Founded in 1875, Davis + Henderson provides innovative programs, technology products, and technology based business services to customers in the financial services industry who offer deposit, lending, insurance and wealth management products to consumers and businesses. Davis + Henderson Corporation is listed on the Toronto Stock Exchange under the symbol DH. Further information can be found in the disclosure documents filed by Davis + Henderson Corporation with the securities regulatory authorities, available at www.sedar.com.

Forward-Looking Information

This press release contains certain statements that constitute forward-looking information within the meaning of applicable securities laws (“forward-looking statements”). Statements concerning D+H’s objectives, goals, strategies, intentions, plans, beliefs, expectations and estimates, and the business, operations, financial performance and condition of D+H are forward-looking statements. The words “believe”, “expect”, “anticipate”, “estimate”, “intend”, “may”, “will”, “would” and similar expressions and the negative of such expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements are subject to important assumptions, including the following specific assumptions: the ability of D+H to meet its revenue, EBITDA and Adjusted net income targets; general industry and economic conditions; changes in D+H’s relationship with its customers and suppliers; pricing pressures and other competitive factors; the anticipated effect of acquisitions on the financial performance of D+H; and the expected benefits arising as a result of the acquisitions. D+H has also made certain macroeconomic and general industry assumptions in the preparation of such forward-looking statements. While D+H considers these factors and assumptions to be reasonable based on information currently available, there can be no assurance that actual results will be consistent with these forward-looking statements.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Business, or developments in D+H’s industry, to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements.

Risks related to forward-looking statements include, among other things, challenges presented by declines in the use of personal and business cheques; D+H’s dependence on a limited number of large financial institution customers and dependence on their acceptance of new programs; strategic initiatives being undertaken to meet the D+H’s financial objective; stability and growth in the real estate, mortgage and lending markets; as well as general market conditions, including economic and interest rate dynamics. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The documents incorporated by reference herein also identify additional factors that could affect the operating results and performance of D+H. Forward-looking statements are based on management’s current plans, estimates, projections, beliefs and opinions, and D+H does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change except as required by applicable securities laws.

All of the forward-looking statements made in this press release are qualified by these cautionary statements and other cautionary statements or factors contained herein, and there can be no assurance that the actual results or developments will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, D+H.

Stock Exchange Symbol: DH

Website: www.dhltd.com

TORONTO, May 8, 2012 /CNW/ – Davis + Henderson Corporation (“D+H”) today reported its financial results for the three months ended March 31, 2012 that were consistent with expectations in the context of our strategic agenda and reflected year-over-year growth in revenues and EBITDA¹ primarily due to the inclusion of Mortgagebot LLC (“Mortgagebot”), acquired on April 12, 2011, partially offset by higher spending to benefit future periods.

First Quarter Highlights

• Revenue was $181.6 million compared to $169.5 million for the same quarter in 2011.
• EBITDA was $40.8 million compared to $37.5 million for the same quarter in 2011.  EBITDA for the first quarter of 2012 was impacted by acquisition-related costs of $0.7 million compared to acquisition-related costs of $1.8 million for the same period in 2011.
• Adjusted net income¹ was $22.0 million ($0.3709 per share) for the first quarter of 2012 compared to $22.8 million ($0.4275 per share) for the same quarter in 2011. Adjusted net income per share for the first quarter of 2012 was impacted by the issuance of 6 million shares in April 2011 to partially fund the Mortgagebot acquisition.
• Net income was $14.9 million ($0.2521 per share) compared to $36.0 million ($0.6769 per unit) for the same quarter in 2011. Net income for the first quarter of 2011 benefited from tax recoveries of $14.3 million compared to a tax expense of $4.9 million in the first quarter of 2012. Net income per share for the first quarter of 2012 was additionally impacted by the issuance of 6 million shares in April 2011.
• On March 30, 2012, D+H paid a dividend of $0.31 per share to its shareholders of record on March 16, 2012. For the same period in 2011, D+H paid $0.3033 per share which comprised of a $0.1533 per unit distribution that was paid on January 31, 2011 (declared on December 31, 2010 when D+H was an income trust) and a $0.15 per share special dividend paid on March 31, 2011.

____________________________
¹ _{D+H financial results are prepared in accordance with IFRS. D+H reports several non-IFRS financial measures, including EBITDA and Adjusted net income used above. Adjusted net income is calculated as net income, adjusted to remove certain non-cash items and certain items of note such as acquisition-related expenses and discontinued operations and the related tax effects of these adjustments including tax effects of corporate conversions. These items are excluded in calculating Adjusted net income as they are not considered indicative of the financial performance of D+H for the period being reviewed. Any non-IFRS financial measures should be considered in context with the IFRS financial statement presentation and should not be considered in isolation or as a substitute for IFRS net income or cash flows. Further, D+H’s measures may be calculated differently from similarly titled measures of other companies. See Non-IFRS Financial Measures for a more complete description of these terms.}

D+H’s unaudited consolidated financial statements for the first quarter of 2012, accompanying notes to the financial statements and management’s discussion & analysis (MD&A) along with the supplementary financial information will be available tomorrow on www.sedar.com and at www.dhltd.com.

For a more detailed discussion of the results and management’s outlook, please see Management’s Discussion and Analysis below.

Caution Concerning Forward-Looking Statements

This press release contains certain statements that constitute forward-looking information within the meaning of applicable securities laws (“forward-looking statements”). Statements concerning D+H’s objectives, goals, strategies, intentions, plans, beliefs, expectations and estimates, and the business, operations, financial performance and condition of D+H are forward-looking statements.  The words “believe”, “expect”, “anticipate”, “estimate”, “intend”, “may”, “will”, “would” and similar expressions and the negative of such expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.  These forward-looking statements are subject to important assumptions, including the following specific assumptions: the ability of D+H to meet its revenue, EBITDA and Adjusted net income targets; general industry and economic conditions; changes in D+H’s relationship with its customers and suppliers; pricing pressures and other competitive factors; the anticipated effect of acquisitions on the financial performance of D+H; and the expected benefits arising as a result of acquisitions. D+H has also made certain macroeconomic and general industry assumptions in the preparation of such forward-looking statements.  While D+H considers these factors and assumptions to be reasonable based on information currently available, there can be no assurance that actual results will be consistent with these forward-looking statements.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of D+H, or developments in D+H’s industry, to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements.

Risks related to forward-looking statements include, among other things, challenges presented by declines in the use of personal and business cheques; D+H’s dependence on a limited number of large financial institution customers and dependence on their acceptance of new programs; strategic initiatives being undertaken to meet D+H’s financial objective; stability and growth in the real estate, mortgage and lending markets; as well as general market conditions, including economic and interest rate dynamics. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.  The documents incorporated by reference herein also identify additional factors that could affect the operating results and performance of D+H. Forward-looking statements are based on management’s current plans, estimates, projections, beliefs and opinions, and D+H does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change except as required by applicable securities laws.

All of the forward-looking statements made in this press release and the documents incorporated by reference herein are qualified by these cautionary statements and other cautionary statements or factors contained herein, and there can be no assurance that the actual results or developments will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, D+H.

Conference Call

D+H will discuss its financial results for the three months ended March 31, 2012 via conference call at 10:00 a.m. EST (Toronto time) on Wednesday, May 9, 2012. The number to use for this call is 647-427-7450 for Local / International callers or 1-888-231-8191 for US / Canada callers. The conference call will be hosted by Gerrard Schmid, Chief Executive Officer and by Brian Kyle, Chief Financial Officer. The conference call will also be available on the web by accessing CNW Group’s website www.newswire.ca/en/event. For anyone unable to listen to the scheduled call, the rebroadcast number will be: 416-849-0833 for Toronto area callers, or 1-855-859-2056 for all other callers, with Encore Password 75732471. The rebroadcast will be available until Wednesday, May 23, 2012.  An archive recording of the conference call will also be available at the above noted web address for one month following the call and a text version of the call will be available at www.dhltd.com.

ADDITIONAL INFORMATION

Additional information relating to D+H, including D+H’s most recently filed Annual Information Form, is available on SEDAR at www.sedar.com.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Management’s Discussion and Analysis (“MD&A”) for the first quarter of 2012 for Davis + Henderson Corporation (the “Company” or the “Corporation” or the “Business” or “Davis + Henderson” or “D+H” or “we” or “our”), which was formerly known as Davis + Henderson Income Fund (the “Fund”), has been prepared with an effective date of May 8, 2012 and should be read in conjunction with the MD&A in the Annual Report for the year ended December 31, 2011, dated March 6, 2012, and the unaudited condensed interim consolidated financial statements for the three months ended March 31, 2012. External economic and industry factors remain substantially unchanged from those described in the annual MD&A and the Corporation’s most recently filed Annual Information Form, except as described herein.

NON-IFRS FINANCIAL MEASURES

The information presented within the tables in this MD&A include certain adjusted financial measures such as “EBITDA” (Earnings before interest, taxes, depreciation and amortization; EBITDA also excludes fair value adjustments of interest-rate swaps which are directly related to interest expense), “Adjusted net income” (net income before certain non-cash charges such as amortization of intangibles from acquisitions and fair value adjustments of interest-rate swaps and certain items of note such as acquisition-related expenses and discontinued operations), and “Adjusted net income per share”, all of which are not defined terms under IFRS. These non-IFRS financial measures should be read in conjunction with the Consolidated Statements of Income.  See the reconciliation of EBITDA and Adjusted net income to the most directly comparable IFRS measure, “Net income”, in the “Operating Results” section of this MD&A.

Management believes these supplementary measures provide useful additional information related to the operating results of the Corporation.  Management uses these subtotals as measures of financial performance and as a supplement to the Consolidated Statements of Income.  Investors are cautioned that these measures should not be construed as an alternative to using net income as a measure of profitability or as an alternative to the IFRS Consolidated Statements of Income or other IFRS statements. Further, these measures do not have any standardized meaning and D+H’s method of calculating each balance may not be comparable to calculations used by other companies bearing the same description.

EBITDA

In addition to its use by management as an internal measure of financial performance, EBITDA is used to measure (with adjustments) compliance with certain financial covenants under the Company’s credit facility and bonds. EBITDA is also widely used by D+H in assessing performance and value of a business. EBITDA has limitations as an analytical tool, and the reader should not consider it in isolation or as a substitute for analysis of results as reported under IFRS.

Adjusted Net Income and Adjusted Net Income per Share

Effective January 1, 2011, as a result of the conversion from an income trust structure to a corporate structure, the Business commenced using Adjusted net income and Adjusted net income per share as a measure for evaluating its results.  Periods prior to January 1, 2011, do not have a comparable measure.

Adjusted net income is used as a measure of internal performance similar to net income, but is calculated after removing the impacts of certain items such as acquisition-related expenses, discontinued operations and certain non-cash items such as amortization of intangibles from acquisitions and fair value adjustments of interest-rate swaps. Also excluded from Adjusted net income are the tax effects of corporate conversion and acquisitions. These items are excluded in calculating Adjusted net income as they are not considered indicative of the financial performance of the Business for the period being reviewed.

STRATEGY

D+H is a leading solutions provider to the financial services marketplace. We have several market-leading service offerings within Canada, including: payment solutions (reported as programs to chequing accounts in prior periods); the provision of registration, recovery and related services for secured loan products; the servicing of student loans; and the delivery of lending technology solutions. Additionally, through Mortgagebot LLC (“Mortgagebot”), D+H is a market-leading provider of Software-as-a-Solution (“SaaS”), point-of-sale mortgage and consumer loan solutions in the United States for over 1,070 banks and credit unions. In Canada, we also offer leading technology solutions in the commercial lending, small business lending and leasing area, as well as servicing solutions within the credit card market and in a number of other specialty areas.

D+H’s strategy is to establish market-leading positions within well defined and growing service areas in the financial services marketplace and to further expand our service offerings by enhancing the activities that we perform on behalf of our customers. We expect to advance this strategy through organic initiatives, as well as by partnering with third parties and by way of selective acquisitions. D+H’s long-term financial objective is to deliver sustainable and growing earnings through continued organic revenue growth and by way of strategic acquisitions.

Over the past several years, D+H has executed this strategy by evolving payment solutions, completing several acquisitions, including Resolve Business Outsourcing Income Fund (“Resolve”) in 2009, ASSET Inc. (“ASSET”) in January 2011, and Mortgagebot in April 2011, and by further enhancing our services and capabilities. As a result, we offer a diverse range of market-leading services.

