2 0 1 2 an n u aL R E P O R t
H i gH Li gHtS
YEaR EndEd auguSt 31
2012
2011
2010
2009
Revenue
$27,157,385
$24,274,990
$20,687,278
$13,616,814
Operating Margin
6,140,744
5,632,042
4,873,426
2,542,017
Earnings before interest, income taxes,
depreciation and amortization
$2,710,379
$2,346,088
$1,937,215
$1,239,823
total assets
total debt
Other liabilities
$25,342,445
$24,994,058
$25,081,913
$26,079,426
2,219,691
2,889,376
3,716,347
4,815,518
9,363,384
9,174,599
9,000,019
8,885,532
Shareholders’ equity
13,759,370
12,930,083
12,365,547
12,378,376
total liabilities and shareholders’ equity
$25,342,445
$24,994,058
$25,081,913
$26,079,426
cash, end of year
$3,199,643
$1,287,741
$1,663,557
$2,103,988
Repayment of long-term debt, net
$853,910
$2,749,928
$1,311,953
$1,467,610
common shares outstanding at year end
32,970,527
32,970,527
32,970,527
32,803,861
REvEnuE
(in $ millions)
OPERating MaRgin
(in $ millions)
EBitda
(in $ millions)
30
25
20
15
10
5
0
7
6
5
4
3
2
1
2009
2010
2011
2012
2009
2010
2011
2012
3
2
1
2009
2010
2011
2012
T o Th e S h a r e h o l d e rS
o f P e oPl e C o rPo r a Ti o n
This year stands out as the year in which our strategic plan gained significant
momentum. This is not to say that we didn’t achieve important milestones in
preceding years, because we did. Creating anything ‘built-to-last’ takes homework,
experimentation, planning, focus and good old hard work.
We began with an idea, articulated a vision, and developed it into a strategy – in
my words, an executable idea. In 2009, when People Corporation and Groupworks
Financial merged, we started on our journey to build the leading provider of innovative
group benefits, group retirement and human resources consulting services in Canada.
The evolution of any great company – the kind of company we are building – requires
not only a strategy, but a well laid out plan of execution. Over the past three years, we
have been developing that plan and executing on it. And this year it really took off.
We are in an amazing industry – group benefits, group retirement and HR consulting
– at an amazing time. Specifically, when we laid out our vision and strategy, we
recognized industry dynamics and conditions that presented a unique opportunity in
the sector in Canada. Clients are increasingly demanding advice, not only along the
lines of cost containment, but also on ways to attract and retain the best employees.
As the competition for top talent continues to intensify, employers must develop
programs to attract, retain and motivate their best employees in order to compete.
Those who do will prosper; those who don’t will not be competitive. To provide a
compelling value proposition to employers, consultants must provide innovative
products, specialized services and customized solutions. More and more, to be able to
do so requires scale. As such, it has become all the more difficult for smaller players to
bring the necessary resources and bench strength to a client assignment.
Once we recognized this to be an ideal time to capitalize on the opportunities
described above, we invested significant resources in determining how best to provide
what clients need, want and deserve – best-in-class consulting advice and solutions
that are customized to each client’s situation – while creating significant value for
shareholders. We developed a plan, which included the following:
• Attracting and developing a strong management team;
• A strategic roadmap to guide us in building the next top-tier consulting firm in
Canada;
• An operating framework that laid out the specific steps for how to get there;
• A financing plan, to ensure access to capital and maintenance of a strong balance
sheet; and
• An acquisition model we call “Be In Business For Yourself Not By Yourself”.
With these pieces in place, we began to execute. We created scalable processes
and procedures that could be replicated throughout the organization. We developed
proprietary products and services so that we could offer innovative and customized
solutions to our clients. We created our Shared Services Group, designed to serve
our consultants and clients by bringing industry and subject matter expertise, buying
power and national servicing capabilities to every client engagement. We invested in
CEO and Chairman’s mEssagE tO sharEhOldErs
FOr thE YEar EndEd aUgUst 31, 2012
1
information technology and other resources to craft a sophisticated operating platform
that is the backbone for delivery of our products and services to our clients. We
established a balance sheet that is stronger than ever, ready to capitalize on market
opportunities, and we have been identifying and recruiting top talent throughout the
entire industry across Canada.
Today, we are clearly well past ‘start-up’, and our current momentum is exhilarating,
but we have only just begun. For the 2012 fiscal year, here are the results:
• Revenue grew by 11.2%
• EBITDA grew by 15.5%
• Premiums are close to $500 Million
• Our footprint across Canada is growing and now stands at 26 offices and satellite
offices across seven provinces with well over 200 people serving more than 2,000
clients across the nation.
All of this is evidence that firms across Canada, including clients and potential
partners, are starting to recognize our strong commitment to delivering best-in-class
solutions, and to becoming the ‘partner-of-choice’ in a sector where size is increasingly
important. Throughout the industry, firms and individuals are choosing to become
part of the People Corporation team – as clients, as employees and as partners. In the
past several months, we have closed three strategic partnerships: JSL Inc., the Prosure
Group of Companies, and, most recently, Bencom Financial Services Group Inc. All
three firms are top-tier in their areas of expertise and we are very proud to have them
as our partners.
Last year we established a new brand – People Corporation – along with our tag line,
Experience the Benefits of People. This year, we continued to build our brand, and
clients are responding very positively. Perhaps just as importantly so are our people.
We truly believe that branding develops from the inside out – how we answer the
phone, respond to client requests, bring innovative and fresh ideas to a new or
existing client. We want People Corporation to be where Great People do Great Work.
Simply put, we want our clients to experience the benefits of our people.
We plan for, and expect, fiscal 2013 and beyond to be even better, by building on the
momentum that we have today. To our shareholders: we don’t intend to simply build
your hopes; we plan to continue to build your confidence in us – as consultants to your
organization, as your employer, as your partner in business, as your strategic partner in
our industry.
To those aware of our story, it is time to re-familiarize yourselves – much has been
accomplished in the past year. To those new to our company, I invite you to see what
we’ve got going on here at People Corporation. Please come and Experience the
Benefits of People.
Sincerely,
Laurie Goldberg
Chairman and CEO
2
P e oPl e C o rPo r a Ti o n
Ma n aGeMe nT ’ S d iS C U S Si o n
& a n a l Y SiS Q Ua r Te r a n d
Ye a r e n d e d aU G U S T 3 1 , 2 0 1 2
TA BlE O F C O N T E N T S
FINANCIAl HIGHlIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
BUSINESS OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Group Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Third Party Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Corporate Shared Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Human Resource Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
INDUSTRY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
OUTlOOK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
OVERVIEW OF OPERATIONAl PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2012 Milestones: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ACQUISITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
OVERVIEW OF FINANCIAl PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Selected Quarterly Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Personnel and Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
General and Administrative Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Advertising and Promotion Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Finance and other income (costs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
NON IFRS FINANCIAl MEASURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Operating Income before Corporate Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Corporate Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
lIQUIDITY AND CAPITAl RESOURCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Capital Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Working Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Share Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
COMMITMENTS AND CONTINGENCIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
RElATED PARTY TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
RISKS AND UNCERTAINTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
CRITICAl ACCOUNTING POlICIES AND ESTIMATES . . . . . . . . . . . . . . . . . . . . . . . . 28
INTERNATIONAl FINANCIAl REPORTING STANDARDS (“IFRS”) . . . . . . . . . . . . . . 30
OFF BAlANCE SHEET ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SEASONAlITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
FINANCIAl INSTRUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
managEmEnt’s disCUssiOn & anal Ysis FOr thE
FOUrth QUartEr & YEar EndEd aUgUst 31, 2012
3
4
P e oPl e C o rPo r a Ti o n
This Management’s Discussion and Analysis (“MD&A”) has been prepared with an
effective date of December 4, 2012 and provides an update on matters discussed
in, and should be read in conjunction with the audited annual consolidated financial
statements of the Company, including the notes thereto, as at and for the year ended
August 31, 2012, which were prepared in accordance with International Financial
Reporting Standards (“IFRS”), unless otherwise specified. All amounts contained
within this MD&A are in Canadian dollars unless otherwise specified. Amounts set
forth in this MD&A are stated in thousands of dollars except for per share, issued and
outstanding share data, and unless otherwise noted. Certain totals, subtotals and
percentages may not reconcile due to rounding.
additiOnal inFOrmatiOn
Additional information regarding the Company is available on SEDAR at www.sedar.
com and on the Company’s website at www.peoplecorporation.com.
FOrWard lOOKing statEmEnts
This MD&A contains “forward looking statements” within the meaning of applicable
securities laws, such as statements concerning anticipated future events, results,
circumstances, performance or expectations that are not historical facts. Use of
words such as “may”, “will”, “expect”, “believe”, or other words of similar effect
may indicate a “forward looking” statement. These statements are not guarantees
of future performance and are subject to numerous risks and uncertainties, including
those described in our publicly filed documents (available on SEDAR at www.sedar.
com) and in this MD&A under the heading “Risks and Uncertainties”. Those risks
and uncertainties include the ability to maintain profitability and manage organic
or acquisition growth, reliance on information systems and technology, reputation
risk, dependence on key clients, reliance on key professionals and general economic
conditions. Many of these risks and uncertainties can affect our actual results and
could cause our actual results to differ materially from those expressed or implied
in any forward looking statement made by us or on our behalf. Given these risks
and uncertainties, investors should not place undue reliance on forward looking
statements as a prediction of actual results. All forward looking statements in this
MD&A are qualified by these cautionary statements. These statements are made as
of the date of this MD&A and, except as required by applicable law, we undertake no
obligation to publicly update or revise any forward looking statement, whether as a
result of new information, future events or otherwise. Additionally, we undertake no
obligation to comment on analyses, expectations or statements made by third parties
in respect of the Company, its financial or operating results or its securities.
Readers are cautioned that net income before interest expense, tax expense,
depreciation and amortization (“EBITDA”) or the Company’s calculation of Operating
Income, Operating Income before Corporate Costs, Corporate Costs, Adjusted
Working Capital, Operating Working Capital and other similar terms do not have
standardized meanings as prescribed by IFRS and may not be comparable to similar
measures presented by other companies. Further, readers are cautioned that EBITDA
or Operating Income should not replace Net income or loss or cash flows from
operating, investing and financing activities (as determined in accordance with IFRS),
as an indicator of the Company’s performance.
managEmEnt’s disCUssiOn & anal Ysis FOr thE
FOUrth QUartEr & YEar EndEd aUgUst 31, 2012
5
People Corporation (the “Company”) is an employee benefit, pension and human
resource consulting firm in Canada. With a growing national footprint of twenty six
offices and satellite offices in seven provinces, the Company is bringing together
leading consultants in the industry, offering innovative and customized benefit,
pension and human resource solutions to its clients. The Company is listed on the
TSX Venture Exchange (“TSX V”) under the symbol “PEO”.
f i n a nCi a l h iGh l iGhT S
Revenue
EBITDA
Net Income
EBITDA per share (Basic)
Net income per share (Basic)
AUG 31, 2012
AUG 31, 2011
THREE MONTHS
ENDED
$ 6,710.7
$ 442.3
$ 214.5
$ 0.013
$ 0.007
YEAR
ENDED
$ 27,157.4
$ 2,710.4
$ 726.2
$ 0.082
$ 0.022
THREE MONTHS
ENDED
$ 6,859.4
$ 301.9
$ (86.2)
$ 0.009
$ (0.003)
YEAR
ENDED
$ 24,414.1
$ 2,346.1
$ 471.2
$ 0.071
$ 0.014
For the year ended August 31, 2012, the Company reported revenue growth of
$2,743 or 11.2%. The 2.2% decrease in revenue reported for the three months ended
August 31, 2012 as compared to the prior year is due to timing differences resulting
from several changes in renewal dates of group benefit clients. Revenue growth rates
continue to be strong. EBITDA margins were 10.0% for the year ended August 31,
2012 compared to 9.2% in 2011.
Vi eW
bU Si n eS S oVe r
The Company delivers employee group benefit consulting, third party benefits
administration, group retirement consulting, strategic human resource consulting and
recruitment services to help companies attract, retain and reward employees. The
Company achieves this through its approximately 200 professionals and support staff
with twenty six offices and satellite offices in seven provinces and earns its revenues from
a diverse base of clients in various industries. The Company’s priority is the continued
profitable expansion of existing operations through a focus on organic growth and the
acquisition of synergistic companies with a view to maximize value for its stakeholders;
i) shareholders, ii) clients, iii) acquisition partners, and iv) employees.
On October 1, 2011, the Company was rebranded as People Corporation. As the
Company continues to grow and expand its team of consultants, service offerings and
national footprint, rebranding was considered an essential part of the growth strategy
in order to more accurately reflect what the Company does. The Company’s new tag
line ‘Experience the Benefits of People’ is intended to reflect a commitment to bring
the right people to deliver solutions that help clients to attract and get the best from
their people.
The Company maintains a corporate strategic plan, a financial plan and an ongoing
annual planning process that enables the Company to continue to grow and achieve
its vision. The Company has a funnel of potential acquisitions in place and available
financial and management resources to execute such acquisitions in accordance with
its corporate strategic plan.
6
P e oPl e C o rPo r a Ti o n
The Company is organized in order to emphasize integration of all of its practice areas,
which are as follows:
Experience the Benefits of People
group
Benefits
third Party
administration
shared
services
human resource
Consulting
integrated
solutions
Business
development
group
retirement
solutions
Concierge
Client
services
WHITE WILLOW
BENEFIT CONSULTANTS INCORPORATED
c o m e u n d e r o u r c a r e
People Corporation is a national provider of group benefits, group retirement, and
human resource services. The Company has offices across Canada; each led by a team
of experts and backed by the resources of a Public Company. Our diverse team of
experienced consultants have industry specific expertise and can provide businesses
with uniquely valuable insight to customize an innovative suite of services specific for
their business requirements. Our Company is committed to helping businesses attract,
retain and reward their people who will ensure they continue to succeed.
While the Company continues to go to market with the various brands that it acquired
through acquisition, the Company is organized in such a way as to leverage the
capabilities of the entire organization. People Corporation can help businesses attract
the right talent for the job and provide the right incentives to motivate employees to
exceed, enabling our client’s business to prosper.
The Company employs approximately 200 professionals and support staff with twenty
six offices and satellite offices in seven provinces across Canada and earns its revenues
from a diverse base of clients in various industries.
Together with its partner firms, People Corporation helps businesses:
attract
reward
Our employee benefit, group retirement and HR divisions are led by
experts who understand our clients’ businesses and can help our clients
attract the best people for their industry, helping position them as top
employers.
Our benefit consulting, third party administration and proprietary solutions
ensure our clients’ staff has access to health, wellness, dental, and
retirement plans that make financial sense for their families as well as our
clients’ business.
Prosper
People Corporation can help make our clients’ organization a place where
the best people will want to build their careers while also ensuring cost
containment for our clients benefit, HR and group retirement plans.
managEmEnt’s disCUssiOn & anal Ysis FOr thE
FOUrth QUartEr & YEar EndEd aUgUst 31, 2012
7
GROUP BENEFITS
Whether a client needs a simple benefits package or a comprehensive solution, our
experts can customize a program for our client’s unique needs. We have:
Expertise
Custom solutions
All People Corporation consultants are business builders
– recognized industry leaders who can create unparalleled
value for our client’s organization. Through the experience of
adding hundreds of clients to our client list, our consultants
have developed broad, as well as specialized, product,
insurance and industry expertise.
People Corporation’s broad range of innovative and
proprietary group benefit solutions can be tailored to suit
organizations of any size, in any sector. This is achieved
through our partner relationships, the ability to leverage our
various systems & platforms and through the expertise of
our consultants and staff.
industry leading Pricing As a national provider, our buying power allows us to offer
clients the best products on the best terms.
independent guidance
People Corporation’s experts’ advice is unbiased and
independent. We work with all major insurers to provide
clients with the best customized solution for our client’s
business and people.
national servicing
With offices across the country, People Corporation can
provide clients with servicing on a localized basis.
Below is a summary of the Company’s various operating brands within group benefits:
GAllIVAN & ASSOCIATES
Gallivan & Associates (“gallivan”), established in 1993, provides professional
advice and service infrastructure to post secondary student organizations in order
to offer group benefit programs to students. Gallivan operates on a national basis
with offices and satellite offices across the country and provides Student Health
and Dental Plans to post secondary student organizations representing over
225,000 students.
THE INVESTMENT GUIlD
The Investment Guild (“tig”), established in 1981, specializes in mid market
corporate benefits, association plan benefits, group retirement solutions and
individual insurance products.
BUFFETT TAYlOR & ASSOCIATES
Buffett Taylor & Associates (“Buffett taylor”), established in 1981, is uniquely
positioned in the marketplace as a forward thinking consulting firm specializing in
servicing a predominately public sector and not for profit clientele. Buffett Taylor
is well versed in all areas of group benefits insurance and benefit plans. Buffett
Taylor’s experience enables clients to benefit from the sharing of information and
experiences. Using an integrated approach to the design and cost management
planning of group benefit programs with a proven track record in servicing clients
across Ontario has enabled Buffett Taylor to maximize the investment that their
clients have made in their employee benefit plan.
8
P e oPl e C o rPo r a Ti o n
WHITE WIllOW BENEFITS CONSUl TANTS
White Willow Benefit Consultants (“White Willow”), established in 1988, is
a boutique group benefits consulting firm that services mid market to large
corporate clients with group benefit plans and group retirement solutions. White
Willow has specialty expertise in servicing legal firms and organizations within the
financial services sector.
lES ASSURANCE W.B.
les Assurance W.B. (“laWB”) is a provider of group benefit solutions to
clients based in the Québec city area and northern Québec. lAWB leverages
the HSP platform, hereinafter described, to provide its clients with third party
administration of group benefit programs including billing services, client services,
employee data management and claims management. In addition to providing
third party administration services, lAWB also provides traditional group benefit
programs to its clients.
JSl INC.
JSL Inc. (“Jsl”), established in 1976, is a provider of group benefit solutions
to clients based in southern Ontario and specializes in mid market corporate
clients and has taken a partnership approach with clients to develop customized
employee benefits programs that meet the changing needs of their businesses
and employees.
PROSURE GROUP ADMINISTRATORS INC. & PROSURE INSURANCE
AGENCIES INC.
Prosure Insurance Agencies Inc. & Prosure Insurance Agencies Inc. (collectively,
“Prosure”), established in 1987, provides employee benefits solutions, consulting
services and third party administration services to over 300 mid market corporate
clients, the majority of which are located in Ontario.
BENCOM FINANCIAl GROUP SERVICES INC.
Bencom Financial Services Group Inc. (“Bencom”), established in 1982, provides
group benefit, group retirement and individual benefit advisory services to
approximately 200 mid market corporate clients located primarily in Ontario.
