Nicolas MEGELAS - Garda World Security

COMPANY ANALYSIS OF GARDA (TSX:GW)
NICOLAS MEGELAS
November 29th 2010

“If you know both
yourself and your hate,
you will dismantle the
work of a hundred
battles with a hundred
victories.”
Sun Tzu, The art of War

Garda World Security Corporation has gone through an important acquisition process in
the past few years. The fact that the company is facing so many changes as well as the
economic crisis is creating uncertainty about expected future earnings of the company
and the ability of the management to succeed in integrating the new comers into Garda.
In 1995, Stéphan D. Crétier took a $25 000 mortgage on his house to start up his own
security firm: TransQuebec Security, which he took public in 1999 (having grown
considerably). A few months later, Crétier made the acquisition of Montreal-based
Garda and appropriated the name to become Garda World Security. Originally a minor
league baseball umpire, Crétier is a forward thinker, constantly pushing his company to
new heights, whilst instilling in his team values of integrity, excellence, top performance
and social conscience (Garda plays a strong role within communities where it operates
to help them improve their quality of life) to name a few.
First and foremost, for Garda, customer satisfaction always comes first. Having worked
in sports, it goes without saying that Crétier values a modern managerial approach,
acting as a coach rather than a chief. The company has great growth opportunities and
keeps expanding in various sectors; in the long run, this could create heavy hierarchy
making it quasi-impossible to keep ahead of the game. Consequently, Garda’s CEO
grants its teams, executive and decision-making freedom while encouraging its high
level executives to adopt a cutting edge attitude to always be ready when new business
opportunities arise. This helps to keep Garda a step ahead of the competition and
generate much appreciated value for stockholders. It is its competence, creativity and
capacity to differentiate itself that leads Garda to surpass its competitors in more than
one way.
With prospects for the economy showing relative growth over the next few years, and
those of the industry showing excellent growth perspective, we found that the method
used by Garda to expand its size is common within the industry. Even though the
security industry is more of a defensive one, both the Canadian and the American
economies having recently experienced a recession, and with the Americans especially
affected by the depreciation of their exchange rate, and decrease in their GDP, we’ve
seen quite a notable impact on the stock price. Although the Bank of Montreal (BMO) is
expecting a growth in Canadian GDP for 2011, in Garda’s case, we cannot say the
industry in which it operates (safety/security/protection industry) is cyclical, and would
therefore be expected to emulate the patterns of the economy. Nonetheless we can
definitely affirm that the aforementioned industry is dependant on the crises of the world
(notably 9/11, the Iraq War etc.) and how much they affect the Americas.
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Garda’s industry (safety/security/protection industry) more or less emerged at the start of
the 20th century. Back then, the underdeveloped sector focused mainly on the offering
of protection services. Throughout the century, and especially over the past twenty
years, the industry diversified itself and went on to offer a wider range of products to its
customers. Nowadays, the industry’s services can be defined as “services provided by
the private sector to prevent crimes, damages, or harm against private individuals,
organizations or facilities”1.
Not only did the industry’s spectrum broaden, it also expanded in size. In 1997, the
market size for security services was about 2 billion Canadian dollars. In 2009,
estimations reached 4 billion in Canada while generating an astonishing 120 billion of
revenues in the United States. It is interesting to notice that over the last thirty years,
the number of private security agencies has increased steadily with relation to the
population, while the number of police officers has been decreasing. In Canada, the
U.S., Australia and South Africa, there are more private security guards than police
officers. In recent years, police services have been facing a more complex demand
while their budgets have not necessarily grown enough to allow them to fulfill their added
duties. From this added pressure on police forces (or the gap between the public’s
expectations and what the force is able to offer) stems part of the growth experienced by
the private sector. One also easily understands that a turning point for the industry of
security services has been experienced since September 11th 2001. From this moment
on, fear has driven the demand for security, which increased in commercial, residential
and governmental sectors.
As for the competitive environment, the Canadian market for security services is said to
be very much fragmented and with over 2,400 licensed companies it is quite difficult not
to agree with this. Compared with all industries, the average size of businesses
operating in the industry of security is large: 51.5% of players have fewer than five
employees while the national average for companies having less than five employees is
59.2%. The proportion of businesses in the investigation and security services industry
with more than nine employees reaches 31.5%, once again higher than the national
average of 23.0%. Therefore, many enterprises in this industry have a larger workforce
when compared to Canadian industries in general, although they average a lower pay
(See appendix A).
1
http://www.hrsdc.gc.ca/eng/hip/hrp/sp/industry_profiles/investigation_security_services.shtml
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The industry of security is not highly correlated to the market: some even say it is
counter cyclical. This affirmation is logical: would a company reduce its security level in
a recession and would that be the first area in which expenses are cut? The clear
answer is no. However, in recession, especially the one we have known in the past few
years, the need for certain services could be reduced, for instance, in airport screening,
because people tend to travel less, saving their money for more essential needs.
One must not assume that the large number of participants in the market indicates the
absence of leaders. In fact, three players seem to stand out from the competition:
Group4Securicor, Securitas, and Brink’s Co. The first two companies are European-
based multinational companies among the leaders in the world market for security.
They both entered the North American market by acquiring well-established security
businesses in the United States. Group4Securicor walked its first steps on American
ground by buying out The Wackenhut Corporation, the second-largest security services
company back in 2002. As for Securitas, it had adopted a similar approach by acquiring
Pinkerton, the number one security company in the market at that time. Garda is
currently using the same strategy to establish itself in the US security industry as their
recent purchases of a few key players illustrate.
Garda’s goal, as stated in their financial statement, is to work with clients to give them a
one-stop shopping experience for all their security solutions. Consequently, they offer a
complete array of security solutions mainly divided in two sectors: physical security and
transportation of valuables. In physical security, Garda is the undisputed leader in
Canada and among the top players in the United States. Acting in mall, airport and
business place security (to name a few) as well as inspectors and pre-employment
investigators, Garda has an exhaustive set of tools and expertise at hand. As for
transportation of valuables, be it bulletproof trucks, ATM maintenance or refilling bank
safes, Garda is currently the leader for such services in Canada and in the Midwestern
United States.
After speaking with clients of the security industry2, we came to the conclusion that the
quality and quantity of services offered by a given security company as well as the price,
are the most important factors. For these clients, the current method for choosing a
security provider is to issue a contract call and to subsequently compare the services
offered by each company to the services needed; getting everything under one roof
(security guard, cash handling, consulting, investigation), does not seem to be of great
2
We called Desjardins and Banque Nationale on November 10th, 2010.
7
concern to customers. From this point of view, Garda’s great diversification does not
give them as strong a competitive advantage as they may have suggested; the
advantage resides in that they can reach a greater market. In the security business,
trustworthiness is of primary importance so it is not surprising or unusual to find
companies staying in business together for very long periods of time.
Considering Garda has only been around since 1995, the speed at which it grew is quite
astounding. Nevertheless, after analyzing its growth structure, we realize Garda kept
buying out its competitors (whilst maintaining each new division’s assets, learning and
improving on them but also perhaps not using synergies to their full potential) to ensure
its place on the global market. Consequently, its major competitors are all big
multinational firms such as Securitas and Group4 Securicor.
Although Garda has undergone several mergers and acquisitions, and even though it
was thought that the security industry was counter cyclical, the company’s stock price
still had quite a sharp decline during the recession, but what hit Garda most was actually
the bankruptcies of the market as opposed to the reorganization of operations.
Analyzing the expansion of the company, we see that its cycle of growth hasn’t yet
reached its end. Consequently and together with the current economic situation, we can
also affirm that the company shouldn’t declare dividends in the near future. This
affirmation is based on the concept that a company should only declare dividends when
it reaches maturity and there are no more projects under review with positive net present
value. Garda today posts an income statement loss of close to $35M and a negative
ROE and ROI: this is a temporary situation, or so the management likes to think.
Looking at the evaluation of Garda’s position in the market as well as the highly involved
management style and expertise of its CEO, not to mention his ability to always look out
for the next growth opportunity, we can see that Garda does possess the strength and
size to keep operating well beyond this crisis; Mr Crétier will certainly be able to get his
empire get back to its pre-2008 level.
8
Appendix A
Firms representation according to size
Appendix B
Garda World Security Corporation

