Halifax, Canada
MD&A and Financial Statements
2024
Management’s Discussion & Analysis
Clarke Inc.
December 31, 2024 and 2023
2
MANAGEMENT’S DISCUSSION & ANALYSIS
Management’s Discussion & Analysis (“MD&A”) presents management’s view of the financial position and performance of
Clarke Inc. (“Clarke” or the “Company”) for the year ended December 31, 2024, compared with the year ended December 31,
2023. The following information is derived from the Company’s consolidated financial statements which are prepared with
accounting standards in accordance with International Financial Reporting Standards (“IFRS” or “IFRS Accounting
Standards”) as issued by the International Accounting Standards Board. This MD&A should be read in conjunction with the
information disclosed in the consolidated financial statements and notes thereto for the year ended December 31, 2024, and the
Company’s Annual Information Form (“AIF”), including the risk factors described therein, available on SEDAR+ at
www.sedarplus.ca. This MD&A provides an overall discussion and analysis of the Company’s performance. The MD&A is
prepared as at March 10, 2025 (unless otherwise stated). All dollar amounts are shown in millions of Canadian dollars except
for per common share amounts or unless otherwise indicated.
OVERVIEW & STRATEGY
Clarke was incorporated on December 9, 1997, pursuant to the Canada Business Corporations Act and its head office is located
at 168 Hobsons Lake Drive, Beechville, Nova Scotia.
The Company is a real estate company with holdings across real estate sectors – primarily residential, furnished suites and
hospitality. The Company operates primarily in Canada. The Company continually evaluates the acquisition, retention, and
disposition of its holdings and changes in its asset mix and segment allocation should be expected. Our objective is to maximize
shareholder value. While not the perfect metric, we believe that Clarke’s book value per share1, together with the cumulative
dividends paid to shareholders, is an appropriate measure of our success in maximizing shareholder value over time.
Our objective is to actively manage our residential and hospitality assets to generate strong earnings and deliver attractive
returns to our shareholders. We focus on optimizing operations, enhancing asset value, and executing strategic initiatives to
drive long-term profitability. At the same time, we remain committed to providing high-quality accommodations and service
to our tenants and guests, ensuring a positive living and hospitality experience that supports both customer satisfaction and
sustained financial performance. In doing this, we also look for new real estate opportunities that are either undervalued or are
underperforming and may be in need of positive change, or to evaluate any changing trends within our current portfolio of
assets that would allow the Company to generate accretive returns through a combination of land development, new
construction, renovations and conversions of existing assets.
FULL YEAR REVIEW AND OUTLOOK1
During 2024, the Company’s book value per common share increased by $3.32, or 20.1%. The change can be attributed
primarily to (i) fair value adjustments on investment properties of $34.0 million, or $2.44 per share, (ii) revaluation gains on
certain hotels of $15.6 million, or $1.12 per share and (iii) hotel net operating income of $22.9 million, or $1.64 per share,
offset by (iv) depreciation of $10.6 million, or $0.76 per share and (v) interest and accretion of $7.5 million, or $0.54 per share.
The Company’s book value per common share at the end of the year was $19.85 while our common share price was $23.60.
Real Estate and Financing
The first phase of our Talisman residential development on Carling Avenue in Ottawa, ON (the “Talisman”), which is two
towers and 404 rental units, was substantially completed in August 2024. We welcomed our first residents in June 2024 and
reached full occupancy in February 2025.
The Company’s former Travelodge® Ottawa West hotel was closed in November 2023 and was demolished in the first quarter
of 2024 to make way for the Talisman’s second phase, which will be three towers and 612 rental units. Construction on this
phase commenced in 2024 and we expect the first of three buildings to be operational by mid-2025, with the remaining two
buildings completed and operational in 2026.
In March 2024, the Company sold the shares of a wholly owned subsidiary, Holloway Lodging US Inc. (“HLUS”), to an entity
owned by the Company’s Chairman and his immediate family member for $3.1 million (US$2.3 million), net of agreed upon
post-closing adjustments. The transaction was non-cash whereby the consideration before post-closing adjustments was the
1 This MD&A refers to "book value per share” and “net operating income”, or “NOI”. These are non-IFRS measures and ratios. Refer to the “Cautionary
Statement Regarding Use of Non-IFRS Accounting Measures and Ratios” section of this MD&A for more information.
3
partial settlement of an unsecured credit facility due to the acquiring entity from the parent company. HLUS included vacant
investment property located in Houston, TX. As a result of certain post-closing adjustments made during the year, the Company
recorded a loss of $0.4 million on the disposition of HLUS. The Company may be required to record additional adjustments to
this transaction in future periods due to the ultimate settlement of other post-closing adjustments.
The Company has $184.6 million of debt and has access to two secured, revolving credit facilities. The Company’s maximum
combined borrowing base under these revolving credit facilities is $85.0 million. As of December 31, 2024, $26.4 million was
drawn and $58.6 million was undrawn and available.
Hotel Operations
Hotel revenue declined due to the winding down and ultimate closure of our former Travelodge Ottawa West hotel as well as
the conversion of one hotel to a residential asset. Despite having two fewer hotel assets in our portfolio, income before income
taxes in our hospitality segment increased from $10.9 million in 2023 to $12.1 million in 2024.
We completed the partial conversion of one hotel into a mixed-use asset, which included the renovation and conversion of
certain hotel rooms into 136 residential units. This was our second hospitality-to-residential conversion, following our
successful conversion of an 82-room hotel to residential in 2023. We continue to explore more furnished unit offerings and
potential residential conversions to assess if these opportunities will be accretive to the Company.
BOOK VALUE PER SHARE
The Company’s book value per share at December 31, 2024 was $19.85, an increase of $3.32 since December 31, 2023. The
following graph illustrates Clarke’s book value per share, share price and cumulative dividends paid over the past ten years.
12.21
11.61
10.71
12.21
15.06
11.20
14.48
15.28
16.53
19.85
0.40
2.60
4.60
4.60
4.60
8.18
8.18
8.18
8.18
8.18
9.86
9.36
10.45
12.50
12.44
6.68
10.32
12.48
14.28
23.60
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Book Value per Share
Cumulative Dividend
Clarke Share Price
4
RESULTS OF OPERATIONS
Highlights of the consolidated financial statements for the last three completed fiscal years are as follows:
Year ended
December 31, 2024
$
Year ended
December 31, 2023
$
Year ended
December 31, 2022
$
Hotel and rental revenue
66.5
65.2
54.7
Provision of services revenue
8.9
8.2
9.7
Investment and other income *
39.7
4.0
2.8
Net income
37.8
3.4
3.2
Other comprehensive income
8.6
13.7
6.9
Comprehensive income
46.4
17.1
10.1
Basic and diluted earnings per share (“EPS”)
2.71
0.24
0.23
Total assets
516.4
395.1
416.1
Total liabilities
239.4
164.4
201.2
Long-term financial liabilities
74.5
120.6
62.7
Book value per share
19.85
16.53
15.28
*Investment and other income includes unrealized and realized gains and losses on assets and liabilities, fair value changes of property and
equipment and investment properties presented in the statement of earnings, interest income, pension recovery and foreign exchange
gains/losses.
The Company’s net income was $37.8 million compared to $3.4 million in 2023 and $3.2 million in 2022. The increased
earnings year-over-year were primarily a result of $37.9 million of fair value adjustment gains recorded within earnings. The
$37.9 million was the aggregate of a $34.0 million fair value gain on the Company’s investment properties, and $3.9 million
of revaluation gains on certain hotel properties. The Company also had $11.7 million of additional revaluation gains on certain
hotel properties, which were recorded within other comprehensive income (“OCI”). Additionally, the results of 2023 and 2022
included operating losses from the Company’s three vacant office buildings in Houston, TX, and a former joint venture located
at 1111 Atwater Avenue in Montreal, QC (“1111 Atwater”). Each of those assets had been disposed of by March 2024.
Comprehensive income for the year ended December 2024 was $46.4 million compared to $17.1 million in 2023 and $10.1
million in 2022. Comprehensive income in the year ended December 31, 2024, exceeded 2023 due primarily to increased
earnings and larger revaluation gains recorded in earnings and OCI in 2024 compared to those recorded in 2023.
Comprehensive income in 2022 was fueled by revaluation gains on the Company’s hotels, offset by losses on its defined benefit
pension plans.
SEGMENT REPORTING
The table below summarizes the Company’s assets by segment. The Other category is not a segment and is disclosed for
reconciliation purposes. It consists of the Company’s treasury and executive functions, pension plans and unsecured revolving
credit facility.
December 31, 2024
December 31, 2023
Segment
$
%
$
%
Investment
250.3
48.5
148.8
37.7
Hospitality
230.4
44.6
211.5
53.5
Other
35.7
6.9
34.8
8.8
Total
516.4
100.0
395.1
100.0
Investment segment
The investment segment is comprised of the Company’s ferry business and investment properties. Development of the Talisman
continues to progress and is the largest driver of the segment’s $80.0 million of capital expenditures in 2024. The improved
results in the investment segment are due to several factors. One of the Company’s hotels was converted to a residential property
at the end of 2023 and is now presented in this segment, whereas the results of 2023 are presented in the hospitality segment.
During the prior year, the Company recorded a $7.8 million fair value adjustment loss on three vacant office buildings in
Houston, TX. This adjustment and these assets’ operating losses were not repeated after their respective dispositions. Also in
2023, 1111 Atwater was incurring losses for lease-up and marketing activities. Lastly, the first phase of the Talisman had been
under construction and non-operating in 2023 but began operations in the second quarter of 2024.
5
The Company owns a passenger/car ferry that has been operating on the St. Lawrence River under contract with the Government
of Québec since 1973. The ferry does not operate during the first quarter of the year and completes its annual maintenance and
repairs during this off-season period. The ferry’s 2024 season ran from March 28, 2024, until January 2, 2025 and will
commence its 2025 season on April 17, 2025.
Results for the year ended December 31, 2024, compared to the year ended December 31, 2023 are as follows:
Year ended
December 31,
2024
$
Year ended
December 31,
2023
$
Rental revenue and provision of services
12.7
8.4
Investment and other income
34.5
0.3
Total revenue and other income
47.2
8.7
Less:
Operating expenses, property taxes and insurance
8.0
9.8
Depreciation and amortization
―
0.1
Interest
1.8
―
Income (loss) before income taxes
37.4
(1.2)
Hospitality segment
The Hospitality segment consists of the Company’s ownership and operation of hotels across Canada. Results for the year
ended December 31, 2024, compared to the year ended December 31, 2023 are as follows:
Year ended
December 31,
2024
$
Year ended
December 31,
2023
$
Hotel revenue
61.6
64.2
Investment and other income
3.9
4.3
Total revenue and other income
65.5
68.5
Less:
Operating expenses, property taxes and insurance
39.7
42.5
Depreciation and amortization
10.5
10.0
Interest and accretion
3.2
5.0
Income before income taxes
12.1
10.9
Investment and other income for the hospitality segment includes revaluation gains of $3.9 million and $4.3 million, recorded
on certain hotels in the years ended December 31, 2024 and 2023, respectively. The Company also recorded $11.7 million of
additional revaluation gains on certain hotel properties within OCI in 2024 (2023 – $11.8 million).
Hotel revenue was $61.6 million for the year ended December 31, 2024, compared to $64.2 million in 2023. Hotel operations
produced strong results and achieved net operating income of $22.9 million during the year, compared to $22.5 million in 2023.
We are pleased to deliver increased NOI compared to the previous year despite the conversion of one hotel to a residential
investment property and the closure and demolition of another property to make way for the second phase of the Talisman
development.
OUTSTANDING SHARE DATA
At March 10, 2025, the Company had:
•
An unlimited number of common shares authorized and 13,936,257 common shares outstanding; and
•
An unlimited number of First and Second Preferred Shares authorized and none outstanding.
6
REPURCHASE OF COMMON SHARES
The Company periodically files normal course issuer bids to purchase its securities. The Board of Directors and senior
management are of the opinion that, from time to time, the purchase of common shares at the prevailing market price may be
a worthwhile use of funds and in the best interest of the Company and its shareholders. A summary of the repurchases under
these normal course issuer bids outstanding within fiscal 2024 and 2023 are as follows:
Bid Date
Expiry
Maximum #
Repurchased #
June 29, 2022
June 28, 2023
711,543
237,025
July 4, 2023
July 3, 2024
699,232
39,400
July 4, 2024
July 3, 2025
697,592
15,100*
*Including repurchases up to and including the date of this document.
