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2016 CONTENTS
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2016 HIGHLIGHTS
FINANCIAL HIGHLIGHTS – CONTINUING OPER ATIONS
Revenues increased 8.3% to $ 354 million
Adjusted EBITDA grew to $ 39.2 million, which is 11.1%
of revenue
Total debt reduced by $ 38.2 million
Shareholder equity increased by $ 34.6 million
Issued $ 46 million of convertible debentures to December 31,
2021 and lowered effective interest cost by 0.5%
Organic growth of USA revenue by 15%
OPER ATIONAL HIGHLIGHTS
Increased services and revenue from participating
in the operation and management of the assets we design,
for example:
Developed solutions to manage assets within
education, healthcare, transit, and office facilities
Expanded our presence in India with a number
of new contracts, including project management and
consulting for the implementation of Bhubaneswar’s
Smart City Strategy
Implemented an intelligent water delivery and
management system – a world-first technology
that dramatically reduces energy use and cost
of water delivery for cities
Progressed major Canadian P3 transit infrastructure
contracts, including Eglinton Crosstown LRT, vivaNEXT,
and Edmonton Valley Line LRT
Reflecting the re-emergence of manufacturing in the
USA, delivered automotive facilities for Porsche, GM,
Mercedes, and BMW and the design of data centres
for GM and Ford, supporting the industry shift into the
mobility business
Our IBI Learning+ practice was awarded over 20 design
commissions for new education facilities projects
in the USA in 2016
Supported by significant population growth in major
Canadian markets, demand for multi-unit housing
in our high-rise residential practice remains strong
FOUNDED 1974
PUBLICLY TRADED SINCE 2004
CORPORATE HEAD OFFICE TORONTO
THREE SECTORS OF EXPERTISE INTELLIGENCE, BUILDINGS, INFRASTRUCTURE
2016 REVENUES FROM CONTINUING OPERATIONS $ 354 MILLION
We are a globally integrated design and
technology firm. We design every aspect
of a truly integrated city for people to
live, work, and play.
OUR MISSION
Defining the Cities of Tomorrow
We define how cities look, how cities feel, and how cities work.
OUR VISION
We are the global partner to plan, design, build, and sustain
the cities of tomorrow.
We are holistically minded, design inspired, and technology-driven.
OUR VALUES
Integrity
We do what is right.
Partnerships
We work together.
Excellence
We pursue design excellence.
Innovation
We embrace ingenuity.
Community
We build community.
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2016 PROJECT HIGHLIGHTS
1
ONTARIO CENTRAL REGION
COMPASS TRANSPORTATION
MANAGEMENT CENTRE
TORONTO, ON, CANADA
IBI Group led a program of
intelligence projects for the
Greater Toronto Area’s largest
traffic control centre. The
facility has been designed
as a central hub for event and
disaster management, enabling
collaboration among local
transportation agencies.
CANADA WEST
17% OF REVENUES
CANADA EAST
36% OF REVENUES
UK /IREL AND
9% OF REVENUES
INTERNATIONAL
5% OF REVENUES
USA WEST
16% OF REVENUES
USA EAST
17% OF REVENUES
EUROPE
MEXICO
CARIBBEAN
MIDDLE EAST
INDIA
CHINA
COUNTRIES
REGIONS
OFFICES
EMPLOYEES
11 6
64
2500
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4
5
511 TRAVELLER
INFORMATION
LOCATIONS ACROSS
THE USA
IBI Group continued to increase
USA market share of the 511
traveler information system
with major new contracts and
successful rollouts across five
states, incorporating software
as a service (SaaS) model. This
technology currently reaches
one in four Americans.
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PARQ VANCOUVER
VANCOUVER, BC, CANADA
ONE EMPIRE PASS
DEER VALLEY, UT, USA
IBI Group is Architect
of Record for this 800,000
square foot urban resort
located in the city’s
entertainment district,
which will feature a casino,
two hotels, numerous
restaurants, and
convention facilities.
One Empire Pass is an intimate
community of private ski-in /
ski-out residences in the Deer
Valley Resort. The community
was conceived to create open,
vibrant living, activity, and
gathering spaces that foster
social relationships among
all families.
LOS ANGELES CIVIC
CENTER MASTER PL AN
LOS ANGELES, CA, USA
The proposed master land use
plan, developed in partnership
with Ernst & Young, is a first
of its kind ‘Civic Innovation
District,’ with the potential to
guide future development in
the area for the next 15 years.
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LEARN
IBI Learning+ creates learning
environments that are healthy
and connected.
CARDIFF UNIVERSIT Y BRAIN RESEARCH
IMAGING CENTRE (CUBRIC)
CARDIFF, WALES, UK
Project Highlights
• Opened by Her Majesty The Queen and His Royal
Highness The Duke of Edinburgh on June 7, 2016
• One of four MRI laboratories houses the 3T
Connectom MRI, an imaging machine so powerful
it has been compared to the Hubble Space Telescope;
it is also the first of its kind in Europe and the second
of its kind in the world
• A clinical cluster that brings together the academic
community, working clinicians, and private industry
• Rated BREEAM ‘Excellent’
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LIVE
IBI Living+ designs for diverse
living choices and resilient
communities.
ONE PACIFIC
VANCOUVER, BC, CANADA
Project Highlights
• Recipient of Best Urban High-Rise Residential
and Vancouver Sun Reader’s Choice Award at the
Pacific Region Urban Development Institute Awards
for Excellence
• Site incorporates public initiatives including dedicated
pedestrian and bike lanes and street extensions
• Building infrastructure connects to neighbourhood
energy utility for domestic hot water and heating
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HEAL
IBI Healthcare+ focuses on
improving the patient experience,
inside and outside the
hospital walls.
WOMEN’S COLLEGE HOSPITAL
TORONTO, ON, CANADA
Project Highlights
• First patient-centred, ambulatory care hospital
in Ontario
• Recipient of the Silver Award for Project Development
from the Canadian Council for Private Public
Partnerships (CCPPP) and the Generative Space
Award from the CARITAS Project
• Pilot hospital for IBI Group’s Healthcare Challenge –
a research project exploring how technology can
improve the patient experience
• Designated LEED ® Gold
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MOVE
IBI Group is engineering urban
journeys that shape vibrant cities.
MISSISSAUGA BUS RAPID TRANSIT
MISSISSAUGA, ON, CANADA
Project Highlights
• An 18 km regional transit corridor that connects
with Toronto public transit
• Conceptual design for all 12 proposed stations,
and subsequent construction documents for the
10 new stations
• Facilities include commuter parking, Kiss & Ride,
and Bike & Ride
Tahoe Station
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Central Parkway Station
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RESILIENT CITY, RESILIENT FIRM
We’re shaping the future of cities at every scale. From software creation
to product design to fully livable communities, IBI Group is a global leader
in urban growth.
Design and technology have evolved in the last
decade. Architecture, engineering, planning, and
urban design are disciplines that require practitioners
to not only create for what is seen by the eye, but to
account for all that is unseen, to understand how the
assets they design connect with their ecosystems.
Understanding what is commonly invisible and how
it interacts with space and place is the new charge
for resilient firms today. Technology is allowing us
to design these interactions in new ways – blurring
boundaries between professions, land uses, and
building types, all within the dynamic place that is
our city, our community.
At IBI Group, we believe in creating healthy cities that
are adaptable to change. That’s why we have become
strategic partners with our clients. Our global reach,
accompanied by the breadth of our practice, gives
IBI a unique opportunity to solve local problems
with expertise from a global network.
PIVOTING TOWARDS TECHNOLOGY
Technology underpins the changes we are seeing
in how we live, learn, heal, and move within and
through our communities. IBI Group’s long history
as a technology firm, combined with our extensive
design expertise across sectors, means we are
experts in using intelligence to design the buildings
and infrastructure that make those communities
connected, livable, sustainable, and prosperous.
2016 was a pivotal year for IBI as we strengthened
our Intelligence practice and extended the
incorporation of design technology throughout our
work. We developed new asset management systems
for clients, strengthened our analytics group, and
leveraged an emergent 3D and data visualization
expertise to drive better design outcomes. And these
developments are just the beginning of a burgeoning
product development and operations capability
for the firm.
Financially, with continued growth in revenue and
EBITDA, the redemption of outstanding convertible
debentures, and the refinancing of our debt, we are
in a very stable position to enable and drive growth
through next year and beyond.
In 2017, IBI will continue to have a strong and stabilizing
presence in Canada, while targeting growth in the USA
and select international markets. We are rolling out
a set of strategic initiatives that will not only grow our
core consulting business, but also transition us to
a technology-driven design firm. Additionally, we will
provide even more value to our clients by operating
and maintaining the intelligent systems, buildings, and
infrastructure that we design for them. This will mean
diversifying our existing business model to create more
predictable revenue flows and offer an agile set of
products and services that will help our clients, and
in turn, their cities, be capable of adapting to change.
With the continued expansion of urban regions, the
rising investments in infrastructure globally, and the
increased importance of technology, IBI Group is
ideally positioned for growth.
8
2016 GOALS, STRATEGIES, AND PERFORMANCE
GOALS
STRATEGIES
METRICS
PERFORMANCE
GROW TH
A FOCUSED APPROACH
INCREASE OUR TOP-LINE
REVENUE INCREASED BY $ 27 MILLION
Grow our fee-
based professional
services business.
Focus on major revenue
generators, pursue areas
that have potential for
substantial growth, and
concentrate on higher
margin services.
REVENUE CONSISTENT
WITH INDUSTRY NORMS
TO $ 354 MILLION IN 2016
FINANCIALS
Provide a stable,
sustainable
financial base.
EFFICIENT AND
SUSTAINABLE
Continue to improve our
financial operations and
work on a sustainable
and productive long-
term relationship with
capital markets.
ACHIEVE AN EBITDA
CONSISTENT WITH
INDUSTRY NORMS,
WHICH ARE T YPICALLY
8 –12%
EBITDA INCREASED BY $ 4.9 MILLION
TO $ 39. 2 MILLION IN 2016
REDUCE DAY SALES
OUTSTANDING (DSO)
DSO REDUCED FROM 85 DAYS TO 80 DAYS
AT DECEMBER 31, 2016
OPERATIONS
Maximize efficiency
and effectiveness.
GLOBAL FIRM,
PROFESSIONALLY
MANAGED
Consolidate / regionalize
services, implement
effective internal processes
and systems, and improve
operational efficiency
and responsiveness.
INCREASE FEE REVENUE
SHARE ON PROJECTS BY
LEVERAGING INTERNAL
EXPERTISE
COMMISSIONED TASK FORCES ON QUALIT Y
MANAGEMENT AND SUSTAINABILIT Y,
ENSURING COMMON, FIRM-WIDE
STANDARDS AND APPROACHES
INCREASE
COLL ABORATION
BET WEEN OFFICES
ADOPTION OF COMPANY-WIDE ERP SYSTEM
TALENT
THOUGHT LEADERSHIP
REDUCE VOLUNTARY
VOLUNTARY TURNOVER REDUCED BY 7.8%
Nurture and
develop our internal
pool of talent.
Encourage a culture of
curiosity and innovation,
engage, support and
mentor staff, and hire
the best and brightest.
TURNOVER
INCREASE STAFF
DEVELOPMENT
OPPORTUNITIES
• EXECUTED FIRM-WIDE PROJECT MANAGEMENT
AND FINANCE 101 TRAINING
• 2,300+ COURSE CERTIFICATES ISSUED BY THE
‘IBIU’ INTERNAL TRAINING PROGRAM
DEVELOP GREATER
DIVERSIT Y AMONG STAFF
• LAUNCHED COMPANY WELLNESS PROGRAM
• LAUNCHED WOMEN’S LEADERSHIP NET WORK
AGILIT Y
A NET WORKED AND
INCREASE OUR
ADOPTED ADVANCED VISUALIZ ATION TOOLS
Increase flexibility,
adaptability,
and resilience.
DIVERSIFIED COMPANY
INTELLIGENCE REVENUE
Diversify our regional
services, strengthen our
cross-sector initiatives,
share resources and
information, and
collaborate across
geographies.
SHARE IN THE BUILDINGS
AND INFRASTRUCTURE
SECTORS
DIVERSIF Y OUR BUSINESS
• DEVELOPED SOLUTIONS TO MANAGE ASSETS
TO ENCOMPASS OPERATIONS
AND MAINTENANCE AS WELL
AS DESIGN CONSULTING
WITHIN FACILITIES ACROSS MULTIPLE SECTORS
• OPERATED 511 TRAVELLER INFORMATION
SYSTEM, REACHING 1 IN 4 AMERICANS
9
“In 2017, we are making strategic
investments in key markets, especially
in the USA and in software and
technology, allowing IBI to provide
enhanced services to our clients.”
MESSAGE FROM THE CEO,
SCOTT STEWART
2016 was another year of strong growth, solid financial
performance, an improved balance sheet, and corporate
transformation.
IBI Group benefited from continued urbanization, major investments
in infrastructure, and growing needs and opportunities for technology
to better deliver urban services. Canada is still our major market,
but we see solid growth in the USA and International operations.
We have continued our investment in staff, the tools we use and
the procedures we apply, improving the quality of our services,
the employee experience, and ensuring our competitive position
in the market.
Our improved financial standing and debt reduction puts the firm
in a strong position to respond to changes in the political and the
economic environment we have seen over the past year, and make
strategic investments to grow the business.
In 2017, we are making those investments in key markets, especially
in the USA and in software and technology, allowing IBI to provide
enhanced services to our clients. The ultimate objective is to transition
IBI into a technology-based design firm that participates in and
creates value throughout the life of the assets we design. This will
be transformative, changing our business model, strengthening our
relationship with clients, and creating new services for end-users.
SCOTT STEWART
CEO
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MESSAGE FROM THE PRESIDENT,
DAVID THOM
2016 allowed us to leverage our global thought leadership
across different sectors to inspire staff, drive growth, and
respond to the challenges of an urban future.
Three years ago, we set out on the bold task of redesigning IBI Group through
our firm’s first strategic plan. In 2015, we started aligning our practice areas with
our clients’ market segments. Last year’s focus was on tapping our knowledge
base to further strengthen our position as global thought leaders to ensure
strong, sustained growth in the years to come.
We began this journey by looking at our internal knowledge pool. First we
crowd-sourced ideas from our staff on how to leverage our collective experience.
This resulted in a series of staff-driven initiatives to develop emerging leaders,
to foster wellness for staff, and develop a vision for the IBI of the future. The
insights allowed us to conceive a model for staff-directed micro-research.
In addition, an internal design competition produced a series of innovative
healthcare sector, design, and technology solutions that we are now taking
to market.
The energy of these internal initiatives has progressively been channeled to
our clients and followers. We launched our new blog, TH!NK by IBI, showcasing
our multidisciplinary thinking on urban futures. We reenergized our social media
presence by engaging in dialogue about the future of cities. We rolled out our
Instagram account, presenting a visual story of what inspires us. And, we
shared the insights of our first micro-research project, exploring the effects
of driverless cars on cities.
Our strengthened global thought leadership position has not passed unnoticed
by the markets:
• We have won high-profile projects, such as the Bhubaneswar Smart City
Strategy in India and the FTA mobility-on-demand ‘sandbox’ grant in
Portland, Oregon;
• We have completed prominent Healthcare+ projects, such as the award-
winning Women’s College Hospital in Toronto that built on the success
of super-hospitals in Glasgow and Montreal;
• We have bolstered our Living+ practice by winning a USA-wide competition
for Aging in Place and established a seniors studio centre of excellence
to think through the impact of an aging population on cities;
• Our Learning+ practice won the state of Texas’ highest award for educational
facility design and will soon open a $160 M educational village in the fastest
growing school district in Texas.
These and other examples underpin our strong financial performance, particularly
in the USA, where we had double-digit growth during 2016. For 2017, we will
focus on advancing our goal to transform IBI Group into an integrated design and
technology firm. If 2016 is an indication, 2017 will be an even better year for IBI.
DAVID THOM
PRESIDENT
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“The growth in our revenue and profitability
was to the benefit of all shareholders with
our share price more than doubling in 2016.”
MESSAGE FROM THE CHAIR
OF THE BOARD, DALE RICHMOND
With long-term growth in urban markets,
a prosperous, resilient IBI Group is poised
for a strong and sustainable future.
In 2016, IBI Group realized additional potential from the
transformative change it undertook in 2013 under the
leadership of our CEO, Scott Stewart and our President,
David Thom. Benefiting from a sustainable and resilient
platform for growth, we are in a strong financial position
and experienced growth in revenue in 2016.
Through the deployment of a global enterprise resource
planning system, and the enhancement of operational and
financial controls, the firm continued to improve the efficiency
and quality of its operations. The growth in our revenue
and profitability was to the benefit of all shareholders with
our share price more than doubling in 2016.
Economic growth is increasingly concentrated in
urban and infrastructure markets and our core business
is strong and growing. Also, IBI’s long history of systems
and intelligence excellence and innovation, positions the
firm to compete in an industry where technology plays an
increasingly important role. The Board, working with IBI
Group’s senior management, and with the interests of
shareholders in mind, will continue to guide the firm in
ways that will allow it to grow and prosper.
DALE RICHMOND
CHAIR OF THE BOARD
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CONSOLIDATED FINANCIAL STATEMENTS OF IBI GROUP INC. YEARS ENDED DECEMBER 31, 2016 AND 2015 IBI GROUP INC.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(thousands of Canadian dollars)
ASSETS
Current Assets
Cash
Restricted cash
Accounts receivable
Work in process
Prepaid expenses and other current assets
Income taxes recoverable
Total Current Assets
Restricted cash
Other assets
Property and equipment
Investment in equity accounted investee
Intangible assets
Deferred tax assets
TOTAL ASSETS
LIABILITIES AND DEFICIT
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities
Deferred revenue
Vendor notes payable
Income taxes payable
Consent fee notes payable
Finance lease obligation
Onerous lease provisions
Total Current Liabilities
Onerous lease provisions
Finance lease obligation
Credit facilities
Convertible debentures
Other financial liabilities
Deferred tax liabilities
TOTAL LIABILITIES
EQUITY/(DEFICIT)
Shareholders’ Equity/(Deficit)
Share capital
Capital reserve
Contributed surplus
Deficit
Convertible debentures – equity component
Accumulated other comprehensive loss
Total Shareholders’ Equity/(Deficit)
Non-controlling interest
TOTAL EQUITY/(DEFICIT)
TOTAL LIABILITIES AND EQUITY/(DEFICIT)
NOTES
DECEMBER 31,
2016
DECEMBER 31,
2015
6
6,12
6,12
5
9
6,12
7
20
8
9
6,12
5
6,19
9
6,19
6,12
6,12
6
6
6
9
11
11
6
11
$
$
$
$
$
$
$
$
8,008 $ 7,968
3,238
111,771
80,622
11,825
1,796
217,002 $ 217,220
–
108,593
87,052
12,842
507
4,522
421
15,772
–
7,672
16,421
2,010
480
14,923
32
6,891
13,684
261,810 $ 255,240
55,505
50,522
–
1,860
–
37
1,018
54,423
38,675
4,238
1,570
3,067
148
995
108,942 $ 103,116
2,270
67
73,184
43,876
9,089
4,176
3,244
104
72,277
84,720
-
6,660
241,604 $ 270,121
279,667
453
7,397
(269,351)
561
(4,304)
248,422
-
3,002
(272,165)
4,956
(4,220)
14,423 $ (20,005)
5,783
5,124
20,206 $ (14,881)
261,810 $ 255,240
See accompanying notes to the consolidated financial statements.
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IBI GROUP INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
YEAR ENDED DECEMBER 31, 2016
(thousands of Canadian dollars, except per share amounts)
Revenue
Expenses
Salaries, fees and employee benefits
Rent
Other operating expenses
Foreign exchange loss (gain)
Amortization of intangible assets
Depreciation of property and equipment
Decrease in fair value of other financial liabilities
Impairment of financial assets
OPERATING INCOME
Interest expense, net
Other finance costs
FINANCE COSTS
Share of loss of equity accounted investee, net of tax
NET INCOME BEFORE TAX
Current tax expense
Deferred tax (recovery) expense
INCOME TAXES
Net income from continuing operations
Net loss from discontinued operations
NET INCOME
OTHER COMPREHENSIVE LOSS
Items that are or may be reclassified to profit or loss
Loss on translating financial statements of foreign
operations, from continuing operations, net of tax
OTHER COMPREHENSIVE LOSS, NET OF TAX
TOTAL COMPREHENSIVE INCOME
NET INCOME ATTRIBUTABLE TO:
Common shareholders
Non-controlling interests
NET INCOME
TOTAL COMPREHENSIVE INCOME
ATTRIBUTABLE TO:
Common shareholders
Non-controlling interests
TOTAL COMPREHENSIVE INCOME
EARNINGS PER SHARE ATTRIBUTABLE TO
COMMON SHAREHOLDERS
Basic earnings per share
Diluted earnings per share
Basic earnings per share from
continuing operations
Diluted earnings per share from
continuing operations
Basic and diluted earnings per share from
discontinued operations
NOTES
2016
2015
$ 354,140 $ 327,092
14
12(a)
8
7
12
248,869
22,740
41,781
7,363
1,002
4,323
(1,819)
1,653
325,912
229,900
23,466
37,136
(8,699)
784
4,024
-
1,486
288,097
$ 28,228 $ 38,995
12,15
15
25,553
1,642
21,792
908
$ 27,195 $ 22,700
20
9
9
785
$ 1,001 $ 15,510
32
2,908
(5,401)
381
3,793
$ (2,493) $ 4,174
11,336
(1,873)
$ 3,494 $ 9,463
3,494
-
(1,054)
(1,054)
$ 3,389 $ 8,409
(105)
(105)
7,381
2,082
$ 3,494 $ 9,463
2,814
680
$ 2,730 $ 6,559
1,850
$ 3,389 $ 8,409
659
11
11
11
11
$ 0.11 $ 0.41
$ 0.11 $ 0.41
11
$ 0.11 $ 0.49
11
$ 0.11 $ 0.49
11
$ - $ (0.08)
A-3
See accompanying notes to the consolidated financial statements.
3
IBI GROUP INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
IBI GROUP INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 2016
(thousands of Canadian dollars, except per share amounts)
Revenue
Expenses
Rent
Salaries, fees and employee benefits
Other operating expenses
Foreign exchange loss (gain)
Amortization of intangible assets
Depreciation of property and equipment
Decrease in fair value of other financial liabilities
Impairment of financial assets
OPERATING INCOME
Interest expense, net
Other finance costs
FINANCE COSTS
Share of loss of equity accounted investee, net of tax
NET INCOME BEFORE TAX
Current tax expense
Deferred tax (recovery) expense
INCOME TAXES
Net income from continuing operations
Net loss from discontinued operations
NET INCOME
OTHER COMPREHENSIVE LOSS
Items that are or may be reclassified to profit or loss
Loss on translating financial statements of foreign
operations, from continuing operations, net of tax
OTHER COMPREHENSIVE LOSS, NET OF TAX
TOTAL COMPREHENSIVE INCOME
NET INCOME ATTRIBUTABLE TO:
Common shareholders
Non-controlling interests
NET INCOME
TOTAL COMPREHENSIVE INCOME
ATTRIBUTABLE TO:
Common shareholders
Non-controlling interests
TOTAL COMPREHENSIVE INCOME
EARNINGS PER SHARE ATTRIBUTABLE TO
COMMON SHAREHOLDERS
Basic earnings per share
Diluted earnings per share
Basic earnings per share from
continuing operations
Diluted earnings per share from
continuing operations
Basic and diluted earnings per share from
discontinued operations
NOTES
2016
2015
$ 354,140 $ 327,092
12(a)
14
8
7
12
248,869
229,900
22,740
41,781
7,363
1,002
4,323
(1,819)
1,653
325,912
23,466
37,136
(8,699)
784
4,024
-
1,486
288,097
$ 28,228 $ 38,995
12,15
15
25,553
1,642
21,792
908
$ 27,195 $ 22,700
20
9
9
32
785
$ 1,001 $ 15,510
2,908
(5,401)
381
3,793
$ (2,493) $ 4,174
3,494
-
11,336
(1,873)
$ 3,494 $ 9,463
(105)
(105)
(1,054)
(1,054)
$ 3,389 $ 8,409
2,814
680
7,381
2,082
$ 3,494 $ 9,463
$ 2,730 $ 6,559
659
1,850
$ 3,389 $ 8,409
11
11
11
11
$ 0.11 $ 0.41
$ 0.11 $ 0.41
11
$ 0.11 $ 0.49
11
$ 0.11 $ 0.49
11
$ - $ (0.08)
YEAR ENDED DECEMBER 31, 2016
(thousands of Canadian dollars)
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES
Net income
Items not affecting cash:
Onerous lease provision
Depreciation of property and equipment
Amortization of intangible assets
Amortization of deferred financing costs
Impairment of financial assets
Share of loss of equity-accounted investee,
net of tax
Foreign exchange loss (gain)
Interest expense, net
Deferred tax (recovery) expense
Stock option expense
Decrease in fair value of other financial liabilities
Interest paid
Income taxes paid
NOTES
2016
2015
$ 3,494 $ 9,463
7
8
6
20
12
15
9
(951)
4,323
1,002
1,041
1,653
32
7,363
25,553
(5,401)
453
(1,819)
(8,608)
(1,449)
(499)
4,024
784
245
1,486
785
(8,699)
21,792
3,793
-
-
(14,824)
(1,486)
Change in non-cash operating working capital
NET CASH PROVIDED BY OPERATING ACTIVITIES
13
4,164
13,962
$ 30,850 $ 30,826
CASH FLOWS USED IN FINANCING
ACTIVITIES
Payments on principal of notes payable
Payments on principal of credit facilities
Payments on principal of consent fee
Issuance of convertible debentures
Costs from issuance of convertible debentures
Redemption of convertible debentures
Deferred financing costs
Payments on principal of finance lease obligation
Proceeds from shares issued
NET CASH USED IN FINANCING
ACTIVITIES
CASH FLOWS USED IN INVESTING
ACTIVITIES
Purchase of property and equipment
Purchase of intangible assets
Restricted cash
NET CASH USED IN INVESTING ACTIVITIES
Effect of foreign exchange rate fluctuations on
cash held
NET INCREASE (DECREASE) IN CASH
Cash, beginning of period
CASH, END OF PERIOD
19
6
6
6
6
11
7
8
(4,076)
(1,263)
(3,545)
46,000
(2,594)
(57,500)
-
(148)
-
(1,609)
(2,573)
-
-
-
(20,000)
(2,839)
(676)
5,579
$ (23,126) $ (22,118)
(5,529)
(2,070)
629
(5,613)
(1,650)
(4,857)
$ (6,970) $ (12,120)
12
(714)
1,038
$ 40 $ (2,374)
7,968
10,342
$ 8,008 $ 7,968
See accompanying notes to the consolidated financial statements.
3
See accompanying notes to the consolidated financial statements.
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IBI GROUP INC.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY/(DEFICIT)
YEAR ENDED DECEMBER 31, 2016
(thousands of Canadian dollars)
SHARE CAPITAL
Share capital, beginning of period
Shares issued
SHARE CAPITAL, END OF PERIOD
CAPITAL RESERVE
Capital reserve, beginning of period
Stock options
CAPITAL RESERVE, END OF PERIOD
CONTRIBUTED SURPLUS
Contributed surplus, beginning of period
Redemption of 5.75% debentures
Redemption of 6% debentures
Conversion of 7% debentures
CONTRIBUTED SURPLUS, END OF PERIOD
DEFICIT
Deficit, beginning of period
Net income attributable to
common shareholders
DEFICIT, END OF PERIOD
CONVERTIBLE DEBENTURES – EQUITY COMPONENT
Convertible debentures, beginning of period
Redemption of 5.75% debentures
Redemption of 6% debentures
Conversion of 7% debentures
CONVERTIBLE DEBENTURES, END OF PERIOD
ACCUMULATED OTHER COMPREHENSIVE LOSS
Accumulated other comprehensive loss,
beginning of period
Other comprehensive loss attributable to
common shareholders
ACCUMULATED OTHER COMPREHENSIVE LOSS,
END OF PERIOD
NOTES
2016
2015
11
$ 248,422 $ 235,036
13,386
$ 279,667 $ 248,422
31,245
$ - $ -
-
$ 453 $ -
453
3,002
-
2,106
896
-
-
$ 7,397 $ 3,002
3,206
1,189
(272,165)
(279,546)
2,814
7,381
$ (269,351) $ (272,165)
6(b)
6(b)
6(b)
6(b)
4,956
5,852
(896)
-
-
$ 561 $ 4,956
-
(3,206)
(1,189)
(4,220)
(3,398)
(84)
(822)
$ (4,304) $ (4,220)
TOTAL SHAREHOLDERS' EQUITY/(DEFICIT)
$ 14,423 $ (20,005)
NON-CONTROLLING INTEREST
Non-controlling interest, beginning of period
Total comprehensive income attributable to
non-controlling interests
Issuance of shares
NON-CONTROLLING INTEREST, END OF PERIOD
5,124
1,305
11
11
1,850
1,969
$ 5,783 $ 5,124
659
-
TOTAL EQUITY/(DEFICIT), END OF PERIOD
$ 20,206 $ (14,881)
A-5
See accompanying notes to the consolidated financial statements.
5
IBI GROUP INC.
YEAR ENDED DECEMBER 31, 2016
(thousands of Canadian dollars)
SHARE CAPITAL
Share capital, beginning of period
Shares issued
SHARE CAPITAL, END OF PERIOD
CAPITAL RESERVE
Capital reserve, beginning of period
Stock options
CAPITAL RESERVE, END OF PERIOD
CONTRIBUTED SURPLUS
Contributed surplus, beginning of period
Redemption of 5.75% debentures
Redemption of 6% debentures
Conversion of 7% debentures
CONTRIBUTED SURPLUS, END OF PERIOD
DEFICIT
Deficit, beginning of period
Net income attributable to
common shareholders
DEFICIT, END OF PERIOD
CONVERTIBLE DEBENTURES – EQUITY COMPONENT
Convertible debentures, beginning of period
Redemption of 5.75% debentures
Redemption of 6% debentures
Conversion of 7% debentures
CONVERTIBLE DEBENTURES, END OF PERIOD
ACCUMULATED OTHER COMPREHENSIVE LOSS
Accumulated other comprehensive loss,
beginning of period
Other comprehensive loss attributable to
common shareholders
ACCUMULATED OTHER COMPREHENSIVE LOSS,
END OF PERIOD
NON-CONTROLLING INTEREST
Non-controlling interest, beginning of period
Total comprehensive income attributable to
non-controlling interests
Issuance of shares
NON-CONTROLLING INTEREST, END OF PERIOD
NOTES
2016
2015
$ 248,422 $ 235,036
11
31,245
13,386
$ 279,667 $ 248,422
$ - $ -
453
$ 453 $ -
-
-
-
2,106
896
3,002
-
3,206
1,189
$ 7,397 $ 3,002
(272,165)
(279,546)
2,814
7,381
$ (269,351) $ (272,165)
6(b)
6(b)
6(b)
6(b)
4,956
-
(3,206)
(1,189)
5,852
(896)
-
-
$ 561 $ 4,956
(4,220)
(3,398)
(84)
(822)
$ (4,304) $ (4,220)
5,124
1,305
11
11
659
-
1,850
1,969
$ 5,783 $ 5,124
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY/(DEFICIT)
NOTE 1: ORGANIZATION AND DESCRIPTION OF THE BUSINESS
IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
IBI Group Inc. (the “Company”) is a company incorporated pursuant to the provisions of the Canada
Business Corporations Act (the “CBCA”) on September 30, 2010 and is the successor to IBI Income
Fund (the “Fund”), an unincorporated, open-ended limited purpose trust established under the laws of
Ontario.
The Fund was created on July 23, 2004, to indirectly acquire the outstanding Class A partnership units
of IBI Group Partnership (“IBI Group”), a general partnership formed and carrying on business under
the laws of the Province of Ontario. As at December 31, 2016, the Company’s common share capital
consisted of 31,186,819 (2015 – 24,966,744) issued and outstanding shares. Each share entitles the
holder to one vote at all meetings of shareholders.
IBI Group also issued Class B partnership units to IBI Group Management Partnership (the
“Management Partnership”), the entity that carried on the operations of the Fund prior to its acquisition
by the Fund. The Class B partnership units of IBI Group are indirectly exchangeable for shares on the
basis of one share of the Company for each Class B subordinated partnership unit. Class B partnership
units do not entitle the holder to voting rights at the meetings of shareholders of the Company.
If all of the outstanding Class B partnership units were converted to common shares, the common share
capital as at December 31, 2016 would be 37,469,041 (December 31, 2015 – 31,248,966). If the Class
B partnership units were converted, the Management Partnership and affiliated partnerships would hold
37.5% of the voting shares as at December 31, 2016 (December 31, 2015 – 44.5%).
The table below summarizes the ownership of the Company by the Management Partnership and
affiliated partnerships as at December 31, 2016:
NUMBER OF
UNITS HELD
PERCENTAGE
OF TOTAL
OWNERSHIP
Class B partnership units and non-participating voting shares held
by the Management Partnership
Common shares held by the Management Partnership and
affiliated partnerships
6,282,222
16.77%
7,763,329
20.72%
TOTAL SHAREHOLDERS' EQUITY/(DEFICIT)
$ 14,423 $ (20,005)
The table below summarizes the ownership of the Company by the Management Partnership and
affiliated partnerships as at December 31, 2015:
TOTAL EQUITY/(DEFICIT), END OF PERIOD
$ 20,206 $ (14,881)
Class B partnership units and non-participating voting shares held
6,282,222
20.10%
by the Management Partnership
Common shares held by the Management Partnership and
affiliated partnerships
7,619,874
24.40%
NUMBER OF
UNITS HELD
PERCENTAGE
OF TOTAL
OWNERSHIP
See accompanying notes to the consolidated financial statements.
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IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Through IBI Group, the Company is an international, multi-disciplinary provider of a broad range of
professional services focused on the physical development of cities. IBI Group's business is
concentrated in three main areas of development, being intelligence, buildings and infrastructure. The
professional services provided by IBI Group include planning, design, implementation, analysis of
operations and other consulting services related to these three main areas of development.
The table below summarizes the trading symbols of the Company’s securities which are listed on the
Toronto Stock Exchange as at December 31, 2016:
SECURITY
Common shares
7.0% convertible debentures (Option A), $14,755 principal, convertible at
$19.17 per share, matures on June 30, 2019 ("7.0% Debentures")
5.5% convertible debentures, $46,000 principal, convertible at $8.35
per share, matures on December 31, 2021 ("5.5% Debentures")
TRADING SYMBOL
“IBG”
“IBG.DB.C”
"IBG.DB.D"
The Company’s registered head office is 55 St. Clair Ave. West, 7th Floor, Toronto, Ontario, M5V 2Y7.
NOTE 2: BASIS OF PREPARATION
(a) STATEMENT OF COMPLIANCE
These consolidated financial statements of the Company and its subsidiaries (the “consolidated group”)
have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued
by the International Accounting Standards Board (“IASB”) and interpretations of the International
Financial Reporting Interpretations Committee (“IFRIC”).
The consolidated financial statements were authorized for issuance by the Company’s Board of
Directors on March 7, 2017.
(b) BASIS OF MEASUREMENT
These consolidated financial statements were prepared on a going concern basis. Amounts are
recorded under the historical cost convention, except for certain financial liabilities measured at fair
value through profit or loss (“FVTPL”), as described in Note 3(i).
(c) BASIS OF CONSOLIDATION
SUBSIDIARIES
Subsidiaries are entities over which the Company has control. An investor controls an investee when
the investor is exposed, or has rights, to variable returns from its involvement with the investee and has
the ability to affect those returns through its power over the investee. The financial statements of
subsidiaries are included in the consolidated financial statements from the date that effective control
commences and are de-consolidated from the date control ceases.
