observed a decline in incorporation and registration of new
businesses volumes, maintenance volumes and revenue
from the filing of annual returns was positive. We expect this
stability to continue into 2017. We also foresee search revenue
increasing as a result of the pricing changes made in 2016.
For the Personal Property Registry, our initial view is that we
expect revenue to be down slightly for 2017 compared to
2016, due to slightly lower volumes as well as some downward
price adjustments made in 2016. Provincial population and net
migration, employment, retail sales and new motor vehicle
sales in Saskatchewan are drivers of activity in the Personal
Property Registry. A number of these areas of activity have
seen declines in 2016 and we anticipate the declines will
continue through 2017.
11 Liquidity and Capital Resources
11.1 Cash Flow
Our primary source of operating cash flow is generated from revenue related to the Land Registry, Corporate Registry, Personal
Property Registry and Corporate Services. Our primary uses of funds are operational expenses, capital expenditures and dividends.
Historically, ISC has financed its operations and met its capital and finance expenditure requirements through cash provided from
operating activities. Most recently, the Company has also utilized borrowing to supplement cash generated from operations to
finance acquisition activities. The Company believes that internally generated cash flow, supplemented by additional borrowing that
may be available to us (refer to Note 10 of the Financial Statements for our existing Credit Facilities), will be sufficient to meet cash
requirements, capital expenditures and anticipated dividend payments.
Liquidity risk is managed based on financial forecasts and anticipated cash flow. Cash is held with Canadian chartered banks and the
risk of loss is believed to be minimal. As at December 31, 2016, the Company held $33.7 million in cash, compared to $36.6 million as
at December 31, 2015, a decrease of $2.9 million.
The Company expects to be able to meet its cash requirements, including being able to settle current liabilities of $16.4 million
(December 31, 2015 – $21.5 million) and meet any unanticipated cash requirements due to changes in working capital commitments.
Such changes that would affect our liquidity may arise from, among other factors, general economic conditions and the failure
of one or more customers to pay their obligations. Deficiencies arising from short-term working capital requirements and capital
expenditures may be financed on a short-term basis with bank indebtedness or on a permanent basis with offerings of securities.
The following table summarizes our sources and uses of funds for the three months and year ended December 31, 2016, and 2015:
(thousands of CAD dollars)
Three Months Ended December 31,
2015
2016
Year Ended December 31,
2015
2016
Net cash flow provided by operating activities
Net cash flow (used in) investing activities
Net cash flow (used in) provided by financing activities
Increase in cash
Cash, beginning of period
Cash, end of period
$ 6,052
(1,021)
(9,603)
(4,572)
38,255
$ 33,683
$
$
7,604
(21,763)
10,949
(3,210)
39,781
36,571
$ 26,164
(7,436)
(21,616)
(2,888)
36,571
$ 33,683
$ 30,738
(28,091)
343
2,990
33,581
36,571
$
33
2016 ISC® Annual Report | Management’s Discussion and Analysis
Net Cash Flow Provided by Operating Activities
Net cash flow provided by operating activities for the three months ended December 31, 2016, was $6.1 million compared to
$7.6 million for the same period in 2015. For the year ended December 31, 2016, net cash flow from operating activities was
$26.2 million compared to $30.7 million for the same period in 2015. The higher figure in 2015 was due to the receipt of a large
payment for GST/HST during that year.
Net Cash Flow Used in Investing Activities
Net cash flow used in investing activities for the three months ended December 31, 2016, was $1.0 million compared to
$21.8 million for the three months ended December 31, 2015, and for the year ended December 31, 2016, was $7.4 million
compared to $28.1 million for the same period in 2015. The larger investing activities in 2015 reflect the investment made in
ESC in 2015.
Net Cash Flow (Used in) Provided by Financing Activities
Net cash flow used in financing activities for the three months ended December 31, 2016, was $9.6 million compared to net cash
flow provided of $10.9 million for the three months ended December 31, 2015. For the year ended December 31, 2016, net cash flow
used was $21.6 million compared to net cash flow provided of $0.3 million for the same period in 2015. The 2016 figures represent
cash used in the payment of dividends and financing charges (interest), as well as the $1.0 million contingent consideration paid,
while 2015 results represent the payment of dividends and lower financing charges, offset by the receipt of proceeds of long-term
debt received in the fourth quarter of 2015.
11.2 Capital Expenditures
Capital expenditures for the three months ended December 31, 2016, were $1.1 million, compared to $1.5 million for the same
period in 2015. For the year ended December 31, 2016, capital expenditures were $6.3 million compared to $4.0 million for
the same period in 2015. Capital expenditures were focused on the renewal and enhancement of technology supporting the
Corporate Registry, the acquisition of the interest of a subcontractor in a customer contract within our Services segment and
growth identification and execution.
(thousands of CAD dollars)
Registries
Services
Corporate
Total capital expenditures
11.3 Long-Term Debt
Three Months Ended December 31,
2015
2016
Year Ended December 31,
2015
2016
$
$
200
5
903
1,108
$
$
1,315
11
199
1,525
$
$
3,189
2,050
1,036
6,275
$
$
3,009
11
997
4,017
Long-term debt for the year ended December 31, 2016, was $23.4 million compared to $24.6 million at December 31, 2015.
The revolving term facility of $9.935 million consists of a three-year, committed revolving term loan facility, which matures on
September 28, 2018, unless renewed prior to that time. It is currently held in a six-month bankers’ acceptance note bearing interest at
1.100 per cent that matures on June 21, 2017, (December 31, 2015 – bankers’ acceptance note, due June 28, 2016, bearing interest at
0.963 per cent per annum).
The operating facility, which consists of a $10.0 million uncommitted, revolving credit facility, was undrawn at December 31, 2016. The
operating facility is repayable by ISC upon demand by the lender and the lender may terminate such operating facility at any time.
The non-revolving term facility had $13.5 million outstanding as of December 31, 2016, and is repayable through quarterly payments
of $375 thousand, maturing on September 28, 2018. This facility bears an interest rate of prime plus applicable margin which, at
December 31, 2016, equated to 2.7 per cent, plus 0.7 per cent, for a rate of 3.4 per cent per annum (December 31, 2015 – 2.7 per cent,
plus 0.7 per cent, for a rate of 3.4 per cent per annum).
34
2016 ISC® Annual Report | Management’s Discussion and Analysis
11.4 Total Assets
Total assets decreased to $131.3 million at December 31, 2016, compared to $136.3 million at December 31, 2015, primarily due to the
net use of cash in 2016 as outlined previously and a decrease of our deferred tax assets in our Registries segment.
(thousands of CAD dollars)
Cash
Goodwill
Assets excluding cash and goodwill
Total assets
(thousands of CAD dollars)
Cash
Goodwill
Assets excluding cash and goodwill
Total assets
11.5 Working Capital
Registries
$
21,232
–
39,996
$ 61,228
Registries
$ 23,784
–
43,248
$ 67,032
Services
Corporate
As at December 31,
2016
$
1,835
13,141
18,492
$ 33,468
$
10,616
–
26,009
$ 36,625
$ 33,683
13,141
84,497
131,321
$
Services
Corporate
$
895
13,141
18,332
$ 32,368
$
11,892
–
24,985
$ 36,877
As at December 31,
2015
$
36,571
13,141
86,565
136,277
$
As at December 31, 2016, working capital was $25.4 million, an increase of $3.7 million, compared to $21.7 million at December 31,
2015. The change in working capital resulted from a decrease in cash and a decrease in our trade and other payables as a result of
the payment of the contingent consideration related to the ESC transaction.
(thousands of CAD dollars)
Current assets
Current liabilities
Working capital
11.6 Outstanding Share Data
As at December 31,
2016
As at December 31,
2015
$ 41,800
(16,363)
$ 25,437
$ 43,180
(21,490)
$ 21,690
The number of basic issued and outstanding Class A Shares as at December 31, 2016, was 17.5 million and the number of fully diluted
shares was 17.9 million. On November 2, 2016, the Board declared a quarterly cash dividend of $0.20 per Class A Share, which was
paid on January 15, 2017, to shareholders of record as of December 31, 2016.
12 Share-Based Compensation Plan
12.1 Deferred Share Unit Plan
The Company has established a Deferred Share Unit (“DSU”)
plan to provide directors and senior officers of ISC with
the opportunity to acquire DSUs in order to allow them to
participate in the long-term success of ISC and to promote a
greater alignment of interests between our directors, senior
officers and shareholders. Refer to Note 7 of the Financial
Statements on the share-based compensation plan.
Share-based compensation, related to DSUs, for the three
months ended December 31, 2016, totalled $46 thousand
(2015 – $56 thousand) and for the year ended December 31,
2016, totalled $418 thousand (2015 – $192 thousand). The
total carrying amount of the liability arising from the DSUs
as of December 31, 2016, totalled $800 thousand (2015 –
$442 thousand).
On August 15, 2016, the Board granted 15,232 DSUs at a
weighted average award price of $17.40 that vest quarterly. On
August 18, 2016, 3,379.45 DSUs were redeemed at a weighted
average award price of $17.69. As at December 31, 2016,
the DSU plan balance was 45,444.05 (December 31, 2015 –
31,726.50) with a fair value of $18.14 per DSU. The weighted
average award price of the DSUs granted at December 31,
2016, was $16.94 (December 2015 – $16.82).
35
2016 ISC® Annual Report | Management’s Discussion and Analysis
12.2 Stock Option Plan
The Company established a stock option plan that was
approved by shareholders in 2014, to encourage share
ownership and enhance the Company’s ability to attract, retain
and motivate key personnel and reward significant performance
achievements. Refer to Note 7 of the Financial Statements on
the share-based compensation plan. On March 14, 2017, the
Board approved an amended and restated stock option plan,
with the amendments principally related to the expansion of the
limitation provisions (grants to one person, aggregate option
grants to insiders and option grants to non-employee directors)
and a further narrowing of the plan amendments that can be
made without shareholder approval.
Compensation expense is recognized in proportion to the
amount of stock options vested. Share-based compensation
related to the stock option plan for the three months
ended December 31, 2016, totalled $96 thousand (2015 –
$88 thousand) and for the year ended December 31, 2016,
totalled $376 thousand (2015 – $173 thousand). The total
carrying amount of the equity settled employee benefit reserve
arising from these stock options as at December 31, 2016,
totalled $599 thousand (2015 – $223 thousand).
On August 15, 2016, the Board granted 298,509 stock options
at an exercise price of $17.40. As at December 31, 2016, a total of
759,259 (December 31, 2015 – 460,750) stock options had been
granted. The outstanding share options at the end of the period
had a weighted average exercise price of $15.41 (2015 – $15.49).
13 Commitments
The Company is subject to contractual obligations such as leasing office space, the MSA with the Government of Saskatchewan
and information technology service agreements with Hewlett-Packard (Canada) Co. (“HP”) and Information Systems Management
Canada Corporation (“ISM”). The following table summarizes our commitments as of December 31, 2016:
(thousands of CAD dollars)
2017
2018
2019
2020
2021
Thereafter
Total
Office leases 1
Master Service Agreement 2
Information Technology
Service Agreements 3,4
Total
$ 3,138
500
$ 3,118
500
$ 3,121
500
$ 2,922
500
$ 2,488
500
$ 6,425
6,000
$ 21,212
8,500
8,920
$ 12,558
8,586
$ 12,204
2,852
$ 6,473
–
$ 3,422
–
$ 2,988
–
$ 12,425
20,358
$ 50,070
1 The Company leases all of its office space through operating leases. Operating leases related to office space include lease terms of between two and ten years, with various
options to extend. The Company does not have an option to purchase the leased assets at the expiry of the lease period.
2 The MSA requires ISC to pay the Government of Saskatchewan and to manage and operate the Land Titles Registry, Land Surveys, Personal Property Registry and Corporate
Registry on behalf of the Government of Saskatchewan for a 20-year period.
3 HP provides application development, maintenance and support services related to the operation of the Land Titles Registry, Personal Property Registry, and Geomatics pursuant
to an agreement for information technology services. An Amending Agreement for a five-year term was signed and effective as of June 1, 2015.
4 ISM provides hardware management services and support services for software and hardware infrastructure pursuant to a services agreement. An Amending Agreement for a
five-year term was signed and effective as of May 1, 2015.
14 Off-Balance Sheet Arrangements
The Company had no off-balance sheet arrangements as at December 31, 2016.
15 Related Party Transactions
Routine operating transactions with related parties are settled at agreed upon exchange amounts under normal trade terms. Refer
to Note 15 of our Financial Statements for information pertaining to transactions with related parties.
16 Critical Accounting Estimates
ISC’s critical accounting estimates are contained in the Financial Statements. Refer to Note 2 for the summary of use of estimates
and judgments. The preparation of consolidated financial statements in conformity with IFRS requires management to make
estimates and underlying assumptions and judgments that affect the accounting policies and reported amounts of assets, liabilities,
revenue and expenses.
Estimates and underlying assumptions are reviewed on an ongoing basis. Actual results may differ from these estimates. Revisions
to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
36
2016 ISC® Annual Report | Management’s Discussion and Analysis
17 Changes in Accounting Policies
Refer to Note 3 of the Financial Statements for information
pertaining to changes in accounting policies effective in 2016
and for information on issued accounting pronouncements that
will be effective in future years.
18 Financial Instruments
and Financial Risks
Financial instruments held in the normal course of business
included in our consolidated statement of financial position as
at December 31, 2016, consist of cash, trade receivables, trade
and other payables, provision for early retirement plan, dividend
payable, long-term debt and deferred share unit liability.
The Company does not use any form of derivative financial
instruments to manage our exposure to credit risk, interest rate
risk or market risk. Refer to Note 14 of the Financial Statements
for information pertaining to financial instruments and related
risk management.