THIRD PARTY ADMINISTRATION
The Company has several third party administration (“TPA”) service platforms
that allow the Company to administer benefit plans on behalf of our clients and
insurance carrier partners. These administration platforms, allow the Company to
develop specialized, unique and customized benefit solutions for our clients. TPA
services include employee data management, billing services, consolidated billing
services where a client has multiple insurance carriers associated with its plan,
customized reporting, customized plan design services, underwriting services,
communication services and booklet printing services. In addition, through its
various partners, the TPA platforms also provide claims adjudication services and
claims management.
managEmEnt’s disCUssiOn & anal Ysis FOr thE
FOUrth QUartEr & YEar EndEd aUgUst 31, 2012
9
HEAlTHSOURCE PlUS
HealthSource Plus Inc (“HSP”), established in 1992, provides TPA of group benefit
programs including billing services, client services, employee data management
and claims management through a proprietary platform. As a TPA, HSP is able to
provide customized benefits solutions based on the needs of the client including
complex plan design, customized reporting, alternative funding models and
hybrid plans. HSP has offices in Toronto, Montreal, Niagara and Winnipeg and
typically serves businesses with 25 to 5,000 employees.
PROSURE
In addition to providing group benefit advisory services, as discussed, above,
Prosure operates a specialized TPA platform for the administration of Health
Spending Accounts and Cost Plus Accounts.
CORPORATE SHARED SERVICES
Through our corporate shared service divisions, People Corporation helps its
subsidiaries and divisions to prosper by providing the resources to attract clients
and retain clients. The corporate shared service divisions were created to ensure
that our subsidiaries and divisions could have access to advanced product experts,
proprietary products and services not normally available to mid size employee
benefit firms; thereby ensuring clients are receiving the best possible consulting
advice, and its subsidiaries have a unique value proposition allowing them a
competitive edge to attract and retain clients.
INTEGRATED SOlUTIONS
Integrated Solutions provides services to help the Company’s benefits consultants
grow and enhance their client service offering by going to market on an integrated
basis and offering existing clients the Company’s full suite of products. In addition,
Integrated Solutions has responsibility for product development and the launching
of a suite of group benefit, optional benefit and individual insurance products.
CONCIERGE ClIENT SERVICES
The Company has been rolling out its Concierge Client Service offering and
recently expanded this service model by restructuring its client service team and
adding several client managers. The mandate behind this division is to provide
clients of every division with a consistent client experience.
GROUP RETIREMENT SOlUTIONS
Group Retirement Solutions focuses on enhancing and expanding upon the
Company’s existing group retirement products and client service model. The
mandate of the division is to provide support services to the Company’s benefit
consultants to facilitate and help them expand their service offering to clients by
adding Group Retirement Solutions.
10
P e oPl e C o rPo r a Ti o n
HUMAN RESOURCE SERVICES
Within its human resource service divisions the Company has deep expertise and
the ability to take advantage of the entire organizations resources to provide:
• Executive search and Recruiting services
• Career management services
• HR consulting services
Below is a summary of the Company’s various operating brands within human
resource services:
PEOPlE FIRST HR SERVICES
People First HR Services (“PFHR”), established in 2000, is Manitoba’s largest full
service human resource provider. PFHR through its various brands delivers high
quality leadership and organizational solutions and contributes to the success of
its clients by working with them to: recruit top talent; discover the full potential of
each of their employees; and realize the collective strength of a highly engaged
workforce. They leverage the experience base of the firm and the efficiency of
its processes to create workable and timely solutions that deliver great value for
clients.
KWA PARTNERS
Well known for the excellence of its career transition services, the Company
provides career management services in Manitoba, Saskatchewan and
Northwestern Ontario under the KWA Partners brand. KWA Partners is a
national partnership of locally owned offices that provide career transition and
career development solutions customized to their customer’s human resources
objectives.
Saskatoon
Vancouver
Calgary
Winnipeg
Quebec City
Montreal
Stouffville
Markham
Waterloo
Niagara
Whitby
Toronto
Cambridge
Halifax
managEmEnt’s disCUssiOn & anal Ysis FOr thE
FOUrth QUartEr & YEar EndEd aUgUst 31, 2012
11
i n dU S Tr Y
Resulting from recent economic downturns including ongoing financial crises
around the world, projected shortage of skilled employees, rapid technological
change in many industries, and increasing regulatory scrutiny, companies have
to rethink their approach to human resources. According to research conducted
by the Conference Board of Canada, companies will be faced with a shortfall of
1 million skilled workers by 2020. For every two workers leaving the workforce,
only one worker is entering and while this issue has been dampened by the recent
recession, it will become exacerbated as the economy recovers. The pending
“war for talent” will require companies and HR professionals to offer potential
employees with value propositions and to deliver on those value propositions
to attract and retain them. Innovative compensation programs with reward and
recognition programs – monetary and other, combined with work life balance,
fulfilling roles and flexible work arrangements will become increasingly important.
Companies now need to include ongoing recruitment practices that facilitate a
constant funnel of potential candidates, the nurturing of candidate relationships,
strategic interview processes, strong candidate selection processes combined
with candidate profiling, rapid response and candidate follow up. The recruiting
process needs to be continuous, rapid and highly responsive which creates an
administrative challenge. Furthermore, companies need to provide employees
with on boarding, training and career development programs to ensure that they
are successful. Small to mid sized companies don’t have the skills, technology
and resources necessary to be effective or competent in these areas and will
increasingly need to outsource recruiting and other HR functions to expert
professional advisors.
Many companies have long used the employer sponsored benefits program as
one of the tools to help attract and retain employees. Companies have seen
significant cost increases in group insurance premiums resulting from increasing
healthcare costs, the entry of new drugs, aging demographics and related
consumer utilization. With an aging population that is both living and working
longer and taking advantage of more medical services and improvements in
drugs, cost and utilization are naturally increasing. This, combined with the
continued cost shifting from the public sector to the private sector through
reduced coverage under provincial healthcare programs and other public plans,
and the long term outlook for group insurance costs, suggest that such premiums
will continue to rise. This creates a double edged sword for companies – they
need to use benefits programs to attract and retain workers – but, the increasing
cost makes it difficult.
Human resource consulting and staffing services are dominated by many small
players and a few large multinational firms. Small and medium enterprise
group insurance and pension consulting is serviced by a large number of
small regional and local participants. The balance of the industry, which is
focused on large employers and government accounts, is serviced by a small
number of multinational consulting firms. The scope of their services generally
includes pension and benefits consulting, pension and benefits administration,
communication consulting, actuarial services and wellness consulting. The
multinational consulting firms primarily offer fee based consulting and
administrative services, while the balance of the marketplace operates primarily
on commission based compensation, with limited fee based services available
depending upon the client and the services required.
12
P e oPl e C o rPo r a Ti o n
Management believes that the continued evolution and growth of the benefits,
pension, insurance and human resource industries combined with external factors
such as aging demographics, regulatory and legal changes, and technology
will continue to cultivate the need by clients for external expertise in consulting
and administrative matters in order to attract, retain and reward employees.
In addition, Management believes that consultant demographics and lack of
succession planning options is positioning the industry for consolidation. The
Company’s unique approach to provide these services within a one stop shop
approach positions the Company well within the overall human resources and
insurance distribution industry.
oU Tl o oK
Management believes that the employee benefits and human resources industry
and the business of the Company are positioned for growth. The industry is
poised for growth as a result of rising health care costs and the long term trend
of tightening labour markets. The industry is also ripe for consolidation as a result
of the aging demographics of regional consulting practices and the significant
demand from mid market employers to manage the costs and requirements of
providing employee benefits to staff and while ancillary human resource services
like recruiting, career transition and human resource consulting services have
suffered decreased demand through the recent economic downturn, these service
areas are expected to grow significantly due to long term employment trends.
In order to take advantage of these industry trends and the opportunity for growth,
the Company has developed and implemented a strategic plan that focuses on
growth through acquisition combined with specific business plans for each of
its operating brands to enhance organic growth opportunities. The Company’s
design and recent roll out of its Shared Services structure is expected to provide
both significant revenue growth opportunities to the existing operating brands as
well as a value added recruiting tool for new consultants and acquisition targets.
Management expects that their plan, the rebranding and focus on organic growth,
acquisitions and its Shared Services strategy has resulted in organic growth during
fiscal 2012 and will continue to do so in 2013 and in subsequent years.
oVe r Vi eW o f oPe r a Ti o n a l
Pe r f o rMa nCe
As the Company continues to execute its strategic plan, it has been successful
in building upon and growing operational capabilities by investing in employees
and the tools they need to provide responsive solutions which address their
client’s business challenges. Renaming the Company to People Corporation, and
the addition of the tag line ‘Experience the Benefits of People’ – sets the culture
in which our foundational principals can thrive. The Company wants its clients
to experience the benefits which People Corporation professionals bring to the
table, to experience the benefits their people can deliver to them, and wants the
client relationship to be an experience, not a transaction.
During fiscal 2011, the Company expanded practice areas with the addition of
Group Retirement Solutions, Business Development and Integrated Solutions; the
Company also attracted new talent, redeveloped its service model, strengthened
its balance sheet, negotiated expanded acquisition credit facilities with CIBC and
launched an Employee Share Ownership Program (“ESOP”) amongst many other
initiatives.
managEmEnt’s disCUssiOn & anal Ysis FOr thE
FOUrth QUartEr & YEar EndEd aUgUst 31, 2012
13
With the centralization of the group benefit accounting functions, technology
operations and servers at the Company’s corporate offices in Winnipeg, the
Company launched the Shared Support Group. The Shared Support Group
provides accounting, human resource, technology and logistical services to the
Company’s various practice and functional areas therefore enabling practice
leaders to focus on client service and revenue generating activities.
The combination of all these activities positions the Company well to continue to
grow both organically and through acquisitions.
2012 MIlESTONES:
The Company continued its positive momentum and strong performance during
the fourth quarter. Corporately, our objectives continued to focus on: i) shifting
expenses from non revenue generating activities to revenue generating activities
with a view of boosting organic growth; ii) promoting and recruiting leadership to
execute our organic growth plans; and iii) focusing on building a funnel of possible
acquisitions.
Results from the implementation of the above strategic initiatives, momentum
from past initiatives and the overall improvement in revenue growth can be
seen in the Company’s continued strong financial performance. Our results are
demonstrative of operating leverage whereby increased revenue resulted in
increased profitability.
MIlESTONES IN THE CURRENT FISCAl YEAR INClUDE:
• Continued growth of the benefits consultant team across Canada to drive
organic revenue growth. Specifically, new benefits consultants were hired in
Ontario, Québec and Manitoba. Looking forward, the Company is focused
on increasing its recruiting efforts in order to increase its team of revenue
generating consultants.
• Further expansion of senior leadership presence in Ontario through the addition
of the Regional Vice President, Ontario. This key role has overall responsibility
for sales and client service for the Ontario Region.
• Augmentation of client service capabilities, The Company now has a
compliment of six Client Managers through which the Company is continuing to
rollout and enhance its Concierge Service offering.
• Roll out of a proprietary Preferred Pharmacy Program with leading Canadian
pharmacy chains. The program is designed to improve an employers ability to
offer their employees robust drug coverage while maintaining sustainable costs.
• The Company launch of newly developed Online Enrolment Platform which will
provide our administered clients with a significantly improved transition process
when moving their benefits plan to the Company’s TPA system.
14
P e oPl e C o rPo r a Ti o n
aC Q UiSiTi o nS
The Company’s business plan, in addition to organically growing the Company
through client growth and product expansion, is to acquire additional businesses
which are complementary to the existing businesses. To date the Company has
completed eight acquisitions which includes ten operating entities. During the
past several years the Company has focused on strengthening its balance sheet,
has put in place acquisition financing and has developed and built several value
propositions to attract acquisitions. The Company recently went to market with
its renewed acquisition model and value propositions and has seen significant
traction from its efforts.
Effective December 3, 2012, the Company acquired Bencom. Established in 1982,
Bencom provides group benefit, group retirement and individual benefit advisory
services to approximately 200 mid market corporate clients located primarily in
Ontario.
Effective November 1, 2012, The Company acquired Prosure Group
Administrators ltd. and Prosure Insurance Agencies ltd. (collectively “Prosure”).
Prosure was established in 1987, and provides employee benefits solutions,
consulting services and TPA to over 300 mid market corporate clients, the majority
of which are located in Ontario. Prosure’s unique product mix which includes cost
plus arrangements and health spending accounts, combined with its TPA platform
and its client service model, has allowed it to grow since its inception.
Effective September 1, 2012, the Company acquired JSl. JSl was established
in 1976, and provides employee benefits solutions, consulting services and
practical health management programs to its clients. JSL specializes in mid market
corporate clients and has taken a unique partnership approach with clients to
develop customized employee benefits programs that meet the changing needs
of their businesses and employees.
Supported by strong cash flows for servicing requirements, these acquisitions
are funded through vendor take back debt and by drawing on the Company’s
acquisition credit facility with CIBC and are therefore accretive to shareholders
over time with no shareholder dilution. As a full service benefits and pension
advisory practices, each of Bencom, Prosure and JSl business models are aligned
with People’s strategic, operating and growth objectives. In addition to growth in
the Company’s revenues and EBITDA, these acquisitions bring additional carrier
relationships. The Company’ capabilities, resources, systems, tools, business
development team are expected to support the vendors to increase the rates at
which the acquired businesses grow.
In addition to the recently closed acquisitions, the Company continues to have a
number of opportunities at various stages of the acquisition process.
managEmEnt’s disCUssiOn & anal Ysis FOr thE
FOUrth QUartEr & YEar EndEd aUgUst 31, 2012
15
oVe r Vi eW o f f i n a nCi a l Pe r f o rMa nCe
SElECTED QUARTERl Y FINANCIAl INFORMATION
The selected financial information provided below is derived from the Company’s unaudited quarterly
financial statements for each of the last eight quarters:
2012
2011
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Revenue
6,710.7
6,545.0
7,274.8
6,626.9
6,859.4
6,123.5
6,180.1
5,251.1
Operating expenses
6,268.4
5,984.9
6,350.9
5,842.9
6,557.5
5,646.1
5,296.9
4,567.5
EBITDA
Interest expense, net
Amortization and
depreciation
Income tax expense, net
Net income
Total Assets
442.3
(76.7)
560.1
(94.4)
923.9
(87.3)
784.0
(78.3)
301.9
477.5
883.1
(204.5)
(120.4)
(105.9)
683.6
(99.2)
(312.7)
(305.4)
(297.9)
(294.4)
(315.6)
(297.3)
(295.7)
(290.8)
(156.3)
214.5
92.6
30.5
158.7
366.2
238.9
156.0
(144.1)
(86.2)
9.4
27.8
123.7
328.4
63.3
201.1
25,342.4
24,460.3
24,378.0
24,317.0
24,994.1
23,671.4
24,051.9
23,948.1
Total loans and borrowings
2,219.7
2,380.3
2,705.5
2,775.2
2,964.3
2,776.4
2,957.0
2,999.1
Total other liabilities
Shareholders’ equity
EBITDA per share
Basic earnings per share
Diluted earnings per share
9,363.4
8,529.8
8,192.7
8,442.1
9,102.5
7,890.9
8,141.2
8,353.2
13,759.4
13,550.2
13,479.7
13,099.7
12,927.3
13,004.1
12,953.7
12,595.8
0.013
0.007
0.006
0.017
0.001
0.001
0.028
0.011
0.011
0.024
0.005
0.005
0.009
(0.003)
(0.003)
0.014
0.001
0.001
0.027
0.010
0.010
0.021
0.006
0.006
During the 2012 fiscal year, the Company adopted IFRS with a transition date of September 1, 2010.
The quarterly data for the 2010 fiscal year is presented in conformity with Canadian GAAP and has
not been restated under IFRS. Accordingly, it may not be comparable with the information for fiscal
2011 and 2012. See “Adoption of International Financial Reporting Standards (IFRS)” on page 25 for
a description of the significant differences between Canadian GAAP and IFRS for the Company.
REVENUE
Revenue from group benefit consulting is primarily earned as commissions which are paid by the
insurance carriers. Revenues from TPA services are earned as fees which are generally charged
to clients. The Company is a reseller of benefit products and services and therefore assumes no
underwriting risk as the insurance policy is underwritten by the insurance carrier.
Revenue from group retirement consulting is principally earned through commissions and fees
earned from pension assets under administration and is paid by the carrier which administers and
invests the funds.
The human resource consulting and recruitment services offered by the Company derive revenue
primarily from consulting fees. Fees for human resource consulting services are generally based on
hourly rates and depend on the nature of the project and skill set and experience of the consultant
engaged on the project. Fees for recruitment services are generally charged as a percentage of
projected compensation of the candidate being placed. Fees for career management services are
based on the level of the program selected by the client. Fees are negotiated with the client prior to
the services or engagement starting.
16
P e oPl e C o rPo r a Ti o n
FOR THE YEAR ENDED
AUG 31, 2012
AUG 31, 2011
$ VARIANCE
% VARIANCE
Commissions
$ 12,829.8
$ 11,085.0
$ 1,744.8
Fees and other revenues
14,327.6
13,329.2
998.4
$ 27,157.4
$ 24,414.2
$ 2,743.2
15.7%
7.5%
11.2%
During fiscal 2012, the Company increased its revenues by $2,743.2, or 11.2%, over
the prior year. Growth in revenue was due to organic revenue growth resulting from
the addition of new clients from leads generated through the Company’s Business
Development Services, Integrated Solutions and Group Retirement Solutions, as well as
from expanding the benefit consulting team.
PERSONNEl AND COMPENSATION
The largest operating expense of the Company is compensation and related costs which
includes salaries, commissions, bonuses, stock based compensation, group benefits, and
payroll taxes.
FOR THE YEAR ENDED
AUG 31, 2012
AUG 31, 2011
$ VARIANCE
% VARIANCE
Compensation and benefits
$ 14,190.3
$ 12,781.1
$ 1,409.2
Bonuses
Short term benefits &
insurance premiums
Share based payments
1,965.6
1,481.7
103.1
1,328.1
1,221.2
93.3
637.5
260.5
9.8
$ 17,740.7
$ 15,423.7
$ 2,317.0
11.0%
48.0%
21.3%
10.5%
15.0%
For the year ended August 31, 2012, personnel and compensation costs represent 65.3%
of revenues (2011 – 63.2%) The Company believes that investment in its employees and
associate consultant networks are key to ensuring successful execution of its strategic plans.
The increase in salary expense for the year ended August 31, 2012 from $15,423.7 to
$17,740.7 is due to; $1,385.6 in incremental commission directly resulting from growth
in sales and performance based bonuses awarded for meeting or surpassing established
revenue targets coupled with bonuses for retaining existing clients; $706.1 resulting
from hiring of Regional Vice Presidents in Quebec and Ontario, hiring client managers in
Manitoba, Ontario and Quebec, expanding the client service teams and the expansion of
the business development team offset by reductions in non revenue generating roles; and
$270.4 in related benefits costs including the implementation of the Company’s Employee
Share Purchase Plan.