JOINT ARRANGEMENTS
The Company performs the majority of its construction projects through wholly owned subsidiary entities,
which are fully consolidated. However, a number of projects, particularly some larger, multi-year, multi-
disciplined projects, are executed through partnering agreements. As such, the classification of these
entities as a subsidiary, joint operation, joint venture or associate requires judgment by management to
A-7
7
IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Through IBI Group, the Company is an international, multi-disciplinary provider of a broad range of
professional services focused on the physical development of cities. IBI Group's business is
concentrated in three main areas of development, being intelligence, buildings and infrastructure. The
professional services provided by IBI Group include planning, design, implementation, analysis of
operations and other consulting services related to these three main areas of development.
The table below summarizes the trading symbols of the Company’s securities which are listed on the
Toronto Stock Exchange as at December 31, 2016:
SECURITY
Common shares
7.0% convertible debentures (Option A), $14,755 principal, convertible at
$19.17 per share, matures on June 30, 2019 ("7.0% Debentures")
5.5% convertible debentures, $46,000 principal, convertible at $8.35
"IBG.DB.D"
per share, matures on December 31, 2021 ("5.5% Debentures")
TRADING SYMBOL
“IBG”
“IBG.DB.C”
The Company’s registered head office is 55 St. Clair Ave. West, 7th Floor, Toronto, Ontario, M5V 2Y7.
NOTE 2: BASIS OF PREPARATION
(a) STATEMENT OF COMPLIANCE
These consolidated financial statements of the Company and its subsidiaries (the “consolidated group”)
have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued
by the International Accounting Standards Board (“IASB”) and interpretations of the International
Financial Reporting Interpretations Committee (“IFRIC”).
The consolidated financial statements were authorized for issuance by the Company’s Board of
These consolidated financial statements were prepared on a going concern basis. Amounts are
recorded under the historical cost convention, except for certain financial liabilities measured at fair
value through profit or loss (“FVTPL”), as described in Note 3(i).
Directors on March 7, 2017.
(b) BASIS OF MEASUREMENT
(c) BASIS OF CONSOLIDATION
SUBSIDIARIES
Subsidiaries are entities over which the Company has control. An investor controls an investee when
the investor is exposed, or has rights, to variable returns from its involvement with the investee and has
the ability to affect those returns through its power over the investee. The financial statements of
subsidiaries are included in the consolidated financial statements from the date that effective control
commences and are de-consolidated from the date control ceases.
JOINT ARRANGEMENTS
The Company performs the majority of its construction projects through wholly owned subsidiary entities,
which are fully consolidated. However, a number of projects, particularly some larger, multi-year, multi-
disciplined projects, are executed through partnering agreements. As such, the classification of these
entities as a subsidiary, joint operation, joint venture or associate requires judgment by management to
analyze the various indicators that determine whether control exists. In particular, when assessing
whether a joint arrangement should be classified as either a joint operation or a joint venture,
management considers the contractual rights and obligations, voting shares, share of board members
and the legal structure of the joint arrangement. Subject to reviewing and assessing all the facts and
circumstances of each joint arrangement, joint arrangements contracted through agreements and
general partnerships would generally be classified as joint operations whereas joint arrangements
contracted through corporations would be classified as joint ventures. All current partnering
arrangements are classified as joint operations.
The Company recognizes its assets, liabilities and transactions in relation to its proportionate share of
joint operations in the consolidated financial statements.
TRANSACTIONS ELIMINATED ON CONSOLIDATION
Transactions, balances, income and expenses incurred within the consolidated group are eliminated in
full on consolidation.
NON-CONTROLLING INTEREST
Non-controlling interest in IBI Group is exchangeable into common shares of the Company. Changes in
the equity of IBI Group and distributions to the non-controlling interest are recorded in non-controlling
interest.
(d) FUNCTIONAL AND PRESENTATION CURRENCY
These consolidated financial statements are presented in Canadian dollars, which is the currency of the
primary economic environment in which the Company and its Canadian subsidiaries, including IBI
Group, operate (the “functional currency”).
Each of the Company’s subsidiaries determines its functional currency, and items included in the
financial statements of each subsidiary are measured using that functional currency. The Company’s
foreign operations are translated into its reporting currency (Canadian dollar) as follows: assets and
liabilities are translated at the rate of exchange in effect at the date of the consolidated statement of
financial position, and items of revenues and expenses are translated at the average rate of exchange
for the period. The resulting unrealized exchange gains and losses on foreign subsidiaries are
recognized in accumulated other comprehensive loss (“AOCL”).
Transactions in foreign currencies are translated to the functional currency of the respective entity at
exchange rate in effect on the date of the transaction. Foreign exchange gains and losses on such
transactions, as well as from the translation of monetary assets and liabilities not denominated in the
functional currency of the respective entity, are recorded in earnings. On disposal, or partial disposal, of
a foreign entity, or repatriation of the net investment in a foreign entity, resulting in a loss of control,
significant influence or joint control, the cumulative translation recognized in AOCL relating to that
particular foreign entity is recognized in earnings as part of the gain or loss on sale. On a partial
disposition of a subsidiary that does not result in a loss of control, the amounts are reallocated to the
non-controlling interest in the foreign operation based on their proportionate share of the cumulative
amounts recognized in AOCL. On partial disposition of jointly controlled foreign entities or associates,
the proportionate share of translation differences previously recognized in AOCL is reclassified to
earnings.
References to “$” in these consolidated financial statements denote Canadian dollars and references to
“US$” are to US dollars.
All amounts presented in Canadian dollars have been rounded to the nearest thousand.
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IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(e) USE OF ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of these consolidated financial statements requires management to exercise judgment
and make estimates and assumptions that affect the application of accounting policies on reported
amounts of assets and liabilities, disclosure of contingent liabilities at the date of the consolidated
statement of financial position, and the reported amounts of revenue and expenses for the period
covered by the consolidated statement of comprehensive income (loss). Actual amounts may differ from
these estimates.
Within the context of these consolidated financial statements, a judgment is a decision made by
management in respect of the application of an accounting policy, a recognized or unrecognized
financial statement amount and/or note disclosure, following an analysis of relevant information that may
include estimates and assumptions. Estimates and assumptions are used mainly in determining the
measurement of balances recognized or disclosed in the consolidated financial statements and are
based on a set of underlying data that may include management’s historical experience, knowledge of
current events and conditions and other factors that are believed to be reasonable under the
circumstances. Management continually evaluates the estimates and judgments it uses.
Information about judgments made in applying accounting policies that have the most significant impact
on the amounts recognized in the consolidated financial statements are as follows:
REVENUE RECOGNITION
The Company also enters into contracts that require multiple deliverables, which can include software
and hardware elements. Management applies judgment when assessing whether certain deliverables
in a customer arrangement should be included or excluded from a unit of account to which contract
accounting is applied. The judgment is typically related to the sale and inclusion of third party hardware
and licenses in a customer arrangement, and involves an assessment that principally addresses
whether the deliverable has stand-alone value to the customer that is not dependent upon other
components of the arrangement.
RECOVERABILITY OF ACCOUNTS RECEIVABLE
The Company records accounts receivable net of impairment losses determined based on the age of
the outstanding receivables, factors specific to individual clients and its historical collection and loss
experience.
Information about assumptions and estimation uncertainties that have a significant impact on the
amounts recognized in the consolidated financial statements for the year ended December 31, 2016 are
as follows:
REVENUE RECOGNITION AND DEFERRED REVENUE
The Company accounts for certain of its revenue in accordance with IAS 11 Construction Contracts,
(“IAS 11”) which requires estimates to be made for contract costs and revenues and IAS 18 Revenue
(“IAS 18”). Revenue from fixed-fee and variable-fee-with-ceiling contracts is recognized using the
percentage of completion method based on the ratio of professional costs incurred to total estimated
professional costs. Estimating total professional costs is subjective and requires the use of
management’s best estimate based on the information available at that point in time. The Company also
provides for estimated losses on contracts in-progress in the period in which such losses are
determined. Deferred revenue is recorded when billings to the clients exceeds the revenue that has
been earned based on effort completed at the date of the consolidated statement of financial position.
Changes in the estimates are reflected in the period in which they are made and would affect the
Company’s revenue and work in process.
A-9
9
IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(e) USE OF ACCOUNTING ESTIMATES AND JUDGEMENTS
ACCURACY OF WORK IN PROCESS
The preparation of these consolidated financial statements requires management to exercise judgment
and make estimates and assumptions that affect the application of accounting policies on reported
amounts of assets and liabilities, disclosure of contingent liabilities at the date of the consolidated
statement of financial position, and the reported amounts of revenue and expenses for the period
covered by the consolidated statement of comprehensive income (loss). Actual amounts may differ from
these estimates.
Within the context of these consolidated financial statements, a judgment is a decision made by
management in respect of the application of an accounting policy, a recognized or unrecognized
financial statement amount and/or note disclosure, following an analysis of relevant information that may
include estimates and assumptions. Estimates and assumptions are used mainly in determining the
measurement of balances recognized or disclosed in the consolidated financial statements and are
based on a set of underlying data that may include management’s historical experience, knowledge of
current events and conditions and other factors that are believed to be reasonable under the
circumstances. Management continually evaluates the estimates and judgments it uses.
Information about judgments made in applying accounting policies that have the most significant impact
on the amounts recognized in the consolidated financial statements are as follows:
REVENUE RECOGNITION
The Company also enters into contracts that require multiple deliverables, which can include software
and hardware elements. Management applies judgment when assessing whether certain deliverables
in a customer arrangement should be included or excluded from a unit of account to which contract
accounting is applied. The judgment is typically related to the sale and inclusion of third party hardware
and licenses in a customer arrangement, and involves an assessment that principally addresses
whether the deliverable has stand-alone value to the customer that is not dependent upon other
components of the arrangement.
RECOVERABILITY OF ACCOUNTS RECEIVABLE
The Company records accounts receivable net of impairment losses determined based on the age of
the outstanding receivables, factors specific to individual clients and its historical collection and loss
experience.
as follows:
Information about assumptions and estimation uncertainties that have a significant impact on the
amounts recognized in the consolidated financial statements for the year ended December 31, 2016 are
REVENUE RECOGNITION AND DEFERRED REVENUE
The Company accounts for certain of its revenue in accordance with IAS 11 Construction Contracts,
(“IAS 11”) which requires estimates to be made for contract costs and revenues and IAS 18 Revenue
(“IAS 18”). Revenue from fixed-fee and variable-fee-with-ceiling contracts is recognized using the
percentage of completion method based on the ratio of professional costs incurred to total estimated
professional costs. Estimating total professional costs is subjective and requires the use of
management’s best estimate based on the information available at that point in time. The Company also
provides for estimated losses on contracts in-progress in the period in which such losses are
determined. Deferred revenue is recorded when billings to the clients exceeds the revenue that has
been earned based on effort completed at the date of the consolidated statement of financial position.
Changes in the estimates are reflected in the period in which they are made and would affect the
Company’s revenue and work in process.
The Company records its work in process based on the time and materials charged into each project.
The work in process for each project is reviewed on a monthly basis to determine whether the amounts
recorded are recoverable. Where the review determines that the value of work in process exceeds the
amount that can be invoiced, review of project budgets is performed to determine whether an adjustment
is required to the percentage of completion to accurately reflect revenue earned to date. The percentage
complete is determined by estimating the professional costs to be incurred to complete the project.
ONEROUS LEASE PROVISIONS
The Company recognizes provisions when there is a present legal or constructive obligation as a result
of past events, it is probable that an outflow of resources will be required to settle the obligation, and the
amount can be reliably estimated. Management has recorded a provision related to lease exit liabilities
which requires estimation of the expected sublease income and discount rate reflective of the risk
specific to the obligation.
DETERMINING PROBABLE FUTURE UTILIZATION OF TAX LOSS CARRYFORWARDS
Deferred tax assets are recognized for all unused tax losses to the extent that it is probable that taxable
profit will be available against which the losses can be utilized. Significant management judgment is
required to determine the amount of deferred tax assets that can be recognized, based on the likely
timing and the level of future taxable profits, together with future tax-planning strategies.
NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Unless otherwise indicated, the significant accounting policies followed by the Company set out below
have been applied consistently to all periods presented in these consolidated financial statements.
(a) REVENUE RECOGNITION
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the
Company and the revenue can be reliably measured. Revenue is measured at the fair value of the
consideration received.
Revenue from fixed-fee and variable-fee-with-ceiling contracts is recognized by reference to the stage
of completion using the cost approach. Stage of completion is measured by reference to professional
costs incurred to date as a percentage of total professional costs for each contract. Where the contract
outcome cannot be measured reliably, revenue is recognized only to the extent that the expenses
incurred are eligible to be recovered. Revenue from time-and-material contracts without stated ceilings
and short-term projects, is recognized as costs are incurred. Revenue is calculated based on billing
rates recoverable under the contract for the services performed.
Provisions for estimated losses on contracts in-progress are made in the period in which the losses are
determined. The effect of revisions to estimated revenues and costs is recorded when the amounts are
known or can be reasonably estimated. Where total contract costs exceed, or are expected to exceed,
revenues, the anticipated loss based on a percentage of completion calculation is immediately
recognized as an expense.
Accounts receivable is valued at amortized cost net of allowances for impairment losses (refer to note
3(i) for further discussion on financial instruments).
The Company's software license agreements are multiple-element arrangements as they may also
include maintenance, professional services and hardware. Multiple-element arrangements are
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IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
recognized as the revenue for each unit of accounting is earned based on the relative fair value of each
unit of accounting as determined by an internal analysis of prices. A delivered element is considered a
separate unit of accounting if it has value to the customer on a standalone basis, and delivery or
performance of the undelivered elements is considered probable and substantially under the Company's
control. If these criteria are not met, revenue for the arrangement as a whole is accounted for as a single
unit of accounting.
(b) WORK IN PROCESS AND DEFERRED REVENUE
Work in process represents the fee revenue and recoverable disbursements which have not been billed
but are expected to be billed and collected from clients for contract work performed to date, and is valued
at estimated net realizable value.
Billings in excess of time value incurred on jobs in progress, for which future services will be provided,
are included in deferred revenue in the consolidated statement of financial position.
An allowance account is also maintained on work in process, measured by the estimated amount of
professional costs that are expected not to be invoiced. When work in process is determined not
recoverable, the amount is written off in the reserve for work in process.
(c) CASH
Cash is comprised of cash on hand. Cash balances, which the Company has the ability and intent to
offset, are used to reduce reported bank indebtedness and fund operations.
(d) PROPERTY AND EQUIPMENT
Items of property and equipment are measured at cost less accumulated depreciation, net of
accumulated impairment losses, and amortized over their estimated useful lives as follows:
ASSET
BASIS
RATE
Office furniture and equipment
Computer equipment
Vehicles
Leasehold improvements
Diminishing balance
Straight line
Diminishing balance
Straight line
20%
2 years
20%
Term of lease
Depreciation methods, useful lives and residual values are reviewed at each annual reporting date and
adjusted if appropriate.
The cost of repairs and maintenance of property and equipment are recognized as an expense as
incurred.
A-11
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IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
recognized as the revenue for each unit of accounting is earned based on the relative fair value of each
unit of accounting as determined by an internal analysis of prices. A delivered element is considered a
separate unit of accounting if it has value to the customer on a standalone basis, and delivery or
performance of the undelivered elements is considered probable and substantially under the Company's
control. If these criteria are not met, revenue for the arrangement as a whole is accounted for as a single
unit of accounting.
(b) WORK IN PROCESS AND DEFERRED REVENUE
Work in process represents the fee revenue and recoverable disbursements which have not been billed
but are expected to be billed and collected from clients for contract work performed to date, and is valued
at estimated net realizable value.
Billings in excess of time value incurred on jobs in progress, for which future services will be provided,
are included in deferred revenue in the consolidated statement of financial position.
An allowance account is also maintained on work in process, measured by the estimated amount of
professional costs that are expected not to be invoiced. When work in process is determined not
recoverable, the amount is written off in the reserve for work in process.
(c) CASH
(d) PROPERTY AND EQUIPMENT
Cash is comprised of cash on hand. Cash balances, which the Company has the ability and intent to
offset, are used to reduce reported bank indebtedness and fund operations.
Items of property and equipment are measured at cost less accumulated depreciation, net of
accumulated impairment losses, and amortized over their estimated useful lives as follows:
ASSET
BASIS
RATE
Office furniture and equipment
Diminishing balance
Computer equipment
Vehicles
Leasehold improvements
Straight line
Diminishing balance
Straight line
20%
2 years
20%
Term of lease
Depreciation methods, useful lives and residual values are reviewed at each annual reporting date and
adjusted if appropriate.
incurred.
The cost of repairs and maintenance of property and equipment are recognized as an expense as
(e) INTANGIBLE ASSETS
Intangible assets are initially recorded at fair value at their acquisition date and stated at cost less
accumulated amortization and net impairment losses, where applicable. The cost of intangible assets
with determinable lives is amortized over the period in which the benefits of such assets are expected
to be realized as follows:
ASSET
BASIS
AMORTIZATION
PERIOD
Customer relationships
Contracts backlog
Non-competition provisions
ERP Systems
Straight line
Straight line
Straight line
Straight line
(f) IMPAIRMENT OF NON-FINANCIAL ASSETS
8-10 years
1-2 years
3-4 years
10 years
The Company evaluates the recoverability of property and equipment and intangible assets with
determinable lives for impairment at the end of each reporting period. If there are indicators of
impairment, a review is undertaken to determine whether the carrying amounts are in excess of their
recoverable amounts.
The determination of recoverable amount is based on the higher of value in use or fair value less costs
to sell.
For the purposes of assessing impairment where it is not possible to estimate the recoverable amount
of an individual asset, the recoverable amount of the cash generating unit (“CGU”) to which the asset
belongs is estimated. A CGU is the smallest identifiable group of assets for which there are separately
identifiable cash inflows.
The carrying amount of a CGU includes the carrying amount of only those assets that can be attributed
directly, or allocated on a reasonable and consistent basis, and are expected to generate the future
cash inflows.
An impairment loss is recognized in the consolidated statement of comprehensive income (loss) when
a CGU's carrying amount exceeds its recoverable amount. The impairment loss is allocated on a pro
rata basis to the assets in the CGU.
For property and equipment and intangible assets with determinable useful lives, an impairment loss is
reversed only to the extent that the asset’s carrying value does not exceed the carrying value that would
have been determined, net of amortization, had no impairment loss been recognized.
(g) INCOME TAXES
Income tax expense consists of current tax charge and the change in deferred tax assets and liabilities.
Current tax and deferred tax is recognized in the consolidated statement of comprehensive income
(loss) except to the extent that it relates to a business combination, or to items recognized directly in
equity or other comprehensive loss.
Current tax represents the current tax payable (receivable) on the taxable income (loss) for the period,
calculated in accordance with the rates and legislation of the respective tax jurisdiction in which the
Company operated, enacted or substantively enacted as at the date of the consolidated statement of
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IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
financial position;; it also reflects any adjustment resulting from new information to taxes payable
(recoverable) in respect of previous years.
Deferred tax assets and liabilities are recognized in respect of the expected income tax consequences
attributable to temporary differences between the financial statement carrying values of existing assets
and liabilities in the consolidated statement of financial position and their respective income tax bases.
Deferred tax assets and liabilities are measured using enacted, or substantively enacted, tax rates
expected to apply to taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in the consolidated statement of comprehensive income (loss) in the period that includes the
date of enactment or of substantive enactment of the future tax rates.
Deferred tax assets are recognized for unused tax losses, tax credits, and deductible temporary
differences to the extent that it is probable that future taxable profits will be available against which they
can be utilized. Deferred tax assets are evaluated at each reporting period and are reduced to the extent
that it is no longer probable that future taxable profits will be available against which they can be utilized.
(h) SHARE-BASED COMPENSATION
Cash settled transactions
The Company has a share-based compensation plan (“Deferred Share Plan”) which allows directors to
receive director fees in the form of deferred shares rather than cash. These awards are accounted for
as liabilities at FVTPL. On the grant date, the deferred shares are measured at fair value based on the
market price with subsequent changes to the fair value recorded as salaries, fees and employee benefit
expenses until settled.
Equity settled transactions
The grant date fair value of share based payment awards granted to employees is recognized as an
employee expense, with a corresponding increase in equity, over the period that the employees
unconditionally become entitled to the awards. An option valuation model is used to fair value the stock
options on the grant date. The amount recognized as an expense is adjusted to reflect the number of
awards for which the related service and non-market vesting conditions are expected to be met, such
that the amount ultimately recognized as an expense is based on the number of awards that do meet
the related service and non-market performance conditions at the vesting date.
(i) FINANCIAL INSTRUMENTS
All financial assets and financial liabilities are required to be classified into one of the following
categories:
• Financial assets are classified as either FVTPL, available-for-sale, held-to-maturity investments or
loans and receivables;; and
• Financial liabilities are classified as either FVTPL or other liabilities.
All financial assets and liabilities are initially recognized at fair value plus directly attributable transaction
costs, except for financial assets at FVTPL, for which transaction costs are expensed. Purchases or
sales of financial assets are accounted for at trade dates. All financial liabilities are recognized initially
at fair value and, in the case of loans and borrowings, net of directly attributable transaction costs.
A-13
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IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
financial position;; it also reflects any adjustment resulting from new information to taxes payable
(recoverable) in respect of previous years.
The table below summarizes the classification and subsequent measurement of the Company’s financial
assets and liabilities:
Deferred tax assets and liabilities are recognized in respect of the expected income tax consequences
attributable to temporary differences between the financial statement carrying values of existing assets
and liabilities in the consolidated statement of financial position and their respective income tax bases.
Deferred tax assets and liabilities are measured using enacted, or substantively enacted, tax rates
expected to apply to taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in the consolidated statement of comprehensive income (loss) in the period that includes the
date of enactment or of substantive enactment of the future tax rates.
Deferred tax assets are recognized for unused tax losses, tax credits, and deductible temporary
differences to the extent that it is probable that future taxable profits will be available against which they
can be utilized. Deferred tax assets are evaluated at each reporting period and are reduced to the extent
that it is no longer probable that future taxable profits will be available against which they can be utilized.
(h) SHARE-BASED COMPENSATION
Cash settled transactions
The Company has a share-based compensation plan (“Deferred Share Plan”) which allows directors to
receive director fees in the form of deferred shares rather than cash. These awards are accounted for
as liabilities at FVTPL. On the grant date, the deferred shares are measured at fair value based on the
market price with subsequent changes to the fair value recorded as salaries, fees and employee benefit
expenses until settled.
Equity settled transactions
The grant date fair value of share based payment awards granted to employees is recognized as an
employee expense, with a corresponding increase in equity, over the period that the employees
unconditionally become entitled to the awards. An option valuation model is used to fair value the stock
options on the grant date. The amount recognized as an expense is adjusted to reflect the number of
awards for which the related service and non-market vesting conditions are expected to be met, such
that the amount ultimately recognized as an expense is based on the number of awards that do meet
the related service and non-market performance conditions at the vesting date.
(i) FINANCIAL INSTRUMENTS
categories:
All financial assets and financial liabilities are required to be classified into one of the following
• Financial assets are classified as either FVTPL, available-for-sale, held-to-maturity investments or
loans and receivables;; and
• Financial liabilities are classified as either FVTPL or other liabilities.
All financial assets and liabilities are initially recognized at fair value plus directly attributable transaction
costs, except for financial assets at FVTPL, for which transaction costs are expensed. Purchases or
sales of financial assets are accounted for at trade dates. All financial liabilities are recognized initially
at fair value and, in the case of loans and borrowings, net of directly attributable transaction costs.
FINANCIAL INSTRUMENT
CLASSIFICATION
MEASUREMENT
FINANCIAL ASSETS
Cash
Restricted cash
Accounts receivable
FINANCIAL LIABILITIES
Accounts payable and
accrued liabilities
Deferred share plan liability(1)
Due to related parties
Vendor notes payable
Consent fee notes payable
Finance lease obligation
Credit facilities
Convertible debentures –
liability component
Other financial liability
FVTPL
FVTPL
Loans and receivables
Fair value
Fair value
Amortized cost
Other liabilities
FVTPL
Other liabilities
Other liabilities
Other liabilities
Other liabilities
Other liabilities
Other liabilities
FVTPL
Amortized cost
Fair value
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Fair value
(1) The deferred share plan liability is grouped with accounts payable and accrued liabilities on the consolidated statement of
financial position. See Note 16 – Deferred Share Plan, for further discussion.
FINANCIAL ASSETS AT FVTPL
At the end of each reporting period subsequent to initial recognition, financial assets at FVTPL are
measured at fair value, with changes in fair value recognized directly in the consolidated statement of
comprehensive income (loss) in the period in which they arise.
LOANS AND RECEIVABLES
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are
not quoted in an active market. They are included in current assets, except for those with maturities
greater than 12 months after the date of the consolidated statement of financial position. After their initial
fair value measurement, they are measured at amortized cost using the effective interest rate method,
net of allowance for impairment losses.
IMPAIRMENT
The Company’s policy is to assess at the end of each reporting period whether there is any objective
evidence that a financial asset or group of financial assets is impaired.
The Company maintains an allowance for impairment losses on accounts receivable. The estimate is
based on the best assessment of the collectability of the related receivable balance, based in part, on
the age of the outstanding receivables and in part on the Company’s historical collection and loss
experience. When the carrying amount of the receivable is reduced through the allowance, the reduction
is recognized in impairment of financial assets in the consolidated statement of comprehensive income
(loss).
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IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Subsequent recoveries of the amounts previously written off are charged against the allowance account
and recognized as income in the consolidated statement of comprehensive income (loss).
FINANCIAL LIABILITIES AND EQUITY
Debt and equity instruments are classified as either financial liabilities or as equity (in accordance with
the substance of the contractual arrangement). An equity instrument is any contract that evidences a
residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued
are recorded net of direct issue costs.
Debt securities issued and other liabilities are recognized at fair value on the date that they originated.
Other financial liabilities are recognized initially on the trade date at which the Company becomes party
to the contractual provisions of the instrument. Financial liabilities are classified as either financial
liabilities at FVTPL or as other liabilities.
FINANCIAL LIABILITIES AT FVTPL
At the end of each reporting period subsequent to initial recognition, financial liabilities at FVTPL are
measured at fair value, with changes in fair value recognized directly in the consolidated statement of
comprehensive income (loss) in the period in which they arise.
OTHER FINANCIAL LIABILITIES
Other financial liabilities are recognized initially at fair value, net of any directly attributable transaction
costs. Subsequent to initial recognition, these liabilities are carried at amortized cost using the effective
interest rate method.
EFFECTIVE INTEREST METHOD
The effective interest method calculates the amortized cost of a financial instrument and allocates
interest income or expense over the corresponding period. The effective interest rate is the rate that
discounts estimated future cash flows over the expected life of the financial instrument to the net carrying
amount of the financial instrument on initial recognition.
COMPOUND FINANCIAL INSTRUMENTS
Compound financial instruments issued by the Company consist of convertible debentures that can be
converted into share capital at the option of the holder. The liability component of a compound financial
instrument is measured initially at fair value, calculated as the net present value of the liability without a
conversion option and using a discount rate reflective of a liability instrument without a conversion factor.
The equity and derivative liability component is recognized initially at the difference between the fair
value of the compound financial instrument as a whole and the fair value of the liability component. Any
directly attributable transaction costs are allocated to the liability, derivative liability, and equity
components in proportion to their initial carrying amounts.
Subsequent to initial recognition, the liability component of a compound financial instrument is measured
at amortized cost using the effective interest method. The derivative liability component is remeasured
subsequent to initial recognition at fair value. The equity component of a compound financial instrument
is not remeasured subsequent to initial recognition. Upon derecognition, the equity component of a
compound financial instrument is reclassified to contributed surplus.
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IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Subsequent recoveries of the amounts previously written off are charged against the allowance account
DERECOGNITION OF FINANCIAL INSTRUMENTS
and recognized as income in the consolidated statement of comprehensive income (loss).
FINANCIAL LIABILITIES AND EQUITY
Debt and equity instruments are classified as either financial liabilities or as equity (in accordance with
the substance of the contractual arrangement). An equity instrument is any contract that evidences a
residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued
are recorded net of direct issue costs.
Debt securities issued and other liabilities are recognized at fair value on the date that they originated.
Other financial liabilities are recognized initially on the trade date at which the Company becomes party
to the contractual provisions of the instrument. Financial liabilities are classified as either financial
liabilities at FVTPL or as other liabilities.
FINANCIAL LIABILITIES AT FVTPL
At the end of each reporting period subsequent to initial recognition, financial liabilities at FVTPL are
measured at fair value, with changes in fair value recognized directly in the consolidated statement of
comprehensive income (loss) in the period in which they arise.
Other financial liabilities are recognized initially at fair value, net of any directly attributable transaction
costs. Subsequent to initial recognition, these liabilities are carried at amortized cost using the effective
OTHER FINANCIAL LIABILITIES
interest rate method.
EFFECTIVE INTEREST METHOD
The effective interest method calculates the amortized cost of a financial instrument and allocates
interest income or expense over the corresponding period. The effective interest rate is the rate that
discounts estimated future cash flows over the expected life of the financial instrument to the net carrying
amount of the financial instrument on initial recognition.
COMPOUND FINANCIAL INSTRUMENTS
Compound financial instruments issued by the Company consist of convertible debentures that can be
converted into share capital at the option of the holder. The liability component of a compound financial
instrument is measured initially at fair value, calculated as the net present value of the liability without a
conversion option and using a discount rate reflective of a liability instrument without a conversion factor.
The equity and derivative liability component is recognized initially at the difference between the fair
value of the compound financial instrument as a whole and the fair value of the liability component. Any
directly attributable transaction costs are allocated to the liability, derivative liability, and equity
components in proportion to their initial carrying amounts.
Subsequent to initial recognition, the liability component of a compound financial instrument is measured
at amortized cost using the effective interest method. The derivative liability component is remeasured
subsequent to initial recognition at fair value. The equity component of a compound financial instrument
is not remeasured subsequent to initial recognition. Upon derecognition, the equity component of a
compound financial instrument is reclassified to contributed surplus.
A financial asset is derecognized when the contractual rights to the cash flows from the asset expire or
when the Company transfers the financial asset to another party without retaining control or substantially
all the risks and rewards of ownership of the assets. Any interest in transferred assets that are created
or retained by the Company is recognized as a separate asset or liability.
A financial liability is derecognized when the underlying contractual obligation is legally discharged,
cancelled or expires.
(j) LEASES
The substance of the transaction at inception of the lease determines whether the lease is classified as
operating or finance. Any modification to the terms of a lease requires reassessment by the Company
of the classification of the lease.
OPERATING LEASE
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor
are classified as operating leases. Payments under an operating lease, net of any incentives received
from the lessor, are recognized as rent in the consolidated statement of comprehensive income (loss)
on a straight-line basis over the period of the lease.
FINANCE LEASE
Leases in which substantially all the risks and rewards of ownership are transferred to the Company are
classified as finance leases. Assets which meet the finance lease criteria are capitalized at the lower of
the present value of the related lease payments or the fair value of the leased asset at the inception of
the lease and amortized over the term of the lease. Minimum lease payments are apportioned between
the finance charge and the settlement of the obligation. The finance charge is allocated to each period
during the lease term so as to produce a constant periodic rate of interest on the remaining balance of
the obligation.
(k) PROVISIONS
Provisions are recognized when the Company has a present legal or constructive obligation as a result
of past events, it is probable that an outflow of resources will be required to settle the obligation, and the
amount can be reliably estimated.
Provisions are not recognized for future operating losses. Provisions are measured at the present value
of the expected expenditures to settle the obligation using a discount rate that reflects current market
assessments of the time value of money and the risks specific to the obligation. The increase in the
provision due to passage of time is recognized as an interest expense. All provisions are reviewed at
each reporting date and adjusted to reflect the current best estimate.
ONEROUS CONTRACTS
The Company’s onerous contracts consist of lease exit liabilities. The Company accrues charges when
it ceases to use office space under an operating lease arrangement. The provision is calculated as the
present value of the remaining lease payments, less the recovery of the tenant improvement allowance
and the present value of the expected future sublease income.
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IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4: CHANGES IN ACCOUNTING POLICIES
(a) ACCOUNTING POLICY CHANGES ADOPTED IN 2016
Annual Improvements to IFRS (2012 - 2014) Cycles
In September 2014, the IASB issued narrow-scope amendments to a total of four standards as part of
its annual improvements process. The IASB uses the annual improvements process to make non-urgent
but necessary amendments to IFRS.
The Company adopted these amendments in its consolidated financial statements for the annual period
beginning on January 1, 2016. The adoption of the amendments did not have a material impact on the
consolidated financial statements.
IAS 1 Presentation of Financial Statements
In December 2014, the IASB issued amendments to IAS 1 Presentation of Financial Statements, to
provide guidance on the application of judgment in the preparation of financial statements and
disclosures.
The Company adopted these amendments in is consolidated financial statements for the annual period
beginning on January 1, 2016. The adoption of these amendments did not have a material impact on
the consolidated financial statements.
IFRS 11 Joint Arrangements
In May 2014, IFRS 11 Joint Arrangements (“IFRS 11”) was amended to require an acquisition of a joint
operation that constitutes a business to be accounted for using the principles of business combinations
in IFRS 3 Business Combinations. This amendment applies to both initial and additional interest
acquired in the joint operation.
The Company adopted the amendments to IFRS 11 in its consolidated financial statements for the
annual period beginning on January 1, 2016. The adoption of these amendments did not have a material
impact on the interim financial statements.
(b) FUTURE ACCOUNTING POLICY CHANGES NOT YET ADOPTED
Amendments to IAS 7 Statement of Cash Flows
In January 2016, the IASB issued Disclosure Initiative (Amendments to IAS 7). The amendments
apply prospectively for annual periods beginning on or after January 1, 2017. Earlier application is
permitted.
The amendments require disclosures that enable users of financial statements to evaluate changes in
liabilities arising from financing activities, including both changes arising from cash flow and non-cash
changes.
The Company intends to adopt the amendments to IAS 7 in its financial statements for the annual
period beginning on January 1, 2017. The adoption of these amendments is not expected to have a
material impact on the Company’s financial statements.
Amendments to IAS 12 Income Taxes
In January 2016, the IASB issued Amendments to IAS 12 Income Taxes to provide clarification on the
requirements relating to the recognition of deferred tax assets for unrealized losses on debt
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IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4: CHANGES IN ACCOUNTING POLICIES
(a) ACCOUNTING POLICY CHANGES ADOPTED IN 2016
Annual Improvements to IFRS (2012 - 2014) Cycles
In September 2014, the IASB issued narrow-scope amendments to a total of four standards as part of
its annual improvements process. The IASB uses the annual improvements process to make non-urgent
but necessary amendments to IFRS.
The Company adopted these amendments in its consolidated financial statements for the annual period
beginning on January 1, 2016. The adoption of the amendments did not have a material impact on the
consolidated financial statements.
IAS 1 Presentation of Financial Statements
In December 2014, the IASB issued amendments to IAS 1 Presentation of Financial Statements, to
provide guidance on the application of judgment in the preparation of financial statements and
disclosures.
The Company adopted these amendments in is consolidated financial statements for the annual period
beginning on January 1, 2016. The adoption of these amendments did not have a material impact on
the consolidated financial statements.
IFRS 11 Joint Arrangements
In May 2014, IFRS 11 Joint Arrangements (“IFRS 11”) was amended to require an acquisition of a joint
operation that constitutes a business to be accounted for using the principles of business combinations
in IFRS 3 Business Combinations. This amendment applies to both initial and additional interest
acquired in the joint operation.