Consistent with its strategy, on a go-forward basis, management is working to: (i) evolve and enhance the value of payment solutions (specifically chequing and credit card programs); (ii) extend our technology supported services related to personal, student and commercial lending and leasing markets; and (iii) grow in other areas within the financial services marketplace.

As well, on May 3, 2012, D+H announced the acquisition of 100% equity interest in Avista Solutions, Inc. (“Avista”) of Charleston, South Carolina, for a purchase price of approximately US$ 40 million.  Avista is a leading provider of SaaS mortgage loan origination software for community and regional banks, credit unions and mortgage bankers in the United States. Additionally, on April 24, 2012, we announced the completion of a strategic minority investment in Santa Ana, California-based Compushare, Inc. (“Compushare”), a technology management and cloud computing provider to financial institutions, for US$ 9.8M. Both of these transactions strengthen our capability to deliver on our goal of being a leading solutions provider to the North American financial services industry.

For a detailed discussion of the results for the first quarter 2012 and management’s outlook, please see below. For a detailed discussion of risk factors, please refer to the most recent Annual Information Form and the 2011 Annual Report filed on SEDAR.

ACCOUNTING PRINCIPLES AND FINANCIAL INFORMATION PRESENTATION

The Company’s consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”).  Prior to January 1, 2011, the consolidated financial statements were reported in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”).

Results from continuing operations include the performance of acquired businesses from the respective dates of acquisition and exclude results from businesses classified as discontinued operations.

Comparative information presented for periods prior to January 1, 2011 relate to those of the Fund, and the results for the periods subsequent to January 1, 2011 are those of the Corporation. Consequently, throughout this MD&A, any references to distributions, unitholders, and per unit amounts relate to periods prior to January 1, 2011, and any references to dividends, shareholders and per share amounts relate to periods subsequent to January 1, 2011.

All amounts are in Canadian dollars, unless otherwise specified.

Segment Reporting

Commencing in the first quarter of 2012, D+H reports its results by its reportable segments based on its two strategic business units, the “Canadian Segment” and the “U.S. Segment”.  Comparatives have been presented to conform to the current period disclosure.

The Canadian Segment includes payment solutions, loan registration and recovery services, loan servicing, technology solutions in commercial lending, small business lending and leasing area, lending technology services to the Canadian mortgage market and other business service solutions.  The U.S. Segment consists of lending technology services to the U.S. mortgage market, including Mortgagebot, a leading SaaS provider of mortgage point-of-sale offerings in the United States and provider of a range of consumer direct, loan officer, branch and call centre mortgage and consumer loan origination solutions.

The results reported under each of these segments do not include certain items such as interest expense, income taxes and fair value adjustments related to derivative instruments, as these items are considered to be of a corporate nature and as such, have been reported as part of Corporate.

CONSOLIDATED OPERATING RESULTS – FIRST QUARTER OF 2012

Consolidated Operating Results – Overview

Growth in consolidated revenues and EBITDA in the first quarter of 2012, compared to the same period in 2011, was driven primarily by the inclusion of the Mortgagebot business acquired on April 12, 2011. The Business also experienced modest increases in three of its five service areas in the Canadian Segment as more fully described in the discussion of business results.  Consolidated EBITDA for both quarters were additionally impacted by acquisition-related costs incurred in connection with the acquisitions of ASSET and Mortgagebot.

The following table is derived from, and should be read in conjunction with, the Consolidated Statements of Income and includes non-IFRS financial measures. Management believes this supplementary disclosure provides useful additional information. See Non-IFRS Financial Measures section for a description of non-IFRS terms used.

The consolidated results include those of ASSET, effective January 18, 2011, and Mortgagebot effective April 12, 2011.  Operating results of ASSET have been included as part of the Canadian Segment and the operating results of Mortgagebot have been included as part of the U.S. segment.

Consolidated Operating and Financial Results¹
(in thousands of Canadian dollars, except per share amounts, unaudited)

Consolidated Revenue

Consolidated revenue for the first quarter of 2012 was $181.6 million, an increase of $12.1 million, or 7.1%, compared to the same period in 2011. This increase was primarily due to the inclusion of Mortgagebot, acquired on April 12, 2011, and to a lesser extent, organic growth in certain other service areas.  Services delivered by the Business are subject to seasonality, including fees earned in connection with mortgage origination services and automobile loan registration services, which are typically stronger in the second and third quarters than in the first and fourth quarters.  See Operating Results by Segment section for a more detailed discussion of revenue by service area.

The following table reflects the relative size of each of the major service areas as a percentage of consolidated revenue based on a rolling twelve-month period:

Payment solutions include: (i) the cheque supply program which serves the personal and small business account holders of our financial services customers; and (ii) various other subscription fee based enhancement services and other service offerings directed towards account opening activities. These service offerings (excluding the component of enhancement and identity protection services that are integrated in the cheque order) currently represent a small component of revenues within this revenue category. In general, cheque order volumes in this area have historically been declining as consumers and small businesses choose other payment methods.  Revenue related to payment solutions is reported as part of the Canadian Segment for segment reporting purposes.

Loan registration and recovery services support the personal and commercial lending activities of our financial services customers. Services include the registration and management of data related to secured lending for both personal and real property loans as well as recovery services related to both secured and unsecured lending activities. The largest service areas within this revenue category are search and registration services, which currently account for approximately 50% to 60% of revenue, and recovery services accounting for approximately 25% to 35% of revenue. In both instances, loans relating to vehicle purchases are a significant driver of activity and as such can be variable. In general, registration services are impacted by both economic cyclicality and seasonality, while recovery services are, in general, counter-cyclical. Other services within this revenue category include mortgage discharge services and various search-related services, both of which we deliver on behalf of our financial institution customers.  Revenue related to the loan registration and recovery services are reported as part of the Canadian Segment for segment reporting purposes.

Loan servicing programs include student loans administration services offered to financial institutions and governments and credit card servicing offered to card issuers.  The student loans administration services currently account for approximately 70% to 80% of revenues within this revenue category.  In general, student loan servicing volumes have been stable and modestly growing as student loans balances have been increasing and the term of the loans extended.  Recent integration of two lending portfolios into a single managed portfolio will reduce the fees we earn on a net basis. Volumes related to credit card servicing can be more variable and are primarily impacted by customer initiatives.  Revenues related to the loan servicing programs are reported as part of the Canadian Segment for segment reporting purposes.

Lending technology services include services directed towards mortgage markets in both Canada and, recently with the acquisition of Mortgagebot in April 2011, the United States. As well, we offer technology products and services in both countries directed towards leasing, commercial lending and small business lending. Revenues related to the mortgage markets currently represent approximately 85% to 95% of revenues within this category, with approximately 50% to 60% attributable to transaction-based fees earned in connection with Canadian mortgage originations and 40% to 50% representing fees related to the U.S. SaaS loan origination services.  Mortgage origination fees can be variable and are impacted by many factors including the economy, the housing market and interest rates, among others.  For segment reporting purposes, revenues from the lending technology services to the Canadian mortgage markets and the products and technology solutions for leasing, commercial lending and small business lending offered in both Canada and U.S. are reported as part of the Canadian Segment. Revenues related to the U.S. SaaS loan origination services are reported as part of the U.S. Segment.

Business service solutions (previously reported as Other), include a number of smaller service offerings that are primarily outsourced activities we perform on behalf of a variety of customers including non-financial services customers. Revenues from these activities are reported as part of the Canadian Segment for segment reporting purposes.

Consolidated Expenses     

Consolidated expenses of $140.8 million for the first quarter of 2012 increased by $8.7 million or, 6.6% compared to the same quarter in 2011.  The increase primarily reflects the inclusion of Mortgagebot expenses within the U.S. Segment.  The Canadian Segment also contributed to the increase in consolidated expenses as a result of costs associated with technology-related transformation and integration activities.  On a consolidated basis, these increases were partially offset by lower acquisition-related expenses in the first quarter of 2012, compared to the same period in 2011. Consolidated expenses for the first quarter of 2012 included $0.7 million of acquisition-related costs ($1.8 million for the same period in 2011).

Consolidated EBITDA

Consolidated EBITDA during the first quarter of 2012 was $40.8 million, an increase of $3.3 million, or 8.9%, compared to the same quarter in 2011. The majority of the increase in the first quarter of 2012 was attributable to the acquisition of Mortgagebot as part of the U.S. Segment, partially offset by a decrease in EBITDA in the Canadian Segment.  To a lesser degree, consolidated EBITDA for the first quarter of 2012 benefited from lower acquisition-related costs of $0.7 million in the current quarter, compared to $1.8 million for same period in 2011.

Consolidated Net Income

Consolidated net income of $14.9 million for the first quarter of 2012 decreased by $21.1 million, or 58.6%, compared to the same period in 2011.  Net income for the first quarter of 2011 benefited from tax recoveries of $14.3 million which included tax recoveries of $19.2 million related to the changes in the tax status of the Business as a result of the conversion from an income trust to a corporation. This was compared to an income tax expense of $4.9 million for the first quarter of 2012. Net income for the first quarter of 2012 was additionally impacted by an increase in expenses related to integration initiatives in the Canadian Segment, partially offset by the positive contribution from the U.S. Segment as a result of the inclusion of the results from Mortgagebot.

Consolidated Adjusted Net Income

Adjusted net income for the first quarter of 2012 and for the same period in 2011 excluded: (i) non-cash impacts of items such as amortization of intangibles from acquisitions and gains and losses related to fair value adjustment of derivative instruments; and (ii) other items of note such as acquisition-related costs referred to below and tax recoveries related to the changes in the tax status of the Business as a result of the conversion from an income trust to a corporation. Net income is also adjusted for the tax impact of these adjustments to arrive at Adjusted net income.

For the first quarter of 2012, consolidated Adjusted net income was $22.0 million ($0.3709 per share), a decrease of $0.8 million, or 3.5%, compared to $22.8 million ($0.4275 per share) for the same period in 2011.  Adjusted net income per share for the first quarter of 2012 was impacted by the issuance of 6 million shares in April 2011 to partially fund the Mortgagebot acquisition. Consolidated Adjusted net income excluded tax recoveries of $19.2 million ($0.3608 per share) related to the changes in the tax status of the Business as a result of the conversion from an income trust to a corporation. Compared to an adjustment of $13.5 million related to tax recoveries originally reported in the first quarter of 2011, Adjusted net income for the first quarter of 2011 has been amended to reflect the identification of a further one-time non-cash tax recovery of $5.7 million related to tax changes in connection with the corporate conversion in January 2011.

OPERATING RESULTS BY SEGMENT¹
(in thousands of Canadian dollars, except per share amounts, unaudited)

OPERATING RESULTS – CANADIAN SEGMENT

Operating results from the following service areas are included in the Canadian Segment:  (i) payment solutions; (ii) loan registration and recovery services; (iii) loan servicing; (iv) lending technology services in Canada; and (v) business service solutions.

Overall, in the first quarter of 2012, revenue growth in certain service areas of the Canadian Segment was offset by decreases in revenue in other service areas combined with higher spending to benefit future periods. For a more detailed discussion on revenues and expenses in this segment, see the comments below.

Revenue
(in thousands of Canadian dollars, unaudited)

												Quarter ended March 31,
												2012						2011
Revenue – Canadian Segment
	Payment solutions											$ 74,781						$ 74,211
	Loan registration and recovery services 1											37,954						36,374
	Loan servicing											34,111						33,272
	Lending technology services 2											14,548						15,499
	Business service solutions 3											8,628						10,192
												$ 170,022						$ 169,548

1 Includes revenue from ASSET from the acquisition date of January 18, 2011.

2 Excludes revenue from Mortgagebot.

3 Excluded from reported revenue are the discontinued operations for the comparative period presented.

Revenue from payment solutions for the first quarter of 2012 was $74.8 million, an increase of $0.6 million, or 0.8%, compared to the same quarter in 2011. Revenue for the first quarter of 2012 benefited from the positive impact of higher average order values attributable to program changes and product and service enhancements in the chequing and credit card programs, partially offset by volume decreases in cheque orders.  Management believes that the long-term historical trend related to current cheque order decline is relatively unchanged and continues to be in the low single digit range. In recent periods, there has been greater volatility in order volumes, including higher personal order volume reductions.