GENERAl AND ADMINISTRATIVE EXPENSES
While management of costs is an ongoing focus for the Company, increases amongst the
various subcategories of general and administrative expenses are a direct result of growth in
operations that drive revenue growth. General and administrative expenses are composed
of expenditures identified in the following tables:
managEmEnt’s disCUssiOn & anal Ysis FOr thE
FOUrth QUartEr & YEar EndEd aUgUst 31, 2012
17
FOR THE YEAR ENDED
AUG 31, 2012
AUG 31, 2011
$ VARIANCE
% VARIANCE
Administration fees
$ 1,568.7
$ 1,447.5
$ 121.2
Depreciation of property
& equipment
Occupancy
Office Supplies
& communication
Other
Professional fees
Public company costs
Corporate Travel
309.3
1,315.7
1,123.7
308.3
793.0
285.9
252.4
308.3
1,298.8
1,090.8
482.2
889.5
257.8
255.6
1.0
16.9
32.9
(173.9)
(96.5)
28.1
(3.2)
$ 5,957.0
$ 6,030.5
$ (73.5)
8.4%
0.3%
1.3%
3.0%
(36.1)%
(10.8)%
10.9%
(1.3)%
(1.2)%
This decrease of $73.5 in general and administrative expenses for the year ended
August 31, 2012 is comprised of an increase in administration fees which are directly
related to the organic revenue growth experienced in the fiscal year, offset by
increased efficiency and capacity for projected growth as a result of restructuring costs
incurred in the prior year.
During the prior year, the Company incurred increased legal fees related to contract
negotiations, corporate restructuring and employment matters. Similar costs were not
incurred for the year ended August 31, 2012 which resulted in a decrease of $96.5 in
professional fees. The decrease of $173.9 in other expenses is due to non recurring
restructuring costs incurred in the prior year.
ADVERTISING AND PROMOTION EXPENSES
Advertising and promotion expenses are composed of expenditures identified in the
following tables:
FOR THE YEAR ENDED
AUG 31, 2012
AUG 31, 2011
$ VARIANCE
% VARIANCE
Business Development
$ 349.2
$ 364.1
$ (14.9)
Travel
Advertising
603.1
209.4
481.3
170.1
121.8
39.3
$ 1,161.7
$ 1,015.5
$ 146.2
(4.1)%
25.3%
23.1%
14.4%
The increase in travel and advertising for the year ended August 31, 2012 is associated
with the continued roll out of the shared services divisions, the expansion of the
Company’s sales force, restructuring efforts, branding costs associated with the
Company’s change in name and travel costs associated with acquisitions and securing
new clients.
18
P e oPl e C o rPo r a Ti o n
FINANCE AND OTHER INCOME (COSTS)
Finance and other income and costs are as follows:
FOR THE YEAR ENDED
AUG 31, 2012
AUG 31, 2011
$ VARIANCE
% VARIANCE
Amortization of
intangible assets
Finance income
Finance expenses
$ (901.1)
$ (891.1)
$ (10.0)
1.1%
47.4
(384.2)
64.9
(594.7)
(17.5)
210.5
$ (1,237.9)
$ (1,420.9)
$ 183.0
(27.0)%
(35.4)%
(12.9)%
The decrease in finance expenses for the year ended August 31, 2012 is due to the
repayment of long term debt and the associated reduced debt levels in general.
n o n i f rS f i n a nCi a l Me aS Ur eS
The Company reports certain financial information using non IFRS financial measures,
as it believes provision of such information is useful to investors and other users of the
MD&A in understanding the Company’s performance and facilitate a comparison of
quarterly and annual results of ongoing operations. These non IFRS financial measures
do not have any standardized meaning and may not be comparable with similar
measures used by other companies. For certain non IFRS financial measures there
are no directly comparable amounts under IFRS. They should not be viewed as an
alternative to measures of financial performance determined in accordance with IFRS.
FOR THE YEAR ENDED
Revenue
Operating costs (i)
Income before corporate costs
Corporate costs (ii)
EBITDA (iii)
less
Stock based compensation
Income before undernoted
Interest expense, net (iv)
Depreciation of capital assets
Amortization of intangible assets
Restructuring costs
Income taxes, net
net income
AUG 31, 2012
AUG 31, 2011
$ 27,157.4
$ 24,414.1
21,016.6
$ 18,782.1
6,140.8
3,430.4
$ 5,632.0
3,286.0
2,710.4
2,346.0
103.1
93.3
2,607.3
2,252.7
336.8
309.3
901.1
-
333.9
529.9
308.3
891.1
-
52.3
$ 726.2
$ 471.1
managEmEnt’s disCUssiOn & anal Ysis FOr thE
FOUrth QUartEr & YEar EndEd aUgUst 31, 2012
19
(i)
Represent operating expenses of acquired businesses.
(ii)
Represent expenses incurred at the corporate head office.
(iii)
The Company defines EBITDA as earnings before interest, taxes, depreciation
and amortization, and stock based compensation. The Company believes that
in addition to net income (loss), EBITDA is a useful supplemental measure for
investors of earnings before debt service, capital asset charges and taxes. This
earnings measure should not be construed as an alternative to net income or
as an alternative to cash flow from operating, investing and financing activities
or the Company’s liquidity. EBITDA does not have a standardized meaning
prescribed by IFRS and therefore the Company’s method of calculating
EBITDA may not be comparable to similar measures presented by other
companies or issuers.
(iv)
Includes interest on long term debt, vendor take back loans and an amount
paid for settlement amount in excess of carrying value.
OPERATING INCOME BEFORE CORPORATE COSTS
Operating Income before Corporate Costs for the year ended August 31, 2012
increased from $5,632.0 in the prior period to $6,140.8 in the current period, an
increase of 9.0%. The increase in Operating Income before Corporate Costs is
comprised of a combination of the increases in revenues from organic growth and
additions to the existing client base offset with the smaller proportionate increase in
related operating costs. The Company allocates various services and supplies, which
include Error and Omission insurance, Property and Casualty insurance, consolidation
of professional services including recruiting, legal and accounting services to the
subsidiaries. These costs were previously absorbed within the Corporate Cost Centre.
CORPORATE COSTS
Corporate Costs for the year ended August 31, 2012 were $3,430.4 versus $3,286.0
incurred in the prior period. The increase of $144.4 is due to; $214.6 in additional
salaries and wages incurred for the hiring of project managers which will drive several
strategic projects including the development of new products as well as a TPA
platform; $28.3 in incremental costs for public company compliance; offset reductions
of $18.7 in travel, $67.2 in professional and legal costs and $12.6 in other costs, as
compared to the prior year.
EBITDA
EBITDA, as defined under Forward-looking Statements, for the year ended
August 31, 2012 was $2,710.4, an increase of $364.4 from the $2,346.0 of EBITDA
that was reported for the same period in the prior year. Continued improvement in
EBITDA illustrates the effective measures the Company has developed to generate
additional revenue while minimizing controllable costs.
20
P e oPl e C o rPo r a Ti o n
l iQ Ui d iT Y a n d CaPiT
a l r eSoUrCeS
CASH FLOWS
The following table summarizes the Company’s cash flows for the year ended
August 31, 2012: (amounts derived from the unaudited interim financial statements).
FOR THE YEAR ENDED
AUG 31, 2012
AUG 31, 2011
$ VARIANCE
% VARIANCE
Net income for the
period
Add non cash items, net
Changes in non cash
working capital
Operating activities
Investing activities
Financing activities
$ 726.2
$ 471.2
$ 255.0
1,192.5
902.8
2,821.5
(165.1)
(744.6)
949.2
(303.4)
1,117.0
(340.3)
(1,152.5)
243.3
54.1%
25.6%
1,206.2
(397.6)%
1,704.5
175.2
407.9
152.6%
(51.5)%
(35.4)%
net increase (decrease)
$ 1,911.8
$ (375.8)
$ 2,287.6
(608.7)%
Cash generated from operating activities for the year ended August 31, 2012 was
$2,821.5, an increase of $1,704.5 or 152.6% from the $1,117.0 of cash generated
in the same period in the prior year. Increases in non cash items were offset by a
decrease in accounts receivable balances and an increase in cash utilized in payment
of accounts payable and accrued liabilities.
Cash used by investing activities for the year ended August 31, 2012 of $165.1
was largely comprised of capital asset additions required for the Shared Services
Group, upgrading existing technology, office furnishings for new office space for
the Integrated Solutions Group, the development of new office space for its Toronto
operations and also includes the payout of existing lines of credit relating to the
acquisition of lAWB.
Cash used by financing activities for the year ended August 31, 2012, was $744.6,
as compared to $1,152.5 used in the prior year. Cash outflows related to repayment
of long term debt of $838.7 (2011 – $916.3) as well as the payment of finance lease
liabilities of $15.2 (2011 – $15.0) were partially offset by proceeds of short term
financing of $109.3 (2011 – $164.6).
CAPITAl MANAGEMENT
The Company’s objectives when managing capital are to safeguard the Company’s
ability to continue as a going concern in order to provide opportunities for growth to
shareholders and benefits for other stakeholders and to maintain financial flexibility
in, or to take advantage of, organic growth and new acquisition opportunities as they
arise.
In the management of capital, the Company includes cash, bank financing, vendor
take back debt and shareholders’ equity in the definition of capital. The Company
manages its capital structure and can adjust it in light of changes in economic
conditions and the risk characteristics of the underlying assets. In order to maintain
or adjust capital structure, the Company may issue new shares, issue new debt,
renegotiate vendor take back debt or issue new debt to replace existing debt with
different characteristics. The Company’s acquisition strategy includes the issuance of
debt and shares. The Company has the opportunity to use its operating line of credit
managEmEnt’s disCUssiOn & anal Ysis FOr thE
FOUrth QUartEr & YEar EndEd aUgUst 31, 2012
21
during the year to finance cash flows related to seasonal changes in non cash working
capital items. The Company has not made use of its operating line of credit during
year.
WORKING CAPITAl
The Company’s working capital (defined as current assets less current liabilities) at
August 31, 2012 is set forth in the table below. The Company defined “Available
Working Capital” as current assets less current liabilities, with an exclusion of certain
current liabilities (the “Excluded Items”) from such calculation. The Excluded Items
include:
DEFERRED REVENUE
Deferred revenue represents the excess of retainer amounts billed over costs
incurred and revenue earned on service contracts. The amount is amortized into
income as services are rendered, in accordance with the revenue recognition
policies described in the Company’s financial statements. Group benefit
commission revenue from clients where advisory services and plan administration
services are provided by the Company is generally received in advance and
recorded as deferred revenue. Fee revenue that is contingent on certain criteria
being met is included in deferred revenue until the criteria has been met.
Deferred revenue is a non cash liability and therefore management believes that
adding back the deferred revenue provides a more accurate reflection of the
liquidity and working capital position of the Company. Deferred revenue has a
substantial impact on the traditional working capital position of the Company and
therefore it is worth fully understanding the nature of the deferred revenue when
assessing the liquidity and working capital position of the Company.
VENDOR TAKE BACK DEBT
Certain vendor take back (“VtB”) debt is held by senior employees of the
Company who are also substantial shareholders of the Company. Given the nature
of this relationship it is management’s belief that a portion of this debt could be
renegotiated if required to ensure the ongoing operating of the Company. The
Company is of the opinion that it makes sense to add back the vendor take back
debt when assessing the true operating working capital of the Company.
The table below reconciles the differences in the calculation of working capital and
Available Working Capital.
Current assets
Current liabilities
Working capital
Add back:
Deferred revenue
VTB debt held by senior management
AUG 31, 2012
AUG 31, 2011
$ 6,203.6
$ 4,809.9
8,475.2
8,209.5
(2,271.6)
(3,399.6)
4,098.5
11.9
4,116.2
3,345.0
250.7
3,595.7
available working capital
$ 1,844.6
$ 196.1
22
P e oPl e C o rPo r a Ti o n
Available operating working capital has increased by $1,648.5 to an available working
capital surplus of $1,844.6 from the available working capital surplus experienced a
year ago.
SHARE CAPITAl
The Company has authorized share capital of an unlimited number of common voting
shares.
Common shares issued and outstanding:
Stock options outstanding:
AUG 31, 2012
AUG 31, 2011
32,970,527
32,970,527
2,763,142
2,891,142
CoM MiT Me nT S a n d
Co nTi nGe nCi eS
CONTRACTUAl OBlIGATIONS AND COMMITMENTS
The following table summarizes, as at August 31, 2012, our contractual obligation for
the periods specified.
OBlIGATION
lESS
THAN
1 YEAR
TOTAL
1 – 3
YEARS
4 – 5
YEARS
THERE-
AFTER
Accounts Payable and accrued liabilities
$ 3,645.1
$ 3,645.1
$ -
$ -
$ -
Operating lease obligations
Capital lease obligations
Long term debt
Vendor take back debt
3,747.1
802.3
1,562.1
1,083.3
299.4
59.7
2,148.1
11.9
16.8
435.4
11.9
39.0
722.7
-
3.9
-
720.0
270.0
-
-
$ 9,611.9
$ 4,911.5
$ 2,323.8
$ 1,807.2
$ 569.4
With enhanced controls around cash management, Management believes that
operations will generate sufficient cash flows to fund ongoing operations and finance
its seasonal working capital needs.
On June 10, 2011, the Company entered into a Credit Facility Agreement with the
Canadian Imperial Bank of Commerce which includes the following components:
1. A $2 million operating line of credit. As at August 31, 2012, the Company had not
utilized this facility.
2. A $10 million term revolving acquisition credit facility to fund future acquisitions. The
acquisition credit facility is available via loans bearing interest at prime plus 1.5% or
via bankers’ acceptances with a stamping fee of 2.5% annually. Each draw on the
facility will be treated as a separate loan repayable over a period of up to seven
years. Subsequent to August 31, 2012, the company drew $3.8 million against the
acquisition credit facility.
3. A $2.5 million instalment loan which was utilized to repay and discharge a
substantial amount of long term debt facilities and vendor take back debt of the
Company. The instalment loan will be repaid in quarterly instalments over a seven
year period and bears interest at prime plus 1.5%. As at August 31, 2012, the
balance owing on this facility was equal to $2.1 million.
managEmEnt’s disCUssiOn & anal Ysis FOr thE
FOUrth QUartEr & YEar EndEd aUgUst 31, 2012
23
The facility is secured by a general security agreement over the assets of the Company
and its subsidiaries and is subject to covenants.
CONTINGENCIES
In the ordinary course of operating the Company’s business it may from time to time
be subject to various claims or possible claims. Although management currently
believes there are no claims or possible claims that if resolved would either individually
or collectively result in a material adverse impact on the Company’s financial position,
results of operations, or cash flows, these matters are inherently uncertain and
management’s view of these matters may change in the future.
r e l aTe d P a r T Y Tr a nSaC Ti o nS
During the year ended August 31, 2011 outlined below, the Company had certain
transactions with directors and officers or shareholders of the Company. All the
transactions are in the normal course of operations and are measured at the
exchanged amount, which is the consideration agreed to by the parties. Related party
transactions for the year ended and balances as at August 31, 2012 are as follows:
Interest expense (i)
AUG 31, 2012
AUG 31, 2011
$ -
$ 268.1
(i)
Interest on vendor take back debt related to prior acquisitions was paid
or accrued.
(ii) Accrued interest on the vendor take back loan
(iii) Represents vendor take back debt on acquisitions and promissory notes payable
(Financial Statement note 14 (a), (d), (e),(g) and (h)) owed to officers and directors
of the Company.
r iS K S a n d UnCe r Ta i nTi eS
The Company operates in a well established and highly competitive industry and
its results of operations, business prospects and financial condition are subject to a
number of risks and uncertainties and are affected by a number of factors outside the
control of management of the Company. These factors include, but are not limited to,
the following:
KEY PERSONNEl
The Company is highly dependent upon the expertise and experience of its personnel,
particularly those engaged in generating revenue. The Company’s operations depend,
in part, on the relationships and reputations these individuals have established with
clients, often over many years. In the event the Company were to lose key personnel,
client relationships could be negatively impacted which could lead to material adverse
effects on the Company’s operating and financial results. In addition, many of the
Company’s employees have developed specialized expertise and experience in the
delivery of human resource and benefit solutions. These solutions include, but are
not limited to, specialized human resource consulting engagements, recruitment
projects, career management, benefits plan design and administration, legislative and
regulatory issues, as well as group retirement plan design.
24
P e oPl e C o rPo r a Ti o n
The Company currently has many well experienced employees that have served
the Company for five years or more, who hold senior positions in the Company,
that have various professional designations and that have developed deep and
trusted relationships with clients. While the Company provides a competitive
compensation structure including stock options and an employee share ownership
plan to its employees and has signed comprehensive employment agreements with
its employees to protect the Company, in the event that the Company were to lose
any of its key personnel, it may have a material adverse effect on the business of
the Company. The ability to attract, retain and develop new employees into senior
positions could affect the business of the Company.
REGUlATION AND CERTIFICATION
The Company’s benefit and pension consulting and administration services are
subject to laws and regulations that are constantly evolving. In addition, the laws and
regulations differ from province to province and the Company is required to keep up
to date with the laws and regulations of each province.
Although there are currently restrictions on the ability of Canadian banks to market
insurance products in competition with the Company, such legislation is currently
under review. Accordingly, dependent upon the nature of legislative reforms, Canadian
banks may in the future be able to offer products which are competitive with the
products offered by the Company.
Currently the provisions of recruitment services and human resource consulting
engagements are not generally subject to government regulation. However, there is
no certainty that regulation will not be introduced.
Any changes to laws, rules, regulations or policies could have a material adverse effect
on the Company’s business, financial condition and operating results.
CONTROlS
As a venture issuer, the Company is not required to certify the design and evaluation
of the Company’s disclosure controls and procedures (DC&P) and internal controls
over financial reporting (ICFR), and as such has not completed such an evaluation.
Investors should be aware that inherent limitations on the ability of certifying officers
of a venture issuer to design and implement on a cost effective basis DC&P and
ICFR as defined in NI 52 – 109 may result in additional risks to the quality, reliability,
transparency and timeliness of interim and annual filings and other reports provided
under securities legislation.
TERMINATION OF CONTRACTS
Group insurance contracts are generally re negotiated on an annual basis with clients,
pursuant to which insurance premium pricing increases or decreases. Accordingly,
there can be no guarantee that insurance contracts sold through the Company in the
past will be renewed on a go forward basis. While the Company has several benefit
and insurance clients with contracts that extend for one to seven years, the majority
of the Company’s benefit and pension revenue is derived from contracts that can
be cancelled with thirty days notice. The Company’s experience is that most clients
terminate during the renewal process rather than during the policy year. No single
client makes up more than 5% of the Company’s revenue and the clients are diversified
both in size and industry. During the renewal process the benefits consulting team
will provide benefits planning and consulting services which could result in decreased
managEmEnt’s disCUssiOn & anal Ysis FOr thE
FOUrth QUartEr & YEar EndEd aUgUst 31, 2012
25
benefits coverage and/or decreased premiums which generally results in decreased
revenue for the Company. The Company is often paid commissions in advance from
the insurance carrier. In the event that a contract is terminated by a client and the
Company has been paid in advance for the year, then the Company must rebate the
amount paid on a pro rata basis to the insurance company.