The Company adopted the amendments to IFRS 11 in its consolidated financial statements for the
annual period beginning on January 1, 2016. The adoption of these amendments did not have a material
impact on the interim financial statements.
(b) FUTURE ACCOUNTING POLICY CHANGES NOT YET ADOPTED
Amendments to IAS 7 Statement of Cash Flows
In January 2016, the IASB issued Disclosure Initiative (Amendments to IAS 7). The amendments
apply prospectively for annual periods beginning on or after January 1, 2017. Earlier application is
The amendments require disclosures that enable users of financial statements to evaluate changes in
liabilities arising from financing activities, including both changes arising from cash flow and non-cash
permitted.
changes.
The Company intends to adopt the amendments to IAS 7 in its financial statements for the annual
period beginning on January 1, 2017. The adoption of these amendments is not expected to have a
material impact on the Company’s financial statements.
Amendments to IAS 12 Income Taxes
In January 2016, the IASB issued Amendments to IAS 12 Income Taxes to provide clarification on the
requirements relating to the recognition of deferred tax assets for unrealized losses on debt
instruments measured at fair value. The amendments apply retrospectively for annual periods
beginning on or after January 1, 2017. Earlier application is permitted.
The amendments clarify that the existence of a deductible temporary difference depends solely on a
comparison of the carrying amount of an asset and its tax base at the end of the reporting period, and
is not affected by possible future changes in the carrying amount or expected manner of recovery of
the asset. The amendments also clarify the methodology to determine the future taxable profits used
for assessing the utilization of deductible temporary differences.
The Company intends to adopt the amendments to IAS 12 in its financial statements for the annual
period beginning on January 1, 2017. The adoption of these amendments is not expected to have a
material impact on the Company’s financial statements.
IFRS 15 Revenue from Contracts with Customers
In May 2014, the IASB issued IFRS 15 Revenue from Contracts with Customers (“IFRS 15”). The
new standard is effective for annual periods beginning on or after January 1, 2018 and is available for
early adoption.
IFRS 15 will replace IAS 11, IAS 18, IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements
for the Construction of Real Estate, IFRIC 18 Transfer of Assets from Customers, and SIC 31
Revenue – Barter Transactions Involving Advertising Services.
The new standard contains a single model that applies to contracts with customers and two
approaches for recognizing revenue: at a point in time or over time. The model features a contract-
based five-step analysis of individual transactions to determine whether, how much and when
revenue is recognized. New estimates and judgmental thresholds have been introduced, which may
affect the amount and/or timing of revenue recognized.
In April 2016, the IASB issued Clarifications to IFRS 15, which is effective at the same time as IFRS
15.
The clarifications to IFRS 15 provide additional guidance with respect to the five-step analysis,
transition, and the application of the standard to licenses of intellectual property.
The Company intends to adopt IFRS 15 in its consolidated financial statements for the annual period
beginning January 1, 2018. The Company has set out a plan to review contracts in multiple operating
segments that may be impacted by the adoption of this standard. The Company is in the initial phase
of the project plan as it has identified a sample of significant contracts within each operating segment
for initial review in accordance with IFRS 15. The extent of the impact of adoption of the standard has
not yet been determined, but management expects the contracts for software license agreements that
are accounted for as multiple-element arrangements will have the most complexity. The Company
has not yet determined which transition method it will apply or whether it will use the optional
exemptions or practical expedients available under the standard.
IFRS 9 Financial Instruments
In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments (“IFRS 9”), with a
mandatory effective date for annual periods beginning on or after January 1, 2018. Early adoption is
permitted.
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IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The new standard brings together the classification and measurements, impairment and hedge
accounting phases of the IASB’s project to replace IAS 39 Financial Instruments: Recognition and
Measurement. In addition to the new requirements for classification and measurement of financial
assets, a new general hedge accounting model and other amendments issued in previous versions of
IFRS 9, the standard also introduces new impairment requirements that are based on a forward-
looking expected credit loss model.
The Company intends to adopt IFRS 9 in its consolidated financial statements for the annual period
beginning January 1, 2018. The extent of the impact of the adoption of IFRS 9 has not yet been
determined.
IFRS 16 Leases
In January 2016, the IASB issued IFRS 16 Leases (“IFRS 16”). The new standard is effective for
annual periods beginning on or after January 1, 2019, with earlier adoption permitted if IFRS 15 has
been adopted.
IFRS 16 will replace IAS 17 Leases. The new standard requires all leases to be reported on the
balance sheet unless certain criteria for exclusion are met. The Company intends to adopt IFRS 16 in
its consolidated financial statements for the annual period beginning on January 1, 2019. The extent
of the impact of adoption of the standard has not yet been determined.
Amendments to IFRS 2 Classification and Measurement of Share-Based Payment Transactions
In June 2016, the IASB issued Amendments to IFRS 2 Share-Based Payments (“IFRS 2”), clarifying
how to account for certain types of share-based payment transactions. The amendments apply for
annual periods beginning on or after January 1, 2018. As a practical simplification, the amendments
can be applied prospectively or retrospectively, with early application permitted if information is
available without the use of hindsight.
The amendments provide requirements on the accounting for the effects of vesting and non-vesting
conditions on the measurement of cash-settled share-based payments, share based payment
transactions with a net settlement feature for withholding tax obligations, and a modification to the
terms and conditions of a share-based payment that changes the classification of the transaction from
cash-settled to equity-settled.
The Company intends to adopt the amendments to IFRS 2 in its consolidated financial statements for
the annual period beginning January 1, 2018. The extent of the impact of the adoption of the standard
has not yet been determined.
IFRIC 22 Foreign Currency Transactions and Advance Consideration
On December 8, 2016 the IASB issued IFRIC Interpretation 22 Foreign Currency Transactions and
Advance Consideration (“IFRIC 22”). The Interpretation clarifies which date should be used for
translation when a foreign currency transaction involves an advance payment or receipt. The
Interpretation is applicable for annual periods beginning on or after January 1, 2018. Earlier
application is permitted. The Company intends to adopt the Interpretation in its financial statements
for the annual period beginning on January 1, 2018. The extent of the impact of adoption of the
interpretation has not yet been determined.
A-19
19
IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5: SEGMENT INFORMATION
The Company is an international, multi-disciplinary provider of a broad range of professional services
focused on the physical development of cities. The Company considers the basis on which it is
organized, including geographic areas and service offerings, in identifying its reportable segments.
(a) OPERATING SEGMENTS
Operating segments of the Company are defined as components for which separate financial
information is available that is evaluated regularly in allocating resources and assessing performance.
The Company has one operating segment, consulting services. These services are provided throughout
Canada, the US, and internationally.
In January 2016, the IASB issued IFRS 16 Leases (“IFRS 16”). The new standard is effective for
annual periods beginning on or after January 1, 2019, with earlier adoption permitted if IFRS 15 has
(b) GEOGRAPHIC SEGMENTS
The following table demonstrates certain consolidated statement of financial position information line
items segmented geographically as at December 31, 2016, with comparatives as at December 31, 2015:
AS AT DECEMBER 31, 2016
CANADA
US
INTERNATIONAL
TOTAL
Property and equipment
$
Intangible assets
Work in process
Reserve for work in process
Work in process, net
10,431 $
4,599
53,082
(8,788)
44,294
3,837 $
2,519
12,121
-
12,121
1,504 $
554
30,895
(258)
30,637
15,772
7,672
96,098
(9,046)
87,052
Deferred revenue
Total assets
31,064
125,844
6,504
64,037
12,954
71,929
50,522
261,810
AS AT DECEMBER 31, 2015
CANADA
US
INTERNATIONAL
TOTAL
Property and equipment
$
Intangible assets
Work in process
Reserve for work in process
Work in process, net
10,584 $
2,766
56,275
(14,137)
42,138
2,533 $
3,306
15,053
(557)
14,496
1,806 $
819
26,766
(2,778)
23,988
14,923
6,891
98,094
(17,472)
80,622
Deferred revenue
Total assets
25,909
120,168
8,492
62,233
4,274
72,839
38,675
255,240
The new standard brings together the classification and measurements, impairment and hedge
accounting phases of the IASB’s project to replace IAS 39 Financial Instruments: Recognition and
Measurement. In addition to the new requirements for classification and measurement of financial
assets, a new general hedge accounting model and other amendments issued in previous versions of
IFRS 9, the standard also introduces new impairment requirements that are based on a forward-
looking expected credit loss model.
The Company intends to adopt IFRS 9 in its consolidated financial statements for the annual period
beginning January 1, 2018. The extent of the impact of the adoption of IFRS 9 has not yet been
determined.
IFRS 16 Leases
been adopted.
IFRS 16 will replace IAS 17 Leases. The new standard requires all leases to be reported on the
balance sheet unless certain criteria for exclusion are met. The Company intends to adopt IFRS 16 in
its consolidated financial statements for the annual period beginning on January 1, 2019. The extent
of the impact of adoption of the standard has not yet been determined.
Amendments to IFRS 2 Classification and Measurement of Share-Based Payment Transactions
In June 2016, the IASB issued Amendments to IFRS 2 Share-Based Payments (“IFRS 2”), clarifying
how to account for certain types of share-based payment transactions. The amendments apply for
annual periods beginning on or after January 1, 2018. As a practical simplification, the amendments
can be applied prospectively or retrospectively, with early application permitted if information is
available without the use of hindsight.
The amendments provide requirements on the accounting for the effects of vesting and non-vesting
conditions on the measurement of cash-settled share-based payments, share based payment
transactions with a net settlement feature for withholding tax obligations, and a modification to the
terms and conditions of a share-based payment that changes the classification of the transaction from
cash-settled to equity-settled.
The Company intends to adopt the amendments to IFRS 2 in its consolidated financial statements for
the annual period beginning January 1, 2018. The extent of the impact of the adoption of the standard
has not yet been determined.
IFRIC 22 Foreign Currency Transactions and Advance Consideration
On December 8, 2016 the IASB issued IFRIC Interpretation 22 Foreign Currency Transactions and
Advance Consideration (“IFRIC 22”). The Interpretation clarifies which date should be used for
translation when a foreign currency transaction involves an advance payment or receipt. The
Interpretation is applicable for annual periods beginning on or after January 1, 2018. Earlier
application is permitted. The Company intends to adopt the Interpretation in its financial statements
for the annual period beginning on January 1, 2018. The extent of the impact of adoption of the
interpretation has not yet been determined.
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A-20
IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The following table demonstrates certain information contained in the consolidated statement of
comprehensive income (loss) segmented geographically for the year ended December 31, 2016, with
comparatives for the year ended December 31, 2015. The unallocated amounts pertain to interest on
convertible debentures.
YEAR ENDED DECEMBER 31, 2016
UNALLOCATED
CORPORATE
COSTS
CANADA
US
INTERNATIONAL
TOTAL
$
$
- $
186,377 $
118,271 $
49,492 $
354,140
(26,107) $
-
14,361 $
6,630
8,792 $
75
3,955 $
658
1,001
7,363
$
(26,107) $
20,991 $
8,867 $
4,613 $
8,364
YEAR ENDED DECEMBER 31, 2015
UNALLOCATED
CORPORATE
COSTS
CANADA
US
INTERNATIONAL
TOTAL
$
$
- $
176,760 $
102,848 $
47,484 $
327,092
(20,785) $
32,192 $
3,507 $
596 $
15,510
-
(8,892)
(23)
216
(8,699)
$
(20,785) $
23,300 $
3,484 $
812 $
6,811
Revenues
Net income (loss)
before tax
Foreign exchange loss
Net income (loss)
before tax and foreign
exchange
Revenues
Net income (loss)
before tax
Foreign exchange loss
(gain)
Net income (loss)
before tax and foreign
exchange
A-21
21
The following table demonstrates certain information contained in the consolidated statement of
comprehensive income (loss) segmented geographically for the year ended December 31, 2016, with
comparatives for the year ended December 31, 2015. The unallocated amounts pertain to interest on
convertible debentures.
YEAR ENDED DECEMBER 31, 2016
UNALLOCATED
CORPORATE
COSTS
CANADA
US
INTERNATIONAL
TOTAL
Revenues
- $
186,377 $
118,271 $
49,492 $
354,140
Net income (loss)
before tax
Foreign exchange loss
Net income (loss)
before tax and foreign
exchange
$
(26,107) $
20,991 $
8,867 $
4,613 $
8,364
YEAR ENDED DECEMBER 31, 2015
UNALLOCATED
CORPORATE
COSTS
CANADA
US
INTERNATIONAL
TOTAL
Revenues
- $
176,760 $
102,848 $
47,484 $
327,092
Net income (loss)
before tax
Foreign exchange loss
(gain)
Net income (loss)
before tax and foreign
exchange
(20,785) $
32,192 $
3,507 $
596 $
15,510
-
(8,892)
(23)
216
(8,699)
$
(20,785) $
23,300 $
3,484 $
812 $
6,811
$
$
$
$
IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6: FINANCIAL INSTRUMENTS
(a) INDEBTEDNESS
On October 5, 2015, IBI Group secured an agreement to refinance its credit facilities under the existing
banking agreement with its senior lenders. The new arrangement consists of a $90,000 revolver facility,
of which a maximum of $10,000 is available under a swing line facility and will mature on June 30, 2018.
The commitment under the swing line facility will reduce availability under the revolver facility on a dollar-
for-dollar basis. The existing credit facilities were paid off in full upon closing under the terms of the new
agreement and $20,000 was placed in a segregated cash collateral account (“Sinking Fund”) upon
closing. This amount was used to redeem the 5.75% debentures on December 18, 2015. The agreement
requires additional deposits each quarter for pre-defined amounts to the Sinking Fund as noted below:
(26,107) $
14,361 $
8,792 $
-
6,630
75
3,955 $
658
1,001
7,363
(in thousands of Canadian dollars)
October 05, 2015
December 31, 2015
March 31, 2016
June 30, 2016
September 30, 2016
December 31, 2016
March 31, 2017
June 30, 2017
September 30, 2017
December 31, 2017
March 31, 2018
June 30, 2018
$ 20,000
2,000
3,250
3,250
3,250
3,250
2,240
2,240
2,240
2,240
2,240
2,240
The additional deposits in the Sinking Fund are pledged to repay the credit facilities or convertible
debentures, and as security in the event of default. IBI Group made the December 31, 2016, deposit to
the Sinking Fund, which has been recognized in restricted cash in the consolidated statement of financial
position. The Company applied $13,690 from the sinking fund to redeem a portion of 6% Debentures
on December 30, 2016. IBI Group will earn interest on the deposits in the Sinking Fund based on the
Canadian dollar prime rate less an applicable margin. On November 8, 2016, the Company’s quarterly
Sinking Fund contribution was modified to $2,240 per quarter beginning on March 2017.
As at December 31, 2016, IBI Group has borrowings of $74,737 under the credit facilities, which has
been recognized in the consolidated statement of financial position net of deferred financing costs of
$1,553. IBI Group has letters of credit outstanding of $8,034 as at December 31, 2016, of which $5,816
is issued under a $7,500 facility which matures on July 31, 2017 and supports letters of credit
backstopped by Export Development Canada. Advances under the revolver facility bear interest at a
rate based on the Canadian dollar prime rate or US dollar base rate, LIBOR or Banker’s Acceptance
rates plus, in each case, an applicable margin. At December 31, 2016, $32,117 was outstanding under
Bankers’ Acceptance with the remainder borrowed as Prime Rate debt.
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IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at December 31, 2015, IBI Group had borrowings of $74,872 under the credit facilities which had
been recognized in the consolidated statement of financial position net of deferred financing costs of
$2,595. IBI Group had issued letters of credit of $5,318 as at December 31, 2015, of which $3,091 is
issued under the $5,000 facility which matured on July 31, 2016 and supports letters of credit
backstopped by Export Development Canada. Advances under the revolver facility bear interest at a
rate based on the Canadian dollar prime rate or US dollar base rate, LIBOR or Banker’s Acceptance
rates plus, in each case, an applicable margin. As at December 31, 2015, $30,000 was outstanding
under Bankers’ Acceptance with the remainder borrowed as prime rate debt.
The facility is subject to compliance with certain financial, reporting and other covenants. The financial
covenants under the new agreement include a leverage ratio, interest coverage ratio, minimum Adjusted
EBITDA1 threshold, and restrictions on distributions, if certain conditions are not met. IBI Group was in
compliance with its credit facility covenants as at December 31, 2016.
Continued compliance with the covenants under the amended credit facilities is dependent on IBI Group
achieving revenue forecasts, profitability, reducing costs and the continued improvement of working
capital. Market conditions are difficult to predict and there is no assurance that IBI Group will achieve its
forecasts. In the event of non-compliance, IBI Group’s lenders have the right to demand repayment of
the amounts outstanding under the lending agreements or pursue other remedies if IBI Group cannot
reach an agreement with its lenders to amend or waive the financial covenants. As in the past, IBI Group
will carefully monitor its compliance with the covenants and will seek waivers, subject to lender approval,
as may become necessary from time to time.
1
As defined in the credit facilities agreement, references to “Adjusted EBITDA” is to earnings before interest, income taxes, depreciation and
amortization;; adjusted for gain/loss arising from extraordinary, unusual or non-recurring items;; acquisition costs and deferred consideration revenue;;
non-cash expenses;; gain/loss realized upon the disposal of capital property;; gain/loss on foreign exchange translation;; gain/loss on purchase or
redemption of securities issued;; gain/loss on fair valuation of financial instruments;; amounts attributable to minority equity investments;; and interest
income. Adjusted EBITDA is not a recognized measure under IFRS and does not have a standardized meaning prescribed by IFRS, and the
Company’s method of calculating Adjusted EBITDA may differ from the methods used by other similar entities.
A-23
23
IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at December 31, 2015, IBI Group had borrowings of $74,872 under the credit facilities which had
been recognized in the consolidated statement of financial position net of deferred financing costs of
$2,595. IBI Group had issued letters of credit of $5,318 as at December 31, 2015, of which $3,091 is
issued under the $5,000 facility which matured on July 31, 2016 and supports letters of credit
backstopped by Export Development Canada. Advances under the revolver facility bear interest at a
rate based on the Canadian dollar prime rate or US dollar base rate, LIBOR or Banker’s Acceptance
rates plus, in each case, an applicable margin. As at December 31, 2015, $30,000 was outstanding
under Bankers’ Acceptance with the remainder borrowed as prime rate debt.
The facility is subject to compliance with certain financial, reporting and other covenants. The financial
covenants under the new agreement include a leverage ratio, interest coverage ratio, minimum Adjusted
EBITDA1 threshold, and restrictions on distributions, if certain conditions are not met. IBI Group was in
compliance with its credit facility covenants as at December 31, 2016.
Continued compliance with the covenants under the amended credit facilities is dependent on IBI Group
achieving revenue forecasts, profitability, reducing costs and the continued improvement of working
capital. Market conditions are difficult to predict and there is no assurance that IBI Group will achieve its
forecasts. In the event of non-compliance, IBI Group’s lenders have the right to demand repayment of
the amounts outstanding under the lending agreements or pursue other remedies if IBI Group cannot
reach an agreement with its lenders to amend or waive the financial covenants. As in the past, IBI Group
will carefully monitor its compliance with the covenants and will seek waivers, subject to lender approval,
as may become necessary from time to time.
(b) CONVERTIBLE DEBENTURES
The Company had the following series of convertible debentures outstanding as at December 31, 2016
and December 31, 2015.
5.75% Debentures (redeemed)
Balance January 1, 2015
Accretion of 5.75% Debentures 2015
Redemption of 5.75% Debentures (December 2015)
Balance at December 31, 2015
6.0% Debentures (redeemed)
Balance at January 1, 2015
Accretion of 6.0% Debentures 2015
Balance at December 31, 2015
Accretion of 6.0% Debentures 2016
Redemption of 6.0% Debentures (October 2016)
Redemption of 6.0% Debentures (December 2016)
Balance at December 31, 2016
7.0% Debentures (matures on June 30, 2019)
Balance at January 1, 2015
Accretion of 7.0% Debentures 2015
Balance at December 31, 2015
Accretion of 7.0% Debentures 2016
Conversion of 7.0% Debentures (October 2016)
Balance at December 31, 2016
5.5% Debentures (matures on December 31, 2021)
Balance at January 1, 2016
Issuance of 5.5% Debentures (September 2016)
Accretion of 5.5% Debentures 2016
Decrease in fair value of other financial liabilities
(December 2016)
Balance at December 31, 2016
LIABILITY
COMPONENT
EQUITY
COMPONENT
OTHER
FINANCIAL
LIABILITY
COMPONENT
TOTAL
18,838
1,162
(20,000)
-
896
-
(896)
-
54,266
3,206
836
55,102
2,398
(43,810)
(13,690)
-
25,333
4,285
29,618
12,486
(31,245)
10,859
-
32,498
519
-
33,017
-
3,206
-
(2,443)
(763)
-
1,750
-
1,750
-
(1,189)
561
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
19,734
1,162
(20,896)
-
57,472
836
58,308
2,398
(46,253)
(14,453)
-
27,083
4,285
31,368
12,486
(32,434)
11,420
-
10,908
43,406
-
519
(1,819)
9,089
(1,819)
42,106
BALANCE, DECEMBER 31, 2016
$ 43,876 $ 561 $ 9,089 $ 53,526
1
As defined in the credit facilities agreement, references to “Adjusted EBITDA” is to earnings before interest, income taxes, depreciation and
amortization;; adjusted for gain/loss arising from extraordinary, unusual or non-recurring items;; acquisition costs and deferred consideration revenue;;
non-cash expenses;; gain/loss realized upon the disposal of capital property;; gain/loss on foreign exchange translation;; gain/loss on purchase or
redemption of securities issued;; gain/loss on fair valuation of financial instruments;; amounts attributable to minority equity investments;; and interest
income. Adjusted EBITDA is not a recognized measure under IFRS and does not have a standardized meaning prescribed by IFRS, and the
Company’s method of calculating Adjusted EBITDA may differ from the methods used by other similar entities.
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IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5.5% DEBENTURES ($46,000 PRINCIPAL, MATURES ON DECEMBER 31, 2021)
In September 2016, the Company issued 5.5% Debentures of $46,000 with a maturity date of
December 31, 2021. The 5.5% Debentures are convertible into common shares of the Company at the
option of the holder at a conversion price of $8.35 per common share. The 5.5% Debentures are not
redeemable at the option of the Company before December 31, 2019. The 5.5% Debentures are
redeemable by the Company at a price of $1,000 per 5.5% Debenture, plus accrued and unpaid
interest, on or after December 31, 2019 and prior to December 31, 2020 (provided that the volume
weighted average trading price of the shares of the Company on the TSX for the 20 consecutive trading
days ending five trading days preceding the date on which notice of redemption is given, is not less
than 125% of the conversion price of $8.35 per share). On or after December 31, 2020 and prior to the
maturity date, the 5.5% Debentures are redeemable by the Company at a price of $1,000 per 5.5%
Debenture, plus accrued and unpaid interest. The 5.5% Debentures bear interest from the date of issue
at 5.5% per annum, payable in equal semi-annual payments in arrears on June 30th and December 31st
of each year, commencing June 30, 2017.
The 5.5% Debentures are recorded as a hybrid financial instrument. The non-derivative debt (interest
and principal portion) was recorded at fair value on the date of issue and was recognized at $32,498
which was net of deferred financing costs of $2,594, estimated using discounted future cash flows at
an estimated discount rate discount rate of 11.5%. Subsequently the non-derivative debt component is
measured at amortized cost using the effective interest method over the life of the debenture.
The derivative component of this hybrid financial instrument representing the conversion feature of the
5.5% Debentures was measured at fair value of $10,908 at the date of issuance, and recorded as part
of Other financial liabilities in the statement of financial position. This conversion feature is unique to
this issuance of convertible debt given IBI has the right to settle any request to convert debentures to
IBI shares by the Debenture holders for an equivalent amount of cash. As at December 31, 2016, the
fair value of the derivative component was $9,089.
On September 30, 2016, the net proceeds of $43,406 from the issuance of the 5.5% Debentures were
used to repay the Company’s credit facilities.
6.0% DEBENTURES ($57,500 PRINCIPAL, REDEEMED ON OCTOBER 24, 2016 AND DECEMBER
30, 2016)
On October 24, 2016, the Company financed the partial redemption of its 6.0% Debentures for $43,810
cash from the credit facilities, plus paid accrued and unpaid interest up to but excluding the redemption
date. On December 30, 2016, the Company redeemed the remaining portion of the 6.0% Debentures
for $13,690 cash, plus paid accrued and unpaid interest up to but excluding the redemption date. The
6.0% Debentures were accreted to principal upon each redemption date, resulting in $2,398 of accretion
expense being recognized in the consolidated statement of comprehensive income (loss) during the
year ended December 31, 2016. The equity component of $3,206 was reclassified to contributed surplus
upon redemption.
7.0% DEBENTURES ($46,000 PRINCIPAL, OPTION A MATURES ON JUNE 30, 2019 AND OPTIONS
B AND C REDEEMED ON OCTOBER 31, 2016)
On July 23, 2014, the Company entered into a supplemental trust indenture with CIBC Mellon Trust
Company, the trustee for the 7.0% convertible unsecured subordinated debentures (“Debentures”)
which were originally scheduled to mature on December 31, 2014, to give effect to the amendments
approved at a special meeting of the Debenture holders to extend the maturity of the Debentures to
June 30, 2019. In exchange for the extension of the maturity, Debenture holders that delivered and did
A-25
25
IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5.5% DEBENTURES ($46,000 PRINCIPAL, MATURES ON DECEMBER 31, 2021)
In September 2016, the Company issued 5.5% Debentures of $46,000 with a maturity date of
December 31, 2021. The 5.5% Debentures are convertible into common shares of the Company at the
option of the holder at a conversion price of $8.35 per common share. The 5.5% Debentures are not
redeemable at the option of the Company before December 31, 2019. The 5.5% Debentures are
redeemable by the Company at a price of $1,000 per 5.5% Debenture, plus accrued and unpaid
interest, on or after December 31, 2019 and prior to December 31, 2020 (provided that the volume
weighted average trading price of the shares of the Company on the TSX for the 20 consecutive trading
days ending five trading days preceding the date on which notice of redemption is given, is not less
than 125% of the conversion price of $8.35 per share). On or after December 31, 2020 and prior to the
maturity date, the 5.5% Debentures are redeemable by the Company at a price of $1,000 per 5.5%
Debenture, plus accrued and unpaid interest. The 5.5% Debentures bear interest from the date of issue
at 5.5% per annum, payable in equal semi-annual payments in arrears on June 30th and December 31st
of each year, commencing June 30, 2017.
The 5.5% Debentures are recorded as a hybrid financial instrument. The non-derivative debt (interest
and principal portion) was recorded at fair value on the date of issue and was recognized at $32,498
which was net of deferred financing costs of $2,594, estimated using discounted future cash flows at
an estimated discount rate discount rate of 11.5%. Subsequently the non-derivative debt component is
measured at amortized cost using the effective interest method over the life of the debenture.
The derivative component of this hybrid financial instrument representing the conversion feature of the
5.5% Debentures was measured at fair value of $10,908 at the date of issuance, and recorded as part
of Other financial liabilities in the statement of financial position. This conversion feature is unique to
this issuance of convertible debt given IBI has the right to settle any request to convert debentures to
IBI shares by the Debenture holders for an equivalent amount of cash. As at December 31, 2016, the
fair value of the derivative component was $9,089.
On September 30, 2016, the net proceeds of $43,406 from the issuance of the 5.5% Debentures were
used to repay the Company’s credit facilities.
6.0% DEBENTURES ($57,500 PRINCIPAL, REDEEMED ON OCTOBER 24, 2016 AND DECEMBER
30, 2016)
On October 24, 2016, the Company financed the partial redemption of its 6.0% Debentures for $43,810
cash from the credit facilities, plus paid accrued and unpaid interest up to but excluding the redemption
date. On December 30, 2016, the Company redeemed the remaining portion of the 6.0% Debentures
for $13,690 cash, plus paid accrued and unpaid interest up to but excluding the redemption date. The
6.0% Debentures were accreted to principal upon each redemption date, resulting in $2,398 of accretion
expense being recognized in the consolidated statement of comprehensive income (loss) during the
year ended December 31, 2016. The equity component of $3,206 was reclassified to contributed surplus
upon redemption.
7.0% DEBENTURES ($46,000 PRINCIPAL, OPTION A MATURES ON JUNE 30, 2019 AND OPTIONS
B AND C REDEEMED ON OCTOBER 31, 2016)
On July 23, 2014, the Company entered into a supplemental trust indenture with CIBC Mellon Trust
Company, the trustee for the 7.0% convertible unsecured subordinated debentures (“Debentures”)
which were originally scheduled to mature on December 31, 2014, to give effect to the amendments
approved at a special meeting of the Debenture holders to extend the maturity of the Debentures to
June 30, 2019. In exchange for the extension of the maturity, Debenture holders that delivered and did
not withdraw a valid proxy voting for the extension received either;; a reduced conversion price to $5.00
per share from $19.17 per share with a consent fee note equal to $86.96 per $1,000 principal amount
of Debentures (“Option B”) or the Debenture holders retained the conversion price of $19.17 per share
and received a consent fee note equal to $195.65 per $1,000 principal amount of Debentures (“Option
A”). The conversion price was also reduced to $5.00 per share from $19.17 per share for Debenture
holders who did not deposit a proxy, abstained from voting or voted against the Debenture amendments
(“Option C”). The Debentures bear interest from the date of issue at 7.0% per annum, payable in equal
semi-annual payments in arrears on June 30th and December 31st of each year. The consent fee notes
are unsecured, non-convertible, mature on December 31, 2016 and bear interest at the rate of 7.0% per
annum which is payable on maturity.
The amendments to the Debentures resulted in them being accounted for as extinguishments for
accounting purposes. Consequently, the original Debentures were derecognized and the new
Debentures (under Option A, B and C) were recognized at fair value.
On October 31, 2016, the Company redeemed the 7.0% Debentures under Options B and C (“IBG.DB”).
The holders of $29,988 principal of the 7.0% Debentures had exercised the $5 share conversion option
and received 5,997,600 shares. For the balance of $1,257 principal of the 7.0% Debentures, the
Company issued 222,476 shares. The financial liability being redeemed under Options B and C were
accreted to the full principal value, resulting in total accretion expense of $12,485 being recognized in
the consolidated statement of comprehensive income (loss) during the year ended December 31, 2016.
See Note 15 – Finance Costs for further detail regarding the accretion expense for the period. The
Company recorded $31,245 in common shares and reclassified the equity component of the portion
redeemed of $1,189 to contributed surplus.
The fair value of the remaining 7.0% Debentures under Option A is $15,043 (December 31, 2015 -
$10,624) with a face value of $14,755 should they be redeemed for cash prior to or at maturity. The
consent fee notes issued under Option A and B were paid in full upon maturity as at December 31, 2016.
The fair value of the convertible debentures as at December 31, 2016, based on a Level 1 quoted
market price, is as follows:
5.5% Debentures
6.0% Debentures
7.0% Debentures
Carrying Value
Fair Value
$ 33,017 $ 46,920
-
-
15,043
10,859
BALANCE, DECEMBER 31, 2016
$ 43,876 $ 61,963
The fair value of the convertible debentures as at December 31, 2015, based on a Level 1 quoted
market price, is as follows:
5.5% Debentures
6.0% Debentures
7.0% Debentures
Carrying Value
Fair Value
$ -
55,102
29,618
$ -
42,493
33,917
BALANCE, DECEMBER 31, 2015
$ 84,720
$ 76,410
25
26
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6
1
0
2
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A-26
IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(c) FINANCIAL ASSETS AND LIABILITIES
The fair values of cash, restricted cash, accounts receivable, accounts payable and accrued liabilities,
vendor notes payable, consent fee notes payable and finance lease obligation approximate their
carrying amounts due to their short-term maturity.
The carrying amount of the Company’s financial instruments as at December 31, 2016 are as follows:
FINANCIAL
ASSETS
AND
LIABILITIES
AT FVTPL
LOANS AND
RECEIVABLES
OTHER
FINANCIAL
LIABILITIES
TOTAL
FINANCIAL ASSETS
Cash
Restricted cash
Accounts receivable
$ 8,008 $ - $ - $ 8,008
4,522
-
108,593
108,593
4,522
-
-
-
TOTAL
$ 12,530 $ 108,593 $ - $ 121,123
FINANCIAL LIABILITIES
Accounts payable and accrued
liabilities
Deferred share plan liability(1)
Consent fee notes payable
Finance lease obligation
Credit facilities
Convertible debentures
Other Financial Liabilities
$ - $ - $ 53,145 $ 53,145
2,360
-
-
-
104
-
73,184
-
43,876
-
9,089
-
-
-
104
73,184
43,876
-
2,360
-
-
-
-
9,089
TOTAL
$ 11,449 $ - $ 170,309 $ 181,758
(1) The deferred share plan liability is grouped with accounts payable and accrued liabilities on the consolidated statement of
financial position. See Note 16 – Deferred Share Plan, for further discussion.
A-27
27
IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(c) FINANCIAL ASSETS AND LIABILITIES
The carrying amount of the Company’s financial instruments as at December 31, 2015 are as follows:
The fair values of cash, restricted cash, accounts receivable, accounts payable and accrued liabilities,
vendor notes payable, consent fee notes payable and finance lease obligation approximate their
carrying amounts due to their short-term maturity.
The carrying amount of the Company’s financial instruments as at December 31, 2016 are as follows:
FINANCIAL
ASSETS
AND
LIABILITIES
AT FVTPL
LOANS AND
RECEIVABLES
OTHER
FINANCIAL
LIABILITIES
TOTAL
FINANCIAL
ASSETS
AND
LIABILITIES
LOANS AND
FINANCIAL
AT FVTPL
RECEIVABLES
LIABILITIES
TOTAL
OTHER
FINANCIAL ASSETS
Cash
Restricted cash
Accounts receivable
$ 7,968 $ - $ - $ 7,968
5,248
-
111,771
111,771
5,248
-
-
-
FINANCIAL ASSETS
Cash
Restricted cash
Accounts receivable
$ 8,008 $ - $ - $ 8,008
4,522
-
-
108,593
-
-
4,522
108,593
TOTAL
$ 12,530 $ 108,593 $ - $ 121,123
FINANCIAL LIABILITIES
Accounts payable and accrued
liabilities
Deferred share plan liability(1)
Consent fee notes payable
Finance lease obligation
Credit facilities
Convertible debentures
Other Financial Liabilities
$ - $ - $ 53,145 $ 53,145
2,360
-
-
-
-
9,089
-
-
-
-
-
-
-
-
-
104
73,184
43,876
2,360
-
104
73,184
43,876
9,089
TOTAL
$ 11,449 $ - $ 170,309 $ 181,758
(1) The deferred share plan liability is grouped with accounts payable and accrued liabilities on the consolidated statement of
financial position. See Note 16 – Deferred Share Plan, for further discussion.
TOTAL
$ 13,216 $ 111,771 $ - $ 124,987
FINANCIAL LIABILITIES
Accounts payable and accrued
liabilities
Deferred share plan liability(1)
Vendor notes payable
Consent fee notes payable
Finance lease obligation
Credit facilities
Convertible debentures
Other Financial Liabilities
$ - $ - $ 53,696 $ 53,696
727
-
4,238
-
3,067
-
252
-
72,227
-
84,720
-
-
-
-
4,238
3,067
252
72,227
84,720
-
727
-
-
-
-
-
-
TOTAL
$ 727 $ - $ 218,200 $ 218,927
(1) The deferred share plan liability is grouped with accounts payable and accrued liabilities on the consolidated statement of
financial position. See Note 16 – Deferred Share Plan, for further discussion.