LIQUIDITY AND CAPITAL RESOURCES
The Company maintains two secured credit facilities with Canadian chartered banks. The borrowing capacity of the first credit
facility is determined by a borrowing base calculation, subject to a maximum of $55.0 million. This credit facility bears interest
at the lender’s prime rate plus 1.50% or based on a spread to the Canadian Overnight Repo Rate Average (CORRA). At
December 31, 2024, the Company had drawn $9.4 million on this facility. This facility is secured by six hotel properties, and
the Company’s ferry business. The Company’s second credit facility has a maximum borrowing capacity of $30.0 million and
bears interest at the lender’s prime rate plus 1.00%. At December 31, 2024, the Company had drawn $17.0 million on this
facility. This facility and a corresponding term loan are secured by five hotel properties. This facility matures in November
2027. The interest rate of both facilities was renegotiated subsequent to December 31, 2024, and both facilities now bear interest
at prime plus 0.50%. Both facilities are subject to an annual review. Any decline in the fair value or profitability of the pledged
assets may limit the Company’s access to the full amount of these credit facilities.
The Company has an $85.0 million construction loan for the first phase of the Talisman. As at December 31, 2024, this loan
was fully drawn, bears interest at the lender’s prime rate and has a three-year term. The Company is currently evaluating several
refinancing options as this credit facility matures in October 2025.
In the year ended December 31, 2023, the Company redeemed its outstanding convertible debentures (the “Debentures”). The
redemption was financed using a $35.0 million credit facility with an entity owned by the Company’s Chairman and his
immediate family member. This facility has a maximum borrowing capacity of $35.0 million, bears interest at 6.00% and has
interest-only payments until January 1, 2028. After January 1, 2028, the facility will continue as a revolving line of credit due
on demand. As at December 31, 2024, the Company had drawn $30.0 million on this facility.
The Company monitors and forecasts its cash balances and cash flows to meet its required obligations. The Company believes
it has access to sufficient capital through cash on hand, operating cash flows and existing borrowing facilities to meet its
obligations as they come due.
Cash flow from operating activities
Cash provided by operating activities was $18.0 million for the year ended December 31, 2024, compared to $8.2 million in
2023. In both 2024 and 2023, this was primarily the result of cash generated from hotel, rental and ferry operations offset in
2023 by additions on the Company’s real estate inventory under development of 1111 Atwater.
Cash flow from investing activities
Cash used in investing activities was $81.0 million for the year ended December 31, 2024, compared to $24.9 million in 2023.
The primary use of cash during the year was the result of the continued capital expenditures for the Talisman construction and
capital improvements at the Company’s hotels in the amount of $90.8 million. The use of cash in 2024 was offset by $9.7
million of principal repayments received on a loan receivable. In 2023, the use of cash was primarily due to progress on the
Talisman development and capital expenditures for the hotel portfolio of $49.3 million, partially offset by the proceeds on
disposition of 1111 Atwater and two investment properties in Houston, TX in the amount of $23.3 million.
Cash flow from financing activities
Cash provided from financing activities was $62.9 million for the year ended December 31, 2024, compared to $16.6 million
in 2023. Cash provided in 2024 was primarily due to net proceeds of long-term debt of $43.5 million and net proceeds of short-
term indebtedness of $22.7 million, partially offset by the repayment of long-term debt of $3.0 million. Cash provided in 2023
was primarily the result of net proceeds of long-term debt of $88.9 million, offset by the repayment of long-term debt of $13.4
million, the redemption of the Debentures of $34.9 million, and the net repayment of short-term indebtedness of $22.3 million.
7
Contractual obligations and capital resource requirements
The table below summarizes the Company’s maximum contractual obligations by due date:
Contractual obligations
Total
$
Less than
1 year
$
1 – 3 years
$
3 - 5 years
$
After 5 years
$
Short-term indebtedness
26.4
26.4
―
―
―
Long-term debt
158.5
90.7
37.2
30.6
―
Lease obligation
0.6
0.1
0.2
0.2
0.1
185.5
117.2
37.4
30.8
0.1
Unrecorded commitments
At December 31, 2024, Clarke continued to be a party to the unrecorded commitments as discussed in note 14 to the
consolidated financial statements for the year ended December 31, 2024.
FOURTH QUARTER
A comparison of results for the three months ended December 31, 2024, and 2023, is as follows:
Three months ended
December 31, 2024
$
Three months ended
December 31, 2023
$
Revenue and other income
Hotel and rental revenue
16.7
14.7
Provision of services
1.6
1.5
Investment and other income
30.2
8.9
48.5
25.1
Expenses
Operating expenses
9.7
10.1
Cost of services provided
1.2
1.1
General and administrative expenses
1.7
1.4
Property taxes and insurance
1.2
1.0
Depreciation and amortization
2.8
2.6
Interest and accretion
2.8
1.5
Income before income taxes
29.1
7.5
Provision for income taxes
7.6
―
Net income
21.5
7.5
Other comprehensive income (loss)
(0.2)
8.7
Comprehensive income
21.3
16.1
Hotel and rental revenue increased by $2.0 million, from $14.7 million to $16.7 million year over year due to increased rental
revenue from the opening of the first phase of the Talisman.
The Company had net income of $21.5 million in the fourth quarter of 2024 compared to $7.5 million in 2023. The $29.9
million fair value adjustment gain on investment properties is the largest factor in the increase year-over-year, offset by
incremental deferred taxes in the fourth quarter of 2024 compared to the same period in 2023.
The Company had other comprehensive losses of $0.2 million in the fourth quarter of 2024 compared to OCI of $8.7 million
in 2023. The primary reasons for the decrease year-over-year are the higher revaluation gains on certain hotel properties as well
as higher remeasurement gains on the pension asset in the fourth quarter of 2023 compared to 2024.
For the three months ended December 31, 2024, Clarke’s basic and diluted EPS was $1.54, compared to $0.54 for the same
period in 2023.
8
Cash provided by operating activities was $8.1 million for the fourth quarter of 2024, compared to $5.2 million in the same
period in 2023. Cash flows in the fourth quarter of both 2024 and 2023 were driven mainly by the hospitality and ferry
operations and were supplemented in the fourth quarter of 2024 by cash flows from operations of the first phase of the Talisman,
which was still under construction in 2023. In addition, cash flow from operations in 2023 was offset by capital expenditures
of $0.9 million for additions to the real estate inventory under development.
Cash used in investment activities was $27.3 million in the fourth quarter of 2024, compared to $2.9 million provided in the
same period in 2023. The primary uses of cash in the fourth quarter of 2024 were additions to property and equipment and
investment properties for a total of $27.3 million. The primary sources of cash in the fourth quarter of 2023 were the proceeds
on the Company’s disposition of 1111 Atwater and its two investment properties in Houston, TX, offset by additions to
investment properties of $13.3 million and capital expenditures on the hotels of $3.2 million.
Cash provided by financing activities for the fourth quarter of 2024 was $18.7 million compared to $8.2 million used in the
same period in 2023. The primary sources of cash in the fourth quarter of 2024 were proceeds of short-term indebtedness and
long-term debt of $19.7 million, partially offset by the repayment of debt of $0.9 million. The primary use of cash in the fourth
quarter of 2023 was related to repayment of short-term indebtedness of $26.4 million, partially offset by $18.8 million of
proceeds from long-term debt.
SUMMARY OF QUARTERLY RESULTS
Key financial information for the current and preceding seven quarters is as follows:
Three months ended
Dec.
2024
$
Sep.
2024
$
Jun.
2024
$
Mar.
2024
$
Dec.
2023
$
Sep.
2023
$
Jun.
2023
$
Mar.
2023
$
Revenue and other income
48.5
33.4
17.2
15.9
25.1
19.2
17.8
15.4
Net income (loss)
21.5
12.2
1.8
2.4
7.5
(1.9)
(0.5)
(1.7)
Other comprehensive income (loss)
(0.2)
11.5
(0.9)
(1.9)
8.7
2.7
(0.3)
2.8
Comprehensive income (loss)
21.3
23.6
0.9
0.5
16.1
0.8
(0.8)
1.0
Basic and diluted EPS
1.54
0.87
0.13
0.17
0.54
(0.13)
(0.03)
(0.12)
As demonstrated above, our results can fluctuate significantly from quarter to quarter. The Company’s hotel and ferry
businesses are seasonal in nature and their results tend to fluctuate throughout the year. Revenue is generally highest in the
third quarter due to increased leisure travel during the summer months. While certain expenses fluctuate according to revenue
and operating levels, other expenses such as property taxes, insurance and interest are generally fixed and are incurred evenly
throughout the year. In addition, the accounting for the accrued pension benefit asset can cause significant volatility to OCI and
comprehensive income due to changes in assumptions and the impact of the accounting requirements of the asset ceiling under
IFRS. Further volatility in net income, OCI and comprehensive income can be caused by the timing of various fair value
adjustments to the Company’s property and equipment and investment properties.
FINANCIAL INSTRUMENTS
In the normal course of operations, the Company uses the following financial and other instruments:
•
To generate investment returns, the Company may invest in equity, debt and other securities. These instruments may have
interest rate, market, credit and foreign exchange risk associated with them.
•
To manage foreign exchange, interest rate and general market risk, the Company may enter into futures and forward
exchange contracts. These instruments may have interest, market, credit and foreign exchange risk associated with them.
Clarke may hedge its foreign currency exposure on U.S. dollar denominated investments. Given the Company’s holdings
at December 31, 2024, foreign exchange risk is considered insignificant. The Company does not currently have any futures
or foreign exchange contracts in place.
The Company has several financial instruments. Notes 1, 3, 4, 9, 10, 11, 12, and 21 to the audited consolidated financial
statements for the year ended December 31, 2024, and the Company’s 2024 Annual Information Form, provide further
information on classifications in the financial statements, and risks, pertaining to the use of financial instruments by the
Company.
9
RELATED PARTY TRANSACTIONS
The Company was party to the following related party transactions during the year ended December 31, 2024:
•
The Company holds a 6.00%, $35.0 million credit facility from a company owned by Clarke’s Chairman and his
immediate family member. As at December 31, 2024, $30.0 million was drawn on this facility (2023 – $35.0 million),
and interest of $1.9 million was incurred in 2024 (2023 – $0.9 million).
•
The Company was a party to rental and information technology agreements with companies owned by the Company’s
Chairman and his immediate family member. During 2024, the Company paid $0.3 million (2023 – $0.3 million)
under these agreements.
•
The Company provided administrative and asset management services to two pension plans it sponsors and charged
$1.1 million (2023 – $0.9 million).
•
The Company provided and received services with entities owned by the Company’s Chairman and his immediate
family member of $0.6 million (2023 – $0.3 million). The Company provided hotel management services in exchange
for receiving legal, accounting, tax, construction, and pre-construction consulting services.
During the year, the Company sold the shares of a wholly owned subsidiary, HLUS, to an entity owned by the Company’s
Chairman, Mr. George Armoyan and his immediate family member for $3.1 million (US$2.3 million), net of agreed upon post-
closing adjustments. The primary asset of HLUS was a vacant office building located at 222 Benmar Drive, in Houston, TX.
The transaction constituted a "related party transaction" pursuant to Multilateral Instrument 61-101 – Protection of Minority
Security Holders in Special Transactions ("MI 61-101"). The Company was exempt from the requirements to obtain a formal
valuation and minority shareholder approval in connection with the sale in reliance on the exemptions contained in sections
5.5(a) and 5.7(1)(a) of MI 61-101, respectively, as the fair market value of the transaction did not exceed 25% of the Company’s
market capitalization. The transaction was reviewed and approved by the Board of Directors of the Company, excluding Mr.
George Armoyan, who abstained from voting on the matter. The transaction was subject to certain post-closing adjustments
and closed in March 2024. The Company recorded a fair value adjustment loss on this investment property in the year ended
December 31, 2023. The Company may need to record additional adjustments in the statement of earnings in future periods
due to the ultimate settlement of other post-closing adjustments.