Loan registration and recovery services revenue for the first quarter of 2012 was $38.0 million, an increase of $1.6 million, or 4.3%, compared to the same quarter in 2011.  This increase was mainly due to higher transaction volumes in registration services reflecting a modest recovery within the auto and auto lending markets.  Volumes in this area can be variable due to changes in the economy, changes in the auto and auto lending markets and seasonality. Typically, this service area experiences stronger volumes during the second and third quarters as compared to the first and fourth quarters as consumers more frequently purchase and finance cars in the spring and summer.  The increase in revenue related to registration volumes during the first quarter of 2012 was partially offset by a decline in recovery services related to ASSET, a counter-cyclical business, in line with our expectations.

Loan servicing programs revenue for the first quarter was $34.1 million, an increase of $0.8 million, or 2.5%, compared to the same quarter in 2011. As described earlier, loan servicing programs consist of student loan administration services, which comprises the largest portion of revenues within this service area, and credit card servicing. The increase during the first quarter of 2012 was primarily attributable to an increase in professional fees, partially offset by contractual price declines, within the student loans program. Volumes in this area are expected to be relatively stable and modestly growing in the short-term, as described earlier. Cost management activities are being directed towards lowering the impact of reduced pricing and fees related to particular customers, including reduced fees we will earn as one of our customers integrates the servicing of their portfolio into that of another one of our customers.  The increase in revenue within the student loan administration services was partially offset by a decrease in the credit card servicing area, where prior periods reflected specific customer initiatives that increased both revenues and expenses with minimal impact on profitability in those periods.

Revenue from the lending technology services related to the Canadian Segment for the first quarter of 2012 was $14.5 million, a decrease of $1.0 million, or 6.1%, compared to the same quarter in 2011.  The decrease was mainly due to a reduction in transaction-based fees in this service area, specifically, an anticipated decrease in origination fees for the quarter driven by the repatriation by a customer of certain services we historically performed for them that we announced previously, and to a lesser extent, from the changes announced by the Department of Finance on January 17, 2011 to tighten mortgage rules, including reductions in mortgage amortization periods, maximum refinancing amounts and amounts that can be drawn on home equity loans. These changes become effective in the first quarter of the prior year and the Company believes contributed to an acceleration of origination activities in the first quarter of 2011. In general, industry analysts expect the Canadian housing market to continue to moderate with some potential for cooling of prices in major urban areas through 2012.

Revenues from business service solutions, which consists of other smaller service areas for the first quarter of 2012 were $8.6 million, compared to $10.2 million for the same period in 2011.  In general, we expect to continue to experience some reductions in this area as a result of program repatriation by certain customers.  On October 7, 2010, the Business sold a non-strategic component of its contact centre business and entered into a transition agreement with the buyer, which expired on April 1, 2011.  The results of these operations were previously reported in this revenue category and have been presented as discontinued operations for the comparative periods presented.

Expenses

Total expenses for the Canadian Segment for the first quarter of 2012 were $134.5 million, an increase of $4.0 million, or 3.1%, compared to the same quarter in 2011.  This increase was primarily attributable to costs associated with technology transformation and integration activities.  Expenses for the first quarter 2011 for the Canadian Segment included acquisition-related costs of $0.2 million. No such costs were incurred in the first quarter of 2012.

Canadian Segment											Quarter ended March 31,
(in thousands of Canadian dollars, unaudited)											2012						2011
Employee compensation and benefits 1											$ 53,257						$ 50,381
Non-compensation direct expenses 2											56,708						55,939
Other operating expenses 3											24,526						24,125
											$ 134,491						$ 130,445

1 Employee compensation and benefits are net of apprenticeship tax credits and amounts capitalized related to software product development.

2 Non-compensation direct expenses include materials, shipping, selling expenses and third party direct disbursements.

3 Other operating expenses include occupancy costs, communication costs, licensing fees, professional fees, contractor fees, transaction costs related to acquisitions of businesses and expenses not included in other categories. Other operating expenses are net of inter-segment management fees received from the U.S. segment.

Employee compensation and benefits costs of $53.3 million for the first quarter of 2012 for the Canadian Segment increased by $2.9 million, or 5.7%, compared to the same quarter in 2011.  The increase was primarily related to the replacement of contract labour (recorded as other operating expenses) with full-time staff, partially offset by tax credits associated with a government apprenticeship program.

Non-compensation direct expenses for the Canadian Segment were $56.7 million for the first quarter of 2012, an increase of $0.8 million, or 1.4%, compared to the same quarter in 2011. In general, these expenses directionally change with revenue changes.

Other operating expenses for the first quarter of 2012 of $24.5 million increased by $0.4 million, or 1.7%, compared to the same quarter in 2011.  The increase in other operating expenses was attributable to costs associated with technology transformation and integration activities. The increase was partially offset by replacement of contract labour with full-time staff as discussed above and inter-segment management fees charged to Mortgagebot for shared services.

EBITDA

EBITDA for the first quarter of 2012  for the Canadian Segment was $35.5 million, a decrease of $3.6 million, or 9.1%, compared to the same quarter in 2011, mainly due to an increase in expenses as a result of the costs associated with transformation and integration activities. EBITDA was additionally impacted by integration and program repatriation by customers as previously described. Cost management activities are being directed towards reducing the impact of integration and repatriation by customers as described above.

Depreciation of Capital Assets and Amortization of Non-acquisition Intangibles

Depreciation of capital assets and amortization of non-acquisition intangible assets of $6.5 million during the first quarter of 2012 for the Canadian Segment increased by $1.0 million, or 18.2%, compared to the first quarter of 2011, primarily related to capital additions.

Amortization of Intangibles from Acquisitions

Amortization of acquisition-related intangibles for the first quarter of 2012 in the Canadian Segment of $8.1 million was consistent with the same period in 2011.

OPERATING RESULTS – U.S. SEGMENT

The U.S. Segment consists of the operating results of Mortgagebot since the acquisition date of April 12, 2011.

Revenue

U.S. Segment revenue for first quarter of 2012 of $ $11.6 million related to online mortgage origination revenue from Mortgagebot.

Expenses

Expenses for the U.S. Segment included acquisition-related costs of $0.7 million for the first quarter of 2012 ($1.6 million for the same period in 2011). These consisted of retention and incentive costs related to the acquisition of Mortgagebot and transaction costs incurred in connection with acquisitions of businesses that are required to be expensed under IFRS.

EBITDA

EBITDA for the U.S. Segment for the first quarter of 2012 was $5.3 million, which included acquisition-related costs of $0.7 million for the first quarter of 2012 and $1.6 million for the same period in 2011 described above.  Expenses for the first quarter of 2011 include transaction costs incurred in connection with the acquisition of Mortgagebot.

Depreciation of Capital Assets and Amortization of Non-acquisition Intangibles

Depreciation of capital assets and amortization of non-acquisition intangible assets during the first quarter of 2012 for the U.S. Segment was $0.3 million.

Amortization of Intangibles from Acquisitions

Amortization of acquisition-related intangibles for the first quarter of 2012 for the U.S. Segment was $2.8 million and related to the intangibles from the Mortgagebot acquisition on April 12, 2011.

OPERATING RESULTS – CORPORATE

The following items are reported as part of the Corporate segment:  interest expense, amortization and fair value adjustments of derivative instruments and income tax expense (recovery).

Interest Expense

Interest expense for the first quarter of 2012 increased by $0.8 million, compared to the same quarter in 2011, due to increased borrowings in relation to the acquisitions of ASSET and Mortgagebot.

Amortization and Fair Value Adjustment of Derivative Instruments

Interest-rate swaps

A net unrealized gain of $1.6 million  on interest-rate swaps was recognized in the first quarter of 2012 (Q1 2011 -  net unrealized gain of $1.7 million) reflecting fair value adjustments related to changes in market interest rates at March 31, 2012 compared to December 31, 2011.

These unrealized gains and losses are recognized in income because these interest-rate swaps are not designated as hedges for accounting purposes.  In general, a loss on interest-rate swaps is recorded when interest rates decrease as compared to certain previous periods and a gain is recorded when interest rates increase.  Provided the Company does not cancel its interest-rate swaps, the unrealized amounts represent a non-cash unrealized gain or loss that will subsequently reverse through income as the related swaps mature.  The Company has historically held its derivative contracts to maturity.

Income Tax Expense (Recovery)

In the first quarter of 2012, an income tax expense of $4.9 million was recorded (Q1 2011 -  $14.3 million recovery), which included tax expenses related to the utilization of loss carry-forwards and book income not taxable until a future period.  The income tax recovery in the first quarter of 2011 included a tax recovery due to the recognition of a previously unrecognized deferred tax asset related to intangible assets.  The benefit of this deferred tax asset was expected to be realized as a consequence of the corporate conversion. Additional recoveries related to the conversion were also recognized in Q1 2011.

Due to the corporate structure, certain available tax losses, and no expected requirements to pay 2012 tax instalments, the Company does not expect to pay any significant cash taxes in 2012.

EIGHT QUARTER CONSOLIDATED STATEMENT OF INCOME – SUMMARY ¹
(in thousands of Canadian dollars, except per share amounts, unaudited)

The Business has generally reported quarterly revenues that are relatively stable and growing when measured on a year-over-year basis, however more recent changes in the economic environment generally, the housing and mortgage markets and the auto lending markets specifically, have increased volatility. Measured on a sequential quarter-to-quarter basis, revenues can also vary due to seasonality and are generally stronger in the second and third quarters. The acquisition of ASSET on January 18, 2011 and the acquisition of Mortgagebot on April 12, 2011 increased revenues and expenses. Per share amounts were also impacted by the issuance of 6,000,000 additional shares of the Corporation in April 2011 to partially fund the acquisition of Mortgagebot.

Effective January 1, 2011, as a result of the conversion from an income trust structure to a corporate structure, the Business commenced using Adjusted net income as a measure for evaluating its results.  Adjusted net income is a non-IFRS financial measure.  See Non-IFRS Financial Measures for a more complete description of this term.  Periods prior to January 1, 2011, do not have a comparable measure for Adjusted net income.

Net income has been more variable as it has been affected by the variability in non-cash items such as fair value adjustments of interest-rate swaps, amortization of intangibles from acquisitions and changes in other non-cash tax items.

CONSOLIDATED CASH FLOW AND LIQUIDITY

The following table is derived from, and should be read in conjunction with, the Consolidated Statements of Cash Flows. Management believes this disclosure provides useful additional information related to the cash flows of the Corporation, repayment of debt and other investing activities.

Consolidated Summary of Cash Flows  
(in thousands of Canadian dollars, unaudited)

Consolidated Capital Expenditures

Consolidated capital expenditures were $10.5 million for the first quarter of 2012, $0.8 million higher than the same period in 2011.

Higher capital expenditures in the first quarter of 2012 primarily reflected integration and upgrade activities, and investing in the building of technology products and capability.

Dividends

During the first quarter of 2012, the Corporation paid $0.31 per share to its shareholders.  For the same period in 2011, $0.3033 per share was paid to the shareholders, which comprised of a $0.1533 per unit distribution that was paid on January 31, 2011 (declared on December 31, 2010 when D+H was an income trust) and a $0.15 per share special dividend paid on March 31, 2011.

Shares Outstanding

As at March 31, 2012, and May 8, 2012, common shares outstanding were 59,233,373, reflecting the additional 6 million common shares issued in April 2011 to fund the Mortgagebot acquisition (as at March 31, 2011 – 53,233,373 shares outstanding;  December 31, 2011 – 59,233,373 shares outstanding).

Consolidated Changes in Non-Cash Working Capital and Other Items

										Quarter ended March  31,
(in thousands of Canadian dollars, unaudited)										2012						2011
Increase in non-cash working
	capital items									$ (14,640)						$ (15,674)
Changes in other operating assets and
	liabilities and discontinued operations									683						104
Increase  in non-cash working capital and
	other items									$ (13,957)						$ (15,570)

The net increase in non-cash working capital items for the first quarter of 2012 was attributable mainly to decreases in accrued payables due to normal course timing differences reflecting payments made during the first quarter of 2012.

The Company expects to experience continued variability of non-cash working capital due to the nature and timing of services rendered in connection with the businesses recently acquired.