The following tables summarize the Company’s fair value hierarchy for those assets and liabilities that
are measured at fair value on a recurring basis as at December 31, 2016 and December 31, 2015:
AS AT DECEMBER 31, 2016
LEVEL 2
LEVEL 1
LEVEL 3
Cash
Restricted cash
Deferred share plan liability(1)
Other Financial Liabilities
$ 8,008 $ - $ -
-
-
-
-
(2,360)
(9,089)
4,522
-
-
27
28
$ 12,530 $ (11,449) $ -
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6
1
0
2
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U
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A-28
IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS AT DECEMBER 31, 2015
LEVEL 2
LEVEL 1
LEVEL 3
Cash
Restricted cash
Deferred share plan liability(1)
NOTE 7: PROPERTY AND EQUIPMENT
(a) CARRYING AMOUNT
$ 7,968 $ - $ -
-
-
5,248
-
-
(727)
$ 13,216 $ (727) $ -
The following table presents the Company’s property and equipment as at December 31, 2016 and
December 31, 2015:
OFFICE
FURNITURE
AND
EQUIPMENT
COMPUTER
EQUIPMENT VEHICLES LEASEHOLDS
TOTAL
COST
January 1, 2015
$ 9,821 $ 14,267 $ 138 $ 12,016 $ 36,242
Additions
Disposals
Write off of fully amortized
assets
Foreign currency
translation gain
December 31, 2015
Additions
Disposals
Write off of fully amortized
assets
Foreign currency
translation loss
1,763
(135)
2,762
(53)
258
(1)
908
(7)
5,691
(196)
(248)
(36)
-
(324)
(608)
2,365
$ 11,872 $ 18,046 $ 421 $ 13,155 $ 43,494
1,106
562
671
26
2,059
(1,069)
1,465
(247)
(32)
(188)
36
-
-
3,166
(197)
6,726
(1,513)
(216)
(436)
(355)
(589)
(65)
(274)
(1,283)
DECEMBER 31, 2016
$ 12,475 $ 18,487 $ 392 $ 15,634 $ 46,988
A-29
29
IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS AT DECEMBER 31, 2015
LEVEL 1
LEVEL 2
LEVEL 3
$ 7,968 $ - $ -
5,248
-
-
(727)
-
-
$ 13,216 $ (727) $ -
Cash
Restricted cash
Deferred share plan liability(1)
NOTE 7: PROPERTY AND EQUIPMENT
(a) CARRYING AMOUNT
December 31, 2015:
The following table presents the Company’s property and equipment as at December 31, 2016 and
OFFICE
FURNITURE
AND
COMPUTER
EQUIPMENT
EQUIPMENT VEHICLES LEASEHOLDS
TOTAL
January 1, 2015
$ 9,821 $ 14,267 $ 138 $ 12,016 $ 36,242
1,763
(135)
2,762
(53)
258
(1)
908
(7)
5,691
(196)
COST
Additions
Disposals
Write off of fully amortized
assets
Foreign currency
translation gain
December 31, 2015
$ 11,872 $ 18,046 $ 421 $ 13,155 $ 43,494
671
1,106
26
562
2,365
Additions
Disposals
2,059
(1,069)
1,465
(247)
3,166
(197)
6,726
(1,513)
Write off of fully amortized
assets
Foreign currency
translation loss
(32)
(188)
(216)
(436)
(355)
(589)
(65)
(274)
(1,283)
36
-
-
DECEMBER 31, 2016
$ 12,475 $ 18,487 $ 392 $ 15,634 $ 46,988
OFFICE
FURNITURE
AND
EQUIPMENT
COMPUTER
EQUIPMENT VEHICLES LEASEHOLDS
TOTAL
ACCUMULATED
DEPRECIATION
January 1, 2015
Depreciation from
continuing operations
Write off of fully amortized
assets
Disposals
Foreign currency
translation loss
$ 5,434 $ 12,256 $ 99 $ 5,673 $ 23,462
1,277
1,780
57
910
4,024
(248)
(84)
(36)
(30)
-
-
(324)
(4)
(608)
(118)
477
944
14
376
1,811
December 31, 2015
$ 6,856 $ 14,914 $ 170 $ 6,631 $ 28,571
Depreciation from
continuing operations
Write off of fully
amortized assets
Disposals
Foreign currency
translation gain
1,211
1,962
72
1,078
4,323
(32)
(130)
(188)
(54)
-
-
(216)
(131)
(436)
(315)
(290)
(449)
(27)
(161)
(927)
(248)
(36)
-
(324)
(608)
DECEMBER 31, 2016
$ 7,615 $ 16,185 $ 215 $ 7,201 $ 31,216
NET CARRYING AMOUNT
DECEMBER 31, 2015
DECEMBER 31, 2016
$ 5,016 $ 3,132 $ 251 $ 6,524 $ 14,923
$ 4,860 $ 2,302 $ 177 $ 8,433 $ 15,772
29
30
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A
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N
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A
6
1
0
2
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U
O
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I
A-30
IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8: INTANGIBLE ASSETS AND GOODWILL
(a) CARRYING AMOUNT
The following table presents the Company’s goodwill and intangible assets as at December 31, 2016
and December 31, 2015:
ERP SYSTEM
CLIENT
RELATIONSHIPS
OTHER
TOTAL
COST
Balance at January 1, 2015
Fully amortized assets
Additions
Foreign exchange
translation gain
December 31, 2015
Fully amortized assets
Additions
Foreign exchange
translation loss
$ 1,115
-
1,650
-
$ 2,765
-
1,757
$ 4,551 $ 1,857 $ 7,523
(1,272)
1,650
(1,272)
-
-
-
817
246
1,063
$ 5,368 $ 831 $ 8,964
-
2,070
-
313
-
-
-
(332)
(26)
(358)
DECEMBER 31, 2016
$ 4,522
$ 5,036 $ 1,118 $ 10,676
ACCUMULATED
AMORTIZATION AND
IMPAIRMENT
Balance at January 1, 2015
Fully amortized assets
Amortization
Foreign exchange
translation loss
December 31, 2015
Fully amortized assets
Amortization
Foreign exchange
translation gain
ERP SYSTEM
CLIENT
RELATIONSHIPS
OTHER
TOTAL
$ -
$ 669 $ 1,537 $ 2,206
-
-
-
592
(1,272)
192
(1,272)
784
-
$ -
-
227
-
355
$ 1,416 $ 657 $ 2,073
155
200
-
600
-
175
-
1,002
(53)
(18)
(71)
DECEMBER 31, 2016
$ 227
$ 1,963 $ 814 $ 3,004
NET CARRYING AMOUNT
DECEMBER 31, 2015
DECEMBER 31, 2016
$ 2,765
$ 4,295
$ 3,952 $ 174 $ 6,891
$ 3,073 $ 304 $ 7,672
A-31
31
IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8: INTANGIBLE ASSETS AND GOODWILL
NOTE 9: INCOME TAXES
The major components of income tax expense include the following:
The following table presents the Company’s goodwill and intangible assets as at December 31, 2016
ERP SYSTEM
RELATIONSHIPS
OTHER
TOTAL
CLIENT
CURRENT TAX EXPENSE / (RECOVERY)
Current period
Provision to file / Witholding taxes
Balance at January 1, 2015
$ 1,115
$ 4,551 $ 1,857 $ 7,523
DEFERRED TAX EXPENSE / (RECOVERY)
Origination and reversal of temporary differences
Change in tax rates
Adjustment for prior periods
Change in unrecognized deductible temporary differences
YEAR ENDED
DECEMBER 31,
2016
2015
$ 2,904 $ 478
(97)
4
2,908
381
(3,037)
64
(54)
(2,374)
4,579
126
69
(981)
(5,401)
3,793
TOTAL TAX EXPENSE
$ (2,493) $ 4,174
T
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2
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A-32
32
(a) CARRYING AMOUNT
and December 31, 2015:
COST
Fully amortized assets
Additions
Foreign exchange
translation gain
Fully amortized assets
Additions
Foreign exchange
translation loss
ACCUMULATED
AMORTIZATION AND
IMPAIRMENT
Fully amortized assets
Amortization
Foreign exchange
translation loss
Fully amortized assets
Amortization
Foreign exchange
translation gain
December 31, 2015
$ 2,765
$ 5,368 $ 831 $ 8,964
DECEMBER 31, 2016
$ 4,522
$ 5,036 $ 1,118 $ 10,676
ERP SYSTEM
RELATIONSHIPS
OTHER
TOTAL
CLIENT
Balance at January 1, 2015
$ -
$ 669 $ 1,537 $ 2,206
December 31, 2015
$ -
$ 1,416 $ 657 $ 2,073
-
-
-
-
(1,272)
-
(1,272)
1,650
817
246
1,063
-
313
-
2,070
(332)
(26)
(358)
-
592
155
-
600
(1,272)
(1,272)
192
200
-
175
784
355
-
1,002
(53)
(18)
(71)
DECEMBER 31, 2016
$ 227
$ 1,963 $ 814 $ 3,004
NET CARRYING AMOUNT
DECEMBER 31, 2015
DECEMBER 31, 2016
$ 2,765
$ 3,952 $ 174 $ 6,891
$ 4,295
$ 3,073 $ 304 $ 7,672
-
1,650
-
-
-
1,757
-
-
-
-
227
-
31
IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The provision for income taxes in the consolidated statement of comprehensive income (loss)
represents an effective tax rate different than the Canadian enacted or substantively enacted statutory
rate of approximately 26.5% (December 31, 2015 – 26.5%). The differences are as follows:
YEAR ENDED
DECEMBER 31,
2016
2015
Net income from continuing operations
Total tax expense
$ 3,494 $ 11,336
4,174
(2,493)
Net income before tax from continuing operations
$ 1,001 $ 15,510
Income tax using the Company's domestic tax rate
$ 265 $ 4,110
Income tax effect of:
Non-deductible expenses
Change in deferred tax rates
Operating in jurisdictions with different tax rates
Change in unrecognized temporary differences
Prior period adjustments to current tax
Prior period adjustments to deferred tax
Withholding taxes
Recognition of previously unrecognized deferred tax asset
Benefit retained on discontinued operations
Other
1,113
64
1,082
(2,374)
(14)
(54)
139
(2,972)
-
258
780
126
380
(981)
(97)
69
253
-
(374)
(92)
INCOME TAX EXPENSE
$ (2,493) $ 4,174
The applicable tax rate is the aggregate of the Canadian Federal income tax rate of 15% (2015 – 15%)
and the Provincial income tax rate of 11.5% (2015 – 11.5%).
UNRECOGNIZED DEFERRED TAX LIABILITIES
As at December 31, 2016, the Company has approximately $16,089 (December 31, 2015 - $14,904) of
temporary differences associated with its investments in foreign subsidiaries for which no deferred taxes
have been provided on the basis that the company is able to control the timing of the reversal of such
temporary differences and that such reversal is not probable in the foreseeable future.
UNRECOGNIZED DEFERRED TAX ASSETS
Deferred tax assets have not been recognized in respect of the following gross temporary differences:
Deductible temporary differences
Tax losses – Federal
Tax losses – State
A-33
33
YEAR ENDED
DECEMBER 31,
2016
2015
$ 6,658 $ 12,531
25,038
43,867
3,293
35,707
$ 45,658 $ 81,436
IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The tax effected amount of unrecognized gross temporary differences is as follows:
YEAR ENDED
DECEMBER 31,
2016
2015
Deductible temporary differences
Tax losses – Federal
Tax losses – State
YEAR ENDED
DECEMBER 31,
2016
2015
$ 2,525 $ 4,647
8,870
2,851
1,107
1,571
$ 5,203 $ 16,368
Deferred tax assets are recognized for operating loss carry forwards to the extent that the realization of
the related tax benefit through future taxable profits is probable. As at December 31, 2016, the
Company’s affiliated entities have $45,292 (December 31, 2015 - $27,858) of operating loss carry
forwards available for income tax purposes, which expire in the years 2017 through 2036. The ability of
the Company to realize the tax benefits of the loss carry forwards is contingent on many factors,
including the ability to generate future taxable profits in the jurisdictions in which the tax losses arose.
The Company regularly assesses the status of open tax examinations and its historical tax filing
positions for the potential for adverse outcomes to determine the adequacy of the provision for income
and other taxes. The Company believes that it has adequately provided for any tax adjustments that are
more likely than not to occur as a result of ongoing tax examinations or historical filing positions.
The tax effect of temporary differences between the financial statement carrying amounts of assets and
liabilities and their respective tax bases that give rise to significant portions of the deferred tax assets at
December 31, 2016 and December 31, 2015 are presented below:
INCOME TAX EXPENSE
$ (2,493) $ 4,174
RECOGNIZED DEFERRED TAX ASSETS AND LIABILITIES
The applicable tax rate is the aggregate of the Canadian Federal income tax rate of 15% (2015 – 15%)
Deferred tax assets and liabilities are attributable to the following:
YEAR ENDED DECEMBER 31, 2016
TOTAL
LIABILITIES
ASSETS
The provision for income taxes in the consolidated statement of comprehensive income (loss)
represents an effective tax rate different than the Canadian enacted or substantively enacted statutory
rate of approximately 26.5% (December 31, 2015 – 26.5%). The differences are as follows:
Net income from continuing operations
Total tax expense
$ 3,494 $ 11,336
(2,493)
4,174
Net income before tax from continuing operations
$ 1,001 $ 15,510
Income tax using the Company's domestic tax rate
$ 265 $ 4,110
Income tax effect of:
Non-deductible expenses
Change in deferred tax rates
Operating in jurisdictions with different tax rates
Change in unrecognized temporary differences
Prior period adjustments to current tax
Prior period adjustments to deferred tax
Withholding taxes
Recognition of previously unrecognized deferred tax asset
Benefit retained on discontinued operations
Other
1,113
64
1,082
(2,374)
(14)
(54)
139
(2,972)
-
258
780
126
380
(981)
(97)
69
253
-
(374)
(92)
and the Provincial income tax rate of 11.5% (2015 – 11.5%).
UNRECOGNIZED DEFERRED TAX LIABILITIES
As at December 31, 2016, the Company has approximately $16,089 (December 31, 2015 - $14,904) of
temporary differences associated with its investments in foreign subsidiaries for which no deferred taxes
have been provided on the basis that the company is able to control the timing of the reversal of such
temporary differences and that such reversal is not probable in the foreseeable future.
UNRECOGNIZED DEFERRED TAX ASSETS
Deferred tax assets have not been recognized in respect of the following gross temporary differences:
Deductible temporary differences
Tax losses – Federal
Tax losses – State
YEAR ENDED
DECEMBER 31,
2016
2015
$ 6,658 $ 12,531
3,293
35,707
25,038
43,867
$ 45,658 $ 81,436
33
34
$ 16,421 $ (4,176) $ 12,245
T
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O
P
E
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N
N
A
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1
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2
P
U
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I
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I
A-34
$ 1,128 $ (552) $ 576
11,156
(2,962)
302
3,115
58
Property and equipment
Non-capital loss
Reserves
Financing costs
Intangible assets
Other
-
(3,518)
-
(94)
(12)
11,156
556
302
3,209
70
IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2015
TOTAL
LIABILITIES
ASSETS
Property and equipment
Non-capital loss
Reserves
Financing costs
Intangible assets
Other
$ 1,496 $ (11) $ 1,485
6,395
(4,487)
386
3,287
(42)
-
(6,371)
-
(170)
(108)
6,395
1,884
386
3,457
66
$ 13,684 $ (6,660) $ 7,024
NOTE 10: RELATED PARTY TRANSACTIONS
Pursuant to the Administration Agreement, IBI Group and certain of its subsidiaries are paying to the
Management Partnership an amount representing the base compensation for the services of the
partners of the Management Partnership. The amount paid for such services during the year ended
December 31, 2016 was $23,720 (2015 - $24,145). As at December 31, 2016, the Company advanced
$298 to the Management Partnership for payment of future compensation for the services of the partners
(December 31, 2015 – $1,036). As at December 31, 2016, there were 87 partners (December 31, 2015
– 91 partners).
IBI Group from time to time makes a monthly distribution to each Class B partnership unit holder equal
to the dividend per share (on a pre-tax basis) declared to each shareholder. All of the Class B partnership
units are held by the Management Partnership. As at December 31, 2016 and 2015, the amount of
distributions payable to the Management Partnership were nil.
As noted in Note 18 – Share Based Compensation, during the year the Company issued stock options
to management under the terms of the Company’s stock option plan.
COMPENSATION OF KEY MANAGEMENT PERSONNEL
The Company’s key management personnel are comprised of members of the executive team, to the
extent that they have the authority and responsibility for planning, directing and controlling the day-to-
day activities of the Company. The Company also provides compensation to the members of the Board
of Directors.
Directors fees, salaries and other short-term employee benefits
Share–based compensation
$ 3,076 $ 2,712
405
840
Total compensation
$ 3,916 $ 3,117
YEAR ENDED
DECEMBER 31,
2016
2015
A-35
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IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Property and equipment
$ 1,496 $ (11) $ 1,485
Non-capital loss
Reserves
Financing costs
Intangible assets
Other
YEAR ENDED DECEMBER 31, 2015
ASSETS
LIABILITIES
TOTAL
6,395
1,884
386
3,457
66
(6,371)
-
-
(170)
(108)
6,395
(4,487)
386
3,287
(42)
$ 13,684 $ (6,660) $ 7,024
NOTE 10: RELATED PARTY TRANSACTIONS
Pursuant to the Administration Agreement, IBI Group and certain of its subsidiaries are paying to the
Management Partnership an amount representing the base compensation for the services of the
partners of the Management Partnership. The amount paid for such services during the year ended
December 31, 2016 was $23,720 (2015 - $24,145). As at December 31, 2016, the Company advanced
$298 to the Management Partnership for payment of future compensation for the services of the partners
(December 31, 2015 – $1,036). As at December 31, 2016, there were 87 partners (December 31, 2015
– 91 partners).
IBI Group from time to time makes a monthly distribution to each Class B partnership unit holder equal
to the dividend per share (on a pre-tax basis) declared to each shareholder. All of the Class B partnership
units are held by the Management Partnership. As at December 31, 2016 and 2015, the amount of
distributions payable to the Management Partnership were nil.
As noted in Note 18 – Share Based Compensation, during the year the Company issued stock options
to management under the terms of the Company’s stock option plan.
COMPENSATION OF KEY MANAGEMENT PERSONNEL
The Company’s key management personnel are comprised of members of the executive team, to the
extent that they have the authority and responsibility for planning, directing and controlling the day-to-
day activities of the Company. The Company also provides compensation to the members of the Board
of Directors.
Directors fees, salaries and other short-term employee benefits
$ 3,076 $ 2,712
Share–based compensation
840
405
Total compensation
$ 3,916 $ 3,117
YEAR ENDED
DECEMBER 31,
2016
2015
NOTE 11: EQUITY
(a) SHAREHOLDERS’ EQUITY
The Company is authorized to issue an unlimited number of common shares. As at December 31, 2016,
the Company’s common share capital consisted of 31,186,819 shares issued and outstanding
(December 31, 2015 – 24,966,744 shares).
Each share entitles the holder to one vote at all meetings of shareholders.
The 6,282,222 Class B partnership units of IBI Group are indirectly exchangeable for common shares
of the Company on the basis of one share of the Company for each Class B subordinated partnership
unit. If all such Class B partnership units of IBI Group had been exchanged for shares on December 31,
2016, the units issued on such exchange would have represented a 16.8% interest in the Company.
Class B partnership units do not entitle the holder to voting rights at the meetings of shareholders,
although the holder also holds an equal number of non-participating voting shares in the Company. The
Class B partnership units have been recorded as a non-controlling interest in the consolidated financial
statements as at December 31, 2016 and 2015.
SHARE ISSUANCES
2016
• During the year ended December 31, 2016, the Company issued 6,220,076 common shares
upon redemption of 7.0% Debentures Options B and C valued at $31,245.
2015
• During the year ended December 31, 2015, the Company issued 3,487,071 common shares
for cash proceeds of $5,579 and incurred transaction costs of $113.
• During the year ended December 31, 2015, the Company issued 3,671,189 common shares
for proceeds of $7,985 in exchange for promissory notes which were used to pay down the
Management Partnership loan and incurred transaction costs of $125.
• During the year ended December 31, 2015, the Company issued 1,256,444 Class B
partnership units for proceeds of $2,010 in exchange for a promissory note which was used to
pay down the Management Partnership loan and incurred transaction costs of $41.
DIVIDENDS
There were no dividends declared during the years ended December 31, 2016 and 2015. The
Company suspended its dividend on May 24, 2013 and no dividends have been declared after February
2013.
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IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
EARNINGS (LOSS) PER SHARE FROM CONTINUING AND DISCONTINUED OPERATIONS
YEAR ENDED
DECEMBER 31,
2016
2015
Net income
$
3,494 $
9,463
Net income from continuing operations attributable to
owners of the Company
Net loss from discontinued operations attributable to
owners of the Company
2,814
8,842
-
(1,461)
Net income attributable to owners of the Company
$
2,814 $
7,381
Weighted average common shares outstanding
Dilutive effect of Class B partnership units
Dilutive effect of stock options granted
Diluted weighted average common shares outstanding
26,020
6,282
193
32,495
Basic earnings per common share
Diluted earnings per common share
Basic earnings per share from continuing operations
Diluted earnings per share from continuing operations
Basic and diluted loss per common share from discontinued
$
$
$
$
$
0.11 $
0.11 $
0.11 $
0.11 $
- $
17,985
5,074
-
23,059
0.41
0.41
0.49
0.49
(0.08)
operations
For the purposes of calculating diluted earnings (loss) per share, any impact of the convertible rights on
the convertible debentures are not included in the calculation of net loss per common share or weighted
average number of common shares outstanding as they would be anti-dilutive.
(b) NON-CONTROLLING INTEREST
Non-controlling interest in the Company’s subsidiaries is exchangeable into the common shares of the
Company on a one for one basis, subject to certain conditions. The movement in non-controlling interest
is shown in the consolidated statement of changes in equity.
The calculation of net loss and total comprehensive income (loss) attributable to non-controlling interest
is set out below:
YEAR ENDED
DECEMBER 31,
2016
2015
Net income
Non-controlling interest share of ownership(1)
$ 3,494 $ 9,463
22.00%
19.45%
Net income attributable to
non-controlling interest
$ 680 $ 2,082
(1) For the purposes of allocating net income and total comprehensive income to non-controlling interest, the average share
of non-controlling interest for the year ended December 31, 2016 was used.
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IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
EARNINGS (LOSS) PER SHARE FROM CONTINUING AND DISCONTINUED OPERATIONS
YEAR ENDED
DECEMBER 31,
2016
2015
2,814
8,842
-
(1,461)
Net income
$
3,494 $
9,463
Net income from continuing operations attributable to
owners of the Company
Net loss from discontinued operations attributable to
owners of the Company
Net income attributable to owners of the Company
$
2,814 $
7,381
Weighted average common shares outstanding
Dilutive effect of Class B partnership units
Dilutive effect of stock options granted
Diluted weighted average common shares outstanding
Basic earnings per common share
Diluted earnings per common share
Basic earnings per share from continuing operations
Diluted earnings per share from continuing operations
Basic and diluted loss per common share from discontinued
operations
26,020
6,282
193
32,495
$
$
$
$
$
0.11 $
0.11 $
0.11 $
0.11 $
- $
17,985
5,074
-
23,059
0.41
0.41
0.49
0.49
(0.08)
For the purposes of calculating diluted earnings (loss) per share, any impact of the convertible rights on
the convertible debentures are not included in the calculation of net loss per common share or weighted
average number of common shares outstanding as they would be anti-dilutive.
(b) NON-CONTROLLING INTEREST
Non-controlling interest in the Company’s subsidiaries is exchangeable into the common shares of the
Company on a one for one basis, subject to certain conditions. The movement in non-controlling interest
is shown in the consolidated statement of changes in equity.
The calculation of net loss and total comprehensive income (loss) attributable to non-controlling interest
is set out below:
YEAR ENDED
DECEMBER 31,
2016
2015
Net income
Non-controlling interest share of ownership(1)
$ 3,494 $ 9,463
19.45%
22.00%
Net income attributable to
non-controlling interest
$ 680 $ 2,082
(1) For the purposes of allocating net income and total comprehensive income to non-controlling interest, the average share
of non-controlling interest for the year ended December 31, 2016 was used.
YEAR ENDED
DECEMBER 31,
2016
2015
Total comprehensive income
Non-controlling interest share of ownership(1)
$ 3,389 $ 8,409
22.00%
19.45%
Total comprehensive income attributable
to non-controlling interest
$ 659 $ 1,850
(1) For the purposes of allocating net income and total comprehensive income to non-controlling interest, the average share
of non-controlling interest for the year ended December 31, 2016 was used.
NOTE 12: FINANCIAL RISK MANAGEMENT
The Company has exposure to market, credit and liquidity risk. The Company’s primary risk
management objective is to protect the Company’s consolidated statement of financial position,
comprehensive income (loss) and cash flow in support of sustainable growth and earnings. The
Company’s financial risk management activities are governed by financial policies that cover risk
identification, tolerance, measurement, authorization levels, and reporting.
(a) MARKET RISK
INTEREST RATE RISK
The Company’s credit facilities have floating-rate debt, which subjects it to interest rate cash flow risk.
Advances under these credit facilities bear interest at a rate based on the Canadian dollar or US dollar
prime rate, LIBOR or banker’s acceptance rates, plus, in each case, an applicable margin.
If the interest rate on the Company’s variable rate loan balance as at December 31, 2016, had been 50
basis points higher or lower, with all other variables held constant, net income for the year ended
December 31, 2016 would have decreased or increased by approximately $275.
CURRENCY RISK
The Company’s foreign exchange risk is the risk that the fair value of the future cash flows of a financial
instrument will fluctuate as a result of changes in foreign exchange rates. The Company’s policy has
been to economically hedge foreign exchange exposures rather than purchasing currency swaps and
forward foreign exchange contracts.
Foreign exchange gains or losses in the Company’s net income arise on the translation of foreign-
denominated intercompany loans held in the Company’s Canadian operations and financial assets and
liabilities held in the Company’s foreign operations. The Company minimizes its exposure to foreign
exchange fluctuations on these items by matching US-dollar liabilities when possible.
If the exchange rates had been 100 basis points higher or lower during the year ended and as at
December 31, 2016, with all other variables held constant, total comprehensive income would have
increased or decreased by $274 for the year ended December 31, 2016. If the exchange rates had been
100 basis points higher or lower during the year ended December 31, 2016, with all other variables held
constant, net income would have increased or decreased by $137 for the year ended December 31,
2016.
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IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(b) CREDIT RISK
Financial instruments that subject the Company to credit risk consist primarily of accounts receivable.
The Company maintains an allowance for estimated credit losses on accounts receivable. The estimate
is based on the best assessment of the ultimate collection of the related accounts receivable balance
based, in part, on the age of the outstanding accounts receivable and on its historical impairment loss
experience.
The Company provides services to diverse clients in various industries and sectors of the economy, and
its credit risk is not concentrated in any particular client, industry, economic or geographic sector. In
addition, management reviews accounts receivable past due on an ongoing basis with the objective of
identifying matters that could potentially delay the collection of funds (at an early stage). The Company
monitors accounts receivable with an internal target of working days of revenue in accounts receivable
(a non-IFRS measure). At December 31, 2016 there were 60 working days of revenue in accounts
receivable, compared to 62 days at December 31, 2015. The maximum exposure to credit risk, at the
date of the consolidated statement of financial position to recognized financial assets is the carrying
amount, net of any provisions for impairment of those assets, as disclosed in the consolidated statement
of financial position.
A significant portion of the accounts receivable are due from government and public institutions.
Receivables that are neither past due nor impaired are considered by management to have no
significant collection risk. The liquidity of customers and their ability to pay receivables are considered
in assessing the impairment of such assets. No collateral is held in respect of impaired assets or assets
that are past due but not impaired.
The aging of the accounts receivable are detailed below with the entire allowance for impairment losses
relating to accounts receivable over 90 days:
Current
30 to 90 days
Over 90 days
Allowance for impairment losses
TOTAL
(c) LIQUIDITY RISK
AS AT
DECEMBER 31, DECEMBER 31,
2016
2015
$ 46,057 $ 44,283
30,614
46,185
(9,311)
29,315
43,097
(9,876)
$ 108,593 $ 111,771
The Company strives to maintain sufficient financial liquidity to withstand sudden adverse changes in
economic circumstances. Management forecasts cash flows for its current and subsequent fiscal years
to identify financing requirements. These requirements are then addressed through a combination of
committed credit facilities (as described in Note 6 – Financial Instruments) and access to capital
markets.
On October 5, 2015, IBI Group signed an amendment to refinance its credit facilities with its senior
lenders (refer to Note 6 – Financial Instruments).
As at December 31, 2016, a foreign subsidiary of the Company had issued letters of credit in the amount
of US $2,300. The Company has pledged US $2,300 (December 31, 2015 - $2,300) of cash as security
for these letters of credit issued by a foreign financial institution on behalf of the foreign subsidiary.
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IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(b) CREDIT RISK
The Company has the following contractual obligations as at December 31, 2016:
2017
2022 AND
BEYOND
2020 AND
2021
-
3,874
-
CARRYING
AMOUNT
74,737
1,937
14,755
73,184
-
43,876
-
-
46,000
YEARS ENDED DECEMBER 31
2018 AND
2019
-
104
3,563
37
6,609
67
5,060
-
-
-
Accounts payable and
accrued liabilities
Credit facilities
Interest on credit facilities
Convertible debentures
Interest on convertible
debentures
Finance lease obligation
$ 55,505 $ 55,505 $ - $ - $ -
-
-
-
Financial instruments that subject the Company to credit risk consist primarily of accounts receivable.
The Company maintains an allowance for estimated credit losses on accounts receivable. The estimate
is based on the best assessment of the ultimate collection of the related accounts receivable balance
based, in part, on the age of the outstanding accounts receivable and on its historical impairment loss
experience.
The Company provides services to diverse clients in various industries and sectors of the economy, and
its credit risk is not concentrated in any particular client, industry, economic or geographic sector. In
addition, management reviews accounts receivable past due on an ongoing basis with the objective of
identifying matters that could potentially delay the collection of funds (at an early stage). The Company
monitors accounts receivable with an internal target of working days of revenue in accounts receivable
(a non-IFRS measure). At December 31, 2016 there were 60 working days of revenue in accounts
receivable, compared to 62 days at December 31, 2015. The maximum exposure to credit risk, at the
date of the consolidated statement of financial position to recognized financial assets is the carrying
of financial position.
Receivables that are neither past due nor impaired are considered by management to have no
significant collection risk. The liquidity of customers and their ability to pay receivables are considered
in assessing the impairment of such assets. No collateral is held in respect of impaired assets or assets
that are past due but not impaired.
The aging of the accounts receivable are detailed below with the entire allowance for impairment losses
relating to accounts receivable over 90 days:
Allowance for impairment losses
Current
30 to 90 days
Over 90 days
TOTAL
(c) LIQUIDITY RISK
AS AT
DECEMBER 31, DECEMBER 31,
2016
2015
$ 46,057 $ 44,283
29,315
43,097
(9,876)
30,614
46,185
(9,311)
$ 108,593 $ 111,771
The Company strives to maintain sufficient financial liquidity to withstand sudden adverse changes in
economic circumstances. Management forecasts cash flows for its current and subsequent fiscal years
to identify financing requirements. These requirements are then addressed through a combination of
committed credit facilities (as described in Note 6 – Financial Instruments) and access to capital
markets.
On October 5, 2015, IBI Group signed an amendment to refinance its credit facilities with its senior
lenders (refer to Note 6 – Financial Instruments).
As at December 31, 2016, a foreign subsidiary of the Company had issued letters of credit in the amount
of US $2,300. The Company has pledged US $2,300 (December 31, 2015 - $2,300) of cash as security
for these letters of credit issued by a foreign financial institution on behalf of the foreign subsidiary.
amount, net of any provisions for impairment of those assets, as disclosed in the consolidated statement
Total obligations
$ 172,669 $ 62,979 $ 98,105 $ 51,060 $ -
A significant portion of the accounts receivable are due from government and public institutions.
(d) CAPITAL MANAGEMENT
The Company’s objective in managing capital is to maintain a strong capital base so as to maintain
investor, creditor, and market confidence and to sustain future growth within the business. The Company
defines its capital as the aggregate of credit facilities, convertible debentures and equity.
The Company’s financing strategy is to access capital markets to raise debt and equity financing and
utilize the banking market to provide committed term and operating credit facilities to support its short-
term and long-term cash flow needs.
The Company has used the credit facilities to fund working capital. The credit facilities contain financial
covenants including a leverage ratio, interest coverage ratio, minimum Adjusted EBITDA1 threshold,
and restrictions on distributions, if certain conditions are not met. The Company was in compliance with
all financial covenants as at December 31, 2016.
As disclosed in Note 6 – Financial Instruments, on September 30, 2016, the Company issued 5.5%
Debentures at principal of $46,000.
As disclosed in Note 6 – Financial Instruments, on October 24, 2016 and December 30, 2016, the
Company redeemed its 6.0% Debentures at principal of $57,500.
As disclosed in Note 6 – Financial Instruments, on October 31, 2016, the Company redeemed its 7%
Debentures Options B and C.
(e) FAIR VALUE MEASUREMENTS
The fair values of cash, restricted cash, accounts receivable, accounts payable and accrued liabilities,
vendor notes payable, consent fee notes payable and finance lease obligation approximate their
carrying amounts due to their short-term maturity.
1
As defined in the credit facilities agreement, references to “Adjusted EBITDA” is to earnings before interest, income taxes, depreciation and
amortization;; adjusted for gain/loss arising from extraordinary, unusual or non-recurring items;; acquisition costs and deferred consideration revenue;;
non-cash expenses;; gain/loss realized upon the disposal of capital property;; gain/loss on foreign exchange translation;; gain/loss on purchase or
redemption of securities issued;; gain/loss on fair valuation of financial instruments;; amounts attributable to minority equity investments;; and interest
income. Adjusted EBITDA is not a recognized measure under IFRS and does not have a standardized meaning prescribed by IFRS, and the
Company’s method of calculating Adjusted EBITDA may differ from the methods used by other similar entities.
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IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The fair value of the Company’s credit facilities (net of deferred financing costs) approximate carrying
value due to the variable rate of interest of the debt.
IFRS 7 Financial Instruments – Disclosures, requires disclosure of all financial instruments at fair value
other than short term and carried at amortized cost, grouped in Levels 1 to 3, in the fair value hierarchy,
based on the degree to which the fair value is observable. The three levels of the fair value hierarchy
are:
• Level 1 – inputs derived from quoted prices (unadjusted) in active markets for identical assets or
liabilities;;
• Level 2 – inputs other than quoted prices included within Level 1 that are observable for the asset
or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices);; and
• Level 3 – fair value derived from valuation techniques that include inputs for the asset or liability
that are not based on observable market data (unobservable inputs).
For financial instruments recognized at fair value on a recurring basis, the Company determines whether
transfers have occurred between levels in the hierarchy by reassessing categorization at the end of
each reporting period. There were no transfers between Level 1 and Level 2 for the years ended
December 31, 2016 and December 31, 2015.
NOTE 13: CHANGE IN NON-CASH OPERATING WORKING CAPITAL
Accounts receivable
Work in process
Prepaid expenses and other assets
Accounts payable and accrued liabilities
Deferred revenue
Net income taxes payable
YEAR ENDED
DECEMBER 31,
2016
2015
$ (1,825) $ 3,538
10,473
(1,180)
(6,931)
8,873
(811)
(9,457)
(1,610)
2,383
13,036
1,637
Change in non-cash operating working capital
$ 4,164 $ 13,962
NOTE 14: COMMITMENTS
Non-cancellable operating leases where the Company is the lessee are payable as set out below.