Consolidated Financial Statements
For the years ended January 31, 2010 and 2009
PricewaterhouseCoopers
LLP/s.r.l./s.e.n.c.r.l.
Chartered Accountants
1250 René-Lévesque Boulevard West
Suite 2800
Montréal, Quebec
Canada H3B 2G4
Telephone +1 514 205 5000
Facsimile +1 514 876 1502
Auditors’ Report
To the Shareholders of
We have audited the consolidated balance sheets of Garda World Security Corporation as at January 31,
2010 and 2009 and the consolidated statements of loss, comprehensive loss, deficit and cash flows for the years
then ended. These financial statements are the responsibility of the Corporation’s management. Our
responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards
require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statements presentation.
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial
position of the Corporation as at January 31, 2010 and 2009 and the results of its operations and its cash flows
for the years then ended in accordance with Canadian generally accepted accounting principles.
Chartered Accountants
Montreal, Québec, Canada

April 29, 2010
1
Chartered accountant auditor permit No. 12300
Consolidated Balance sheets and Statements of Deficit
(in thousands of dollars)
Consolidated Balance sheets 2010 2009

(restated note 4)
$ $
ASSETS
Current assets
Cash and cash equivalent 11,857 23,993
Accounts receivable (note 5) 114,612 126,271
Revenue to be billed 22,965 21,143
Inventories 8,018 8,125
Prepaid expenses 12,954 14,002
Income taxes refundable 2,611 3,241
Future income taxes (note 18) 94 14,028
Current assets held for sale (note 19) - 27,946
173,111 238,749
Property plant and equipment (note 6) 218,763 271,205

Goodwill (note 7) 303,583 335,205
Intangible assets (note 7) 47,737 57,616
Other assets (note 8) 12,210 12,798
Future income taxes (note 18) 48,731 28,623
Long-term assets held for sale (note 19) - 41,834
804,135 986,030
LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities
Bank indebtedness 9,551 876
Accounts payable and accrued liabilities 123,220 140,252
Income taxes payable 770 57
Future income taxes liabilities (note 18) - 1,203
Liabilities held for sales (note 19) - 14,122
Current portion of long-term debt (note 1 and 9) 39,933 38,108
173,474 194,618
Long-term debt (note 1 and 9) 512,356 622,894

Future income taxes (note 18) 9,703 13,670
Others long-term liabilities (note 10) 64,228 93,665
Liabilities held for sales (note 19) - 285
Shareholders’ Equity
Share capital (note 11) 116,105 115,285
Contributed surplus (note 12) 12,818 9,412
Accumulated other comprehensive loss (note 15) (5,606) (20,148)
Deficit (78,943) (43,651)
44,374 60,898
804,135 986,030
Consolidated Statements of Deficit 2010 2009

(restated note 4)
$ $
Retained earnings (deficit) beginning of year, as previously reported (40,724) 56,424

Change in accounting policy (note 4) (2,927) (1,927)
Retained earnings (deficit), as restated (43,651) 54,497
Net loss for the year (35,292) (98,148)
Deficit, end of year (78,943) (43,651)
Contingencies (note 21)
Subsequent event (note 1)
See accompanying notes to consolidated financial statements.
Approved by the Board of Directors
(Signed) François Plamondon, Director (Signed) Stéphan Crétier, Director

Consolidated Statements of Loss and Comprehensive Loss
(in thousands of dollars except per share amounts)
Consolidated Statement of Loss 2010 2009

(restated note 4)
$ $
Revenues 1,083,087 1,104,788

Operating costs 803,001 827,785
Gross profit 280,086 277,003
Fixed costs, general and administrative expenses 151,852 160,460

Operating profit 128,234 116,543
Stock based compensation (note 11 (d)) 3,712 3,757

Settlement of litigation (note 21) 5,192 -
Loss on disposal of property, plant and equipment 843 -
Depreciation and amortization (note 13) 51,052 51,068
Goodwill impairment (note 7) - 55,089
Income before the following: 67,435 6,629
Financing expenses (note 14) 90,558 73,176

Change in fair value of derivative instruments (note 22) 27,649 23,998
Loss before recovery of income taxes and discontinued operations (50,772) (90,545)
Recovery of income taxes (note 18)

Current (822) (952)
Future (22,497) (16,122)
(23,319) (17,074)
Net loss from continuing operations (27,453) (73,471)
Loss from discontinued operations (note 19) (2,717) (24,677)

Loss on disposal of discontinued operations (note 19) (5,122) -

Net loss per share from continuing operations
Basic and diluted (0.87) (2.34)
Net loss per share total (note 16)
Basic and diluted (1.12) (3.12)
Consolidated Statement of Comprehensive Loss 2010 20092

(restated note 4)
$ $
Other comprehensive income (loss):
Gain (loss) on translation of self sustaining foreign operations (9,956) 38,649
Unrealized gains (loss) on derivatives 36,499 (3,182)
Future income taxes (12,001) 1,000
Comprehensive loss for the year (20,750) (61,681)
Consolidated Statements of Cash flows
(in thousands of dollars)
2010 2009
(restated note 4)
$ $
CASH FLOW FROM OPERATING ACTIVITIES

Non-cash items
Depreciation of property, plant and equipment (note 13) 47,219 47,623
Amortization of intangible assets (note 13) 4,496 5,677
Stock based compensation (note (11 (d)) 3,712 3,757
Amortization of deferred financing costs (note 14) 3,892 3,459
Capitalized interest on long-term debt (note 14) 1,497 616
Adjustment related to carrying value of long-term debt (note 1) 20,035 -
Future income taxes (note 18) (22,497) (18,068)
Loss on disposal of discontinued operations (note 19) 5,122 -
Goodwill impairment (note 7) - 74,111
Change in fair value of derivative instruments (note 22) 27,649 23,998
Loss on disposal of property, plant and equipment 843 -
56,676 43,025
Net change in non-cash working capital (note 17) (11,465) 37,162

45,211 80,187
CASH FLOW FROM FINANCING ACTIVITIES

Increase (decrease) in bank indebtedness 8,675 (8,339)
Increase in long-term debt - 10,489
Repayment of long-term debt (80,057) (48,472)
Decrease in revolving facilities (1,233) (21,128)
Shares issuance (note 11 (c)) 514 487
Increase in deferred financing costs (2,179) (1,587)
Others (981) -
(75,261) (68,550)
CASH FLOW FROM INVESTING ACTIVITIES

Additions to property, plant and equipment (20,077) (24,586)
Proceeds from disposal of property, plant and equipment 1,446 1,077
Proceeds from disposal of discontinued operations (note 19) 42,174 -
Collateral for insurance provision (note 10) (7,523) -
Others (1,116) 1,322
14,904 (22,187)
Foreign currency translation on cash 1,813 1,900
Net change in cash and cash equivalent during the year (13,333) (8,650)
Cash and cash equivalent, beginning of the year 25,190 33,840
Cash and cash equivalent, end of year related to:

Total cash and cash equivalent including discontinued operations and deposits from
customers (note 17) 11,857 25,190
Discontinued operations (note 19) - (1,197)
11,857 23,993