Key management consists of the directors and officers of the Company. The compensation incurred is as follows:
Year ended December 31, 2024
Directors
$
Officers
$
Total
$
Salary and fees
0.1
0.4
0.5
Pension value
0.1
―
0.1
Total
0.2
0.4
0.6
DISCLOSURE CONTROLS AND INTERNAL CONTROLS OVER FINANCIAL REPORTING
In accordance with Canadian Securities Administrators National Instrument 52-109 - Certification of Disclosure in Issuers’
Annual and Interim Filings, the Company has filed certificates signed by the President & Chief Executive Officer and the Chief
Financial Officer that, among other things, report on the design and effectiveness of disclosure controls and procedures and the
design and effectiveness of internal controls over financial reporting.
Management has designed disclosure controls and procedures to provide reasonable assurance that material information relating
to the Company is made known to the President & Chief Executive Officer and the Chief Financial Officer, particularly during
the period in which annual filings are being prepared. These two officers certified the effectiveness of the Company’s disclosure
controls and procedures as of December 31, 2024, concluding that these controls and procedures were adequate and effective.
Management has also designed internal controls over financial reporting to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. The
President & Chief Executive Officer and the Chief Financial Officer have supervised the Company’s management in the
evaluation of the design and effectiveness of the Company’s internal controls over financial reporting as of the end of the period
covered by the annual filings and believe the design and effectiveness to be adequate to provide such reasonable assurance
using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal
Control – Integrated Framework (2013).
10
There have been no changes in the Company’s disclosure controls and procedures or internal controls over financial reporting
during the year ended December 31, 2024, that have materially affected, or are reasonably likely to materially affect, the
effectiveness of the internal controls over financial reporting.
ENVIRONMENTAL MATTERS
The Company’s businesses are exposed to the following environmental risks in conducting regular operations: (i) contamination
of owned or leased property; and (ii) contamination of the environment relating to spills or leaks originating from the
Company’s ferry.
The Company’s businesses regularly review their operations and facilities to identify any potential environmental
contamination or liability. Limited internal reviews, which may include third party environmental assessments, have been
conducted at all the Company’s wholly owned real estate. These limited reviews identified no material remediation issues or
potential risks and there have been no material events arising subsequently that would indicate additional obligations.
The Company believes it and its businesses comply in all material respects with all relevant environmental laws and
regulations. The Company is not aware of any material uninsured pending or proceeding actions against it or any of its
businesses relating to environmental issues.
MATERIAL ACCOUNTING POLICIES, JUDGEMENTS AND ESTIMATES
Please refer to notes 1 and 2 of our consolidated financial statements for the year ended December 31, 2024, for a detailed
discussion regarding our material accounting policies and application of significant accounting judgements, estimates and
assumptions.
Valuation of property and equipment
Land and buildings and components are revalued on a sufficiently regular basis using third party offers, internal models or
external appraisals, when available, so that the carrying amount of an asset does not differ materially from its fair value at each
reporting date. The Company has established a methodology to evaluate when circumstances indicate that the carrying amount
may differ materially from its fair value, which include: significant changes in operating performance, economic activity,
regional development opportunities and changing competition in the markets in which each property operates.
The Company performed a revaluation analysis of its hotels during the year using external appraisals, management’s knowledge
of various markets and capitalization rates obtained from independent third parties. The Company obtained external appraisals
for four hotels during the year. The analysis resulted in seven hotels with revaluation increases, one hotel with a revaluation
decrease and seven hotels with no change in value. The eight hotel properties that required a change were revalued using an
income capitalization model prepared internally. Significant assumptions used in the internal income capitalization model
included budgeted cash flow forecasts for 2025 and capitalization rates. The capitalization rates used ranged from 8.50% to
12.50%. If the capitalization rates were 0.25% higher/lower, the estimated fair value would result in a change of $3,000 to
property and equipment. Based on the Company’s methodology, the remaining seven hotels did not require a revaluation.
In aggregate, a revaluation increase of $17.9 million was recorded on seven hotels and a revaluation decrease of $2.3 million
was recorded on one hotel. Property and equipment increased by $15.6 million, with an increase of $11.7 million included in
other comprehensive income and a net increase of $3.9 million recorded in earnings.
During the year ended December 31, 2023, the Company recorded a revaluation increase of $19.8 million on six hotels and a
revaluation decrease of $3.7 million on two hotels. Property and equipment increased by $16.1 million, with a net increase of
$11.8 million included in other comprehensive income and a net increase of $4.3 million recorded in earnings.
Fair value of investment properties
The Company’s significant investment properties as at December 31, 2024, consisted of a multi-building residential rental
complex, with a portion currently operational and the remainder under construction, and a standalone residential rental building.
Changes to the fair value of the Company’s investment properties may occur periodically, based on operating performance,
economic activity, regional development opportunities and new competition in the markets in which they operate.
11
The Company performed an analysis of the fair value of its investment properties during the year using external appraisals,
management’s knowledge of various markets and capitalization rates obtained from independent third parties. The Company
obtained external appraisals for two investment properties during the year, which resulted in a fair value increase of $34.0
million. The gain is included in earnings within investment and other income. Significant assumptions used in the internal
income capitalization model included budgeted cash flow forecasts for 2025 and capitalization rates. The capitalization rates
used ranged from 4.25% to 6.00%. If the capitalization rates were 0.25% higher/lower, the estimated fair value would result in
a change of $1.0 million to investment properties. There were no fair value adjustments to the remaining investment properties.
During the prior year, the Company sold two of its three investment properties located in Houston, TX. These investment
properties were remeasured at their fair value less costs to sell, resulting in a fair value decrease of $4.3 million being recorded.
During the prior year, the Company also evaluated the fair value of the remaining Houston, TX investment property. Using
management’s professional judgement and expertise, the Company estimated the value of this remaining investment property
and recorded a fair value decrease of $3.5 million. The aggregate of these fair value decreases and the eventual realized loss on
the Company’s investment properties was $7.8 million and is included in investment and other income in the consolidated
statements of earnings for the year ended December 31, 2023. The company sold the remaining Houston, TX investment
property during the current year.
Pension benefits and asset ceiling
The costs of defined benefit pension plans and the present value of the pension obligation are determined using actuarial
valuations. An actuarial valuation involves making various assumptions which may differ from actual developments in the
future. These include the determination of the discount rate, future salary increases, mortality rates and future pension increases.
Due to the complexity of the valuation, the underlying assumptions and its long-term nature, a defined benefit obligation is
highly sensitive to changes in these assumptions.
All assumptions are reviewed at each reporting date. In determining the appropriate discount rate, management considers the
interest rates of corporate bonds in the respective currency with at least a AA rating, with extrapolated maturities corresponding
to the expected duration of the defined benefit obligation. The underlying bonds are further reviewed for quality, and those
having excessive credit spreads are removed from the population of bonds on which the discount rate is based, on the basis that
they do not represent high quality bonds. The mortality rate is based on publicly available mortality tables. Future salary
increases and pension increases are based on expected future inflation rates. Management is also required to make certain
assumptions regarding the quantification of the asset ceiling, which impacts the accrued pension benefit asset recorded on the
consolidated statements of financial position.
CAUTIONARY STATEMENT REGARDING USE OF NON-IFRS ACCOUNTING MEASURES AND RATIOS
This MD&A makes reference to “book value per share” and “net operating income”. Book value per share and net operating
income are not financial measures or ratios calculated and presented in accordance with IFRS and should not be considered in
isolation or as a substitute for any financial measures or ratios of performance calculated and presented in accordance with
IFRS. These non-IFRS financial measures and ratios are presented in this MD&A because management of Clarke believes that
such measures and ratios enhance the user’s understanding of our historical and current financial performance.
Book value per share is measured by dividing shareholders’ equity of the Company at the date of the statement of financial
position by the number of common shares outstanding at that date. Net operating income is defined as revenue less expenses.
Net operating income measures operating results before interest, depreciation, amortization and income taxes.
The following table reconciles hotel net operating income to income before income taxes of the Company’s hospitality segment
as disclosed in the consolidated financial statements for the year ended December 31, 2024.
Year ended
December 31, 2024
$
Year ended
December 31, 2023
$
Income before income taxes
12.1
10.9
Deduct:
Investment and other income
(3.9)
(4.3)
Add:
Non-operating corporate expenses
1.0
0.9
Depreciation and amortization
10.5
10.0
Interest and accretion
3.2
5.0
Hotel net operating income
22.9
22.5
12
Clarke’s method of determining these amounts may differ from other companies’ methods and, accordingly, these amounts
may not be comparable to measures used by other companies.
Due to rounding, numbers presented throughout this document may not sum precisely to the totals provided.
FORWARD-LOOKING STATEMENTS
This MD&A may contain or refer to certain forward-looking statements relating, but not limited, to the Company’s
expectations, intentions, plans and beliefs with respect to the Company. Often, but not always, forward-looking statements can
be identified by the use of words such as “plans”, “expects”, “does not expect”, “is expected”, “budgets”, “estimates”,
“forecasts”, “intends”, “anticipates” or “does not anticipate”, “believes”, or equivalents or variations of such words and phrases,
or state that certain actions, events or results, “may”, “could”, “would”, “should”, “might” or “will” be taken, occur or be
achieved. Forward-looking statements include, without limitation, those with respect to the future or expected performance of
the Company’s underlying assets, changes in the property holdings, changes to the Company’s hedging practices, currency
fluctuations and requirements for additional capital. Forward-looking statements rely on certain underlying assumptions that,
if not realized, can result in such forward-looking statements not being achieved. Forward-looking statements involve known
and unknown risks, uncertainties and other factors that could cause the actual results of the Company to be materially different
from the historical results or from any future results expressed or implied by such forward-looking statements. Such risks and
uncertainties include, among others, the Company’s investment strategy, legal and regulatory risks, general market risk,
potential lack of diversification in the Company’s investments, interest rates, foreign currency fluctuations, the sale of Company
assets, the expectation that the Company's redeployment of capital from its asset dispositions, renovations and repurposes will
be accretive to the Company’s shareholders, the anticipated timing for completion of the second phase of the Talisman
residential redevelopment, reliance on key executives and other factors. The real estate industry is subject to various risks that
could impact on our financial performance and asset values. These risks include fluctuations in property values, changes in
market demand, interest rate volatility, and broader economic conditions such as inflation, employment levels, and consumer
confidence. Tourism levels, economic activity and changing competition in our markets can have a significant impact on the
underlying results of our assets. Competition from new developments and alternative accommodation options could affect
occupancy rates and rental pricing. Regulatory and legislative changes, including zoning laws, rent control measures and
environmental policies, may impose additional costs or restrictions on operations. Additionally, unforeseen capital
expenditures, rising maintenance costs, and disruptions in supply chains may impact profitability. Our ability to successfully
acquire, develop, and manage real estate assets depends on effective risk mitigation strategies, financial flexibility, and market
adaptability. With respect to the ferry operations, such risks and uncertainties include, among others, weather conditions, safety,
claims and insurance, uninsured losses, changes in levels of business and commercial travel and tourism and other factors.
Although the Company has attempted to identify important factors that could cause actions, events or results not to be as
estimated or intended, there can be no assurance that forward-looking statements will prove to be accurate as actual results, and
future events could differ materially from those anticipated in such statements. Other than as required by applicable Canadian
securities laws, the Company does not update or revise any such forward-looking statements to reflect events or circumstances
after the date of this document or to reflect the occurrence of unanticipated events. Accordingly, readers should not place undue
reliance on forward-looking statements.
Consolidated Financial Statements
Clarke Inc.
December 31, 2024 and 2023
PricewaterhouseCoopers LLP
Sun Life Centre, 99 Bank Street, Suite 710, Ottawa, Ontario, Canada K1P 1E4
T.: +1 613 237 3702, F.: +1 613 237 3963, Fax to mail: ca_ottawa_main_fax@pwc.com
“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.
Independent auditor’s report
To the Shareholders of Clarke Inc.
Our opinion
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,
the financial position of Clarke Inc. and its subsidiaries (together, the Company) as at December 31, 2024
and 2023, and its financial performance and its cash flows for the years then ended in accordance with
International Financial Reporting Standards as issued by the International Accounting Standards Board
(IFRS Accounting Standards).
What we have audited
The Company’s consolidated financial statements comprise:
the consolidated statements of financial position as at December 31, 2024 and 2023;
the consolidated statements of earnings for the years then ended;
the consolidated statements of comprehensive income for the years then ended;
the consolidated statements of cash flows for the years then ended;
the consolidated statements of shareholders’ equity for the years then ended; and
the notes to the consolidated financial statements, comprising material accounting policy information
and other explanatory information.