COMPETITIVE CONDITIONS
The insurance brokerage market is highly competitive and is composed of a large
number of companies of varying size and scope of services. Insurance companies
themselves also offer their products through other methods, including insurance
agents and direct distribution channels, which are competitive with the insurance
brokerage industry and the Company.
FUTURE GROWTH VIA ACQUISITIONS
The Company’s growth and expansion plans contain a dual approach of generating
organic growth through enhanced service offerings amongst the Company’s existing
client base and through ongoing acquisition of independent Group Benefit, Pension
Advisory businesses and human resource Consulting and Staffing firms at reasonable
prices. There can be no assurance that an adequate number of suitable acquisition
candidates will be available to the Company to meet this area of focus of its expansion
plans, or in the event that such businesses are available for acquisition that they will be
available at a price which would allow the Company to operate on a profitable basis.
The Company competes for acquisition and expansion opportunities with entities that
have substantially greater resources than the Company and these entities may be able
to outbid the Company for acquisition targets.
INTEGRATION OF ACQUISITIONS
There can be no assurance that the businesses acquired by the Company in the
future will achieve acceptable levels of revenue and profitability or otherwise perform
as expected. The Company has limited experience in acquiring and integrating
brokerages in other markets. The Company may be unable to successfully integrate
any business it may acquire in the future, due to diversion of management attention,
strains on the Company’s infrastructure, difficulties in integrating operations and
personnel, entry into unfamiliar markets, or unanticipated legal liabilities or tax,
accounting or other issues. A failure to integrate acquired businesses may be
disruptive to the Company’s operations and negatively impact the Company’s revenue
or increase the Company’s expenses.
AVAIlABIlITY OF FINANCING
The Company has relied principally on equity and vendor take back debt financing
to fund its acquisitions. The Company may require additional funds to make future
acquisitions of Group Benefit and Pension Advisory businesses and may require
additional funds to market and sell its products into the marketplace. The ability of
the Company to arrange such financing in the future, and to repay its existing debt,
will depend in part upon the prevailing capital market conditions as well as the
business performance of the Company. There can be no assurance that the Company
will be successful in its efforts to arrange additional financing, when needed, on
terms satisfactory to the Company. If additional financing is raised by the issuance of
shares from the treasury of the Company, control of the Company may change and
shareholders may suffer additional dilution. If additional financing is not available
on terms favourable to the Company, the Company may be unable to grow or may
26
P e oPl e C o rPo r a Ti o n
be required to limit or halt its expansion plans. In addition, the Company’s existing
creditors, some of whom have security interests in the Company’s assets, may exercise
their rights to acquire or dispose of the Company’s assets.
DIVIDENDS
Any decision to pay dividends on its common shares in the future will be made by the
Board of Directors on the basis of the Company’s earnings, financial requirements and
other conditions at such time.
lEGAl RISK
Legal risk is the potential for civil litigation or criminal or regulatory proceedings being
commenced against the Company that, once decided, could materially and adversely
affect our business, operations or financial condition. In the ordinary course of
business, the Company may be involved in litigation and other claims as a defendant
or as a plaintiff. The outcomes of these actions could result in significant losses to the
Company which could have a material adverse effect on the Company’s business,
financial condition and operating results.
REPUTATION RISK
The Company is dependent, to a large extent, on its client relationships and its
reputation with clients. In addition, the human resource Consulting and Staffing part
of the Company is dependent upon its reputation with potential candidates that will
be placed with clients through its recruitment services. The Company’s reputation
can be significantly damaged by failing to deliver timely and quality consulting and
recruitment services or by failing to provide quality services to potential candidates.
The benefit and pension part of the Company relies upon information systems and
technology to maintain accurate records and to carry out its contractual administrative
obligations. Failing to meets its contractual obligations to clients could result in
litigation as well as significant reputation damage to the Company. Damage to the
Company’s reputation could result in the loss of client and candidate relationships
which could result in a material adverse effect on the Company’s business, financial
condition and operating results.
CANADIAN ECONOMY
The Company’s future success is dependent upon the direction and state of the
Canadian economy. The business, operating results and financial condition of
the Company could be materially affected by a prolonged and deep recession or
downturn in the Canadian economy. The Company may not have sufficient financial
resources to withstand a prolonged and deep recession.
managEmEnt’s disCUssiOn & anal Ysis FOr thE
FOUrth QUartEr & YEar EndEd aUgUst 31, 2012
27
Cr iTiCa l aC CoUnTi nG Po l iCi eS
a n d eS TiMa TeS
Critical accounting policies are defined as those that are both very important to the
portrayal of the Company’s financial condition and results, and require management’s
most difficult, subjective or complex judgments. We are required in preparing the
Company’s financial statements, in accordance with IFRS, to make certain estimates,
judgments and assumptions that we believe are reasonable based upon available
information, historical information and/or forecasts. These estimates, judgments and
assumptions affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported revenues and expenses during the reporting
periods. Actual results could differ from these estimates. The accounting policies which
management believes are the most critical to aid in fully understanding and evaluating
our reported financial results include those relating to revenue recognition, business
acquisitions and accounting for the resulting customer relationships and contracts,
goodwill and income taxes.
REVENUE RECOGNITION
Revenue includes fees and commissions generated from administrative, advisory and
consulting services provided to clients.
Generally, revenue from the rendering of services is recognized when the following
criteria are met:
• The amount of revenue can be reliably measured;
• The stage of completion can be reliably measured;
• The receipt of economic benefits is probable; and
• Costs incurred and to be incurred can be reliably measured.
Concurrently with the above general principles, the Company applies the following
specific revenue recognition policies:
Group benefit commission revenue from clients where advisory services and plan
administration services are provided by the Company is generally received in advance
and recorded as deferred revenue. Commission advances are recognized in income
on a monthly basis based on the number of months for which the commission revenue
was advanced, net of a provision for return commissions due to policy cancellation and
adjustments. The provision is determined based on historical data.
Group benefit commission revenue from clients where the Company provides only
advisory services are recognized in income at the effective or renewal date of the
policy, net of a provision for return commissions due to policy cancellation and
adjustments. The provision is determined based on historical data.
Fee revenue from administrative and consulting services are recognized on the
percentage of completion basis.
For fee revenue that is contingent on certain criteria being met, the revenue is not
recognized until the work is completed.
28
P e oPl e C o rPo r a Ti o n
All other revenues are recognized upon the completion of services rendered by the
Company. Other revenue includes investment income recorded on the accrual basis
of accounting.
BUSINESS COMBINATIONS
For acquisitions, the Group measures goodwill as the fair value of the consideration
transferred including the recognized amount of any non controlling interest in the
acquiree, less the net recognized amount (generally fair value) of the identifiable assets
acquired and liabilities assumed, all measured as of the acquisition date. When the
excess is negative, a bargain purchase gain is recognized immediately in profit or loss.
Transaction costs, other than those associated with the issue of debt or equity
securities, that the Group incurs in connection with a business combination are
expensed as incurred.
INTANGIBlE ASSETS
(i)
goodwill
Goodwill represents the excess of the purchase price paid for the acquisition
of subsidiaries over the fair value of the net tangible and intangible assets
acquired. Following the initial recognition, goodwill is measured at cost less any
accumulated impairment losses.
(ii) Other intangible assets
Other intangible assets consist of acquired customer relationships and contracts.
Other intangible assets acquired separately are measured on initial recognition at
cost. The cost of identifiable intangible assets acquired in a business combination
is equal to fair value as at the date of acquisition. Following initial recognition,
identifiable intangible assets are carried at cost less any accumulated amortization
and any accumulated impairment losses.
Definite life intangible assets are amortized from the date of acquisition or,
for internally developed assets, from the time the asset is available for use.
Amortization is recognized in the either on a declining balance or on a straight
line basis over the estimated useful life of the asset, and the residual values and
useful lives of the assets are reviewed at each financial year end and adjusted
if appropriate.
Intangible assets are considered to have indefinite lives where management
believes that there is no foreseeable limit to the period over which the intangible
assets are expected to generate net cash flows.
(iii) subsequent expenditure
Subsequent expenditure is capitalized only when it increases the future economic
benefits embodied in the specific asset to which it relates. All other expenditures are
recognized in profit or loss as incurred.
managEmEnt’s disCUssiOn & anal Ysis FOr thE
FOUrth QUartEr & YEar EndEd aUgUst 31, 2012
29
DEFERRED INCOME T AX
Deferred tax is recognized in respect of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts
used for taxation purposes. Deferred tax is not recognized for the following temporary
differences: the initial recognition of assets or liabilities in a transaction that is not a
business combination and that affects neither accounting nor taxable profit or loss,
and differences relating to investments in subsidiaries and jointly controlled entities
to the extent that it is probable that they will not reverse in the foreseeable future. In
addition, deferred tax is not recognized for taxable temporary differences arising on
the initial recognition of goodwill. Deferred tax is measured at the tax rates that are
expected to be applied to temporary differences when they reverse, based on the laws
that have been enacted or substantively enacted by the reporting date. Deferred tax
assets and liabilities are offset if there is a legally enforceable right to offset current tax
liabilities and assets, and they relate to income taxes levied by the same tax authority
on the same taxable entity, or on different tax entities, but they intend to settle current
tax liabilities and assets on a net basis or their tax assets and liabilities will be realized
simultaneously.
A deferred tax asset is recognized for unused tax losses, tax credits and deductible
temporary differences, to the extent that it is probable that future taxable profits will
be available against which they can be utilised. Deferred tax assets are reviewed at
each reporting date and are reduced to the extent that it is no longer probable that
the related tax benefit will be realized.
i nTe r n a Ti o n a l f i n a nCi a l
r ePo r Ti nG S T a n d a r dS ( “i f rS ” )
In February 2008 the Canadian Accounting Standards Board (“AcSB”) confirmed that
the use of IFRS would be required for Canadian publicly accountable enterprises for
interim and annual financial statements effective for fiscal years beginning on or after
January 1, 2011. The Company implemented these standards on September 1, 2011.
The unaudited interim condensed financial statements for the year August 31, 2012
and 2011 comply with IFRS. These financial statements have been prepared as
described in Note 2 of the interim condensed consolidated financial statements.
In preparing the interim condensed consolidated financial statements in accordance
with IFRS 1, the Company has applied the mandatory exceptions and certain of the
optional exemptions from full retrospective application of IFRS.
Note 22 of the unaudited interim condensed financial statements for the year
August 31, 2012 and 2011 contains a detailed description of the Company’s
conversion to IFRS, including required reconciliations of the Company’s financial
statements previously prepared under Canadian GAAP to those under IFRS as at
September 1, 2010 and for the three months ended August 31, 2011 and for the year
ended August 31, 2011.
30
P e oPl e C o rPo r a Ti o n
o f f b a l a nCe Sh e eT
a r r a nGeMe nT S
Other than as described above, the Company does not have any off balance sheet
arrangements.
Se aSo n a l iT Y
During the year ended August 31, 2012, the Company continued to experience the
impacts of the Shared Services division resulting in a leveling of seasonal fluctuations.
Notwithstanding, the Company expects higher revenues in the fourth quarter due to
the renewal of a large association client, as well as, the seasonal impacts associated
with student benefit advisory services. During the past fiscal year the Company had
greater cash flows during the third and fourth quarter. The fourth quarter is primarily
strong due to cash receipts associated with its student benefit advisory business which
renews in August. It is Management’s belief that as growth from strategic activities
continues to develop and mature the seasonal impacts in revenue and cash flow will
be minimized.
f i n a nCi a l i nS TrU Me nT S
The financial instruments of the Company consist of basic financial instruments which
are typically used in the Company’s operation, including cash, restricted cash, accounts
receivable, accounts payable and other liabilities, obligations under capital lease and
long term debt.
For the current assets and liabilities, the main risk is the credit risk associated with
accounts receivable. The credit risk is reduced due to a diversified customer base. The
risks associated with long term debt include the risk of interest rate increases and the
risk of potential defaults in debt payments due to insufficient cash flows.
managEmEnt’s disCUssiOn & anal Ysis FOr thE
FOUrth QUartEr & YEar EndEd aUgUst 31, 2012
31
32
P e oPl e C o rPo r a Ti o n
Co nSo l i d a Te d f i n a nCi a l
S TaTeMe nT S f o r Th e Ye a rS e n d e d
aU G U S T 3 1 , 2 0 1 2 & 2 0 1 1
MANAGEMENTS’ STATEMENT OF RESPONSIBIlITY
FOR FINANCIAl REPORTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
INDEPENDENT AUDITOR’S REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
CONSOlIDATED STATEMENTS OF FINANCIAl POSITION . . . . . . . . . . . . . . . . . . . 36
CONSOlIDATED STATEMENTS OF COMPREHENSIVE INCOME . . . . . . . . . . . . . . . 37
CONSOlIDATED STATEMENTS OF CHANGES IN EQUITY . . . . . . . . . . . . . . . . . . . . 38
CONSOlIDATED STATEMENTS OF CASH FlOWS . . . . . . . . . . . . . . . . . . . . . . . . . . 39
NOTES TO THE CONSOlIDATED FINANCIAl STATEMENTS . . . . . . . . . . . . . . . . . . 40
COnsOlidatEd FinanCial statEmEnts
FOr thE YEars EndEd aUgUst 31, 2012 & 2011
33
Ma n aGeMe nT S ’ S T aTeMe nT o f
r eS Po nSi b i l iT Y f o r f i n a nCi a l r ePo r
Ti nG
To the Shareholders of People Corporation:
Management is responsible for the preparation and presentation of the accompanying consolidated financial
statements, including responsibility for significant accounting judgments and estimates in accordance with
International Financial Reporting Standards and ensuring that all information in the annual report is consistent
with the consolidated financial statements. This responsibility includes selecting appropriate accounting
principles and methods, and making decisions affecting the measurement of transactions in which objective
judgment is required.
In discharging its responsibilities for the integrity and fairness of the consolidated financial statements,
management designs and maintains the necessary accounting systems and related internal controls to
provide reasonable assurance that transactions are authorized, assets are safeguarded and financial records
are properly maintained to provide reliable information for the preparation of consolidated financial
statements.
The Board of Directors and Audit Committee are composed primarily of Directors who are neither
management nor employees of the Company. The Board is responsible for overseeing management in the
performance of its financial reporting responsibilities, and for approving the financial information included
in the annual report. The Board fulfils these responsibilities by reviewing the financial information prepared
by management and discussing relevant matters with management and external auditor. The primary
function of the Audit Committee is to assist the Board in fulfilling its financial oversight responsibilities
by reviewing the financial reports and other financial information provided by the Company to regulatory
authorities and shareholders, the Company’s systems of internal controls regarding finance and accounting,
and the Company’s accounting and financial reporting processes. The Committee is also responsible for
recommending the appointment of the Company’s external auditors.
MNP llP, an independent firm of Chartered Accountants, is appointed by the shareholders to audit the
consolidated financial statements and report directly to them; their report follows. The external auditor have
full and free access to, and meet periodically and separately with, both the Committee and management to
discuss their audit findings.
