EXCELLENCE. DEDICATION. INNOVATION.
2 0 2 1 A N N U A L R E P O R T
MTY Group franchises and operates quick-service, fast casual and casual dining restaurants under more than 80 different banners in Canada,
the US and Internationally. Based in Montreal, MTY is a family whose heart beats to the rhythm of its brands, the very soul of its multi-branded
strategy. For over 40 years, it has been increasing its presence by delivering new concepts of restaurants, making acquisitions, and forging
strategic alliances, which have allowed it to reach new heights year after year. By combining new trends with operational know-how, the brands
forming the MTY Group now touch the lives of millions of people every year. With 6,719 locations, the many flavours of the MTY Group hold the
key to responding to the different tastes and needs of today’s consumers as well as those of tomorrow.
REVENUE BY PRODUCT
SYSTEM SALES BY GEOGRAPHY
LOCATIONS BY TYPE
49%
$552M
2021 Revenues
23%
17%
11%
Franchise operation
Promotional funds
Food processing, distribution & retail
Corporate stores
16%
22%
35%
$3,631M
2021 System Sales
12%
64%
6,719
Locations in 2021
14%
3%
Canada
Central US
East Coast US
34%
West Coast US
International
Street front
Non-traditional format
Shopping mall & office tower food court
$3,631M
SYSTEM SALES
$552M
REVENUE
6,719
LOCATIONS
218
Opened
489
Closed
13
Disposed
2
Net Joint
Venture
$1.4B
MARKET CAPITALIZATION
124,200
LOST BUSINESS DAYS
1
1
202 1 H IG H LIG H T S
ROBUST FINANCIAL RESULTS
HEALTHY FINANCIAL POSITION
• Record adjusted EBITDA of $168.6 million
• Healthy free cash flows of $139.0 million
OPERATIONAL CHALLENGES
• Net debt to adjusted EBITDA ratio of 2.1x
• Cash on hand of $61.2 million
• Available credit of $255.0 million
• Locations temporarily closed due to COVID-19 pandemic
SIGNIFICANT NEWS
• COVID-19 government-imposed restrictions
• Renewed Normal Course Issuer Bid until July 2022
• Supply chain disruptions
• Labour shortages
• Food price inflation
• Restored quarterly dividend of $0.185 per share
• Acquired Küto Comptoir à Tartares (December 2021)
• Increased quarterly dividend by 14% to $0.21 per share
(January 2022)
CAPITAL ALLOCATION
• Inaugural ESG report to be published in 2022
• $102.2 million for long-term debt repayments
• $9.1 million for dividend payments
• $2.2 million for share repurchases
BOARD OF DIRECTORS CHANGES
• David K. Wong resigned effective March 31, 2021
• $6.8 million for capital expenditures & intangibles
• Suzan Zalter nominated effective May 13, 2021
• Gary O’Connor resigned effective November 16, 2021
• Victor Mandel nominated effective November 23, 2021
2
5-YE AR H I G H LIG H TS
For the years ended November 30
(in thousands of Canadian $, except where indicated)
2021
2020
2019
2018
2017
OPERATING RESULTS
Revenue
Adjusted EBITDA (1)
Income (loss) before taxes
Net income (loss) attributable to owners
Total comprehensive income (loss) attributable to owners
Earnings per share – basic ($ per share)
Earnings per share – diluted ($ per share)
Weighted daily average number of common
shares (in 000s of shares)
Weighted average number of diluted common
shares (in 000s of shares)
Number of shares outstanding (in 000s of shares)
NETWORK METRICS
System sales (2)
Digital sales (2)
Number of locations (#)
CASH FLOW
551,903
168,622
112,072
85,639
77,673
3.47
3.46
511,117
137,819
(51,949)
(37,108)
(49,726)
(1.50)
(1.50)
550,942
147,395
97,997
77,675
76,489
3.09
3.08
412,346
124,851
80,008
95,776
109,327
3.95
3.95
276,083
93,726
62,664
49,507
33,747
2.32
2.32
24,705
24,755
25,145
24,228
21,374
24,745
24,670
24,755
24,706
25,186
25,071
24,273
25,170
21,374
21,374
3,631,300
3,459,100
3,619,800
2,782,500
2,301,800
803,600
636,400
199,200
6,719
7,001
7,373
n/a
5,984
n/a
5,469
Cash flows from operations
139,299
133,652
Cash flows from operations per diluted share ($ per share) (2)
5.63
5.40
112,951
4.48
Free cash flows (1)
139,001
140,652
116,938
Free cash flows per diluted share ($ per share) (3)
Dividends paid on common stock
Dividends per common share ($ per share)
Shares repurchased and cancelled
Number of shares repurchased and cancelled (#)
5.62
9,141
0.37
2,184
36,600
5.68
4,633
0.185
18,866
364,774
4.64
16,713
0.66
5,227
98,543
97,880
4.03
92,598
3.81
14,530
0.60
—
—
93,531
4.38
94,021
4.40
9,832
0.46
—
—
BALANCE SHEET
Cash
Total assets
Long-term debt, including current portion
Shareholders’ equity
TRADING DATA ON COMMON SHARES
Close ($ per share)
52-week high ($ per share)
52-week low ($ per share)
Market capitalization (in millions $ per share)
61,231
44,302
50,737
32,304
1,904,594
2,013,697
1,648,801
1,239,520
360,728
648,898
460,542
582,514
540,650
665,480
275,616
610,895
56,453
859,241
227,807
318,530
55.19
72.10
47.15
1,362
51.65
62.82
14.23
1,276
55.92
71.86
51.61
1,402
65.58
73.19
44.97
1,651
52.24
55.98
44.75
1,117
(1) This is a non-GAAP measure. Please refer to section “Definition of non-GAAP measures” found in the Supplemental Information section of Management’s Discussion and Analysis.