Notes to Consolidated Financial Statements
January 31, 2010 and 2009
(All amounts are in thousands of dollars except information on number of options and shares)
1 Nature of operations and refinancing transaction
The Corporation provides security services primarily in Canada and the United States. Its activities are carried out through
two (2) main segments: physical security and cash logistics.
On March 12, 2010 the Corporation successfully completed the refinancing of the majority of its long-term debt. The new
facilities include as follows:
• Revolving facilities of a maximum of $125,000 bearing interest at Canadian prime rate plus 4.00% or at LIBOR or
Banker’s acceptance rate plus 5.00% with reduction in relation with the leverage ratio. Repayable in full at
maturity in March 2013 (note 9 (d)).
• Term loan of $215,000, bearing interest at Canadian prime rate plus 4.00% or at LIBOR or banker’s acceptance
plus 5.00% with reduction in relation with the leverage ratio. Repayable in quarterly instalments of $5,000 from
July 31, 2010 to April 30, 2011 and of $7,500 from July 31, 2011 to March 2013 (note 9 (d)).
• Senior notes of US $250,000 and CA $75,000 bearing interest at a fixed rate of 9.75% repayable in full at
maturity in March 2017 (note 9 (d)).
The revolving facilities and term loan are secured by a general pledge as well as a movable hypothec on the universality
of present and future assets of the Corporation.
Senior notes rank pari-passu and are unsecured.
As part of this new credit agreement the Corporation is subject to certain financial covenants which include a total
leverage ratio, a senior debt leverage ratio and a fixed charges coverage ratio.
2 Significant accounting policies
Basis of presentation
These consolidated financial statements have been prepared under the assumption of going concern in accordance with
Canadian generally accepted accounting principles (GAAP), which assume the realization of assets and the settlement of
liabilities in the normal course of operations. Significant accounting policies are as follows:
Consolidation
These consolidated financial statements include the accounts of the Corporation, its wholly owned subsidiaries and
variable interest entities (VIE) if the Corporation is the primary beneficiary. All intercompany balances and transactions
have been eliminated on consolidation.
Management estimates
The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Significant estimates include the allowance for doubtful accounts, valuation of
goodwill and intangible assets, realization of income tax assets, certain accrued liabilities, insurance provision and residual
value of property, plant and equipment. Actual results could differ from those estimates.
1
Revenue recognition
Revenues are recognized when there is persuasive evidence that an agreement exists, when services have been rendered,
when the price is fixed or determinable, and when collection is reasonably assured. Revenues are recorded on the basis of
cyclical billings and also include revenue accrued in respect of services rendered but as yet unbilled.
Insurance
Certain United States subsidiaries maintain high retention for risks related to vehicles and worker’s compensation. These
United States subsidiaries maintain non-cash insurance reserve to cover the estimated retained liability. The non-cash
insurance reserve for insurance is determined by management and is based on claims filed and an estimate of claims
incurred but not yet reported. Management considers a number of factors, including third party actuary valuations, when
making these determinations. The United States subsidiaries maintain third party stop-loss insurance policies to cover
certain liability costs in excess of predetermined retained amounts.
Translation of foreign currencies
Self-sustaining foreign operations
Assets and liabilities of self-sustaining foreign subsidiaries are translated into Canadian dollars at year-end exchange
rates. Revenue and expense items are translated into Canadian dollars at the average monthly rate on which such items
are recognized in income. Translation gains and losses are recorded as a component of equity in accumulated other
comprehensive loss.
Translation of other foreign currency transactions
Monetary items denominated in foreign currencies other than the Canadian dollar are translated at year-end exchange
rates. Revenue and expense items are translated into Canadian dollars at the average monthly rate on which such items
are recognized in income. The resulting exchange gains and losses are included in the income for the year.
Cash and cash equivalent
Cash includes cash on hand and deposits from customers.
Accounts receivable and allowance for doubtful accounts
Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Corporation provides an
allowance for doubtful accounts using its best estimate of the amount of probable credit losses in its existing accounts
receivable. Account balances are written off against the allowance when the Corporation determines if it is probable the
receivable will not be recovered.
Inventories
Inventories are valued at the lower of cost and net realizable value, cost being determined according to the specific
identification method.
2
Property, plant and equipment
Property, plant and equipment are recorded at cost, less related accumulated depreciation. Depreciation is calculated over
their estimated useful lives according to the following methods and annual rates or periods:
Method Rate/Period
Buildings Straight-line 20 and 30 years