/s/ “mr. laurie goldberg, Ca”
_______________________________
Director & Chief Executive Officer
/s/ “mr. Brevan Canning, Cga”
_______________________________
Vice President of Finance
December 4, 2012
34
P e oPl e C o rPo r a Ti o n
COnsOlidatEd FinanCial statEmEnts
FOr thE YEars EndEd aUgUst 31, 2012 & 2011
35
PEOPlE COrPOratiOn
Consolidated Statements of Financial Position
As at August 31, 2012, August 31, 2011 and September 1, 2010
assets
Current assets:
Cash and cash equivalents
Trade and other receivables
Other current assets
Total current assets
Non current assets:
Property and equipment
Intangible assets
Total non current assets
total assets
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable, accrued and other liabilities
Deferred revenue
Income taxes payable
Current portion of loans and borrowings
Total current liabilities
Accrued liabilities
Deferred revenue
Loans and borrowings
Deferred income tax liability
Total liabilities
shareholders’ equity:
Share capital
Contributed surplus
Retained earnings (deficit)
Total shareholders’ equity
NOTE
AUG 31, 2012
AUG 31, 2011
(NOTE 25)
AUG 31, 2010
(NOTE 25)
5
6
7
8
9
12
11
8
9
11
12
$
3,199,643
$
1,287,741
$
1,663,557
2,573,125
430,873
6,203,641
840,670
18,298,134
19,138,804
3,208,481
313,659
4,809,881
984,908
19,199,269
20,184,177
2,415,898
248,375
4,327,830
938,268
19,815,815
20,754,083
$
25,342,445
$
24,994,058
$
25,081,913
$
3,684,621
$
3,996,384
$
3,105,837
4,098,533
3,344,981
226,651
465,351
107,041
761,128
8,475,156
8,209,534
57,398
150,518
1,754,340
1,145,663
60,465
324,150
2,203,129
1,266,697
3,168,694
531,559
1,433,935
8,240,025
147,217
324,015
2,331,869
1,673,240
11,583,075
12,063,975
12,716,366
13
11,990,956
11,990,956
11,990,956
650,878
1,117,536
547,744
391,383
454,404
(79,813)
13,759,370
12,930,083
12,365,547
total liabilities and shareholders’ equity
$
25,342,445
$
24,994,058
$
25,081,913
Commitments and contingencies (note 18)
subsequent Events (note 24)
On BEhalF OF thE BOard OF dirECtOrs
/s/ “Susan Dabarno”
____________________________________
Director, Chair of the Audit Committee
/s/ “laurie Goldberg”
_____________________________________
Director, Chief Executive Officer
36
PEOPlE COrPOratiOn
Consolidated Statements of Comprehensive Income
For the years ended August 31, 2012 and August 31, 2011
revenue
Commissions
Fees and other revenues
Operating expenses
Personnel
General and administrative
Advertising and promotion
income before undernoted
Finance and other income (costs):
Amortization of intangible assets
Finance income
Finance expenses
net income before income taxes
income tax expense:
Current
Deferred
net income and comprehensive income
Basic and diluted earning per share
13(c)
Basic
Diluted
NOTE
YEAR ENDED
AUG 31, 2012
YEAR ENDED
AUG 31, 2011
(NOTE 25)
$
12,829,814
$
11,084,965
23
23
15
15
12
12
14,327,571
27,157,385
17,740,775
5,957,044
1,161,615
24,859,434
2,297,951
(901,135)
47,401
(384,188)
13,329,178
24,414,143
15,423,649
6,030,507
1,015,532
22,469,688
1,944,455
(891,134)
64,875
(594,739)
(1,237,922)
(1,420,998)
1,060,029
523,457
454,910
(121,034)
333,876
485,385
(433,123)
52,262
726,153
$
471,195
0.022
0.022
0.014
0.014
$
$
$
37
PEOPlE COrPOratiOn
Consolidated Statements of Changes in Equity
For the years ended August 31, 2012 and August 31, 2011
SHARE
CAPITAL
CONTRIBUTED
SURPlUS
(DEFICIT)
RETAINED
EARNINGS)
TOTAL
Balance, september 1, 2010 (Note 25)
$
11,990,956
$
454,404
$
(79,813)
$
12,365,547
Net Income and comprehensive income for the year
-
-
471,195
471,195
Transactions with shareholders, recorded directly in shareholders’ equity
Share based payments
Total transactions with shareholders
Balance, august 31, 2011 (Note 25)
-
-
11,990,956
$
$
93,340
93,340
547,744
$
$
-
-
391,383
93,340
93,340
12,930,083
$
$
$
$
SHARE
CAPITAL
CONTRIBUTED
SURPlUS
RETAINED
EARNINGS)
TOTAL
Balance, august 31, 2011
$
11,990,956
$
547,744
$
391,383
$
12,930,083
Net Income and comprehensive income for the year
-
-
726,153
471,195
Transactions with shareholders, recorded directly in shareholders’ equity
Share based payments
Total transactions with shareholders
Balance, august 31, 2012
-
-
11,990,956
$
$
103,134
103,134
650,878
$
$
$
$
-
-
1,117,536
103,134
103,134
13,759,370
$
$
38
PEOPlE COrPOratiOn
Consolidated Statements of Cash Flows
For the years ended August 31, 2012 and August 31, 2011
Operating activities
Net Income for the year
Adjustments for:
Depreciation
Amortization of intangible assets
Share based compensation
Accretive interest expense
Deferred tax expense (recovery)
Net cash and cash equivalents from operations
Change in the following:
Trade and other receivables
Other current assets
Accounts payable, accrued and other liabilities
Deferred revenue
Deferred tax liability
net cash and cash equivalents from (used by) working capital items
NOTE
YEAR ENDED
AUG 31, 2012
YEAR ENDED
AUG 31, 2011
(NOTE 25)
$
726,153
$
471,195
6
7
309,293
901,135
103,134
-
(121,034)
1,918,681
635,358
(117,214)
(314,829)
579,919
119,610
902,844
308,292
891,134
93,340
89,572
(433,123)
1,420,410
(792,583)
(65,284)
802,560
176,421
(424,518)
(303,404)
net cash from operating activities
2,821,525
1,117,006
investing activities
Acquisition of subsidiary, net of cash and cash equivalents acquired
Acquisition of property and equipment
net cash used in investing activities
Financing activities
Proceeds from loans and borrowings
Repayment of loans and borrowings
net cash used in financing activities
net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year
-
(165,056)
(165,056)
109,343
(853,910)
(744,567)
1,911,902
1,287,741
(34,672)
(305,608)
(340,280)
2,618,267
(3,770,809)
(1,152,542)
(375,816)
1,663,557
Cash and cash equivalents at the end of the year
$
3,199,643
$
1,287,741
39
PEOPlE COrPOratiOn
Notes to the Consolidated Financial Statements
For the years ended August 31, 2012 and August 31, 2011
1. rEPOrting EntitY:
People Corporation, (the “Company”) was incorporated under the Ontario Business Corporations Act
on July 5, 2006. The Company is a public company listed on the TSX Venture Exchange (the “TSX V”),
trading under the “PEO” symbol and is domiciled in Canada. The address of the Company’s head office
is 360 Main Street, Suite 1800, Winnipeg, Manitoba, Canada and the Company’s registered office is
180 Bay Street, Suite 4400, Toronto, Ontario, Canada. These consolidated financial statements of the
Company comprise accounts of the Company and its subsidiaries (together referred to as the “Group”
and individually as “Group entities”). The Group is primarily involved in the delivery of employee
group benefit consulting, pension consulting and third party benefits administration services, as well
as, recruiting services, strategic human resources consulting and career management services to help
companies recruit, retain and reward employees (Note 21).
These consolidated financial statements were approved by the Board of Directors and authorized for
issue on December 4, 2012.
2. Basis OF PrEsEntatiOn:
(a) statement of compliance
These consolidated financial statements have been prepared in accordance with International
Financial Reporting Standards (“IFRSs”). These are the Group’s first annual consolidated consolidated
financial statements prepared in accordance with IFRSs and IFRS 1 First-time Adoption of
International Financial Reporting Standards have been applied.
An explanation of how the transition to IFRS has affected the reported financial position, financial
performance and cash and cash equivalents flows of the Company is provided in Note 25. This note
includes reconciliations of equity and comprehensive income for comparative periods and of the
shareholders’ equity at the date of transition reported under Canadian GAAP to those reported for
those periods and at the date of transition under IFRS.
(b) Basis of measurement
These consolidated financial statements have been prepared on the historical cost basis except for
the following material items in the consolidated statements of financial position:
•
financial instruments at fair value through profit or loss are measured at fair value
•
equity settled share based payment awards are measured at fair value at grant date
(c) Functional and presentation currency
The consolidated financial statements are presented in Canadian dollars, which is the Group’s
functional currency. All financial information presented has been rounded to the nearest dollar except
where indicated otherwise.
40
PEOPlE COrPOratiOn
Notes to the Consolidated Financial Statements
For the years ended August 31, 2012 and August 31, 2011
(d) Use of estimates and judgments
The preparation of these consolidated financial statements in conformity with IFRS requires
management to make judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets and liabilities at the date of these financial
statements and reported amounts of income and expenses during the reporting period. Actual
results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognized in the period in which the estimates are revised and in any future periods
affected.
3. signiFiCant aCCOUnting POliCiEs:
The accounting policies set out below have been applied consistently to all periods presented in these
consolidated financial statements and in preparing the opening IFRS statement of financial position at
September 1, 2010 for the purposes of the transition to IFRS, unless otherwise indicated.
(a) Basis of consolidation
(i) Business combinations
For acquisitions, the Group measures goodwill as the fair value of the consideration transferred,
including the recognized amount of any non controlling interest in the acquiree, less the net
recognized amount (generally fair value) of the identifiable assets acquired and liabilities
assumed, all measured as of the acquisition date. When the excess is negative, a bargain
purchase gain is recognized immediately in profit or loss.
Transaction costs, other than those associated with the issue of debt or equity securities, that the
Group incurs in connection with a business combination are expensed as incurred.
(ii) subsidiaries
Subsidiaries are entities controlled by the Company or a subsidiary of the Company. The
financial statements of subsidiaries are included in these consolidated financial statements from
the date that control commences until the date that control ceases. The accounting policies of
subsidiaries have been changed to align them with the policies adopted by the Group.
(iii) transactions eliminated on consolidation
Intra Group balances and transactions, and any unrealized income and expenses arising from
intra group transactions, are eliminated in preparing these consolidated financial statements.
Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that
there is no evidence of impairment.
41
PEOPlE COrPOratiOn
Notes to the Consolidated Financial Statements
For the years ended August 31, 2012 and August 31, 2011
(b) Financial instruments
(i) non-derivative financial assets
Financial assets and liabilities classified as fair value through profit and loss (“FVTPl”) are
measured at fair value, with gains and losses recognized in net income/loss. Cash and cash
equivalents are classified as FVTPl.
The Group initially recognizes loans and receivables on the date that they are originated.
All other financial assets (including assets designated at fair value through profit or loss) are
recognized initially on the trade date at which the Group becomes a party to the contractual
provisions of the instrument.
The Group derecognizes a financial asset when the contractual rights to the cash and cash
equivalents flows from the asset expire, or it transfers the rights to receive the contractual cash
and cash equivalents flows on the financial asset in a transaction in which substantially all the
risks and rewards of ownership of the financial asset are transferred. Any interest in transferred
financial assets that is created or retained by the Group is recognized as a separate asset or
liability.
Financial assets and liabilities are offset and the net amount presented in the consolidated
statements of financial position when, and only when, the Group has a currently enforceable
legal right to offset the recognized amounts and intends either to settle on a net basis or to
realize the asset and settle the liability simultaneously.
(ii) loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that are not
quoted in an active market. Such assets are recognized initially at fair value plus any directly
attributable transaction costs.
Subsequent to initial recognition loans and receivables are measured at amortized cost using the
effective interest method, less any impairment losses. Loans and receivables comprise trade and
other receivables.
(iii) non-derivative financial liabilities
The Group initially recognizes debt securities issued and subordinated liabilities on the date
that they are originated. All other financial liabilities (including liabilities designated at fair value
through profit or loss) are recognized initially on the trade date at which the Group becomes a
party to the contractual provisions of the instrument.
The Group derecognizes a financial liability when its contractual obligations are discharged or
cancelled or expire.
Financial assets and liabilities are offset and the net amount presented in the consolidated
statements of financial position when, and only when, the Group has a legal right to offset the
amounts and intends either to settle on a net basis or to realize the asset and settle the liability
simultaneously.
42
PEOPlE COrPOratiOn
Notes to the Consolidated Financial Statements
For the years ended August 31, 2012 and August 31, 2011
The Group has the following non-derivative financial liabilities: loans and borrowings, accounts
payable, accrued and other liabilities.
Such financial liabilities are recognized initially at fair value less any directly attributable
transaction costs. Subsequent to initial recognition these financial liabilities are measured at
amortized cost using the effective interest method.
(iv) share capital
Common voting shares are classified as equity. Incremental costs directly attributable to the issue
of common voting shares are recognized as a deduction from equity, net of any tax effects.
(c) Property and equipment
(i) recognition and measurement
Items of property and equipment are measured at cost less accumulated depreciation and
accumulated impairment losses. When parts of an item of property and equipment have different
useful lives, they are accounted for as separate items (major components) of property and
equipment. The costs of the day to day servicing of property and equipment are recognized in
the consolidated statements of comprehensive income in the period in which they are incurred.
(ii) depreciation
Depreciation is recognized in the consolidated statements of comprehensive income over the
estimated useful lives of each part of an item of property and equipment in a manner which most
closely reflects the expected pattern of consumption of the future economic benefits embodied
in the asset. The estimated useful lives for the current and comparative periods are as follows:
ASSET
BASIS
Furniture and fixtures
Computer equipment
Leasehold improvements
Computer software
Software licenses
Diminishing balance
Diminishing balance
Straight line
Straight line
Straight line
RATE
20%
30%
Useful life or term of the lease
4 years
Useful life or term of the license
Depreciation methods, useful lives and residual values are reviewed at each financial year end and
adjusted if appropriate.
(d) intangible assets
(i) goodwill
Goodwill represents the excess of the purchase price paid for the acquisition of subsidiaries over
the fair value of the net tangible and intangible assets acquired. Following the initial recognition,
goodwill is measured at cost less any accumulated impairment losses.
43
PEOPlE COrPOratiOn
Notes to the Consolidated Financial Statements
For the years ended August 31, 2012 and August 31, 2011
(ii) Other intangible assets
Other intangible assets consist of acquired customer relationships and contracts. Other
intangible assets acquired separately are measured on initial recognition at cost. The cost of
identifiable intangible assets acquired in a business combination is equal to fair value as at the
date of acquisition. Following initial recognition, identifiable intangible assets are carried at cost
less any accumulated amortization and any accumulated impairment losses.
Definite life intangible assets are amortized from the date of acquisition or, for internally
developed assets, from the time the asset is available for use. Amortization is recognized in the
consolidated statements of comprehensive income either on a declining balance or on a straight
line basis over the estimated useful life of the asset, and the residual values and useful lives of
the assets are reviewed at each financial year-end and adjusted if appropriate.
Intangible assets are considered to have indefinite lives where management believes that there
is no foreseeable limit to the period over which the intangible assets are expected to generate
net cash and cash equivalents flows.
(iii) subsequent expenditure
Subsequent expenditure is capitalized only when it increases the future economic benefits
embodied in the specific asset to which it relates. All other expenditures are recognized in profit
or loss as incurred.
(e) leased assets
Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are
classified as finance leases. Upon initial recognition, the leased asset is measured at an amount equal
to the lower of its fair value and the present value of the minimum lease payments. Imputed interest
on the lease payments is charged against income. Subsequent to initial recognition, the asset is
accounted for in accordance with the accounting policy applicable to that asset.
Leases not meeting the criteria for finance leases are operating leases and the related assets are not
recognized in the Group’s consolidated statements of financial position.
Payments made under operating leases are recognized in profit or loss on a straight line basis over
the term of the lease. Lease incentives received are recognized as an integral part of the total lease
expense, over the term of the lease.
Minimum lease payments made under finance leases are apportioned between the finance
expense and the reduction of the outstanding liability. The finance expense is allocated to each
period during the lease term so as to produce a constant periodic rate of interest on the remaining
balance of the liability.
44
PEOPlE COrPOratiOn
Notes to the Consolidated Financial Statements
For the years ended August 31, 2012 and August 31, 2011
(f)
impairment
(i) Financial assets
A financial asset not carried at fair value through profit or loss is assessed at each reporting date
to determine whether there is objective evidence that it is impaired. A financial asset is impaired
if objective evidence indicates that a loss event has occurred after the initial recognition of
the asset, and that the loss event had a negative effect on the estimated future cash and cash
equivalents flows of that asset that can be estimated reliably.
At each reporting date, the Company assesses whether there is objective evidence that a
financial asset is impaired. An impairment loss in respect of a financial asset measured at
amortized cost is calculated as the difference between its carrying amount and the present
value of the estimated future cash and cash equivalents flows discounted at the asset’s original
effective interest rate. losses are recognized in profit or loss and reflected in an allowance
account against assets. Interest on the impaired asset continues to be recognized using the
effective interest rate method. When a subsequent event causes the amount of impairment
loss to decrease, the decrease in impairment loss is reversed up to the amount of original cost
through profit or loss.
(ii) non financial assets
The carrying amounts of the Group’s non financial assets, other than deferred tax assets, are
reviewed at each reporting date to determine whether there is any indication of impairment.
If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill,
and intangible assets that have indefinite useful lives or that are not yet available for use, the
recoverable amount is estimated each year at the same time.
The recoverable amount of an asset or cash and cash equivalents generating unit is the greater
of its value in use and its fair value less costs to sell. In assessing value in use, the estimated
future cash and cash equivalents flows are discounted to their present value using a pre tax
discount rate that reflects current market assessments of the time value of money and the
risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested
individually are grouped together into the smallest group of assets that generates cash and
cash equivalents inflows from continuing use that are largely independent of the cash and
cash equivalents inflows of other assets or groups of assets (the “cash and cash equivalents
generating unit”, or “CGU”). For the purposes of goodwill impairment testing, goodwill
acquired in a business combination is allocated to the CGU, or the group of CGUs, that is
expected to benefit from the synergies of the combination. This allocation is subject to an
operating segment ceiling test and reflects the lowest level at which that goodwill is monitored
for internal reporting purposes.
The Group’s corporate assets do not generate separate cash and cash equivalents inflows. If
there is an indication that a corporate asset may be impaired, then the recoverable amount is
determined for the CGU to which the corporate asset belongs.
An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its
estimated recoverable amount. Impairment losses are recognized in profit or loss. Impairment
losses recognized in respect of CGUs are allocated first to reduce the carrying amount of any
goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in
the unit (group of units) on a pro rata basis.
45
PEOPlE COrPOratiOn
Notes to the Consolidated Financial Statements
For the years ended August 31, 2012 and August 31, 2011
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment
losses recognized in prior periods are assessed at each reporting date for any indications that the
loss has decreased or no longer exists. An impairment loss is reversed if there has been a change
in the estimates used to determine the recoverable amount. An impairment loss is reversed only
to the extent that the asset’s carrying amount does not exceed the carrying amount that would
have been determined, net of depreciation or amortization, if no impairment loss had been
recognized.
(g) accounts payable, accrued and other liabilities
Accounts payables include obligations to pay for goods or services that have been acquired in
the ordinary course of business. Accounts payables are classified as current liabilities if payment is
due within one year or less and are recognized initially at fair value and subsequently measured at
amortized cost.
Accrued liabilities include accruals for salaries and compensation, and other obligations incidental
to the Company’s normal business operations. They are classified as current when it is expected to
be settled within one year of the reporting period date, and are recognized initially at fair value and
subsequently measured at amortized cost.
(h) deferred revenue
Deferred revenue represents the excess of retainer amounts billed over costs incurred and revenue
earned on service contracts. The amount is amortized into income as services are rendered, in
accordance with the revenue recognition policies described below.
(i)
insurance premium liabilities and related cash and cash equivalents
In its capacity as consultants, the Company collects premiums from insurers and remits premiums, net
of agreed deductions, such as taxes, administrative fees and commissions, to insurance carriers. As
the Company is acting in its capacity as consultants to collect and remit premiums from insurers to
insurance underwriters, the Company is considered to have a legal right to offset premiums collected
and corresponding liabilities. As such, the cash and cash equivalents and investment balances
relating to these liabilities have been offset against the related liability in the Company’s consolidated
statements of financial position.
(j) Employee benefits
(i) short term employee benefits
Short term employee benefit obligations are measured on an undiscounted basis and are
expensed as the related service is provided.
A liability is recognized for the amount expected to be paid under short term cash and cash
equivalents bonus or profit sharing plans if the Group has a present legal or constructive
obligation to pay this amount as a result of past service provided by the employee, and the
obligation can be estimated reliably.
46
PEOPlE COrPOratiOn
Notes to the Consolidated Financial Statements
For the years ended August 31, 2012 and August 31, 2011
(ii) share-based payment transactions
Share-based payments are comprised of equity settled stock options and equity settled Share
Ownership plan. Equity settled share based payments to employees are measured at the fair
value of the equity instruments at the grant date. The grant date fair value of share based
payment awards granted to employees as a personnel expense, with a corresponding increase in
equity, over the period that the options vest. The amount recognized as an expense is adjusted
to reflect the number of awards for which the related service and non market vesting conditions
are expected to be met, such that the amount ultimately recognized as an expense is based on
the number of awards that do meet the related service and non market performance conditions
at the vesting date. For share-based payment awards with non vesting conditions, the grant
date fair value of the share-based payment is measured to reflect such conditions and there is no
reconciliation for differences between expected and actual outcomes.
The Company’s contributions under its employee Share Ownership plan are expensed as
incurred.
Equity settled share-based payments to non employees are measured at the fair value of the
goods and services received unless that fair value cannot be estimated reliably, in which case
they are measured at the fair value of the equity instrument granted and measured at the date
the Company obtains the good or the counter party renders the service.
(k) Use of judgements and estimates
Management has exercised judgement in the process of applying the Company’s accounting
policies. In particular, the Company’s management has applied judgement in the application of its
accounting policies.