18.1 Fair Value of Financial Instruments
The carrying values of cash, trade receivables, trade and other
payables, provision for early retirement plan and dividend
payable approximate fair value due to their immediate or
relatively short-term maturity. Within long-term debt, the
revolving term is currently managed throughout the three-year
term with short-term bankers’ acceptance notes and, as such,
the carrying value approximates fair value due to the short term
to maturity as well. It has been determined that there are no
differences between the carrying amount and the fair market
value of these instruments. In regard to the non-revolving
term within long-term debt, it bears an interest rate of prime
plus applicable margin, which exposes the Company to some
interest rate risk. However, the impact of a change in interest
rate is expected to be low.
18.2 Credit Risk
Credit risk is the risk that one party to a transaction will fail to
discharge an obligation and cause the other party to incur a
financial loss. The Company extends credit to its customers
in the normal course of business and is exposed to credit risk
in the event of non-performance by customers, but does not
anticipate such non-performance would be material.
The Company monitors the credit risk and credit rating of
customers on a regular basis. The Company has significant
concentration of credit risk among government sectors. Our
customers are primarily provincial, federal and municipal
government ministries and agencies, and our private sector
customers are diverse.
Cash is held with major Canadian chartered banks and the
Company believes the risk of loss to be minimal. The maximum
exposure to credit risk at December 31, 2016, is $37.9 million
(December 31, 2015 – $40.2 million) equal to the carrying
value of the Company’s financial assets, those being cash at
$33.7 million (December 31, 2015 – $36.6 million) and trade
receivables at $4.2 million (December 31, 2015 – $3.6 million).
Quarterly reviews of the aged receivables are completed. The
Company expects to fully collect on all outstanding receivables;
therefore, the risk to the Company is low.
18.3 Liquidity Risk
Liquidity risk is the risk that the Company will not be able to
meet our financial obligations as they fall due. The Company’s
cash resources are managed based on financial forecasts and
anticipated cash flow.
18.4 Market Risk
The Company is not exposed to market risk with respect to
financial instruments as it does not hold any financial assets or
liabilities whose fair value is affected by equity prices.
18.5 Interest Rate Risk
The Company is subject to interest rate risks as the Credit
Facilities bear interest at rates that are based on floating rates
based on prime, which can vary in accordance with borrowing
rates. The Company manages interest rate risk by using short-
term bankers’ acceptance notes with an option to lock in rates
at any time and by monitoring the effects of market changes in
interest rates. The Company considers the interest rate risk on
its overall debt to be low.
19 Business Risks and
Risk Management
All companies are exposed to risk and are required to mitigate
risks on a daily and long-term basis. A key component of
creating strong and sustainable corporate performance is
to balance risk and reward. This begins by understanding a
company’s risk tolerance and appetite for taking on new risks.
ISC actively identifies risks that may affect the Company’s
ability to achieve its goals and objectives and implements
processes to manage those risks. At the foundation of this
process are the frameworks, policies, tools and procedures that
help the organization to ensure risks are being identified and
managed at a strategic, operational and procedural level. ISC is
constantly addressing numerous existing and emerging risks.
Our corporate strategies and plans are designed to implement
effective risk mitigation or management approaches on an
ongoing basis.
37
2016 ISC® Annual Report | Management’s Discussion and Analysis The Board oversees ISC’s Enterprise Risk Management (“ERM”) framework. This includes ensuring appropriate management
systems are in place to ensure ISC’s risks are prudently managed.
The executive team is accountable for providing executive oversight of ISC’s ERM activities, including the ongoing identification
and assessment of risks and the development of mitigation strategies to manage the corporate risks facing the Company. The
key corporate risks are documented and tracked as part of ISC’s risk register.
The following are high-level descriptions of primary business risks:
Revenue Diversification
There is a risk that ISC’s current revenue sources are not significantly diversified to withstand
economic challenges in Canada or downturns connected to common revenue drivers.
Cost/Efficiency/ Profitability
There is a risk that ISC’s business model and resourcing mix will not allow ISC to achieve cost
efficiencies in new or existing product lines, or be sufficiently nimble to take advantage of
business development opportunities or adapt to volume changes within its business.
Acquisition
Reputational
There is a risk that acquisitions could occur with insufficient due diligence, leadership
and cultural differences, over-valuation, imprudent financing, ineffective post-acquisition
integration or could be misaligned with ISC’s overall strategy.
There is a risk that ISC’s reputation could be negatively impacted, thereby damaging
ISC’s credibility, future revenue and/or business opportunities. Events that could impact
ISC’s reputation include the integrity and security of information, inability to successfully
implement on growth strategies and failure to comply with rules, regulation and disclosures.
Human and
Organizational Capital
There is a risk that ISC does not have the required competencies, skills and knowledge to
execute on strategic priorities as a growing publicly traded company.
Aligning Investor Expectations
There is a risk that a lack of alignment of ISC’s strategy with investor expectations may result
in unfavourable outcomes and investor behaviours or actions.
IT Infrastructure
Competition
MSA Compliance
Labour Relations
There is a risk that ISC does not have the IT infrastructure (i.e., age, integrity or architecture
of hardware, networks, software and facilities) in place to effectively facilitate current and
future requirements to support its business needs and the achievement of its strategic
goals. There is also a risk of potential service disruptions or service delays. ISC relies on
third-party service providers for aspects of its IT infrastructure and the provision of critical
IT-related services.
There is a risk that ISC may be ineffective in its ability to compete against current or future
competitors, in some cases given others’ potential advantage having greater longevity in
the market, access to low-cost capital, private ownership, etc., or as a result of ISC’s potential
requirement to receive ancillary service approvals from the Government of Saskatchewan
or other regulators.
Inability to comply with the requirements in the MSA could result in the loss/termination of
the agreement as well as impacting ISC’s reputation and future growth strategies.
In the event of a labour disruption such as a strike or lockout, ISC’s ability to carry on
operations would be expected to be impaired significantly, which could have a material
adverse effect on the business, results of operations and financial condition.
Misalignment of Service
Evolution and Pricing Approach
There is a risk that business model requirements for successful and profitable evolution of
registry services are not supported by the Government of Saskatchewan.
You are cautioned that the foregoing discussion of risks and uncertainties is not exhaustive. Additional information on these and
other risks that could affect our business, operations or financial results are also discussed in our Annual Information Form filed on
www.sedar.com or on www.company.isc.ca.
38
2016 ISC® Annual Report | Management’s Discussion and Analysis 20 Internal Controls over
Financial Reporting
21 Disclosure Controls
and Procedures
The Company’s management, including the President and
Chief Executive Officer and the Vice President, Finance &
Technology and Chief Financial Officer, is responsible for
establishing and maintaining appropriate disclosure control and
procedures. Disclosure controls and procedures are designed
to provide reasonable assurance that relevant information is
gathered and reported to senior management, including the
President and Chief Executive Officer and the Vice-President,
Financial & Technology and Chief Financial Officer, on a timely
basis so that appropriate decisions can be made regarding
public disclosures. The design and effectiveness of ISC’s
disclosure controls and procedures in accordance with National
Instrument 52-109 Certification of Disclosure in Issuers’ Annual
and Interim Filings as at December 31, 2016, was evaluated by
management. Based on the foregoing evaluation, the President
and Chief Executive Officer and the Vice President, Finance
& Technology and Chief Financial Officer concluded that our
disclosure controls and procedures are effective to provide
reasonable assurance that material information relating to
the Company is made known to them and that information
required to be disclosed by the Company is recorded,
processed, summarized and reported within the time periods
specified in applicable securities legislation.
The Company’s management, including the President and
Chief Executive Officer and the Vice President, Finance &
Technology and Chief Financial Officer, is responsible for
establishing and maintaining appropriate internal control over
financial reporting. Internal controls over financial reporting
have been designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of
financial statements in accordance with IFRS. The design and
effectiveness of ISC’s internal controls over financial reporting
in accordance with National Instrument 52-109 Certification
of Disclosure in Issuers’ Annual and Interim Filings as at
December 31, 2016, was evaluated by management. The
Internal Control – Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”) was used to evaluate the effectiveness
of our internal controls over financial reporting. Based on this
evaluation, the President and Chief Executive Officer and the
Vice President, Finance & Technology and Chief Financial
Officer concluded that our internal controls over financial
reporting were effective as at December 31, 2016.
During the year, the design scope of internal controls over
financial reporting were expanded to include controls, policies
and procedures of ESC Corporate Services Ltd. which was
acquired in the previous year.
No changes in our internal control over financial reporting that
have occurred during the period have materially affected or
are reasonably likely to materially affect our internal control
over financial reporting.
It should be noted that all internal control systems, no matter
how well designed, have inherent limitations. Therefore, even
those systems determined to be effective can provide only
reasonable assurance with respect to financial statement
preparation and presentation.
39
2016 ISC® Annual Report | Management’s Discussion and Analysis 22 Non-IFRS Financial Measures
22.1 Non-IFRS Financial Measures
This MD&A includes certain measures which have not been
prepared in accordance with IFRS, such as EBITDA, EBITDA
margin, adjusted EBITDA, adjusted EBITDA margin and free
cash flow. Rather, these measures are provided as additional
information to complement those IFRS measures by
providing further understanding of our results of operations
from management’s perspective, to provide investors with
supplemental measures of our operating performance
and, thus, highlight trends in our core business that may
not otherwise be apparent when relying solely on IFRS
financial measures.
Management also uses non-IFRS measures to facilitate
operating performance comparisons from period to period,
prepare annual operating budgets and assess our ability
to meet our future capital expenditure and working
capital requirements.
Accordingly, these non-IFRS measures should not be considered
in isolation or as a substitute for analysis of our financial
information reported under IFRS. Such measures do not have
any standardized meaning prescribed by IFRS and, therefore,
they may not be comparable to similar measures presented by
other corporations.
22.2 Non-IFRS Financial Measures Definition
EBITDA is defined as earnings before interest, taxes,
depreciation and amortization expense. Adjusted EBITDA
adjusts EBITDA for stock-based compensation expense or
income, stock option expense, transactional gains or losses
on assets, asset impairment charges, and acquisition and
integration costs. These measures, in addition to net income
and income from operations, measure business performance
and cash flow generation because it removes cash flow
fluctuations caused by the above adjustments. Furthermore,
we use adjusted EBITDA for business planning purposes and to
evaluate and price potential acquisitions. In addition to its use
by management, we also believe these measures are widely
used by securities analysts, investors and others to evaluate
the financial performance of our Company and for comparing
our results with those of other companies. EBITDA margin
and adjusted EBITDA margin are calculated as a percentage of
overall revenue.
Free cash flow is used as a financial measure in our evaluation of
liquidity and financial strength. Adjusting for the swings in non-
cash working capital items due to seasonality or other timing
issues and cash additions to property, plant and equipment
and intangible assets, free cash flow assists in the long-term
assessment of liquidity and financial strength. This measurement
is useful as an indicator of our ability to service our debt, meet
other payment obligations and make strategic investments. Free
cash flow does not represent residual cash flow available for
discretionary expenditures.
40
2016 ISC® Annual Report | Management’s Discussion and Analysis Consolidated Financial Statements
For the Year Ended December 31, 2016
Table of Contents
Management’s Responsibility
Independent Auditor’s Report
Consolidated Statement of Financial Position
Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
Status of the Company
Basis of Presentation
Summary of Significant Accounting Policies
Cash
Seasonality
Tax Provision
Share-Based Compensation Plan
Property, Plant and Equipment
Intangible Assets
Debt
Investment in Associate
Earnings per Share
Equity and Capital Management
Financial Instruments and Related Risk Management
Related Party Transactions
Compensation of Key Management Personnel
Segment Information
Acquisition
Net Change in Non-Cash Working Capital
Commitments and Contingencies
Pension Expense
Subsequent Events
42
43
44
45
45
46
47
47
48
54
54
54
56
58
59
60
61
61
62
62
65
65
65
67
68
68
69
69
41
2016 ISC® Annual Report | Consolidated Financial Statements Management’s Responsibility
Management’s Report on Consolidated Financial Statements
The accompanying consolidated financial statements of Information Services Corporation were prepared by management, which
is responsible for the integrity and fairness of the information presented, including the many amounts that must, of necessity,
be based on estimates and judgments. These consolidated financial statements were prepared in accordance with International
Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. Financial information appearing
throughout our management’s discussion and analysis is consistent with these consolidated financial statements.
In discharging our responsibility for the integrity and fairness of the consolidated financial statements and for the accounting
systems from which they are derived, we maintain the necessary system of internal controls designed to ensure that transactions
are authorized, assets are safeguarded and proper records are maintained. These controls include quality standards in hiring
employees, policies and procedure manuals, a corporate code of conduct, and accountability for performance within appropriate
and well-defined areas of responsibility.
The Board of Directors oversees management’s responsibilities for financial reporting through an Audit Committee, which is
composed entirely of directors who are neither officers nor employees of Information Services Corporation. This Committee reviews
our consolidated financial statements and recommends them to the Board of Directors for approval. Other key responsibilities of the
Audit Committee include reviewing our existing internal control procedures and planned revisions to those procedures, and advising
the directors on auditing matters and financial reporting issues.
Deloitte LLP, who was appointed by the shareholders of Information Services Corporation upon the recommendation of the Audit
Committee and the Board of Directors’ approval, have performed an independent audit of the consolidated financial statements and
their report follows. The auditors have full and unrestricted access to the Audit Committee to discuss their audit and related findings.
Jeff Stusek
President and Chief Executive Officer
March 14, 2017
Shawn B. Peters, CPA, CA
Vice-President, Finance & Technology
and Chief Financial Officer
42
2016 ISC® Annual Report | Consolidated Financial Statements
Independent Auditor’s Report
To the Shareholders of Information Services Corporation
We have audited the accompanying consolidated financial statements of Information Services Corporation, which comprise the
consolidated statements of financial position as at December 31, 2016 and December 31, 2015, and the consolidated statements of
comprehensive income, changes in equity and cash flows for the years then ended, and a summary of significant accounting policies
and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with
International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the
preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our
audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical
requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements
are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material
misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the
auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements
in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies
used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Information
Services Corporation as at December 31, 2016 and December 31, 2015, and its financial performance and its cash flows for the years
then ended in accordance with International Financial Reporting Standards.