Consolidated Cash Balances and Long-Term Indebtedness

At March 31, 2012, cash and cash equivalents totalled $2.9 million, compared to $2.2 million at December 31, 2011.

The long-term indebtedness is recorded on the Consolidated Statement of Financial Position, net of unamortized deferred financing fees. The long-term indebtedness as at March 31, 2012, before deducting unamortized deferred finance fees of $5.8 million, was $355.8 million, compared to $352.1 million at December 31, 2011.  During the first quarter of 2012, on a net basis, the Business drew $5.0 million on its credit facilities.

The long-term indebtedness includes drawings under a Seventh Amended and Restated Credit Agreement (“Credit Agreement”) dated April 12, 2011 of $213.0 million.  Total committed senior secured credit facilities under this Credit Agreement as at March 31, 2012 were $355.0 million, consisting of a revolving credit facility that matures on April 12, 2016.  The Business is permitted to draw on the revolving facility’s available balance of $142.0 million to fund capital expenditures or for other general purposes.  The Credit Agreement contains a number of covenants and restrictions, including the requirement to meet certain financial ratios and financial condition tests.  The financial covenants include a leverage test, a fixed charge coverage ratio test and a limit on the maximum amount of distributions by the Corporation to its shareholders during each rolling four-quarter period.  The Company was in compliance with all of its financial covenants and financial condition tests as of the end of its latest quarterly period.  A copy of the Credit Agreement is available at www.sedar.com.

As at March 31, 2012, and May 8, 2012, long-term indebtedness also consists of fixed-rate Bonds of $80 million issued under a Second Amended and Restated Note Purchase and Private Shelf Agreement dated April 12, 2011 (“Note Purchase Agreement”), which include a $50.0 million Bond issued under the senior secured Note Purchase Agreement at a fixed-interest rate of 5.99% and a $30.0 million Bond at 5.17%, both maturing on June 30, 2017.  In addition, the Business entered into a Note Purchase and Private Shelf Agreement pursuant to which the Company issued US$ 63 million of senior secured guaranteed notes at 5.59%, maturing on April 12, 2021 to partially fund the acquisition of Mortgagebot.

The Note Purchase Agreements and the Note Purchase and Private Shelf Agreement are available at www.sedar.com.

As at March 31, 2012, and as at May 8, 2012, the Credit Agreement provides for an additional uncommitted credit arrangement of up to $150.0 million and the Note Purchase and Private Shelf Agreement provides for an additional uncommitted arrangement of up to US$ 37 million with the use of these arrangements subject to the prior approval of the relevant lenders with any fees, spreads and other additional terms to be negotiated at that time.

The Company has historically hedged against increases in market interest rates on certain of its debt by utilizing interest-rate swaps and more recently by issuing fixed rate long-term bonds as described above.

As at March 31, 2012, the average effective interest rate on the Corporation’s total indebtedness was approximately 4.8%.

Hedge Contracts

Interest-rate swaps

In respect of interest-rate swap contracts with its lenders, as of March 31, 2012, the Company’s borrowing rates on 44.6% of outstanding long-term indebtedness under the Credit Agreement are effectively fixed at the interest rates and for the time periods ending as outlined in the following table:

(in thousands of Canadian dollars, unaudited)
					Fair value of interest-rate swaps
Maturity Date	Notional amount				Asset	Liability				Interest Rate ¹
December 18, 2014	$ 25,000				$ -	$ 809				2.720%
March 18, 2015	25,000				-	1,013				2.940%
March 18, 2017	25,000				-	1,789				3.350%
March 20, 2017	20,000				-	1,447				3.366%
	$ 95,000				$ -	$ 5,058

1 The listed interest rates exclude bankers’ acceptance fees and prime-rate spreads currently in effect.  Such fees and spreads could increase or decrease depending on the Company’s financial leverage compared to certain levels specified in the Credit Agreement.  As at March 31, 2012, the Company’s long-term bank indebtedness was subject to bankers’ acceptance fees of 2.25% over the applicable BA rate and prime rate spreads of 1.25% over the prime rate.

As at March 31, 2012, the Company would have to pay the fair value of $5.1 million if it were to close out all of its interest-rate swap contracts as set out in the Consolidated Statement of Financial Position.  It is not the present intention of management to close out these contracts and the Company has historically held its derivative contracts to maturity.

Foreign exchange forward contracts

The Company enters into foreign exchange contracts to fix foreign exchange rates on its foreign currency transactions, which are relatively minor.   As at March 31, 2012, the Company had foreign exchange forward contracts aggregating US $10.0 million with two of its lenders, as follows:

(in thousands of Canadian dollars, unless otherwise noted, unaudited)

Under these contracts, the Company is required to deliver the agreed US dollar amount and in return receive the contracted Canadian dollar amount set forth in each contract.  It is not the present intention of management to close out these contracts.  The Company has historically held its derivative contracts to maturity.

These foreign exchange contracts have been designated as hedges in accordance with IFRS, for hedge accounting purposes to hedge a set amount of forecasted cash inflows.  The Company accounts for these hedges as cash flow hedges as per IAS 39. The change in fair value of the hedging instrument (foreign exchange forward contracts), to the extent it is effective, is recorded in Other Comprehensive Income (“OCI”). The ineffective portion of the gain or loss on the hedging instrument is recognized in profit or loss.  The fair value changes are recorded in OCI, as the hedging relationship was considered to be effective both at inception of these hedges and at the reporting date.

BUSINESS RISKS 

A comprehensive discussion of the risks that impact the Business can be found on the Corporation’s most recently filed Annual Information Form and the most recently filed annual MD&A, available on SEDAR at www.sedar.com.  Risks and uncertainties related to the Corporation have not changed since the filing of the 2011 annual MD&A and the 2011 Annual Information Form.

OUTLOOK

D+H’s long-term financial objective is to deliver sustainable and growing earnings through continued organic revenue growth and by way of strategic acquisitions. In January and April 2011, respectively, the Company completed the acquisitions of ASSET and Mortgagebot. In April and May 2012, respectively, D+H announced the completion of the minority interest investment in Compushare, and the acquisition of Avista.  These acquisitions continue to strengthen our ability to deliver on our goal of being a leading solutions provider to the North American financial services industry, provide further revenue diversification, and support our long-term strategy.

Going forward, we will focus on executing our organic growth initiatives, integrating the Business and continuing to diligently manage costs through our transformational and integration initiatives.  Beyond the immediate term, we believe that our market leadership and combined capabilities will solidly position D+H in the markets we serve and allow us to grow consistent with our long-term objectives.

As set out in our statement of strategy, we look to grow our Business through a combination of organic initiatives, partnering with third parties and by way of selective acquisitions. Our organic initiatives are many and include: (i) the ongoing advancement of payment solutions through the addition of value-added service enhancements; (ii) the expansion of our current services within the student lending, commercial and personal lending areas (including the mortgage, credit card and personal property markets); (iii) selling and delivering our lending technology services to new customers; and (iv) combining the capabilities of D+H together with those of the recently acquired businesses to develop new service offerings for our financial institution customers. Our acquisition strategy focuses on acquiring companies that extend or add to the services that we provide within the financial services marketplace.  Our acquisition plans may continue to involve extending beyond the Canadian market.

With the inclusion of several new service areas over the last several years, we expect to continue to experience some increase in variability in year-over-year quarterly revenues, earnings and cash flows, due to, among other items: (i) volume variances within the lien registration and mortgage origination service areas; (ii) variability in professional services work; and (iii) fees and expenses incurred in connection with acquisitions and related business integration activities.  In the Canadian Segment, the Company believes that lending technology services revenues in 2012 will reflect the impact of a previously announced customer repatriation and more moderate housing and real estate activity compared to the previous year.  In the U.S. Segment, a slight recovery within the U.S. housing market is expected combined with a reduction in refinancing activity in 2012.

For 2012, we anticipate that our capital spending will be approximately $35 million, although additional spending will be incurred in support of growth opportunities if and as they surface.

As described earlier, the Corporation does not expect to pay any significant cash taxes in 2012.

ADDITIONAL INFORMATION

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

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION 
(in thousands of Canadian dollars, unaudited)

CONSOLIDATED STATEMENTS OF INCOME 
(in thousands of Canadian dollars, except per share amounts, unaudited)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 
(in thousands of Canadian dollars, unaudited)  

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY 
(in thousands of Canadian dollars, unaudited) 

							Three months ended March 31, 2012
							Accumulated other comprehensive income (loss)
				Share capital			Foreign currency translation reserve			Hedging reserve			Retained earnings / (deficit)			Total equity
Balance at January 1, 2012				$673,163			$9,326			$(240)			$27,449			$709,698
Net Income for the period				-			-			-			14,934			14,934
Cash flow hedges				-			-			(111)			-			(111)
Foreign currency translation				-			(2,937)			-			-			(2,937)
Dividends				-			-			-			(18,362)			(18,362)
Options				189			-			-			-			189
Balance at March 31, 2012				$673,352			$6,389			$(351)			$24,021			$703,411
							Three months ended March 31, 2011
							Accumulated other comprehensive income (loss)
				Share capital			Foreign currency translation reserve			Hedging reserve			Retained earnings / (deficit)			Total equity
Balance at January 1, 2011				$595,859			$-			$(86)			$(40,623)			$555,150
Net Income for the period				-			-			-			36,035			36,035
Amortization of mark-to-market adjustment of derivative instruments				-			-			52			-			52
Capital reduction pursuant to the arrangement				(40,623)			-			-			40,623			-
Dividends				-			-			-			(7,985)			(7,985)
Balance at March 31, 2011				$555,236			$-			$(34)			$28,050			$583,252

CONSOLIDATED STATEMENTS OF CASH FLOWS 
(in thousands of Canadian dollars, unaudited) 

About D+H

D+H is a leading solutions provider to the financial services marketplace. Founded in 1875, the Company today provides innovative technology-based programs, products and business services tailored to our customers’ needs. We embrace thought leadership and are continuously expanding our capabilities to better anticipate the needs of our customers, build trust and deliver on our promises. Davis + Henderson Corporation is listed on the Toronto Stock Exchange under the symbol DH. Further information can be found in the disclosure documents filed by Davis + Henderson Corporation with the securities regulatory authorities, available at www.sedar.com. 

The acquisition adds to D+H’s customer base and expands the range of integrated technology solutions D+H offers to the North American financial services industry by complementing the SaaS consumer point of sale (POS) mortgage origination platform it delivers to more than 1,100 U.S. banks and credit unions through its Mortgagebot subsidiary. Like Mortgagebot, Avista’s loan origination system (LOS) technology is delivered via the Internet as a service and revenues are generated on a subscription-fee basis under long-term contracts.

“This acquisition is fully aligned to D+H’s “follow your customer” approach – in fact, customers have told us unequivocally that they want us to extend our offering with an LOS platform,” said Gerrard Schmid, CEO of D+H. “With Avista, we’ve added an innovative, fast growing LOS business featuring proven capabilities that are highly synergistic to those we offer through Mortgagebot. Together, we now support the entire mortgage origination process for U.S. lenders and provide customers with a comprehensive suite of products that enable efficient, effective growth from origination through to closing. We are pleased that Avista’s team, including Mark Phlieger, its founder and CEO, are joining D+H to drive future growth.”

Founded in 2001, Avista is a profitable and growing financial technology business with over 150 financial institution customers and a technology suite that includes a complete loan origination system with integrated product and pricing engine, document imaging, workflow capabilities, and a comprehensive network of seamlessly integrated third party mortgage service providers.

“We believe that a combination of our innovative LOS technology and D+H’s industry leading mortgage point of sale solutions will allow us to jointly reach more customers, more rapidly, and with a more effective one-stop value proposition,” said Mark Phlieger, CEO of Avista. “Speaking on behalf of our team at Avista, I am excited by the prospects of taking our business to the next level.”

Terms

The purchase price is $40 Million (USD) payable in cash, and funded from D+H’s existing credit facilities.  The addition of Avista is expected to provide accretion for D+H shareholders in 2012, on an Adjusted net income basis.

About D+H

D+H is a leading solutions provider to the North American financial services marketplace, providing innovative technology-based programs, products and business services tailored to our customer’s needs. We embrace thought leadership and are continuously expanding our capabilities and expertise to better anticipate the needs of our customers, build trust and deliver on our promises.