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of
the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Company in accordance with the ethical requirements that are relevant to our
audit of the consolidated financial statements in Canada. We have fulfilled our other ethical responsibilities
in accordance with these requirements.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements for the year ended December 31, 2024. These matters were
addressed in the context of our audit of the consolidated financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Valuation of land and buildings and
components
Refer to note 1 – Material accounting policies,
note 2 – Significant accounting judgments,
estimates and assumptions and note 6 – Property
and equipment to the consolidated financial
statements.
The Company measures its land and buildings and
components (together, hotels) at fair value under
the revaluation model, and as at December 31,
2024, these assets were valued at $208.6 million.
Hotels are carried at fair value as at the date of
revaluation and subsequently depreciated until the
next revaluation. A significant portion of the fair
values of hotels, that were revalued, was
determined using income capitalization models.
The significant assumptions used in the income
capitalization models include the budgeted cash
flow forecasts for 2025 and capitalization rates.
We considered this a key audit matter due to the
significant judgments by management when
determining the fair values of the hotels using the
income capitalization models and a high degree of
complexity in assessing audit evidence related to
the significant assumptions used by management.
In addition, the audit effort involved the use of
professionals with specialized skill and knowledge
in the field of real estate valuations.
Our approach to addressing the matter included the
following procedures, among others:
Tested how management determined the fair
values of a sample of hotels that were revalued
using the income capitalization models, which
included the following:
Evaluated the reasonableness of the cash
flow forecasts for 2025 by (i) comparing
them to current and historical results of the
hotels; (ii) comparing with external market
and industry data; and (iii) considering
whether these assumptions were aligned
with evidence obtained in other areas of
the audit.
Tested the underlying data used in the
models.
Professionals with specialized skill and
knowledge in the field of real estate
valuations assisted us in evaluating the
appropriateness of the income
capitalization models and in evaluating the
reasonableness of the capitalization rates.
Key audit matter
How our audit addressed the key audit matter
Valuation of investment properties
Refer to note 1 – Material accounting policies,
note 2 – Significant accounting judgments,
estimates and assumptions and note 7 –
Investment properties to the consolidated financial
statements.
The Company measures its investment properties
at fair value and as at December 31, 2024, these
assets were valued at $249.1 million. The fair
values of investment properties, in the amount of
$183.2 million, were determined using income
capitalization models. The significant assumptions
used in the income capitalization models include
the budgeted cash flow forecasts for 2025 and
capitalization rates.
We considered this a key audit matter due to the
significant judgments by management when
determining the fair values of the investment
properties using the income capitalization models
and a high degree of complexity in assessing audit
evidence related to the significant assumptions
used by management. In addition, the audit effort
involved the use of professionals with specialized
skill and knowledge in the field of real estate
valuations.
Our approach to addressing the matter included the
following procedures, among others:
Tested how management determined the fair
value of a sample of investment properties
using the income capitalization models, which
included the following:
Evaluated the reasonableness of the cash
flow forecasts for 2025 by (i) comparing to
current and past leasing activity of the
investment properties; (ii) comparing with
external market and industry data; and
(iii) considering whether these assumptions
were aligned with evidence obtained in
other areas of the audit.
Tested the underlying data used in the
models.
Professionals with specialized skill and
knowledge in the field of real estate
valuations assisted us in evaluating the
appropriateness of the income
capitalization models and in evaluating the
reasonableness of the capitalization rates.
Other information
Management is responsible for the other information. The other information comprises the Management’s
Discussion and Analysis.
Our opinion on the consolidated financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of management and those charged with governance for the
consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with IFRS Accounting Standards, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends to liquidate
the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting
process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report
to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Company to
cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the financial
information of the entities or business units within the Company as a basis for forming an opinion on
the consolidated financial statements. We are responsible for the direction, supervision and review of
the audit work performed for purposes of the group audit. We remain solely responsible for our audit
opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the consolidated financial statements of the current period and
are therefore the key audit matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Krista Ryan.
Chartered Professional Accountants, Licensed Public Accountants
Ottawa, Ontario
March 10, 2025
/s/PricewaterhouseCoopers LLP
2
Clarke Inc.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in thousands of Canadian dollars)
See accompanying notes to the consolidated financial statements
On behalf of the Board:
/s/ George Armoyan
/s/ Blair Cook
Director
Director
As at December 31,
2024
$
2023
$
ASSETS
Current
Cash
809
929
Receivables (note 3)
6,402
3,957
Other assets (note 4)
1,054
10,567
Income taxes receivable
―
183
Total current assets
8,265
15,636
Accrued pension benefit asset (note 5)
34,325
33,752
Property and equipment (notes 2 and 6)
224,130
206,926
Investment properties (notes 2 and 7)
249,133
138,486
Deferred income tax assets (note 8)
113
130
Other assets (note 4)
412
200
Total assets
516,378
395,130
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current
Short-term indebtedness (note 9)
26,414
3,763
Accounts payable and other liabilities (note 10)
24,808
26,273
Income taxes payable
98
―
Current portion of long-term debt (note 12)
90,637
1,845
Total current liabilities
141,957
31,881
Long-term debt (note 12)
67,590
120,176
Construction accounts payable (note 10)
6,268
―
Lease obligations
593
392
Deferred income tax liabilities (note 8)
23,028
11,992
Total liabilities
239,436
164,441
Commitments (note 14)
Shareholders’ equity
Share capital (note 15)
82,528
82,574
Contributed surplus
7,302
7,302
Retained earnings
81,965
44,221
Accumulated other comprehensive income
105,147
96,592
Total shareholders’ equity
276,942
230,689
Total liabilities and shareholders’ equity
516,378
395,130
3
Clarke Inc.
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands of Canadian dollars, except per share amounts)
See accompanying notes to the consolidated financial statements
Years ended December 31,
2024
$
2023
$
Revenue and other income
Hotel and rental revenue
66,486
65,242
Provision of services
8,883
8,249
Investment and other income (note 16)
39,699
3,989
115,068
77,480
Expenses (note 17)
Operating expenses
37,236
42,657
Cost of services provided
5,132
4,266
General and administrative expenses
4,062
3,827
Property taxes and insurance
4,218
4,251
Depreciation and amortization
10,563
10,179
Interest and accretion (note 18)
7,531
7,187
68,742
72,367
Income before income taxes
46,326
5,113
Provision for income taxes (note 8)
8,503
1,689
Net income
37,823
3,424
Basic and diluted earnings per share (note 15)
2.71
0.24
4
Clarke Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands of Canadian dollars)
See accompanying notes to the consolidated financial statements
Years ended December 31,
2024
$
2023
$
Net income
37,823
3,424
Other comprehensive income
Items that will not be reclassified to profit or loss
Remeasurement gains (losses) and effect of
changes to asset ceiling on defined benefit pension
plans, net of income tax (notes 5 and 8)
(408)
4,628
Revaluation gains on property and equipment, net of
income tax (notes 2, 6 and 8)
8,958
9,025
Items that have been reclassified subsequently to profit
or loss
Unrealized gains on translation of net investment in
foreign operations, net of income tax (notes 7 and 8)
94
40
Reclassification of realized translation gains on disposal of
net investment in foreign operations
(89)
―
Other comprehensive income
8,555
13,693
Comprehensive income
46,378
17,117
5
Clarke Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of Canadian dollars)
Years ended December 31,
2024
$
2023
$
OPERATING ACTIVITIES
Net income
37,823
3,424.
Adjustments for items not involving cash (note 19)
(19,768)
9,659.
18,055
13,083.
Net change in non-cash working capital balances (note 19)
(50)
(2)
Additions to real estate inventory under development (note 22)
―
(4,924)
Net cash provided by operating activities
18,005
8,157.
INVESTING ACTIVITIES
Additions to property and equipment (note 6)
(13,681)
(9,263)
Additions to investment properties (note 7)
(77,087)
(40,040)
Collection of loan receivable (note 4)
9,733
―.
Net proceeds on disposition of investment properties (note 7)
―
7,457.
Distribution of pension plan surplus, net of income tax (note 5)
―
1,049.
Disposal of joint operation interest, net of cash (note 22)
―
15,863.
Net cash used in investing activities
(81,035)
(24,934)
FINANCING ACTIVITIES
Repurchase of shares for cancellation (note 15)
(125)
(1,482)
Net proceeds (repayment) of short-term indebtedness (note 9)
22,651
(22,323)
Proceeds of long-term debt, net of financing fees (note 12)
43,519
88,896.
Repayment of long-term debt (note 12)
(3,013)
(13,404)
Principal payments of lease obligations
(122)
(155)
Redemption of convertible debentures (note 11)
―
(34,916)
Net cash provided by financing activities
62,910
16,616.
Net change in cash during the year
(120)
(161)
Cash, beginning of year
929
1,090.
Cash, end of year
809
929.
See accompanying notes to the consolidated financial statements
6
Clarke Inc.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands of Canadian dollars)
Years ended December 31,
2024
$
2023
$
Share capital
Balance at beginning of year
82,574
83,190.
Common shares repurchased for cancellation (note 15)
(46)
(700)
Common shares issued on debenture conversion (note 15)
―
84.
Balance at end of year
82,528
82,574.
Contributed surplus
Balance at beginning and end of year
7,302
7,302.
Retained earnings
Balance at beginning of year
44,221
41,579.
Net income
37,823
3,424.
Purchase price in excess of the book value of common shares repurchased for
cancellation (note 15)
(79)
(782)
Balance at end of year
81,965
44,221.
Accumulated other comprehensive income
Balance at beginning of year
96,592
82,899.
Other comprehensive income
8,555
13,693.
Balance at end of year
105,147
96,592.
Total shareholders’ equity
276,942
230,689.
See accompanying notes to the consolidated financial statements
Clarke Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024 and 2023
(in thousands of Canadian dollars, except per share amounts)
7
1. MATERIAL ACCOUNTING POLICIES
Nature of operations
Clarke Inc. (the “Company”) was incorporated on December 9, 1997 pursuant to the Canada Business Corporations Act.
The head office of the Company is located at 168 Hobsons Lake Drive, Beechville, Nova Scotia. The Company is a real
estate company with holdings across real estate sectors – primarily residential, furnished suites and hospitality. The
Company has operated exclusively in Canada since the disposal of its remaining operations located in the United States of
America in March 2024 (note 7). The Company continually evaluates the acquisition, retention and disposition of its
holdings and changes in its asset mix and segment allocation should be expected. These consolidated financial statements
were approved by the Board of Directors on March 10, 2025.
Basis of presentation and statement of compliance
The Company prepares its consolidated financial statements in accordance with generally accepted accounting principles in
Canada as set out in the CPA Canada Handbook – Accounting, which incorporates International Financial Reporting
Standards as issued by the International Accounting Standards Board (“IFRS Accounting Standards”). These consolidated
financial statements were prepared under the historical cost convention, except for certain financial assets and liabilities,
certain classes of property and equipment, and investment properties that are measured at fair value, and defined benefit
pension plans where plan assets are measured at fair value.
Amendments to IAS 1 – Presentation of Financial Statements
In October 2022, the International Accounting Standards Board published amendments to the Classification of Liabilities as
Current or Non-current in IAS 1 – Presentation of Financial Statements. The amendments aim to improve the information
companies provide when the right to defer settlement of a liability for at least twelve months is subject to the entity
complying with covenants after the reporting date. The amendments specify that covenants to be complied with after the
reporting date do not affect the classification of debt as current or non-current at the reporting date. The amendments require
an entity to disclose information about these covenants in the notes to the financial statements. The amendments are
effective for annual periods beginning on or after January 1, 2024. The Company adopted this amendment with no impact to
the Company’s consolidated statements of financial position.
Principles of consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. The
Company’s significant subsidiary is Holloway Lodging Corporation (“Holloway”). All intercompany transactions have been
eliminated on consolidation. All subsidiaries have the same reporting year-end as the Company, and all follow the same
accounting policies.
The consolidated financial statements also included the Company’s share of the revenues and expenses of its 1111 Atwater
Avenue development joint operation in Montreal, QC (“1111 Atwater”) for the period of ownership until its disposition
during the year ended December 31, 2023 (note 22).