Chartered Professional Accountants
Licensed Professional Accountants
March 14, 2017
Regina, Saskatchewan
43
2016 ISC® Annual Report | Consolidated Financial Statements Consolidated Statements of Financial Position
(thousands of CAD dollars)
Assets
Current assets
Cash
Trade receivables
GST/HST receivable
Income tax recoverable
Prepaid expenses
Total current assets
Non-current assets
Deferred tax asset
Property, plant and equipment
Intangible assets
Goodwill
Investment in associate
Total assets
Liabilities
Current liabilities
Trade and other payables
Advances from customers
Dividend payable
Long-term debt – current portion
Deferred revenue
Income tax payable
Provision for early retirement plan
Total current liabilities
Non-current liabilities
Deferred revenue
Deferred tax liability
Long-term debt
Total non-current liabilities
Shareholders’ equity
Share capital
Equity settled employee benefit reserve
Retained earnings
Total shareholders’ equity
Total liabilities and shareholders’ equity
See Note 20 for Commitments and Contingencies
See accompanying Notes
Note
As at December 31,
2016
As at December 31,
2015
4
$
6
8
9
18
11
10
6
10
13
7
$
$
$
33,683
4,243
484
1,518
1,872
41,800
40,472
5,402
24,495
13,141
6,011
131,321
6,783
4,135
3,500
1,500
438
–
7
16,363
19
3,683
21,935
25,637
19,955
599
68,767
89,321
131,321
$
$
$
$
36,571
3,661
553
676
1,719
43,180
44,310
6,637
25,647
13,141
3,362
136,277
11,395
4,325
3,500
1,500
463
286
21
21,490
251
4,034
23,060
27,345
19,955
223
67,264
87,442
136,277
APPROVED BY THE BOARD OF DIRECTORS ON MARCH 14, 2017:
Joel Teal
Director
44
Anthony Guglielmin
Director
2016 ISC® Annual Report | Consolidated Financial Statements
Consolidated Statements of Comprehensive Income
Year Ended December 31,
(thousands of CAD dollars)
Revenue
Expenses
Wages and salaries
Information technology services
Depreciation and amortization
Occupancy costs
Professional and consulting services
Cost of goods sold
Financial services
Project initiatives
Other
Total expenses
Net income before items noted below
Finance expense (income)
Interest income
Interest expense
Net finance expense (income)
Share of profit in associate
Change in contingent consideration
Income before tax
Income tax expense
Net income and total comprehensive income
Earnings per share ($ per share)
Total, basic
Total, diluted
See accompanying Notes
Note
17
8, 9
4
11
14, 18
6
12
12
2016
$
88,375
$
28,008
9,602
8,429
4,992
5,564
3,586
2,362
3,214
2,172
67,929
20,446
(256)
577
321
1,654
(1,000)
20,779
5,276
15,503
0.89
0.87
$
$
$
$
$
$
2015
78,318
24,846
9,688
5,713
4,563
3,569
955
2,362
2,521
1,513
55,730
22,588
(331)
236
(95)
62
–
22,745
6,828
15,917
0.91
0.90
Consolidated Statements of Changes in Equity
(thousands of CAD dollars)
Note
Retained Earnings
Share Capital
Equity Reserve
Total
Balance at January 1, 2015
Net income and total comprehensive income
Stock option expense
Dividend declared
Balance at December 31, 2015
Balance at January 1, 2016
Net income and total comprehensive income
Stock option expense
Dividend declared
Balance at December 31, 2016
See accompanying Notes
7
7
$ 65,347
15,917
–
(14,000)
$ 67,264
$ 67,264
15,503
–
(14,000)
$ 68,767
$
$
$
$
19,955
–
–
–
19,955
19,955
–
–
–
19,955
$
$
$
$
50
–
173
–
223
223
–
376
–
599
$ 85,352
15,917
173
(14,000)
$ 87,442
$ 87,442
15,503
376
(14,000)
$ 89,321
45
2016 ISC® Annual Report | Consolidated Financial Statements
Consolidated Statements of Cash Flows
(thousands of CAD dollars)
Operating
Net income
Add: Charges not affecting cash
Depreciation
Amortization
Income tax expense recognized in net income
(Gain) loss on disposal of property, plant and equipment
Loss on disposal of intangible asset
Recovery of MARS project expenses
Net finance expense (income)
Stock option expense
Share of profit in associate
Net change in non-cash working capital
Income tax paid
Net cash flow provided by operating activities
Investing
Interest received
Cash received on disposal of property, plant and equipment
Additions to property, plant and equipment
Additions to intangible assets
Cash outflow on acquisition of subsidiary
Cash outflow on investment in associate
Net cash flow used in investing activities
Financing
Interest paid
Repayment of long-term debt
Proceeds of long-term debt
Contingent consideration paid
Dividend paid
Net cash flow (used in) provided by financing activities
(Decrease) increase in cash
Cash, beginning of year
Cash, end of year
See accompanying Notes
Note
2016
2015
Year Ended December 31,
$
15,503
$
15,917
8
9
9
7
19
1,791
6,638
5,276
(1)
–
232
321
376
(1,654)
600
(2,918)
26,164
256
2
(851)
(5,848)
–
(995)
(7,436)
(491)
(1,125)
–
(6,000)
(14,000)
(21,616)
(2,888)
36,571
33,683
$
$
1,828
3,885
6,828
1
4
232
(95)
173
(62)
4,803
(2,776)
30,738
331
2
(1,790)
(2,656)
(20,678)
(3,300)
(28,091)
(282)
(375)
15,000
–
(14,000)
343
2,990
33,581
36,571
46
2016 ISC® Annual Report | Consolidated Financial Statements
1 Status of the Company
Information Services Corporation (“ISC” or the “Company”)
was created by Order in Council as Saskatchewan Land
Information Services Corporation, a Saskatchewan provincial
Crown corporation, on January 1, 2000, pursuant to The Crown
Corporations Act, 1993 (Saskatchewan). On November 1, 2000,
the Company’s name was changed by Order in Council to
Information Services Corporation of Saskatchewan.
On May 30, 2013, The Information Services Corporation Act
(the “ISC Act”) was proclaimed and resulted in The Crown
Corporations Act, 1993 (Saskatchewan) ceasing to apply to the
Company. The Company was continued under The Business
Corporations Act (Saskatchewan) as Information Services
Corporation, a corporation with share capital. ISC’s wholly
owned subsidiary, ISC Saskatchewan Inc. (“ISC Sask”), was
incorporated on May 30, 2013, under The Business Corporations
Act (Saskatchewan) to hold certain assets which are dedicated
to the operation of the public registries.
On July 9, 2013, the Company became publicly listed on the
Toronto Stock Exchange (“TSX”) under the symbol “ISV”. The
Company is the provider of registry and information services
and is the exclusive provider of the Land Titles Registry, Land
Surveys Directory, Geomatics, Personal Property Registry
and Corporate Registry (collectively, the “Registries”) in
Saskatchewan. The registered office of the Company is
300 – 10 Research Drive, Regina, Saskatchewan, S4S 7J7.
On December 15, 2014, ISC Enterprises Inc. (“ISC Ent”), a
wholly owned subsidiary of ISC, was incorporated under The
Canada Business Corporations Act. ISC Ent currently acts as a
holding company for all of ISC’s business interests outside of
Saskatchewan.
On September 2, 2015, the Company completed its acquisition
of 30 per cent of the issued and outstanding voting common
shares of OneMove Technologies Inc. (“OneMove”) for
CAD$3.3 million. OneMove and its econveyance™ software is
an industry-leading, online, subscription-based solution that
offers a secure and efficient means of managing real property
transactions. The econveyance™ solution is available in British
Columbia, Alberta and Ontario. In 2016, OneMove purchased and
amalgamated with Dye & Durham Corporation (see Note 11).
On October 1, 2015, the Company completed the acquisition
of all of the issued and outstanding common shares of ESC
Corporate Services Ltd. (“ESC”), a leading technology-enabled
corporate services provider. ESC is a Canadian company with
offices in Toronto and Montreal. The Company completed the
transaction through its wholly owned subsidiary, ISC Ent, with
$21.0 million of the purchase price, subject to working capital
adjustment, paid on closing of the transaction and a further
$6.0 million of contingent consideration that was paid in the
form of a performance-based, 12-month earnout.
2 Basis Of Presentation
Statement of compliance
These consolidated financial statements have been prepared
in accordance with International Financial Reporting Standards
(“IFRS”), as issued by the International Accounting Standards
Board (“IAS Board”).
The Company’s Board of Directors (the “Board”) authorized
the consolidated financial statements for the year ended
December 31, 2016, for issue on March 14, 2017.
Basis of measurement
The consolidated financial statements have been prepared
on a going concern basis under the historical cost basis except
for financial instruments that are measured at fair value at the
end of each reporting period, as explained in the accounting
policies below.
Historical cost is generally based on the fair value of the
consideration given in exchange for goods and services.
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date, regardless of
whether that price is directly observable or estimated using
another valuation technique. In estimating the fair value of
an asset or a liability, the Company takes into account the
characteristics of the asset or liability if market participants
would take those characteristics into account when pricing
the asset or liability at the measurement date. Fair value for
measurement and/or disclosure purposes in these consolidated
financial statements is determined on such a basis, except for
share-based payment transactions that are within the scope of
IFRS 2 — Share-based Payment and measurements that have
some similarities to fair value but are not fair value, such as net
realizable value in International Accounting Standards (“IAS”)
2 — Inventories or value in use in IAS 36 — Impairment of Assets.
In addition, for financial reporting purposes, fair value
measurements are categorized into Level 1, 2 or 3 based on the
degree to which the inputs to the fair value measurements are
observable and the significance of the inputs to the fair value
measurement in its entirety, which are described as follows:
• Level 1 inputs are quoted prices (unadjusted) in active
markets for identical assets or liabilities that the entity can
access at the measurement date;
• Level 2 inputs are inputs, other than quoted prices included
within Level 1, that are observable for the asset or liability,
either directly or indirectly; and
• Level 3 inputs are unobservable inputs for the asset or liability.
47
2016 ISC® Annual Report | Notes to the Consolidated Financial Statements Functional and presentation currency
These consolidated financial statements are presented
in Canadian dollars (“CAD”), which is the Company’s
functional currency.
Basis of consolidation
These consolidated financial statements incorporate the
financial statements of the Company and its wholly owned
subsidiaries: ISC Sask, ISC Ent and ESC. All intragroup assets
and liabilities, equity, income, expenses and cash flows are
eliminated in full on consolidation.
The preparation of the consolidated financial statements in
conformity with IFRS requires management to make estimates
and underlying assumptions and judgments that affect the
accounting policies and reported amounts of assets, liabilities,
revenue and expenses. Estimates and underlying assumptions
are reviewed on an ongoing basis.
Use of estimates and judgments
Actual results may differ from these estimates. Revisions to
accounting estimates are recognized in the period in which the
estimates are revised and in any future periods affected. Critical
accounting estimates and judgments are those that have a
significant risk of causing material adjustment. Management
believes that the following are the significant accounting
estimates and judgments used in the preparation of the
consolidated financial statements.
Significant items subject to estimates and underlying
assumptions include:
• recoverability of deferred tax asset (Note 6);
• the carrying value, impairment and estimated useful lives of
property, plant and equipment (Note 8); and
• the carrying value, impairment and estimated useful lives of
intangible assets (Note 9) and goodwill (Note 18).
The relevant accounting policies in Note 3 contain further
details on the use of these estimates and assumptions.
3 Summary of Significant Accounting Policies
Property, plant and equipment
Property, plant and equipment are recorded at cost less
accumulated depreciation and any provisions for impairment.
Cost includes expenditures that are directly attributable
to the acquisition of the asset. The cost of self-developed
assets includes materials, services, direct labour and directly
attributable overhead. Interest costs associated with major
capital and development projects are capitalized during the
development period. Depreciation of assets under development
will commence once they are operational and available for use.
The costs of maintenance, repairs, renewals or replacements
which do not extend productive life of an asset are charged
to operations when incurred. The costs of replacements and
improvements which extend productive life are capitalized.
The cost of replacing part of an item of property, plant and
equipment is recognized in the carrying amount of the item
if it is probable that the future economic benefits embodied
within the part will flow to the Company and its cost can be
measured reliably. The carrying amount of the replaced part
is derecognized.
Depreciation is recorded on property, plant and equipment
on the straight-line basis, which is the cost of the asset less its
residual value over the estimated productive life of each asset.
The useful life of each asset is as follows:
Leasehold improvements
Office furniture
Office equipment
Hardware
10 years
10 years
5 years
3 years
The estimated useful life and depreciation methods are
reviewed at the end of each annual reporting period, with the
effect of any changes in estimate being accounted for on a
prospective basis. Gains or losses arising from the disposition
or retirement of an item of property, plant and equipment are
measured at the difference between the net disposal proceeds
and the carrying amount of the asset and are recognized in the
consolidated statements of comprehensive income.
Intangible assets
Intangible assets acquired separately
Finite intangible assets acquired separately are carried at
cost less accumulated amortization and any accumulated
impairment losses. Amortization is provided for on the straight-
line basis over the corresponding estimated useful life of the
applicable assets. The estimated useful life and amortization
methods are reviewed at the end of each annual reporting
period, with the effect of any changes in estimate being
accounted for on a prospective basis. Gains or losses arising
from derecognition of an intangible asset are measured at the
difference between the net disposal proceeds and the carrying
amount of the asset and are recognized in the statements of
comprehensive income.
Amortization on externally acquired system enhancements,
such as corporate registry, contracts and corporate assets,
including software, is recorded on the straight-line basis over
the estimated productive life.