For over 130 years, we have demonstrated a proven track record of success and a deeply rooted tradition of developing and nurturing valued customer relationships. Our mission is to provide a unique and broad set of integrated solutions that help our customers deepen relationships with their own clients. For more information about D+H visit www.dhltd.com

D+H’s Mortgagebot operation serves consumer-direct, branch, loan officer and call center mortgage channels through its award-winning PowerSite® family of integrated point-of-sale solutions. Mortgagebot blends deep mortgage experience with innovative “cloud computing” technology to create scalable and affordable websites for more than 1,100 banks and credit unions. Lenders large and small view PowerSite as a “must-have” solution because it helps them deliver a superior borrower experience, increase volume, and compete more effectively. PowerSite is also flexible and easy to use, with a rapid and proven implementation process. For more information about Mortgagebot visit www.mortgagebot.com

About Avista Solutions

Avista Solutions is a leader in sophisticated web-based loan origination systems for the American financial services industry. Founded in 2001, its suite of mortgage lending software provides complete, end-to-end solutions incorporating loan origination, product eligibility, pricing and imaging that can be rapidly implemented across all origination channels. Avista is considered a Top 50 Mortgage Technology Provider by Mortgage Technology magazine. For more information, visit www.AvistaSolutions.com.

Forward Looking Statement

This press release contains certain statements that constitute forward-looking information within the meaning of applicable securities laws (“forward-looking statements”). Statements concerning D+H’s objectives, goals, strategies, intentions, plans, beliefs, expectations and estimates, and the business, operations, financial performance and condition of D+H are forward-looking statements. The words “believe”, “expect”, “anticipate”, “estimate”, “intend”, “may”, “will”, “would” and similar expressions and the negative of such expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements are subject to important assumptions, including the following specific assumptions: the ability of D+H to meet its revenue, EBITDA and Adjusted net income targets; general industry and economic conditions; changes in D+H’s relationship with its customers and suppliers; pricing pressures and other competitive factors; the anticipated effect of acquisitions on the financial performance of D+H; and the expected benefits arising as a result of the acquisitions. D+H has also made certain macroeconomic and general industry assumptions in the preparation of such forward-looking statements. While D+H considers these factors and assumptions to be reasonable based on information currently available, there can be no assurance that actual results will be consistent with these forward-looking statements.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Business, or developments in D+H’s industry, to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements.

Risks related to forward-looking statements include, among other things, challenges presented by declines in the use of personal and business cheques; D+H’s dependence on a limited number of large financial institution customers and dependence on their acceptance of new programs; strategic initiatives being undertaken to meet the D+H’s financial objective; stability and growth in the real estate, mortgage and lending markets; as well as general market conditions, including economic and interest rate dynamics. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The documents incorporated by reference herein also identify additional factors that could affect the operating results and performance of D+H. Forward-looking statements are based on management’s current plans, estimates, projections, beliefs and opinions, and D+H does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change except as required by applicable securities laws.

All of the forward-looking statements made in this press release are qualified by these cautionary statements and other cautionary statements or factors contained herein, and there can be no assurance that the actual results or developments will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, D+H.

The conference call to review these financial results will take place at 10:00 a.m. (Toronto time) on Wednesday, May 9, 2012. The number to use for this call is 647-427-7450 for Local/Int’l callers or 1-888-231-8191 for US/Canada callers. The conference call will be hosted by Gerrard Schmid, Chief Executive Officer and by Brian Kyle, Chief Financial Officer.

The conference call will also be available on the web by accessing CNW Group’s website www.newswire.ca/en/event

For anyone unable to listen to the scheduled call, the rebroadcast number will be: 416-849-0833 for Toronto area callers, or 1-855-859-2056 for all other callers, with Encore Password 75732471.

The rebroadcast will be available until Wednesday, May 23, 2012. An archive recording of the conference call will also be available at the above noted web address for one month following the call and a text version of the call will be available at www.dhltd.com.

Founded in 1875, Davis + Henderson provides innovative programs, technology products, and technology based business services to customers in the financial services industry who offer deposit, lending, insurance and wealth management products to consumers and businesses. Davis + Henderson Corporation is listed on the Toronto Stock Exchange under the symbol DH. Further information can be found in the disclosure documents filed by Davis + Henderson Corporation with the securities regulatory authorities, available at www.sedar.com.

This investment continues to grow D+H’s capabilities in the North American FinTech space and complements its existing footprint among U.S. Community Banks and Credit Unions where D+H provides Software as a Service (SaaS) mortgage and loan origination solutions through its Mortgagebot subsidiary to close to 1,100 banks.  “Our goal is to be a leading solutions provider to the North American financial services industry and we believe this investment in Compushare continues to strengthen our ability to deliver on our vision,” stated Gerrard Schmid, CEO of D+H. “In particular, this investment enables us to participate in the growing needs of U.S. Community Banks and Credit Unions for cloud delivered services and applications to better allow them to focus on their core business and more effectively support their growth.  We look forward to working with the talented team at Compushare as they expand their business.”

Compushare offers an enterprise suite of technology solutions that helps Community Banks, Credit Unions and other financial services firms focus on their operations, franchise value and safety through a range of Systems Management, Network Security, Applications Solutions and Compliance management products and services. Compushare currently serves approximately 300 customers with these solutions.

Romir Bosu, CEO of Compushare stated that “We are excited to have D+H as a strategic partner and shareholder.  D+H’s investment in Compushare will enable us to accelerate our growth and pursue additional opportunities with Community Banks and Credit Unions throughout the United States. With the only true community cloud based solution offered to a market that is readily adopting the technology, we will be better positioned to meet this demand, while continuing to invest in additional innovative solutions.  We are pleased to partner with a large financial services solution provider with deep experience in serving the needs of a wide range of financial institutions in North America.”

About D+H:

D+H is a leading solutions provider to the North American financial services marketplace. Founded in 1875, the company today provides innovative technology-based programs, products and business services tailored to our customer’s needs. We embrace thought leadership and are continuously expanding our capabilities and expertise to better anticipate the needs of our customers, build trust and deliver on our promises.

For over 130 years, we have demonstrated a proven track record of success and a deeply rooted tradition of developing and nurturing valued customer relationships. Our mission is to provide a unique and broad set of integrated solutions that help our customers deepen relationships with their own clients.

For more information about D+H visit www.dhltd.com

About Compushare

Compushare is the leading provider of high quality, innovative technology and compliance solutions for the financial market. Whether it’s providing a totally outsourced cloud computing solution or assisting with the management of technology or IT strategic plans, Compushare takes a consultative approach to its solutions. With more than 15 years of technology experience supporting over 800 financial clients nationwide, Compushare is an SSAE 16, SOC 2 Type II, FDIC reviewed, and preferred partner with many major providers. From the leadership team to the members of the service delivery team, the array of knowledge, certifications and practical expertise is unrivaled in the Financial Services Industry.

Learn more about Compushare, Inc. at www.compushare.com.

Forward-Looking Information

This press release contains certain statements that constitute forward-looking information within the meaning of applicable securities laws (“forward-looking statements”). Statements concerning D+H’s objectives, goals, strategies, intentions, plans, beliefs, expectations and estimates, and the business, operations, financial performance and condition of D+H are forward-looking statements. The words “believe”, “expect”, “anticipate”, “estimate”, “intend”, “may”, “will”, “would” and similar expressions and the negative of such expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements are subject to important assumptions, including the following specific assumptions: the ability of D+H to meet its revenue, EBITDA and Adjusted net income targets; general industry and economic conditions; changes in D+H’s relationship with its customers and suppliers; pricing pressures and other competitive factors; the anticipated effect of acquisitions on the financial performance of D+H; and the expected benefits arising as a result of the acquisitions. D+H has also made certain macroeconomic and general industry assumptions in the preparation of such forward-looking statements. While D+H considers these factors and assumptions to be reasonable based on information currently available, there can be no assurance that actual results will be consistent with these forward-looking statements.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Business, or developments in D+H’s industry, to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements.

Risks related to forward-looking statements include, among other things, challenges presented by declines in the use of personal and business cheques; D+H’s dependence on a limited number of large financial institution customers and dependence on their acceptance of new programs; strategic initiatives being undertaken to meet D+H’s financial objective; stability and growth in the real estate, mortgage and lending markets; as well as general market conditions, including economic and interest rate dynamics. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The documents incorporated by reference herein also identify additional factors that could affect the operating results and performance of D+H. Forward-looking statements are based on management’s current plans, estimates, projections, beliefs and opinions, and D+H does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change except as required by applicable securities laws.

All of the forward-looking statements made in this press release are qualified by these cautionary statements and other cautionary statements or factors contained herein, and there can be no assurance that the actual results or developments will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, D+H.

Founded in 1875, Davis + Henderson provides innovative programs, technology products, and technology based business services to customers in the financial services industry who offer deposit, lending, insurance and wealth management products to consumers and businesses. Davis + Henderson Corporation is listed on the Toronto Stock Exchange under the symbol DH. Further information can be found in the disclosure documents filed by Davis + Henderson Corporation with the securities regulatory authorities, available at www.sedar.com.

Forward-Looking Information

This press release contains certain statements that constitute forward-looking information within the meaning of applicable securities laws (“forward-looking statements”). Statements concerning D+H’s objectives, goals, strategies, intentions, plans, beliefs, expectations and estimates, and the business, operations, financial performance and condition of D+H are forward-looking statements. The words “believe”, “expect”, “anticipate”, “estimate”, “intend”, “may”, “will”, “would” and similar expressions and the negative of such expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements are subject to important assumptions, including the following specific assumptions: the ability of D+H to meet its revenue and EBITDA targets; general industry and economic conditions; changes in D+H’s relationship with its customers and suppliers; pricing pressures and other competitive factors; the anticipated effect of the acquisition of Mortgagebot on the financial performance of D+H; and the expected benefits arising as a result of the acquisition of Mortgagebot. D+H has also made certain macroeconomic and general industry assumptions in the preparation of such forward-looking statements. While D+H considers these factors and assumptions to be reasonable based on information currently available, there can be no assurance that actual results will be consistent with these forward-looking statements.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Business, or developments in D+H’s industry, to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements.

Risks related to forward-looking statements include, among other things, challenges presented by declines in the use of cheques by consumers; D+H’s dependence on a limited number of large financial institution customers and dependence on their acceptance of new programs; strategic initiatives being undertaken to meet the D+H’s financial objective; stability and growth in the real estate, mortgage and lending markets; as well as general market conditions, including economic and interest rate dynamics. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The documents incorporated by reference herein also identify additional factors that could affect the operating results and performance of D+H. Forward-looking statements are based on management’s current plans, estimates, projections, beliefs and opinions, and D+H does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change except as required by applicable securities laws.

All of the forward-looking statements made in this press release are qualified by these cautionary statements and other cautionary statements or factors contained herein, and there can be no assurance that the actual results or developments will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, D+H.

Fourth Quarter Highlights

• Revenue was $183.8 million, an increase of $21.3 million, or 13.1%, compared to the same quarter in 2010.
• EBITDA¹ was $45.6 million, an increase of $16.1 million, or 54.7%, compared to the same quarter in 2010. The majority of the increase was attributable to the acquisitions of ASSET and Mortgagebot and to the impact on EBITDA in the fourth quarter of 2010 of the restructuring charge.  The impact of the restructuring charge on EBITDA in the fourth quarter of 2010 was  $6.2 million. EBITDA for the fourth quarter of 2011 was also reduced by acquisition-related costs of  $0.6 million.
• Adjusted net income¹ was $25.6 million ( $0.4315 per share) for the fourth quarter of 2011. There is no comparable measure in 2010.
• Net income was $15.4 million ( $0.2595 per share), a year-over-year increase of  $3.3 million, or 27.8%, compared to $12.0 million ( $0.2260 per unit) for the same quarter in 2010. The change in results in the fourth quarter of 2011 was primarily attributable to the impacts of the ASSET and Mortgagebot acquisitions, the changes in the tax status of the Business as a result of the conversion from an income trust to a corporation, and the impacts of the restructuring charge recorded in the fourth quarter of 2010 as previously described.  Net income per share for the fourth quarter of 2011 was also impacted by the issuance of 6 million shares in April 2011 to partially fund the Mortgagebot acquisition.
• During the fourth quarter of 2011, the Company paid a dividend of $0.3100 per share on December 30, 2011 to its shareholders of record on November 30, 2011.
• During the fourth quarter of 2011, the Business made a repayment of $20.0 million on its credit facilities.