Revenue recognition
Hotel and rental revenue
Hotel revenue is generated from room occupancy, food and beverage services, rental and ancillary services, and is presented
net of the cost of hotel brand loyalty programs. Rental revenue is generated from leasing space for both residential and
commercial purposes. The Company recognizes revenue when the services are provided to the customer and payment of
the transaction price is due, as there are no further performance obligations to be satisfied at that point.
Clarke Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024 and 2023
(in thousands of Canadian dollars, except per share amounts)
8
1. MATERIAL ACCOUNTING POLICIES (CONT’D)
Revenues from the Company’s residential investment properties include rents, parking, storage, and other miscellaneous
revenue paid by tenants under the terms of their leases. The Company recognizes residential rental revenue on a straight-line
basis over the term of the lease in accordance with IFRS 16 – Leases.
The Company has retained substantially all of the risks and benefits of ownership of its investment properties and therefore
accounts for its leases with tenants as operating leases, with rentals payable monthly. The Company commences revenue
recognition on leases, for both residential and commercial tenants, when the tenant takes control over the leased property.
Control is considered to be provided on either the lease commencement date, or upon substantial completion of any required
tenant improvements completed by the Company. Rental income from operating leases where the Company is a lessor is
recognized in income on a straight-line basis over the lease term. All residential tenants are currently under short-term lease
agreements.
Provision of services
The Company generates revenue from investment management services to pension plans sponsored by the Company.
Revenue is recognized as the services are rendered to the pension plans and payment of the transaction price is due. The
total transaction price includes variable consideration based on returns achieved on the assets of the pension plans on an
annual basis. Revenue from the Company’s ferry business is recognized upon provision of those services and customer
acceptance of those services, as there are no further performance obligations to be satisfied at that point.
Investment and other income
Interest income is recorded using the effective interest rate (“EIR”) for all financial instruments measured at amortized cost.
Property and equipment
Depreciation of property and equipment is provided on a straight-line basis from the date assets are ready to be put into
service at rates which will amortize the carrying cost or revalued amounts, net of residual values, over their estimated useful
lives. Estimated useful lives and residual values are reviewed at least annually. The estimated useful lives of property and
equipment are as follows:
Property and equipment class
Useful life
Buildings and components
15 – 60 years
Furniture, fixtures, and equipment
2 – 10 years
Ferry and vessel dry dock costs
3 – 5 years
Right-of-use assets
Term of the lease
Land is not amortized. Renovations in progress are amortized once they are put into use.
Property and equipment are stated at cost, net of accumulated depreciation and/or accumulated impairment losses, with the
exception of land and buildings and components, which are recognized at fair value using the revaluation model. When
significant parts of property and equipment are required to be replaced at intervals, the Company recognizes such parts as
individual assets with specific useful lives and depreciation, respectively. All other repair and maintenance costs are
expensed as incurred.
Under the revaluation model, increases in fair value are recorded in other comprehensive income except to the extent that
they reverse a revaluation decrease previously recorded in the consolidated statement of earnings, in which case the reversal
is recorded in the consolidated statement of earnings. Decreases in fair value are charged against other comprehensive
income and the revaluation surplus to the extent of any credit balance existing in the revaluation surplus in respect of that
asset, and thereafter are recorded in the consolidated statement of earnings.
Clarke Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024 and 2023
(in thousands of Canadian dollars, except per share amounts)
9
1. MATERIAL ACCOUNTING POLICIES (CONT’D)
Land and buildings and components are carried at fair value at the date of revaluation and subsequently depreciated until the
next revaluation. The Company applies the net method for adjustment upon revaluation. The net method eliminates
accumulated depreciation against the carrying amount of the asset and then revalues the net carrying amount.
Investment properties
Investment properties are held either to earn rental income, for capital appreciation (including future redevelopment) or
both, but not for sale in the ordinary course of business. Investment properties are initially measured at cost, including
transaction costs, and subsequently measured at fair value at each reporting date. The difference between the fair value at
the reporting date and the carrying value is recognized in earnings. Under the fair value model, investment properties are
not depreciated.
Investment properties under construction are carried at fair value, to the extent that fair value can be determined reliably. In
assessing whether fair value can be determined reliably, management considers factors such as the stage of completion of
the construction, the level of reliability of cash flows after completion, the level of pre-leasing completed and other factors.
To the extent that fair value cannot be determined reliably, the Company uses cost as the best estimate of fair value until the
earlier of either construction completion or fair value becoming reliably measurable. Investment properties under
construction include costs that are directly attributable to the asset, including borrowing costs. These costs are capitalized
when the activities necessary to prepare an asset for development begin and continue until the date that construction is
substantially completed.
Taxes
Current income tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation
authorities. The tax rates and tax laws used to compute these amounts are those that are enacted or substantively enacted, at
the reporting date in the jurisdictions where the Company operates and generates taxable income.
Current income tax relating to items recognized directly in shareholders’ equity is recognized in shareholders’ equity and
not within earnings. Management periodically evaluates positions taken in the tax returns with respect to situations in
which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred income tax
Deferred income tax is provided using the liability method on temporary differences at the reporting date between the tax
bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are
recognized for all taxable temporary differences, except in respect of taxable temporary differences associated with
investments in subsidiaries where the timing of the reversal of the temporary differences can be controlled and it is probable
that the temporary differences will not reverse in the foreseeable future.
Deferred income tax assets are recognized for all deductible temporary differences, carry-forward amounts of unused tax
credits and unused tax losses, to the extent that it is probable that taxable profit will be generated against the deductible
temporary differences, and the carry-forward of unused tax credits and unused tax losses can be utilized, except:
•
Where the deferred income tax asset relating to the deductible temporary difference arises from the initial
recognition of an asset or liability in a transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable profit or loss.
•
In respect of deductible temporary differences associated with investments in subsidiaries, deferred tax assets are
recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future
and taxable profit will be available against which the temporary differences can be utilized.
Clarke Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024 and 2023
(in thousands of Canadian dollars, except per share amounts)
10
1. MATERIAL ACCOUNTING POLICIES (CONT’D)
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no
longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be
utilized. Unrecognized deferred income tax assets are reassessed at each reporting date and are recognized to the extent that
it has become probable that future taxable profits will allow the deferred income tax asset to be recovered. Deferred income
tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the
liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date.
Deferred income tax relating to items recognized outside of profit or loss is recognized outside of profit or loss. Deferred
income tax items are recognized in correlation to the underlying transaction either in other comprehensive income or
directly in shareholders’ equity.
Foreign currency translation
The Company’s consolidated financial statements are presented in Canadian dollars, which is also the functional currency of
the parent company. Each of the Company’s subsidiaries determines its own functional currency and items included in the
financial statements of each entity are measured using that functional currency.
Transactions in foreign currencies are initially recorded at their respective functional currency rates prevailing at the date of
the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency
spot rate of exchange at the reporting date. There were no non-monetary assets or liabilities denominated in foreign
currencies as at December 31, 2024, in entities where the functional currency is Canadian dollars. All foreign exchange
gains and losses are recorded in investment and other income as incurred.
The assets and liabilities of subsidiaries for which the functional currency is not Canadian dollars, are translated into
Canadian dollars at the rate of exchange prevailing at the reporting date and their statements of earnings are translated at
yearly average exchange rates. The exchange differences arising on the translation are recognized in other comprehensive
income. On disposal of a foreign operation, the component of accumulated other comprehensive income relating to that
particular foreign operation is recognized in the consolidated statements of earnings. The Company had no remaining
foreign operations as at December 31, 2024.
Financial instruments
Initial recognition
Financial assets and financial liabilities are recognized on the consolidated statement of financial position when the
Company becomes a party to a financial instrument contract.
Classification and measurement
All financial instruments are required to be initially measured at fair value, plus or minus, in the case of financial assets and
liabilities not at fair value through profit or loss (“FVTPL”), transaction costs that are directly attributable to the acquisition
or issue of the financial asset or liability.
Financial assets are classified and subsequently measured at amortized cost as they are held with the objective of collecting
contractual cash flows and those cash flows represent solely payments of principal and interest and not designated as
FVTPL. The Company does not hold any financial assets classified as FVTPL or fair value through other comprehensive
income. The Company determines the classification of its financial assets at initial recognition. Subsequent to initial
recognition, all financial assets are carried at amortized cost.
Clarke Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024 and 2023
(in thousands of Canadian dollars, except per share amounts)
11
1. MATERIAL ACCOUNTING POLICIES (CONT’D)
The Company’s financial assets classified and subsequently measured at amortized cost include cash, receivables and loan
receivable included in other assets.
The Company’s financial liabilities classified and subsequently measured at amortized cost include short-term indebtedness,
accounts payable and other liabilities, construction accounts payable and long-term debt.
Interest income and expense are recognized in the consolidated statements of earnings using the EIR method, except for
borrowing costs related to qualifying assets, which are capitalized as part of the cost of that asset.
Impairment
At each reporting date, the Company assesses each financial asset measured at amortized cost for impairment using the
expected credit loss (“ECL”) model.
The impairment loss for amounts receivable is determined using the simplified ECL model which calculates an impairment
loss based on lifetime ECLs. ECLs are based on the difference in cash flows the Company expects to receive and the
contractual cash flows due in accordance with the contract, discounted using the asset’s original EIR. In determining ECLs,
the Company considers its historical credit loss experience, adjusted for forward looking factors specific to the debtors and
the economic environment.
Derecognition and modification
Financial assets are derecognized when the contractual rights to receive cash flows and benefits from the financial asset
expire, or if the Company transfers the control or substantially all the risks and rewards of ownership of the financial asset
to another party. The difference between the assets carrying amount and the sum of the consideration received, and
receivable is recognized in earnings.
A financial liability is derecognized when the obligation under the liability is discharged, cancelled or expires. When an
existing financial liability is replaced by another from the same lender on substantially different terms, such an exchange is
treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective
carrying amounts is recognized in earnings. If the change of terms is not substantial and is considered a debt modification of
the financial liability, the carrying amount of the existing debt liability is adjusted to reflect the revised estimated cash flow
payments discounted using the original EIR. The adjustment is recognized as a modification gain or loss in earnings.
Pensions and other post-employment benefits
The Company has two defined benefit pension plans covering full-time employees who commenced employment before
September 2003. One plan is federally regulated by the Office of the Superintendent of Financial Institutions and one plan
is provincially regulated by Retraite Québec. For certain other employees, the Company has an RRSP plan and a defined
contribution pension plan. The cost of providing benefits under the defined benefit plans is determined separately for each
plan using the projected unit credit method. Remeasurement gains and losses and the effect of the limit on the asset ceiling
of the defined benefit plans are included in other comprehensive income. The past service costs, current service costs, net
interest on surplus and non-investment management fees are recognized in earnings. The defined benefit asset comprises
the fair value of plan assets less the present value of the defined benefit obligation (using a discount rate based on high
quality corporate bonds). Plan assets are not available to the creditors of the Company, nor can they be paid directly to the
Company. The value of any defined benefit asset recognized is restricted to the present value of any economic benefits
available in the form of refunds from the plan or reductions in future contributions to the plan.
Clarke Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024 and 2023
(in thousands of Canadian dollars, except per share amounts)
12
1. MATERIAL ACCOUNTING POLICIES (CONT’D)
Impairment of non-financial assets
The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication
exists, or when annual impairment testing for an asset is required, the Company estimates the asset’s recoverable amount.
The recoverable amount is the higher of an asset’s or cash-generating unit’s (“CGU”) fair value less costs to sell and its
value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely
independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its
recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses are
recognized in earnings.
Per share information
Basic earnings per share is calculated based on net income using the weighted average number of common shares
outstanding during the year. Diluted earnings per share is calculated based on the weighted average number of common
shares that would have been outstanding during the year, including adjustments for dilutive instruments, if applicable.
Government grants
Government grants are recognized when there is reasonable assurance that the grant will be received, and all attached
conditions will be met. When the grant relates to an expense item, it is recognized as income over the period necessary to
match the grant on a systematic basis to the costs that it is intended to compensate. When the grant relates to an asset, it is
recorded as a reduction to the cost of the asset. When the Company receives non-monetary grants, no amounts are recorded
in the consolidated statements of earnings as the grants are for consumables in the Company’s operations.