System enhancements (“SE”)
– externally acquired
3-5 years
48
2016 ISC® Annual Report | Notes to the Consolidated Financial Statements Internally generated intangible assets
Research expenditures are expensed and development
expenditures are recognized only if they meet the recognition
criteria for internally generated intangible assets as provided
under IFRS. The amount initially recognized for an internally
generated intangible asset is the sum of the expenditures
incurred from the date when the intangible asset first meets
the recognition criteria. If no internally generated intangible
asset can be recognized, development expenditures are
charged to operations in the period in which they are incurred.
Internally generated intangible assets include: land titles
automated network delivery (“LAND”), geographic information
system (“GIS”), system enhancements, corporate assets,
brand, customer relations, non-compete clause and assets
under development.
An internally generated intangible asset arising from
development is recognized if, and only if, all of the following
have been demonstrated:
• the technical feasibility of completing the intangible asset so
that it will be available for use or sale;
• the intention to complete the intangible asset and use or
sell it;
• the ability to use or sell the intangible asset;
• how the intangible asset will generate probable future
economic benefits;
• the availability of adequate technical, financial and other
resources to complete the development and to use or sell
the intangible asset; and
• the ability to measure reliably the expenditure attributable
to the intangible asset during its development.
Subsequent to initial recognition, an internally generated
intangible asset is reported at cost less accumulated
amortization and accumulated impairment losses, on the
same basis as an intangible asset acquired separately. The
estimated useful life and amortization methods for these assets
are reviewed at the end of each annual reporting period, with
the effect of any changes in estimate being accounted for on
a prospective basis. Amortization is recorded on internally
generated intangible assets on the straight-line basis over the
estimated productive life.
LAND data conversion
LAND development
Internally generated
– system enhancement
GIS
Corporate assets
Assets under development
15 years
7 years
3-7 years
5 years
3-5 years
N/A (not ready for use)
Upon acquisition of ESC, the Company also acquired the
following internally generated intangible assets that are not
included in the above categories. These assets also record
amortization on the straight-line basis over the estimated
productive life.
Customer relations
Brand
Non-compete clause
5-15 years
15 years
3 years
Impairment of tangible and intangible assets
At each statement of financial position date, ISC reviews
the carrying amounts of its tangible and intangible assets to
determine whether there is any indication that those assets
have suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss (if any). Where
it is not possible to estimate the recoverable amount of an
individual asset, ISC estimates the recoverable amount of the
cash-generating unit to which the asset belongs. Where a
reasonable and consistent basis of allocation can be identified,
corporate assets are also allocated to individual cash-generating
units; otherwise, they are allocated to the smallest group of
cash-generating units for which a reasonable and consistent
allocation basis can be identified. Intangible assets not
yet available for use are tested for impairment annually in
December each year and whenever there is an indication that
the asset may be impaired.
The recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset for which
the estimates of future cash flows have not been adjusted. If
the recoverable amount of an asset (or cash-generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (or cash-generating unit) is reduced to
its recoverable amount. An impairment loss is recognized
immediately in comprehensive income.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (or cash-generating unit) is increased to
the revised estimate of its recoverable amount, but so that
the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment
loss been recognized for the asset (or cash-generating unit)
in prior years. A reversal of an impairment loss is recognized
immediately in comprehensive income.
49
2016 ISC® Annual Report | Notes to the Consolidated Financial Statements
Goodwill
Goodwill arising on the acquisition of a business represents
the excess of the purchase price over the net fair value of
the identifiable assets, liabilities and contingent liabilities of
the acquired business recognized at the date of acquisition.
Goodwill is initially recognized as an asset at cost and is
subsequently measured at cost less any accumulated
impairment losses.
Impairment of goodwill
For the purpose of impairment testing, goodwill is allocated
to the cash-generating units expected to benefit from the
synergies of the combination. Cash-generating units are tested
for impairment annually or more frequently if events indicate
that the units may be impaired. The Company’s reporting
segments that correspond to the cash-generating units for
impairment testing are disclosed in Note 17.
When the recoverable amount of the cash-generating unit is
less than the carrying amount of the cash-generating unit,
the impairment loss is allocated first to reduce the carrying
amount of any goodwill allocated to the unit and then to the
other assets of the cash-generating unit on a pro rata basis. An
impairment loss recognized for goodwill is not reversed in a
subsequent year. The Company performs its annual review of
goodwill in December each year.
Business acquisition
Business acquisitions are accounted for using the acquisition
method. The consideration transferred in a business
combination is measured at fair value, which is calculated at the
date of acquisition as the sum of the fair values of the assets
transferred by the Company and the liabilities incurred by the
Company to the former owners of the acquiree in exchange for
the control of the acquiree. Acquisition costs are recognized in
profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and the
liabilities assumed are recognized at their fair value, except the
deferred tax assets and liabilities are recognized and measured
in accordance with IAS 12 — Income Taxes.
Goodwill is measured as the excess of the sum of the
consideration transferred, the amount of any non-controlling
interests in the acquiree and the fair value of the acquirer’s
previously held equity interest in the acquiree, if applicable,
over the net of the identifiable assets acquired and the liabilities
assumed at date of acquisition.
Goodwill arose in the acquisition of ESC because the cost of
the combination included a control premium. In addition, the
consideration paid for the combination effectively included
amounts in relation to the benefit of expected synergies,
revenue growth, future market development and the assembled
workforce of ESC. These benefits are not recognized separately
from goodwill because they do not meet the recognition criteria
for identifiable intangible assets. None of the goodwill arising on
these acquisitions is expected to be deductible for tax purposes.
When the consideration transferred by the Company in a
business combination includes assets or liabilities resulting
from a contingent consideration arrangement, the contingent
consideration is measured at its acquisition-date fair value and
included as part of the consideration transferred in a business
combination. Changes in the fair value of the contingent
consideration that qualify as measurement period adjustments
are adjusted retrospectively, with corresponding adjustments
against goodwill. Measurement period adjustments are
adjustments that arise from additional information obtained
during the ‘measurement period’ (which cannot exceed one
year from the acquisition date) about facts and circumstances
that existed at the acquisition date.
The subsequent accounting for changes in fair value of the
contingent consideration that do not qualify as a measurement
period adjustment depends on how the contingent
consideration is classified. Contingent consideration that is
classified as equity is not measured at subsequent reporting
dates and its subsequent settlement is accounted for within
equity. Contingent consideration that is classified as an asset
or a liability is remeasured at subsequent reporting dates in
accordance with IAS 39 — Financial Instruments, Recognition
and Measurement, or IAS 37 — Provisions, Contingent Liabilities
and Contingent Assets, as appropriate, with the corresponding
gain or loss recognized in net earnings or loss.
Leases
Leases are classified as finance leases whenever the terms
of the lease transfer substantially all the risks and rewards of
ownership to the Company. ISC has determined that all leases
entered into by the Company are classified as operating leases,
as the risks and rewards of ownership have not been transferred
to the Company.
Operating lease payments are recognized as an expense on the
straight-line basis over the lease term, except where another
systematic basis is more representative of the time pattern in
which economic benefits from the leased asset are consumed.
In the event that lease incentives are received to enter into
operating leases, such incentives are recognized as a liability. The
aggregate benefit of incentives is recognized as a reduction of
rental expense on the straight-line basis, except where another
systematic basis is more representative of the time pattern in
which economic benefits from the leased asset are consumed.
50
2016 ISC® Annual Report | Notes to the Consolidated Financial Statements Revenue recognition
Revenue from the Registries and other services are recognized
in the accounts when services are rendered. Amounts received
in advance of Geomatics services being performed are reflected
as deferred revenue and are recorded as revenue when services
are rendered. Amounts received from customers in advance
are reflected as ‘advances from customers’ and are recorded as
revenue when services are rendered.
Revenue from the sale of goods is recognized when all the
following conditions are satisfied:
• the Company has transferred to the buyer the significant risks
and rewards of ownership of the goods;
• the Company retains neither continuing managerial
involvement to the degree usually associated with ownership
nor effective control over the goods sold;
• the amount of revenue can be measured reliably;
•
it is probable that the economic benefits associated with the
transaction will flow to the Company; and
• the costs incurred or to be incurred in respect of the
transaction can be measured reliably.
Revenue from fixed-price contracts to provide services is
recognized by reference to the stage of completion as defined
in the contract when the outcome of the contract can be
estimated reliably. The outcome of a contract can be estimated
reliably when all of the following conditions are satisfied:
• the amount of revenue can be measured reliably;
•
it is probable that the economic benefits associated with the
transaction will flow to the Company;
• the stage of completion of the transaction at the end of the
reporting period can be measured reliably; and
• the costs incurred for the transaction and the costs to
complete the transaction can be measured reliably.
Revenue from time and material contracts is recognized at
the contractual rates as labour hours are delivered and direct
expenses are incurred.
Employee benefits
The Company provides pension plans for all eligible employees.
Certain Saskatchewan employees hired prior to October 1,
1977, participate in the Public Service Superannuation Plan, a
defined benefit plan. Pension obligations for this plan are the
responsibility of the General Revenue Fund of the Province
of Saskatchewan.
Saskatchewan employees hired after October 1, 1977, make
contributions to the Public Employees Pension Plan, a defined
contribution plan. The Company’s obligations are limited to
making regular payments to the plans for current services.
These contributions are expensed.
ESC employees make contributions to a defined contribution
plan. The Company’s obligations are limited to making regular
payments to the plans for current services. These contributions
are expensed.
Government grants
Government grants are not recognized until there is reasonable
assurance that the Company will comply with the conditions
attached to them and that the grants will be received.
Government grants whose primary condition is that the Company
should purchase, construct or otherwise acquire non-current
assets are recognized as deferred income in the statements of
financial position and transferred to profit on a systematic and
rational basis over the useful life of the related assets.
Other government grants are recognized as income over the
periods necessary to match them with the costs for which they
are intended to compensate, on a systematic basis. Government
grants that are receivable as compensation for expenses or
losses already incurred or for the purpose of giving immediate
financial support to the Company with no future related costs
are recognized in profit or loss in the period in which they
become receivable.
Other government grants are netted against the related
expenses as services are performed.
Financial instruments
Non-derivative financial instruments
Non-derivative financial instruments are recognized when
the Company becomes a party to the contractual provisions
of the instrument. Financial assets are derecognized when
the rights to receive cash flows from the assets have expired
or have been transferred and the Company has transferred
substantially all risks and rewards of ownership. Non-derivative
financial instruments are recognized initially at fair value plus, for
instruments not at fair value through profit or loss, any directly
attributable transaction costs.
At initial recognition, all financial instruments are classified in one
of the following categories depending on the purpose for which
the instruments were acquired.
51
2016 ISC® Annual Report | Notes to the Consolidated Financial Statements Financial assets and liabilities at fair value
through profit or loss
Financial assets and liabilities at fair value through profit or loss
(“FVTPL”) are financial assets and liabilities held for trading or
that are designated as such by management. Such assets are
held for trading if they are acquired principally for the purpose
of selling in the short term. These assets and liabilities are initially
recognized, and subsequently carried, at fair value, with changes
recognized in the consolidated statements of comprehensive
income. Transaction costs are expensed. Assets and liabilities in
this category include cash, deferred share unit liability and the
contingent consideration.
Loans and receivables
Loans and receivables (“LAR”) are subsequently measured
at amortized cost using the effective interest method, less
any impairment losses, with interest expense recognized on
an effective yield basis. Assets in this category include trade
receivables.
Other financial liabilities
Other financial liabilities (“OFL”) are initially measured at fair
value and are subsequently measured at amortized cost using
the effective interest method, with interest expense recognized
on an effective yield basis. Liabilities in this category include
trade and other payables, dividend payable, provision for early
retirement plan and long-term debt.
Borrowing costs
Borrowing costs directly attributable to the purchase,
construction or production of qualifying assets, which are assets
that necessarily take a substantial period of time to get ready for
their intended use or sale, are added to the cost of those assets,
until such time as the assets are substantially ready for their
intended use or sale.
Investment income earned on the temporary investment of
specific borrowings pending their expenditure on qualifying
assets is deducted from the borrowing costs eligible for
capitalization.
All other borrowing costs are recognized in profit or loss in the
period in which they are incurred.
Provisions
Provisions are recognized when the Company has a present
obligation (legal or constructive) as a result of a past event,
it is probable that the Company will be required to settle the
obligation and a reliable estimate can be made of the amount
of the obligation. The amount recognized as a provision is the
best estimate of the consideration required to settle the present
obligation at the end of the reporting period, taking into account
the risks and uncertainties surrounding the obligation. Where a
provision is measured using the cash flows estimated to settle
the present obligation, its carrying amount is the present value
of those cash flows.
When some or all of the economic benefits required to settle
a provision are expected to be recovered from a third party,
the receivable is recognized as an asset if it is virtually certain
that reimbursement will be received and the amount of the
receivable can be measured reliably.
Share-based compensation plan
A deferred share unit (“DSU”) plan has been approved by
the Board, which is described in Note 7. The Company has
recognized an obligation at an estimated amount based on
the fair value of the DSUs as of the grant date using the Black-
Scholes option-pricing model. At the end of each reporting
period, the estimates are re-assessed based on the fair value of
the DSUs as of the reporting period. Compensation expense is
recognized in proportion to the amount of DSUs vested. The
DSUs can be settled in cash or shares that are purchased from
the open market by a broker. As a result, at the end of each
reporting period, the estimates are re-assessed based on the fair
value of the DSUs with any change in estimate recognized in the
obligation and expense.
A stock option plan has been approved by the Board and
shareholders, which is described in Note 7. The Company has
recognized an obligation at an estimated amount based on
the fair value of the stock options as of the grant date using
the Black-Scholes option-pricing model. The share-based
compensation expense is recognized in proportion to the amount
of stock options vested. This expense for the reporting period
also represents the total carrying amount of the equity settled
employee benefit reserve arising from these stock options.