Office furniture Declining balance and straight-line 20% and 5 years
Computer equipment Declining balance and straight-line 30% and 3 to 5 years
Equipment Declining balance and straight-line 20% and 4 to 5 years
Vehicles Declining balance and straight-line 30% and 4 years
Aircraft and aircraft rotables Straight-line 12 years with 45% residual
Armored vehicles Straight-line 6, 10 and 12 years
Uniforms Straight-line 2 years
Leasehold improvements Straight-line 5 to 10 years
Assets under capital lease obligations
Leases that transfer substantially all of the benefits and risks of ownership of the assets to the Corporation are accounted
for as capital lease obligations. An asset is recorded together with the related capital lease obligation. Assets under capital
lease obligations are amortized over their estimated useful lives at the same rate as other similar assets.
Impairment of long-lived assets
Long-lived assets are reviewed for impairment when events or circumstances indicate that costs may not be recoverable.
Impairment exists when the carrying value of the asset is greater than the undiscounted future cash flows expected to be
provided by the asset. The amount of impairment loss is the excess of the carrying value over the fair value.
Goodwill
Goodwill is the residual amount that results when the purchase price of an acquired business exceeds the sum of the
amounts allocated to the assets acquired, less liabilities assumed, based on their fair values. Goodwill is not amortized. On
an annual basis, a goodwill impairment test is performed on January 31. This test is carried out more frequently if events
or changes in circumstances indicate that goodwill might be impaired. A “step I” goodwill impairment test determines
whether the fair value of a reporting unit exceeds the net carrying amount of that reporting unit as of the assessment
date in order to assess if goodwill should be impaired. If the fair value is greater than the net carrying amount, no
impairment is necessary. In the event that the net carrying amount exceeds the fair value, a “Step II” goodwill
impairment test must be performed in order to determine the amount of the impairment charge. Fair value of goodwill is
estimated in the same way as goodwill is determined at the date of acquisition in a business combination. To accomplish
the Step II test, the fair value of the reporting unit’s goodwill must be estimated and compared to its carrying value. The
excess of the carrying value over the fair value is recorded as an impairment charge in the year.
Goodwill is assigned as of the date of the business combination to reporting units that are expected to benefit from
business combinations.
Intangible assets
Intangible assets consist of service contracts and client relationships and softwares. Service contracts and client
relationships are recorded at cost less accumulated amortization and are amortized on a straight-line basis over periods
varying from ten (10) to twenty (20) years, which represent their estimated useful lives. Software are amortized on a
straight-line basis between 3 and 5 years.
3
Deferred financing costs
Deferred financing costs include expenses incurred by the Corporation in various financing activities and are amortized
using the effective interest rate method over the terms of these financings.
Interest rate swap agreement designated as hedging instrument
The Corporation has entered into an interest rate swap agreement in order to mitigate the changes in cash flows related
to the interest rate risk on a portion of its long-term debt. The Corporation formally documents all relationships between
the swap agreement and long-term debt and its risk management objective and strategy for using this hedge. The
Corporation does not use derivative financial instruments for speculative purposes. Changes in the fair value of these
derivatives are recognized in the consolidated statements of comprehensive loss, except for any ineffective portion, which
is recognized immediately in income. The changes in fair value recognized in other comprehensive loss are reclassified in
the consolidated statements of loss under change in fair value of derivative instruments in the periods during which the
cash flows related to the hedge item affect losses.
When the derivative financial instrument no longer qualifies as an effective hedge for accounting purposes, or when the
hedging instrument is sold or terminated prior to maturity, if applicable, hedge accounting is discontinued prospectively.
Accumulated other comprehensive loss related to a cash flow hedging relationship that ceases to be effective is
reclassified in the consolidated statements of loss in the periods during which the cash flows related to the hedged item
affect losses. Furthermore, when it is probable that the anticipated transaction will not occur within the period
determined. The related accumulated other comprehensive loss is then immediately reclassified in the consolidated
statements of loss.
Future income taxes
The Corporation follows the liability method of accounting for income taxes, under which future income taxes are
computed based on the difference between the carrying amounts of the various assets and liabilities and their tax basis.
The substantially enacted tax rate when these differences are expected to reverse is used to compute future income taxes
at the balance sheet dates. Income tax assets are recognized when it is more likely than not that the assets will be
realized.
Net loss per share
Net loss per share is determined using the weighted average number of shares outstanding during the year. Diluted net
loss per share is determined using the treasury stock method to evaluate the dilutive effects of stock options and other
instruments, when applicable. Under this method, instruments with a dilutive effect, basically when the average market
price of a share for the period exceeds the exercise price, are considered to have been exercised at the beginning of the
year, and the proceeds received are considered to have been used to redeem common shares of the Corporation at the
average market price for the year.
Stock options
The Corporation has applied the fair value method of accounting for stock-based compensation awards granted to
directors, officers, employees and other key personnel of the Corporation. This method consists of recording an expense
in income based on the vesting period of the options granted. The fair value is calculated based on the Black-Scholes
option pricing model, which was designed to estimate the fair value of traded options that have no vesting restrictions and
are fully transferable. Any consideration paid upon exercise of the options is credited to share capital.
4
Financial instruments
Financial assets, assets and liabilities held for trading and derivative financial instruments, part of a hedging
relationship or not, have to be measured at fair value.
The Corporation has made the following classification:
• Cash is classified as financial assets held for trading and is measured at fair value. Gains and losses related
to periodical revaluation are recorded in net income.
• Accounts receivable, revenue to be billed and long-term receivables are classified as loans and receivables
and are initially measured at fair value and recorded at amortized cost using the effective interest rate
method.
• Bank indebtedness, accounts payable and accrued liabilities and long-term debt are classified as other
liabilities and are initially measured at fair value and subsequently recorded at amortized cost using the
effective interest rate method.
3 Changes in accounting policies
Adopted in the current year:
Goodwill and Intangible Assets:
In February 2008, the CICA issued Handbook (“HB”) Section 3064, Goodwill and Intangible Assets, which replaced the
existing HB Section 3062, Goodwill and Other Intangible Assets, and HB Section 3450, Research and Development. The
new standard provides guidance on the recognition, measurement, presentation and disclosure of goodwill and intangible
assets. This standard is effective for interim and annual financial statements relating to fiscal years beginning on or after
October 1, 2008.
The adoption of this Section was applied retroactively with restatement of consolidated financial statements of prior
periods. The impact of the adoption of these standards has been included in note 4.
Financial instruments – Disclosures:
In June 2009, the CICA amended Section 3862, “Financial Instruments – Disclosures”, to enhance disclosure requirements
about the liquidity risk of financial instruments. The amendment also includes new disclosure requirements about the fair
value measurement of financial instruments. This amendment is effective for annual financial statements relating to fiscal
years ending after September 30, 2009.
To be adopted in future periods:
Business Combinations:
CICA issued HB 1582, Business Combinations, to establish new standards for accounting for business combinations. It is
the Canadian equivalent to IFRS 3 (revised), Business Combinations (January 2008). The section is effective for business
combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or
after January 1, 2011. Earlier application is permitted. New HB 1582, HB 1601, Consolidated Financial Statements, and
HB 1602, Non-Controlling Interests, are to be implemented concurrently.
This new section requires, amongst others, that most identifiable assets, liabilities, non-controlling interests and goodwill
acquired in a business combination be recorded at “full fair value” and acquisition-related costs are recognized as
expenses as incurred and that liabilities associated with restructuring or exit activities are recognized only if they meet the
definition of a liability as of the acquisition date.
Consolidated Financial Statements:
CICA issued HB 1601, Consolidated Financial Statements, which supersedes the like named HB 1600. This Section applies
to interim and annual financial statement for fiscal years beginning on or after January 1, 2011. The Section establishes
standards for the preparation of consolidated financial statements. HB 1601 carries forward the consolidated guidance
previously included in HB 1600.
5
Non Controlling Interests:
CICA issued HB 1602, Non-Controlling Interests, to provide guidance on accounting for non-controlling interests
subsequent to a business combination. The section is to be implemented concurrently with HB 1582, Business
Combinations. HB 1602 is effective for fiscal years beginning on or after January 1, 2011 with earlier adoption permitted
as of the beginning of a fiscal year. HB 1602 is to be applied retrospectively, with certain exceptions.
HB 1602 replicates the provisions of IAS 27, Consolidated and Separate Financial Statements, other than the disclosure
requirements. The key features are: non-controlling interests in subsidiaries are presented in the consolidated balance
sheet with equity, separate from the parent shareholder’s equity. In income statements, non-controlling interest is not
deducted in arriving at consolidated net income, but is allocated to the controlling interest and the non-controlling interest
according to their percentage ownership.
The Corporation does not expect these three new standards to have a material impact on the Corporation’s consolidated
financial statements.
Accounting changes:
In June 2009, the CICA amended Section 1506, “Accounting Changes”, to exclude from the scope of this Section changes
in accounting policies upon the complete replacement of an entity’s primary basis of accounting. This amendment is
effective for years beginning after July 1, 2009.
Financial instruments – Recognition and measurement:
In June 2009, the CICA amended Section 3855, “Financial Instruments – Recognition and Measurement”, to clarify the
application of the effective interest rate method after a debt instrument has been impaired. The amendment also clarifies
when an embedded prepayment option is separated from its host debt instrument for accounting purposes. This
amendment is effective January 1, 2011. At this point, the Corporation does not intend to early adopt this amendment.
The Corporation is evaluating the impact of the adoption of this amendment.
4 Change in accounting policy – Goodwill and intangible assets
On February 1, 2009, the Corporation adopted this new standard with retrospective application. Accordingly, start-up
costs incurred after obtaining certain contracts and advertising costs that were previously capitalized have been expensed
as incurred. This change in accounting policy has been applied retroactively, and the consolidated statements of loss,
deficit, comprehensive loss and cash flow for the year ended January 31, 2009 as well as the consolidated balance sheet
as at January 31, 2009 have been restated. The effect of this change decrease the retained earnings at the beginning of
the year ended January 31, 2009 by $1,927 and increased the net loss for the year ended January 31, 2009 by $1,000.
The Corporation also reclassified the software from computer equipment to intangible assets. The related depreciation has
also been reclassified to amortization of intangible assets. This reclassification has no impact on the Corporation’s deficit.
6
The impact of these changes on the previously reported January 31, 2009 consolidated balance sheet is as follows:
As at January 31, 2009
As previously As
reported Restatement restated
$ $ $
Assets
Other assets 15,725 (2,927) 12,798
Property, plant and equipment 272,319 (1,114) 271,205
Intangible assets 56,502 1,114 57,616
Shareholders’ Equity
Deficit (40,724) (2,927) (43,651)
The impact on the consolidated statements of loss and comprehensive loss is as follows:
For the year ended January 31, 2009

As previously As
$ $ $
Capitalized deferred charges - 1,775 1,775

Amortization of deferred charges 775 (775) -
Amortization of intangible assets 3,385 2,292 5,677
Depreciation of property, plant and equipment 49,915 (2,292) 47,623
Net loss from continuing operations (72,471) (1,000) (73,471)
Net loss for the year (97,148) (1,000) (98,148)
Basic and diluted loss per share (3.09) (0.03) (3.12)
The impact on the consolidated statements of cash flows is as follows:
For the year ended January 31, 2009
As previously As
$ $ $
Net loss for the year (97,148) (1,000) (98,148)

Depreciation and amortization 54,075 (775) 53,300
Net change in non-cash working capital 35,466 1,696 37,162
Increase in deferred charges (79) 79 -
7
5 Accounts receivable
The Corporation grants credit to its customers under the ordinary course of business. Management believes that the
credit risk of accounts receivable is limited due to the following reasons:
• There is a broad base of customers with dispersion across different market segments.
• No single customer accounts for more than 10% of the Corporation’s total revenues.
• Approximately 89.6% (2009 – 90.4%) of the Corporation trade accounts receivable are less than 120 days old.
• Bad debt write-offs to total revenues have been approximately 0.2% of consolidated revenues for the last 3
years. In light of the above, the allowance for doubtful accounts at January 31, 2010 was $5.1 million (2009 –
$8.2 million). All bad debt expenses are charged to fixed costs, general and administrative expenses.
8
6 Property, plant and equipment
2010
Accumulated
Cost amortization Net
$ $ $
Land 246 - 246

Buildings 4,189 472 3,717
Office furniture 3,074 2,150 924
Computer equipment 12,552 8,110 4,442
Equipment 29,526 17,324 12,202
Vehicles 11,071 7,297 3,774
(1)
Aircraft and aircraft rotables 131,494 26,049 105,445
Armored vehicles 105,783 44,648 61,135
Uniforms 7,092 4,494 2,598
Leasehold improvements 44,468 20,188 24,280
349,495 130,732 218,763
2009
(restated note 4)
Accumulated
Cost amortization Net
$ $ $
Land 283 - 283