^{__________________________________
1}D+H financial results are prepared in accordance with IFRS. D+H reports several non-IFRS financial measures, including EBITDA and Adjusted net income used above. Adjusted net income is calculated as net income, adjusted to remove certain non-cash items and certain items of note such as acquisition-related expenses and discontinued operations. These items are excluded in calculating adjusted net income as they are not considered indicative of the financial performance of the Business for the period being reviewed. Any non-IFRS financial measures should be considered in context with the IFRS financial presentation and should not be considered in isolation or as a substitute for IFRS net income or cash flow. Further, D+H’s measures may be calculated differently from similarly titled measures of other companies. See Non-IFRS Financial Measures section in the MD&A for a more complete description of these terms.

2011 Highlights

• Revenue was $724.7 million, an increase of  $75.0 million, or 11.5%, compared to 2010.
• EBITDA was $177.4 million, an increase of $30.3 million, or 20.6%, compared to the same period 2010. The majority of the increase was attributable to the acquisitions of ASSET and Mortgagebot and to the impact on EBITDA in 2010 of the restructuring charge and acquisition-related expenses.   EBITDA for 2011 was reduced by acquisition-related costs of  $3.8 million in connection with the acquisitions of ASSET and Mortgagebot.  EBITDA for 2010 was reduced by a restructuring charge and acquisition-related expense in connection with the finalization of the Resolve acquisition under IFRS, totalling  $10.6  million.
• Adjusted net income was $109.4 million ($1.8994 per share) for 2011 and there is no comparable measure for 2010.
• Net income was $89.9 million ($1.5620 per share),  a year-over-year increase of  $11.1 million, or  14.1% compared to $78.8 million ( $1.4800 per unit) for the same period in 2010. The net increase was primarily attributable to the impacts of the ASSET and Mortgagebot acquisitions, the changes in the tax status of the Business as a result of the conversion from an income trust to a corporation, the non-cash unrealized loss on interest-rate swaps and the various impacts of acquisition-related items and non-cash tax recoveries. Net income per share for 2011 was also impacted by the issuance of 6 million shares in April 2011 to partially fund the Mortgagebot acquisition.
• During 2011, D+H paid $1.2233 per share to its shareholders.
• During 2011, excluding the borrowings to fund the acquisitions, the Business made a net repayment of $36.0 million on its credit facilities.
• In September 2011, the Company announced the succession plans related to the retirement of Bob Cronin in February 2012 and the assumption of the role of CEO by Gerrard Schmid, the Company’s President and COO.

D+H’s consolidated financial statements for 2011, accompanying notes to the financial statements and management’s discussion & analysis (MD&A) along with the supplementary financial information will be available tomorrow on www.sedar.com.

For a more detailed discussion of the results and management’s outlook, please see the MD&A below.

Caution Concerning Forward-Looking Statements

This press release contains certain statements that constitute forward-looking information within the meaning of applicable securities laws (“forward-looking statements”). Statements concerning D+H’s objectives, goals, strategies, intentions, plans, beliefs, expectations and estimates, and the business, operations, financial performance and condition of D+H are forward-looking statements.  The words “believe”, “expect”, “anticipate”, “estimate”, “intend”, “may”, “will”, “would” and similar expressions and the negative of such expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.  These forward-looking statements are subject to important assumptions, including the following specific assumptions: the ability of D+H to meet its revenue and EBITDA targets; general industry and economic conditions; changes in D+H’s relationship with its customers and suppliers; pricing pressures and other competitive factors; the anticipated effect of the acquisition of Mortgagebot on the financial performance of D+H; and the expected benefits arising as a result of the acquisition of Mortgagebot. D+H has also made certain macroeconomic and general industry assumptions in the preparation of such forward-looking statements.  While D+H considers these factors and assumptions to be reasonable based on information currently available, there can be no assurance that actual results will be consistent with these forward-looking statements.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Business, or developments in D+H’s industry, to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements.

Risks related to forward-looking statements include, among other things, challenges presented by declines in the use of cheques by consumers; the Company’s dependence on a limited number of large financial institution customers and dependence on their acceptance of new programs; strategic initiatives being undertaken to meet the Company’s financial objective; stability and growth in the real estate, mortgage and lending markets; as well as general market conditions, including economic and interest rate dynamics. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.  The documents incorporated by reference herein also identify additional factors that could affect the operating results and performance of the Company. Forward-looking statements are based on management’s current plans, estimates, projections, beliefs and opinions, and D+H does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change except as required by applicable securities laws.

All of the forward-looking statements made in this press release and the documents incorporated by reference herein are qualified by these cautionary statements and other cautionary statements or factors contained herein, and there can be no assurance that the actual results or developments will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, the Company.

Conference Call

Davis + Henderson will discuss its financial results for the three and twelve months ended December 31, 2011 via conference call at 10:00 a.m. EST (Toronto time) on Wednesday, March 7, 2012. The number to use for this call is 647-427-7450 for Toronto area callers or 1-888-231-8191 for all other callers. The conference call will be hosted by Gerrard Schmid, Chief Executive Officer and by Brian Kyle, Chief Financial Officer. The conference call will also be available on the web by accessing CNW Group’s website www.newswire.ca/en/event. For anyone unable to listen to the scheduled call, the rebroadcast number will be: 416-849-0833 for Toronto area callers, or 1-855-859-2056 for all other callers, with Encore Password 48468447. The rebroadcast will be available until Wednesday, March 21, 2012.  An archive recording of the conference call will also be available at the above noted web address for one month following the call and a text version of the call will be available at www.dhltd.com.

ADDITIONAL INFORMATION

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

MANAGEMENT’S DISCUSSION AND ANALYSIS

Management’s Discussion and Analysis (“MD&A”) for the fourth quarter of 2011 and the year ended December 31, 2011 for Davis + Henderson Corporation (the “Company” or the “Corporation” or the “Business” or “Davis + Henderson” or “D+H” or “we” or “our”), which was formerly known as Davis + Henderson Income Fund (the “Fund”), has been prepared with an effective date of March 6, 2012 and should be read in conjunction with the MD&A in the Annual Report for the year ended December 31, 2010, dated March 8, 2011, the Short Form Prospectus, dated April 6, 2011, and the attached unaudited consolidated financial statements. External economic and industry factors remain substantially unchanged from the annual MD&A and the Short Form Prospectus, unless otherwise stated.

On April 12, 2011, D+H completed the acquisition of Mortgagebot LLC (“Mortgagebot”) for a purchase price of US $232.7 million, excluding transaction costs. Mortgagebot is a leading Software-as-a-Solution (“SaaS”) provider of mortgage point-of-sale offerings in the United States and provides a range of consumer direct, loan officer, branch and call centre mortgage and consumer loan origination solutions for over 1,070 banks and credit unions.

On January 18, 2011, D+H acquired the assets and operations of ASSET Inc. (“ASSET”) for $74.9 million, excluding transaction costs.  ASSET is Canada’s largest provider of technology based asset recovery and insolvency management solutions to the Canadian financial services industry. This acquisition furthers D+H’s strategy of being a leading provider of integrated solutions to the financial services industry and, in particular, deepens the Corporation’s capabilities across the broader lending spectrum.

The strategies and objectives of the Business remain unchanged.

This MD&A of financial condition and results of operations has been prepared with an effective date of March 6, 2012 and should be read in conjunction with D+H’s audited consolidated financial statements for the year ended December 31, 2011. This MD&A comments on D+H’s operations, performance and financial condition for the years ended December 31, 2011, 2010 and 2009.

STRATEGY

D+H is a leading solutions provider to the financial services marketplace. We have several market-leading service offerings within Canada, including: our cheque supply program; the servicing of student loans; the provision of registration, recovery and related services for secured loan products; and the delivery of lending technology solutions. Additionally, with the recent acquisition of Mortgagebot, D+H is a market-leading provider of SaaS, point-of-sale mortgage and consumer loan solutions in the United States for over 1,070 banks and credit unions. We also offer broader technology solutions in the commercial lending, small business lending and leasing area, as well as servicing solutions within the credit card market and other outsourced services in a number of specialty areas.

D+H’s strategy is to establish market-leading positions within well defined and growing service areas in the financial services marketplace and to further expand our service offerings by enhancing the activities that we perform on behalf of our customers. We expect to advance this strategy through organic initiatives, as well as by partnering with third parties and by way of selective acquisitions. D+H’s long-term financial objective is to deliver sustainable and growing earnings through continued organic revenue growth and by way of strategic acquisitions. The Business focuses on three primary ways to pursue its objectives. These are to: (i) evolve and enhance the value of our programs to payment accounts (specifically chequing and credit cards); (ii) extend our technology supported services related to personal, student and commercial lending and leasing markets; and (iii) pursue opportunities in other areas within the financial services marketplace.

Over the past several years, D+H has executed this strategy by evolving our programs to the chequing account, completing several acquisitions, including the Resolve Corporation (“Resolve”) in 2009, ASSET in January 2011, and Mortgagebot in April 2011, and by further enhancing our services and capabilities. As a result, we offer a diverse range of market-leading services.

For a detailed discussion of the annual and fourth quarter 2011 results, management’s outlook and risk factors, please see below.

ACCOUNTING PRINCIPLES AND FINANCIAL INFORMATION PRESENTATION

For fiscal years beginning on or after January 1, 2011, Canadian public companies are required to prepare their financial statements in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”). Due to the requirement to present comparative financial information, the effective transition date was January 1, 2010. Effective January 1, 2011, the Company’s consolidated financial statements have been prepared in accordance with IFRS, as issued by the IASB, with 2010 comparative figures restated to conform to IFRS.

Prior to January 1, 2011, the consolidated financial statements were prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”), and therefore, comparative periods for 2010 have been restated to be in accordance with IFRS. Comparative periods presented in this MD&A that are prior to January 1, 2010, have not been restated for IFRS and have been presented in accordance with Canadian GAAP.

Note 26 of the Corporation’s audited consolidated financial statements for 2011 contain reconciliations and descriptions of the effect of the transition from Canadian GAAP to IFRS on equity, earnings and comprehensive income, including line-by-line reconciliations of the statement of financial position as at January 1, 2010 and December 31, 2010 as well as the statement of income for the year ended December 31, 2010.  In 2010, the Company described the adjustments that were anticipated in converting from Canadian GAAP to IFRS; with the completion of the IFRS implementation project, the final adjustments have been determined, revised where appropriate, and are reported in Note 26.

Results from continuing operations include the performance of acquired businesses from the date of their acquisition and exclude results from businesses classified as discontinued operations.

Comparative information presented for periods prior to January 1, 2011 relate to those of the Fund, and the results for the periods subsequent to January 1, 2011 are those of the Corporation. Consequently, throughout this MD&A, any references to distributions, unitholders, and per unit amounts relate to periods prior to January 1, 2011, and any references to dividends, shareholders and per share amounts relate to periods subsequent to January 1, 2011.

All amounts are in Canadian dollars, unless otherwise specified.

OPERATING RESULTS FOR THE FOURTH QUARTER

Overview

D+H’s solid operating performance in the fourth quarter of 2011 was consistent with our expectations and we are satisfied with these results in the context of our strategic agenda. Overall, in the fourth quarter of 2011, the Business had growth in revenues and EBITDA, compared to the same period in 2010, due primarily to the inclusion of ASSET and Mortgagebot and additionally from the impacts of acquisition-related costs and restructuring charges that were recorded in 2010.  For a more detailed description on revenues and expenses, see the comments below.

Consolidated revenue for the fourth quarter of 2011 was $183.8 million, an increase of $21.3 million, or 13.1%, compared to the same quarter in 2010. The increase was primarily due to the inclusion of ASSET acquired January 18, 2011 and Mortgagebot, acquired April 12, 2011, with both increases and decreases in other service areas as described below.

The following table is derived from, and should be read in conjunction with, the Consolidated Statements of Income and includes non-IFRS financial measures. Management believes this supplementary disclosure provides useful additional information. See Non-IFRS Financial Measures section for a description of non-IFRS terms used.

The consolidated results include those of ASSET, effective January 18, 2011, and Mortgagebot, effective April 12, 2011.