Investment in associate
The Company has recorded its investment in associate using
the equity method. The carrying amount of the investment
in associate is calculated at cost plus the entity’s subsequent
share of the associate’s comprehensive income. If, at the end
of a reporting period, there is an indication that an investment
may be impaired, the entire carrying amount of the investment
is tested for impairment. If the carrying amount of the
investment is found to be less than its recoverable amount, the
carrying amount is reduced to its recoverable amount and an
impairment loss is immediately recognized in profit or loss.
52
2016 ISC® Annual Report | Notes to the Consolidated Financial Statements Changes in accounting policies
The Company has adopted the following new and revised standards, along with any consequential amendments, effective January 1,
2016, or on such date as they became applicable. These changes were made in accordance with the applicable transitional provisions.
The adoption of these changes did not require any adjustments to the consolidated financial statements.
Standard
Description
IFRS 7 — Financial Instrument
Disclosures (transition)
Amends certain criteria for grouping assets and liabilities into classes and certain disclosure
requirements.
IFRS 12 — Disclosure of
Interests in other entities
A consolidated disclosure standard requiring a wide range of disclosures about an entity’s interest
in subsidiaries, joint arrangement and associates.
Amendments to IAS 1 —
Disclosure Initiative
Amends IAS 1 — Presentation of Financial Statements to address some of the concerns expressed
about existing presentation and disclosure requirements and to ensure entities are able to use
judgment when applying the Standard.
Amendments to IAS 16 and
IAS 38 — Clarification of
Acceptable Methods of
Depreciation and Amortization
Amends IAS 16 — Property, Plant and Equipment and IAS 38 — Intangible Assets to add guidance
that expected future reductions in the selling price of an item that was produced using an asset
could indicate the expectation of technological or commercial obsolescence of the asset, which,
in turn, might reflect a reduction of the future economic benefits embodied in the asset.
Recent accounting pronouncements
The IAS Board and International Financial Reporting Interpretations Committee issued the following new standards and
amendments to standards and interpretations, which become effective for future periods.
Proposed Standard
Description
Amendment to IAS 7 —
Statements of Cash Flows
Disclosure of changes in liabilities arising from financing activities. This
amendment is currently being assessed by the Company to determine
the impact.
Effective Date
January 1, 2017
Amendment to IAS 12 —
Income Taxes
Clarification of recognizing a deferred tax asset that is related to a debt
instrument measured at fair value. This amendment is currently being assessed
by the Company to determine the impact.
January 1, 2017
Amendment to IFRS 2 —
Share-based Payment
The amendments provide requirements on the accounting for the effects of
vesting and non-vesting conditions on the measurement of cash-settled share-
based payments; share-based payment transactions with a net settlement
feature for withholding tax obligations; and a modification to the terms and
conditions of a share-based payment that changes the classification of the
transaction from cash-settled to equity-settled. This amendment is currently
being assessed by the Company to determine the impact.
IFRS 9 — Financial Instruments The new Standard replaces the current multiple classification and measurement
models for financial assets and liabilities with a single model that has only two
classifications: amortized cost and fair value. Under IFRS 9, where the fair value
option is applied to financial liabilities, any change in fair value resulting from an
entity’s own credit risk is recorded through other comprehensive income (loss)
rather than net income (loss). The new Standard also introduces a credit loss
model for evaluating impairment of financial assets. This Standard is currently
being assessed by the Company to determine the impact.
January 1,
2018
January 1,
2018
53
2016 ISC® Annual Report | Notes to the Consolidated Financial Statements Proposed Standard
Description
IFRS 15 — Revenue from
Contracts with Customers
IFRS 16 — Leases
The Standard provides for a single model that applies to contracts with
customers as well as two revenue recognition approaches: at a point in time
or over time. The model features a contract-based, five-step analysis of
transactions to determine whether, when and how much revenue is recognized.
The new Standard applies to contracts with customers. It does not apply to
insurance contracts, financial instruments or leases, which are within the scope
of other IFRSs. This Standard is currently being assessed by the Company to
determine the impact.
IFRS 16 — Leases replaces IAS 17 — Leases and sets out the principles for the
recognition, measurement, presentation and disclosure of leases for both
parties to a contract (i.e., the customer (‘lessee’) and the supplier (‘lessor’)).
The Company is currently assessing the impact on our consolidated financial
statements along with the timing of our adoption of IFRS 16. The Company
believes that, on adoption of the Standard, there will be an increase to assets
and liabilities, as the Company will be required to record a right-of-use asset
and a corresponding lease liability on the consolidated statements of financial
position, as well as a decrease to operating costs, an increase to finance costs
(due to accretion of the lease liability) and an increase to depreciation and
amortization (due to amortization
of the right-of-use asset).
Effective Date
January 1,
2018
January 1,
2019
4 Cash
Cash is held on deposit and certain accounts earn interest
at a range of 0.50 per cent to prime less 1.95 percent.
Interest revenue earned in 2016 is $256 thousand (2015 –
$331 thousand).
5 Seasonality
Our Registries segment experiences moderate seasonality,
primarily because Land Titles revenue fluctuates in line with
real estate transaction activity in Saskatchewan. Typically, our
second and third quarters generate higher revenue during the
fiscal year when real estate activity is traditionally highest. Our
Services segment is sufficiently diversified with little seasonality
to its revenue performance. However, some smaller categories
of products or services can have some seasonal variation,
slightly increasing during the second and fourth quarters.
Expenses are generally consistent from quarter to quarter, but
can fluctuate due to the timing of project-related expenses.
6 Tax Provision
The Company is subject to federal and provincial income taxes
at an estimated combined statutory rate of 27.0 per cent
(2015 – 27.0 per cent).
The increase in tax bases of certain of the Company’s assets,
upon the change in tax status related to the Company’s Initial
Public Offering, created a deferred tax asset. Upon the change
in status, a new taxation year commenced and the Company’s
properties were deemed to have been disposed of at fair
market, while the Company was still exempt from tax, and
have been reacquired at that amount at the commencement
of the new taxation year. Consequently, the Company can
amortize and deduct the cost of depreciable tangible and
intangible properties in computing its income for tax purposes
in accordance with the rules in the Income Tax Act (Canada).
As well, upon acquisition of ESC, the value of the acquired assets
was greater on an accounting basis than on a tax basis, resulting
in a deferred tax liability.
(thousands of CAD dollars)
Year Ended December 31,
2015
2016
Current tax expense
Current tax on earnings for the year $ 1,790
$ 1,862
Deferred tax expense
Current period expense
Income tax expense
3,486
$ 5,276
4,966
$ 6,828
54
2016 ISC® Annual Report | Notes to the Consolidated Financial Statements
Income tax expense varies from the amounts that would be computed by applying the statutory income tax rate to earnings before
taxes for the following reasons:
(thousands of CAD dollars)
Net income before tax
Combined statutory income tax rate
Expected income tax expense
Increase (decrease) in income tax resulting from:
Non-deductible expenses/non-taxable income
Tax pools not previously recognized
Other
Income tax expense
Effective income tax rate
Year Ended December 31,
2015
2016
$ 20,779
27.0%
5,610
(72)
(264)
2
5,276
25.4%
$
$
22,745
27.0%
6,141
621
–
66
$
6,828
30.0%
Income tax effects of temporary differences that give rise to significant portions of deferred income tax assets and liabilities
are as follows:
(thousands of CAD dollars)
January 1, 2016
ESC Purchase
Price Allocation
Taxes Credited (Charged) to
Net Earnings Due to Current
Period Temporary Differences December 31, 2016
Deferred tax asset
Intangible assets
Property, plant and equipment
Non-capital losses
Other assets
Deferred tax liability
Other liabilities
$ 37,160
129
6,724
297
$ 44,310
$ 4,034
Recorded on the consolidated statements
of financial position as follows:
Deferred tax asset
Deferred tax liability
$ 44,310
4,034
$
$
$
$
–
–
–
–
–
–
–
–
$
$
$
(2,498)
134
(1,046)
147
(3,263)
$ 34,662
263
5,678
444
$ 41,047
224
$
4,258
$
(3,838)
(351)
$ 40,472
3,683
(thousands of CAD dollars)
January 1, 2015
ESC Purchase
Price Allocation
Taxes Credited (Charged) to
Net Earnings Due to Current
Period Temporary Differences
December 31, 2015
Deferred tax asset
Intangible assets
Property, plant and equipment
Non-capital losses
Other assets
Deferred tax liability
Other liabilities
$ 38,748
20
10,345
256
$ 49,369
$
–
Recorded on the consolidated statements
of financial position as follows:
Deferred tax asset
Deferred tax liability
$ 49,369
–
$
$
$
$
–
–
–
–
–
4,127
–
4,127
$
$
$
$
(1,588)
109
(3,621)
41
(5,059)
(93)
(5,059)
(93)
$
37,160
129
6,724
297
$ 44,310
$
4,034
$ 44,310
4,034
55
2016 ISC® Annual Report | Notes to the Consolidated Financial Statements
A summary of the status of the DSU plan and the changes
within the period ended December 31, 2016, are as follows:
DSUs balance at December 31, 2015
DSUs granted August 15, 2016
DSUs/DEUs redeemed August 18, 2016
Total notional dividend equivalents
declared to date
Balance at December 31, 2016
Weighted
Average
Units Award Price
30,359.50
15,232.00
(3,379.45)
$
16.82
17.40
17.69
3,232.00
45,444.05
16.34
$ 16.94
The Company has recognized an obligation at an estimated
amount based on the fair value of the DSUs as of the grant
date. Compensation expense is recognized in proportion to
the amount of DSUs vested. At the end of each reporting
period, the estimates are re-assessed based on the fair value
of the DSUs as of the reporting period. Any change in estimate
is recognized in the obligation and expense at the end of the
reporting period.
Share-based compensation for the three months ended
December 31, 2016, totalled $46 thousand (2015 – $56 thousand)
and for the twelve months ended December 31, 2016, totalled
$418 thousand (2015 – $192 thousand). The total carrying amount
of the liability arising from the DSUs as of December 31, 2016,
totalled $800 thousand (2015 – $442 thousand). The liability
amount is included within Trade and other payables on the
consolidated statements of financial position.
The fair value of the DSUs at December 31, 2016, has been
calculated using the Black-Scholes option-pricing model based
on the following inputs:
Market price
Expected volatility
Risk free interest rate
Expected life (days)
Fair value at December 31, 2016
$
18.14
17.77%
1.3%
227
$ 18.14
The Company included the following variables:
• the expected volatility, which is based on a three-year
standard deviation of ISC stock price;
• the risk free rate, that is estimated based on a 10-year Canada
bond rate; and
• the maximum option term, which is the maximum duration
before expiry.
In assessing the recovery of deferred income tax assets,
management considers whether it is more likely than not that
the deferred income tax assets will be realized. The recognition
and measurement of the current and deferred tax assets and
liabilities involves dealing with uncertainties in the application
of complex tax regulations and in the assessment of the
recoverability of deferred tax assets. The ultimate realization of
deferred income tax assets is dependent upon the generation
of future taxable income during the periods in which the
temporary differences, are deductible.
Actual income taxes could vary from these estimates as a result
of future events, including changes in income tax laws or the
outcome of tax review by tax authorities and related appeals.
To the extent the final outcome is different from the amounts
initially recorded, such differences, which could be significant,
will impact the tax provision in the period in which the outcome
is determined.
No deferred tax has been recognized in respect of temporary
differences associated with investments in the Company’s
subsidiaries where the Company is in a position to control
the timing and reversal of the temporary differences, and
it is probable that such differences will not reverse in the
foreseeable future.
7 Share-Based Compensation Plan
Deferred share unit (“DSU”) plan
The Company has established a DSU plan to provide directors
and senior officers of ISC with the opportunity to acquire DSUs
in order to allow them to participate in the long-term success
of ISC and to promote a greater alignment of interests between
its directors, senior officers and shareholders. The Board may
award DSUs at its discretion from time to time in accordance
with the plan and upon such other terms and conditions as the
Board may prescribe. DSU awards vest immediately, unless an
alternate vesting schedule is specified by the Board at the time
of the award.
DSUs earn dividend equivalent units (“DEUs”) in the form
of additional DSUs at the same rate as dividends on Class A
Limited Voting Shares (“Class A Shares”). The participant is not
allowed to convert the DSUs until termination of employment/
directorship or death. The cash value of the DSUs is equivalent
to the market value of the Class A Shares when redemption
takes place.
On each applicable redemption date, the Company delivers
to each participant a cash payment equal to the redemption
value of the DSUs, or an equivalent number of Class A Shares
purchased on the TSX.
56
2016 ISC® Annual Report | Notes to the Consolidated Financial Statements
Stock option plan
ISC’s stock option plan was approved by the Board on March 19, 2014, and approved by the shareholders on May 13, 2014. The
exercise price of options issued under the stock option plan is determined by the Board at the time of the grant, but shall not be less
than the closing price for the Class A Shares on the TSX on the trading day immediately preceding the date of the grant.
Unless the Board determines otherwise, options granted will vest and become exercisable in equal tranches over the four years
following the date of the grant. Once vested, options may be exercised at any time within eight years of the date of the grant, after
which they expire and terminate.
A summary of the status of the stock option plan and the changes within the twelve months ended December 31, 2016,
are as follows:
Balance at December 31, 2015
Stock options granted August 15, 2016
Balance at December 31, 2016
Units
Exercise Price
460,750
298,509
759,259
$
$
15.49
17.40
15.41
The outstanding share options at the end of the period had a weighted average exercise price of $15.41 (2015 – $15.49).
The Company has recognized an equity reserve at an estimated amount based on the fair value of the stock options as of the
following grant dates:
Spot price
Expected volatility
Risk free interest rate
Dividend yield
Expected life (days)
Fair value
August 15, 2016
August 12, 2015
May 13, 2014
$
17.40
17.77%
1.30%
4.48%
2,920
1.35
$
$
15.04
18.97%
2.00%
4.54%
2,920
1.45
$
18.80
$
22.50%
2.50%
4.20%
2,920
2.74
$
Compensation expense is recognized in proportion to the amount of stock options vested. Share-based compensation related
to the stock option plan for the three months ended December 31, 2016, totalled $96 thousand (2015 – $88 thousand) and for
the twelve months ended December 31, 2016, totalled $376 thousand (2015 – $173 thousand). The total carrying amount of the
equity settled employee benefit reserve arising from these stock options as of December 31, 2016, totalled $599 thousand (2015 –
$223 thousand).