The preparation of consolidated financial statements in accordance with IFRS 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 consolidated balance sheet date and
the reported amounts of revenue and expenses during the reporting period. Key areas where
management has made estimates include revenue recognition, fair values and impairment of
intangible assets, income taxes, fair value of stock options and useful lives of capital assets and
intangible assets. Actual results could differ from those estimates.
(l) revenue recognition
Revenue includes fees and commissions generated from administrative, advisory and consulting
services provided to clients.
Generally, revenue from the rendering of services is recognized when the following criteria are met:
• The amount of revenue can be reliably measured;
• The stage of completion can be reliably measured;
• The receipt of economic benefits is probable; and
• Costs incurred and to be incurred can be reliably measured.
Concurrently with the above general principles, the Company applies the following specific revenue
recognition policies:
47
PEOPlE COrPOratiOn
Notes to the Consolidated Financial Statements
For the years ended August 31, 2012 and August 31, 2011
Group benefit commission revenue from clients where advisory services and plan administration
services are provided by the Company is generally received in advance and recorded as deferred
revenue. Commission advances are recognized in income on a monthly basis based on the number
of months for which the commission revenue was advanced, net of a provision for return commissions
due to policy cancellation and adjustments. The provision is determined based on historical data.
Group benefit commission revenue from clients where the Company provides only advisory services
are recognized in income at the effective or renewal date of the policy, net of a provision for return
commissions due to policy cancellation and adjustments. The provision is determined based on
historical data.
Fee revenue from administrative and consulting services are recognized as services are provided.
For fee revenue that is contingent on certain criteria being met, the revenue is not recognized until
criteria has been met.
All other revenues are recognized as services are rendered by the Company. Other revenue includes
investment income recorded on the accrual basis of accounting.
(m) Finance income and finance costs
Finance income comprises interest income on funds invested which is recognized as it accrues
in profit or loss, using the effective interest method. Finance costs comprise interest expense on
borrowings which are recognized in profit or loss using the effective interest method.
Foreign currency gains and losses are reported on a net basis.
(n) income tax
Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized
in profit or loss except to the extent that it relates to a business combination, or items recognized
directly in equity or in other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using
tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable
in respect of previous years.
Deferred tax is recognized in respect of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
Deferred tax is not recognized for the following temporary differences: the initial recognition of assets
or liabilities in a transaction that is not a business combination and that affects neither accounting
nor taxable profit or loss, and differences relating to investments in subsidiaries and jointly controlled
entities to the extent that it is probable that they will not reverse in the foreseeable future. In addition,
deferred tax is not recognized for taxable temporary differences arising on the initial recognition of
goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary
differences when they reverse, based on the laws that have been enacted or substantively enacted
by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable
right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax
authority on the same taxable entity, or on different tax entities, but they intend to settle current tax
liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.
48
PEOPlE COrPOratiOn
Notes to the Consolidated Financial Statements
For the years ended August 31, 2012 and August 31, 2011
A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary
differences, to the extent that it is probable that future taxable profits will be available against which
they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the
extent that it is no longer probable that the related tax benefit will be realized.
(o) Earnings per share
Basic earnings per share is calculated by dividing income available to common shareholders by the
weighted average number of common shares outstanding during the period.
Diluted earnings per share is determined by adjusting the profit or loss attributable to common
shareholders and the weighted average number of common shares outstanding, adjusted for own
shares held, for the effects of all dilutive potential common shares, which comprise convertible notes
and share options granted to employees.
(p) segment reporting
Segment capital expenditure is the total cost incurred during the period to acquire property and
equipment, and intangible assets other than goodwill.
(q) new standards and interpretations not yet adopted
The Group has not early applied the following new and revised Standards and Interpretations that
have been issued but are not yet effective.
iFrs 9, “Financial instruments”
In November 2009, the IASB issued IFRS 9, “Financial Instruments” to replace IAS 39, “Financial
Instruments: Recognition and Measurement”. IFRS 9 uses a single approach to determine whether a
financial asset is measured at amortized cost or fair value, and replaces the multiple rules in IAS 39.
The approach in IFRS 9 focuses on how an entity manages its financial instruments in the context of
its business model, as well as the contractual cash and cash equivalents flow characteristics of the
financial assets. The new standard also requires a single impairment method to be used, replacing
the multiple impairment methods currently provided in IAS 39. IFRS 9 is effective for annual periods
beginning on or after January 1, 2013, with earlier application permitted.
iFrs 10, “Consolidation”
IFRS 10, “Consolidation” replaces SIC 12, “Consolidation Special Purpose Entities” and parts of IAS
27, “Consolidated and Separate Financial Statements”. IFRS 10 requires an entity to consolidate an
investee when it is exposed, or has rights, to variable returns from its involvement with the investee
and has the ability to affect those returns through its power over the investee. The standards are
effective for annual periods beginning on or after January 1, 2013, with earlier application permitted.
iFrs 11, “Joint arrangements”
IFRS 11 supersedes IAS 31, “Interests in Joint Ventures”, and SIC 13, “Jointly Controlled Entities
Non monetary Contributions by Venturers”. IFRS 11 requires a venturer to classify its interest in a
joint arrangement as a joint venture or joint operation. Joint ventures will be accounted for using the
equity method of accounting whereas, for a joint operation, the venturer will recognize its share of
the assets, liabilities, revenues and expenses of the joint operation. The standards are effective for
annual periods beginning on or after January 1, 2013, with earlier application permitted.
49
PEOPlE COrPOratiOn
Notes to the Consolidated Financial Statements
For the years ended August 31, 2012 and August 31, 2011
iFrs 12, “disclosure of interests in Other Entities”
IFRS 12 establishes disclosure requirements for interests in other entities, such as joint arrangements,
equity accounted investments, special purpose vehicles and off balance sheet vehicles. The standard
introduces additional disclosure requirements that address the nature of, and risks associated with, an
entity’s interests in other entities. The standards are effective for annual periods beginning on or after
January 1, 2013, with earlier application permitted.
iFrs 13, “Fair Value measurement”
IFRS 13 is a comprehensive standard that defines fair value, sets out a single IFRS framework for
measuring fair value, and requires disclosures about fair value measurements. This new standard
clarifies that fair value is the price that would be received to sell an asset, or paid to transfer a liability
in an orderly transaction between market participants, at the measurement date. The standard also
establishes disclosures about fair value measurement. The standards are effective for annual periods
beginning on or after January 1, 2013, with earlier application permitted.
amendments to Other standards
The IASB have made amendments to existing standards, including IAS 1, “Presentation of
Financial Statements”, IAS 19, “Employee Benefits”, IAS 27, “Consolidated and Separate Financial
Statements” and IAS 28, “Investments in Associates and Joint Ventures”. The amendments to IAS
1 will require that entities group items presented in other comprehensive income based on an
assessment of whether such items may or may not, be reclassified to earnings at a subsequent date.
Amendments to IAS 1 are applicable to annual periods beginning on or after July 1, 2012, with early
adoption permitted.
Amendments to IAS 19 eliminate an entity’s option to defer the recognition of certain gains and
losses related to post employment benefits and require re measurement of associated assets and
liabilities in other comprehensive income. Amendments to IAS 19 are applicable on a modified
retrospective basis to annual periods beginning on or after January 1, 2013, with early adoption
permitted.
The amended IAS 27 addresses accounting for subsidiaries, jointly controlled entities and associates
in non consolidated financial statements. IAS 28 has been amended to include joint ventures in its
scope and to address the changes in IFRS 10 to 13 as described above. Amendments to IAS 27 and
IAS 28 are applicable to annual periods beginning on or after January 1, 2013, with early adoption
permitted.
The Company anticipates that the application of IFRS 9 may have impact on the amounts reported
in respect of the Group’s financial assets. However, it is not yet practicable to provide a reasonable
estimate of that effect. The Company anticipates that the application of the other new and revised
standards and amendments will have no material impact on the results and the financial position of
the Group.
50
PEOPlE COrPOratiOn
Notes to the Consolidated Financial Statements
For the years ended August 31, 2012 and August 31, 2011
4. BUsinEss aCQUisitiOns:
Effective April 30, 2011, the Company acquired all the outstanding shares of les Assurances W.B. Inc
(“lAWB”), a Quebec based group benefits and pension advisory company in exchange for a cash and
cash equivalents consideration of $1.
The acquisition was accounted for using the acquisition method. The results of operations from
April 30, 2011 have been included in these consolidated financial statements and no comparative
information is provided. The consideration paid was allocated to the assets acquired and liabilities
assumed based on their fair values and the excess of the purchase price over the fair value of the net
identifiable assets acquired has been recorded as goodwill. All acquired property and equipment and
intangible assets are subject to amortization.
The allocation of the purchase price, net of cash and cash equivalents acquired, to the fair value of the
assets acquired and the liabilities assumed is as follows:
assets
Property and equipmentA
Intangible assets
liabilities
Bank indebtedness
Accounts payable, accrued and other liabilities
Loans and borrowings
Deferred future income tax liability
Fair value of net assets acquired
Purchase price, net of cash and cash equivalents acquired
$
3,019
100,000
103,019
1,237
34,671
215,118
26,580
277,606
(174,587)
1
Total goodwill on purchase
$
(174,588)
The results of operations reflect the revenues and expenses of acquired operations from the date of
acquisition. The revenue included in the consolidated statements of comprehensive income since
April 30, 2011 contributed by lAWB was $55,481. Consolidated statements of comprehensive income of
the Company include a loss from lAWB operations of $28,891 over the same period. Had lAWB been
acquired on September 1, 2010, contributed revenue to the Group for year ended August 31, 2011
would have been approximately $143,563 with a loss of approximately $13,700.
5. tradE and OthEr rECEiV aBlEs:
Trade receivables
Commission advances
AUG 31, 2012
AUG 31, 2011
SEPT 1, 2010
$
$
2,573,125
-
2,573,125
$
$
3,208,183
298
3,208,481
$
$
2,414,252
1,646
2,415,898
51
PEOPlE COrPOratiOn
Notes to the Consolidated Financial Statements
For the years ended August 31, 2012 and August 31, 2011
6. PrOPErtY and EQUiPmEnt:
Advances for which the related performance conditions have not yet been met are presented as deferred
revenue (Note 9). The Group’s exposure to credit and currency risks, and impairment losses related to trade
and other receivables is disclosed in note 19.
NOTE
lEASEHOlD
IMPROVEMENTS
FURNITURE
AND
FIXTURES
COMPUTER
EQUIPMENT
COMPUTER
SOFTWARE
TOTAL
Cost
Balance, September 1, 2010
Additions
Acquisition through
business combination
Balance, August 31, 2011
Additions
433,474
4,371
647,150
54,226
742,468
187,180
327,510
59,518
2,150,602
305,295
4
-
2,444
575
-
3,019
437,845
25,467
703,820
21,503
930,223
85,824
387,028
32,262
2,458,916
165,056
Balance, August 31, 2012
463,312
725,323
1,016,047
419,290
2,623,972
amortization and impairment losses
Balance, September 1, 2010
(202,306)
(376,472)
Amortization for the year
Write offs
(74,507)
46,620
(58,006)
-
(471,652)
(107,466)
-
(161,904)
(1,212,334)
(68,313)
(308,292)
-
46,620
Balance, August 31, 2011
$
(230,193)
$
(434,478)
$
(579,118)
$
(230,217)
$
(1,474,006)
Amortization for the year
(75,454)
(55,200)
(116,225)
(62,414)
(309,293)
Balance, August 31, 2012
(305,647)
(489,678)
(695,343)
(292,631)
(1,783,299)
Carrying amounts
Balance, September 1, 2010
Balance, August 31, 2011
Balance, August 31, 2012
$
$
$
231,168
207,652
157,665
$
$
$
270,678
269,341
235,643
$
$
$
270,816
351,104
320,703
$
$
$
165,606
156,811
126,659
$
$
$
938,268
984,908
840,670
52
PEOPlE COrPOratiOn
Notes to the Consolidated Financial Statements
For the years ended August 31, 2012 and August 31, 2011
7. intangiBlE assEts: .
NOTE
GOODWIll
CUSTOMER
RElATIONSHIPS
CUSTOMER
CONTRACTS
TOTAL
Cost
Balance, September 1, 2010
$
13,373,247 $
5,861,351
$
3,000,000
$
22,234,598
Acquisition through
business combination
4
174,588
100,000
-
274,588
Balance, August 31, 2011
13,547,835
5,961,351
3,000,000
22,509,186
Balance, August 31, 2012
amortization and impairment losses
Balance, September 1, 2010
Amortization for the year
Balance, August 31, 2011
Amortization for the year
Balance, August 31, 2012
Carrying amounts
Balance, September 1, 2010
Balance, August 31, 2011
Balance, August 31, 2012
$
$
$
$
$
$
13,547,835
$
5,961,351
$
3,000,000
$
22,509,186
-
-
-
-
-
13,373,247
13,547,835
13,547,835
$
(1,468,783)
$
(950,000)
$
(2,418,783)
(591,134)
(300,000)
(891,134)
(2,059,917)
(601,135)
(1,250,000)
(3,309,917)
(300,000)
(901,135)
(2,661,052)
$
(1,550,000)
$
(4,211,052)
4,392,568
3,901,434
3,300,299
$
$
$
2,050,000
1,750,000
1,450,000
$
$
$
19,815,815
19,199,269
18,298,134
$
$
$
$
8. aCCOUnts PaYaBlE, aCCrUEd and OthEr liaBilitiEs:
The Group had the following accounts payable, accrued and other liabilities.
Trade payables
Deferred lease inducements
Less current portion of accounts payable, accrued and other liabilities
Long term portion of Accounts payable, accrued and other liabilities
AUG 31, 2012
AUG 31, 2011
SEPT 1, 2010
$
$
$
3,645,064
96,955
3,742,019
3,684,621
$
$
3,909,632
147,217
4,056,849
3,996,384
$
$
3,066,600
186,454
3,253,054
3,105,837
57,398
$
60,465
$
147,217
The Group’s exposure to currency and liquidity risk related to trade payables is disclosed in note 19.
53
PEOPlE COrPOratiOn
Notes to the Consolidated Financial Statements
For the years ended August 31, 2012 and August 31, 2011
9. dEFErrEd rEVEnUE:
Deferred revenue represents the excess of retainer amounts billed over costs incurred and revenue earned on
service contracts. The Group had the following deferred revenue.
Fees received in advance
less: current portion of deferred revenue
Long term portion of deferred revenue
AUG 31, 2012
AUG 31, 2011
SEPT 1, 2010
$
$
4,249,051
4,098,533
150,518
$
$
3,669,131
3,344,981
324,150
$
$
3,492,709
3,168,694
324,015
10. insUranCE PrEmiUm liaBilitiEs and rElatEd
Cash and Cash EQUiV alEnts:
In its capacity as third party benefits administrator, the Group collects premiums from insurers and remits
premiums, net of agreed deductions, such as taxes, administrative fees and commissions, to insurance
underwriters. These are considered flow through items for the Group and, as such, the cash and cash
equivalents and investment balances relating to these liabilities are deducted from the related liability in the
consolidated balance sheets. The Group had the following insurance premium liabilities.
Payable to carriers and insured individuals or groups
less: related cash and cash equivalents balances
AUG 31, 2012
AUG 31, 2011
SEPT 1, 2010
$
$
10,882,121
10,882,121
-
$
$
13,045,780
13,045,780
-
$
$
10,456,515
10,456,515
-
11. lOans and BOrrOWings:
This note provides information about the contractual terms of the Group’s interest bearing loans and
borrowings, which are measured at amortized cost. For more information about the Group’s exposure to
interest rate and liquidity risk, see note 19.
term loans
(a) A vendor take back loan bearing interest of 7% per annum.
The loan is secured by the assets of the Company and is
subordinated to the bank indebtedness. The loan was repaid
in September 2010.
(b) A loan bearing interest of 7% per annum, unsecured,
repayable in quarterly installments of principal and interest
of $21,422. The loan matures on September 30, 2012.
(c) A loan bearing interest of 4% per annum, unsecured,
repayable in monthly installments of principal and interest
of $8,896. The loan was repaid in October 2010.
(d) A loan bearing interest of 7% per annum, unsecured,
repayable in monthly installments of principal and interest
of $2,554. The loan was repaid in February 2011.
(e) A loan bearing interest of 4.5% per annum, unsecured,
repayable in monthly installments of principal and interest
of $8,847. The loan was repaid in November 2011.
AUG 31, 2012
AUG 31, 2011
SEPT 1, 2010
$
-
$
-
$
587,203
21,054
101,711
176,960
-
-
-
-
-
17,703
15,016
26,328
-
54
PEOPlE COrPOratiOn
Notes to the Consolidated Financial Statements
For the years ended August 31, 2012 and August 31, 2011
(f) A loan bearing interest of 7% per annum, unsecured,
repayable in monthly installments of principal and interest
of $2,274. The loan was repaid in February 2012.
(g) A loan bearing interest of 4.5% per annum, unsecured,
repayable in monthly installments of principal and interest
of $1,195. The loan was repaid in November 2011.
(h) A non interest bearing loan, unsecured, repayable in monthly
installments of $933. The loan matures on June 1, 2016.
(i) A loan bearing interest of prime plus 1.5% per annum,
repayable in quarterly installments of $90,000 plus accrued
interest. The loan matures May 31, 2018
(j) A loan bearing interest of 4.5% per annum, repayable in
monthly installments of principal and interest of $11,161.
The loan matures November 30, 2012
Vendor-take-back loans
(k) A vendor take back loan bearing no interest per annum,
secured by the assets of the Company, repayable in three equal
installments of $143,333. The loan was repaid in March 2012.
(l) A group of vendor take back loans bearing no interest per annum,
secured by the assets of the Company, repayable in monthly
installments. The loans mature on dates ranging from August 1,
2010 to February 1, 2013.
(m) A group of vendor take back loans bearing no interest per annum,
secured by the assets of the Company, repayable in monthly
installments. The loan was repaid in June 2011.
(n) A group of vendor take back loans assumed on the acquisition of
People Corporation bearing interest of 12% per annum, secured
by the assets of the Company, repayable in monthly installments
of principal and interest of $16,133. The loan was repaid in
June 2011.
(o) A group of vendor take back loans assumed on the acquisition
of People Corporation, bearing no interest per annum,
unsecured, repayable in monthly installments. The loan was
repaid in April 2012.
Finance lease liabilities
(p) A finance lease repayable in monthly installments of $939
and secured by the assets to which the obligation relates.
The lease expires August 1, 2015 and includes implicit
interest rates ranging from 8.65%.
(q) A finance lease repayable in monthly installments of $1,074
and secured by the assets to which the obligation relates.
The lease expires December 1, 2015 and includes implicit
interest rates ranging from 11.28%.
(r) A finance lease repayable in monthly installments of $774
and secured by the assets to which the obligation relates.