Buildings 3,594 388 3,206
Office furniture 3,174 1,887 1,287
Computer equipment 11,301 6,192 5,109
Equipment 32,325 14,783 17,542
Vehicles 10,167 5,449 4,718
(1)
Aircraft and aircraft rotables 145,534 19,309 126,225
Armored vehicles 111,175 35,190 75,985
Uniforms 8,933 5,765 3,168
Leasehold improvements 48,548 14,866 33,682
375,034 103,829 271,205
(1) All the aircraft are leased to a private air cargo operator. Rental revenues amounted to $21,625 for
the year ended January 31, 2010 (2009 - $15,330).
As at January 31, 2010, the cost and accumulated amortization for computer equipment, vehicles, armored vehicles
and aircraft held under capital leases amounted to $81,737 and $26,326 respectively (2009 – $98,616 and
$21,335).
9
7 Goodwill and Intangible assets
The changes in the carrying value of goodwill and intangible assets comprise the following:
Intangible
assets Goodwill
(restated note 4)
$ $
Balance – January 31, 2008, as previously reported 51,998 379,745

Change in accounting policy (note 4) 3,406 -
Balance – January 31, 2008, restated 55,404 379,745
New service contract 492 -

Adjustments (1) - 2,018
Adjustments for assets held for sale (2) (2,127) (40,918)
Amortization of intangible assets (note 4 and 13) (5,677) -
Impairment charge - (55,089)
Impairment charge for assets held for sale - (19,022)
Effect in exchange rate during the year 9,524 68,471
Balance – January 31, 2009 57,616 335,205
Software addition 1,116 -

Adjustment for assets held for sale 79 2,246
Amortization of intangible assets (4,496) -
Effect in exchange rate during the year (6,578) (33,868)
Balance – January 31, 2010 47,737 303,583
(1) During the fourth quarter of 2009, the Corporation adjusted the change in purchases prices for previous
acquisitions.
(2) As at January, 31 2009, the Corporation reclassified certain assets, including Intangible and Goodwill, as assets
held for sale.
a) The Corporation performed its goodwill impairment test as at January 31, 2010. The result of the test
determined that no loss impairment was required as at January 31, 2010. The Corporation performed its
goodwill impairment test as at January 31, 2009. The results determined that the carrying amount of the
Corporation’s physical security and US cash logistics operating segment’s assets exceeded its fair value.
Accordingly, a goodwill impairment loss of $26.5 million and $47.6 million was recognized in the physical
security and US cash logistics segments respectively.
b) Intangible assets
As at January 31, 2009, the Corporation performed impairment tests of its significant amortizable intangible
assets consisting of service contracts and client relationships and no impairment loss was required.
Intangible assets are shown in the balance sheet net of accumulated amortization of $14,274 (2009- $11,915).
10
8 Other assets
2010 2009
$ $
Notes receivable 8,302 8,807

Other 3,908 3,991
12,210 12,798
9 Long-term debt
2010 2009
$ $
Authorized revolving facilities repaid in March 2010 (note 9 (a)) 24,289 27,133
Senior term loan repaid in March 2010 (note 9 (a)) 144,847 178,750
Senior term loan repaid in March 2010 (note 9 (a)) 180,130 233,035
Subordinated term loan repaid in March 2010 (note 9 (a)) 150,541 160,061
Capital leases obligations, secured by property, plant and equipment,

bearing interest at rates ranging from nil to 10.39% with an average rate
of 6.49%, repayable in monthly instalments of a maximum of $1,813,
including principal and interest, maturing at different dates until
November 2014 45,602 66,627
Conditional sales contracts, collateralized by rolling stock, at interest rates

varying between nil and 9.4%, payable in monthly instalments of $287,
principal and interest, maturing on various dates through July 2014 6,130 6,566
Balances of purchase prices payable, bearing interest at a rate of 5%,

payable in annual and quarterly instalments until October 2010 750 2,050
Deferred financing costs (note 14) - (13,220)
552,289 661,002
Less: Current portion (note 9 (a)) 39,933 38,108
512,356 622,894
a) As described in note 1, the Corporation completed the refinancing of the majority of its long-term debt
subsequent to year-end. As a result of this transaction, except for capital repayments made prior to the
refinancing transaction, the amounts otherwise due on a current basis under the Corporation’s existing credit
facilities as at January 31, 2010 have been presented as long-term on the consolidated balance sheet in
accordance with EIC-122, “Balance Sheet Classification of Callable Debt Obligations and Debt Obligations
Expected to be Refinanced”.
b) As at January 31, 2010, letters of credit amounting to $33,694 reduced the available revolving facilities.
11
c) The Corporation’s management reviews compliance with the financial covenants on a monthly basis and the
Corporation’s board of director’s reviews compliance with the financial covenants on a quarterly basis.
d) Principal payments on long-term debt in accordance with note 9 (a) and capital leases obligations over the next
five (5) years are as follows:
Capital payment on Minimum payments on

long-term debt capital leases obligations
2011 18,262 23,696

2012 29,289 12,435
2013 31,015 10,196
2014 93,021 3,029
2015 170 98
2016 and thereafter 334,930 -
506,687 49,454
Minimum instalments payable for the subsequent years under capital leases obligations amounting to $49,454
of which $3,852 is interest. The current portion of capital leases obligations is $21,671 (2009 - $21,588).
e) The Corporation reassessed the carrying value of its long-term debt and deferred financing costs as at January
31, 2010 and registered an amount of $20,035 as an adjustment related to the carrying value of the long-term
debt which was consistent with the refinancing transaction subsequent to year-end.
10 Other long-term liabilities
2010 2009
$ $
Insurance provision, net of collateral of $7,523 (2009 – nil) 7,911 18,203
Fair value of swap on long-term debt to convert from a variable to a fixed

average rate of 5.61%, covering 90% of the senior and subordinated term
loans, repaid in March 2010 (note 22) 47,441 64,224
Deferred rent for tenant’s improvements 7,653 9,787
Other 1,223 1,451
64,228 93,665
12
11 Share capital
a) Capital risk management
The Corporation has defined its capital as long-term debt, share capital, contributed surplus and deficit, net of cash
and bank indebtedness.
The following table summarizes certain information with respect to the Corporation’s capital structure at the end of
each year:
2010 2009
$ $
Cash, net of bank indebtedness (2,306) (23,117)

Long-term debt 552,289 661,002
549,983 637,885
Shareholders’ equity excluding accumulated other
comprehensive loss 49,980 81,046
599,963 718,931
The Corporation’s objectives when managing capital are to maintain an optimal capital structure with the use of
external long-term debt to support its growth.
The Corporation normally finances fixed asset acquisitions through capital leases.
The Corporation’s management monitors the covenants on a monthly basis and the Corporation's Board of Directors
reviews the covenants on a quarterly basis.
The Corporation expects to meet all the covenants under the new credit facilities for the next year.
Other than the covenants required by its credit facilities (note 1), the Corporation is not subject to any externally
imposed capital requirements.
b) Authorized – in unlimited number, without par value

Class “A” shares, voting and participating
Class “B” shares, issuable in one or more series. The directors are authorized to fix the number of shares in
each series and to determine the description, rights, privileges, restrictions and conditions attached to the
shares of each series.
c) Issued and fully paid
Changes in share capital issued during the two (2) previous years are summarized as follows:
Number of
Class “A”
shares $
Balance as at January 31, 2008 31,399,569 114,798
Issued following exercise of options (note 11 (d)) 78,313 487
Issued following exercise of options (note 11 (d)) 119,416 820
13
d) Options
The Board of Directors of the Corporation may, by resolution, grant options to directors, officers, employees of, and
service providers to, the Corporation and of its subsidiaries, provided that the total number of shares issued under
the plan does not exceed ten percent (10%) of the common shares issued by the Corporation. The exercise price of
the options is determined by the Board of Directors at the time of the grant of an option. The exercise price of the
options shall not be lower than the closing price of the shares on the last trading day of the Toronto Stock Exchange
prior to the time of the grant.
The vesting period ranging from the date of the grant to five (5) years.
The following table summarizes the Corporation’s Class “A” stock option activity:
2010 2009
Weighted Weighted
average average
Number exercise Number exercise
of shares price of shares price
$ $
Options granted – Beginning of

year 2,471,353 15.17 2,485,668 13.69
Granted 1,165,000 4.59 603,000 12.61
Exercised (119,416) 4.31 (78,313) 3.88
Forfeited (458,250) 14.33 (539,002) 6.51
Cancelled (306,686) 16.30 - -
Options granted – End of year 2,752,001 11.18 2,471,353 15.17
14
The following table summarizes information about Class “A” share stock options outstanding and exercisable as at
January 31, 2010:
Options outstanding Options exercisable
Weighted
average Weighted Weighted
remaining average average
Exercise Number contractual life exercise Number exercise
price of shares (years) price of shares price
$ $ $
8.00 8,334 0.18 8.00 - 8.00