57
2016 ISC® Annual Report | Notes to the Consolidated Financial Statements
8 Property, Plant And Equipment
(thousands of CAD dollars)
Cost
Balance at December 31, 2014
Acquired assets
Additions
Disposals
Transfers
Balance at December 31, 2015
Additions
Disposals
Transfers
Balance at December 31, 2016
Accumulated depreciation
Balance at December 31, 2014
Depreciation
Disposals
Balance at December 31, 2015
Depreciation
Disposals
Balance at December 31, 2016
Carrying value
At December 31, 2015
At December 31, 2016
Leasehold
Improvements
Office
Furniture
Office
Equipment
Hardware
Asset under
Development
Total
$ 8,598
45
10
–
1,055
$ 9,708
15
–
957
$ 10,680
$ 4,738
940
–
$ 5,678
826
–
$ 6,504
$ 3,100
40
1
(9)
22
3,154
$
46
(14)
17
$ 3,203
$
1,994
271
(7)
$ 2,258
264
(13)
$ 2,509
$ 4,030
$ 4,176
$
896
$ 694
$
$
$
$
$
$
$
$
90
21
–
(5)
42
148
1
(6)
50
193
61
22
(4)
79
37
(6)
110
$ 2,380
37
4
(443)
19
1,997
$
24
(124)
588
$ 2,485
$
$
1,343
595
(442)
1,496
664
(124)
$ 2,036
69
83
$
501
$ 449
$
$
$
$
$
$
$
$
687
–
1,592
–
(1,138)
1,141
471
–
(1,612)
–
–
–
–
–
–
–
–
$ 14,855
143
1,607
(457)
–
$ 16,148
557
(144)
–
$ 16,561
$ 8,136
1,828
(453)
9,511
$
1,791
(143)
11,159
$
1,141
–
$ 6,637
$ 5,402
58
2016 ISC® Annual Report | Notes to the Consolidated Financial Statements
9 Intangible Assets
(thousands of CAD dollars)
Cost
Balance at December 31, 2014
Acquired assets
Additions
Impairment
Disposals
Transfers
Balance at December 31, 2015
Additions
Disposals
Transfers
Balance at December 31, 2016
Accumulated Depreciation
Balance at December 31, 2014
Amortization
Disposals
Recovery of MARS expenses
Balance at December 31, 2015
Amortization
Disposals
Recovery of MARS expenses
Balance at December 31, 2016
Carrying Value
At December 31, 2015
At December 31, 2016
System Enhancements
Externally Acquired
Internally Generated
Asset under
Development
$
$
$
$
$
$
3,407
143
–
–
(353)
39
3,236
2,092
(244)
6,838
11,922
3,013
284
(350)
–
2,947
987
(244)
–
3,690
$ 88,425
16,114
–
–
–
718
$ 105,257
–
(7,409)
(527)
$ 97,321
$ 79,623
3,601
–
232
$ 83,456
5,651
(7,409)
232
$ 81,930
$
289
$ 8,232
$
$
21,801
15,391
$
$
$
$
$
$
$
$
1,904
–
2,410
–
–
(757)
3,557
3,626
–
(6,311)
872
–
–
–
–
–
–
–
–
–
Total
$ 93,736
16,257
2,410
–
(353)
–
$ 112,050
5,718
(7,653)
–
110,115
$
$ 82,636
3,885
(350)
232
$ 86,403
6,638
(7,653)
232
$ 85,620
3,557
872
$ 25,647
$ 24,495
System enhancements externally acquired consist of:
Corporate registry
Contract acquisition
Corporate assets
December 31, 2016
Accumulated
Amortization
$ 1,910
201
1,579
$ 3,690
Net Book
Value
$ 6,239
1,809
184
$ 8,232
Cost
$ 8,149
2,010
1,763
$ 11,922
December 31, 2015
Accumulated
Amortization
$
1,414
–
1,533
$ 2,947
Cost
$
1,414
–
1,822
$ 3,236
Net Book
Value
$
$
–
–
289
289
59
2016 ISC® Annual Report | Notes to the Consolidated Financial Statements
Internally generated consists of:
GIS*
LAND** system
LAND data conversion
Customer relations
Technology
Brand
Non-compete clause
Corporate assets
Cost
$
6,705
30,685
17,262
10,844
3,937
962
371
26,555
$ 97,321
* Geographic information system
** Land titles automated network delivery
December 31, 2016
December 31, 2015
Accumulated
Amortization
Net Book
Value
$
6,705
30,685
16,687
940
1,531
75
144
25,163
$ 81,930
$
–
–
575
9,904
2,406
887
227
1,392
15,391
$
Cost
$
6,705
30,685
17,262
10,844
3,937
962
371
34,491
$ 105,257
Accumulated
Amortization
$
6,705
30,685
15,536
142
220
11
21
30,136
$ 83,456
Net Book
Value
$
$
–
–
1,726
10,702
3,717
951
350
4,355
21,801
In 2016, amortization of $5.7 million for internally generated intangible assets includes accelerated depreciation of $718 thousand
due to the reassessment of useful life of assets replaced by the new corporate registry system.
10 Debt
On September 28, 2015, the Company entered into an amended and restated credit agreement in connection with the secured
credit facilities (collectively, the “Credit Facilities”) provided by a Canadian chartered bank (the “Lender”). The aggregate amount
available under the Credit Facilities is $34.935 million comprised of (i) a $9.935 million committed revolving term loan facility (the
“Revolving Term Facility”) along with; (ii) a $10.0 million uncommitted revolving credit facility (the “Operating Facility”) to be used
for general corporate purposes; and (iii) a $15.0 million committed non-revolving reducing credit facility (the “Non-Revolving Term
Facility”) that was used by ISC to fund, in part, the acquisition of ESC.
Borrowings under the Credit Facilities will bear interest at a base rate of prime, bankers’ acceptance, letter of credit or letter of
guarantee fee (determined in accordance with the terms of the Credit Facilities), plus a margin varying between 0.7 per cent and
1.7 per cent per annum depending on the type of advance. The Company is also required to pay a commitment fee quarterly in
arrears at the rate of 0.34 per cent per annum of the unutilized portion of the Revolving Term Facility loan.
(thousands of CAD dollars)
Revolving Term Facility, which consists of a three-year committed revolving term loan facility
that matures on September 28, 2018, unless renewed prior to that time. Currently held in
a 6-month bankers’ acceptance note bearing interest at 1.100 per cent per annum that
matures on June 21, 2017, (December 31, 2015 – a bankers’ acceptance note, due June 28,
2016, bearing interest at 0.963 per cent per annum).
December 31,
2016
December 31,
2015
$
9,935
$
9,935
Operating Facility, which consists of a $10.0 million uncommitted revolving credit facility that
was undrawn at December 31, 2016. The Operating Facility is repayable by ISC upon demand
by the Lender and the Lender may terminate such Operating Facility at any time.
–
–
Non-Revolving Term Facility, repayable by ISC through quarterly payments of $375 thousand
and matures on September 28, 2018. This facility bears an interest rate of prime plus applicable
margin, which at December 31, 2016, equates to 2.7 per cent plus 0.7 per cent for a rate of
3.4 per cent per annum (December 31, 2015 – 2.7 per cent plus 0.7 per cent for a rate of
3.4 per cent per annum).
Current portion
Long-term portion
Total long-term debt
1,500
12,000
$ 23,435
1,500
13,125
$ 24,560
60
2016 ISC® Annual Report | Notes to the Consolidated Financial Statements
The Revolving Term Facility and the Operating Facility under
the Credit Facilities contain financial covenants which require
the Company to maintain a ratio of Funded Debt to Earnings
Before Interest, Taxes, Depreciation and Amortization
(“EBITDA”) (defined in the Credit Facilities) of less than 2:1
and a Fixed Charge Coverage ratio (as defined in the Credit
Facilities) of greater than 1.35:1.
The Non-Revolving Term Facility under the Credit Facilities
contain financial covenants which require the Company to
maintain a ratio of Funded Debt less up to $5.0 million cash
on hand to ESC adjusted EBITDA being less than 3:1 and an
Interest Coverage ratio (as defined in the Credit Facilities) of
greater than 3:1.
The Credit Facilities also contain other positive covenants,
negative covenants, events of default, representations and
warranties customary for credit facilities of this nature. The
Company was in compliance with all covenants throughout
the period.
The indebtedness under the Credit Facilities is secured by a
first ranking security interest in all of the personal property and
floating charge on all real property of the Company, a pledge
of all shares of ISC Sask and ESC, an unlimited guarantee and
postponement of claim from ISC Sask and ESC guaranteeing
all of ISC’s indebtedness and obligations to the Lender, a
second ranking security interest (subject to the security of the
Government of Saskatchewan under a debenture) in all of the
personal property and floating charge over all property of ISC
Sask and a first ranking security interest in all of the personal
property and floating charge on all real property of ESC.
The amount of borrowing costs capitalized during 2016 and
2015 were nil.
11 Investment in Associate
On September 2, 2015, the Company completed its acquisition
of 30 per cent of the issued and outstanding voting common
shares of OneMove for $3.3 million. ISC used existing cash to
finance the investment through its wholly owned subsidiary,
ISC Ent.
On February 19, 2016, the Company subscribed for 1,620,454
Class B common shares in the capital of OneMove, for a total
of $990 thousand, representing its pro rata share of an equity
raise by OneMove. This investment maintained ISC’s 30 per
cent ownership in OneMove.
On March 10, 2016, OneMove announced that it had acquired
100 per cent of Dye & Durham Corporation, a comprehensive
supplier of registry and legal support services in Western Canada.
On April 6, 2016, the Company subscribed for an additional
351,565 Class B common shares in the capital of OneMove, for
a total of $215 thousand, representing its pro rata share of an
equity raise by OneMove. This investment maintained ISC’s
30 per cent ownership in OneMove.
On April 12, 2016, OneMove announced that it had acquired
51 per cent of Easy Convey Limited, the creators of England
and Wales’ leading and most comprehensive electronic
conveyancing platform.
Effective July 1, 2016, OneMove amalgamated with its wholly
owned subsidiary, Dye & Durham Corporation, changing its
name to Dye & Durham Corporation. The registered office
of Dye & Durham Corporation is 161 Bay Street, Suite 2210,
Toronto, Ontario, M5J 2S1.
ISC’s 30 per cent ownership level and related rights give the
Company significant influence over Dye & Durham Corporation,
but does not represent control and, as a result, the Company
has accounted for this investment using the equity method. The
Company recorded its pro rata share of the net income (loss) on
its consolidated statements of comprehensive income.
12 Earnings per Share
The calculation of earnings per share is based on net income after tax and the weighted average number of shares outstanding
during the period. Details of the earnings per share are set out below:
(thousands of CAD dollars, except number of shares and earnings per share)
Net income and total comprehensive income
Weighted average number of shares, basic
Potential dilutive shares resulting from stock options
Weighted average number of shares, diluted
Earnings per share ($ per share)
Total, basic
Total, diluted
Year Ended December 31,
2015
2016
$
15,503
$
15,917
17,500,000
374,654
17,874,654
17,500,000
120,230
17,620,230
$
$
0.89
0.87
$
$
0.91
0.90
61
2016 ISC® Annual Report | Notes to the Consolidated Financial Statements
13 Equity and Capital Management
The Company’s authorized share capital consists of an unlimited number of Class A Shares, one Class B Golden Share (the “Golden
Share”) and an unlimited number of Preferred Shares, issuable in series. The Company currently has 17,500,000 Class A Shares
issued and outstanding, one Golden Share issued and outstanding and no Preferred Shares issued or outstanding. Class A Shares are
entitled to one vote per share. The Golden Share, held by the Government of Saskatchewan, has certain voting rights with respect
to the location of the head office and the sale of all or substantially all of the assets of the Company. The Golden Share has no pre-
emptive, redemption, purchase or conversion rights and is not eligible to receive dividends declared by the Company. The Preferred
Shares can be issuable at any time and may include voting rights.
Class A
Class B
Number
of Shares
17,500,000
–
17,500,000
17,500,000
–
17,500,000
Share Capital
$
$
19,955
–
19,955
19,955
–
19,955
Number
of Shares
Share Capital
1
–
1
1
–
1
$
$
$
–
–
–
–
–
–
The Company monitors the credit risk and credit rating of
customers on a regular basis. The Company has significant
concentration of credit risk among government sectors. Its
customers are predominantly provincial, federal and municipal
government ministries and agencies, and its private sector
customers are diverse.
Cash is held with Canadian chartered banks, and the Company
believes the risk of loss to be minimal. The maximum exposure
to credit risk at December 31, 2016, is $37.9 million (December 31,
2015 – $40.2 million) equal to the carrying value of the
Company’s financial assets, those being cash at $33.7 million
(December 31, 2015 – $36.6 million) and trade receivables at
$4.2 million (December 31, 2015 – $3.6 million). Quarterly reviews
of the aged receivables are completed. The Company expects
to fully collect on all outstanding receivables. Therefore, the risk
to the Company is considered to be low. The following table sets
out details of cash and aging of receivables:
(thousands of CAD dollars)
Cash
Current trade receivables
and other
Up to three months past
due date
Greater than three months
past due date
Total credit risk
December 31,
2016
December 31,
2015
$ 33,683
$
36,571
3,566
3,452
638
192
39
$ 37,926
17
$ 40,232
(thousands of CAD dollars, except number of shares)
Balance at January 1, 2015
No movement
Balance at December 31, 2015
Balance at January 1, 2016
No movement
Balance at December 31, 2016
Capital management
The Company’s capital at December 31, 2016, consisted of
long-term debt, share capital, equity settled employee benefit
reserve, accumulated other comprehensive income and
retained earnings (comprising total shareholders’ equity).