These amounts represent the minimum annual future lease payments (excluding common area
maintenance costs and property taxes), in aggregate, that the Company is required to make under
existing operating lease agreements.
2017
2018
2019
2020
2021
Thereafter
$ 26,641
20,862
16,732
14,562
14,036
52,963
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IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The fair value of the Company’s credit facilities (net of deferred financing costs) approximate carrying
value due to the variable rate of interest of the debt.
IFRS 7 Financial Instruments – Disclosures, requires disclosure of all financial instruments at fair value
other than short term and carried at amortized cost, grouped in Levels 1 to 3, in the fair value hierarchy,
based on the degree to which the fair value is observable. The three levels of the fair value hierarchy
• Level 1 – inputs derived from quoted prices (unadjusted) in active markets for identical assets or
are:
liabilities;;
• Level 2 – inputs other than quoted prices included within Level 1 that are observable for the asset
or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices);; and
• Level 3 – fair value derived from valuation techniques that include inputs for the asset or liability
that are not based on observable market data (unobservable inputs).
For financial instruments recognized at fair value on a recurring basis, the Company determines whether
transfers have occurred between levels in the hierarchy by reassessing categorization at the end of
each reporting period. There were no transfers between Level 1 and Level 2 for the years ended
December 31, 2016 and December 31, 2015.
NOTE 13: CHANGE IN NON-CASH OPERATING WORKING CAPITAL
YEAR ENDED
DECEMBER 31,
2016
2015
$ (1,825) $ 3,538
(9,457)
(1,610)
2,383
13,036
1,637
10,473
(1,180)
(6,931)
8,873
(811)
Accounts receivable
Work in process
Prepaid expenses and other assets
Accounts payable and accrued liabilities
Deferred revenue
Net income taxes payable
NOTE 14: COMMITMENTS
Change in non-cash operating working capital
$ 4,164 $ 13,962
Non-cancellable operating leases where the Company is the lessee are payable as set out below.
These amounts represent the minimum annual future lease payments (excluding common area
maintenance costs and property taxes), in aggregate, that the Company is required to make under
existing operating lease agreements.
The Company leases certain property and equipment under operating leases. The leases typically run
for an initial lease period with the potential to renew the leases after the initial period at the option of the
Company.
One of the leased properties has been sub-let by the Company. The lease expires in 2024 and the
sublease expires in 2018. Sublease payments of $1,457 are expected to be received during 2016.
The rent expense recognized in the consolidated statement of comprehensive income (loss):
Lease expense
Onerous lease provision
Sublease income
Total rent expense
NOTE 15: FINANCE COSTS
Interest on credit facilities
Interest on convertible debentures
Interest on consent fee notes payable
Non-cash accretion of convertible debentures
Non-cash accretion of consent fee notes payable
Other
YEAR ENDED
DECEMBER 31,
2016
2015
$ 25,148 $ 25,422
(499)
(1,457)
(951)
(1,457)
$ 22,740 $ 23,466
YEAR ENDED
DECEMBER 31,
2016
2015
$ 3,057 $ 5,458
7,781
248
6,283
436
1586
5,872
255
15,403
479
487
INTEREST EXPENSE, NET
$ 25,553 $ 21,792
Financing costs
Amortization of deferred financing costs
Other
OTHER FINANCE COSTS
FINANCE COSTS
NOTE 16: DEFERRED SHARE PLAN
$ - $ 334
245
329
1,041
601
$ 1,642 $ 908
$ 27,195 $ 22,700
2017
2018
2019
2020
2021
Thereafter
$ 26,641
20,862
16,732
14,562
14,036
52,963
The Company offers a deferred share plan (“DSP”) for independent members of the Board of Directors
(“Board”). Under the DSP, directors of the Company may elect to allocate all or a portion of their annual
compensation in the form of deferred shares rather than cash. These shares are fully vested upon
issuance and are recorded as a financial liability at FVTPL in the consolidated statement of financial
position amounting to $2,360. Directors can only redeem their DSPs for shares when they leave the
Board.
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IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
During the year ended December 31, 2016, the Company granted 73,764 deferred shares
(December 31, 2015 – 121,048) and redeemed no deferred shares (December 31, 2015 – nil), for a
total of 402,766 deferred shares outstanding as at December 31, 2016 (December 31, 2015 – 329,002).
Compensation expense for the year ended December 31, 2016 related to the deferred shares was
$1,633 (December 31, 2015 – $336). There is no unrecognized compensation expense related to
deferred shares, since these awards vest immediately when granted.
The table below shows the DSP transactions for the year ended December 31, 2016:
Balance, January 1, 2016
Deferred shares issued
Change in fair value due to share price
BALANCE, DECEMBER 31, 2016
DEFERRED
SHARES
FAIR VALUE
329,002 $ 727
384
1,249
73,764
-
402,766
2,360
The table below shows the DSP transactions for the year ended December 31, 2015:
Balance, January 1, 2015
Deferred shares issued
Change in fair value due to share price
BALANCE, DECEMBER 31, 2015
NOTE 17: CONTINGENCIES
(a) LEGAL MATTERS
DEFERRED
SHARES
FAIR VALUE
207,954 $ 391
224
121,048
112
-
329,002 $ 727
In the normal course of business, the Company is a defendant in a number of lawsuits. The potential
liability, if any, is not determinable and in management's opinion, it would not have a material effect on
these consolidated financial statements, therefore no provisions have been recorded.
(b) INDEMNIFICATIONS
The Company provides indemnifications and, in very limited circumstances, bonds, which are often
standard contractual terms, to counterparties in transactions such as purchase and sale contracts for
assets or shares, service agreements, and leasing transactions. The Company also indemnifies its
directors and officers against any and all claims or losses reasonably incurred in the performance of
their service to the Company to the extent permitted by law. These indemnifications may require the
Company to compensate the counterparty for costs incurred as a result of various events, including
changes in or in the interpretation of laws and regulations, or as a result of litigation claims or statutory
sanctions that may be suffered by the counterparty as a consequence of the transaction. The terms of
these indemnifications will vary based upon the contract, the nature of which prevents the Company
from making a reasonable estimate of the maximum potential amount that it could be required to pay to
counterparties. The Company carries liability insurance, subject to certain deductibles and policy limits
that provides protection against certain insurable indemnifications. Historically, the Company has not
made any significant payments under such indemnifications, and no provisions have been accrued in
A- 43
43
During the year ended December 31, 2016, the Company granted 73,764 deferred shares
(December 31, 2015 – 121,048) and redeemed no deferred shares (December 31, 2015 – nil), for a
total of 402,766 deferred shares outstanding as at December 31, 2016 (December 31, 2015 – 329,002).
Compensation expense for the year ended December 31, 2016 related to the deferred shares was
$1,633 (December 31, 2015 – $336). There is no unrecognized compensation expense related to
deferred shares, since these awards vest immediately when granted.
The table below shows the DSP transactions for the year ended December 31, 2016:
The table below shows the DSP transactions for the year ended December 31, 2015:
Balance, January 1, 2016
Deferred shares issued
Change in fair value due to share price
BALANCE, DECEMBER 31, 2016
Balance, January 1, 2015
Deferred shares issued
Change in fair value due to share price
BALANCE, DECEMBER 31, 2015
NOTE 17: CONTINGENCIES
(a) LEGAL MATTERS
DEFERRED
SHARES
FAIR VALUE
329,002 $ 727
73,764
-
384
1,249
402,766
2,360
DEFERRED
SHARES
FAIR VALUE
207,954 $ 391
121,048
-
224
112
329,002 $ 727
In the normal course of business, the Company is a defendant in a number of lawsuits. The potential
liability, if any, is not determinable and in management's opinion, it would not have a material effect on
these consolidated financial statements, therefore no provisions have been recorded.
(b) INDEMNIFICATIONS
The Company provides indemnifications and, in very limited circumstances, bonds, which are often
standard contractual terms, to counterparties in transactions such as purchase and sale contracts for
assets or shares, service agreements, and leasing transactions. The Company also indemnifies its
directors and officers against any and all claims or losses reasonably incurred in the performance of
their service to the Company to the extent permitted by law. These indemnifications may require the
Company to compensate the counterparty for costs incurred as a result of various events, including
changes in or in the interpretation of laws and regulations, or as a result of litigation claims or statutory
sanctions that may be suffered by the counterparty as a consequence of the transaction. The terms of
these indemnifications will vary based upon the contract, the nature of which prevents the Company
from making a reasonable estimate of the maximum potential amount that it could be required to pay to
counterparties. The Company carries liability insurance, subject to certain deductibles and policy limits
that provides protection against certain insurable indemnifications. Historically, the Company has not
made any significant payments under such indemnifications, and no provisions have been accrued in
IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
the accompanying consolidated financial statements with respect to these indemnifications as it is not
probable that there will be an outflow of resources.
NOTE 18: SHARE-BASED COMPENSATION
Cash settled transactions
The Company has a share-based compensation plan which allows directors to receive director fees in
the form of deferred shares rather than cash. These awards are accounted for as financial liabilities at
FVTPL. On the grant date, the deferred shares are measured at fair value based on the market price
with subsequent changes to the fair value until settlement recorded as salaries, fees and employee
benefit expenses. The change in fair value of the deferred shares is recognized in other operating
expenses in the consolidated statement of comprehensive income (loss). During the year ended
December 31, 2016, an expense of $384 was recognized (December 31, 2015 – $224).
Equity settled transactions
The Company has an equity-settled stock option plan. The grant-date fair value of the stock options is
recognized as salaries, fees and employee expenses, with a corresponding increase to capital reserve
over the vesting period of the stock options. Market conditions are reflected in the initial measurement
of fair-value, with no subsequent true-up for differences between expected and actual outcomes.
Under the terms of the Company’s stock option plan, the options vest evenly over a three year period
on each of the first, second and third anniversary dates of the grant, and expire on the tenth
anniversary of the date of the grant. All options are to be settled by the physical delivery of shares.
43
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IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
On January 15, 2016, the Company granted 535,000 stock options to management under the terms of
the Company’s stock option plan at an exercise price of $2.33 per share. The fair value of the stock
option plan at the grant date has been measured using the Black-Scholes model. The following inputs
were used in the measurement of the fair values at the grant date of the options:
Fair value at grant date
Share price at grant date
Exercise price
Expected volatility (weighted average)
Expected life (weighted average)
Expected dividends
Risk-free interest rate
TRANCHE 1 TRANCHE 2 TRANCHE 3
$
1.14
$ 2.13
$ 2.33
64.2%
5.5 years
0%
0.64%
$
1.16
$ 2.13
$ 2.33
62.1%
6.0 years
0%
0.72%
$ 1.17
$ 2.13
$ 2.33
60.2%
6.5 years
0%
0.81%
On May 25, 2016, the Company granted 99,213 stock options to management under the terms of the
Company’s stock options plan at an exercise price of $4.49 per share. The fair value of the stock
option plan at the grant date has been measured using the Black-Scholes model. The following inputs
were used in the measurement of the fair values at the grant date of the options:
Fair value at grant date
Share price at grant date
Exercise price
Expected volatility (weighted average)
Expected life (weighted average)
Expected dividends
Risk-free interest rate
TRANCHE 1 TRANCHE 2 TRANCHE 3
$
2.47
$ 4.34
$ 4.49
66.9%
5.5 years
0%
0.86%
$
2.49
$ 4.34
$ 4.49
64.3%
6.0 years
0%
0.92%
$ 2.52
$ 4.34
$ 4.49
62.3%
6.5 years
0%
0.99%
Expected volatility is based on an evaluation of the historical volatility of the Company’s share price
over the historical period commensurate with the expected term. The expected term of the instruments
has been based on general option-holder behavior.
For the year ended December 31, 2016, the Company has recognized an expense of $453
(December 31, 2015 – nil).
A- 45
45
IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
IBI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
On January 15, 2016, the Company granted 535,000 stock options to management under the terms of
the Company’s stock option plan at an exercise price of $2.33 per share. The fair value of the stock
option plan at the grant date has been measured using the Black-Scholes model. The following inputs
were used in the measurement of the fair values at the grant date of the options:
Fair value at grant date
Share price at grant date
Exercise price
Expected volatility (weighted average)
Expected life (weighted average)
Expected dividends
Risk-free interest rate
TRANCHE 1 TRANCHE 2 TRANCHE 3
$
1.14
$
1.16
$ 1.17
$ 2.13
$ 2.13
$ 2.13
$ 2.33
$ 2.33
$ 2.33
64.2%
62.1%
60.2%
5.5 years
6.0 years
6.5 years
0%
0.64%
0%
0%
0.72%
0.81%
On May 25, 2016, the Company granted 99,213 stock options to management under the terms of the
Company’s stock options plan at an exercise price of $4.49 per share. The fair value of the stock
option plan at the grant date has been measured using the Black-Scholes model. The following inputs
were used in the measurement of the fair values at the grant date of the options:
Fair value at grant date
Share price at grant date
Exercise price
Expected volatility (weighted average)
Expected life (weighted average)
Expected dividends
Risk-free interest rate
TRANCHE 1 TRANCHE 2 TRANCHE 3
$
2.47
$
2.49
$ 2.52
$ 4.34
$ 4.34
$ 4.34
$ 4.49
$ 4.49
$ 4.49
66.9%
64.3%
62.3%
5.5 years
6.0 years
6.5 years
0%
0.86%
0%
0%
0.92%
0.99%
Expected volatility is based on an evaluation of the historical volatility of the Company’s share price
over the historical period commensurate with the expected term. The expected term of the instruments
has been based on general option-holder behavior.
For the year ended December 31, 2016, the Company has recognized an expense of $453
(December 31, 2015 – nil).
NOTE 19: NOTES PAYABLE
The movement in the vendor notes payable for the year ended December 31, 2016 is as follows:
Balance, January 1, 2015
Repayment
Foreign exchange
Balance, December 31, 2015
Repayment
Foreign exchange
BALANCE, DECEMBER 31, 2016
$
$
$
5,013
(1,609)
834
4,238
(4,076)
(162)
-
The vendor notes payable were repaid upon maturity on June 30, 2016.
The movement in the consent fee notes payable for the year ended December 31, 2016 is as follows:
Balance, December 31, 2015
Accretion
Repayment
BALANCE, DECEMBER 31, 2016
TOTAL
3,067
1,097
(4,164)
-
$
$
$
See Note 6 - Financial Instruments for further details regarding the issuance of consent fee notes
related to the amendment of the 7.0% Debentures during 2014. The consent fee notes payable were
repaid upon maturity on December 30, 2016.
NOTE 20: INVESTMENT IN EQUITY ACCOUNTED INVESTEE
On October 2, 2014, the Company’s interest in China decreased from 100% to 51% by way of a sale of
the China operations. Although the Company retained 51% interest in China, the Company has
determined that it does not have control of this entity and thus it is being accounted for as an equity
investment subsequent to the sale.
The following table reconciles the Company’s investment in China as at December 31, 2016 and
December 31, 2015:
Investment in China, January 1, 2015
Share of loss
Investment in China, December 31, 2015
Share of loss
INVESTMENT IN CHINA, DECEMBER 31, 2016
$
$
817
(785)
32
(32)
-
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IBI GROUP INC.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2016
FORWARD-LOOKING STATEMENTS ......................................................................................................... 4
FORWARD LOOKING STATEMENTS AND RISK FACTORS .................................................................... 4
COMPANY PROFILE .................................................................................................................................... 5
OUTLOOK ..................................................................................................................................................... 6
FINANCIAL HIGHLIGHTS ............................................................................................................................ 7
OVERVIEW ................................................................................................................................................... 8
KEY EVENTS ............................................................................................................................................ 8
STATEMENT OF COMPREHENSIVE INCOME (LOSS) ......................................................................... 8
RESULTS OF OPERATIONS ..................................................................................................................... 10
DESCRIPTION OF VARIANCES IN OPERATING RESULTS ............................................................... 11
SELECTED ANNUAL INFORMATION ....................................................................................................... 16
ADJUSTED EBITDA FROM CONTINUING OPERATIONS FOR THE PREVIOUS EIGHT QUARTERS .17
IMPACT OF TRENDS ON QUARTERLY RESULTS .............................................................................. 18
LIQUIDITY AND CAPITAL RESOURCES .................................................................................................. 18
WORKING CAPITAL ............................................................................................................................... 18
CASH FLOWS ............................................................................................................................................ 21
OPERATING ACTIVITIES ....................................................................................................................... 21
FINANCING ACTIVITIES ........................................................................................................................ 21
INVESTING ACTIVITIES ......................................................................................................................... 22
CREDIT FACILITY ...................................................................................................................................... 22
SECURITY INTEREST OF SENIOR LENDERS ........................................................................................ 23
NOTES PAYABLE ...................................................................................................................................... 23
CONVERTIBLE DEBENTURES ................................................................................................................. 25
FINANCIAL RISK MANAGEMENT ............................................................................................................. 27
MARKET RISK ........................................................................................................................................ 27
CREDIT RISK .......................................................................................................................................... 28
LIQUIDITY RISK ...................................................................................................................................... 28
CONTRACTUAL OBLIGATIONS ................................................................................................................ 29
CAPITAL MANAGEMENT .......................................................................................................................... 29
FUTURE CASH GENERATION .................................................................................................................. 29
SHARE CAPITAL .................................................................................................................................... 30
TRANSACTIONS WITH RELATED PARTIES ........................................................................................ 30
CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS ..................................................................... 31
ACCOUNTING DEVELOPMENTS ............................................................................................................. 33
DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROL OVER FINANCIAL
REPORTING ............................................................................................................................................... 36
DEFINITION OF NON-IFRS MEASURES .................................................................................................. 36
3 – IBI Group Inc. – December 31, 2016
The following Management Discussion and Analysis (“MD&A”) of operating results and financial position of
IBI Group Inc. and its subsidiaries (the “Company”) for the three and twelve months ended December 31,
2016 should be read in conjunction with the accompanying audited consolidated financial statements for
the year ended December 31, 2016, including the notes thereto. Additional information relating to the
Company, including its Annual Information Form for the year ended December 31, 2016 is or will be
available on SEDAR at www.sedar.com.
The financial information and tables presented herein have been prepared on the basis of International
Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board
(“IASB”), for financial statements and are expressed in thousands of Canadian dollars except for per share
amounts. Certain information in this MD&A are based on non-IFRS measures, which have been defined on
page 37 of this MD&A.
FORWARD-LOOKING STATEMENTS
This report includes certain forward-looking statements that are based on the available information and
management’s judgments as at the date of this report. The forward-looking statements are subject to risks
and uncertainties that may cause the actual results to differ materially from those anticipated in the
discussion. See “Forward Looking Statements and Risk Factors” below for more information.
FORWARD LOOKING STATEMENTS AND RISK FACTORS
Certain statements in this MD&A may constitute “forward-looking” statements which involve known and
unknown risks, uncertainties and other factors which may cause the actual results, performance or
achievements of the Company and its subsidiary entities, including IBI Group Partnership (“IBI Group”) or
the industry in which they operate, to be materially different from any future results, performance or
achievements expressed or implied by such forward looking statements. When used in this MD&A, such
statements use words such as “may”, “will”, “expect”, “believe”, “plan” and other similar terminology. These
statements reflect management’s current expectations regarding future events and operating performance
and speak only as of the date of this MD&A. These forward-looking statements involve a number of risks
and uncertainties, including those related to: (i) the Company’s ability to maintain profitability and manage
its growth; (ii) the Company’s reliance on its key professionals; (iii) competition in the industry in which the
Company operates; (iv) timely completion by the Company of projects and performance by the Company
of its obligations; (v) fixed-price contracts; (vi) the general state of the economy; (vii) risk of future legal
proceedings against the Company; (viii) the international operations of the Company; (ix) reduction in the
Company’s backlog; (x) fluctuations in interest rates; (xi) fluctuations in currency exchange rates; (xii)
upfront risk of time invested in participating in consortia bidding on large projects and projects being
contracted through private finance initiatives; (xiii) limits under the Company’s insurance policies; (xiv) the
Company’s reliance on distributions from its subsidiary entities and, as a result, its susceptibility to
fluctuations in their performance; (xv) unpredictability and volatility in the price of Shares (defined below);
(xvi) the degree to which the Company is leveraged and the effect of the restrictive and financial covenants
in the Company’s credit facilities; (xvii) the possibility that the Company may issue additional Common
Shares (defined below) diluting existing Shareholders’ interests; (xviii) income tax matters. These risk
factors are discussed in detail under the heading “Risk Factors” in the Company’s Annual Information Form
for the year ended December 31, 2016. New risk factors may arise from time to time and it is not possible
for management of the Company to predict all of those risk factors or the extent to which any factor or
combination of factors may cause actual results, performance or achievements of the Company to be
materially different from those contained in forward-looking statements. Given these risks and uncertainties,
investors should not place undue reliance on forward-looking statements as a prediction of actual results.
Although the forward-looking statements contained in this MD&A are based upon what management
4 – IBI Group Inc. – December 31, 2016
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believes to be reasonable assumptions, the Company cannot assure investors that actual results will be
consistent with these forward-looking statements. These forward-looking statements are made as of March
8, 2017.
The factors used to develop revenue forecast in this MD&A include the total amount of work the Company
has signed an agreement with its clients to complete, the timeline in which that work will be completed
based on the current pace of work the company achieved over the last 12 months and expects to achieve
over the next 12 months. The Company updates these assumptions at each reporting period and adjusts
its forward looking information as necessary.
COMPANY PROFILE
The business of the Company is conducted through IBI Group, a global architecture, engineering, planning
and technology entity, which operates 63 offices in 11 countries across the world.
IBI Group has one operating segment, consulting services, which is concentrated in three practice areas:
–
Intelligence
– Buildings
–
Infrastructure
IBI Group’s professionals have a broad range of professional backgrounds and experience in urban design
and planning, architecture, civil engineering, transportation engineering, traffic engineering, systems
engineering, urban geography, real estate analysis, landscape architecture, communications engineering,
software development, and many other areas of expertise, all contributing to the three areas in which IBI
Group practices.
The firm’s clients include national, provincial, state, and local government agencies and public institutions,
as well as leading companies in the real estate building, land and infrastructure development, transportation
and communication industries, and in other business areas.
B-5
5 – IBI Group Inc. – December 31, 2016
believes to be reasonable assumptions, the Company cannot assure investors that actual results will be
consistent with these forward-looking statements. These forward-looking statements are made as of March
8, 2017.
The factors used to develop revenue forecast in this MD&A include the total amount of work the Company
has signed an agreement with its clients to complete, the timeline in which that work will be completed
based on the current pace of work the company achieved over the last 12 months and expects to achieve
over the next 12 months. The Company updates these assumptions at each reporting period and adjusts
its forward looking information as necessary.
COMPANY PROFILE
The business of the Company is conducted through IBI Group, a global architecture, engineering, planning
and technology entity, which operates 63 offices in 11 countries across the world.
IBI Group has one operating segment, consulting services, which is concentrated in three practice areas:
–
Intelligence
– Buildings
–
Infrastructure
IBI Group’s professionals have a broad range of professional backgrounds and experience in urban design
and planning, architecture, civil engineering, transportation engineering, traffic engineering, systems
engineering, urban geography, real estate analysis, landscape architecture, communications engineering,
software development, and many other areas of expertise, all contributing to the three areas in which IBI
Group practices.
The firm’s clients include national, provincial, state, and local government agencies and public institutions,
as well as leading companies in the real estate building, land and infrastructure development, transportation
and communication industries, and in other business areas.
OUTLOOK
The following represents forward looking information and users are cautioned that actual results may vary.
Management is forecasting approximately $363 million in total revenue for the year ended December 31,
2017. The Company currently has $331 million of work that is committed and under contract for the next
three years. This committed workload is a material factor and assumption used to develop revenue
forecasts. The Company continues to see an increase in committed work to be delivered in 2017. The
Company has approximately ten months of backlog (calculated on the basis of the current pace of work
that the Company has achieved during the 12 months ended December 31, 2016).
The Company bases its view of industry performance on:
1. Annual survey completed by The Environmental Financial Consulting Group, Inc (“EFCG”) which
focuses on architecture and engineering industries.
2. The reported performance of the Company’s direct competitors.
3. The reports published by market analysts covering firms in the Company’s business sectors.
The Company has returned to Adjusted EBITDA1 margins in line with industry averages. Based on the most
recent review of this information, EBITDA margins in the industry average 8-12%.
Ongoing efforts are underway to improve the monitoring of financial results, identify synergies and
implement cost management initiatives, as well as strengthen the billings and collections process. The
Company continues to seek out opportunities to enhance profitability.
5 – IBI Group Inc. – December 31, 2016
6 – IBI Group Inc. – December 31, 2016
1 See “Definition of Non-IFRS Measures”.
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FINANCIAL HIGHLIGHTS
(in thousands of Canadian dollars except for per share amounts)
THREE MONTHS ENDED
DECEMBER 31,
2016
(unaudited)
2015
(unaudited)
YEAR ENDED
DECEMBER 31,
2016
2015
Number of working days (unaudited)
Revenue
63
$ 86,841 $ 84,913
63
251
$ 354,140 $ 327,092
251
Net income from continuing
operations
Net loss from discontinued operations
Net income
$ 7,594 $ 990
$ 3,494 $ 11,336
$ - $ (462)
$ 7,594 $ 528
$ - $ (1,873)
$ 3,494 $ 9,463
Cash flows provided by operating activities $ 17,247 $ 14,248
$ 30,850 $ 30,826
Basic and diluted earnings per share
Basic earnings per share from continuing
operations
Basic and diluted earnings per share from
discontinued operations
$ 0.24 $ 0.02
$ 0.11 $ 0.41
$ 0.24 $ 0.04
$ 0.11 $ 0.49
$ - $ (0.02)
$ - $ (0.08)
Adjusted EBITDA1 (unaudited)
Adjusted EBITDA1 as a percentage
of revenue (unaudited)
1-
See “Definition of Non-IFRS Measures”.
$ 7,480 $ 8,279
$ 39,247 $ 34,387
8.6%
9.7%
11.1%
10.5%
B-7
7 – IBI Group Inc. – December 31, 2016
FINANCIAL HIGHLIGHTS
(in thousands of Canadian dollars except for per share amounts)
OVERVIEW
KEY EVENTS
THREE MONTHS ENDED
DECEMBER 31,
2016
2015
(unaudited)
(unaudited)
YEAR ENDED
DECEMBER 31,
2016
2015
Number of working days (unaudited)
63
63
251
251
Revenue
$ 86,841 $ 84,913
$ 354,140 $ 327,092
Net income from continuing
operations
$ 7,594 $ 990
$ 3,494 $ 11,336
Net loss from discontinued operations
$ - $ (462)
$ - $ (1,873)
Net income
$ 7,594 $ 528
$ 3,494 $ 9,463
Cash flows provided by operating activities $ 17,247 $ 14,248
$ 30,850 $ 30,826
Basic and diluted earnings per share
Basic earnings per share from continuing
operations
Basic and diluted earnings per share from
discontinued operations
$ 0.24 $ 0.02
$ 0.11 $ 0.41
$ 0.24 $ 0.04
$ 0.11 $ 0.49
$ - $ (0.02)
$ - $ (0.08)
Adjusted EBITDA1 (unaudited)
$ 7,480 $ 8,279
$ 39,247 $ 34,387
Adjusted EBITDA1 as a percentage
of revenue (unaudited)
1-
See “Definition of Non-IFRS Measures”.
8.6%
9.7%
11.1%
10.5%
Revenue increased to $86.8 million for the three months ended December 31, 2016 compared to
$84.9 million for the same period in 2015, which reflects an increase of $1.9 million or 2.3%, and
$354.1 million for the year ended December 31, 2016 compared to $327.1 million for the same
period in 2015, which reflects an increase of $27.0 million or 8.3%.
Adjusted EBITDA1 has decreased to $7.5 million for the three months ended December 31, 2016
compared to $8.3 million for the same period in 2015, which reflects a decrease of $0.8 million or
9.7%, and $39.2 million for the year ended December 31, 2016 compared to $34.4 million for the
same period in 2015, which reflects an increase of $4.9 million or 14.1%.
The Company issued 5.5% convertible unsecured subordinated debentures (principal $46 million,
maturing on December 31, 2021). The net proceeds of $43.4 million upon issuance were used to
repay the Company’s credit facilities.
On October 24, 2016, the Company financed the partial redemption of its 6.0% debentures for
$43.8 million cash from the credit facilities. On December 30, 2016, the Company redeemed the
remaining portion of the 6.0% debentures for $13.7 million using the funds available from its Sinking
Fund balance.
On October 31, 2016, the Company redeemed the 7.0% debentures under Options B and C for
$31.2 million by issuing 6,220,076 common shares.
The Company made the required deposit toward the Sinking Fund for $3.25 million during the three
months ended December 31, 2016.
STATEMENT OF COMPREHENSIVE INCOME (LOSS)
Revenue for the three months ended December 31, 2016 was $86.8 million, compared with $84.9 million
in the same period in 2015, an increase of 2.3%. Revenue for the year ended December 31, 2016 was
$354.1 million, compared with $327.1 million for the same period in 2015, an increase of 8.3%.
For the three months ended December 31, 2016, the Company had net income from continuing operations
of $7.6 million compared with $1.0 million for the same period in 2015. The change in net income from
continuing operations for the three months ended December 31, 2016 is attributable to an increase in
revenue, a decrease in interest expense and a positive impact of the gain on fair value of the derivative
liability.
Net income from continuing operations for the year ended December 31, 2016 was $3.5 million compared
to $11.3 million for the same period in 2015. Net income from continuing operations for the year ended
December 31, 2016 is inclusive of a foreign exchange loss of $7.4 million, compared to a foreign exchange
gain of $8.7 million, which was included in net income for the same period in 2015. The Company recorded
a foreign exchange gain of $8.7 million during the year ended December 31, 2015, as the Canadian dollar
weakened against the US dollar and British pound. The foreign exchange loss during the year ended
December 31, 2016 reflects the reversal of trends in global currency markets.
7 – IBI Group Inc. – December 31, 2016
8 – IBI Group Inc. – December 31, 2016
1 See “Definition of Non-IFRS Measures”.
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Basic and diluted earnings per share from continuing operations was $0.24 per share for the three months
ended December 31, 2016, compared to $0.04 for the same period in 2015. Basic and diluted earnings per
share from continuing operations was $0.11 per share for the year ended December 31, 2016, compared
to $0.49 for the same period in 2015.
B-9
9 – IBI Group Inc. – December 31, 2016
Basic and diluted earnings per share from continuing operations was $0.24 per share for the three months
ended December 31, 2016, compared to $0.04 for the same period in 2015. Basic and diluted earnings per
share from continuing operations was $0.11 per share for the year ended December 31, 2016, compared
to $0.49 for the same period in 2015.
RESULTS OF OPERATIONS
The results of operations presented below should be read in conjunction with the applicable annual audited
consolidated financial statements and related notes thereto, prepared in accordance with IFRS.
(thousands of Canadian dollars, except per share amounts)
Revenue
Expenses
Salaries, fees and employee benefits
Rent
Other operating expenses
Foreign exchange loss (gain)
Amortization of intangible assets
Depreciation of property and equipment
Decrease in fair value of other financial liabilities
Impairment of financial assets
OPERATING INCOME
Interest expense, net
Other finance costs
FINANCE COSTS
THREE MONTHS ENDED
DECEMBER 31,
2016
(unaudited)
2015
(unaudited)
YEAR ENDED
DECEMBER 31,
2016
2015
$ 86,841 $ 84,913 $ 354,140 $ 327,092
61,914
5,947
10,502
(1,215)
293
1,168
(1,819)
558
229,900
23,466
37,136
(8,699)
784
4,024
-
1,486
$ 77,348 $ 75,972 $ 325,912 $ 288,097
$ 9,492 $ 8,941 $ 28,228 $ 38,995
248,869
22,740
41,781
7,363
1,002
4,323
(1,819)
1,653
59,174
5,856
10,321
(1,812)
205
1,195
-
1,033
3,064
414
21,792
908
$ 3,478 $ 6,040 $ 27,195 $ 22,700
25,553
1,642
5,651
389
Share of loss of equity-accounted investee, net of tax
-
149
32
785
NET INCOME BEFORE TAX FROM
CONTINUING OPERATIONS
Current tax expense (recovery)
Deferred tax (recovery) expense
INCOME TAXES
Net income from continuing operations
Net loss from discontinued operations
NET INCOME
OTHER COMPREHENSIVE (LOSS) INCOME
Items that are or may be reclassified to profit or loss
Loss on translating financial statements of foreign
operations from continuing operations, net of tax
OTHER COMPREHENSIVE LOSS, NET OF TAX
TOTAL COMPREHENSIVE (LOSS) INCOME
NET INCOME ATTRIBUTABLE TO:
Common shareholders
Non-controlling interests
NET INCOME
TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO:
Common shareholders
Non-controlling interests
TOTAL COMPREHENSIVE INCOME (LOSS)
EARNINGS PER SHARE ATTRIBUTABLE TO
COMMON SHAREHOLDERS
$ 6,014 $ 2,752 $ 1,001 $ 15,510
1,147
(2,727)
381
3,793
$ (1,580) $ 1,762 $ (2,493) $ 4,174
2,908
(5,401)
(940)
2,702
$ 7,594 $ 990 $ 3,494 $ 11,336
$ - $ (462) $ - $ (1,873)
$ 7,594 $ 528 $ 3,494 $ 9,463
$ (1,265) $ (838) $ (105) $ (1,054)
(1,054)
$ 6,329 $ (310) $ 3,389 $ 8,409
(1,265)
(105)
(838)
$ 6,089 $ 413 $ 2,814 $ 7,381
2,082
$ 7,594 $ 528 $ 3,494 $ 9,463
1,505
680
115
$ 5,079 $ (241) $ 2,730 $ 6,559
1,850
$ 6,329 $ (310) $ 3,389 $ 8,409
1,250
(69)
659
9 – IBI Group Inc. – December 31, 2016
10 – IBI Group Inc. – December 31, 2016
Basic and diluted earnings per share
Basic and diluted earnings per share from continuing operations
Basic and diluted earnings per share from discontinued operations
$ 0.24 $ 0.02 $ 0.11 $ 0.41
$ 0.24 $ 0.04 $ 0.11 $ 0.49
$ - $ (0.02) $ - $ (0.08)
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DESCRIPTION OF VARIANCES IN OPERATING RESULTS
i)
REVENUE
The Company reports revenue net of direct recoverable costs as these costs can vary significantly from
contract to contract and are not indicative of its professional services business.
Revenue for the three months ended December 31, 2016 increased by $1.9 million or 2.3% compared to
the same period in 2015. The increase in revenue is due to growth in the United States and International
geographical segments, including continuing work on significant transit projects. Growth has slowed in the
Company’s international segment, which includes the UK, due to uncertainty in the UK of Brexit and the
related decrease in the value of the British pound. Revenue for the three months ended December 31, 2016
in the UK decreased by $2.6 million or 25% compared to the same period in 2015.
Revenue for the year ended December 31, 2016 increased by $27.0 million or 8.3% compared to the same
period in 2015. The increase in revenue is due to growth in all geographical segments, including continuing
work on significant transit projects. Although there has been overall growth in the International segment the
UK experienced a reduction in revenues of $6.3 million due to the uncertainty of Brexit and the related
decrease in the value of the British pound. Significant effort has been incurred on major transit projects
during the year, the benefit of which is expected to be realized in future periods.
The impact of foreign exchange on revenue for the year ended December 31, 2016 was an additional $2.2
million of revenue compared to the same period in 2015.
ii)
SALARIES, FEES, AND EMPLOYEE BENEFITS
Salaries, fees, and employee benefits for the three months ended December 31, 2016 was $61.9 million
compared with $59.2 million in the same period in 2015. As a percentage of revenues, salaries, fees and
employee benefits for the three months ended December 31, 2016 was 71.3% compared to 69.7% for the
same period in 2015.