Consolidated Operating and Financial Results¹
(in thousands of Canadian dollars, except per share amounts, unaudited)

Revenue

Services delivered by the Business are subject to seasonality, including fees earned in connection with mortgage origination services and automobile loan registration services, which are typically stronger in the second and third quarters than in the first and fourth quarters.

(in thousands of Canadian dollars, unaudited)

Programs to the chequing account revenue for the fourth quarter of 2011 was $73.8 million, an increase of $0.7 million, or 1.0%, compared to the same quarter in 2010. Revenue for the fourth quarter of 2011 benefitted from continued positive impact of higher average order values attributable to program changes and product and service enhancements, partially offset by volume decreases.  Management believes that the long-term historical trend related to current cheque order decline is relatively unchanged and continues to be in the low single digit range, however; there has been some volatility in order volumes in recent periods, including more recent higher personal order volume reductions.

Loan registration and recovery services revenue for the fourth quarter of 2011 was $39.3 million, an increase of $13.3 million, or 51.3%, compared to the same quarter in 2010.  This increase was due primarily to the inclusion of ASSET, acquired on January 18, 2011.  Volumes in this area can be variable due to changes in the economy, changes in the auto and auto lending market and seasonality. Typically, this service area experiences stronger volumes during the second and third quarters as compared to the first and fourth quarters as consumers more frequently purchase and finance cars in the spring and summer. Generally, the recovery fees related to ASSET have been as expected.

Loan servicing programs revenue for the fourth quarter was $33.4 million, an increase of $0.4 million, or 1.4%, compared to the same quarter in 2010. Transaction revenue from student loan administrative services, which comprises the largest portion of revenues within this service area, was relatively unchanged compared to 2010. Volumes in this area are expected to be relatively stable and modestly growing in the short-term and cost management activities are being directed towards lowering the impact of reduced pricing and fees related to particular customers, including reduced fees we will earn as one of our customers integrates the servicing of their portfolio into that of another one of our customers.  The majority of the revenue increase in the loan servicing area is attributed to the credit card servicing area, and in turn, primarily related to specific customer initiatives that increased both revenues and expenses with minimal impact on profitability.

Lending technology services revenue for the fourth quarter of 2011 was $28.6  million, an increase of  $8.6 million, or 43.2%, compared to the same quarter in 2010.  The increase during the fourth quarter of 2011 was largely due to the inclusion of Mortgagebot partially offset by reduced fees in other areas.  Fees related to origination volumes were impacted by the repatriation by a customer of certain services we historically performed for them.  In general, industry analysts expect the Canadian housing market to be relatively stable with some potential for modest cooling of prices in major urban areas through 2012 and a slight recovery in the U.S housing market, though a reduction in refinancing activity is expected. 

Other revenue for the fourth quarter of 2011 was $8.8 million, compared to $10.6 million for the same period in 2010.  In general, we have recently experienced and expect to continue to experience some reductions in this area as certain customers repatriate certain outsourced activities.  On October 7, 2010, the Business sold a non-strategic component of its contact centre business and entered into a transition agreement with the buyer, which expired on April 1, 2011.  The results of these operations were previously reported in this revenue category and have been presented as discontinued operations.

Expenses¹       

On a consolidated basis, expenses of $138.2 million for the fourth quarter of 2011 increased by $5.2 million, or 3.9%, compared to the same quarter in 2010.  The increase primarily reflects the inclusion of ASSET and Mortgagebot expenses and the ongoing costs associated with the transformation and integration activities, including in the technology area, partially reduced by cost management and other net savings, including reduced restructuring expenses.

Employee compensation and benefits costs of  $57.3 million for the fourth quarter of 2011 increased by $5.7 million, or 11.0%, compared to the same quarter in 2010.  The increase was primarily related to the inclusion of ASSET and Mortgagebot expenses, and a general increase in compensation levels, partially offset by the tax credits related to the apprenticeship program and benefits related to integration of employee benefit programs. As well, the fourth quarter of 2010 included a restructuring charge related to transformation and integration activities. Additionally, the replacement of contract labour (recorded as other operating expenses) with full-time staff also impacted costs.

Non-compensation direct expenses were $56.6 million for the fourth quarter of 2011, an increase of $5.9 million, or 11.6%, compared to the same quarter in 2010. The increase is primarily attributable to the third party direct disbursements relating to the ASSET business.  In general, these expenses directionally change with revenue changes.

Other operating expenses for the fourth quarter of 2011 of $24.3 million, decreased by $6.4 million, or 20.8%, compared to the same quarter in 2010.  The decrease in other operating expenses were attributable to costs savings realized related to transformation and integration project initiatives and replacement of contract labour with full-time staff as discussed above, partially offset by increases due to the inclusion of ASSET and Mortgagebot expenses.

EBITDA

EBITDA during the fourth quarter of 2011 was $45.6 million, an increase of $16.1 million, or 54.7%, compared to the same quarter in 2010. The majority of the increase was attributable to the acquisitions of ASSET and Mortgagebot and to the impact on EBITDA in the fourth quarter of 2010 of the restructuring charge.  The impact of the restructuring charge on EBITDA in the fourth quarter of 2010 was $6.2 million. EBITDA for the fourth quarter of 2011 was also reduced by acquisition-related costs of $0.6 million.

Depreciation of Capital Assets and Amortization of Non-acquisition Intangibles

Depreciation of capital assets and amortization of non-acquisition intangible assets during the fourth quarter of 2011 increased by $1.1 million, or 19.6%, compared to the fourth quarter of 2010. These increases were primarily related to capital additions and the inclusion of the ASSET and Mortgagebot businesses.

Amortization of Intangibles from Acquisitions

Amortization of acquisition-related intangibles for the fourth quarter of 2011 increased by $3.9 million as compared to the same period in 2010 due to the addition of intangibles related to the acquisitions of ASSET and Mortgagebot.

Interest Expense

Interest expense for the fourth quarter of 2011 increased by $1.5 million, compared to the same quarter in 2010, due to increased borrowings in relation to the acquisitions of ASSET and Mortgagebot.

Amortization and Fair Value Adjustment of Derivative Instruments

Interest-rate swaps

A net unrealized gain of $0.1 million on interest-rate swaps was recognized in the fourth quarter of 2011 (Q4 2010 -  net unrealized gain of $2.8 million) reflecting fair value adjustments related to changes in market interest rates at December 31, 2011 compared to September 30, 2011. The amount for the same period in 2010 also included the amortization related to the cumulative gains and losses that were deferred prior to January 1, 2007 when hedge accounting was used by D+H for these interest-rate swaps.

Effective January 1, 2011, the Company’s policy is to adopt hedge accounting prospectively on any new derivative instruments entered into subsequent to January 1, 2011. As of December 31, 2011, the Company had not entered into any new interest-rate swaps and the fair value adjustments of the existing interest-rate swaps continue to be recognized in the Consolidated Statement of Income.

Income Tax Expense (Recovery)

In the fourth quarter of 2011, an income tax expense of $7.7 million was recorded (Q4 2010 -  $3.4 million expense), which included tax expense related to taxes payable in the future and the de-recognition of previously recorded tax attributes. These items were partially offset by a recovery related to changes in timing and permanent differences between tax and accounting balances.

Net Income

Net income of $15.4 million for the fourth quarter of 2011 increased by $3.3 million, or 27.8%, compared to the same period in 2010.  The change in results in the fourth quarter of 2011 was primarily attributable to the impacts of the ASSET and Mortgagebot acquisitions, the changes in the tax status of the Business as a result of the conversion from an income trust to a corporation, and the impacts of the restructuring charge recorded in the fourth quarter of 2010 as previously described.

Adjusted Net Income

As stated earlier, periods prior to January 1, 2011 do not have a comparable measure for Adjusted net income.  For the fourth quarter of 2011, Adjusted net income was $25.6 million.  Adjusted net income for the quarter excluded: (i) non-cash impacts of items such as gains and losses related to fair value adjustment of derivative instruments, amortization of intangibles from acquisitions and income tax adjustments related to the de-recognition of previously recorded tax attributes; and (ii) other items of note such as acquisition-related costs referred to below. Net income is also adjusted for the tax impact of these adjustments to arrive at Adjusted net income. 

Acquisition-related Costs

During the fourth quarter of 2011, the Corporation recorded acquisition-related costs of $0.6 million, which included certain retention and incentive costs related to Mortgagebot.

CASH FLOW AND LIQUIDITY

The following table is derived from, and should be read in conjunction with, the Consolidated Statements of Cash Flows. Management believes this supplementary disclosure provides useful additional information related to the cash flows of the Corporation, repayment of debt and other investing activities.

Summary of Cash Flows
(in thousands of Canadian dollars, unaudited)

Capital Expenditures

Total capital expenditures were $10.6 million, $3.3 million  lower than in the fourth quarter of 2010. Capital expenditures also include certain contract payments which relate to payment obligations under customer and partner contracts, including fixed contract or program initiation payments and annual payments payable over the life of the contract.  These contract payments reflect, among other things, the high degree of integration and sharing between D+H and its customers and partners of the many activities related to ordering, data handling, customer service, customer access and other activities.

Higher capital expenditures in 2010 primarily reflected increased integration and upgrade activities, consistent with the higher capital spend commencing in the latter part of 2010, and investing in the building of technology products and capability.

Dividends

For the fourth quarter of 2011, D+H paid $0.31 per share as it increased its target annualized dividend amount by 4 cents to $1.24 per share effective for shareholders of record as of August 31, 2011.

For the fourth quarter of 2010, both cash distributions declared and paid were $0.4599 per unit ($24.5 million).

Dividends payable by D+H to its shareholders are recorded when declared.  Actual dividends declared will be subject to the discretion of the D+H Board of Directors and may vary from the intentions stated.  Among other items, in determining actual dividends declared, the Board of Directors will consider the financial performance, capital plans, acquisition plans, expectations of future economic conditions and other factors.

As at December 31, 2011, and March 6, 2012, 59,233,373 common shares were outstanding, reflecting the additional 6 million common shares issued in April 2011 to fund the Mortgagebot acquisition (as at December 31, 2010 – 53,233,373 trust units).

Changes in Non-Cash Working Capital and Other Items
(in thousands of Canadian dollars, unaudited)

The net decrease in non-cash working capital items for the fourth quarter of 2011 was attributable to several items, including a decrease in trade receivables due to reduced revenue from the previous quarter, the timing of collections in the fourth quarter of 2011 and an increase in accrued expenses due to normal course timing differences, partially offset by increases in prepaid expenses related to maintenance agreement and costs in connection with enhancement services related to programs to the chequing account.

The Company expects to experience continued variability of non-cash working capital due to the nature and timing of services rendered in connection with the businesses recently acquired.

2011 OPERATING RESULTS

Overview

D+H delivered solid operating performance in 2011 that was consistent with our expectations and we are satisfied with these results in the context of our strategic agenda. Overall, the growth in revenues and EBITDA, compared to 2010, were due primarily to the inclusion of ASSET and Mortgagebot businesses acquired on January 18, 2011 and April 12, 2011 respectively, with additional impacts from restructuring charges recorded in 2010 related to integration and transformation initiatives and acquisition-related costs associated with the finalization of the Resolve acquisition in 2010 as discussed below.  The Business also experienced increases and decreases in revenues from several service areas as more fully described below.

In 2010, the Business underwent significant change as a result of the integration and transformation initiatives designed to better position the Business going forward to serve customers and improve the effectiveness, efficiency and scalability of our operations.  In 2010, these activities had the effect of increasing expenses, including those related to the $8.4 million restructuring charges.  In the latter part of 2011, the Business began to realize the cost savings and enhanced effectiveness associated with these integration and transformation initiatives, which had a positive impact on EBITDA.  For a more detailed description on revenues and expenses, see the comments below.

The following table is derived from, and should be read in conjunction with, the Consolidated Statements of Income and includes non-IFRS financial measures. Management believes this supplementary disclosure provides useful additional information. See Non-IFRS Financial Measures section for a description of non-IFRS terms used.

The consolidated results include those of ASSET, effective January 18, 2011, and Mortgagebot effective April 12, 2011.