(thousands of CAD dollars)
Long-term debt
Share capital
Equity settled employee
benefit reserve
Retained earnings
Capitalization
December 31,
2016
$ 23,435
19,955
December 31,
2015
$ 24,560
19,955
599
68,767
$ 112,756
223
67,264
$ 112,002
14 Financial Instruments and
Related Risk Management
The Company does not use any form of derivative financial
instruments to manage its exposure to credit risk, interest rate
risk or market risk.
Credit risk
Credit risk is the risk that one party to a transaction will fail to
discharge an obligation and cause the other party to incur a
financial loss. The Company extends credit to its customers
in the normal course of business and is exposed to credit risk
in the event of non-performance by customers, but does
not anticipate such non-performance would be material.
62
2016 ISC® Annual Report | Notes to the Consolidated Financial Statements
Interest rate risk
The Company is subject to interest rate risks as the Credit Facility (Note 10) bears interest at rates that are based on floating rates
based on prime, which can vary in accordance with borrowing rates. The Company manages interest rate risk by using short-term
bankers’ acceptance notes with an option to lock in rates at any time and by monitoring the effects of market changes in interest rates.
The following table presents a sensitivity analysis to changes in market interest rates and their potential impact on the Company for
the period ended December 31, 2016. As the sensitivity is hypothetical, it should be used with caution.
(thousands of CAD dollars)
+ 100 bps*
– 100 bps
+ 100 bps
– 100 bps
Increase (decrease) in interest expense
Decrease (increase) in income from operations before tax
Decrease (increase) in total comprehensive income
$
$
$
140
140
103
$
$
$
(140)
(140)
(103)
$
$
$
38
38
28
$
$
$
(38)
(38)
(28)
December 31, 2016
December 31, 2015
* bps = basis point spread
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s cash
resources are managed based on financial forecasts and anticipated cash flows.
The following summarizes the contractual maturities for the Company’s financial liabilities at December 31, 2016:
(thousands of CAD dollars)
Long-term debt
Trade and other payables
Dividend payable
Total liabilities
Carrying
Amount
$ 23,435
6,783
3,500
$ 33,718
Contractual
Cash Flows
$ 24,280
6,783
3,500
$ 34,563
0-6
months
1,394
6,783
3,500
11,677
$
$
7-12
months
1,010
–
–
1,010
$
$
12+
months
$
21,876
–
–
$ 21,876
Contractual cash flows for long-term debt include principal and interest.
Market risk
The Company is not exposed to market risk with respect to financial instruments as it does not hold any financial assets or liabilities
whose fair value is affected by equity prices.
(thousands of CAD dollars)
Classification
Level
Financial assets
Cash
Trade receivables
Financial liabilities
Trade and other payables*
Dividend payable
Long-term debt – current portion
Long-term debt
Deferred share unit liability
Contingent consideration
*includes provision for early retirement plan
FVTPL
LAR
OFL
OFL
OFL
OFL
FVTPL
FVTPL
L2
L2
L2
L2
L2
L2
L2
L3
December 31, 2016
December 31, 2015
Carrying
Amount
Fair Value
Carrying
Amount
Fair Value
$ 33,683
4,243
$ 33,683
4,243
$
36,571
3,661
$
36,571
3,661
5,990
3,500
1,500
21,935
800
–
5,990
3,500
1,500
21,935
800
–
6,040
3,500
1,500
23,060
442
4,934
6,040
3,500
1,500
23,060
442
4,934
At initial recognition, all financial instruments are classified in one of the following categories depending on the purpose for which the
instruments were acquired.
63
2016 ISC® Annual Report | Notes to the Consolidated Financial Statements
Financial assets and liabilities at fair value
through profit or loss
Financial assets and liabilities at fair value through profit or loss
(“FVTPL”) are financial assets and liabilities held for trading or
that are designated as such by management. Such assets are
held for trading if they are acquired principally for the purpose
of selling in the short term. These assets and liabilities are initially
recognized, and subsequently carried, at fair value, with changes
recognized in the consolidated statements of comprehensive
income. Transaction costs are expensed. Assets and liabilities in
this category include cash, deferred share units liability and the
contingent consideration.
Loans and receivables
Loans and receivables (“LAR”) are subsequently measured
at amortized cost using the effective interest method, less
any impairment losses, with interest expense recognized
on an effective yield basis. Assets in this category include
trade receivables.
Other financial liabilities
Other financial liabilities (“OFL”) are initially measured at fair
value, and are subsequently measured at amortized cost using
the effective interest method, with interest expense recognized
on an effective yield basis. Liabilities in this category include
trade and other payables, dividend payable, provision for early
retirement plan and long-term debt.
Fair value of financial instruments
IFRS require fair value measurements to be categorized into
levels within a fair value hierarchy based on the nature of inputs
used in the valuation.
• Level 1 – Quoted prices are readily available from an active
market.
• Level 2 – Inputs, other than quoted prices included in Level 1
that are observable either directly or indirectly.
• Level 3 – Inputs are not based on observable market data.
The carrying values of cash, trade receivables, trade and other
payables, provision for early retirement plan and dividend
payable approximate fair value due to their immediate or
relatively short-term maturity. Within the long-term debt, the
revolving term is currently managed throughout the three-
year term with short-term bankers’ acceptance notes and, as
such, the carrying value approximates fair value due to the
short term to maturity as well. It has been determined that
there are no differences between the carrying amount and
the fair market value of these instruments. The non-revolving
term within the long-term debt bears an interest rate of prime
plus applicable margin, which exposes the Company to some
interest rate risk. However, as noted in the sensitivity analysis
of interest rate risk above, the impact of a change in interest
rates is considered low.
The deferred share unit liability’s fair value is calculated using
the Black-Scholes model that takes into consideration the
market price, expected volatility and the risk-free interest rate.
This liability is classified as Level 2, but the risk remains low due
to the materiality.
The following table shows a reconciliation from the
beginning balances to the ending balances for the fair value
measurements in Level 3 of the fair value hierarchy.
(thousands of CAD dollars)
Balance at January 1, 2016
Changes in fair value measurements
(discounting of cash flows)
Increase to contingent consideration
Payment of contingent consideration
on November 30, 2016
Balance at December 31, 2016
$
4,934
66
1,000
(6,000)
–
$
Estimates of the fair value of contingent consideration
was performed by the Company on a quarterly basis. Key
unobservable inputs include the discount rate applied at
1.79 per cent. The estimated fair value increases as the
discount rate decreases or vice versa. The changes in fair
value measurements (discounting of cash flows) have been
included in ‘Other’ expenses on the consolidated statements
of comprehensive income.
ISC’s acquisition of ESC included up to $7.0 million in
contingent consideration to the previous owner through
a performance-based, 12-month earnout. The preliminary
estimate of the contingent consideration was $5.0 million.
During the third quarter of 2016, management assessed and
increased its estimate of the consideration by $1.0 million
due to the performance of ESC through the third quarter.
The net impact of the change in contingent consideration
was included in ‘Change in contingent consideration’ on the
consolidated statements of comprehensive income. The
contingent consideration of $6.0 million was settled in the
fourth quarter of 2016.
64
2016 ISC® Annual Report | Notes to the Consolidated Financial Statements
15 Related Party Transactions
17 Segment Information
Operating segments are identified as components of a company
where separate discrete financial information is available for
evaluation by the chief operating decision maker regarding
allocation of resources and assessment of performance. The
Company operates in two reportable segments described
below, defined by their primary type of service offering, namely
Registries and Services. The balance of our corporate activities
and shared services functions are reported as Corporate.
• The Registries segment involves the provision of registry
and information services and solutions to governments
and private sector organizations. Currently, the Company
provides registry and information services to the Province
of Saskatchewan and is the exclusive provider of the Land
Titles Registry, Land Surveys Directory, Geomatics, Personal
Property Registry and Corporate Registry in Saskatchewan.
• The Services segment provides law firms, corporations,
financial service institutions and others with services to fulfill
a wide variety of their clients’ public records due diligence,
filings and corporate supply requirements in connection
with public business registries in Canada and certain other
countries. It provides its Canadian financial institution clients
with customized, automated and proven solutions to validate
the status of business entities. For its law firm customers
that range from large firms to sole practitioners, the Services
segment also provides a complete suite of corporate services
and supplies.
Included in these consolidated financial statements are
transactions with various Saskatchewan Crown corporations,
ministries, agencies, boards and commissions related to the
Company by virtue of common control by the Government of
Saskatchewan and non-Crown corporations and enterprises
subject to joint control and significant influence by the
Government of Saskatchewan (collectively referred to as
“related parties”). The Company has elected to take the
exemption under IAS 24 – Related Party Disclosures which
allows government-related entities to limit the extent of
disclosures about related party transactions with government
or other government-related entities.
Routine operating transactions with related parties are settled
at agreed upon exchange amounts under normal trade terms.
In addition, the Company pays provincial sales tax to the
Saskatchewan Ministry of Finance on all its taxable purchases.
Taxes paid are recorded as part of the cost of those purchases.
Other amounts and transactions due to and from related parties
and the terms of settlement are described separately in these
consolidated financial statements and the notes thereto.
16 Compensation of Key
Management Personnel
The compensation of directors and other members of the key
management team during the period were as follows:
(thousands of CAD dollars)
Year Ended December 31,
2015
2016
Wages, salaries and short-term benefits $ 2,211
1,399
Share-based compensation
89
Defined contribution plan
$ 3,699
Total compensation
$ 2,129
666
110
$ 2,905
Members of the key management team include the President
and Chief Executive Officer, Chief Financial Officer, Vice-
Presidents and Associate Vice-President.
The compensation of directors and the key management
team is determined by the Board upon recommendation of its
Compensation Committee having regard to the performance of
individuals and market trends.
65
2016 ISC® Annual Report | Notes to the Consolidated Financial Statements
The Company evaluates performance and allocated resources based on earnings before interest and income tax. Revenue
reported in the following tables represent revenue generated from external customers. There was no significant inter-segment
revenue in the year.
Revenue and net income
For the year ended December 31, 2016
(thousands of CAD dollars)
Total revenue
Net income
Net income (loss) from operations
Net finance (expense) income
Depreciation and amortization
Income tax (expense) recovery
Share of profit in associate
Change in contingent consideration
Net income (loss)
Registries
Services
Corporate
Total
$ 73,950
$
13,639
$
786
$ 88,375
27,087
7
(3,931)
(5,307)
–
–
17,856
$
3,107
4
(2,638)
124
–
(1,000)
(403)
$
(1,319)
(332)
(1,860)
(93)
1,654
–
(1,950)
$
28,875
(321)
(8,429)
(5,276)
1,654
(1,000)
15,503
$
Capital expenditures
$
3,189
$ 2,050
$
1,036
$ 6,275
For the year ended December 31, 2015
(thousands of CAD dollars)
Total revenue
Net income
Net income from operations
Net finance income
Depreciation and amortization
Income tax expense
Share of profit in associate
Net income (loss)
Capital expenditures
Assets and liabilities
As at December 31, 2016
(thousands of CAD dollars)
Assets
Total assets, excluding goodwill and cash
Goodwill
Cash
Total assets
Registries
Services
Corporate
Total
$ 74,985
$
3,166
$
167
$
78,318
27,207
23
(3,572)
(6,728)
–
16,930
$
$
3,009
809
–
(435)
(100)
–
274
11
$
$
285
72
(1,706)
–
62
(1,287)
28,301
95
(5,713)
(6,828)
62
15,917
$
997
$
4,017
$
$
Registries
Services
Corporate
Total
$ 39,996
–
21,232
$ 61,228
$
18,492
13,141
1,835
$ 33,468
$ 26,009
–
10,616
$ 36,625
$ 84,497
13,141
33,683
$ 131,321
Liabilities
$ 21,937
$ 18,088
$
1,975
$ 42,000
As at December 31, 2015
(thousands of CAD dollars)
Assets
Total assets, excluding goodwill and cash
Goodwill
Cash
Total assets
Registries
Services
Corporate
Total
$ 43,248
–
23,784
$ 67,032
$
18,332
13,141
895
$ 32,368
$ 24,985
–
11,892
$ 36,877
$ 86,565
13,141
36,571
136,277
$
Liabilities
$ 22,000
$ 25,082
$
1,753
$ 48,835
66
2016 ISC® Annual Report | Notes to the Consolidated Financial Statements
The receivables acquired (which is principally comprised of trade
receivables) in these transactions with a fair value of $1.6 million
had gross contractual amounts of $1.7 million. The best estimate
at acquisition date of the contractual cash flows not expected to
be collected are $29 thousand.
The costs of the acquisition relating to professional fees were
$0.9 million and have been recorded in expense.
The revenue and net earnings of the acquiree for 2015, from the
acquisition date and included in the consolidated statements
of earnings for 2015, were $3.2 million and $274 thousand,
respectively.
The revenue and net earnings for the Company and the
acquiree combined for 2015 as though the acquisition date
for the business combination that occurred during the year
had been as of January 1, 2015, would have been $87.5 million,
unaudited and $17.6 million, unaudited, respectively.
Net cash outflow related to the acquisition
(thousands of CAD dollars)
Consideration paid in cash
Consideration from long-term debt paid in cash
Less: cash balance acquired
2015
$
6,498
15,000
(820)
$ 20,678
This acquisition is a business combination to which IFRS 3 —
Business Combinations applies.
Consideration
(thousands of CAD dollars)
Cash
Contingent consideration
Total purchase price
Less: deemed compensation
Consideration to allocate
2015
$
21,498
5,000
26,498
–
$ 26,498
The Registries revenue, which is the Company’s largest
segment, can be further detailed as follows:
(thousands of CAD dollars)
Land Titles Registry, Land Surveys
Directory and Geomatics
Personal Property Registry
Corporate Registry
Total revenue
Year Ended December 31,
2015
2016
$ 54,921
9,947
9,082
$ 73,950
$ 56,871
9,981
8,133
$ 74,985
Revenues are attributed to customers within Canada. No
assets are held outside of Canada. The Company’s top five
customers for the Registries segment represent 18.7 per cent of
total Registries revenue for the year ended December 31, 2016
(2015 – 20.2 per cent). Of those customers, no single customer
represented more than 10.0 per cent of the total Registries
revenue, the same as in 2015.