Joint arrangements
A joint arrangement is defined as an arrangement over which two or more parties have joint control, which is the
contractually agreed sharing of control over said arrangement. There are two types of joint arrangements: joint ventures and
joint operations. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have
rights to the net assets of the joint venture. Investments in joint ventures are accounted for using the equity method as
described in IAS 28 – Investments in Associates and Joint Ventures. A joint operation is a joint arrangement whereby the
parties that have joint control of the arrangement have rights to the assets and obligations for the liabilities relating to the
arrangement. The Company recognized its share of any assets, liabilities, revenues and expenses of its sole joint operation
based on its ownership interest. This joint operation was disposed of during the year ended December 31, 2023 (note 22).
2.
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND
ASSUMPTIONS
The preparation of the Company’s consolidated financial statements requires management to make judgements, estimates
and assumptions that affect the reported amounts in these consolidated financial statements and accompanying notes. These
estimates and associated assumptions are based on historical experience, future operating plans and various other factors
believed to be reasonable under the circumstances, and the results of such estimates form the basis of judgements about
carrying values of assets and liabilities. These underlying assumptions are reviewed on an ongoing basis.
Actual results could differ materially from those estimates. Significant estimates and judgments made in the preparation of
the consolidated financial statements include the following described below, with further information contained in the
applicable accounting policy or note.
Clarke Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024 and 2023
(in thousands of Canadian dollars, except per share amounts)
13
2.
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND
ASSUMPTIONS (CONT’D)
Valuation of property and equipment
Land and buildings and components are revalued on a sufficiently regular basis using third party offers, internal models or
external appraisals, when available, so that the carrying amount of an asset does not differ materially from its fair value at
each reporting date. The Company has established a methodology to evaluate when circumstances indicate that the carrying
amount may differ materially from its fair value, which include: significant changes in operating performance, economic
activity, regional development opportunities and changing competition in the markets in which each property operates.
The Company performed a revaluation analysis of its hotels during the year using external appraisals, management’s
knowledge of various markets and capitalization rates obtained from independent third parties. The Company obtained
external appraisals for four hotels during the year. The analysis resulted in seven hotels with revaluation increases, one
hotel with a revaluation decrease and seven hotels with no change in value. The eight hotel properties that required a change
were revalued using an income capitalization model prepared internally. Significant assumptions used in the internal income
capitalization model included budgeted cash flow forecasts for 2025 and capitalization rates. The capitalization rates used
ranged from 8.50% to 12.50%. If the capitalization rates were 0.25% higher/lower, the estimated fair value would result in a
change of $3,000 to property and equipment. Based on the Company’s methodology, the remaining seven hotels did not
require a revaluation.
In aggregate, a revaluation increase of $17,900 was recorded on seven hotels and a revaluation decrease of $2,300 was
recorded on one hotel. Property and equipment increased by $15,600, with an increase of $11,700 included in other
comprehensive income and a net increase of $3,900 recorded in earnings.
During the year ended December 31, 2023, the Company recorded a revaluation increase of $19,800 on six hotels and a
revaluation decrease of $3,700 on two hotels. Property and equipment increased by $16,100, with a net increase of $11,800
included in other comprehensive income and a net increase of $4,300 recorded in earnings.
Fair value of investment properties
The Company’s significant investment properties as at December 31, 2024, consisted of a multi-building residential rental
complex, with a portion currently operational and the remainder under construction, and a standalone residential rental
building. Changes to the fair value of the Company’s investment properties may occur periodically, based on operating
performance, economic activity, regional development opportunities and changing competition in the markets in which they
operate.
The Company performed an analysis of the fair value of its investment properties during the year using external appraisals,
management’s knowledge of various markets and capitalization rates obtained from independent third parties. The
Company obtained external appraisals for two investment properties during the year, which resulted in a fair value increase
of $34,000. The gain is included in earnings within investment and other income. Significant assumptions used in the
internal income capitalization model included budgeted cash flow forecasts for 2025 and capitalization rates. The
capitalization rates used ranged from 4.25% to 6.00%. If the capitalization rates were 0.25% higher/lower, the estimated fair
value would result in a change of $1,000 to investment properties. There were no fair value adjustments to the remaining
investment properties.
During the prior year, the Company sold two of its three investment properties located in Houston, TX. These investment
properties were remeasured at their fair value less costs to sell, resulting in a fair value decrease of $4,289 being recorded.
During the prior year, the Company also evaluated the fair value of the remaining Houston, TX investment property. Using
management’s professional judgement and expertise, the Company estimated the value of this remaining investment
property and recorded a fair value decrease of $3,480. The aggregate of these fair value decreases and the eventual realized
loss on the Company’s investment properties was $7,837 and is included in investment and other income in the consolidated
statements of earnings for the year ended December 31, 2023. The company sold the remaining Houston, TX investment
property during the current year (note 7).
Clarke Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024 and 2023
(in thousands of Canadian dollars, except per share amounts)
14
2.
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND
ASSUMPTIONS (CONT’D)
Pension benefits and asset ceiling
The costs of defined benefit pension plans and the present value of the pension obligation are determined using actuarial
valuations. An actuarial valuation involves making various assumptions which may differ from actual developments in the
future. These include the determination of the discount rate, future salary increases, mortality rates and future pension
increases. Due to the complexity of the valuation, the underlying assumptions and its long-term nature, a defined benefit
obligation is highly sensitive to changes in these assumptions.
All assumptions are reviewed at each reporting date. In determining the appropriate discount rate, management considers
the interest rates of corporate bonds in the respective currency with at least a AA rating, with extrapolated maturities
corresponding to the expected duration of the defined benefit obligation. The underlying bonds are further reviewed for
quality, and those having excessive credit spreads are removed from the population of bonds on which the discount rate is
based, on the basis that they do not represent high quality bonds. The mortality rate is based on publicly available mortality
tables. Future salary increases and pension increases are based on expected future inflation rates. Management is also
required to make certain assumptions regarding the quantification of the asset ceiling, which impacts the accrued pension
benefit asset recorded on the consolidated statements of financial position.
3.
RECEIVABLES
2024
$
2023
$
Receivables from sales and services
3,008
2,708.
Less: expected credit losses
(126)
(39)
Receivables from sales and services – net
2,882
2,669.
Sales tax receivables
2,849
807.
Other receivables
671
481.
6,402
3,957.
4.
OTHER ASSETS
2024
$
2023
$
Inventories
73
86.
Prepaid expenses, deposits and other
981
748.
Loan receivable (note 22)
―
9,733.
Franchise fees and other intangible assets
412
200.
Total other assets
1,466
10,767.
Less: other assets – current
(1,054)
(10,567)
Other assets – long-term
412
200.
The Company’s loan receivable bore interest at 17.00% and was due from a co-investor in the 1111 Atwater development,
secured by the borrower’s 50% share of the development. The Company collected the loan in full during the year.
Clarke Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024 and 2023
(in thousands of Canadian dollars, except per share amounts)
15
5.
EMPLOYEE FUTURE BENEFITS
The Company measures its accrued benefit obligations and the fair value of plan assets for accounting purposes annually.
The Company has two registered defined benefit plans (the “Plans”). The most recent actuarial valuations for funding
purposes were completed for the Plans as at December 31, 2023 and December 31, 2022, respectively.
During the prior year, the Company received a distribution from one of its Plans in the amount of $1,427 in accordance with
the surplus withdrawal rules of the Quebec Supplemental Pension Plans Act.
During the prior year, one of the Plans purchased a group buy-out annuity for its members for a cash outlay of $4,482.
The Company manages a portion of the Plans’ investment portfolio (note 13). The Company earns administration and
management fees that include an annual performance fee if returns on plan assets exceed certain thresholds.
Defined benefit plan assets
Fair value of plan assets
2024
$
2023
$
Balance, beginning of year
109,092
114,183.
Interest income
4,961
5,494.
Employee contributions
2
3.
Benefits paid
(2,154)
(1,958)
Non-investment management fees
(334)
(341)
Remeasurement gains (losses)
4,933
(2,380)
Surplus distribution
―
(1,427)
Purchase of group buy-out annuity
―
(4,482)
Balance, end of year
116,500
109,092.
Defined benefit plan obligation
Accrued benefit obligation
2024
$
2023
$
Balance, beginning of year
37,032
38,778.
Current service cost
76
365.
Interest cost
1,658
1,797.
Employee contributions
2
3.
Benefits paid
(2,154)
(1,958)
Remeasurement (gains) losses
(44)
2,104.
Settlements
―
425
Purchase of group buy-out annuity
―
(4,482)
Balance, end of year
36,570
37,032.
Clarke Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024 and 2023
(in thousands of Canadian dollars, except per share amounts)
16
5.
EMPLOYEE FUTURE BENEFITS (CONT’D)
Reconciliations of the funded status of the benefit plans to the amounts recorded on the consolidated statements of financial
position are:
2024
$
2023
$
Fair value of plan assets
116,500
109,092
Accrued benefit obligations
(36,570)
(37,032)
Funded status
79,930
72,060
Impact of asset ceiling, excluding interest
(43,843)
(35,945)
Interest on asset ceiling
(1,762)
(2,363)
Accrued pension benefit asset
34,325
33,752
Elements of the defined benefit recovery recognized in earnings are as follows:
Years ended December 31,
2024
$
2023
$
Current service cost
(76)
(365)
Net interest on surplus
1,542 1,335.
Provision for non-investment management fees
(334)
(341)
Past service cost
―
(425)
Defined benefit recovery
1,132 204.
Elements of the defined benefit recovery (expense) recognized in other comprehensive income are as follows:
Years ended December 31,
2024
$
2023
$
Remeasurement gains (losses) and return on plan assets in excess of discount rate
4,977
(4,484)
Change in amount of asset ceiling
(5,536) 10,830.
Deferred income tax recovery (expense)
151
(1,718)
Defined benefit recovery (expense)
(408)
4,628.
Significant assumptions
2024
%
2023
%
Accrued benefit obligation:
Discount rate
4.60
4.60
Rate of compensation increase
3.00 – 4.00
2.50 – 4.00
Benefit costs for the year:
Discount rate
4.60
5.05
Rate of compensation increase
3.00 – 4.00
2.50 – 4.00
Clarke Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024 and 2023
(in thousands of Canadian dollars, except per share amounts)
17
6.
PROPERTY AND EQUIPMENT
Year ended
December 31, 2024
Land
$
Buildings
and
components
$
Ferry and
vessel dry
dock costs
$
Furniture,
fixtures and
equipment
$
Right-of-
use asset
$
Renovations
in progress
$
Total
$
Beginning balance
31,489
163,920
66
9,677
350
1,424 206,926
Additions
―
4,779
―
4,287
662
2,566
12,294
Disposals
―
(1)
―
―
(321)
―
(322)
Revaluations (note 2)
2,340
13,260
―
―
―
―
15,600
Transfers
―
623
―
568
―
(1,191)
―
Depreciation
―
(7,817)
(35)
(2,445)
(71)
― (10,368)
Ending balance
33,829
174,764
31
12,087
620
2,799 224,130
Valuation
33,829
181,602
―
―
―
― 215,431
Cost, net
―
―
4,820
28,447
659
2,799
36,725
Accumulated
depreciation
―
(6,838)
(4,789)
(16,360)
(39)
―
(28,026)
Net book value
33,829
174,764
31
12,087
620
2,799 224,130
Year ended
December 31, 2023
Land
$
Buildings
and
components
$
Ferry and
vessel dry
dock costs
$
Furniture,
fixtures and
equipment
$
Right-of-
use asset
$
Renovations
in progress
$
Total
$
Beginning balance
49,207
160,491
101
9,097
430
2,378 221,704
Additions
―
2,676
―
2,525
―
6,003
11,204
Disposals
―
―
―
(5)
―
―
(5)
Revaluations (note 2)
2,415
13,685
―
―
―
―
16,100
Transfers to investment
properties (note 7)
(20,133)
(7,650)
―
(1,574)
―
(2,547)
(31,904)
Transfers
―
2,130
―
2,280
―
(4,410)
―
Depreciation
―
(7,412)
(35)
(2,646)
(80)
― (10,173)
Ending balance
31,489
163,920
66
9,677
350
1,424 206,926
Valuation
31,489
168,869
―
―
―
― 200,358
Cost, net
―
―
4,795
24,301
738
1,424
31,258
Accumulated
depreciation
―
(4,949)
(4,729)
(14,624)
(388)
―
(24,690)
Net book value
31,489
163,920
66
9,677
350
1,424 206,926
As at December 31, 2024, the net book value of the Company’s land and buildings and components would have been
$24,079 and $123,008 respectively, had the Company used the cost model, and the net book value of property and
equipment would have been $162,624.