8.50 160,000 0.35 8.50 106,661 8.50
8.60 16,667 0.28 8.60 8,333 8.60
14.00 10,000 0.82 14.00 6,666 14.00
15.00 527,500 1.39 15.00 434,999 15.00
15.18 40,000 1.04 15.18 13,333 15.18
23.40 255,000 1.62 23.40 111,662 23.40
18.00 125,000 2.65 18.00 125,000 18.00
16.98 400,000 3.23 16.98 400,000 16.98
4.00 529,500 3.46 4.00 105,000 4.00
5.00 680,000 4.41 5.00 273,750 5.00
2,752,001 2.80 11.18 1,585,404 13.40
During the year ended January 31, 2010, the Corporation granted 1,165,000 (2009 − 603,000) Class “A” share stock
options at exercise prices ranging from $4.00 to $5.00 per share (2009 − $4.00 to $16.98).
The fair value of options granted was estimated on the date of the grant using the Black-Scholes option pricing
model on the basis of the following assumptions:
Issuance of Issuance of
June 5, 2009 & May 21, 2009
Sept 9, 2009
Expected dividend rate Nil Nil

Volatility 90.0% 90.0%
Expected life of options 5 years 4 years
Risk-free interest rate 3.0% 3.0%
Number of options 690,000 475,000
Fair value of options $2,429 $1,064
During the year, the Corporation recorded to net loss a stock based compensation charge of $3,712 (2009 - $3,757)
for the options granted since February 1, 2002, with an offsetting credit to contributed surplus.
15
12 Contributed surplus
2010 2009
$ $
Balance – Beginning of year 9,412 5,837

Stock-based compensation (note 11 (d)) 3,712 3,757
Options exercised (306) (182)
Balance – End of year 12,818 9,412
13 Depreciation and amortization
2010 2009
(restated note 4)
$ $
Depreciation of property, plant and equipment 47,219 47,623

Amortization of intangible assets 4,496 5,677
51,715 53,300
Depreciation and amortization related to
discontinued operations (note 19) (663) (2,232)
51,052 51,068
14 Financing expenses
2010 2009
$ $
Interest on long-term debt 58,233 59,410

Interest on capital lease obligation 4,185 4,430
Other interest 4,217 9,040
Amortization of deferred financing costs (note 9) 3,892 3,459
Capitalized interest on long-term debt 1,497 616
Adjustment related to carrying value of long-term debt (note 9 (e)) 20,035 -
92,059 76,955
Financing expenses related to discontinued operations (note 19) (1,501) (3,779)
90,558 73,176
16
15 Accumulated other comprehensive loss
2010 2009
$ $
Unrealized gains (losses) on translation of financial statements of self-

sustaining foreign operations (5,606) 4,350
Unrealized losses on fair value of financial instruments - (36,499)
Future income taxes - 12,001
(5,606) (20,148)
16 Loss per share
The following table reconciles basic and diluted net loss per share:
2010 2009
(restated note 4)
$ $
Weighted average number of shares outstanding for use

in computation of basic and diluted income per share 31,522,593 31,456,109
Basic and diluted net loss per share $(1.12) $(3.12)
As at January 31, 2010, 2,752,001 (2009 − 2,471,353) Class “A” stock options with an exercise price varying from
$4.00 to $23.40 per share (2009 − $3.00 to $23.40) were excluded in computing the diluted loss per share because
the effect was anti-dilutive.
17
17 Consolidated statements of cash flows
a) The change in non-cash working capital items is determined as follows:
2010 2009
(restated note 4)
$ $
Decrease (increase) in
Accounts receivable 403 15,254
Revenue to be billed (2,393) 1,384
Inventories (931) 18
Prepaid expenses (42) 438
Income taxes refundable 471 7,944
Increase (decrease) in
Accounts payable and accrued liabilities (9,871) 17,406
Income taxes payable 898 (5,282)
(11,465) 37,162
b) Additional information:
Interest paid 64,344 69,715

Income taxes received (2,680) (7,341)
c) Cash and cash equivalent is detailed as follows:
Cash on hand 8,048 13,782

Deposits from customers 3,809 11,408
11,857 25,190
18
18 Income taxes
a) The income tax rate differs from the basic tax rate for the following reasons:
2010 2009
$ $
Loss before recovery of income taxes and discontinued

operations (50,772) (90,545)
Loss from discontinued operations before incomes taxes (3,294) (26,623)
Loss on disposal of discontinued operations (5,122) -
Loss before income taxes (59,188) (117,168)
Canadian statutory income tax rate 30.79% 30.74%
Income taxes calculated at statutory rate (18,226) (36,012)

Increase (decrease) resulting from:
Benefits arising from a financing structure (12,792) (13,546)
Non-Canadian applicable income tax rate difference (980) (3,587)
Change in valuation allowance (7,079) 8,134
Business disposal 13,130 -
Permanent differences and other 398 299
Change in statutory rate 1,653 -
Goodwill impairment - 25,692
(23,896) (19,020)
Income tax recovery attributable to loss consist of:

Current (822) (952)
Future (22,497) (16,122)
Income taxes of discontinued operations (577) (1,946)
(23,896) (19,020)
b) Future income taxes comprise the following:
Future income taxes represent the net tax effect of temporary differences between the financial statements carrying
amounts and tax bases of assets and liabilities. Significant components of the Corporation’s future income tax assets
(liabilities) as at January 31, 2010 and 2009 were as follows:
2010 2009
The tax effect of temporary differences relates to the following: $ $
Property, plant and equipment and intangible assets (29,485) (32,183)

Liabilities and other provisions 15,043 26,031
Loss carryforwards 40,795 23,141
Financial instruments 12,769 19,000
Valuation allowance - (8,211)
Net future income tax assets 39,122 27,778
19
As at January 31, 2010, the Corporation and its subsidiaries have accumulated unused operating losses, from the
Canadian and US operations respectively, totalling $76.2 million and US $52.5 million. The Canadian losses are set
to expire between 2027 and 2030 and the US tax losses are set to expire between 2025 and 2029.
19 Business disposal and discontinued operations
The US cash logistics business is involved in the manufacturing of smart-safe units, the development and upgrading
of the technology used in the product, as well as the installation and servicing of units deployed at its customer
locations throughout the United States (the “CashLINK” products and services). On April 20, 2009, the Corporation
sold all the assets related to the CashLINK products and services for a cash consideration based on the future sales
of the products and services made by the buyer in conjunction with the cash logistics services during the next five
(5) years.
With the January 2006 acquisition of Vance International, the Corporation entered the US market for physical
security services, which includes guarding and global risk consulting services. It also acquired a platform to offer
high-threat protection services internationally. Subsequently, the Corporation acquired certain assets of Kroll in
December 2006 and GSS Global in February 2007 in order to complement and enhance its high-threat protection
services. During the fourth quarter of 2009, it was decided to divest the US and Mexican Guarding operations. On
June 2, 2009, the Corporation concluded the sale of its US and Mexican Guarding operations for a total cash
consideration of US $44.25 million. The Corporation incurred a loss of $5,122.
Revenues and expenses of CashLINK products and services and of the US and Mexican Guarding operations for the
years ended January 31, 2010 and 2009 have been reclassified from continuing operations to discontinued
operations.
20
Summary of discontinued operations

2010 2009
$ $
US and
CashLINK Mexican
Products and Guarding
Services Operations Total Total
Revenues 5,756 45,751 51,507 151,426