Consolidated Operating and Financial Results¹
(in thousands of Canadian dollars, except per share amounts, unaudited)

Revenue¹

The following table reflects the relative size of each of the major service areas as a percentage of total revenue for 2011:

Programs to the chequing account include: (i) our cheque program which serves the personal and small business account holders of our financial services customers; and (ii) various other service offerings directed towards account opening activities, identity protection services and other enhancement services, including services for credit card holders. These service offerings (excluding the component of enhancement and identity protection services that are integrated in the cheque order) currently represent a small component of revenues within this revenue category. In general, cheque order volumes in this area have historically been declining as consumers and small businesses choose other payment methods.

Loan registration and recovery services support the personal and commercial lending activities of our financial services customers. Services include the registration and management of data related to secured lending for both personal and real property loans as well as recovery services related to both secured and unsecured lending activities. The largest service areas within this revenue category are registration services, which currently account for approximately 65% to 75% of revenue, and recovery services accounting for approximately 25% to 35% of revenue. In both instances, loans relating to vehicle purchases are a significant driver of activity and as such can be variable. In general, registration services are impacted by both economic cyclicality and seasonality, while recovery services are, in general, counter-cyclical. Other services within this revenue category include mortgage discharge services and various search-related services, both of which we deliver on behalf of our financial institution customers.

Loan servicing programs include student loans administration services offered to financial institutions and governments and credit card servicing offered to card issuers.  The student loans administration services currently account for approximately 70% to 80% of revenues within this revenue category.  In general, student loan servicing volumes have been stable and modestly growing.  Recent integration of two lending portfolios into a single managed portfolio will reduce the fees we earn on a net basis. Volumes related to credit card servicing can be more variable and are primarily impacted by customer initiatives.

Lending technology services include services directed towards mortgage markets in both Canada and, more recently with the acquisition of Mortgagebot in April 2011, the United States. As well, we offer technology products and services in both countries directed towards leasing, commercial lending and small business lending. Revenues related to the mortgage area currently represent approximately 85% to 95% of revenue within this category, with approximately 60% to 70% attributable to transaction-based fees earned in connection with Canadian mortgage originations and 15% to 25% representing transaction fees related to the U.S. SaaS loan origination service.  Mortgage origination fees can be variable and are impacted by many factors including the economy, the housing market and interest rates, among others. 

Other revenues include a number of smaller service offerings that are primarily outsourced activities we perform on behalf of a variety of customers including non-financial services customers.

See comments below for discussion on annual impacts on revenue for each service area.

Revenue – 2011 vs. 2010

Consolidated revenue for 2011 was $724.7 million, an increase of $75.0 million, or 11.5%, compared to 2010. The increase was primarily due to the inclusion of ASSET acquired January 18, 2011 and Mortgagebot, acquired April 12, 2011, with our core businesses reflecting some growth, offset by declines elsewhere, as described below.

(in thousands of Canadian dollars, unaudited)

Programs to the chequing account revenue for 2011 was $296.3 million, an increase of $2.5 million, or 0.8%, compared to 2010.  The modest increase in 2011 was primarily attributable to program changes and product and service enhancements that provided increased average order values partially offset by cheque order volume reductions.  Management believes that the long-term historical trend related to current cheque order decline is relatively unchanged with the financial impact continuing to be in the low single digit range; however, there has been some volatility in recent periods, including more recent higher personal order volume reductions.

Loan registration and recovery services revenue for 2011 was  $160.7 million, an increase of  $49.0 million, or 43.9%, compared to 2010.  This increase was due primarily to the inclusion of ASSET, acquired on January 18, 2011.  Volumes in this area can be variable due to changes in the economy, changes in the auto and auto lending market and seasonality. Generally, the recovery fees related to ASSET have been as expected.

Loan servicing programs revenue for 2011 was $131.1 million, an increase of $5.4 million, or 4.3%, compared to 2010. Transaction revenue from student loan administrative services, which comprises the largest portion of revenues within this service area, was relatively unchanged for 2011 as compared to 2010 as an increase in service volumes offset contractual price declines. We will earn reduced fees in this area as one of our customers integrates the servicing of their portfolio into that of another one of our customers. The majority of the annual revenue increase is attributed to the credit card servicing area, and in turn, primarily related to specific customer initiatives that increased both revenues and expenses with minimal impact on profitability. Currently, cost management activities in this area are being directed towards lowering the impact of reduced pricing and fees related to particular customers.

Lending technology services revenue for 2011 was $99.5 million, an increase of $22.2 million, or 28.7%, compared to 2010. The increase was due to the inclusion of Mortgagebot, effective from the date of acquisition of April 12, 2011, partially offset by reduced fees in other areas.  Transaction-based fees in this service area can be variable. Fees related to origination volumes were impacted by the repatriation by a customer of certain services we historically performed for them.  In general, industry analysts expect the Canadian housing market to be relatively stable with some potential for modest cooling of prices in major urban areas through 2012 and a slight recovery in the U.S. housing market, though a reduction in refinancing activity is expected. 

Other revenue for 2011 was $37.1 million compared to $41.2 million for 2010.  In general, we have recently experienced and expect to continue to experience some reductions in this area as certain customers repatriate outsourced activities.  On October 7, 2010, the Business sold a non-strategic component of its contact centre business and entered into a transition agreement with the buyer, which expired on April 1, 2011.  The results of these operations were previously reported in this revenue category and have been presented as discontinued operations.

Expenses¹

On a consolidated basis, expenses  were  $547.3  million, an increase of  $44.7  million, or 8.9%, compared to 2010. The increase primarily reflects the inclusion of ASSET and Mortgagebot expenses and the ongoing costs associated with the transformation and integration activities in the technology area.  These increases were partially offset by cost management and other net savings in 2011, and by the impacts in 2010 of restructuring charges and acquisition-related items expensed under IFRS in connection with the finalization of the Resolve acquisition, totalling $10.6 million. 

(in thousands of Canadian dollars, unaudited) 

Employee compensation and benefits costs for 2011 were  $222.4  million, an increase of  $24.2 million, or 12.2%, compared to 2010. The increase was primarily related to the inclusion of ASSET and Mortgagebot expenses, and a general increase in compensation levels, partially offset by tax credits related to the  apprenticeship program. As well, 2010 included a restructuring charge related to transformation and integration activities and acquisition-related expenses in connection with the finalization of the Resolve acquisition under IFRS. Additionally, we have been replacing contract labour (recorded as other operating expenses) with full-time staff as the nature and certainty of work within certain service areas mature.

Non-compensation direct expenses were $231.4 million, an increase of $26.8 million, or 13.1%, compared to 2010. The increase was primarily attributable to third party direct disbursements within the ASSET business.  In general, these expenses directionally change with revenue changes.

Other operating expenses for 2011 of $93.5 million decreased by $6.3 million, or 6.3%, compared to 2010.  The decrease in other operating expenses reflected decreases in several cost areas, including costs savings realized related to transformation and integration project initiatives, as well as the impact of certain restructuring charges recorded in 2010.

EBITDA

EBITDA for 2011 was $177.4 million, an increase of $30.3 million, or 20.6%, compared to 2010.  The majority of the increase was attributable to the acquisitions of ASSET and Mortgagebot and to the impact on EBITDA in 2010 of the restructuring charge and acquisition-related expenses. EBITDA for 2011 was reduced by acquisition-related costs of $3.8 million in connection with the acquisitions of ASSET and Mortgagebot.  EBITDA for 2010 was reduced by a restructuring charge and acquisition-related expenses in connection with the finalization of the Resolve acquisition under IFRS, totalling $10.6 million.

Depreciation of Capital Assets and Amortization of Non-acquisition Intangibles

Depreciation of capital assets and amortization of non-acquisition intangible assets for 2011 increased by $3.6 million, or 17.7%, compared to 2010.  This increase was primarily related to increased capital additions in 2010 and 2011, in addition to the inclusion of the ASSET and Mortgagebot businesses.

Amortization of Intangibles from Acquisitions

Amortization of acquisition-related intangibles for 2011 increased by $12.4 million, as compared to 2010 due to the addition of intangibles related to the acquisitions of ASSET and Mortgagebot.

Interest Expense

Interest expense for 2011 increased by $5.0 million compared to 2010 due to increased borrowings in relation to the acquisitions of ASSET and Mortgagebot.

Amortization and Fair Value Adjustment of Derivative Instruments

Interest-rate swaps

A net unrealized loss of $3.4 million was recognized during 2011, reflecting fair value adjustments of interest-rate swaps attributable to changes in market interest rates during the year.  For 2010, a net unrealized gain of $0.8 million was recorded.  These amounts also included the amortization related to the cumulative gains and losses that were deferred prior to January 1, 2007 when hedge accounting was discontinued for these swaps.

These unrealized gains and losses are recognized in income because these interest-rate swaps are not designated as hedges for accounting purposes.  In general, a loss on interest-rate swaps is recorded when interest rates decrease as compared to certain previous periods and a gain is recorded when interest rates increase.  Provided the Company does not cancel its interest-rate swaps, the unrealized amounts represent a non-cash unrealized gain or loss that will subsequently reverse through income as the related swaps mature.  The Company has historically held its derivative contracts to maturity.

Effective January 1, 2011, the Company’s policy is to adopt hedge accounting prospectively on any new derivative instruments entered into subsequent to January 1, 2011.  At December 31, 2011, the Company had not entered into any new interest-rate swaps and the fair value adjustments of the existing interest-rate swaps continue to be recognized in the Consolidated Statement of Income.

Income Tax Expense (Recovery)

In 2011, an income tax expense of $0.6 million was recorded (2010 – $3.3 million expense).  The Company continued realizing the benefit from prior year tax losses and unamortized tax balances such that no current taxes were payable relating to 2011. Due to the corporate structure, certain available tax losses, and no requirements to pay 2012 tax instalments, the Company does not expect to pay any significant cash taxes in 2012. In 2013, we expect to pay taxes on 2012 taxable income and to commence making corporate tax instalments on 2013 taxable income.

The income tax expense for 2011 included a tax recovery related to the recognition of a deferred tax asset attributable to losses of certain U.S. subsidiaries that are now expected to be realized in connection with the acquisition of Mortgagebot, as well as the recognition of a deferred tax asset related to intangible assets that are now expected to be realized as a consequence of the corporate conversion and an internal reorganization, partially offset by the de-recognition of previously recorded tax attributes. The deferred tax expense was partially offset by a recovery related to changes in timing and permanent differences between tax and accounting balances.

Net Income

Net income of $89.9 million increased by $11.1 million, or 14.1% compared to 2010.  The net increase was primarily attributable to the impacts of the ASSET and Mortgagebot acquisitions, the changes in the tax status of the Business as a result of the conversion from an income trust to a corporation, the non-cash unrealized loss on interest-rate swaps and the various impacts of acquisition-related items and tax recoveries as previously described.

Adjusted Net Income

Effective January 1, 2011, as a result of the conversion from an income trust structure to a corporate structure, the Business commenced using Adjusted net income as a measure for evaluating its financial results.  Adjusted net income is a non-IFRS financial measure.  See Non-IFRS Financial Measures for a more complete description of this term.  Periods prior to January 1, 2011 do not have a comparable measure for Adjusted net income.

Adjusted net income excludes both: (i) non-cash impacts of items such as gains and losses related to fair value adjustment of derivative instruments, amortization of intangibles from acquisitions, an income tax recovery related to the recognition of a deferred tax asset attributable to losses of certain US subsidiaries that were not previously recognized and to tax recoveries related to the corporate conversion and de-recognition of previously recorded tax attributes); and (ii) other items of note such as acquisition-related costs referred to below and discontinued operations.  Net income is also adjusted for the tax impacts of these adjustments.  Adjusted net income for 2011 was $109.4 million. 

Acquisition-related Costs

In 2011, the Corporation recorded acquisition-related costs of $3.8 million, which included certain retention and incentive costs related to Mortgagebot and certain transaction costs incurred in connection with the ASSET and Mortgagebot acquisitions.

During 2010, the purchase accounting for the Resolve acquisition was finalized under Canadian GAAP.  Under IFRS, certain costs did not qualify for equivalent recognition. As such, $2.3 million was recorded as part of continuing operations and $1.9 million (before taxes) was recorded as part of discontinued operations in 2010.

EIGHT QUARTER CONSOLIDATED STATEMENT OF INCOME – SUMMARY ^{1, 9}
(in thousands of Canadian dollars, except per share amounts, unaudited)