Salaries, fees and employee benefits for the year ended December 31, 2016 was $248.9 million, compared
with $229.9 million for the same period in 2015. As a percentage of revenues, salaries, fees and employee
benefits for the year ended December 31, 2016 remained unchanged from the same period in 2015 at
70.3%, which is consistent with the budgeted compensation target of 70%.
The impact of foreign exchange on salaries, fees and employee benefits for the three months ended
December 31, 2016 was $0.2 million additional expense compared to the same period in 2015. The impact
of foreign exchange on salaries, fees and employee benefits for the year ended December 31, 2016 was
an additional $1.5 million of expense compared to the same period in 2015.
iii)
RENT FROM CONTINUING OPERATIONS
Rent for the three months ended December 31, 2016 remained unchanged from the same period in 2015
at $5.9 million. Rent for the year ended December 31, 2016 was $22.7 million, compared with $23.5 million
for the same period in 2015.
iv)
OTHER OPERATING EXPENSES
Other operating expenses for the three months ended December 31, 2016 was $10.5 million, compared
with $10.3 million for the same period in 2015. As a percentage of revenues, operating expenses for the
three months ended December 31, 2016 and 2015, respectively were 12.1%.
B-11
11 – IBI Group Inc. – December 31, 2016
DESCRIPTION OF VARIANCES IN OPERATING RESULTS
i)
REVENUE
The Company reports revenue net of direct recoverable costs as these costs can vary significantly from
contract to contract and are not indicative of its professional services business.
Revenue for the three months ended December 31, 2016 increased by $1.9 million or 2.3% compared to
the same period in 2015. The increase in revenue is due to growth in the United States and International
geographical segments, including continuing work on significant transit projects. Growth has slowed in the
Company’s international segment, which includes the UK, due to uncertainty in the UK of Brexit and the
related decrease in the value of the British pound. Revenue for the three months ended December 31, 2016
in the UK decreased by $2.6 million or 25% compared to the same period in 2015.
Revenue for the year ended December 31, 2016 increased by $27.0 million or 8.3% compared to the same
period in 2015. The increase in revenue is due to growth in all geographical segments, including continuing
work on significant transit projects. Although there has been overall growth in the International segment the
UK experienced a reduction in revenues of $6.3 million due to the uncertainty of Brexit and the related
decrease in the value of the British pound. Significant effort has been incurred on major transit projects
during the year, the benefit of which is expected to be realized in future periods.
The impact of foreign exchange on revenue for the year ended December 31, 2016 was an additional $2.2
million of revenue compared to the same period in 2015.
ii)
SALARIES, FEES, AND EMPLOYEE BENEFITS
Salaries, fees, and employee benefits for the three months ended December 31, 2016 was $61.9 million
compared with $59.2 million in the same period in 2015. As a percentage of revenues, salaries, fees and
employee benefits for the three months ended December 31, 2016 was 71.3% compared to 69.7% for the
same period in 2015.
Salaries, fees and employee benefits for the year ended December 31, 2016 was $248.9 million, compared
with $229.9 million for the same period in 2015. As a percentage of revenues, salaries, fees and employee
benefits for the year ended December 31, 2016 remained unchanged from the same period in 2015 at
70.3%, which is consistent with the budgeted compensation target of 70%.
The impact of foreign exchange on salaries, fees and employee benefits for the three months ended
December 31, 2016 was $0.2 million additional expense compared to the same period in 2015. The impact
of foreign exchange on salaries, fees and employee benefits for the year ended December 31, 2016 was
an additional $1.5 million of expense compared to the same period in 2015.
iii)
RENT FROM CONTINUING OPERATIONS
Rent for the three months ended December 31, 2016 remained unchanged from the same period in 2015
at $5.9 million. Rent for the year ended December 31, 2016 was $22.7 million, compared with $23.5 million
for the same period in 2015.
iv)
OTHER OPERATING EXPENSES
Other operating expenses for the three months ended December 31, 2016 was $10.5 million, compared
with $10.3 million for the same period in 2015. As a percentage of revenues, operating expenses for the
three months ended December 31, 2016 and 2015, respectively were 12.1%.
Other operating expenses for the year ended December 31, 2016 was $41.8 million, compared to $37.1
million for the same period in 2015. As a percentage of revenues, operating expenses for the year ended
December 31, 2016 were 11.8% compared to 11.4% for the same period in 2015. The impact of foreign
exchange on other operating expenses for the year ended December 31, 2016 was an additional $0.2
million of expense compared to the same period in 2015.
A reduction in overhead expenses as a percentage of revenues will continue to be an area of focus for the
Company as we look to improve overall efficiency.
v)
FOREIGN EXCHANGE LOSS (GAIN)
Foreign exchange gain for the three months ended December 31, 2016 was $1.2 million compared to $1.8
million in the same period in 2015. Foreign exchange loss for the year ended December 31, 2016 was $7.4
million compared to a gain of $8.7 million for the same period in 2015.
The foreign exchange loss (gain) is primarily attributable to foreign exchange rate movements between the
Canadian dollar, US dollar and British pound as functional currencies of the Company’s subsidiaries and
other local currencies of international subsidiaries, as well as intercompany loans made by the Canadian
parent company in the functional currencies of foreign subsidiaries that is not considered part of the
permanent investment in the foreign subsidiaries, offset by the foreign exchange impact of its US dollar
drawings on its credit facilities.
The foreign exchange loss for the year ended December 31, 2016, relates to the reversal of the foreign
exchange gains on the US dollar and British pound recognized in 2015 of $8.7 million.
Although the Company strives to minimize its exposure to foreign exchange fluctuations on the translation
of foreign-denominated intercompany loans held in the Company’s Canadian operations by matching US
dollar liabilities when possible, the Company’s primary objective is to ensure it has sufficient cash flow to
meet its short and long-term obligations. As such, the Company closely monitors its availability in its credit
facilities based on foreign exchange rate fluctuations between the Canadian and US dollar, as well as
ensures that tax efficiencies continue to exist in order to meet its short and long-term cash obligations.
vi)
AMORTIZATION OF INTANGIBLE ASSETS
Amortization of intangible assets was $0.3 million for the three months ended December 31, 2016
compared to $0.2 million for the three months ended December 31, 2015. Amortization of intangible assets
for the year ended December 31, 2016 was $1.0 million compared to $0.8 million for the year ended
December 31, 2015. The increase in amortization in each period is a result of commencing amortization
of the ERP system.
vii)
AMORTIZATION OF PROPERTY AND EQUIPMENT
Amortization of property and equipment for the three months ended December 31, 2016 was $1.2 million
compared to $1.2 million for the same period in 2015.
Amortization of property and equipment for the year ended December 31, 2016 was $4.3 million compared
to $4.0 million for the same period in 2015.
viii)
DECREASE IN FAIR VALUE OF OTHER FINANCIAL LIABILITIES
Change in fair value of other financial liabilities for the three months ended December 31, 2016 was a gain
of $1.8 million compared to $nil for the same period in 2015 Change in fair value of other financial liabilities
for the year ended December 31, 2016 was a gain of $1.8 million compared to $nil for the same period in
2015. The gain is related to the revaluation of the derivative liability, which was set up in September 2016
as a result of the issuance of the 5.5% debentures.
11 – IBI Group Inc. – December 31, 2016
12 – IBI Group Inc. – December 31, 2016
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B-12
ix)
IMPAIRMENT OF FINANCIAL ASSETS
Impairment of financial assets for the three months ended December 31, 2016 was $0.6 million compared
to $1.0 million in the same period in 2015. The decrease is consistent with the Company’s ongoing efforts
to focus on collections, resulting in a decrease in write-offs of accounts receivable. Impairment of financial
assets for the year ended December 31, 2016 was $1.7 million compared to $1.5 million for the same period
in 2015. The impairment of financial assets during the year ending December 31, 2015 included recoveries
of amounts that were previously written off in 2013.
x)
INTEREST EXPENSE
Interest expense from continuing operations for the three months ended December 31, 2016 was $3.1
million compared to $5.6 million for the same period in 2015. The decrease of $2.5 million is attributable to
a reduction of $0.4 million in interest on long-term debt, a reduction of $1.1 million in interest on debentures,
and a decrease of $1.0 million in accretion expense due to the redemptions of the 6% debentures in October
2016 and December 2016 as well as the redemption of the 7% debentures option B and C in October 2016
respectively.
Interest expense for the year ended December 31, 2016 was $25.5 million compared with $21.8 million for
the same period in 2015. The increase of $3.8 million is primarily attributable to an increase of $9.1 million
due to accretion expense of convertible debentures redeemed in 2016. See discussion in the liquidity risk
section of this MD&A for further details. The increase in accretion expense was offset by a decrease of $2.4
million in interest on long-term debt, a decrease of $1.9 million on interest on convertible debentures and a
decrease of $1.1 million in other interest as a result of a decrease in interest on the indebtedness owing to
the Management Partnership, which was repaid on December 2015 and the repayment of the vendor notes
on June 30, 2016.
xi)
OTHER FINANCE COSTS
Other finance costs for the three months ended December 31, 2016 was $0.4 million compared to $0.4
million for the same period in 2015. Other finance costs for the year ended December 31, 2016 were $1.6
million compared to $0.9 million for the same period in 2015. The increase of $0.7 million is attributable to
an increase of $0.8 million of amortization of deferred financing costs related to the renegotiation of the
credit facilities in Q4 2015.
xii)
INCOME TAXES
Income taxes for the three months ended December 31, 2016 was a recovery of $1.6 million with an
effective income tax rate of (26.0)% compared to an expense of $1.8 million with an effective income tax
rate of 64.0% for the same period in 2015. The decrease in the effective tax rate for the three months ended
December 31, 2016 was principally as a result of recognition of previously unrecognized deferred tax
assets. The tax expense for the three months ended December 31, 2015 was attributable to the composition
of income in the various jurisdictions in which the Company operates and changes in the valuation of
deferred tax assets.
Income taxes for the year ended December 31, 2016 was a recovery of $2.5 million with an effective tax
rate of (248.9)% compared to an expense of $2.8 million with an effective tax rate of 26.9% for the same
period in 2015. The decrease in the effective tax rate for the year ended December 31, 2016 was primarily
a result of the US operations utilizing and recognizing previously unrecognized deferred tax assets during
2016.
B-13
13 – IBI Group Inc. – December 31, 2016
Impairment of financial assets for the three months ended December 31, 2016 was $0.6 million compared
to $1.0 million in the same period in 2015. The decrease is consistent with the Company’s ongoing efforts
to focus on collections, resulting in a decrease in write-offs of accounts receivable. Impairment of financial
assets for the year ended December 31, 2016 was $1.7 million compared to $1.5 million for the same period
in 2015. The impairment of financial assets during the year ending December 31, 2015 included recoveries
of amounts that were previously written off in 2013.
x)
INTEREST EXPENSE
Interest expense from continuing operations for the three months ended December 31, 2016 was $3.1
million compared to $5.6 million for the same period in 2015. The decrease of $2.5 million is attributable to
a reduction of $0.4 million in interest on long-term debt, a reduction of $1.1 million in interest on debentures,
and a decrease of $1.0 million in accretion expense due to the redemptions of the 6% debentures in October
2016 and December 2016 as well as the redemption of the 7% debentures option B and C in October 2016
respectively.
Interest expense for the year ended December 31, 2016 was $25.5 million compared with $21.8 million for
the same period in 2015. The increase of $3.8 million is primarily attributable to an increase of $9.1 million
due to accretion expense of convertible debentures redeemed in 2016. See discussion in the liquidity risk
section of this MD&A for further details. The increase in accretion expense was offset by a decrease of $2.4
million in interest on long-term debt, a decrease of $1.9 million on interest on convertible debentures and a
decrease of $1.1 million in other interest as a result of a decrease in interest on the indebtedness owing to
the Management Partnership, which was repaid on December 2015 and the repayment of the vendor notes
on June 30, 2016.
xi)
OTHER FINANCE COSTS
credit facilities in Q4 2015.
xii)
INCOME TAXES
Other finance costs for the three months ended December 31, 2016 was $0.4 million compared to $0.4
million for the same period in 2015. Other finance costs for the year ended December 31, 2016 were $1.6
million compared to $0.9 million for the same period in 2015. The increase of $0.7 million is attributable to
an increase of $0.8 million of amortization of deferred financing costs related to the renegotiation of the
Income taxes for the three months ended December 31, 2016 was a recovery of $1.6 million with an
effective income tax rate of (26.0)% compared to an expense of $1.8 million with an effective income tax
rate of 64.0% for the same period in 2015. The decrease in the effective tax rate for the three months ended
December 31, 2016 was principally as a result of recognition of previously unrecognized deferred tax
assets. The tax expense for the three months ended December 31, 2015 was attributable to the composition
of income in the various jurisdictions in which the Company operates and changes in the valuation of
deferred tax assets.
Income taxes for the year ended December 31, 2016 was a recovery of $2.5 million with an effective tax
rate of (248.9)% compared to an expense of $2.8 million with an effective tax rate of 26.9% for the same
period in 2015. The decrease in the effective tax rate for the year ended December 31, 2016 was primarily
a result of the US operations utilizing and recognizing previously unrecognized deferred tax assets during
2016.
ix)
IMPAIRMENT OF FINANCIAL ASSETS
xiii)
NET INCOME
Net income for the three months ended December 31, 2016 was $7.6 million compared to net income of
$0.5 million for the same period in 2015. The factors impacting this are set out in the description of individual
line items above.
Net income for the year ended December 31, 2016 was $3.5 million compared to $9.5 million for the same
period in 2015. The factors impacting this are set out in the description of individual line items above.
Adjusted EBITDA1 for the three months ended December 31, 2016 has decreased by $0.8 million compared
to the same period in 2015 (see table for adjusted EBITDA1 from continuing operations for the previous
eight quarters in this MD&A). Adjusted EBITDA1 for the year ended December 31, 2016 has increased by
$4.9 million as a result of stronger operating performance from all geographical segments.
Following is a summary of finance costs for the year ended December 31, 2016 and December 31, 2015:
(in thousands of Canadian dollars)
Interest on credit facilities
Interest on convertible debentures
Interest on consent fee notes payable
Non-cash accretion of convertible debentures
Non-cash accretion of consent fee notes
payable
Other
INTEREST EXPENSE, NET
Financing costs
Amortization of deferred financing costs
Other
OTHER FINANCE COSTS
FINANCE COSTS
YEAR ENDED
DECEMBER 31,
2016
2015
3,057
5,872
255
15,403
479
487
25,553
-
1,041
601
1,642
27,195
5,458
7,781
248
6,283
436
1,586
21,792
334
245
329
908
22,700
13 – IBI Group Inc. – December 31, 2016
14 – IBI Group Inc. – December 31, 2016
1 See “Definition of Non-IFRS Measures”.
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SUMMARY OF FOREIGN EXCHANGE IMPACT
The following is a summary of the foreign exchange impact on revenue and total expenses for the three
months and year ended December 31, 2016:
(unaudited)
(in thousands of Canadian dollars)
THREE MONTHS ENDED
DECEMBER 31,
2015
2016
FOREIGN
EXCHANGE OPERATING
CHANGE
IMPACT
CHANGE
Revenue
Total expenses, net of
foreign exchange gain
86,841
84,913
1,928
318
1,610
78,455
77,785
670
320
350
(in thousands of Canadian dollars)
Revenue
Total expenses, net of
foreign exchange loss
YEAR ENDED
DECEMBER 31,
2015
2016
FOREIGN
EXCHANGE OPERATING
CHANGE
IMPACT
CHANGE
354,140
327,092
27,048
2,243
24,805
318,440
296,796
21,644
1,870
19,774
B-15
15 – IBI Group Inc. – December 31, 2016
SUMMARY OF FOREIGN EXCHANGE IMPACT
SELECTED ANNUAL INFORMATION
The following is a summary of the foreign exchange impact on revenue and total expenses for the three
months and year ended December 31, 2016:
The selected information presented below should be read in conjunction with the applicable annual audited
consolidated financial statements and related notes thereto, prepared in accordance with IFRS.
YEAR ENDED
(in thousands of Canadian dollars, except per share
amounts)
Revenue
DECEMBER 31, DECEMBER 31, DECEMBER 31,
2015
2014
2016
$ 354,140 $ 327,092 $ 298,274
Net income from continuing operations
Net loss from discontinued operations
NET INCOME (LOSS)
$ 3,494 $ 11,336 $ 5,919
$ - $ (1,873) $ (9,079)
$ 3,494 $ 9,463 $ (3,160)
Basic and diluted earnings per share
Basic and diluted earnings per share
from continuing operations
Basic and diluted earnings per share
from discontinued operations
$ 0.11 $ 0.41 $ (0.14)
$ 0.11 $ 0.49 $ 0.26
$ - $ (0.08) $ (0.40)
(unaudited)
DECEMBER 31,
EXCHANGE OPERATING
(in thousands of Canadian dollars)
2016
2015
CHANGE
IMPACT
CHANGE
THREE MONTHS ENDED
FOREIGN
Revenue
Total expenses, net of
foreign exchange gain
86,841
84,913
1,928
318
1,610
78,455
77,785
670
320
350
(in thousands of Canadian dollars)
2016
2015
CHANGE
IMPACT
CHANGE
YEAR ENDED
DECEMBER 31,
FOREIGN
EXCHANGE OPERATING
Revenue
Total expenses, net of
foreign exchange loss
354,140
327,092
27,048
2,243
24,805
318,440
296,796
21,644
1,870
19,774
(in thousands of Canadian dollars)
DECEMBER 31, DECEMBER 31, DECEMBER 31,
2015
2014
2016
TOTAL ASSETS
$ 261,810 $ 255,240 $ 252,063
Onerous lease provisions
Consent fee notes payable
Finance lease obligation
Credit facilities
Convertible debentures
Other financial liabilities
Deferred tax liabilities
TOTAL LONG-TERM LIABILITIES
$ 2,270 $ 3,244 $ 4,051
$ - $ - $ 2,631
$ 67 $ 104 $ 235
$ 73,184 $ 72,277 $ 63,423
$ 43,876 $ 84,720 $ 98,437
$ 9,089 $ - $ -
$ 4,176 $ 6,660 $ 8,690
$ 132,662 $ 167,005 $ 177,467
NET INCOME FROM CONTINUING OPERATIONS
In 2014, the Company’s net income from continuing operations was impacted by the write-off of accounts
receivable and WIP.
xiv)
ADJUSTED EBITDA1 FROM CONTINUING OPERATIONS
All of the factors outlined above have been adjusted for the discussion in the non-IFRS measure, Adjusted
EBITDA1. The following summary of quarterly results outlines all the items which comprise the difference
between net income (loss) from continuing operations in each of the following quarters.
15 – IBI Group Inc. – December 31, 2016
16 – IBI Group Inc. – December 31, 2016
1 See “Definition of Non-IFRS Measures”.
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ADJUSTED EBITDA1 FROM CONTINUING OPERATIONS FOR THE PREVIOUS
EIGHT QUARTERS
The following table provides quarterly historical financial data for the Company for each of the eight most
recently completed quarters. This information should be read in conjunction with the applicable interim
unaudited and annual audited consolidated financial statements and related notes thereto, prepared in
accordance with IFRS.
(unaudited)
(in thousands of Canadian
dollars
except for per share amounts)
DECEMBER
31,
2016
SEPTEMBER
30,
2016
JUNE 30, MARCH 31, DECEMBER
2016
31,
2015
2016
SEPTEMBER
30,
2015
JUNE 30, MARCH 31,
2015
2015
Revenue
86,841
88,211
90,443
88,645
84,913
83,819
80,879
77,481
Net Income (Loss)
Net Income (Loss) from
continuing operations
Add:
Interest expense, net
Current and deferred tax
expense (recovery)
Amortization and
Depreciation
7,594
(4,728)
4,465
(3,837)
7,594
(4,728)
4,465
(3,837)
528
990
4,815
1,594
2,526
6,226
1,594
2,526
3,064
14,384
4,054
4,051
5,651
5,286
5,741
5,114
(1,580)
(873)
234
(274)
1,762
695
966
751
1,461
2,945
1,345
14,856
1,242
5,530
1,277
5,054
1,399
8,812
1,247
7,228
1,168
7,875
994
6,859
EBITDA
10,539
10,128
9,995
1,217
9,802
13,454
9,469
9,385
EBITDA as a percentage
of revenue
Items excluded in calculation of
Adjusted EBITDA1
12.1%
11.5%
11.1%
1.4%
11.5%
16.1%
11.7%
12.1%
Foreign exchange (gain)/loss
(1,215)
(392)
1,723
7,247
(1,812)
(3,908)
303
(3,282)
Decrease in fair value of other
financial liabilities
Change in fair value of DSP
Stock based compensation
expenses
Deferred financing charges
(1,819)
(85)
133
261
-
365
132
262
-
349
109
259
-
620
79
259
-
63
-
298
-
(82)
-
2
Onerous lease provision
(334)
(275)
(119)
(223)
(222)
(236)
(196)
Share of loss of equity
accounted investee, net of tax
-
(3,059)
-
92
-
32
150
226
2,321
8,014
(1,523)
(3,998)
212
637
-
-
231
(100)
-
87
-
192
154
197
(2,839)
Adjusted EBITDA1
7,480
10,220
12,316
9,231
8,279
9,456
10,106
6,546
Adjusted EBITDA1 as a
percentage of revenue
Earnings per share attributed
to common shareholders
Earnings per share attributed
to common shareholders
from continuing operations
Weighted average share
outstanding
8.6%
11.6%
13.6%
10.4%
9.7%
11.3%
12.5%
8.4%
0.24
(0.15)
0.14
(0.12)
0.02
0.21
0.07
0.11
0.24
(0.15)
0.14
(0.12)
0.04
0.27
0.07
0.11
26,020,418
24,966,744
24,966,744
24,966,744
17,985,213
17,808,484
17,808,484
17,808,484
1 See “Definition of Non-IFRS Measures”.
1 See “Definition of Non-IFRS Measures”.
B-17
17 – IBI Group Inc. – December 31, 2016
ADJUSTED EBITDA1 FROM CONTINUING OPERATIONS FOR THE PREVIOUS
IMPACT OF TRENDS ON QUARTERLY RESULTS
The following table provides quarterly historical financial data for the Company for each of the eight most
recently completed quarters. This information should be read in conjunction with the applicable interim
unaudited and annual audited consolidated financial statements and related notes thereto, prepared in
i)
REVENUE
Consolidated quarterly revenue is impacted by the available chargeable hours which are typically lowest in
the third quarter following the summer as a result of staff taking vacations during the summer. Revenue
was positively impacted in the third and fourth quarters of 2016 as a result of continuing work on significant
transit projects.
(in thousands of Canadian
dollars
except for per share amounts)
DECEMBER
SEPTEMBER
JUNE 30, MARCH 31, DECEMBER
SEPTEMBER
JUNE 30, MARCH 31,
31,
2016
30,
2016
2016
2016
31,
2015
30,
2015
2015
2015
In addition, revenue is impacted by foreign exchange rates.
Revenue
86,841
88,211
90,443
88,645
84,913
83,819
80,879
77,481
ii)
NET INCOME (LOSS) FROM CONTINUING OPERATIONS
Net income (loss) from continuing operations was negatively impacted in the first and second quarters of
2016 as a result of a foreign exchange loss of $7.2 million and $1.7 million, respectively. Net income from
continuing operations was positively impacted in the first and fourth quarters of 2015 as a result of foreign
exchange gains of $3.2 million and $1.8 million, respectively.
The net loss in the third quarter of 2016 was negatively impacted by the accelerated accretion of $10.3
million resulting from the redemption of 6% and 7% debentures. Net income from continuing operations
was positively impacted in the third quarter of 2015 as a result of foreign exchange gain of $3.9 million.
Net income (loss) from continuing operations was positively impacted in the fourth quarter of 2016 by $1.2
million resulting from a foreign exchange gain and $1.8 million resulting from a gain on the fair value of
other financial liabilities.
LIQUIDITY AND CAPITAL RESOURCES
WORKING CAPITAL
The following table represents the working capital information:
EIGHT QUARTERS
accordance with IFRS.
(unaudited)
Net Income (Loss)
Net Income (Loss) from
continuing operations
Add:
Interest expense, net
Current and deferred tax
expense (recovery)
Amortization and
Depreciation
EBITDA as a percentage
of revenue
Items excluded in calculation of
Adjusted EBITDA1
7,594
(4,728)
4,465
(3,837)
4,815
1,594
2,526
7,594
(4,728)
4,465
(3,837)
6,226
1,594
2,526
528
990
3,064
14,384
4,054
4,051
5,651
5,286
5,741
5,114
(1,580)
(873)
234
(274)
1,762
695
966
751
1,461
2,945
1,345
14,856
1,242
5,530
1,277
5,054
1,399
8,812
1,247
7,228
1,168
7,875
994
6,859
EBITDA
10,539
10,128
9,995
1,217
9,802
13,454
9,469
9,385
12.1%
11.5%
11.1%
1.4%
11.5%
16.1%
11.7%
12.1%
Foreign exchange (gain)/loss
(1,215)
(392)
1,723
7,247
(1,812)
(3,908)
303
(3,282)
Decrease in fair value of other
financial liabilities
Change in fair value of DSP
Stock based compensation
expenses
Deferred financing charges
(1,819)
(85)
133
261
-
365
132
262
-
92
-
349
109
259
-
620
79
259
-
63
-
298
-
-
2
(82)
231
(100)
-
-
87
212
637
-
-
192
154
197
Onerous lease provision
(334)
(275)
(119)
(223)
(222)
(236)
(196)
Share of loss of equity
accounted investee, net of tax
-
-
32
150
226
(3,059)
2,321
8,014
(1,523)
(3,998)
(2,839)
Adjusted EBITDA1
7,480
10,220
12,316
9,231
8,279
9,456
10,106
6,546
Adjusted EBITDA1 as a
percentage of revenue
Earnings per share attributed
to common shareholders
Earnings per share attributed
to common shareholders
from continuing operations
Weighted average share
outstanding
1 See “Definition of Non-IFRS Measures”.
8.6%
11.6%
13.6%
10.4%
9.7%
11.3%
12.5%
8.4%
0.24
(0.15)
0.14
(0.12)
0.02
0.21
0.07
0.11
0.24
(0.15)
0.14
(0.12)
0.04
0.27
0.07
0.11
26,020,418
24,966,744
24,966,744
24,966,744
17,985,213
17,808,484
17,808,484
17,808,484
1 See “Definition of Non-IFRS Measures”.
17 – IBI Group Inc. – December 31, 2016
18 – IBI Group Inc. – December 31, 2016
Current assets decreased by $0.2 million as at December 31, 2016 when compared with December 31,
2015. This was due to a decrease of $3.2 million of the current portion of restricted cash in 2016, a $3.2
million decrease in accounts receivable, a $1.2 million decrease in income taxes recoverable, offset by a
$6.4 million increase in work in process, a $1.0 million increase in prepaid expenses and other current
assets, and a nominal increase in cash. The current portion of restricted cash as at December 31, 2015
was related to the amount the Company has pledged as security for letters of credit issued by a foreign
financial institution on behalf of a foreign subsidiary of the Company. These letters of credit are no longer
expected to be released within the next twelve months (as the project has been extended) and have
therefore been classified as long term as at December 31, 2016. Consistent with the continued increase in
revenue, on a combined basis accounts receivable and WIP has increased by $3.2 million offset by an
increase in deferred revenue. The increase in prepaid expenses and other current assets is primarily due
to renewal of corporate insurance.
T
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B-18
DECEMBER 31,
2015
$ 217,002 $ 217,220 $ (218)
(5,826)
(in thousands of Canadian dollars)
Current assets
Current liabilities
WORKING CAPITAL
108,060
114,104
(6,044)
DECEMBER 31,
2016
(103,116)
(108,942)
CHANGE
There was a decrease in current assets due to foreign exchange as at December 31, 2016 of $6.8 million.
Current liabilities increased by $5.8 million as at December 31, 2016 when compared with December 31,
2015. This was due to a nominal decrease in accounts payable and accrued liabilities, a $4.2 million
decrease in vendor notes payable, a decrease in the current portion of finance lease obligation of $0.1
million, a decrease in the consent fee notes payable of $3.1 million, offset by an increase in deferred
revenue of $11.8 million, an increase in income taxes payable of $0.1 million and a nominal increase in
onerous lease provisions. The increase in deferred revenue of $11.8 million is a result of accelerated
billings. The decrease in vendor notes payable of $4.2 million is due to repayment of the vendor notes
during the second quarter of 2016. The decrease in consent fee notes payable of $3.1 million is due to
repayment of the consent fee upon maturity in the fourth quarter of 2016.
There was a decrease in current liabilities due to foreign exchange as at December 31, 2016 of $2.9 million.
WORKING CAPITAL MEASURED IN NUMBER OF DAYS OF GROSS BILLINGS1
Included in working capital of the Company are amounts reflecting project costs and sub-consultant
expenses. The Company only reports its net fee volume as revenue, which would not include the billings
for the recovery of these incurred costs. Therefore, to measure number of days outstanding of working
capital, the gross billings, which include the billings for recovery of project expenses, would result in a more
consistent calculation.
The table below calculates working days on a trailing twelve month basis, measured as days outstanding
on gross billings, which is estimated to be approximately 27% greater than net fee volume.
WORKING DAYS
OF GROSS BILLINGS
OUTSTANDING1
Accounts receivable
WIP
Deferred revenue
DECEMBER 31, SEPTEMBER 30,
2016
(unaudited)
2016
(unaudited)
JUNE 30,
2016
(unaudited)
MARCH 31, DECEMBER 31,
2016
(unaudited)
2015*
(unaudited)
60
49
(29)
80
57
50
(25)
82
55
49
(21)
83
58
48
(24)
82
62
45
(22)
85
*These figures have been adjusted to exclude results from discontinued operations.
The days sales outstanding as at December 31, 2016 has decreased by 5 days compared to December 31,
2015. The Company continues to carry out regular comprehensive reviews of its WIP and accounts
receivable and has achieved significant improvements in the results of the billings and collections process.
Improving the days outstanding in WIP and accounts receivable is a significant area of focus for the
Company. There are ongoing programs and initiatives to accelerate billings and to reduce days outstanding.
COMPONENTS OF WORKING CAPITAL
(in millions of
Canadian dollars)
Accounts receivable
WIP
Deferred revenue
DECEMBER 31, SEPTEMBER 30,
2016
2016
(unaudited)
JUNE 30,
2016
(unaudited)
MARCH 31, DECEMBER 31,
2016
(unaudited)
2015*
108.6
87.0
(50.5)
145.1
106.0
93.5
(46.3)
153.2
102.5
90.4
(39.3)
153.6
104.2
86.5
(42.1)
148.6
111.8
80.6
(38.7)
153.7
*These figures have been adjusted to exclude results from discontinued operations.
1 See “Definition of Non-IFRS Measures”.
B-19
19 – IBI Group Inc. – December 31, 2016
There was a decrease in current assets due to foreign exchange as at December 31, 2016 of $6.8 million.
Current liabilities increased by $5.8 million as at December 31, 2016 when compared with December 31,
2015. This was due to a nominal decrease in accounts payable and accrued liabilities, a $4.2 million
decrease in vendor notes payable, a decrease in the current portion of finance lease obligation of $0.1
million, a decrease in the consent fee notes payable of $3.1 million, offset by an increase in deferred
revenue of $11.8 million, an increase in income taxes payable of $0.1 million and a nominal increase in
onerous lease provisions. The increase in deferred revenue of $11.8 million is a result of accelerated
billings. The decrease in vendor notes payable of $4.2 million is due to repayment of the vendor notes
during the second quarter of 2016. The decrease in consent fee notes payable of $3.1 million is due to
repayment of the consent fee upon maturity in the fourth quarter of 2016.
There was a decrease in current liabilities due to foreign exchange as at December 31, 2016 of $2.9 million.
WORKING CAPITAL MEASURED IN NUMBER OF DAYS OF GROSS BILLINGS1
Included in working capital of the Company are amounts reflecting project costs and sub-consultant
expenses. The Company only reports its net fee volume as revenue, which would not include the billings
for the recovery of these incurred costs. Therefore, to measure number of days outstanding of working
capital, the gross billings, which include the billings for recovery of project expenses, would result in a more
consistent calculation.
The table below calculates working days on a trailing twelve month basis, measured as days outstanding
on gross billings, which is estimated to be approximately 27% greater than net fee volume.
WORKING DAYS
OF GROSS BILLINGS
OUTSTANDING1
Accounts receivable
WIP
Deferred revenue
DECEMBER 31, SEPTEMBER 30,
JUNE 30,
MARCH 31, DECEMBER 31,
2016
2016
2016
2016
2015*
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
60
49
(29)
80
57
50
(25)
82
55
49
(21)
83
58
48
(24)
82
62
45
(22)
85
*These figures have been adjusted to exclude results from discontinued operations.
The days sales outstanding as at December 31, 2016 has decreased by 5 days compared to December 31,
2015. The Company continues to carry out regular comprehensive reviews of its WIP and accounts
receivable and has achieved significant improvements in the results of the billings and collections process.
Improving the days outstanding in WIP and accounts receivable is a significant area of focus for the
Company. There are ongoing programs and initiatives to accelerate billings and to reduce days outstanding.
COMPONENTS OF WORKING CAPITAL
(in millions of
Canadian dollars)
Accounts receivable
WIP
Deferred revenue
DECEMBER 31, SEPTEMBER 30,
JUNE 30,
MARCH 31, DECEMBER 31,
2016
2016
2016
2016
2015*
(unaudited)
(unaudited)
(unaudited)
108.6
87.0
(50.5)
145.1
106.0
93.5
(46.3)
153.2
102.5
90.4
(39.3)
153.6
104.2
86.5
(42.1)
148.6
111.8
80.6
(38.7)
153.7
*These figures have been adjusted to exclude results from discontinued operations.
1 See “Definition of Non-IFRS Measures”.
i)
Accounts Receivable
The table below demonstrates the aging of receivables:
Accounts receivable
aging (net of
allowance)
(in thousands of
Canadian dollars)
Current
30 to 90 days
Over 90 days
TOTAL
DECEMBER 31,
2016
%
SEPTEMBER 30,
2016
%
JUNE 30,
2016
%
MARCH 31,
2016
DECEMBER 31,
2015
%
%
(unaudited)
(unaudited)
(unaudited)
46,057
29,315
33,221
108,593
42
27
31
100
43,196
32,340
30,470
41
30
29
106,006 100
38,580
34,350
29,524
38
33
29
102,454 100
40,145
30,847
33,228
38
30
32
104,220 100
44,283
30,614
36,874
40
27
33
111,771 100
Accounts receivable has decreased by $3.1 million since December 31, 2015. There was a decrease in
accounts receivable due to foreign exchange during the year ended December 31, 2016 of $3.5 million
compared to an increase due to foreign exchange of $10.3 million for the same period in 2015. As a result
of continued progress on implementing the Enterprise Resource Planning (“ERP”) system and the ramp up
of significant transit projects, the Company experienced an increase in WIP and a decrease in accounts
receivable. The Company focused on ensuring that the overall days sales outstanding during the three and
twelve month periods maintained stability to minimize the risk to the working capital of the firm. It is a major
initiative of senior management to improve the timeliness of billings so that outstanding invoices can be
collected sooner.
ii)
Work In Process
WIP has increased by $6.4 million since December 31, 2015. There was a decrease in WIP due to foreign
exchange during the year ended December 31, 2016 of $2.7 million compared to an increase due to foreign
exchange of $5.7 million for the same period in 2015. As a result of continued progress on implementing
the ERP system and the ramp up of significant transit projects, the Company experienced an increase in
WIP and a decrease in accounts receivable. The Company focused on ensuring that the overall days sales
outstanding during the three and twelve month periods maintained stability to minimize the risk to the
working capital of the firm. The Company monitors WIP to ensure that any accounts where billing may be
an issue are being dealt with in a timely manner.
iii)
Deferred Revenue
Deferred revenue has increased by $11.8 million since December 31, 2015. There was a decrease in
deferred revenue due to foreign exchange during the year ended December 31, 2016 of $0.7 million
compared to an increase due to foreign exchange of $1.8 million for the same period in 2015. This increase
is a result of the Company’s continued efforts to improve the timeliness of billings as described above. The
balance is monitored on a regular basis to ensure that amounts are recognized in fee revenue appropriately.
