Financial Report Analyse
HOSF 1277 Final Exam 30% Prepared by: David Cleary Prepared for: George Brown College Course: HOSF 1277 HOSF 1277 Final Exam Cara Foods Instructions In your previously created groups you are to analyze and interpret CARA Foods most recent annual report. A copy of the interim first quarter (2018) report can be found on Blackboard in the Final Exam folder. More specifically, as a group you are to evaluate and show how CARA is doing financially using financial ratios and other types of analysis. From this analysis you should present a decision as to whether or not you would invest in CARA Foods and why. As a group, you are to submit a minimum 2-page report detailing your decision, using your analysis and evaluation as justification for that decision. Please note: your report should show the analytical calculations of your analysis in either the body of the report or in an appendix. Should you include the calculations in appendices you should reference them in the body of your report for easy reference. Your report should be at least 2 pages and should be completed in times new roman, sized 12 font using headers with cover page. One submission per group is required and as such the cover page should contain the names of the group members. Final Exam Rubric Criteria 0-3 Below Standard 4-6 Approaches Standard 7-8 Meets Standard 9-10 Above Standard The group demonstrates a knowledge and understanding of liquidity. The group demonstrates a knowledge and understanding of leverage and solvency. The group demonstrates a knowledge and understanding of profitability. The group demonstrates a knowledge and understanding of qualitative concerns. The group demonstrates a knowledge and understanding of efficiency. The group presented a thorough examination of CARA Foods from a potential investors perspective. The group proposed an investment decision supported by evidence. Adheres to format requirements and contains no spelling or grammatical issues. Totals /80 points Q1 Financials 2018 (IFRS) Apr 27.xlsx Cara Operations Limited Condensed Consolidated Interim Financial Statements (unaudited) For the 13 weeks ended April 1, 2018 and March 26, 2017 Cara Operations Limited Condensed Consolidated Interim Statements of Earnings and Comprehensive Income For the 13 weeks ended April 1, 2018 and March 26, 2017 (in thousands of Canadian dollars, except where otherwise indicated) (note 3) Sales (note 6) $ 202,146 $ 156,963 Franchise revenues (note 7) 44,396 41,588 Total gross revenue $ 246,542 $ 198,551 Cost of inventories sold (84,756) (69,597) Selling, general and administrative expenses (note 8) (130,192) (97,087) Impairment of assets (note 14) (578) (1,184) Restructuring and other (note 9) (229) 25 Operating income $ 30,787 $ 30,708 Net interest expense and other financing charges (note 10) (3,317) (3,042) Share of loss from investment in joint ventures (398) (123) Earnings before change in fair value and income taxes $ 27,072 $ 27,543 Change in fair value of exchangeable partnership units 2,256 - Earnings before income taxes $ 29,328 $ 27,543 Income taxes (note 11) Current (2,660) (3,171) Deferred (expense) recovery (5,131) 19,472 Net earnings $ 21,537 $ 43,844 Net earnings attributable to Shareholders of the Company $ 21,699 $ 43,986 Non-controlling interest (162) (142) $ 21,537 $ 43,844 Statement of comprehensive income Net earnings $ 21,537 $ 43,844 Other comprehensive income 283 - Total comprehensive income $ 21,820 $ 43,844 Net earnings per share attributable to the Common Shareholders of the Company (note 22) (in dollars) Basic earnings per share $ 0.36 $ 0.73 Diluted earnings per share $ 0.35 $ 0.71 April 1, 2018 March 26, 2017 See accompanying notes to the unaudited condensed consolidated interim financial statements. Page | 1 Cara Operations Limited Condensed Consolidated Interim Statements of Total Equity For the 13 weeks ended April 1, 2018 and March 26, 2017 (in thousands of Canadian dollars, except where otherwise indicated) Balance at December 31, 2017 58,572 $ 690,968 $ 11,957 $ - $ (5,326) $ (90,179) $ 607,420 Net earnings - - - - - 21,699 21,699 Other comprehensive income - - - - 283 - 283 The Keg merger (note 26) - - - (216,728) 1,793 (35,117) (250,052) Dividends - - - - - (6,660) (6,660) Share re-purchase (note 21) (27) (654) - - - - (654) Issuance of common stock (note 21) 3,801 94,728 - - - - 94,728 Stock options exercised (note 21) 17 173 (35) - - - 138 Stock-based compensation (note 20) - - 525 - - - 525 3,791 94,247 490 (216,728) 2,076 (20,078) (139,993) Balance at April 1, 2018 62,363 $ 785,215 $ 12,447 $ (216,728) $ (3,250) $ (110,257) $ 467,427 Balance at December 25, 2016 59,982 $ 723,724 $ 9,764 $ - $ (3,790) $ (175,756) $ 553,942 Net earnings and comprehensive income - - - - - 43,986 43,986 Dividends - - - - - (6,099) (6,099) Stock options exercised 14 146 (27) - - - 119 Stock-based compensation (note 21) - - 545 - - - 545 14 146 518 - - 37,887 38,551 Balance at March 26, 2017 59,996 $ 723,870 $ 10,282 $ - $ (3,790) $ (137,869) $ 592,493 Attributable to the Common Shareholders of the Company Attributable to the Common Shareholders of the Company Total equity Total equity # of shares (in thousands) Share capital (note 21) Contributed surplus Deficit # of shares (in thousands) Share capital (note 21) Contributed surplus Deficit Accumulated other comprehensive loss Accumulated other comprehensive loss Merger reserve Merger reserve See accompanying notes to the unaudited condensed consolidated interim financial statements. Page | 2 Cara Operations Limited Condensed Consolidated Interim Balance Sheets As at April 1, 2018, December 31, 2017 and March 26, 2017 (in thousands of Canadian dollars) As at As at As at April 1, 2018 December 31, 2017 March 26, 2017 Assets Current Assets Cash $ 47,420 $ 41,971 $ 13,880 Accounts receivable (note 25) 72,002 60,991 65,749 Inventories (note 12) 34,472 26,321 27,015 Assets held for sale - - 2,998 Current taxes receivable - - 54 Prepaid expenses and other assets 15,272 8,573 5,429 Total Current Assets $ 169,166 $ 137,856 $ 115,125 Long-term receivables (note 13) 40,660 40,033 40,826 Property, plant and equipment (note 14) 419,919 336,210 325,429 Investment in the Keg Limited Partnership (note 26) 130,750 - - Brands and other assets (note 15) 618,102 614,968 592,720 Goodwill (note 16) 191,111 191,111 190,204 Deferred tax asset (note 11) 39,709 23,361 37,894 Total Assets $ 1,609,417 $ 1,343,539 $ 1,302,198 Liabilities Current Liabilities Accounts payable and accrued liabilities $ 119,031 $ 86,131 $ 100,045 Provisions (note 17) 6,332 6,959 6,621 Gift card liability 106,905 57,495 35,803 Income taxes payable 2,304 4,107 5,607 Current portion of long-term debt (note 18) 6,916 2,916 2,527 Total Current Liabilities $ 241,488 $ 157,608 $ 150,603 Long-term debt (note 18) 509,879 401,700 379,280 Note payable to The Keg Royalties Income Fund (note 26) 57,000 - - Provisions (note 17) 8,157 8,171 9,534 Other long-term liabilities (note 19) 92,434 67,842 67,838 Deferred gain on sale of The Keg Rights 135,478 - - Deferred tax liability (note 11) 97,554 100,798 102,450 Total Liabilities $ 1,141,990 $ 736,119 $ 709,705 Shareholders' Equity Common share capital (note 21) $ 785,215 $ 690,968 $ 723,870 Contributed surplus 12,447 11,957 10,282 Merger reserve (note 26) (216,728) - - Accumulated other comprehensive loss (3,250) (5,326) (3,790) Deficit (110,257) (90,179) (137,869) Total Shareholders' Equity $ 467,427 $ 607,420 $ 592,493 Total Liabilities and Equity $ 1,609,417 $ 1,343,539 $ 1,302,198 Commitments, contingencies and guarantees (note 24) Subsequent events (note 28) See accompanying notes to the unaudited condensed consolidated interim financial statements. Page | 3 Cara Operations Limited Condensed Consolidated Interim Statements of Cash Flows For the 13 weeks ended April 1, 2018 and March 26, 2017 (in thousands of Canadian dollars) Cash from (used in) Operating Activities Net earnings $ 21,537 $ 43,844 Depreciation and amortization 14,595 11,522 Net gain on disposal of property, plant and equipment (212) (443) Loss (gain) on early buyout/cancellation of equipment rental contracts 187 (27) Impairment of assets 578 1,184 Net interest expense and other financing charges (note 10) 3,317 3,042 Stock based compensation 525 545 Income taxes (paid) received (4,463) 2,300 Change in assets held for sale - (2,998) Change in restructuring provision (910) (287) Change in deferred tax (note 11) 5,076 (19,472) Change in franchise onerous contract provision (note 17) (254) (284) Change in fair value of Exchangable Keg Partnership units (2,256) - Other non-cash items 1,841 (1,934) Net change in non-cash operating working capital (note 23) (40,388) (8,558) Cash flows (used in) from operating activities (827) 28,434 Investing Activities Common control transaction, net of cash assumed (note 26) (71,753) 1,521 Purchase of property, plant and equipment (6,733) (10,224) Proceeds on disposal of property, plant and equipment 32 527 Proceeds on early buyout of equipment rental contracts 50 100 Share of loss from investment in joint ventures 398 123 Additions to other assets (127) (56) Change in long-term receivables (733) 368 Cash flows used in investing activities (78,866) (7,641) Financing Activities Issuance of long-term credit facility, net of financing costs (note 18) 104,000 - Repayment of long-term credit facility (note 18) (15,000) (32,000) Issuance of subordinated voting common shares (note 21) 138 119 Share re-purchase (note 21) (654) - Change in finance leases (note 18) (740) 512 Interest paid (2,450) (2,308) Cash flows from (used in) financing activities 85,294 (33,677) Change in cash during the period 5,601 (12,884) Foreign currency translation adjustment (152) - Cash - Beginning of period 41,971 26,764 Cash - End of period $ 47,420 $ 13,880 April 1, 2018 March 26, 2017 See accompanying notes to the unaudited condensed consolidated interim financial statements. Page | 4 Cara Operations Limited Notes to the Condensed Consolidated Interim Financial Statements For the 13 weeks ended April 1, 2018 and March 26, 2017 Page | 5 1 Nature and description of the reporting entity Cara Operations Limited is a Canadian Company incorporated under the Ontario Business Corporations Act and is a Canadian full service restaurant operator and franchisor. The Company’s subordinate voting shares are listed on the Toronto Stock Exchange under the stock symbol