Operating expenses 6,999 37,366 44,365 130,881
Gross profit (loss) (1,243) 8,385 7,142 20,545
Fixed costs, general and administrative expenses 1,140 7,132 8,272 22,135
Depreciation and amortization 205 458 663 2,232
Goodwill impairment - - - 19,022
Operating income (loss) before the following: (2,588) 795 (1,793) (22,844)
Interest on long-term debt - 1,501 1,501 3,779
Loss before provision for (recovery of) income

taxes (2,588) (706) (3,294) (26,623)
Provision for (recovery of) income taxes
Current (908) 331 (577) -
Future - - - (1,946)
(908) 331 (577) (1,946)
Loss from discontinued operations (1,680) (1,037) (2,717) (24,677)

Loss on disposal of discontinued operations - (5,122) (5,122) -
(1,680) (6,159) (7,839) (24,677)
Net loss per share

Basic and diluted (0.05) (0.20) (0.25) (0.78)
21
Summary of assets and liabilities sold in the fiscal year ended January 31, 2010
2010 2009
$ $
Assets
Cash - 1,197
Non cash working capital 17,023 12,627
Property, plant and equipment 1,865 2,437
Intangible assets 2,067 2,344
Goodwill 31,680 37,053
Future income taxes 203 -
52,838 55,658
Liabilities
Long-term debt 73 12
Other liabilities 54 273
Net assets held for sale - 55,373
Net assets disposed 52,711 -
Consideration:
Cash proceeds 42,174 -
Balance of sale 5,415 -
Total consideration 47,589 -
Loss on disposal of discontinued operations 5,122 -
20 Pension plans
The Corporation has established defined contribution pension plans for a certain number of its unionized and
non-unionized employees in Canada and the United States. In addition, the Corporation also contributes to a
registered retirement savings plan for various employees. The pension expense for these plans is represented by the
Corporation’s contribution. For the year ended January 31, 2010, the pension expense for these plans amounted to
$3,763 (2009 – $5,386).
21 Contingencies
In the normal course of business, the Corporation is involved in various legal proceedings, the outcome of which
cannot be determined at this time and accordingly, no provision has been recorded. The Corporation believes that
the resolution of these proceedings will not have a material favorable or unfavorable effect on its financial position
and income statement.
One of the divisions of the Corporation settled after the year-end a legal action from a former employee for an
amount of US$3,000 related to wrongful termination allegations. As a result, the Corporation registered an expense
of $5,192 of which $2,063 represents legal fees incurred.
22
22 Financial instruments
Fair value
The Corporation has estimated the fair value of its financial instruments based on current interest rates, market
value and current pricing of financial instruments with similar conditions. Unless otherwise indicated, the carrying
value of these financial instruments is considered to approximate their fair value.
The fair value hierarchy under which the Corporation’s financial instruments are valued is as follows:
• Level 1 – quoted market prices in active markets for identical assets or liabilities;
• Level 2 – inputs other than quoted market prices included in Level 1 that are observable for the asset or
liability, either directly (as prices) or indirectly (derived from prices); and
• Level 3 – unobservable inputs such as inputs for the asset or liability that are not based on observable
market data.
The fair value of financial assets and financial liabilities measured at fair value in the consolidated balance sheet as
at January 31, 2010 are as follows:
Level 1 Level 2 Level 3 Total

$ $ $ $
Assets and liabilities

measured at fair value
Cash and cash equivalents 11,857 - - 11,857
Interest rate swaps - (47,441) - (47,441)
11,857 (47,441) - (35,584)
Credit risk
Financial instruments which potentially subject the Corporation to significant credit risk consist principally of cash,
accounts receivable, derivative instruments and revenue to be billed.
The Corporation’s cash and derivative instrument are held with or issued by high credit quality financial institutions.
Therefore, the Corporation considers the risk of non-performance on those instruments to be remote.
The Corporation’s credit risk is principally attributable to its trade receivables. The amounts presented in the balance
sheet are net of an allowance for doubtful accounts, estimated by the Corporation’s management based, in part, on
the age of the specific receivable balance and the current and expected collection trends. A provision is established
when the likelihood of collecting the account has significantly diminished. The Corporation believes that the credit
risk of accounts receivable is limited.
2010 2009
$ $
Allowance for doubtful accounts, beginning of year 8,234 5,605

Business disposal (859) -
Bad debt expense 2,803 2,875
Amount written off and recoveries (4,466) (1,260)
Currency translation adjustment (641) 1,014
Allowance for doubtful accounts, end of year 5,071 8,234
23
The distribution of the Corporation’s customers and the business risk management procedures have the effect of
avoiding any concentration of credit risk. Generally, the Corporation does not require collateral or other security from
customers for trade accounts receivable; however, credit is extended following an evaluation of creditworthiness. In
addition, the Corporation performs ongoing credit reviews of all its customers and establishes an allowance for
doubtful accounts when accounts are determined to be uncollectible.
Interest rate risk
As at January 31, 2010, the Corporation’s interest rate risk is summarized as follows:
Cash and cash equivalent Variable rate

Accounts receivable Non-interest bearing
Bank indebtedness Variable rate
Accounts payable and accrued liabilities Non-interest bearing
Long-term debt See note 9
Based on long-term debts at variable rates as at January 31, 2010, had interest rate been 100-basis points higher,
loss before recovery of income taxes and discontinued operations would have been approximately $700 (2009 -
$1,250) higher. Had interest rates been 100-basis points lower, loss before recovery of income taxes and
discontinued operations would have been approximately $700 (2009 - $1,250) lower.
In June 2007, the Corporation entered into interest rate swaps that will mature on the same basis as the senior and
subordinated term loans. These contracts are designated as hedges of the change in cash flow related to the interest
rate risk on a portion of the Corporation’s senior and subordinated term loans.
In October 2008, the Corporation introduced a monthly LIBOR rate on the variation interest rate paid to the lenders.
This change resulted in an ineffectiveness of the hedge relationship for its interest rate swap (derivative financial
instrument). As such, the variation in the fair value of the interest rate swap is recognized in the net results since
this change occurred.
On March 12, 2010, the interest rate swap contracts have been terminated for a consideration of $47,441 (note 1).
The Corporation has amortized during the year the derivative loss of $36,499 recognized in the accumulated
comprehensive loss as of January 31, 2009, giving the repayment of the interest rate swap in March 2010.
Foreign exchange risk
The Corporation has operating activities outside Canada, namely in the United States, England and the Middle East,
through its wholly owned subsidiaries. It is therefore exposed to foreign exchange rate risks on the US dollar and the
British pound in the net investment in its self-sustaining foreign subsidiaries.
During the year ended January 31, 2010, if the US dollar had strengthened by $0.01 on average in comparison to
the Canadian dollar, all other variables remaining constant, the impact on the operating income before income taxes
for the year would have been marginal and the comprehensive loss would have been approximately $984 lower.
Transactions recorded in US dollars relate exclusively to self-sustaining foreign operations and do not result in
foreign exchange gains or losses for the Corporation. In addition, the Corporation contracted a debt denominated in
US dollars in the same proportion as the cash flow stream from self-sustaining foreign operations. Consequently, the
Corporation believes that its exposure to risk from currency fluctuations is low.
24
Liquidity risk
Liquidity risk is the risk that the Corporation will not be able to meet its obligations as they become due or can only
do so at excessive cost. The Corporation manages this risk by maintaining detailed cash flows and long-term
operating and strategic plans. The contractual cash flows include the carrying value amount plus interest using the
current rate. The following are the contractual maturities of financial liabilities as at January 31, 2010:
Less than Between More

Carrying Contractual one (1) one (1) and than two
amount cash flows year two (2) years (2) years
$ $ $ $ $
Accounts payable and accrued liabilities 123,220 123,220 123,220 - -