The lease expired August 1, 2011.
less: current portion
Term loans
Vendor take back loans
Finance lease liabilities
-
-
13,365
3,719
23,793
51,723
2,070,000
2,430,000
33,214
-
-
-
-
-
-
-
139,795
269,233
11,924
34,392
66,821
-
-
-
-
-
1,863,742
507,313
88,343
212,356
26,265
33,616
40,650
33,441
41,265
-
-
-
8,807
2,219,691
2,964,257
3,765,804
436,663
11,924
16,764
465,351
1,754,340
495,270
250,684
15,174
761,128
2,203,129
695,171
722,924
15,840
1,433,935
2,331,869
$
$
$
$
$
$
55
PEOPlE COrPOratiOn
Notes to the Consolidated Financial Statements
For the years ended August 31, 2012 and August 31, 2011
On June 10, 2011, the Company entered into a Credit Facility Agreement with the Canadian Imperial Bank of
Commerce which includes the following components:
1.
2.
3.
A $2 million operating line of credit. As at August 31, 2012, the Company had not utilized this facility
(2011 – nil).
A $10 million term revolving acquisition credit facility to fund future acquisitions. The acquisition
credit facility is available via loans bearing interest at prime plus 1.5% or via bankers’ acceptances
with a stamping fee of 2.5% annually. Each draw on the facility will be treated as a separate loan
repayable over a period of up to seven years. As at August 31, 2012, the Company had not utilized
this facility (2011 – nil) (Note 24(d)); and
A $2.5 million installment loan which was utilized to repay and discharge a substantial amount of
long term debt facilities and vendor take back debt of the Company. The installment loan will be
repaid in quarterly installments over a seven year period and bears interest at prime plus 1.5%. As at
August 31, 2012, the balance owing on this facility was equal to $2,070,000 (2011 – $2,430,000).
The facility is secured by a general security agreement over the assets of the Company and its subsidiaries
and is subject to covenants (Note 20)
Finance lease liabilities are payable as follows:
AUG 31, 2012
AUG 31, 2011
SEPT 1, 2010
FUTURE
MINIMUM
lEASE
PAYMENTS
PV OF
MINIMUM
lEASE
PAYMENTS
FUTURE
MINIMUM
lEASE
PAYMENTS
INTEREST
PV OF
MINIMUM
lEASE
PAYMENTS
FUTURE
MINIMUM
lEASE
PAYMENTS
PV OF
MINIMUM
lEASE
PAYMENTS
INTEREST
INTEREST
$
22,055
$
5,289
$
16,766
$
22,055
$
6,881
$
15,174
$
19,264
$
3,422
$
15,842
48,138
5,198
42,940
70,194
10,485
59,707
39,888
6,272
33,615
$
70,193
$
10,487
$
59,706
$
92,249
$
17,366
$
74,881
$
59,152
$
9,694
$
49,457
1-12 months
13-60 months
56
PEOPlE COrPOratiOn
Notes to the Consolidated Financial Statements
For the years ended August 31, 2012 and August 31, 2011
12. dEFErrEd tax assEts and liaBilitiEs:
Income and comprehensive Income
Statutory tax rate
Income taxes (recovery) at statutory tax rates
Adjustments to income taxes
Non deductible items
Change in rate at which temporary differences are recorded
Recognition of previously unrecognized tax losses
Other
Current income taxes
Deferred income taxes
AUG 31, 2012
AUG 31, 2011
$
1,060,029
$
26.78%
283,858
64,960
56,492
-
(71,434)
333,876
454,910
(121,034)
$
333,876
$
523,457
28.91%
151,331
85,425
(12,257)
(104,280)
(67,957)
52,262
485,385
(433,123)
52,262
Significant components of deferred tax assets and liabilities are as follows:
deferred income tax assets
Equity issue and financing costs
Lease inducements
Other reserves
Loss carryforwards
deferred income tax liabilities
Asset based differences
Intangible assets
AUG 31, 2012
AUG 31, 2011
SEPT 1, 2010
$
37,910
$
71,101
$
25,826
30,633
86,695
37,540
61,200
117,858
79,967
49,887
-
-
181,064
287,699
129,854
61,379
1,265,348
1,326,727
113,280
1,441,116
1,554,396
92,174
1,710,920
1,803,094
$
(1,145,663)
$
(1,266,697)
$
(1,673,240)
The Company has non capital loss carryforwards that expire as follows:
2027
2028
2029
2030
2031
2032
$
80,474
2,575
74,844
50,493
63,915
52,502
$
324,803
As of September 1, 2010, $395,149 of tax losses were unrecognized as management did not consider it
probable that future taxable income would be available against which they would be utilized.
57
PEOPlE COrPOratiOn
Notes to the Consolidated Financial Statements
For the years ended August 31, 2012 and August 31, 2011
13. sharE CaPital
(a) authorized
The Company has authorized share capital of an unlimited number of common voting shares.
(b) shares issued and outstanding
Shares issued and outstanding are as follows:
Balance, September 1, 2010
Balance, August 31, 2011
Balance, August 31, 2012
(c) Earnings per share
NUMBER OF COMMON
VOTING SHARES
32,970,527
32,970,527
32,970,527
$
$
$
AMOUNT
11,990,956
11,990,956
11,990,956
Basic earnings per share was calculated by dividing profit attributable to common shares by the sum
of the weighted average number of common shares outstanding during the period.
Diluted earnings per share was calculated using the basic calculation described above, and adjusting
for the potentially dilutive effect of total number of additional common shares that would have been
issued by the Company under its Stock option plan.
The following details the earnings per share, basic and diluted, calculations for the year ended
August 31, 2012 and August 31, 2011:
Net Income attributable to common shares (basic and diluted)
Weighted average number of common shares (basic)
add: Dilutive effect of stock options
Weighted average number of common shares (diluted)
Earnings per share (basic)
Earnings per share (diluted)
AUG 31, 2012
AUG 31, 2011
726,153
$
471,195
32,970,527
38,942
32,970,527
5,093
33,009,469
32,975,620
0.022
0.022
$
$
0.014
0.014
$
$
$
The average market value of the Company’s shares for the purposes of calculating the dilutive effect
of share options was based on quoted market prices for the period during which the options were
outstanding.
(d) shares held in escrow
As at August 31, 2012, the Company had no shares held in escrow (August 31, 2011 – 4,920,579,
September 1, 2010 – 10,012,158).
58
PEOPlE COrPOratiOn
Notes to the Consolidated Financial Statements
For the years ended August 31, 2012 and August 31, 2011
14. sharE-BasEd PaYmEnts
On February 23, 2011, at the Annual General Meeting of the Shareholders, the Shareholders re approved
and amended the Stock Option Plan and approved the Company‘s Employee Share Ownership Plan. Under
the terms of the plan, the number of shares issued under the Stock Option Plan and the Employee Share
Ownership Plan, as well as all other security based compensation agreements combined cannot exceed 15%,
or 4,945,579, of the Company‘s issued and outstanding shares.
(a) Employee share ownership plan
The Company has an employee share ownership plan (“ESOP”) whereby both employee and
Company contributions are used to purchase shares on the open market for employees. The
Company‘s contributions are expensed as incurred as there is no vesting period. Under the plan, the
Company matches $1 for every $4 contributed by employee contributions of between 2% and 5% of
annual base remuneration. Contribution under ESOP began effective November 1, 2011.
At August 31, 2012, there were 87 participants (2011 – nil) in the plan. The total number of shares
purchased during the year ended August 31, 2012 on behalf of participants, including the Company
contribution, was 788,834 (2011 – nil). During the year ended August 31, 2012, the Company’s
matching contributions totalled 157,814 (2011 – nil).
(b) Stock option plan
Options may be granted to directors, officers, employees and service providers of the Company on
terms that the directors of the Company may determine within the limitations set forth in the Stock
Option Plan or by security regulators. Options shall not be granted for a term exceeding five years.
Changes in the number of options outstanding during the year ended August 31, 2012 and
August 31, 2011, are as follows:
AUG 31, 2012
AUG 31, 2011
SEPT 1, 2010
WEIGHTED
AVERAGE
EXERCISE
WEIGHTED
AVERAGE
EXERCISE
OPTIONS
PRICE OPTIONS
PRICE OPTIONS
WEIGHTED
AVERAGE
EXERCISE
PRICE
Balance, beginning of year
2,891,142
$
Granted
Forfeited, cancelled or expired
800,000
(928,000)
Balance, end of period
2,763,142
$
0.39
0.41
0.55
0.34
2,983,678 $
190,000
(282,536)
2,891,142
$
0.40
0.27
0.48
0.39
2,956,954
$
425,000
(398,276)
2,983,678
0.44
0.25
0.48
0.40
Options exercisable,
end of year
1,811,472
2,055,059
1,607,169
Options outstanding at August 31, 2012 consist of the following:
$ 0.10 - $ 0.25
$ 0.26 - $ 0.43
$ 0.10 - $ 0.43
OUTSTANDING
NUMBER
WEIGHTED AVERAGE
REMAINING
CONTRACTUAl lIFE
WEIGHTED
AVERAGE
EXERCISE PRICE
EXERCISABlE
NUMBER
540,000
2,223,142
2,763,142
2.68 years
2.65 years
2.66 years
$0.25
$0.36
$0.34
363,331
1,448,141
1,811,472
59
PEOPlE COrPOratiOn
Notes to the Consolidated Financial Statements
For the years ended August 31, 2012 and August 31, 2011
The share option compensation expense for options issued to employees was determined based
on the fair value of the options at the date of measurement using the Black Scholes option pricing
model (Note 17). with the following weighted average assumptions:
Expected option life
Risk free interest rate
Dividend yield
Forfeiture rate
Volatility factor of expected market price of the Company’s shares
AUG 31, 2012
AUG 31, 2011
5 years
1.46%
nil
6.05%
93.78%
3.65 years
2.22%
nil
5.56%
72.00%
For awards that vest at the end of a vesting period, compensation cost is recognized on a straight
line basis over the period of service. For awards subject to graded vesting, each installment is treated
as a separate award with separate fair value and a separate vesting period. The estimated forfeiture
rate is adjusted to actual forfeiture experience as information becomes available.
The expected life of the share options is based on historical data and current expectations and is not
necessarily indicative of exercise patterns that may occur. Volatility is determined based on the five
year share price history. The expected volatility reflects the assumption that the historical volatility
over a period similar to the life of the options is indicative of future trends, which may also not
necessarily be the actual outcome.
15. FinanCE inCOmE and FinanCE COsts:
The Company’s finance costs for the years ended August 31, 2012 and August 31, 2011 were comprised
of the following:
Interest on long term debt
Bank indebtedness
Interest income
16. FinanCial instrUmEnts:
Fair Value
AUG 31, 2012
AUG 31, 2011
$
354,362
$
532,582
29,826
(47,401)
62,157
(64,875)
$
336,787
$
529,864
The Company‘s carrying value of cash and cash equivalents, trade and other receivables, accounts
payable, accrued and other liabilities approximate their fair values due to the immediate or short term
maturity of these instruments.
The carrying value of the long term debt approximates its fair value as the interest rates are consistent
with the current rates offered to the Company for debt with similar terms.
60
PEOPlE COrPOratiOn
Notes to the Consolidated Financial Statements
For the years ended August 31, 2012 and August 31, 2011
The following is a summary of the accounting model the Company has elected to apply to each of its
significant categories of financial instruments outstanding at August 31, 2012:
Cash and cash equivalents
Trade and other receivable
Accounts payable, accrued and other liabilities
Loans and borrowings
Fair value through profit or loss
Loans and receivables
Other financial liabilities
Other financial liabilities
The different levels of fair value hierarchy, which require the Company to maximize the use of observable
inputs when measuring fair value are defined as follows:
level 1
Unadjusted quoted prices in active markets for identical assets or liabilities. An active market
for the asset or liability is a market in which transactions for the asset or liability occur with
sufficient frequency and volume to provide pricing information on an ongoing basis.
level 2
Observable inputs other than Level 1 prices, such as quoted prices for similar assets or
liabilities, quoted prices in markets that are not active, or other inputs that are observable or
can be corroborated by observable market data for substantially the full term of the assets or
liabilities.
level 3
Unobservable inputs that are supported by little or no market activity and that are significant to
the fair value of the assets or liabilities.
All Fair value through profit or loss financial instruments are measured at fair value using Level 1 inputs.
17. dEtErminatiOn OF F air ValUEs:
A number of the Group‘s accounting policies and disclosures require the determination of fair value, for
both financial and non financial assets and liabilities. Fair values have been determined for measurement
and/or disclosure purposes based on the following methods. When applicable, further information about
the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.
(a) Property and equipment
The fair value of property and equipment recognized as a result of a business combination is based
on market values. The market value of property is the estimated amount for which a property could
be exchanged on the date of valuation between a willing buyer and a willing seller in an arm‘s length
transaction after proper marketing wherein the parties had each acted knowledgeably and willingly.
(b) intangible assets
The fair value of customer contracts and customer relationships is based on the discounted cash and
cash equivalents flows expected to be derived from the use and eventual sale of the assets.
61
PEOPlE COrPOratiOn
Notes to the Consolidated Financial Statements
For the years ended August 31, 2012 and August 31, 2011
(c) share based payment transactions
The fair value of the employee share options and the share appreciation rights is measured using
the Black Scholes formula. Measurement inputs include share price on measurement date, exercise
price of the instrument, expected volatility (based on weighted average historic volatility adjusted
for changes expected due to publicly available information), weighted average expected life of
the instruments (based on historical experience and general option holder behaviour), expected
dividends, and the risk free interest rate (based on government bonds). Service and non market
performance conditions attached to the transactions are not taken into account in determining
fair value.
18. COmmitmEnts and COntingEnCiEs:
(a) Contractual obligations
The Company leases premises and various office equipment under agreements which expire from
December 2012 to February 2018. Future minimum lease payments as at August 31, 2012 are as
follows:
Next 12 months
13 – 24 months
25 – 36 months
37 – 48 months
49 – 60 months
Thereafter
(b) Contingencies
$
802,347
782,085
780,002
552,705
530,593
299,361
$
3,747,093
In the ordinary course of operating the Company‘s business it may from time to time be subject to
various claims or possible claims. Although management currently believes there are no claims or
possible claims that if resolved would either individually or collectively result in a material adverse
impact on the Company‘s financial position, results of operations, or cash and cash equivalents
flows, these matters are inherently uncertain and management‘s view of these matters may change
in the future.
62
PEOPlE COrPOratiOn
Notes to the Consolidated Financial Statements
For the years ended August 31, 2012 and August 31, 2011
19. FinanCial risK managEmEnt:
The Group has exposure to the following risks from its use of financial instruments:
• interest risk
• credit risk
• liquidity risk
This note presents information about the Group‘s exposure to each of the above risks, the Group‘s
objectives, policies and processes for measuring and managing risk, and the Group‘s management of
capital. Further quantitative disclosures are included throughout these consolidated financial statements.
(a) interest rate risk
Interest rate risk is the risk that the fair value or future cash and cash equivalents flows of a financial
instrument will fluctuate because of changes in market interest rates. Financial assets and financial
liabilities with variable interest rates expose the Company to cash and cash equivalents flow interest
rate risk. Financial assets and financial liabilities that bear interest at fixed rates are subject to fair
value interest rate risk. The Company‘s long term debt (vendor take back debt) bears interest at fixed
rates. The carrying value of the long term debt approximates its fair value as the interest rates are
consistent with the current rates offered to the Company for debt with similar terms. The Company‘s
credit facilities bear variable interest rates, but the facilities are not material and are not currently
being utilized.
For the year ended August 31, 2012, a change in interest rate relating to loans and borrowings of 1%
would have increased interest expense by approximately $26,000 (2011 – $33,500, 2010 – $43,000).
(b) Credit risk
Credit risk arises from the potential that a counter party will fail to perform its obligations. The
Company is exposed to credit risk from customers. In order to reduce its credit risk, the Company
reviews a new customer’s credit history before extending credit and conducts regular reviews of its
existing customers’ credit performance. An allowance for doubtful accounts is established based
upon factors surrounding the credit risk of specific accounts, historical trends and other information.
The Company has experienced few bad debt write offs and accordingly its allowance at August 31,
2012 is $812 (2011 – $22,698, 2010 – $18,485).
Pursuant to their respective payment terms, consolidated accounts receivable are aged as follows as
at August 31, 2012:
Current
31 – 60 days past due
61 – 90 days past due
Over 91 days past due
Allowance for doubtful accounts
$
2,231,485
173,065
88,148
81,239
2,573,937
(812)
2,573,125
63
PEOPlE COrPOratiOn
Notes to the Consolidated Financial Statements
For the years ended August 31, 2012 and August 31, 2011
(c) liquidity risk
Liquidity risk is the risk that the Company would not be able to meet its financial obligations as they
come to maturity or can only do so at excessive costs. Based on the Company‘s ability to generate
cash and cash equivalents flows through its ongoing operations, management believes that cash and
cash equivalents flows are sufficient to cover its known operating and capital requirements, as well
as its debt servicing costs. Management evaluates that the Company‘s liquidity risk is moderate at
this time. The Company manages its cash and cash equivalents resources through ongoing financial
forecasts and anticipated cash and cash equivalents flows.
The maturity dates of the Company‘s financial liabilities as at August 31, 2012 are as follows:
Trade payables
Loans and borrowings
Interest payments on long
term debt
CARRYING
AMOUNT
CONTRAC-
TUAl CASH
FLOWS
MATURING
IN THE
NEXT 12
MONTHS
MATURING
IN 13 TO 36
MONTHS
MATURING
IN 37 TO 60
MONTHS
MATURING
IN 13 TO 36
MONTHS
$
3,645,064
$
3,645,064
$ 3,645,064
$
-
$
-
$
-
2,219,691
2,219,691
464,086
761,671
723,934
270,000
246
123
123
-
-
-
$
5,865,001
$
5,864,878
4,109,273
$
761,671
$
723,934
$
270,000
20. CaPital managEmEnt:
The Company views its capital as the combination of its cash and cash equivalents, long term debt, and
shareholders’ equity. The Company’s primary objective when managing capital is to safeguard the entity’s
ability to continue as a going concern while supporting the growth of the Company’s business through
organic growth and new acquisitions.
The Company manages the capital structure and makes adjustments to it in accordance with the
aforementioned objective, as well as taking into consideration changes in economic conditions and the
risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may
issue new or repurchase existing shares and assume new or repay existing debt.
No changes were made in the objectives, policies or processes for managing capital during the year.
The credit facilities require the Company to maintain certain financial covenants. Management also uses
these ratios as key indicators in managing the Company’s capital. The Company is subject to externally
imposed capital requirements to maintain certain financial covenants. The Company complied with all the
required financial covenants at August 31, 2012.
21. OPErating sEgmEnts:
The Company offers human resource consulting, recruitment services, pension advisory services, group
benefits Insurance, benefits and pension administration. As at August 31, 2012, on the basis of type of
services provided and in accordance with IFRS 8, Operating Segments, the Company was represented by
and had one reportable segment. The Company operates exclusively within Canada.