Clarke Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024 and 2023
(in thousands of Canadian dollars, except per share amounts)
18
7.
INVESTMENT PROPERTIES
Year ended December 31, 2024
Buildings
$
Vacant land
$
Under
construction
$
Total
$
Beginning balance
13,828
45
124,613
138,486
Additions
1,613
―
78,341
79,954
Disposals
(3,373)
―
―
(3,373)
Fair value adjustments (note 2)
34,000
―
―
34,000
Transfers
137,072
―
(137,072)
―
Foreign exchange impact
66
―
―
66
Ending balance
183,206
45
65,882
249,133
Year ended December 31, 2023
Buildings
$
Vacant land
$
Under
construction
$
Total
$
Beginning balance
18,431.
45
62,409
80,885.
Additions
195.
―
40,875
41,070.
Disposals
(7,508)
―
―
(7,508)
Fair value adjustments (note 2)
(7,834)
―
―
(7,834)
Transfers from property and equipment
10,575.
―
21,329
31,904.
Foreign exchange impact
(31)
―
―
(31)
Ending balance
13,828.
45
124,613
138,486.
The first phase of the Company’s Talisman residential development on Carling Avenue in Ottawa, ON (the “Talisman”) is
included in ‘Buildings’ in the table above for the year ended December 31, 2024, and was transferred from ‘Under
construction’ upon its substantial completion in 2024. The second phase of the Talisman is included in ‘Under
construction’. The second phase of the Talisman commenced construction during the year and is expected to be completed
in 2026. Additions in the year ended December 31, 2024 are primarily for the Talisman and include capitalized borrowing
costs of $2,516 (2023 – $1,313).
In March 2024, the Company sold the shares of a wholly owned subsidiary, Holloway Lodging US Inc. (“HLUS”), to an
entity owned by the Company’s Chairman and his immediate family member for $3,085 (US$2,299), net of agreed upon
post-closing adjustments. The transaction was non-cash whereby the consideration before post-closing adjustments was the
partial settlement of an unsecured credit facility due to the acquiring entity from the parent company. HLUS included a
vacant investment property located in Houston, TX. As a result of certain post-closing adjustments made during the year,
the Company recorded a loss of $376 on the disposition of HLUS. The Company may be required to record additional
adjustments to this transaction in future periods due to the ultimate settlement of other post-closing adjustments.
During the year ended December 31, 2023, Holloway sold two investment properties located in Houston, TX to unrelated
third parties for total net proceeds of $7,457.
During the year ended December 31, 2023, the Company transferred two assets from property and equipment to investment
properties upon changes in their use. One asset was a hotel that was converted to a residential investment property and one
asset was the land value of a former hotel that was being demolished and is being developed as part of the Talisman
development. The components of that former hotel other than land were fully amortized.
Clarke Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024 and 2023
(in thousands of Canadian dollars, except per share amounts)
19
8.
INCOME TAXES
The provision for income taxes for the years ended December 31 consists of:
Consolidated statements of earnings
2024
$
2023
$
Current income tax
Adjustments in respect of current income tax of previous year
―
(1,879)
Deferred income tax
Relating to origination and reversal of temporary differences
14,189
2,617.
Relating to the change in recoverable amount of a deferred income tax asset
(5,686)
951.
Provision for income taxes
8,503
1,689.
The provision for income taxes varies from the expected provision at statutory rates for the following reasons:
2024
2023
$
$
Net income before income taxes
46,326
5,113
Provision for income taxes at statutory rate of 26.98% (2023 – 27.07%)
12,499
1,384.
Increase (decrease) from statutory rate:
Effect of difference in statutory rates of subsidiaries
(506)
287.
Non-taxable component of realized/unrealized investment gains (losses)
1,945
(124)
Non-taxable and non-deductible expenses
(71)
(51)
Benefit of previously unrecognized deferred income tax asset
(5,686)
458.
Effect of prior year tax adjustments
326
(168)
Other
(4)
(97)
Provision for income taxes at effective rate
8,503
1,689.
The ultimate realization of deferred income tax assets is dependent upon taxable income during the periods in which those
temporary differences become deductible. In concluding that it is probable that the recorded deferred income tax assets will
be realized, management has relied upon existing taxable temporary differences, expected generation of taxable income and
tax planning opportunities as support for the recorded amounts.
As at December 31, 2024, there was no deferred income tax liability recognized for taxable temporary differences related to
undistributed profits of certain of the Company’s subsidiaries as the Company is able to control and determine whether to,
and the method for distributing, those profits and has determined that those taxable temporary differences will not reverse in
the foreseeable future. The taxable temporary differences associated with investments in subsidiaries for which a deferred
income tax liability has not been recognized aggregate to $74,257 (2023 – $24,519).
As at December 31, 2024, the Company had non-capital losses carried forward for tax purposes of $8,638 (2023 – $8,022)
in Canada and US$ nil (2023 – US$18,455) in the United States.
Certain deferred income tax assets have not been recognized:
2024
$
2023
$
Property and equipment
―
613
Non-capital loss carry forwards
203
5,231
Total
203
5,844
Clarke Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024 and 2023
(in thousands of Canadian dollars, except per share amounts)
20
8.
INCOME TAXES (CONT’D)
The significant components of the Company’s deferred income tax assets and liabilities are as follows:
Year ended
December 31, 2024
Deferred income
tax asset (liability)
beginning of year
$
Recognized
directly in
equity
$
Recognized
directly in
earnings
$
Deferred income
tax asset (liability)
end of year
$
Property and equipment and investment
properties
(4,978)
(2,742)
(10,785)
(18,505)
Employee future benefits
(9,135)
151
(275)
(9,259)
Losses carried forward
2,077
―.
2,708
4,785
Other
174
41
(151)
64
(11,862)
(2,550)
(8,503)
(22,915)
Deferred income tax assets
130
174
(191)
113
Deferred income tax liabilities
(11,992)
(2,724)
(8,312)
(23,028)
(11,862)
(2,550)
(8,503)
(22,915)
Year ended
December 31, 2023
Deferred income
tax asset (liability)
beginning of year
$
Recognized
directly in
equity
$
Recognized
directly in
earnings
$
Deferred income
tax asset (liability)
end of year
$
Intangible assets
(579)
―.
574.
(5)
Property and equipment and investment
properties
(605)
(2,775)
(1,598)
(4,978)
Employee future benefits
(7,771)
(1,718)
354.
(9,135)
Deferred financing fees
(45)
―.
107.
62.
Losses carried forward
5,081.
―.
(3,004)
2,077.
Other
50.
68.
(1)
117.
(3,869)
(4,425)
(3,568)
(11,862)
Deferred income tax assets
3,730.
(1,741)
(1,859)
130.
Deferred income tax liabilities
(7,599)
(2,684)
(1,709)
(11,992)
(3,869)
(4,425)
(3,568)
(11,862)
9.
SHORT-TERM INDEBTEDNESS
The Company has two secured credit facilities with Canadian chartered banks. The borrowing capacity of the first credit
facility is determined by a borrowing base calculation, subject to a maximum of $55,000. This credit facility bears interest
at prime plus 1.50% or based on a spread to the Canadian Overnight Repo Rate Average (CORRA). As of December 31,
2024, the Company had drawn $9,414 on this facility (2023 – $3,763), and the borrowing base yielded a maximum draw of
$55,000 (2023 – $47,761). The aggregate carrying value of the six hotel properties and ferry operations securing this facility
is $86,490 (2023 – $80,790).
The Company has a second credit facility with a maximum borrowing capacity of $30,000. This credit facility bears interest
at prime plus 1.00%. As of December 31, 2024, the Company had drawn $17,000 on this facility (2023 – $nil). This
facility, and a corresponding term loan (note 12), are secured by five hotel properties with a carrying value of $96,449 (2023
– $88,062).
The interest rate of both facilities was renegotiated subsequent to December 31, 2024, and both facilities now bear interest
at prime plus 0.50%. Both credit facilities are subject to an annual review and are due on demand. Any decline in the fair
value or the profitability of the pledged assets may limit the Company's access to the full amount of these credit facilities.
Clarke Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024 and 2023
(in thousands of Canadian dollars, except per share amounts)
21
10.
ACCOUNTS PAYABLE AND OTHER LIABILITIES
2024
$
2023
$
Accounts payables
7,674
11,427
Accrued liabilities
17,134
14,846
24,808
26,273
At December 31, 2024, the Company had $6,268 (2023 – $nil) of construction accounts payable due under terms lasting
more than one year, which were presented as long-term on the statements of financial position.
11.
CONVERTIBLE DEBENTURES
2023
$
Beginning balance
34,146.
Accretion
61.
Conversion to common shares
(84)
Face value of debentures redeemed
(34,916)
Loss on modification and redemption
793.
Ending balance
―.
On July 28, 2023, the Company redeemed all of the remaining debentures from the debenture holders. The cash outlay was
$35,384 including $468 of accrued interest and the Company recorded a net loss of $793 on the redemption. The debentures
bore interest at 6.25%, were traded under the symbol CKI.DB and were convertible at a conversion price of $13.74 per
Clarke Inc. common share.
12.
LONG-TERM DEBT
On October 30, 2023, the Company extended a loan facility comprised of a $25,000 term loan and a $30,000 revolving line
of credit (note 9), (the “Combined Facility”). The term loan was extended for four years and matures in November 2027,
has a fixed interest rate of 6.95% and a 25-year amortization period. The Combined Facility is secured by five hotels.
On June 28, 2023, the Company entered into a $35,000 unsecured credit facility with a related party, which was used to
finance the redemption of the Company’s debentures (note 11). This facility bears interest at 6.00% and has interest-only
payments until January 1, 2028, whereby afterwards the facility will continue as a revolving line of credit, due on demand.
The following table summarizes the significant changes in long-term debt:
2024
$
2023
$
Total long-term debt – beginning balance
122,021
98,352.
Proceeds of long-term debt, net of financing fees
43,519
88,896.
Repayment of long-term debt
(3,013)
(13,404)
Settlement of credit facility in lieu of cash on sale of subsidiary (note 7)
(4,302)
―
Derecognition of long-term debt on disposition of joint operation (note 22)
―
(52,965)
Capitalized interest on construction mortgage
―
1,091.
Accretion
2
51.
Total long-term debt – ending balance
158,227
122,021.
Clarke Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024 and 2023
(in thousands of Canadian dollars, except per share amounts)
22
12.
LONG-TERM DEBT (CONT’D)
2024
$
2023
$
Mortgages payable, with a face value of $43,407, bearing interest at a
weighted average rate of 5.87% and maturing on various dates from
February 2025 to February 2030. Individual first charges on nine hotel
properties and one investment property with a carrying value of $153,234
have been pledged as security for individual mortgages.
43,227
45,708.
Unsecured credit facility due to a related party, with a maximum borrowing
limit of $35,000, bearing interest at 6.00% (note 13).
30,000
35,000.
Construction mortgage, with a maximum borrowing limit of $85,000,
bearing interest at the lender’s prime rate, secured by the Talisman
development.
85,000
41,313.
Total long-term debt
158,227
122,021.
Less: current portion of long-term debt
(90,637)
(1,845)
Long-term portion
67,590
120,176.
13.
RELATED PARTY DISCLOSURES
The Company had, other than those disclosed elsewhere in these consolidated financial statements, the following related
party transactions in the normal course of operations and measured at fair value, representing the amount of consideration
established and agreed to by the related parties:
(i) The Company was a party to rental and information technology agreements with companies owned by the
Company’s Chairman and his immediate family member. During 2024, the Company incurred $331 (2023 – $287)
under these agreements.
(ii) The Company provided administrative and asset management services to the Plans and charged $1,053 for services
during the year ended December 31, 2024 (2023 – $910).
(iii) The Company provided and received services with entities owned by the Company’s Chairman and his immediate
family member of $617 (2023 – $277). The Company provided hotel management services in exchange for
receiving legal, accounting, tax, construction, and pre-construction consulting services.
(iv) During the year ended December 31, 2023, the Company entered into a 6.00%, $35,000 unsecured credit facility
with an entity owned by the Company’s Chairman and his immediate family member. Interest incurred in the year
on this credit facility was $1,905 (2023 – $909).