19 – IBI Group Inc. – December 31, 2016
20 – IBI Group Inc. – December 31, 2016
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B-20
CASH FLOWS
Cash flows from operating, financing, and investing activities, as reflected in the Consolidated Statement
of Cash Flows, are summarized in the following tables:
(in thousands of Canadian dollars)
(unaudited)
Cash flows provided by operating activities
Cash flows used in financing activities
Cash flows (used in) provided by investing activities
(in thousands of Canadian dollars)
Cash flows provided by operating activities
Cash flows used in financing activities
Cash flows used in investing activities
OPERATING ACTIVITIES
THREE MONTHS ENDED
DECEMBER 31,
2016
2015
$ 17,247 $ 14,248 $ 2,999
(20,243)
11,936
(24,329)
7,420
(4,086)
(4,516)
CHANGE
YEAR ENDED
DECEMBER 31,
2016
2015
$ 30,850 $ 30,826 $ 24
(1,008)
5,150
(22,118)
(12,120)
(23,126)
(6,970)
CHANGE
Cash flows from operating activities for the three months ended December 31, 2016 were $17.2 million
increased by $3.0 million compared to cash flows provided by operating activities of $14.2 million for the
same period last year. The increase in operating cash flows is primarily the result of an increase in Adjusted
EBITDA1 of $0.8 million, a reduction in interest paid of $2.5 million, an increase in non-cash operating
working capital of $4.4 million and an increase in income taxes paid of $0.6 million.
Cash flows from operating activities for the year ended December 31, 2016 were $30.8 million compared
to $30.8 million for the same period last year. The nominal change in cash flows is primarily the result of a
decrease in non-cash operating working capital of $11.0 million, a nominal decrease in income taxes paid,
offset by a decrease in interest paid of $6.2 million and an increase in Adjusted EBITDA1 of $4.9 million.
FINANCING ACTIVITIES
Cash flows used in financing activities for the three months ended December 31, 2016 were $24.3 million
compared with $4.1 million for the same period last year. During the three months ended December 31,
2016, the Company took advances of $36.7 million from its credit facilities offset by $57.5 million from
redemption of convertible debentures and $3.5 million from settling the consent fee payable. During the
same period in 2015, the Company took advances of $15.0 million from its credit facilities, and redeemed
its convertible debentures for $20.0 million and received cash issuance of shares under the rights offering
for $5.6 million.
Cash flows used in financing activities for the year ended December 31, 2016 were $23.1 million compared
to $22.1 million for the same period last year. During the year ended December 31, 2016 the Company
repaid advances of $1.3 million on its credit facilities, repaid vendor notes of $4.1 million and consent fee
of $3.5 million, and used $14.1 million in cash related to activities on convertible debentures during the
year. In comparison to 2015, the Company repaid $1.6 million of vendor notes, repaid $2.6 million towards
its credit facilities, redeemed its convertible debentures for $20.0 million and received cash issuance of
1 See “Definition of Non-IFRS Measures”.
B-21
21 – IBI Group Inc. – December 31, 2016
CASH FLOWS
Cash flows from operating, financing, and investing activities, as reflected in the Consolidated Statement
of Cash Flows, are summarized in the following tables:
(in thousands of Canadian dollars)
(unaudited)
Cash flows provided by operating activities
Cash flows used in financing activities
Cash flows (used in) provided by investing activities
(in thousands of Canadian dollars)
Cash flows provided by operating activities
Cash flows used in financing activities
Cash flows used in investing activities
OPERATING ACTIVITIES
THREE MONTHS ENDED
DECEMBER 31,
2016
2015
CHANGE
$ 17,247 $ 14,248 $ 2,999
(24,329)
7,420
(4,086)
(4,516)
(20,243)
11,936
YEAR ENDED
DECEMBER 31,
2016
2015
CHANGE
$ 30,850 $ 30,826 $ 24
(23,126)
(6,970)
(22,118)
(12,120)
(1,008)
5,150
Cash flows from operating activities for the three months ended December 31, 2016 were $17.2 million
increased by $3.0 million compared to cash flows provided by operating activities of $14.2 million for the
same period last year. The increase in operating cash flows is primarily the result of an increase in Adjusted
EBITDA1 of $0.8 million, a reduction in interest paid of $2.5 million, an increase in non-cash operating
working capital of $4.4 million and an increase in income taxes paid of $0.6 million.
Cash flows from operating activities for the year ended December 31, 2016 were $30.8 million compared
to $30.8 million for the same period last year. The nominal change in cash flows is primarily the result of a
decrease in non-cash operating working capital of $11.0 million, a nominal decrease in income taxes paid,
offset by a decrease in interest paid of $6.2 million and an increase in Adjusted EBITDA1 of $4.9 million.
FINANCING ACTIVITIES
Cash flows used in financing activities for the three months ended December 31, 2016 were $24.3 million
compared with $4.1 million for the same period last year. During the three months ended December 31,
2016, the Company took advances of $36.7 million from its credit facilities offset by $57.5 million from
redemption of convertible debentures and $3.5 million from settling the consent fee payable. During the
same period in 2015, the Company took advances of $15.0 million from its credit facilities, and redeemed
its convertible debentures for $20.0 million and received cash issuance of shares under the rights offering
for $5.6 million.
Cash flows used in financing activities for the year ended December 31, 2016 were $23.1 million compared
to $22.1 million for the same period last year. During the year ended December 31, 2016 the Company
repaid advances of $1.3 million on its credit facilities, repaid vendor notes of $4.1 million and consent fee
of $3.5 million, and used $14.1 million in cash related to activities on convertible debentures during the
year. In comparison to 2015, the Company repaid $1.6 million of vendor notes, repaid $2.6 million towards
its credit facilities, redeemed its convertible debentures for $20.0 million and received cash issuance of
1 See “Definition of Non-IFRS Measures”.
shares under the rights offering for $5.6 million. In addition, deferred financing costs of $2.8 million incurred
on the refinancing of the credit facilities was classified as a financing activity
INVESTING ACTIVITIES
Cash flows provided by investing activities for the three months ended December 31, 2016 were $7.2 million
compared to $4.5 million used by investing activities for the same period last year. During the three months
ended December 31, 2016, $2.6 million was used for capital expenditures related to property and
equipment, $0.4 million was used for expenditures related to capitalized costs incurred in the continued
progress on the Company’s new ERP system and advances of $10.4 million was drawn from the restricted
cash sinking fund and was used to redeem the convertible debentures. During the same period in
December 31, 2015, $1.8 million was used for capital expenditures related to property and equipment, $0.8
million was used for expenditures related to capitalized costs incurred in the continued progress on the
Company’s new ERP system, and $2.0 million was used to fund restricted cash.
Cash flows used in investing activities for the year ended December 31, 2016 were $7.0 million compared
to $12.1 million for the same period last year. During the year ended December 31, 2016, $5.5 million was
used for capital expenditures related to property and equipment, $2.1 million was used for expenditures
related to capitalized costs incurred in the continued progress on the Company’s new ERP system and
advances of $0.6 million was drawn from restricted cash sinking fund. During the same period in
December 31, 2015, $5.6 million was used for capital expenditures related to property and equipment, $1.7
million was used for expenditures related to capitalized costs incurred in the continued progress on the
Company’s new ERP system, and $4.9 million was used to fund restricted cash.
CREDIT FACILITY
On October 5, 2015, IBI Group secured an agreement to refinance its credit facilities under the existing
banking agreement with its senior lenders. The new arrangement consists of a $90.0 million revolver facility,
of which a maximum of $10.0 million is available under a swing line facility and will mature on June 30,
2018. The commitment under the swing line facility will reduce availability under the revolver facility on a
dollar-for-dollar basis. As at December 31, 2016 the interest rate on Canadian dollar borrowings was 5.58%
(December 31, 2015 – 4.95%) and 6.25% on US dollar borrowings (December 31, 2015 – 6.0%).
The additional deposits in the Sinking Fund are pledged to repay the credit facilities or convertible
debentures, and as security in the event of default. During the three months ended December 31, 2016,
the Company withdrew $13.7 million from the Sinking Fund to redeem its convertible debentures and made
the required deposits to the Sinking Fund of $3.25 million in the same quarter. IBI Group will earn interest
on the deposits in the Sinking Fund based on the Canadian dollar prime rate less an applicable margin.
Transactions to the Sinking Fund have been recognized inclusive of interest earned as an investing activity
in the consolidated statement of cash flows. On November 8, 2016, the Company’s quarterly Sinking Fund
contribution was modified to $2,240 per quarter beginning on March 2017.
As at December 31, 2016, IBI Group has borrowings of $74.7 million under the credit facilities, which has
been recognized in the consolidated statement of financial position net of deferred financing costs of $1.5
million. IBI Group has letters of credit outstanding of $8.0 million as at December 31, 2016, of which $5.8
million is issued under a $7.5 million facility which matures on July 31, 2017 and supports letters of credit
backstopped by Export Development Canada. Advances under the revolver facility bear interest at a rate
based on the Canadian dollar prime rate or US dollar base rate, LIBOR or Banker’s Acceptance rates plus,
in each case, an applicable margin. At December 31, 2016, $32.1 million was outstanding under Bankers’
Acceptance with the remainder borrowed as Prime Rate debt.
21 – IBI Group Inc. – December 31, 2016
22 – IBI Group Inc. – December 31, 2016
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As at December 31, 2015, IBI Group had borrowings of $74.9 million under the credit facilities which had
been recognized in the consolidated statement of financial position net of deferred financing costs of $2.6
million. IBI Group had issued letters of credit of $5.3 million as at December 31, 2015, of which $3.1 million
is issued under the $5.0 million facility which matured on July 31, 2016 and supports letters of credit
backstopped by Export Development Canada. Advances under the revolver facility bear interest at a rate
based on the Canadian dollar prime rate or US dollar base rate, LIBOR or Banker’s Acceptance rates plus,
in each case, an applicable margin. As at December 31, 2015, $30.0 million was outstanding under
Bankers’ Acceptance with the remainder borrowed as prime rate debt.
The facility is subject to compliance with certain financial, reporting and other covenants. The financial
covenants under the new agreement include a leverage ratio, interest coverage ratio, minimum Adjusted
EBITDA1 threshold, and restrictions on distributions, if certain conditions are not met. IBI Group was in
compliance with its credit facility covenants as at December 31, 2016.
Continued compliance with the covenants under the amended credit facilities is dependent on IBI Group
achieving revenue forecasts, profitability, reducing costs and the continued improvement of working capital.
Market conditions are difficult to predict and there is no assurance that IBI Group will achieve its forecasts.
In the event of non-compliance, IBI Group’s lenders have the right to demand repayment of the amounts
outstanding under the lending agreements or pursue other remedies if IBI Group cannot reach an
agreement with its lenders to amend or waive the financial covenants. As in the past, IBI Group will carefully
monitor its compliance with the covenants and will seek waivers, subject to lender approval, as may become
necessary from time to time.
SECURITY INTEREST OF SENIOR LENDERS
Guarantees from certain subsidiaries of IBI Group as well as IBI Group Architects (Ontario), and a first
ranking security interest in all of the assets of IBI Group and the guarantors, subject to certain permitted
encumbrances, have been pledged as security for the indebtedness and obligations of IBI Group under the
credit facilities. The indebtedness secured by these security interests will rank senior to all other security
over the assets of IBI Group and the guarantors, subject to certain permitted encumbrances.
NOTES PAYABLE
The movement in the vendor notes payable for the year ended December 31, 2016 is as follows:
(in thousands of Canadian dollars)
Balance, January 1, 2015
Repayment
Foreign exchange
Balance, December 31, 2015
Repayment
Foreign exchange
BALANCE, DECEMBER 31, 2016
$
$
$
5,013
(1,609)
834
4,238
(4,076)
(162)
-
The Company had notes payable due to the former owners of acquired businesses of $2.8 million which
was due on September 30, 2014 and the remaining balance was due on December 11, 2014. In January
1 See “Definition of Non-IFRS Measures”.
B-23
23 – IBI Group Inc. – December 31, 2016
As at December 31, 2015, IBI Group had borrowings of $74.9 million under the credit facilities which had
been recognized in the consolidated statement of financial position net of deferred financing costs of $2.6
million. IBI Group had issued letters of credit of $5.3 million as at December 31, 2015, of which $3.1 million
is issued under the $5.0 million facility which matured on July 31, 2016 and supports letters of credit
backstopped by Export Development Canada. Advances under the revolver facility bear interest at a rate
based on the Canadian dollar prime rate or US dollar base rate, LIBOR or Banker’s Acceptance rates plus,
in each case, an applicable margin. As at December 31, 2015, $30.0 million was outstanding under
Bankers’ Acceptance with the remainder borrowed as prime rate debt.
The facility is subject to compliance with certain financial, reporting and other covenants. The financial
covenants under the new agreement include a leverage ratio, interest coverage ratio, minimum Adjusted
EBITDA1 threshold, and restrictions on distributions, if certain conditions are not met. IBI Group was in
compliance with its credit facility covenants as at December 31, 2016.
Continued compliance with the covenants under the amended credit facilities is dependent on IBI Group
achieving revenue forecasts, profitability, reducing costs and the continued improvement of working capital.
Market conditions are difficult to predict and there is no assurance that IBI Group will achieve its forecasts.
In the event of non-compliance, IBI Group’s lenders have the right to demand repayment of the amounts
outstanding under the lending agreements or pursue other remedies if IBI Group cannot reach an
agreement with its lenders to amend or waive the financial covenants. As in the past, IBI Group will carefully
monitor its compliance with the covenants and will seek waivers, subject to lender approval, as may become
necessary from time to time.
SECURITY INTEREST OF SENIOR LENDERS
Guarantees from certain subsidiaries of IBI Group as well as IBI Group Architects (Ontario), and a first
ranking security interest in all of the assets of IBI Group and the guarantors, subject to certain permitted
encumbrances, have been pledged as security for the indebtedness and obligations of IBI Group under the
credit facilities. The indebtedness secured by these security interests will rank senior to all other security
over the assets of IBI Group and the guarantors, subject to certain permitted encumbrances.
The movement in the vendor notes payable for the year ended December 31, 2016 is as follows:
NOTES PAYABLE
(in thousands of Canadian dollars)
Balance, January 1, 2015
Repayment
Foreign exchange
Balance, December 31, 2015
Repayment
Foreign exchange
BALANCE, DECEMBER 31, 2016
$
$
$
5,013
(1,609)
834
4,238
(4,076)
(162)
-
The Company had notes payable due to the former owners of acquired businesses of $2.8 million which
was due on September 30, 2014 and the remaining balance was due on December 11, 2014. In January
1 See “Definition of Non-IFRS Measures”.
2015, the Company agreed to an extension of the maturity of the notes payable to June 30, 2016. Monthly
payments on these notes payable were US $0.1 million until May 31, 2016 with a balloon payment of US
$2.6 million due June 30, 2016.
The movement in the consent fee notes payable for the year ended December 31, 2016 is as follows:
Balance, December 31, 2015
Accretion
Repayment
BALANCE, DECEMBER 31, 2016
TOTAL
3,067
1,097
(4,164)
-
$
$
$
See Note 6 - Financial Instruments of the audited consolidated financial statements for further details
regarding the issuance of consent fee notes related to the amendment of the 7.0% debentures during 2014.
23 – IBI Group Inc. – December 31, 2016
24 – IBI Group Inc. – December 31, 2016
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CONVERTIBLE DEBENTURES
The Company had the following series of convertible debentures outstanding as at December 31, 2016 and
2015.
5.75% Debentures (redeemed)
Balance January 1, 2015
Accretion of 5.75% Debentures 2015
Redemption of 5.75% Debentures (December 2015)
Balance at December 31, 2015
6.0% Debentures (redeemed)
Balance at January 1, 2015
Accretion of 6.0% Debentures 2015
Balance at December 31, 2015
Accretion of 6.0% Debentures 2016
Redemption of 6.0% Debentures (October 2016)
Redemption of 6.0% Debentures (December 2016)
Balance at December 31, 2016
7.0% Debentures (matures on June 30, 2019)
Balance at January 1, 2015
Accretion of 7.0% Debentures 2015
Balance at December 31, 2015
Accretion of 7.0% Debentures 2016
Conversion of 7.0% Debentures (October 2016)
Balance at December 31, 2016
5.5% Debentures (matures on December 31, 2021)
Balance at January 1, 2016
Issuance of 5.5% Debentures (September 2016)
Accretion of 5.5% Debentures 2016
Decrease in fair value of other financial liabilities
(December 2016)
Balance at December 31, 2016
LIABILITY
COMPONENT
EQUITY
COMPONENT
OTHER
FINANCIAL
LIABILITY
COMPONENT
TOTAL
18,838
1,162
(20,000)
-
896
-
(896)
-
54,266
3,206
836
55,102
2,398
(43,810)
(13,690)
-
25,333
4,285
29,618
12,486
(31,245)
10,859
-
32,498
519
-
33,017
-
3,206
-
(2,443)
(763)
-
1,750
-
1,750
-
(1,189)
561
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
19,734
1,162
(20,896)
-
57,472
836
58,308
2,398
(46,253)
(14,453)
-
27,083
4,285
31,368
12,486
(32,434)
11,420
-
10,908
43,406
-
519
(1,819)
9,089
(1,819)
42,106
BALANCE, DECEMBER 31, 2016
$ 43,876 $ 561 $ 9,089 $ 53,526
5.5% DEBENTURES ($46.0 MILLION PRINCIPAL, MATURES ON DECEMBER 31, 2021)
In September 2016, the Company issued 5.5% Debentures of $46.0 million with a maturity date of
December 31, 2021. The 5.5% Debentures are convertible into common shares of the Company at the
option of the holder at a conversion price of $8.35 per common share. The 5.5% Debentures are not
redeemable at the option of the Company before December 31, 2019. The 5.5% Debentures are
redeemable by the Company at a price of $1,000 per 5.5% Debenture, plus accrued and unpaid interest,
on or after December 31, 2019 and prior to December 31, 2020 (provided that the volume weighted average
trading price of the shares of the Company on the TSX for the 20 consecutive trading days ending five
trading days preceding the date on which notice of redemption is given, is not less than 125% of the
B-25
25 – IBI Group Inc. – December 31, 2016
CONVERTIBLE DEBENTURES
2015.
The Company had the following series of convertible debentures outstanding as at December 31, 2016 and
5.75% Debentures (redeemed)
Balance January 1, 2015
Accretion of 5.75% Debentures 2015
Redemption of 5.75% Debentures (December 2015)
Balance at December 31, 2015
6.0% Debentures (redeemed)
Balance at January 1, 2015
Accretion of 6.0% Debentures 2015
Balance at December 31, 2015
Accretion of 6.0% Debentures 2016
Redemption of 6.0% Debentures (October 2016)
Redemption of 6.0% Debentures (December 2016)
Balance at December 31, 2016
7.0% Debentures (matures on June 30, 2019)
Balance at January 1, 2015
Accretion of 7.0% Debentures 2015
Balance at December 31, 2015
Accretion of 7.0% Debentures 2016
Conversion of 7.0% Debentures (October 2016)
Balance at December 31, 2016
5.5% Debentures (matures on December 31, 2021)
Balance at January 1, 2016
Issuance of 5.5% Debentures (September 2016)
Accretion of 5.5% Debentures 2016
Decrease in fair value of other financial liabilities
(December 2016)
Balance at December 31, 2016
LIABILITY
EQUITY
COMPONENT
COMPONENT
COMPONENT
TOTAL
OTHER
FINANCIAL
LIABILITY
54,266
3,206
18,838
1,162
(20,000)
-
836
55,102
2,398
(43,810)
(13,690)
-
25,333
4,285
29,618
12,486
(31,245)
10,859
32,498
519
-
-
33,017
896
(896)
3,206
(2,443)
(763)
1,750
1,750
(1,189)
561
-
-
-
-
-
-
-
-
-
-
-
-
19,734
1,162
(20,896)
-
57,472
836
58,308
2,398
(46,253)
(14,453)
-
27,083
4,285
31,368
12,486
(32,434)
11,420
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10,908
43,406
-
519
(1,819)
9,089
(1,819)
42,106
BALANCE, DECEMBER 31, 2016
$ 43,876 $ 561 $ 9,089 $ 53,526
5.5% DEBENTURES ($46.0 MILLION PRINCIPAL, MATURES ON DECEMBER 31, 2021)
In September 2016, the Company issued 5.5% Debentures of $46.0 million with a maturity date of
December 31, 2021. The 5.5% Debentures are convertible into common shares of the Company at the
option of the holder at a conversion price of $8.35 per common share. The 5.5% Debentures are not
redeemable at the option of the Company before December 31, 2019. The 5.5% Debentures are
redeemable by the Company at a price of $1,000 per 5.5% Debenture, plus accrued and unpaid interest,
on or after December 31, 2019 and prior to December 31, 2020 (provided that the volume weighted average
trading price of the shares of the Company on the TSX for the 20 consecutive trading days ending five
trading days preceding the date on which notice of redemption is given, is not less than 125% of the
conversion price of $8.35 per share). On or after December 31, 2020 and prior to the maturity date, the
5.5% Debentures are redeemable by the Company at a price of $1,000 per 5.5% Debenture, plus accrued
and unpaid interest. The 5.5% Debentures bear interest from the date of issue at 5.5% per annum, payable
in equal semi-annual payments in arrears on June 30th and December 31st of each year, commencing
June 30, 2017.
The 5.5% Debentures are recorded as a hybrid financial instrument. The non-derivative debt (interest and
principal portion) was recorded at fair value on the date of issue and was recognized at $32.5 million which
was net of deferred financing costs of $2.6 million. The fair value of the 5.5% non-derivative debt component
was $35.1 million and was estimated using discounted future cash flows at an estimated discount rate of
11.5%. Subsequently the non-derivative debt component is measured at amortized cost using the effective
interest method over the life of the debenture.
The derivative component of this hybrid financial instrument representing the conversion feature of the 5.5%
Debentures was measured at fair value of $10.9 million at the date of issuance, and recorded as part of
Other Financial Liabilities in the statement of financial position. As at December 31, 2016, the fair value of
the derivative component was $9.1 million.
On September 30, 2016, the net proceeds of $43.4 million from the issuance of the 5.5% Debentures were
used to repay the Company’s credit facilities.
6.0% DEBENTURES ($57.5 MILLION PRINCIPAL, REDEEMED ON OCTOBER 24, 2016 AND
DECEMBER 30, 2016)
On October 24, 2016, the Company financed the partial redemption of its 6.0% Debentures for $43.8 million
cash from the credit facilities, plus paid accrued and unpaid interest up to but excluding the redemption
date. On December 30, 2016, the Company redeemed the remaining portion of the 6.0% Debentures for
$13.7 million cash, plus paid accrued and unpaid interest up to but excluding the redemption date. The
6.0% Debentures were accreted to principal upon each redemption date, resulting in $2.4 million of
accretion expense being recognized in the consolidated statement of comprehensive income (loss) during
the year ended December 31, 2016. The equity component of $3.2 million was reclassified to contributed
surplus upon redemption.
25 – IBI Group Inc. – December 31, 2016
26 – IBI Group Inc. – December 31, 2016
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7.0% DEBENTURES ($46.0 MILLION PRINCIPAL, OPTION A MATURES ON JUNE 30, 2019 AND
OPTIONS B AND C REDEEMED ON OCTOBER 31, 2016)
On July 23, 2014, the Company entered into a supplemental trust indenture with CIBC Mellon Trust
Company, the trustee for the 7.0% convertible unsecured subordinated debentures (“Debentures”) which
were originally scheduled to mature on December 31, 2014, to give effect to the amendments approved at
a special meeting of the Debenture holders to extend the maturity of the Debentures to June 30, 2019. In
exchange for the extension of the maturity, Debenture holders that delivered and did not withdraw a valid
proxy voting for the extension received either; a reduced conversion price to $5.00 per share from $19.17
per share with a consent fee note equal to $86.96 per $1,000 principal amount of Debentures (“Option B”)
or the Debenture holders retained the conversion price of $19.17 per share and received a consent fee
note equal to $195.65 per $1,000 principal amount of Debentures (“Option A”). The conversion price was
also reduced to $5.00 per share from $19.17 per share for Debenture holders who did not deposit a proxy,
abstained from voting or voted against the Debenture amendments (“Option C”). The Debentures bear
interest from the date of issue at 7.0% per annum, payable in equal semi-annual payments in arrears on
June 30th and December 31st of each year. The consent fee notes are unsecured, non-convertible, mature
on December 31, 2016 and bear interest at the rate of 7.0% per annum which is payable on maturity.
The amendments to the Debentures resulted in them being accounted for as extinguishments for
accounting purposes. Consequently, the original Debentures were derecognized and the new Debentures
(under Option A, B and C) were recognized at fair value.
On October 31, 2016, the Company redeemed the 7.0% Debentures under Options B and C (“IBG.DB”).
The holders of $29.9 million principal of the 7.0% Debentures had exercised the $5 share conversion option
and received 5,997,600 shares. For the balance of $1.2 million principal of the 7.0% Debentures, the
Company issued 222,476 shares. The financial liability being redeemed under Options B and C were
accreted to the full principal value, resulting in total accretion expense of $12.5 million being recognized in
the consolidated statement of comprehensive income (loss) during the year ended December 31, 2016.
See Description of Variances in Operating Results Part xiii for further detail regarding the accretion expense
for the period. The Company recorded $31,245 in common shares and reclassified the equity component
of the portion redeemed of $1.2 million to contributed surplus.
The fair value of the remaining 7.0% Debentures under Option A is $15.0 million (December 31, 2015 -
$10.6 million). The consent fee notes issued under Option A and B were paid in full upon maturity as at
December 31, 2016.
FINANCIAL RISK MANAGEMENT
The Company has exposure to market, credit and liquidity risk. The Company’s primary risk management
objective is to protect the Company’s audited consolidated statement of financial position, comprehensive
income (loss) and cash flow in support of sustainable growth and earnings. The Company’s financial risk
management activities are governed by financial policies that cover risk identification, tolerance,
measurement, authorization levels, and reporting.
MARKET RISK
INTEREST RATE RISK
The Company’s credit facilities have floating-rate debt, which subjects it to interest rate cash flow risk.
Advances under these credit facilities bear interest at a rate based on the Canadian dollar or US dollar
prime rate, LIBOR or banker’s acceptance rates, plus, in each case, an applicable margin.
B-27
27 – IBI Group Inc. – December 31, 2016
7.0% DEBENTURES ($46.0 MILLION PRINCIPAL, OPTION A MATURES ON JUNE 30, 2019 AND
OPTIONS B AND C REDEEMED ON OCTOBER 31, 2016)
If the interest rate on the Company’s variable rate loan balance as at December 31, 2016, had been 50
basis points higher or lower, with all other variables held constant, net income from continuing operations
for the year ended December 31, 2016 would have decreased or increased by approximately $0.3 million.
On July 23, 2014, the Company entered into a supplemental trust indenture with CIBC Mellon Trust
Company, the trustee for the 7.0% convertible unsecured subordinated debentures (“Debentures”) which
CURRENCY RISK
were originally scheduled to mature on December 31, 2014, to give effect to the amendments approved at
a special meeting of the Debenture holders to extend the maturity of the Debentures to June 30, 2019. In
exchange for the extension of the maturity, Debenture holders that delivered and did not withdraw a valid
proxy voting for the extension received either; a reduced conversion price to $5.00 per share from $19.17
per share with a consent fee note equal to $86.96 per $1,000 principal amount of Debentures (“Option B”)
or the Debenture holders retained the conversion price of $19.17 per share and received a consent fee
note equal to $195.65 per $1,000 principal amount of Debentures (“Option A”). The conversion price was
also reduced to $5.00 per share from $19.17 per share for Debenture holders who did not deposit a proxy,
abstained from voting or voted against the Debenture amendments (“Option C”). The Debentures bear
interest from the date of issue at 7.0% per annum, payable in equal semi-annual payments in arrears on
June 30th and December 31st of each year. The consent fee notes are unsecured, non-convertible, mature
on December 31, 2016 and bear interest at the rate of 7.0% per annum which is payable on maturity.
The amendments to the Debentures resulted in them being accounted for as extinguishments for
accounting purposes. Consequently, the original Debentures were derecognized and the new Debentures
(under Option A, B and C) were recognized at fair value.
On October 31, 2016, the Company redeemed the 7.0% Debentures under Options B and C (“IBG.DB”).
The holders of $29.9 million principal of the 7.0% Debentures had exercised the $5 share conversion option
and received 5,997,600 shares. For the balance of $1.2 million principal of the 7.0% Debentures, the
Company issued 222,476 shares. The financial liability being redeemed under Options B and C were
accreted to the full principal value, resulting in total accretion expense of $12.5 million being recognized in
the consolidated statement of comprehensive income (loss) during the year ended December 31, 2016.
See Description of Variances in Operating Results Part xiii for further detail regarding the accretion expense
for the period. The Company recorded $31,245 in common shares and reclassified the equity component
of the portion redeemed of $1.2 million to contributed surplus.
The fair value of the remaining 7.0% Debentures under Option A is $15.0 million (December 31, 2015 -
$10.6 million). The consent fee notes issued under Option A and B were paid in full upon maturity as at
December 31, 2016.
FINANCIAL RISK MANAGEMENT
The Company has exposure to market, credit and liquidity risk. The Company’s primary risk management
objective is to protect the Company’s audited consolidated statement of financial position, comprehensive
income (loss) and cash flow in support of sustainable growth and earnings. The Company’s financial risk
management activities are governed by financial policies that cover risk identification, tolerance,
measurement, authorization levels, and reporting.
MARKET RISK
INTEREST RATE RISK
The Company’s credit facilities have floating-rate debt, which subjects it to interest rate cash flow risk.
Advances under these credit facilities bear interest at a rate based on the Canadian dollar or US dollar
prime rate, LIBOR or banker’s acceptance rates, plus, in each case, an applicable margin.
The Company’s foreign exchange risk is the risk that the fair value of the future cash flows of a financial
instrument will fluctuate as a result of changes in foreign exchange rates. The Company’s policy has been
to economically hedge foreign exchange exposures rather than purchasing currency swaps and forward
foreign exchange contracts.
Foreign exchange gains or losses in the Company’s net income arise on the translation of foreign-
denominated intercompany loans held in the Company’s Canadian operations and financial assets and
liabilities held in the Company’s foreign operations. The Company minimizes its exposure to foreign
exchange fluctuations on these items by matching US dollar liabilities when possible.
If the exchange rates had been 100 basis points higher or lower during the year ended and as at
December 31, 2016, with all other variables held constant, total comprehensive income would have
increased or decreased by $0.3 million for the year ended December 31, 2016. If the exchange rates had
been 100 basis points higher or lower during the year ended December 31, 2016, with all other variables
held constant, net income would have increased or decreased by $0.1 million for the year ended
December 31, 2016.
CREDIT RISK
Financial instruments that subject the Company to credit risk consist primarily of accounts receivable. The
Company maintains an allowance for estimated credit losses on accounts receivable. The estimate is based
on the best assessment of the ultimate collection of the related accounts receivable balance based, in part,
on the age of the outstanding accounts receivable and on its historical impairment loss experience.
A significant portion of the accounts receivable are due from government and public institutions.
Receivables that are neither past due nor impaired are considered by management to have no significant
collection risk. The liquidity of customers and their ability to pay receivables are considered by management
to have no significant collection risk. The liquidity of customers and their ability to pay receivables are
considered in assessing the impairment of such assets. No collateral is held in respect of impaired assets
or assets that are past due but not impaired.
LIQUIDITY RISK
The Company strives to maintain sufficient financial liquidity to withstand sudden adverse changes in
economic circumstances. Management forecasts cash flows for its current and subsequent fiscal years to
identify financing requirements. These requirements are then addressed through a combination of
committed credit facilities and access to capital markets.
On October 5, 2015, IBI Group signed an amendment to refinance its credit facilities with its senior lenders.
See liquidity and capital resources section of this MD&A for more details.
As at December 31, 2016, a foreign subsidiary of the Company had issued letters of credit in the amount
of US $2.3 million. The Company has pledged US $2.3 million (December 31, 2015 – US $2.3 million) of
cash as security for these letters of credit issued by a foreign financial institution on behalf of the foreign
subsidiary.
27 – IBI Group Inc. – December 31, 2016
28 – IBI Group Inc. – December 31, 2016
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CONTRACTUAL OBLIGATIONS
As part of continuing operations, the Company enters into contractual obligations from time to time. The
table below summarizes the contractual obligations due on financial liabilities and commitments as of
December 31, 2016:
Contractual Obligations
Payment Due by Period
(in millions of Canadian dollars)
Accounts payable and
accrued liabilities
Credit facilities1
Interest on credit facilities1,2
Convertible debentures
Interest on convertible debentures3
Finance lease obligation
Operating leases
TOTAL CONTRACTUAL
OBLIGATIONS
LESS
THAN
1 YEAR
TOTAL
1-3
YEARS
4-5
YEARS
AFTER 5
YEARS
$ 55.5 $ 55.5 $ - $ - $ -
-
-
-
73.2
-
43.9
74.7
1.9
14.8
-
-
46.0
-
3.9
-
-
0.1
144.3
3.6
-
26.0
6.6
0.1
36.8
5.1
-
28.5
-
-
53.0
$ 317.0 $ 89.0 $ 134.9 $ 79.6 $ 53.0
1 See liquidity risk section of this MD&A.
2 Advances under the revolver facility bear interest at a rate based on the Canadian dollar prime rate or US dollar base rate, LIBOR
or Banker’s Acceptance rates plus, in each case, an applicable margin.
3 Includes the amount of cash interest due on the convertible debentures and does not include non-cash accretion.
CAPITAL MANAGEMENT
The Company’s objective in managing capital is to maintain a capital base that will maintain investor,
creditor, and market confidence and to sustain future growth within the business. The Company defines its
capital as the aggregate of credit facilities, convertible debentures, and equity.
The Company has reviewed its anticipated revenues and costs over future years and has determined that
the business has the ability to generate sufficient cash resources to fund its activities. A downturn in the
economy or other unfavourable events may cause this situation to change. In conjunction with this analysis,
the Company’s financing strategy is to access capital markets to raise debt and equity financing and utilize
the banking market to provide committed term and operating credit facilities to support its short-term and
long-term cash flow needs.
FUTURE CASH GENERATION
Specific items of consideration in future cash generation are as follows:
1. ABILITY TO GENERATE SUFFICIENT CASH
The Company’s existing business plan indicates that future earnings and cash flow generated will
be sufficient to pay down and re-finance existing amounts outstanding within current thresholds
acceptable to lenders. Reference should be made to commentary on forward looking statements
in this document.