64
PEOPlE COrPOratiOn
Notes to the Consolidated Financial Statements
For the years ended August 31, 2012 and August 31, 2011
22. rElatEd PartiEs:
(a) Key management personnel compensation
Key management personnel are those persons having authority and responsibility for planning,
directing and controlling the activities of the Company. The Board of Directors and Officers are key
management personnel. In addition to their salaries, the Company also provides non cash and cash
equivalents benefits and participation in the Employee Share Ownership Plan (Note 14(a)) and Stock
Option Plan (Note 14(b)).
The following table details the compensation paid to key management personnel during the year
ended August 31, 2012 and 2011:
Salaries, fees and short term employee benefits
Short term benefits and insurance premiums
Share based payments
AUG 31, 2012
AUG 31, 2011
1,370,612
$
1,251,141
24,245
79,204
19,106
45,989
1,474,061
$
1,316,236
$
$
(b) Key management personnel and director transactions
Directors and key management personnel control 26.90% percent of the voting shares of the
Company.
The Company engages in transactions with Directors and key management personnel of the Group.
All the transactions are in the normal course of operations and are measured at the exchanged
amount, which is the consideration agreed to by the parties.
The related party transactions for the year ended August 31, 2012 and 2011 and balances as at
August 31, 2012 and 2011 are as follows:
Interest expense (i)
$
-
$
268,137
AUG 31, 2012
AUG 31, 2011
Accounts payable, accrued and other liabilities
Loans and borrowings (ii)
-
-
-
-
2,059
2,390,817
AUG 31, 2012
AUG 31, 2011
SEPT 1, 2010
(i)
Interest on vendor take back debt related to prior acquisitions was paid or accrued totaling nil
for the year ended August 31, 2012 (2011 – $268,137) to certain officers and directors of the
Company.
(ii)
Represents vendor take back debt on acquisitions in prior years and promissory notes payable
(Note 11) (a), (d), (e), (g) and (h)) owed to certain officers and directors of the Company.
65
PEOPlE COrPOratiOn
Notes to the Consolidated Financial Statements
For the years ended August 31, 2012 and August 31, 2011
23. ExPEnsEs BY natUrE:
The Company’s operating expenses for the year ended August 31, 2012 and August 31, 2011 were
comprised of the following:
Personnel
Wages, salaries and commissions
Bonuses
Short term benefits and insurance premiums
Share based payments
Advertising and sponsorships
Automobile
Administration fees
Depreciation of property and equipment
Occupancy
Office supplies and communication
Other
Professional fees
Public company costs
Travel
Restructuring costs
AUG 31, 2012
AUG 31, 2011
$
14,190,325
$
12,781,090
1,965,567
1,481,749
103,134
1,328,051
1,221,167
93,341
17,740,775
15,423,649
491,321
233,317
1,568,739
309,294
1,315,689
1,123,747
375,540
793,005
285,897
622,110
-
472,464
171,259
1,447,485
308,292
1,298,847
1,090,842
106,998
889,477
257,831
565,648
436,896
$
24,859,434
$
22,469,688
Certain employees of the Company participate in a defined contribution pension plan. Contributions
to the plan by the Company totaled $25,683 for the year ended August 31, 2012 (2011 – $30,376).
The amount is included in the salaries, wages and benefits expense in these consolidated financial
statements.
24. sUBsEQUEnt EVEnts:
(a) Effective on September 1, 2012, the Company acquired all the issued and outstanding common
shares of JSl Inc. (“JSl”) for $300,000 of vendor take back debt.
(b) Effective on November 1, 2012, the Company acquired all the issued and outstanding common
shares of Prosure Group Administrators Ltd. and Prosure Insurance Agencies Ltd. (collectively,
“Prosure”) for $800,000 in cash and $700,000 in vendor take back debt.
(c)
Effective on December 3, 2012, the Company acquired all the issued and outstanding shares of
Bencom Financial Services Group Inc. (“Bencom”) for $3,435,907 in cash, $1,214,093 in vendor take
back debt and 1,000 Class G Special shares in the subsidiary of the Company.
(d) Under the terms of its existing Credit Facility Agreement with the Canadian Imperial Bank of
Commerce (Note 11), the Company drew $3,750,000 against the term revolving acquisition credit
facility set up to fund acquisitions. The loan is repayable over a period of up to seven years and will
bear interest at prime plus 1.5%.
66
PEOPlE COrPOratiOn
Notes to the Consolidated Financial Statements
For the years ended August 31, 2012 and August 31, 2011
25. ExPlanatiOn OF transitiOn tO iFrs:
As stated in Note 2, these are the Company’s first consolidated financial statements prepared in
accordance with IFRS.
The accounting policies set out in Note 3 have been applied in preparing the consolidated financial
statements for the year ended August 31, 2012, the comparative information presented and the
preparation of an opening IFRS statements of financial position at September 1, 2010 (the Company’s
transition date).
(a) transition elections
share based payment transaction exemption
The Company has elected to apply the share based payment exemption. It applied IFRS 2 from
September 1, 2010 to those options that were issued after November 7, 2002 but that have not
vested by September 1, 2010.
Estimates
Hindsight is not used to create or revise estimates. The estimates previously made by the Company
under Canadian GAAP were not revised for application of IFRS.
Business combinations
IFRS 1 provides the option to apply IFRS 3, Business Combinations, retrospectively or prospectively
from the Transition Date. The retrospective basis would require restatement of all business
combinations that occurred prior to the Transition Date. The Company elected not to retrospectively
apply IFRS 3 to business combinations that occurred prior to its Transition Date and such business
combinations have not been restated. Any goodwill arising on such business combinations before
the Transition Date has not been adjusted from the carrying value previously determined under
Canadian GAAP as a result of applying these exemptions.
(b) accounting policy elections
IFRS 2 is effective for the Company as of September 1, 2010 and is applicable to stock options and
grants that are unvested at that date. The transition rules in IFRS 1 and IFRS 2 as applied by the
Company result in the following:
• Share options prior to November 7, 2002 are not taken into account for IFRS 2; and
• From September 1, 2010, all share options and other share based payments will be expensed
in accordance with the policy stated in Note 3(j).
67
PEOPlE COrPOratiOn
Notes to the Consolidated Financial Statements
For the years ended August 31, 2012 and August 31, 2011
(c) reconciliation of Consolidated statement of Financial Position as Previously reported Under
Canadian gaaP to iFrs as at september 1, 2010
CANADIAN
GAAP ACCOUNT
ClASSIFICATIONS
REF
TRANSITION
ADJUST-
MENTS
CDN
GAAP
REClASS
ADJUST-
MENTS
IFRS
ACCOUNT
ClASSIFICATIONS
IFRS
Assets
Current Assets:
Current Assets:
cash and cash equivalents
$
1,663,557 $
- $
- $
1,663,557 cash and cash equivalents
Accounts receivables
Prepaid expenses
Property and equipment
Intangible assets
Goodwill
2,415,898
248,375
4,327,830
938,268
6,442,568
13,373,247
20,754,083
-
-
-
-
-
-
-
-
-
-
-
2,415,898 Trade and other receivables
248,375 Other current assets
4,327,830 Total current assets
Non-current assets:
938,268 Property and equipment
13,373,247
19,815,815 Intangible assets
(13,373,247)
-
-
20,754,083 Total non current assets
$ 25,081,913 $
- $
- $ 25,081,913 total assets
Liabilities and shareholders’
equity
Current liabilities:
Accounts payable and accrued
liabilities
Deferred revenue
Income tax payable
Current portion of deferred
lease inducements
Current portion of obligations
under capital lease
3,066,601
3,168,694
531,559
39,236
15,840
Current portion of long term debt
1,418,095
Deferred lease inducements
Deferred revenue
Obligations under capital leases
Long term debt
Future income taxes
Shareholders’ equity:
8,240,025
147,217
324,015
33,616
2,298,253
1,673,240
12,716,366
Share capital
11,990,956
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Contributed surplus
371,969
82,435
Retained earnings
2,622
(82,435)
12,365,547
$ 25,081,913 $
-
- $
Current liabilities:
39,236
3,105,837
Accounts payable and
accrued liabilities
-
-
(39,236)
(15,840)
3,168,694 Deferred revenue
531,559 Current taxes
-
-
15,840
1,433,935
Current portion of loans
and borrowings
-
-
-
8,240,025 Total current liabilities
147,217 Accrued liabilities
324,015 Deferred revenue
(33,616)
-
33,616
2,331,869 Loans and borrowings
-
-
-
-
-
-
1,673,240 Deferred taxes
12,716,366
11,990,956 Share capital
454,404 Contributed surplus
(79,813) Retained earnings (deficit)
12,365,547 Total shareholders’ equity
- $ 25,081,913
total liabilities and
shareholders’ equity
68
PEOPlE COrPOratiOn
Notes to the Consolidated Financial Statements
For the years ended August 31, 2012 and August 31, 2011
reconciliation of Consolidated statement of Financial Position and shareholders’ Equity as
Previously reported Under Canadian gaaP to iFrs as at august 31, 2011:
CANADIAN
GAAP ACCOUNT
ClASSIFICATIONS
REF
TRANSITION
ADJUST-
MENTS
CDN
GAAP
REClASS
ADJUST-
MENTS
IFRS
ACCOUNT
ClASSIFICATIONS
IFRS
Assets
Current Assets:
Current Assets:
cash and cash equivalents
$
1,287,741 $
- $
- $
1,287,741 cash and cash equivalents
Accounts receivables
Prepaid expenses
Property and equipment
Intangible assets
Goodwill
3,208,481
313,659
4,809,881
984,908
5,651,434
13,547,835
20,184,177
-
-
-
-
-
-
-
-
-
-
-
3,208,481 Trade and other receivables
313,659 Other current assets
4,809,881 Total current assets
Non-current assets:
984,908 Property and equipment
13,547,835
19,199,269 Intangible assets
(13,547,835)
-
-
20,184,177 Total non-current assets
$ 24,994,058 $
- $
- $ 24,994,058 total assets
Liabilities and shareholders’
equity
Current liabilities:
Accounts payable and accrued
liabilities
Deferred revenue
Income tax payable
Current portion of deferred
lease inducements
Current portion of obligations
under capital lease
3,909,632
3,344,981
107,041
86,752
15,174
Current portion of long term debt
745,954
Deferred lease inducements
Deferred revenue
Obligations under capital leases
Long term debt
Future income taxes
Shareholders’ equity:
8,209,534
60,465
324,150
59,707
2,143,422
1,266,697
12,063,975
Share capital
11,990,956
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Contributed surplus
418,869
128,875
Retained earnings
520,258
(128,875)
12,930,083
$ 24,994,058 $
-
- $
Current liabilities:
86,752
3,996,384
Accounts payable and
accrued liabilities
-
-
(86,752)
(15,174)
3,344,981 Deferred revenue
107,041 Current taxes
-
-
15,174
761,128
Current portion of loans
and borrowings
-
-
-
8,209,534 Total current liabilities
60,465 Accrued liabilities
324,150 Deferred revenue
(59,707)
-
59,707
2,203,129 Loans and borrowings
-
-
-
-
-
-
1,266,697 Deferred taxes
12,063,975
11,990,956 Share capital
547,744 Contributed surplus
391,383 Retained earnings (deficit)
12,930,083 Total shareholders’ equity
- $ 24,994,058
total liabilities and
shareholders’ equity
69
PEOPlE COrPOratiOn
Notes to the Consolidated Financial Statements
For the years ended August 31, 2012 and August 31, 2011
(d) reconciliation of Comprehensive income as Previously reported Under Canadian gaaP to iFrs
for the year ended august 31, 2011:
CANADIAN
GAAP ACCOUNT
ClASSIFICATIONS
Revenue
TRANSITION
ADJUST-
MENTS
CDN
GAAP
REClASS
ADJUST-
MENTS
IFRS
ACCOUNT
ClASSIFICATIONS
IFRS
REF
Commissions
$
13,339,741 $
- $
(2,254,776) $
11,084,965 Commissions
Fees
Expenses
Salaries and benefits
General and administrative
Commissions
Advertising and Promotion
10,935,249
24,274,990
12,274,952
5,193,682
2,767,894
1,255,478
-
-
-
-
-
-
-
2,393,929
13,329,178 Fees and other revenues
139,153-
24,414,143
-
Operating expenses
3,148,697
15,423,649 Personnel
836,825
6,030,507 General and administrative
(2,767,894)
-
(239,946)
1,015,532 Advertising and promotion
Stock based compensation (i)
46,900
21,538,906
46,441
46,441
(93,341)
-
884,341
22,469,688
2,736,084
(46,441)
(745,188)
1,944,455
income (loss) from
operating activities
Finance income (costs)
Income before undernoted
items
Other expenses
Interest expense
Amortization of property and
equipment
(529,864)
-
(308,292)
Amortization of intangible assets
(891,134)
Restructuring costs
(436,896)
(2,166,186)
-
-
-
-
-
-
594,739
64,875 Finance income
(594,739)
(594,739)
Finance expenses
308,292
-
-
(891,134)
Amortization of intangible
assets
436,896
- Restructuring costs
745,188
(1,420,998)
Income before taxes
Income tax expense (recovery)
569,898
(46,441)
Current
Future
485,385
(433,123)
52,262
-
-
-
Net Income (loss) and
comprehensive income (loss)
517,636
(46,441)
-
-
-
-
-
523,457
net income (loss) before
income taxes
income tax expense
(recovery)
485,385 Current
(433,123)
Deferred
52,262
471,195
net income (loss) and
comprehensive income (loss)
70
PEOPlE COrPOratiOn
Notes to the Consolidated Financial Statements
For the years ended August 31, 2012 and August 31, 2011
(e) reconciliation of shareholders’ Equity:
SHARE
CAPITAL
CONTRIBUTED
SURPlUS
RETAINED
EARNINGS
TOTAL
Balance, september 1, 2010 - Canadian gaaP $
11,990,956 $
371,969 $
2,622 $
12,365,547
IFRS adjustments to share based compensation
-
82,435
(82,435)
-
Balance, september 1, 2010 - iFrs
$
11,990,956 $
454,404 $
(79,813) $
12,365,547
SHARE
CAPITAL
CONTRIBUTED
SURPlUS
RETAINED
EARNINGS
TOTAL
Balance, august 31, 2011 - Canadian gaaP
$
11,990,956 $
418,869 $
520,258 $
12,930,083
IFRS adjustments to share based compensation
-
128,875
(128,875)
-
Balance, august 31, 2011 - iFrs
$
11,990,956 $
547,744 $
391,383 $
12,930,083
notes to tables:
measurement differences:
The following is a summary of the most significant adjustments to the opening balance sheet arising
from the adoption of IFRS. All adjustments are presented before income taxes, and the combined
income tax impact of all adjustments is presented below.
(i)
iFrs 2 – share based Compensation
The Company‘s stock options are generally issued with tranches vesting over three years. Under
Canadian GAAP, the fair value assigned to a specific option grant has been amortized on a
straight line basis over the term of the vesting period. Under IFRS, the Company is required to
vest each tranche separately.
Under Canadian GAAP, the Company recorded forfeitures of options grants prior to vesting on
an as incurred basis. IFRS requires that the Company estimate an expected level of forfeitures.
Forfeitures occur when a grantee has not met vesting requirements, usually as a result of
termination of employment prior to vesting.
These measurement differences impacted retained earnings and contributed surplus in the
consolidated statements of financial position and general and administrative expenses in the
consolidated statements of comprehensive income in the periods presented.
71
PEOPlE COrPOratiOn
Notes to the Consolidated Financial Statements
For the years ended August 31, 2012 and August 31, 2011
reclassification differences:
Under Canadian GAAP, the consolidated statements of operations and comprehensive income
(loss) was presented by a combination of function and nature of expenses. The Company elected to
present its items in the consolidated statements of comprehensive income by function under IFRS.
For the periods presented, the following reclassifications were made:
• Interest income was reclassified to finance income;
• Amortization of capital assets was reclassified to general and administrative expenses;
• Commissions were reclassified to general and salaries and benefits expenses;
• Share based compensation was reclassified to salaries and benefits expenses;
• Certain direct costs, previously reported as a reduction to revenue were reclassified to advertising
and promotion expenses;
• Certain advertising and promotion expenses were reclassified to general and administrative
expenses;
• Restructuring costs were reclassified to general and administrative expenses; and
• Goodwill was reclassified to intangible assets.
In addition, certain fees revenue were reclassified to commission revenue.
(e) reconciliation of statement of cash flows as Previously reported Under Canadian gaaP to iFrs
There are no material differences between the statements of cash flows presented under IFRS
and the statements of cash flows presented under previous Canadian GAAP for the year ended
August 31, 2011.
72
c O R P O RatE in fO R Mat iOn
ExEcutivE
ManagEMEnt tEaM:
Laurie goldberg, chief Executive Officer
John gallivan, President
Bonnie chwartacki, Executive vice President
Brevan canning, vice President finance
glenn Pittman, vice President corporate development
Paul asmundson, vice President corporate development
BOaRd Of diREctORS: Laurie goldberg, chairman
Scott c. anderson, Lead director
Sue dabarno
Richard Leipsic
cORPORatE OfficES: Executive Head Office:
1800 - 360 Main Street, the commodity Exchange tower
Winnipeg, Manitoba R3c 3Z3 canada
Registered Office:
PEOPLE CORPORATION OPERATEs As A PubLICLy-TRAdEd
c/o McMillan LLP, 4400 – 181 Bay Street
COmPANy wITh AN INdEPENdENT bOARd Of dIRECTORs,
toronto, Ontario M5J 2t3 canada
dEdICATEd TO OPERATINg IN COmPLIANCE wITh
LEgaL cOunSEL: McMillan LLP
INdusTRy REguLATIONs. wE hAvE buILT OuR busINEss
Brookfield Place
ON fINANCIAL sTRENgTh ANd sTAbILITy, sO yOu CAN
4400 – 181 Bay Street
COuNT ON PEOPLE CORPORATION TOdAy, TOmORROw
toronto, Ontario M5J 2t3 canada
ANd fOR yEARs TO COmE.
auditORS: MnP LLP
701 - 85 Richmond Street West
toronto, Ontario M5H 2c9 canada
tRanSfER agEnt: Equity financial trust
200 university avenue, Suite 400
toronto, Ontario M5H 4H1 canada
LiSting: Stock Exchange: tSx-v
Symbol: PEO
annuaL
gEnERaL MEEting:
february 21, 2013
3:00 PM central Standard time
Suite 1800, 360 Main Street
Winnipeg, Manitoba R3c 3Z3 canada
ExEcutivE HEad OfficE:
1800 – 360 Main Street
the commodity Exchange tower
Winnipeg, Manitoba R3c 3Z3 canada
REgiStEREd OfficE:
c/o McMillan LLP
4400 – 181 Bay Street
toronto, Ontario M5J 2t3 canada