Key management consists of the directors and officers of the Company. The compensation expensed is as follows:
Year ended December 31, 2024
Directors
$
Officers
$
Total
$
Salary and fees
124
396
520
Pension value
64
10
74
Total
188
406
594
Clarke Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024 and 2023
(in thousands of Canadian dollars, except per share amounts)
23
14.
COMMITMENTS
Under the terms of the Company's hotel franchise agreements, which expire at various dates through to 2042, franchise fees
are due to franchise companies on all but two of the Company’s hotels. The franchise fees paid to franchisors are a function
of hotel revenue.
The Company remains a guarantor on the construction loan of a former joint operation for an aggregate amount of $27,700
(note 22). The Company expects the guarantee to be released in 2025 and has an indemnity agreement with its former
partners for this guarantee until it is released.
Capital commitments consist of the future commitments related to the construction of the second phase of the Talisman,
which began in 2024 and is expected to be completed in 2026. Remaining contracted capital expenditures for this project
not yet incurred are approximately $118,000.
15.
SHARE CAPITAL AND EARNINGS PER SHARE
As at and for the year ended December 31,
2024
2023
# of shares
$
# of shares
$
Authorized
Unlimited number of common shares – no par value
Unlimited number of first preferred shares
Unlimited number of second preferred shares
Issued
Outstanding common shares, beginning of year
13,959,157
82,574 14,069,144 83,190
Common shares repurchased for cancellation
(7,800)
(46)
(116,100)
(700)
Common shares issued upon conversion of debentures
―
― 6,113 84
Outstanding common shares, end of year
13,951,357
82,528 13,959,157 82,574
Earnings per share
2024
2023
Earnings
$
Weighted
average shares
(in thousands)
#
Per
share
amount
$
Earnings
$
Weighted
average shares
(in thousands)
#
Per
share
amount
$
Basic and diluted earnings per
share
37,823
13,956
2.71
3,424
14,004
0.24
As of December 31, 2024 and 2023, the Company did not have any potentially dilutive instruments.
Common share activity
During the year ended December 31, 2024, the Company purchased for cancellation 7,800 (2023 – 116,100) common shares
at a cost of $125 (2023 – $1,482). The purchase price in excess of the historical book value of the shares in the amount of
$79 (2023 – $782) has been charged to retained earnings, and $46 (2023 – $700) has been charged to share capital. The
common share repurchases in the years ended December 31, 2024, and 2023 were completed under the Company’s normal
course issuer bids.
Clarke Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024 and 2023
(in thousands of Canadian dollars, except per share amounts)
24
16.
INVESTMENT AND OTHER INCOME
Investment and other income is comprised of the following:
2024
$
2023
$
Fair value adjustments and realized gains (losses) on
investment properties (note 2)
34,000
(7,837)
Revaluation gains on hotel properties (note 2)
3,900
4,300
Interest income
876
4
Pension recovery (note 5)
1,132
204
Gain (loss) on disposal of property and equipment
78
(5)
Loss on redemption of debentures (note 11)
―
(793)
Foreign exchange gains
89
―
Realized gain on disposal of joint operation (note 22)
―
8,116
Loss on disposal of subsidiary (note 7)
(376)
―
39,699
3,989.
17.
EXPENSES BY NATURE
A summary of operating expenses, costs of services provided, general and administrative expenses, and property taxes and
insurance is presented below:
2024
$
2023
$
Salaries, wages and employee benefits
23,554
25,036
Materials, supplies, repairs and utilities
13,976
15,414
Food, beverage and service costs
2,320
2,746
Royalty and franchise fees
2,784
2,900
Property taxes
3,259
3,341
Other general and administrative
2,365
2,844
Professional fees
702
1,111
Information technology and support
657
693
Insurance
1,031
916
50,648
55,001
18.
INTEREST AND ACCRETION
Interest and accretion expense is comprised of the following:
2024
$
2023
$
Interest on short-term indebtedness
2,982
2,590
Interest on long-term debt and debentures
4,547
4,487
Accretion
2
110
7,531
7,187
Clarke Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024 and 2023
(in thousands of Canadian dollars, except per share amounts)
25
19. SUPPLEMENTAL CASH FLOW INFORMATION
Adjustments for items not involving cash
2024
$
2023
$
Depreciation and amortization
10,563
10,179.
Revaluation gains on hotel properties (note 2)
(3,900)
(4,300)
Fair value adjustments and realized losses (gains) on investment properties
(note 2)
(34,000)
7,837.
Realized gain on disposal of joint operation (note 22)
―
(8,116)
Deferred income tax expense (note 8)
8,503
3,568.
Non-cash long-term incentive recovery
―
(213)
Accretion
2
110.
Unrealized foreign exchange gains
(102)
―.
Pension recovery (note 5)
(1,132)
(204)
Loss on disposal of subsidiary (note 7)
376
―.
Loss (gain) on disposal of property and equipment
(78)
5.
Loss on redemption of debentures (note 11)
―
793.
(19,768)
9,659.
Net change in non-cash working capital balances
2024
$
2023
$
Receivables
(2,445)
885.
Other assets
(589)
458.
Accounts payable and other liabilities
2,703
523.
Income taxes payable
281
(1,868)
(50)
(2)
2024
$
2023
$
Income taxes paid
70
356.
Interest received
1,015
4.
Interest paid
10,072
8,489.
20.
CAPITAL DISCLOSURES
The Company’s capital consists of shareholders’ equity and interest-bearing debt. The objectives of the Company’s capital
management program are to maintain a level of capital that complies with existing debt covenants, optimizes the cost of
capital, funds its business strategies, provides returns to shareholders and builds long-term shareholder value. To maintain
or adjust its capital structure, the Company may, from time to time, issue new shares, secure new debt, repurchase existing
debt or shares and/or adjust the amount of dividends paid to shareholders. The Company was in compliance with all debt
covenants as at December 31, 2024 and 2023.
Clarke Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024 and 2023
(in thousands of Canadian dollars, except per share amounts)
26
21. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The carrying value of the Company’s cash, receivables, loan receivable, short-term indebtedness and accounts payable and
other liabilities approximates their fair value due to the short-term maturity of these instruments.
The fair value of long-term debt is determined using internal valuation techniques which incorporate the discounted future
cash flows using discount rates that reflect current market conditions for debt instruments with similar interest rates, terms
and risk. The fair values do not necessarily represent the amounts the Company might pay in actual market transactions. The
carrying value and fair value of the Company’s outstanding long-term debt at December 31, 2024 was $158,227 and
$160,237 (2023 – $122,021 and $118,630), respectively.
The Company uses the following hierarchy in attempting to maximize the use of observable inputs and minimize the use of
unobservable inputs, primarily using market prices in active markets:
Level 1 – Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a
market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing 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 that can be corroborated by observable market data for
substantially the full term of the asset or liability.
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.
The Company’s assets recognized and measured at fair value include certain classes of property and equipment totalling
$208,593 (note 6) and investment properties of $249,133 (note 7). Both are classified as level 3 in the fair value hierarchy.
Risks associated with financial assets and liabilities
The Company is exposed to various financial risks arising from its financial assets and liabilities. These include market
risk, liquidity risk and credit risk. To manage these risks, the Company performs detailed risk assessment procedures at the
individual investment level, under the framework of a global risk management philosophy.
Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in
market prices. Market risk is typically comprised of equity price risk, interest rate risk and foreign exchange risk. Given the
Company’s holdings at December 31, 2024, equity price risk and foreign exchange risk are considered insignificant.
Interest rate risk
The Company’s interest rate risk arises from long-term debt with variable rates, which expose it to cash flow
interest rate risk. It manages its exposure to interest rate risk by using a combination of fixed rate debt and variable
debt, so changes to cash flows are mitigated by changes in interest rates. The weighted average interest rate on its
long-term debt is 5.67% with a weighted average maturity of approximately 1.7 years.
The Company has one construction loan, two hotel-secured mortgages and two revolving credit facilities that use
variable rates. At December 31, 2024, the after-tax, annualized net income effect of a 1% change in interest rates
would have been $831 on variable rate debt of $113,775.
Clarke Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024 and 2023
(in thousands of Canadian dollars, except per share amounts)
27
21. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONT’D)
Credit risk
Credit risk refers to the risk that a counterparty will fail to fulfill its obligations under a contract and, as a result, will cause
the Company to suffer a loss. This risk is mitigated through credit policies that limit transactions according to
counterparties’ credit quality. The Company assesses the credit quality of all counterparties, considering their financial
position, past experience and other factors. The maximum exposure to credit risk associated with financial assets is the total
carrying value of the Company’s receivables, and loan receivable, which was repaid in full during 2024.
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting its financial obligations. The Company
believes it has access to sufficient capital through cash on hand, operating cash flows and existing or other borrowing
facilities to meet these obligations. The Company monitors and forecasts its cash balances and cash flows generated from
operations to meet its required obligations. As at December 31, 2024, the Company had cash on-hand of $809 and available
undrawn revolving facilities of $58,586.
The following table shows the current timing of contractual payments of the Company’s liabilities:
Due within
1 year
$
1 to 3 years
$
3 to 5 years
$
After 5 years
$
Accounts payable and other liabilities
24,808
3,877
1,561
830
Short-term indebtedness
26,414
―
―
―
Lease obligations
95
190
190
97
Long-term debt
90,652
37,167
30,595
―
Interest on long-term debt
7,800
7,503
1,825
―
149,769
48,737
34,171
927
22.
JOINT OPERATION
The Company exercised its put right in the 1111 Atwater co-ownership agreement and subsequently exited this investment
on December 21, 2023 for net proceeds of $26,209, comprised of $16,476 of cash and a $9,733 loan receivable (note 4). As
a result, the Company derecognized its share of the development’s assets and liabilities and recognized a gain of $8,116
during the year ended December 31, 2023.
During the year ended December 31, 2023, revenue of $954 and operating expenses of $2,394 related to the joint operation
are included in the consolidated statements of earnings.
Clarke Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024 and 2023
(in thousands of Canadian dollars, except per share amounts)
28
23. SEGMENTED INFORMATION
The Company operates in two reportable business segments. The Investment segment represents the Company’s investment
properties, loan receivable and ferry business. The Hospitality segment consists of the Company’s ownership, management
and operation of hotels. The Other category is not a segment and is disclosed for reconciliation purposes. The Other
category consists of the Company’s treasury and executive functions, pension plans and its unsecured credit facility.
Revenue in the Other category is primarily investment management fees.
Transactions between the segments are recorded at fair value, which is the amount of consideration established and agreed
to by management. Reconciling items represent eliminations for services provided between the segments.
The Company no longer has material assets or operations located outside of Canada.
Year ended December 31, 2024
Investment
$
Hospitality
$
Other
$
Eliminations
$
Total
$
Revenue and other income:
Hotel and rental revenue and provision of
services
12,696
61,620
1,083
(30)
75,369
Investment and other income
34,541
3,912
1,246
―
39,699
47,237
65,532
2,329
(30)
115,068
Operating expenses before the undernoted
8,013
39,716
2,949
(30)
50,648
Depreciation and amortization
37
10,447
79
―
10,563
Interest and accretion
1,791
3,230
2,510
―
7,531
Income (loss) before income taxes
37,396
12,139
(3,209)
―
46,326
Assets
250,268
230,409
35,701
―
516,378
Liabilities
110,946
85,862
42,628
―
239,436
Capital expenditures
79,954
12,294
―
―
92,248
Year ended December 31, 2023
Investment
$
Hospitality
$
Other
$
Eliminations
$
Total
$
Revenue and other income:
Hotel and rental revenue and provision of
services
8,398.
64,207
910.
(24)
73,491
Investment and other income (loss)
279.
4,295
(585)
―.
3,989
8,677.
68,502
325.
(24)
77,480
Operating expenses before the undernoted
9,820.
42,507
2,698.
(24)
55,001
Depreciation and amortization
59.
10,049
71.
―.
10,179
Interest and accretion
―.
5,014
2,173.
―.
7,187
Income (loss) before income taxes
(1,202)
10,932
(4,617)
―.
5,113
Assets
139,104.
221,197
34,829.
―.
395,130
Liabilities
62,141.
56,041
46,259.
―.
164,441
Capital expenditures
44,964.
9,263
―.
―.
54,227
Assets located outside of Canada
3,342
―.
―.
―.
3,342
Clarke Inc.
168 Hobsons Lake Drive, Suite 300
Beechville, NS B3S 0G4
www.clarkeinc.com