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29 – IBI Group Inc. – December 31, 2016
CONTRACTUAL OBLIGATIONS
2. CIRCUMSTANCES THAT COULD AFFECT FUNDING
As part of continuing operations, the Company enters into contractual obligations from time to time. The
table below summarizes the contractual obligations due on financial liabilities and commitments as of
December 31, 2016:
Contractual Obligations
Payment Due by Period
(in millions of Canadian dollars)
TOTAL
1 YEAR
YEARS
YEARS
1-3
4-5
AFTER 5
YEARS
LESS
THAN
Accounts payable and
accrued liabilities
Credit facilities1
Interest on credit facilities1,2
Convertible debentures
Interest on convertible debentures3
Finance lease obligation
Operating leases
TOTAL CONTRACTUAL
OBLIGATIONS
1 See liquidity risk section of this MD&A.
$ 55.5 $ 55.5 $ - $ - $ -
73.2
-
43.9
-
0.1
144.3
3.9
-
-
3.6
-
26.0
74.7
1.9
14.8
6.6
0.1
36.8
-
-
46.0
5.1
-
28.5
-
-
-
-
-
53.0
$ 317.0 $ 89.0 $ 134.9 $ 79.6 $ 53.0
2 Advances under the revolver facility bear interest at a rate based on the Canadian dollar prime rate or US dollar base rate, LIBOR
or Banker’s Acceptance rates plus, in each case, an applicable margin.
3 Includes the amount of cash interest due on the convertible debentures and does not include non-cash accretion.
CAPITAL MANAGEMENT
The Company’s objective in managing capital is to maintain a capital base that will maintain investor,
creditor, and market confidence and to sustain future growth within the business. The Company defines its
capital as the aggregate of credit facilities, convertible debentures, and equity.
The Company has reviewed its anticipated revenues and costs over future years and has determined that
the business has the ability to generate sufficient cash resources to fund its activities. A downturn in the
economy or other unfavourable events may cause this situation to change. In conjunction with this analysis,
the Company’s financing strategy is to access capital markets to raise debt and equity financing and utilize
the banking market to provide committed term and operating credit facilities to support its short-term and
long-term cash flow needs.
FUTURE CASH GENERATION
Specific items of consideration in future cash generation are as follows:
1. ABILITY TO GENERATE SUFFICIENT CASH
The Company’s existing business plan indicates that future earnings and cash flow generated will
be sufficient to pay down and re-finance existing amounts outstanding within current thresholds
acceptable to lenders. Reference should be made to commentary on forward looking statements
in this document.
In the event that capital markets deteriorate or the Company does not execute on its business plan
this will affect ability to attract and / or generate sufficient funds.
3. WORKING CAPITAL REQUIREMENTS
In the short term the business has sufficient financing to fund its working capital requirements.
Management is implementing procedures and systems that are expected to assist management
with their objective to reduce the level of working capital on the balance sheet. If achieved, this will
reduce existing borrowing amounts.
4. SITUATIONS INVOLVING EXTENDED PAYMENT
There are situations where arrangements with clients result in extended payment arrangements on
projects. Management is implementing procedures and systems to improve cash flow forecasting
before contracts are signed with clients to continue to ensure that sufficient cash flow is generated
from each project.
5. CIRCUMSTANCES THAT IMPACT ESSENTIAL TRANSACTIONS
Certain larger projects in the architecture and engineering marketplace require capital investment
to participate in the business opportunity. While the Company will continue to participate in these
activities it will continue to do so only where probability of sufficient cash flow generation is
determined at the beginning of the project.
6. SOURCES OF FUNDS TO MEET CAPITAL EXPENDITURE REQUIREMENTS
With the exception of 2014, where new leases were signed on two major offices, the Company
does not have significant capital needs in relation to its cash generating ability. In the event that
capital markets deteriorate or the Company does not execute on its business plan this situation
may change. Reference should be made to commentary on forward looking statements in this
document.
7. CREDIT FACILITY
On October 5, 2015, IBI Group secured an agreement to refinance its Credit Facilities under the
existing banking arrangement with its senior lenders. See liquidity risk section of this MD&A.
8. CONVERTIBLE DEBENTURES
As outlined above, the Company has two series of debentures that provide a basis of capital which
requires repayment or refinancing over the period from June 2018 to December 2021.
SHARE CAPITAL
The Company is authorized to issue an unlimited number of common shares. As at March 8, 2017, the
Company’s common share capital consisted of 31,188,486 shares issued and outstanding.
Each share entitles the holder to one vote at all meetings of shareholders.
The 6,282,222 Class B partnership units of IBI Group are indirectly exchangeable for common shares of
the Company on the basis of one share of the Company for each Class B subordinated partnership unit. If
all such Class B partnership units of IBI Group had been exchanged for shares on December 31, 2016, the
units issued on such exchange would have represented a 16.8% interest in the Company.
29 – IBI Group Inc. – December 31, 2016
30 – IBI Group Inc. – December 31, 2016
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Class B partnership units do not entitle the holder to voting rights at the meetings of shareholders. The
Class B partnership units have been recorded as a non-controlling interest in the consolidated financial
statements as at December 31, 2016.
SHARE ISSUANCES
During the year ended December 31, 2016, the Company issued 6,220,076 common shares
upon redemption of 7.0% Debentures Options B and C valued at $31.2 million.
ACCUMULATED OTHER COMPREHENSIVE LOSS
During the three months ended December 31, 2016, the Company incurred a loss of $1.1 million
related to the translation of financial statements of foreign operations, of which 83.2% is
attributable to common shareholders.
During the year ended December 31, 2016, the Company incurred a loss of $0.2 million related
to the translation of financial statements of foreign operations, of which 83.2% is attributable to
common shareholders.
TRANSACTIONS WITH RELATED PARTIES
Pursuant to the Administration Agreement, IBI Group and certain of its subsidiaries are paying to the
Management Partnership an amount representing the base compensation for the services of the partners
of the Management Partnership. The amount paid for such services during the year ended December 31,
2016 was $23.7 million (2015 - $24.1 million). As at December 31, 2016, the Company advanced $0.3
million to the Management Partnership for payment of future compensation for the services of the partners
(December 31, 2015 – $1.0). As at December 31, 2016, there were 87 partners (December 31, 2015 – 91
partners).
IBI Group from time to time makes a monthly distribution to each Class B partnership unit holder equal to
the dividend per share (on a pre-tax basis) declared to each shareholder. All of the Class B partnership
units are held by the Management Partnership. As at December 31, 2016 and 2015, the amount of
distributions payable to the Management Partnership were $nil.
As noted in Note 18 – Share Based Compensation of the audited consolidated financial statements, during
the year the Company issued stock options to management under the terms of the Company’s stock option
plan.
CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
The preparation of these consolidated financial statements requires management to exercise judgment and
make estimates and assumptions that affect the application of accounting policies on reported amounts of
assets and liabilities, disclosure of contingent liabilities at the date of the consolidated statement of financial
position, and the reported amounts of revenue and expenses for the period covered by the consolidated
statement of comprehensive income (loss). Actual amounts may differ from these estimates.
Within the context of these consolidated financial statements, a judgment is a decision made by
management in respect of the application of an accounting policy, a recognized or unrecognized financial
statement amount and/or note disclosure, following an analysis of relevant information that may include
estimates and assumptions. Estimates and assumptions are used mainly in determining the measurement
of balances recognized or disclosed in the consolidated financial statements and are based on a set of
underlying data that may include management’s historical experience, knowledge of current events and
B-31
31 – IBI Group Inc. – December 31, 2016
Class B partnership units do not entitle the holder to voting rights at the meetings of shareholders. The
Class B partnership units have been recorded as a non-controlling interest in the consolidated financial
conditions and other factors that are believed to be reasonable under the circumstances. Management
continually evaluates the estimates and judgments it uses.
statements as at December 31, 2016.
SHARE ISSUANCES
During the year ended December 31, 2016, the Company issued 6,220,076 common shares
upon redemption of 7.0% Debentures Options B and C valued at $31.2 million.
ACCUMULATED OTHER COMPREHENSIVE LOSS
During the three months ended December 31, 2016, the Company incurred a loss of $1.1 million
related to the translation of financial statements of foreign operations, of which 83.2% is
attributable to common shareholders.
During the year ended December 31, 2016, the Company incurred a loss of $0.2 million related
to the translation of financial statements of foreign operations, of which 83.2% is attributable to
common shareholders.
TRANSACTIONS WITH RELATED PARTIES
Pursuant to the Administration Agreement, IBI Group and certain of its subsidiaries are paying to the
Management Partnership an amount representing the base compensation for the services of the partners
of the Management Partnership. The amount paid for such services during the year ended December 31,
2016 was $23.7 million (2015 - $24.1 million). As at December 31, 2016, the Company advanced $0.3
million to the Management Partnership for payment of future compensation for the services of the partners
(December 31, 2015 – $1.0). As at December 31, 2016, there were 87 partners (December 31, 2015 – 91
partners).
plan.
IBI Group from time to time makes a monthly distribution to each Class B partnership unit holder equal to
the dividend per share (on a pre-tax basis) declared to each shareholder. All of the Class B partnership
units are held by the Management Partnership. As at December 31, 2016 and 2015, the amount of
distributions payable to the Management Partnership were $nil.
As noted in Note 18 – Share Based Compensation of the audited consolidated financial statements, during
the year the Company issued stock options to management under the terms of the Company’s stock option
CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
The preparation of these consolidated financial statements requires management to exercise judgment and
make estimates and assumptions that affect the application of accounting policies on reported amounts of
assets and liabilities, disclosure of contingent liabilities at the date of the consolidated statement of financial
position, and the reported amounts of revenue and expenses for the period covered by the consolidated
statement of comprehensive income (loss). Actual amounts may differ from these estimates.
Within the context of these consolidated financial statements, a judgment is a decision made by
management in respect of the application of an accounting policy, a recognized or unrecognized financial
statement amount and/or note disclosure, following an analysis of relevant information that may include
estimates and assumptions. Estimates and assumptions are used mainly in determining the measurement
of balances recognized or disclosed in the consolidated financial statements and are based on a set of
underlying data that may include management’s historical experience, knowledge of current events and
Information about judgments made in applying accounting policies that have the most significant impact on
the amounts recognized in the consolidated financial statements are as follows:
REVENUE RECOGNITION
The Company also enters into contracts that require multiple deliverables, which can include software and
hardware elements. Management applies judgment when assessing whether certain deliverables in a
customer arrangement should be included or excluded from a unit of account to which contract accounting
is applied. The judgment is typically related to the sale and inclusion of third party hardware and licenses
in a customer arrangement, and involves an assessment that principally addresses whether the deliverable
has stand-alone value to the customer that is not dependent upon other components of the arrangement.
RECOVERABILITY OF ACCOUNTS RECEIVABLE
The Company records accounts receivable net of impairment losses determined based on the age of the
outstanding receivables, factors specific to individual clients and its historical collection and loss experience.
Information about assumptions and estimation uncertainties that have a significant impact on the amounts
recognized in the consolidated financial statements for the year ended December 31, 2016 are as follows:
REVENUE RECOGNITION AND DEFERRED REVENUE
The Company accounts for certain of its revenue in accordance with IAS 11 Construction Contracts, (“IAS
11”) which requires estimates to be made for contract costs and revenues and IAS 18 Revenue (“IAS 18”).
Revenue from fixed-fee and variable-fee-with-ceiling contracts is recognized using the percentage of
completion method based on the ratio of professional costs incurred to total estimated professional costs.
Estimating total professional costs is subjective and requires the use of management’s best estimate based
on the information available at that point in time. The Company also provides for estimated losses on
contracts in-progress in the period in which such losses are determined. Deferred revenue is recorded
when billings to the clients exceeds the revenue that has been earned based on effort completed at the
date of the consolidated statement of financial position. Changes in the estimates are reflected in the period
in which they are made and would affect the Company’s revenue and work in process.
ACCURACY OF WORK IN PROCESS
The Company records its work in process based on the time and materials charged into each project. The
work in process for each project is reviewed on a monthly basis to determine whether the amounts recorded
are recoverable. Where the review determines that the value of work in process exceeds the amount that
can be invoiced, review of project budgets is performed to determine whether an adjustment is required to
the percentage of completion to accurately reflect revenue earned to date. The percentage complete is
determined by estimating the professional costs to be incurred to complete the project.
31 – IBI Group Inc. – December 31, 2016
32 – IBI Group Inc. – December 31, 2016
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ONEROUS LEASE PROVISIONS
The Company recognizes provisions when there is a present legal or constructive obligation as a result of
past events, it is probable that an outflow of resources will be required to settle the obligation, and the
amount can be reliably estimated. Management has recorded a provision related to lease exit liabilities
which requires estimation of the expected sublease income and discount rate reflective of the risk specific
to the obligation.
DETERMINING PROBABLE FUTURE UTILIZATION OF TAX LOSS CARRYFORWARDS
Deferred tax assets are recognized for all unused tax losses to the extent that it is probable that taxable
profit will be available against which the losses can be utilized. Significant management judgment is
required to determine the amount of deferred tax assets that can be recognized, based on the likely timing
and the level of future taxable profits, together with future tax-planning strategies.
ACCOUNTING DEVELOPMENTS
a) ACCOUNTING POLICY CHANGES ADOPTED IN 2016
Annual Improvements to IFRS (2012 - 2014) Cycles
In September 2014, the IASB issued narrow-scope amendments to a total of four standards as part of its
annual improvements process. The IASB uses the annual improvements process to make non-urgent but
necessary amendments to IFRS.
The Company adopted these amendments in its consolidated financial statements for the annual period
beginning on January 1, 2016. The adoption of the amendments did not have a material impact on the
consolidated financial statements.
IAS 1 Presentation of Financial Statements
In December 2014, the IASB issued amendments to IAS 1 Presentation of Financial Statements, to provide
guidance on the application of judgment in the preparation of financial statements and disclosures.
The Company adopted these amendments in is consolidated financial statements for the annual period
beginning on January 1, 2016. The adoption of these amendments did not have a material impact on the
consolidated financial statements.
IFRS 11 Joint Arrangements
In May 2014, IFRS 11 Joint Arrangements (“IFRS 11”) was amended to require an acquisition of a joint
operation that constitutes a business to be accounted for using the principles of business combinations in
IFRS 3 Business Combinations. This amendment applies to both initial and additional interest acquired in
the joint operation.
The Company adopted the amendments to IFRS 11 in its consolidated financial statements for the annual
period beginning on January 1, 2016. The adoption of these amendments did not have a material impact
on the interim financial statements.
B-33
33 – IBI Group Inc. – December 31, 2016
ONEROUS LEASE PROVISIONS
The Company recognizes provisions when there is a present legal or constructive obligation as a result of
past events, it is probable that an outflow of resources will be required to settle the obligation, and the
amount can be reliably estimated. Management has recorded a provision related to lease exit liabilities
which requires estimation of the expected sublease income and discount rate reflective of the risk specific
to the obligation.
DETERMINING PROBABLE FUTURE UTILIZATION OF TAX LOSS CARRYFORWARDS
Deferred tax assets are recognized for all unused tax losses to the extent that it is probable that taxable
profit will be available against which the losses can be utilized. Significant management judgment is
required to determine the amount of deferred tax assets that can be recognized, based on the likely timing
and the level of future taxable profits, together with future tax-planning strategies.
ACCOUNTING DEVELOPMENTS
a) ACCOUNTING POLICY CHANGES ADOPTED IN 2016
Annual Improvements to IFRS (2012 - 2014) Cycles
In September 2014, the IASB issued narrow-scope amendments to a total of four standards as part of its
annual improvements process. The IASB uses the annual improvements process to make non-urgent but
necessary amendments to IFRS.
The Company adopted these amendments in its consolidated financial statements for the annual period
beginning on January 1, 2016. The adoption of the amendments did not have a material impact on the
consolidated financial statements.
IAS 1 Presentation of Financial Statements
The Company adopted these amendments in is consolidated financial statements for the annual period
beginning on January 1, 2016. The adoption of these amendments did not have a material impact on the
consolidated financial statements.
IFRS 11 Joint Arrangements
In May 2014, IFRS 11 Joint Arrangements (“IFRS 11”) was amended to require an acquisition of a joint
operation that constitutes a business to be accounted for using the principles of business combinations in
IFRS 3 Business Combinations. This amendment applies to both initial and additional interest acquired in
the joint operation.
The Company adopted the amendments to IFRS 11 in its consolidated financial statements for the annual
period beginning on January 1, 2016. The adoption of these amendments did not have a material impact
on the interim financial statements.
b) FUTURE ACCOUNTING POLICY CHANGES NOT YET ADOPTED
Amendments to IAS 7 Statement of Cash Flows
In January 2016, the IASB issued Disclosure Initiative (Amendments to IAS 7). The amendments apply
prospectively for annual periods beginning on or after January 1, 2017. Earlier application is permitted.
The amendments require disclosures that enable users of financial statements to evaluate changes in
liabilities arising from financing activities, including both changes arising from cash flow and non-cash
changes.
The Company intends to adopt the amendments to IAS 7 in its financial statements for the annual period
beginning on January 1, 2017. The adoption of these amendments is not expected to have a material
impact on the Company’s financial statements.
Amendments to IAS 12 Income Taxes
In January 2016, the IASB issued Amendments to IAS 12 Income Taxes to provide clarification on the
requirements relating to the recognition of deferred tax assets for unrealized losses on debt instruments
measured at fair value. The amendments apply retrospectively for annual periods beginning on or after
January 1, 2017. Earlier application is permitted.
The amendments clarify that the existence of a deductible temporary difference depends solely on a
comparison of the carrying amount of an asset and its tax base at the end of the reporting period, and is
not affected by possible future changes in the carrying amount or expected manner of recovery of the asset.
The amendments also clarify the methodology to determine the future taxable profits used for assessing
the utilization of deductible temporary differences.
The Company intends to adopt the amendments to IAS 12 in its financial statements for the annual period
beginning on January 1, 2017. The adoption of these amendments is not expected to have a material
impact on the Company’s financial statements.
In December 2014, the IASB issued amendments to IAS 1 Presentation of Financial Statements, to provide
guidance on the application of judgment in the preparation of financial statements and disclosures.
IFRS 15 Revenue from Contracts with Customers
In May 2014, the IASB issued IFRS 15 Revenue from Contracts with Customers (“IFRS 15”). The new
standard is effective for annual periods beginning on or after January 1, 2018 and is available for early
adoption.
IFRS 15 will replace IAS 11, IAS 18, IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for
the Construction of Real Estate, IFRIC 18 Transfer of Assets from Customers, and SIC 31 Revenue –
Barter Transactions Involving Advertising Services.
The new standard contains a single model that applies to contracts with customers and two approaches for
recognizing revenue: at a point in time or over time. The model features a contract-based five-step analysis
of individual transactions to determine whether, how much and when revenue is recognized. New estimates
and judgmental thresholds have been introduced, which may affect the amount and/or timing of revenue
recognized.
In April 2016, the IASB issued Clarifications to IFRS 15, which is effective at the same time as IFRS 15.
The clarifications to IFRS 15 provide additional guidance with respect to the five-step analysis, transition,
and the application of the standard to licenses of intellectual property.
33 – IBI Group Inc. – December 31, 2016
34 – IBI Group Inc. – December 31, 2016
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The Company intends to adopt IFRS 15 in its consolidated financial statements for the annual period
beginning January 1, 2018. The Company has set out a plan to review contracts in multiple operating
segments that may be impacted by the adoption of this standard. The Company is in the initial phase of the
project plan as it has identified a sample of significant contracts within each operating segment for initial
review in accordance with the IFRS 15. The extent of the impact of adoption of the standard has not yet
been determined, but management expects the contracts for software license agreements that are
accounted for as multiple-element arrangements will have the most complexity. The Company has not yet
determined which transition method it will apply or whether it will use the optional exemptions or practical
expedients available under the standard.
IFRS 9 Financial Instruments
In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments (“IFRS 9”), with a mandatory
effective date for annual periods beginning on or after January 1, 2018. Early adoption is permitted.
The new standard brings together the classification and measurements, impairment and hedge accounting
phases of the IASB’s project to replace IAS 39 Financial Instruments: Recognition and Measurement. In
addition to the new requirements for classification and measurement of financial assets, a new general
hedge accounting model and other amendments issued in previous versions of IFRS 9, the standard also
introduces new impairment requirements that are based on a forward-looking expected credit loss model.
The Company intends to adopt IFRS 9 in its consolidated financial statements for the annual period
beginning January 1, 2018. The extent of the impact of the adoption of IFRS 9 has not yet been determined.
IFRS 16 Leases
In January 2016, the IASB issued IFRS 16 Leases (“IFRS 16”). The new standard is effective for annual
periods beginning on or after January 1, 2019, with earlier adoption permitted if IFRS 15 has been adopted.
IFRS 16 will replace IAS 17 Leases. The new standard requires all leases to be reported on the balance
sheet unless certain criteria for exclusion are met. The Company intends to adopt IFRS 16 in its
consolidated financial statements for the annual period beginning on January 1, 2019. The extent of the
impact of adoption of the standard has not yet been determined.
Amendments to IFRS 2 Classification and Measurement of Share-Based Payment Transactions
In June 2016, the IASB issued Amendments to IFRS 2 Share-Based Payments (“IFRS 2”), clarifying how
to account for certain types of share-based payment transactions. The amendments apply for annual
periods beginning on or after January 1, 2018. As a practical simplification, the amendments can be applied
prospectively or retrospectively, with early application permitted if information is available without the use
of hindsight.
The amendments provide requirements on the accounting for the effects of vesting and non-vesting
conditions on the measurement of cash-settled share-based payments, share based payment transactions
with a net settlement feature for withholding tax obligations, and a modification to the terms and conditions
of a share-based payment that changes the classification of the transaction from cash-settled to equity-
settled.
The Company intends to adopt the amendments to IFRS 2 in its consolidated financial statements for the
annual period beginning January 1, 2018. The extent of the impact of the adoption of the standard has not
yet been determined.
B-35
35 – IBI Group Inc. – December 31, 2016
The Company intends to adopt IFRS 15 in its consolidated financial statements for the annual period
IFRIC 22 Foreign Currency Transactions and Advance Consideration
beginning January 1, 2018. The Company has set out a plan to review contracts in multiple operating
segments that may be impacted by the adoption of this standard. The Company is in the initial phase of the
project plan as it has identified a sample of significant contracts within each operating segment for initial
review in accordance with the IFRS 15. The extent of the impact of adoption of the standard has not yet
been determined, but management expects the contracts for software license agreements that are
accounted for as multiple-element arrangements will have the most complexity. The Company has not yet
determined which transition method it will apply or whether it will use the optional exemptions or practical
expedients available under the standard.
IFRS 9 Financial Instruments
In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments (“IFRS 9”), with a mandatory
effective date for annual periods beginning on or after January 1, 2018. Early adoption is permitted.
The new standard brings together the classification and measurements, impairment and hedge accounting
phases of the IASB’s project to replace IAS 39 Financial Instruments: Recognition and Measurement. In
addition to the new requirements for classification and measurement of financial assets, a new general
hedge accounting model and other amendments issued in previous versions of IFRS 9, the standard also
introduces new impairment requirements that are based on a forward-looking expected credit loss model.
The Company intends to adopt IFRS 9 in its consolidated financial statements for the annual period
beginning January 1, 2018. The extent of the impact of the adoption of IFRS 9 has not yet been determined.
IFRS 16 Leases
In January 2016, the IASB issued IFRS 16 Leases (“IFRS 16”). The new standard is effective for annual
periods beginning on or after January 1, 2019, with earlier adoption permitted if IFRS 15 has been adopted.
IFRS 16 will replace IAS 17 Leases. The new standard requires all leases to be reported on the balance
sheet unless certain criteria for exclusion are met. The Company intends to adopt IFRS 16 in its
consolidated financial statements for the annual period beginning on January 1, 2019. The extent of the
impact of adoption of the standard has not yet been determined.
Amendments to IFRS 2 Classification and Measurement of Share-Based Payment Transactions
In June 2016, the IASB issued Amendments to IFRS 2 Share-Based Payments (“IFRS 2”), clarifying how
to account for certain types of share-based payment transactions. The amendments apply for annual
periods beginning on or after January 1, 2018. As a practical simplification, the amendments can be applied
prospectively or retrospectively, with early application permitted if information is available without the use
of hindsight.
settled.
The amendments provide requirements on the accounting for the effects of vesting and non-vesting
conditions on the measurement of cash-settled share-based payments, share based payment transactions
with a net settlement feature for withholding tax obligations, and a modification to the terms and conditions
of a share-based payment that changes the classification of the transaction from cash-settled to equity-
The Company intends to adopt the amendments to IFRS 2 in its consolidated financial statements for the
annual period beginning January 1, 2018. The extent of the impact of the adoption of the standard has not
yet been determined.
On December 8, 2016 the IASB issued IFRIC Interpretation 22 Foreign Currency Transactions and
Advance Consideration (“IFRIC 22”). The Interpretation clarifies which date should be used for translation
when a foreign currency transaction involves an advance payment or receipt. The Interpretation is
applicable for annual periods beginning on or after January 1, 2018. Earlier application is permitted. The
Company intends to adopt the Interpretation in its financial statements for the annual period beginning on
January 1, 2018. The extent of the impact of adoption of the interpretation has not yet been determined.
DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROL OVER
FINANCIAL REPORTING
As required by National Instrument 52-109 of the Canadian Securities Administrators, the Company’s Chief
Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) will be making certifications related to the
information contained in the Company’s quarterly filings. As part of certification, the CEO and CFO must
certify as to the design of disclosure controls and procedures (“DC&P”) and internal controls over financial
reporting (“ICFR”).
DC&P are designed to provide reasonable assurance that information required to be disclosed by the
Company is processed and reported on a timely basis to the Company’s management, including the CEO
and CFO, as appropriate, to allow timely decisions with respect to required disclosure. The Company has
adopted or formalized such controls as it believes are necessary and consistent with its business and
internal management and supervisory practices. ICFR is a process designed to provide reasonable
assurances regarding the reliability of the Company’s financial reporting and of the preparation of financial
statements for external purposes in compliance with generally accepted accounting principles. A control
system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance
with respect to the reliability of the financial reporting and of the preparation of the financial statements.
The Company’s CEO and CFO have evaluated, or caused to be evaluated under their supervision, the
effectiveness of the Company’s ICFR and disclosure controls and DC&P as at December 31, 2016, and
have concluded that such controls and procedures are effective. There have been no changes in the
Company’s internal control over financial reporting that occurred during the period beginning on January 1,
2016, and ended on December 31, 2016, that have materially affected, or are reasonably likely to materially
affect, the Company’s internal control over financial reporting.
DEFINITION OF NON-IFRS MEASURES
Non-IFRS measures do not have a standardized meaning within IFRS and are therefore unlikely to be
comparable to additional measures presented by other issuers. In commentary and tables within this
document IFRS measures are presented along with non-IFRS measures. Where non-IFRS measures are
used, there is a reconciliation to IFRS amounts provided. Any changes in the definition of non-IFRS are
disclosed and quantified.
1. ADJUSTED EBITDA
The Company believes that Adjusted EBITDA, defined below, is an important measure for investors to
understand the Company’s ability to generate cash to honour its obligations. Management of the Company
believes that in addition to net income (loss), Adjusted EBITDA is a useful supplemental measure as it
provides readers with an indication of cash available for debt service, capital expenditures, income taxes
and dividends. Readers should be cautioned, however, that EBITDA should not be construed as an
alternative to net income (loss) determined in accordance with IFRS as an indicator of the Company’s
performance or to cash flows from operating activities as a measure of liquidity and cash flows.
35 – IBI Group Inc. – December 31, 2016
36 – IBI Group Inc. – December 31, 2016
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The Company defines Adjusted EBITDA in accordance with what is required in its lending agreements with
its senior lenders.
References in this MD&A to Adjusted EBITDA are based on net income adjusted for the following items:
- Gain/loss arising from extraordinary, unusual or non-recurring items, such as debt extinguishments
- Acquisition costs and deferred consideration revenue (i.e. restructuring costs, integration costs,
compensation expenses, transaction fees and expenses)
- Non-cash expenses (i.e. grant of stock options, restricted share units or Capital stock to employees
as compensation)
- Gain/Loss realized upon the disposal of capital property
- Gain/loss on foreign exchange translation
- Gain/loss on purchase or redemption of securities issued by that person or any subsidiary
- Gain/loss on fair valuation of financial instruments
- Amounts attributable to minority equity investments
-
Interest income
Adjusted EBITDA is not a recognized measure under IFRS and does not have a standardized meaning
prescribed by IFRS, and the Company’s method of calculating Adjusted EBITDA may differ from the
methods used by other similar entities. Accordingly, Adjusted EBITDA may not be comparable to similar
measures used by such entities. Reconciliations of net income (loss) to adjusted EBITDA have been
provided under the heading “Results of Operations”.
2. WORKING CAPITAL MEASURED IN NUMBER OF DAYS OF GROSS BILLINGS
Included in working capital of the Company are amounts reflecting project costs and sub-consultant
expenses. The Company only reports its net fee volume as revenue, which would not include the billings
for the recovery of these incurred costs. Therefore to measure number of days outstanding of working
capital, the gross billings, which include the billings for recovery of project expenses, would result in a more
consistent calculation.
The information included is calculated based on working days on a twelve month trailing basis, measured
as days outstanding on gross billings, which is estimated to be approximately 27% greater than net fee
volume.
The Company believes that informing investors of its progress in managing its accounts receivable, work-
in-process and deferred revenue is important for investors to anticipate cash flows from the business and
to compare the Company with other businesses that operate in the same industry.
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37 – IBI Group Inc. – December 31, 2016
The Company defines Adjusted EBITDA in accordance with what is required in its lending agreements with
its senior lenders.
BOARD OF DIRECTORS,
IBI GROUP
MANAGEMENT
TEAM
SHAREHOLDER
INFORMATION
References in this MD&A to Adjusted EBITDA are based on net income adjusted for the following items:
- Gain/loss arising from extraordinary, unusual or non-recurring items, such as debt extinguishments
- Acquisition costs and deferred consideration revenue (i.e. restructuring costs, integration costs,
compensation expenses, transaction fees and expenses)
- Non-cash expenses (i.e. grant of stock options, restricted share units or Capital stock to employees
as compensation)
- Gain/Loss realized upon the disposal of capital property
- Gain/loss on foreign exchange translation
- Gain/loss on fair valuation of financial instruments
- Amounts attributable to minority equity investments
-
Interest income
- Gain/loss on purchase or redemption of securities issued by that person or any subsidiary
Adjusted EBITDA is not a recognized measure under IFRS and does not have a standardized meaning
prescribed by IFRS, and the Company’s method of calculating Adjusted EBITDA may differ from the
methods used by other similar entities. Accordingly, Adjusted EBITDA may not be comparable to similar
measures used by such entities. Reconciliations of net income (loss) to adjusted EBITDA have been
provided under the heading “Results of Operations”.
2. WORKING CAPITAL MEASURED IN NUMBER OF DAYS OF GROSS BILLINGS
Included in working capital of the Company are amounts reflecting project costs and sub-consultant
expenses. The Company only reports its net fee volume as revenue, which would not include the billings
for the recovery of these incurred costs. Therefore to measure number of days outstanding of working
capital, the gross billings, which include the billings for recovery of project expenses, would result in a more
consistent calculation.
volume.
The information included is calculated based on working days on a twelve month trailing basis, measured
as days outstanding on gross billings, which is estimated to be approximately 27% greater than net fee
The Company believes that informing investors of its progress in managing its accounts receivable, work-
in-process and deferred revenue is important for investors to anticipate cash flows from the business and
to compare the Company with other businesses that operate in the same industry.
Scott Stewart
Toronto, ON, Canada
CEO, IBI Group
David Thom
Vancouver, BC, Canada
President, IBI Group
Dale Richmond
Oakville, ON, Canada
Independent Director;
Chair of the Board of Directors;
Member of the Audit Committee;
Chair of the Governance and
Compensation Committee
Lorraine Bell
New York City, NY, USA
Independent Director;
Chair of the Audit Committee
Jane Bird
Vancouver, BC, Canada
Independent Director;
Member of the Governance
and Compensation Committee
Dr. Juri Pill
Etobicoke, ON, Canada
Independent Director;
Member of the Audit Committee;
Member of the Governance and
Compensation Committee
Angela Holtham
Mississauga, ON, Canada
Independent Director;
Member of the Audit Committee;
Member of the Governance
and Compensation Committee
Detailed biographies of the Members
of the Board are available in the Annual
Information Form (AIF).
Scott Stewart
CEO
David Thom
President
Stephen Taylor
CFO
Kevin Bebenek
Canada East Regional Lead
Peter Moore
Canada West Regional Lead
Tim Foley
USA East Regional Lead
David Chow
USA West Regional Lead
Paul Hewes
UK / Ireland Regional Lead
Trevor McIntyre
International Regional Lead
Transfer Agent
CST Trust Company
Toronto, ON, Canada
Auditors
KPMG LLP
Toronto, ON, Canada
Principal Bank
Toronto Dominion Bank
Securities Exchange Listing
IBI Group shares are traded on
the Toronto Stock Exchange
under the symbol IBG.
Investor Relations
Bayfield Strategy, Inc.
Annual Meeting
May 11, 2017
10:00 am ET
Dentons Canada LLP
TD North Tower,
Toronto-Dominion Centre
5th Floor, 77 King Street West
Toronto, ON M5K 0A1 Canada
37 – IBI Group Inc. – December 31, 2016
COMMON SHARES TRADE AS IBG
7.0% JUNE 30, 2019 DEBENTURES WITH A $19.17 CONVERSION PRICE TRADE AS IBG.DB.C
5.5% DECEMBER 31, 2021 DEBENTURES WITH A $8.35 CONVERSION PRICE TRADE AS IBG.DB.D
All amounts in this repor t are presented in Canadian Dollars (CAD).
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CONTACT
CORPORATE HEAD OFFICE
Scott Stewart, CEO
55 St. Clair Avenue West, 7th Floor
Toronto, ON M4V 2Y7 Canada
Tel +1 416 596 1930
CANADA EAST (11 OFFICES)
Kevin Bebenek, Regional Lead
55 St. Clair Avenue West, 7th Floor
Toronto, ON M4V 2Y7 Canada
Tel +1 416 596 1930
CANADA WEST (4 OFFICES)
Peter Moore, Regional Lead
Suite 300–10830 Jasper Avenue
Edmonton, AB T5J 2B3 Canada
Tel +1 780 428 4000
USA EAST (14 OFFICES)
Tim Foley, Regional Lead
635 Brooksedge Boulevard
Westerville, OH 43081 USA
Tel +1 614 818 4900
USA WEST (12 OFFICES)
David Chow, Regional Lead
315 West 9th Street, Suite 600
Los Angeles, CA 90015–4206 USA
Tel +1 213 769 0011
UK / IREL AND (10 OFFICES)
Paul Hewes, Regional Lead
87–91 Newman Street
London W1T 3EY UK
Tel +44 20 7079 9900
INTERNATIONAL (13 OFFICES)
Trevor McIntyre, Regional Lead
55 St. Clair Avenue West, 7th Floor
Toronto, ON M4V 2Y7 Canada
Tel +1 416 596 1930
For more information about specific offices,
visit www.ibigroup.com/contact
B-39
ABOUT THIS PUBLICATION
The 2016 Annual Report was developed, designed,
and produced by the firm’s corporate Marketing
and Communications team.
Written and Edited by
Charles Finley, Rachel DeWitt, and Julia Harper
Designed and Produced by
Robyn Gillrie
Portraiture by
Linden Laserna
QA Review by
Jenny Seo
Printed by
Hemlock Printers Ltd.
IBI Group’s 2016 Annual Report is printed on
FSC ® Certified Paper. This paper has been certified
to meet the environmental and social standards of
the Forest Stewardship Council ® (FSC) and comes
from well-managed forests and other responsible
sources. Cover enhancements have been created
with a UV spot and flood varnish treatment.
To view a copy of this Annual Report online,
please visit the Investors section of our website.
For more information about IBI Group,
please visit www.ibigroup.com
© 2017 IBI Group
IBI Group is a globally integrated design and technology firm.
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