Long-term debt 552,289 855,012 83,982 83,595 687,435
Bank indebtedness 9,551 9,551 9,551 - -
Derivative instruments 47,441 47,441 47,441 - -
732,501 1,035,024 264,194 83,595 687,435
Cash flows from operations are the principal source of funding for the Corporation.
On March 12, 2010 the Corporation has refinanced the majority of its long-term debt. As a result of the transaction
the contractual cash flow have been calculated using the refinancing terms and conditions (note 1 and 9 (a)).
25
23 Commitments
The Corporation entered into operating leases of real estate expiring on various dates through May 2024 which call
for lease payments of $126.3 million (2009 – $106.0 million). Minimum lease payments for the upcoming years are
as follows:
2011 24,744
2012 22,523
2013 16,434
2014 13,300
2015 11,504
2016 to 2024 37,795
126,300
24 Segmented information
The Corporation provides security services primarily in Canada and the United States, and its activities are carried
out through two (2) main reportable segments:
i) Physical security and other: security guard services, airport pre-board security screening services, consulting
and investigation/global risk consulting services, pre-employment screening and other.
ii) Cash logistics: the Corporation offers its clients a fully integrated approach to managing the supply chain of
cash, from ATM and point-of-sale services, through armored transportation, deposit processing, cash vault
services, in-store cash control systems and check imaging. This business segment is operated using a
combination of armored vehicles, cargo aircraft, deposit processing systems, high-speed currency processing
systems and cash vault.
Activities carried on through other segments are not significant and are included in the physical security and
other segment.
The accounting policies of the reportable segments are the same as those used for the consolidated financial
statements.
26
a) Business segment
2010 2009
(restated note 4)
$ $
Revenues
Physical security and other 490,268 483,063
Cash logistics (2) 592,819 621,725
1,083,087 1,104,788
(1)
Depreciation of property, plant and equipment
Cash logistics (3) 40,678 38,996
47,219 47,623
(1)
Amortization of intangible assets
Physical security and other 507 505
Cash logistics 3,989 5,172
4,496 5,677
Income before financing expenses, income taxes, discontinued

operations and change in fair value of derivative instruments
Cash logistics (4) 43,670 1,111
67,435 6,629

Cash logistics(5) 208,355 258,765
218,763 271,205
Goodwill
303,583 335,205
Intangible assets
47,737 57,616
Total assets (1)

Cash logistics (6) 570,074 730,865
804,135 986,030
(1) Includes amounts relating to discontinued operations
(2) The Corporation owns a fleet of cargo aircraft that are leased on a long-term basis to an american private air cargo
operator. Revenues includes lease payment of $21,625 in 2010 (2009 - $15,330) that are linked to operating profits
generated by the air cargo operator. In 2010, the total revenues and operating costs of the operator were respectively
$105,374 and $83,749 (2009 – $105,977 and $90,647)
(3) Includes depreciation of aircraft in 2010 of $10,089 (2009 - $9,164)
(4) Includes income before financing expenses, income taxes and discontinued operations related to air cargo in
2010 $11,536 (2009 - $6,166)
(5) Includes aircraft and aircraft rotables of $105,445 in 2010 (2009 - $126,225)
(6) Includes aircraft inventories, aircraft and aircraft rotables of $111,049 in 2010 (2009 – $132,326). The total assets of the
private air cargo are $9,954 (2009 – $11,541)
27
b) Geographical segment
2010 2009
(restated note 4)
$ $
Revenues
Canada 493,357 482,523
United States and other 589,730 622,265
1,083,087 1,104,788
Depreciation of property, plant and equipment(1)

Canada 7,529 7,950
47,219 47,623
Amortization of intangible assets(1)

Canada 594 638
4,496 5,677
Income (loss) before financing expenses, income taxes, discontinued

operations and change in fair value of derivative instruments
Canada 28,656 28,242
United States and other 38,779 (21,613)
67,435 6,629

Canada 22,673 24,514
218,763 271,205
Goodwill
Canada 78,877 78,877
303,583 335,205
Intangible assets
Canada 6,100 5,694
47,737 57,616
Total assets(1)
Canada 204,720 158,494
804,135 986,030
(1) Includes amounts relating to discontinued operations
25 Comparative figures
Certain comparative figures have been reclassified to conform to the new presentation adopted in the current year.
28
Bibliography
1. Reference books
BODIE, Zvi, and al. Investments, Fifth Canandian Edition, Toronto, McGraw-Hill, 2005, 916 p.
N. MARCHON, Maurice. Prévoir l’économie pour mieux gérer, Institut d’économie appliquée,
HEC Montréal, Octobre 2009.
2. Official documents
In Search of Security: The Roles of Public Police and Private Agencies, Law Commission of
Canada, 2002
3. Websites
Bloomberg BusinessWeek, Company overview, [web page consulted on November 10th 2010],
[Online], URL address:
http://investing.businessweek.com/research/stocks/snapshot/snapshot.asp?ticker=GW:CN
Bank of Canada, [web page consulted on November 10th 2010], [Online], URL address:
http://www.bankofcanada.ca/
Canadian International Development Agency, [web page consulted on November 10th 2010],
[Online], URL address: http://www.acdi-cida.gc.ca/cidaweb/acdicida.nsf/En/Home
Economic analysis, BMO Nesbitt Burns, [web page consulted on November 101h 2010], [Online],
URL address: http://www.bmonesbittburns.com/economics/focus/20060825/feature.pdf
Finance Canada, [web page consulted on November 10th 2010], [Online], URL address:
http://www.fin.gc.ca/
Investigation and Security Services, Definition of the Industry, Government of Canada, [web page
consulted on November 9th 2010], [Online], URL address: http://www.hrsdc.gc.ca/asp/
gateway.asp?hr=en/hip/hrp/sp/industry_profiles/investigation_security_services.shtml&hs=h
zp
Statistics Canada, [web page consulted on November 10th 2010], [Online], URL address:
http://www.statcan.ca/
US Department of Commerce – Office of Economic Analysis, [web page consulted on November

9th 2006], [Online], URL address: http://bea.gov/bea/dn/nipaweb/TableView.asp#Mid

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COMPANY ANALYSIS OF GARDA (TSX:GW)

November 29th 2010

Sun Tzu, The art of War

Garda World Security Corporation

Montreal, Québec, Canada

Consolidated Balance sheets 2010 2009

Property plant and equipment (note 6) 218,763 271,205

LIABILITIES AND SHAREHOLDERS’ EQUITY

Long-term debt (note 1 and 9) 512,356 622,894

Consolidated Statements of Deficit 2010 2009

Retained earnings (deficit) beginning of year, as previously reported (40,724) 56,424

Approved by the Board of Directors

(Signed) François Plamondon, Director (Signed) Stéphan Crétier, Director

Consolidated Statement of Loss 2010 2009

Revenues 1,083,087 1,104,788

Fixed costs, general and administrative expenses 151,852 160,460

Stock based compensation (note 11 (d)) 3,712 3,757

Financing expenses (note 14) 90,558 73,176

Recovery of income taxes (note 18)

Loss from discontinued operations (note 19) (2,717) (24,677)

Net loss for the year (35,292) (98,148)

Consolidated Statement of Comprehensive Loss 2010 20092

CASH FLOW FROM OPERATING ACTIVITIES

Net change in non-cash working capital (note 17) (11,465) 37,162

CASH FLOW FROM FINANCING ACTIVITIES

CASH FLOW FROM INVESTING ACTIVITIES

Foreign currency translation on cash 1,813 1,900

Cash and cash equivalent, end of year related to:

See accompanying notes to consolidated financial statements.

1 Nature of operations and refinancing transaction

Senior notes rank pari-passu and are unsecured.

2 Significant accounting policies

Translation of foreign currencies

Self-sustaining foreign operations

Translation of other foreign currency transactions

Cash and cash equivalent

Cash includes cash on hand and deposits from customers.

Accounts receivable and allowance for doubtful accounts

Property, plant and equipment

Buildings Straight-line 20 and 30 years

Assets under capital lease obligations

Impairment of long-lived assets

Deferred financing costs

Interest rate swap agreement designated as hedging instrument

Future income taxes

Net loss per share

The Corporation has made the following classification:

3 Changes in accounting policies

Adopted in the current year:

Goodwill and Intangible Assets:

Financial instruments – Disclosures:

To be adopted in future periods:

Consolidated Financial Statements:

Non Controlling Interests:

Financial instruments – Recognition and measurement:

4 Change in accounting policy – Goodwill and intangible assets

As at January 31, 2009

For the year ended January 31, 2009

Capitalized deferred charges - 1,775 1,775

The impact on the consolidated statements of cash flows is as follows:

For the year ended January 31, 2009

Net loss for the year (97,148) (1,000) (98,148)

6 Property, plant and equipment