18 Acquisition
ESC Corporate Services Ltd. (“ESC”)
On October 1, 2015, ISC completed the acquisition of all issued
and outstanding common shares of ESC. ISC completed
the transaction through a wholly owned subsidiary using a
combination of cash and debt with $21.0 million of the purchase
price, subject to working capital adjustment, paid on closing
of the transaction (“ESC Transaction”) and up to $7.0 million
payable in the form of a performance-based, 12-month
earnout. The initial estimate by management for the contingent
consideration was $5.0 million; however, during the third quarter
of 2016, management assessed and increased its estimate of
the consideration by $1.0 million due to the performance of
ESC through the third quarter. The net impact of the change in
contingent consideration was included in ‘Change in contingent
consideration’ on the consolidated statements of comprehensive
income. The contingent consideration of $6.0 million was settled
in the fourth quarter of 2016.
Through ESC, the Company provides law firms, corporations,
financial service institutions and others with services to fulfill a
wide variety of their clients’ public records due diligence, filings
and corporate supply requirements in connection with public
business registries in Canada and certain other countries. ESC
has offered these services since 2009, in Ontario and Quebec,
when it acquired two well-established businesses that provided
these types of services. For its law firm customers that range
from large firms to sole practitioners, ESC provides a complete
suite of corporate services and supplies. It provides its Canadian
financial institution clients with customized, automated and
proven solutions to validate the status of business entities.
67
2016 ISC® Annual Report | Notes to the Consolidated Financial Statements
20 Commitments and Contingencies
Leasing arrangements
The Company leases all of its office space through operating
leases. Operating leases related to office spaces have lease
terms of between two and 10 years, with various options to
extend. The Company does not have an option to purchase
the leased assets at the expiry of the lease period.
The Company leases all of its photocopiers through operating
leases. Operating leases related to photocopiers have lease
terms of three years. The Company does not have an option
to purchase the leased assets at the expiry of the lease period.
Master Service Agreement
Pursuant to a Master Service Agreement (the “MSA”) with
the Government of Saskatchewan dated May 30, 2013, the
Company was appointed on an exclusive basis to manage
and operate the Land Titles Registry, Land Surveys Directory,
Personal Property Registry and Corporate Registry on behalf
of the Government of Saskatchewan for a 20-year term
expiring on May 30, 2033. The MSA was amended, effective
December 1, 2015, appointing ISC to continue to manage and
operate the Common Business Identifier Program and the
Business Registration Saskatchewan Program for the same
term as the MSA. The MSA requires the Company to pay to the
Government of Saskatchewan the sum of $0.5 million annually,
in a single instalment payable on or before March 1, in each
calendar year of the term commencing with an initial payment
which was due on March 1, 2014.
The allocation of the net purchase price for accounting
purposes is as follows:
(thousands of CAD dollars)
Assets
Cash
Trade receivables
Prepaid expenses
Property, plant and equipment
Intangible assets
Liabilities
Trade and other payables
Income tax payable
Deferred tax liability
Net assets acquired
Goodwill arising on acquisition
Total consideration allocated
Net assets acquired
Discount on contingent consideration
Total goodwill
$
820
1,655
349
286
16,114
19,224
1,602
225
4,127
5,954
$ 13,270
26,498
13,270
87
$ 13,141
The intangible assets above consist of customer relations of
$10.8 million, technology of $3.9 million, brand of $1.0 million
and a non-compete clause of $0.4 million.
19 Net Change in Non-Cash Working Capital
The net change during the period comprised the following:
(thousands of CAD dollars)
Trade receivables
GST/HST receivable
Prepaid expenses
Trade and other payables
Advances from customers
Deferred revenue
Provision for early retirement plan
Net change in non-cash
working capital
Year Ended December 31,
2015
2016
$
(582)
70
(200)
1,773
(190)
(256)
(15)
1,023
$
4,283
(401)
165
91
(334)
(24)
$ 600
$ 4,803
68
2016 ISC® Annual Report | Notes to the Consolidated Financial Statements
Commitments
Future minimum payments for leasing of office space, information technology (“IT”) service agreements with Hewlett-Packard
(Canada) Co. and Information Systems Management Canada Corporation and to the Government of Saskatchewan under the MSA
include the following amounts over the next five years as of December 31, 2016:
Office
Leases
3,138
3,118
3,12 1
2,922
2,488
6,425
21,212
$
$
IT Service
Agreements
$
8,920
8,586
2,852
–
–
–
$ 20,358
Master Service
Agreement
$
500
500
500
500
500
6,000
$ 8,500
Total
$
12,558
12,204
6,473
3,422
2,988
12,425
$ 50,070
(thousands of CAD dollars)
2017
2018
2019
2020
2021
Thereafter
Total commitments
Contingencies
The Land Titles Act, 2000 (Saskatchewan) contains an
assurance provision that allows customers to recover losses due
to the errors or omissions of the Registries. Concurrent with the
execution of the MSA, the Company also entered into Registry
Operating Agreements with the Government of Saskatchewan
for each of the Registries. Each Registry Operating Agreement
contains registry specific terms and conditions respecting the
operation of the applicable Registry, including, but not limited
to, the fees (“Registry Fees”) the Company may charge for the
services applicable to each Registry and the allowable increases
to those Registry Fees, minimum service levels applicable
to each Registry and specific allocation of risk and liability
associated with the operation of each Registry.
Management’s estimate of liability for claims and legal actions
that may be made by customers pursuant to the assurance
provision and the MSA is based upon claims submitted; as at
December 31, 2016, the liability was nil (December 31, 2015 – nil).
21 Pension Expense
The total pension costs under the Company’s defined
contribution plans for the year were $1.4 million (2015 –
$1.4 million).
22 Subsequent Events
On January 23, 2017, the Company announced that it had
successfully completed the acquisition of all of the issued
and outstanding common shares of Enterprise Registry
Solutions Ltd. (“ERS”), a global leader in the development
and implementation of registry technology. This acquisition
enhances ISC’s core registry offering by adding leading
registry technology solutions and consultancy services. The
Company completed the transaction with $14.0 million of the
purchase price paid on closing of the transaction and up to
€5.0 million in consideration is contingent on the retention
of existing leadership and realization of future business. The
purchase price was financed through a combination of cash
and $10.0 million of debt, pursuant to the September 28, 2015,
amended and restated Credit Facilities. Due to the limited
time between the acquisition of ERS and the preparation
of these consolidated financial statements, the value of the
assets acquired and the liabilities assumed on the acquisition
were not available to management as of the date of these
consolidated financial statements.
On March 14, 2017, the Board declared a quarterly cash dividend
of $0.20 per Class A Share, payable on or before April 15, 2017,
to shareholders of record as of March 31, 2017.
69
2016 ISC® Annual Report | Notes to the Consolidated Financial Statements
Board of Directors
Joel Douglas Teal
Saskatoon, Saskatchewan
Director since: 2013
Chair of the Board of Directors
Karyn A. Brooks
Calgary, Alberta
Director since: 2016
Member of the Audit Committee
Thomas Christiansen
Swift Current, Saskatchewan
Director since: 2009
Member of the Governance & Nominating Committee
and a member of the Compensation Committee
Douglas Allen Emsley
Regina, Saskatchewan
Director since: 2013
Chair of the Compensation Committee
Anthony Robert Guglielmin
Vancouver, British Columbia
Director since: 2013
Chair of the Audit Committee
William Scott Musgrave
Lloydminster, Alberta
Director since: 2010
Member of the Audit Committee
Michelle Ouellette, Q.C.
Saskatoon, Saskatchewan
Director since: 2013
Member of the Governance & Nominating Committee
Iraj Pourian
Vancouver, British Columbia
Director since: 2016
Member of the Compensation Committee
Dion E. Tchorzewski
Regina, Saskatchewan
Director since: 2013
Chair of the Governance & Nominating Committee
Officers
Jeff Stusek
President and
Chief Executive Officer
Kenneth W. Budzak
Vice-President, Operations
& Customer Experience
Kathy Hillman-Weir, Q.C.
Vice-President, Corporate Affairs & General Counsel,
Corporate Secretary and Chief Privacy Officer
Shawn B. Peters, CPA, CA
Vice-President, Finance & Technology,
and Chief Financial Officer
More information on our directors and officers can be found in our most recent Annual Information Form or Management Information
Circular, which are available on our website at www.company.isc.ca, or through the System for Electronic Document Analysis and
Retrieval (SEDAR) at www.sedar.com.
70
2016 ISC® Annual Report Corporate Information
Head Office
Class B Golden Share
Suite 300
10 Research Drive
Regina, Saskatchewan S4S 7J7 Canada
Stock Exchange Listing & Symbol
Toronto Stock Exchange: ISV
Share Capital
Authorized — the Company’s authorized share capital consists
of an unlimited number of Class A Shares, one Class B Golden
Share and an unlimited number of Preferred Shares.
Class A Limited Voting Shares
Issued and outstanding — 17,500,000 Class A Shares as at
December 31, 2016.
The Company’s articles and the ISC Act limit ownership of
Class A Shares, including joint ownership to no more than
15.0 per cent of the Class A Shares issued and outstanding.
Issued and outstanding — 1 Class B Golden Share (“Golden
Share”) as at December 31, 2016.
The Golden Share held by the Government of Saskatchewan
has certain voting rights with respect to the location of the
head office and the sale of all or substantially all of the assets
of the Company.
The Golden Share has no pre-emptive, redemption, purchase
or conversion rights and is not eligible to receive dividends
declared by the Company.
Preferred Shares
Issued and outstanding — Nil as at December 31, 2016.
Preferred Shares are issuable at any time and may include
voting rights.
Ownership
As of March 14, 2017, the Board and management are not aware
of any shareholder who directly or indirectly owns or exercises,
or directs control over, more than 10 per cent of our Class A
Shares, other than:
(a) Crown Investment Corporation of Saskatchewan which
holds 5,425,000 Class A Shares representing 31 per cent
of the issued and outstanding Class A Shares; and
(b) Sentry Investments Inc. which holds 2,599,310 Class A
Shares representing approximately 14.85 per cent of the
issued and outstanding Class A Shares.
71
2016 ISC® Annual Report Dividends on Class A Shares
On August 12, 2013, ISC’s Board established a policy of paying an annual dividend of $0.80 per Class A Share to be payable on a
quarterly basis. The payment of dividends is not guaranteed, and the amount and timing of any dividends payable by the Company
will be at the discretion of the Board and will be established on the basis of our cash available for distribution, financial requirements,
any restrictions imposed by our Credit Facilities, the requirements of any future financings and other factors existing at the time.
Year
2016
2016
2016
2016
2015
2015
2015
2015
2014
2014
2014
2014
2013
2013
Type
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Ex-Dividend Date
Dec 29, 2016
Sep 28, 2016
Jun 26, 2016
Mar 27, 2016
Dec 29, 2015
Sep 28, 2015
Jun 26, 2015
Mar 27, 2015
Dec 29, 2014
Sep 26, 2014
Jun 26, 2014
Mar 27, 2014
Dec 27, 2013
Sep 26, 2013
Record Date
Dec 31, 2016
Sep 30, 2016
Jun 30, 2016
Mar 31, 2016
Dec 31, 2015
Sep 30, 2015
Jun 30, 2015
Mar 31, 2015
Dec 31, 2014
Sep 30, 2014
Jun 30, 2014
Mar 31, 2014
Dec 31, 2013
Sep 30, 2013
Payable Date
Amount
Jan 15, 2017
Oct 15, 2016
Jul 15, 2016
Apr 15, 2016
Jan 15, 2016
Oct 15, 2015
Jul 15, 2015
Apr 15, 2015
Jan 15, 2015
Oct 15, 2014
Jul 15, 2014
Apr 15, 2014
Jan 15, 2014
Oct 15, 2013
$0.20
$0.20
$0.20
$0.20
$0.20
$0.20
$0.20
$0.20
$0.20
$0.20
$0.20
$0.20
$0.20
$0.18*
* This dividend represents a partial dividend for the period July 9, 2013 (the closing date of the Company’s Initial Public Offering on July 9, 2013) to September 30, 2013.
Dividends are eligible dividends pursuant to the Income Tax Act (Canada) as amended. An eligible dividend paid to a Canadian
resident is entitled to the enhanced dividend tax credit. For further information on tax implications, please consult a tax advisor.
Auditors
Regulatory Filings
Deloitte LLP
2103 11th Avenue
Regina, Saskatchewan S4P 3Z8 Canada
Transfer Agent
CST Trust Company
For inquiries related to shares, dividends,
changes of address:
Toll-free Inside North America:
Outside North America:
Fax:
1 (800) 387-0825
1 (416) 682-3860
1 (888) 249-6189
English:
www.canstockta.com/en/InvestorServices/index.html
French:
www.canstockta.com/fr/Services_aux_investisseurs/index.html
The Company’s filings are available through the System
for Electronic Document Analysis and Retrieval (SEDAR)
at www.sedar.com.
Investor Contact Information
Jonathan Hackshaw
Director, Investor Relations &
Corporate Communications
investor.relations@isc.ca
Toll-free in North America:
Outside North America:
1 (855) 341-8363
1 (306) 798-1137
Annual and Special Meeting
The annual and special meeting of shareholders will be held
at 9:00 a.m. (Saskatchewan time, MDT) on Wednesday
May 17, 2017, at Innovation Place, 6 Research Drive, Regina,
Saskatchewan.
72
2016 ISC® Annual Report Information Services Corporation
300 - 10 Research Drive
Regina, Saskatchewan S4S 7J7 Canada
Toll-free: 1-866-275-4721
isc.ca
TSX:ISV