(2) This is a supplementary financial measure. Please refer to section “Definition of supplementary financial measures” found in the Supplemental Information section of Management’s
Discussion and Analysis.
(3) This is a non-GAAP ratio. Please refer to section “Definition of non-GAAP ratios” found in the Supplemental Information section of Management’s Discussion and Analysis.
3
Dear Fellow Shareholders,
Despite the unprecedented and incredibly chaotic business
environment of the last two years, I am proud to say 2021 was
a great year for MTY.
M E S S AG E FR OM
É R I C L E F E B V R E
Although we suffered from pandemic-related restrictions affecting our ability to
conduct business normally with 124,000 lost business days in 2021 and reduced
operations during extended periods of time, MTY produced record adjusted
EBITDA of $168.6 million and cash flows from operations of $139.3 million. Our
cash flows from operations per diluted share reached $5.63, providing a very
President and Chief Executive Officer
healthy cash flow yield for our shareholders.
From a share price perspective, all our work hasn’t translated into an equivalent
performance on the stock markets. It was another year filled with significant
fluctuations, but ultimately a discrepancy persisted between the market
participants’ perception of our performance and how we value it internally. There
can be many reasons for that discrepancy, but we believe that if we continue to
do the right things and deliver robust results, the market will rally around our
stock and better appreciation will come.
All the efforts of the past to build a great and nimble organization have paid off
in the volatile business environment that prevailed during the last fiscal period.
MTY has always been proud to be an entrepreneurial company and to promote
a decentralized organization in which each individual should be empowered
“
MTY produced record adjusted EBITDA
of $168.6 million and cash flows from
operations of $139.3 million.
”
4
4
“
We started looking for accretive acquisitions
more aggressively, resumed our NCIB and
restored our dividend payments.
”
and creative. Most of our brands operate as single-brand operations
geographies. Our network did suffer some erosion in 2021, shrinking
by colleagues who are close to their operations, ensuring the right
by approximately 4% in the last year. We ended 2021 with 6,719
decisions are made with the right information and context. Our people
locations, down from 7,001 at the end of the previous year. Although
represent our greatest resource and what separates MTY from other
we don’t like losing any location, the integrity of our network has been
franchisors is the creativity, passion and skills of our empowered
materially preserved in the last two years and will represent a strong
“intrapreneurs,” combined with the resources and stability of a larger
foundation to achieve higher growth in future years.
organization. This produces incredible strength for MTY and our
franchise partners.
In last year’s letter, I mentioned our desire to continue investing in
digital marketing, developing digital sales channels on a more global
Fiscal 2021 was another year during which we had to roll with the
basis and investing in the technology that will enable a better digital
punches and adjust to new restrictions swiftly. Different states and
performance. Our digital sales now make up almost one-quarter of
provinces had highly divergent and varying degrees of restrictions,
total sales and, although we did not quite get where we hoped to be
going from total lockdown and curfews to completely lifted restrictions
at year-end, we fully believe this is the right way to proceed and will
and back to lockdowns in only a few months. The disruptions caused
continue to invest in 2022 to offer our customers a digital experience
by the lack of predictability will be felt for many years by our franchise
that will match their in-store experience.
partners, suppliers, landlords, employees and all other stakeholders.
We remain committed to deliver growth organically and via mergers
These hardships were overcome by the diversified portfolio of brands
and acquisitions in the future. As I write this letter, restrictions have
and regions MTY has built over the last 40 years. While some brands,
been largely lifted everywhere in North America and our restaurants
types of restaurants or regions were adversely affected, others gained
are finally operating at full capacity. Although the restaurant industry
from the recent changes in customer behaviours and habits. The
remains highly competitive, we are confident MTY and its franchise
overall impact of the pandemic on MTY was less than what many
partners are in a solid position to take advantage of current trends and
people had anticipated, mostly because they failed to recognize
opportunities as well as gain market share in the coming years.
how the Company had changed in the last decade or so and how its
diversity would help to face this type of adversity.
On a final note, I want to thank all our colleagues for their dedication
and hard work, particularly those who come to work every day in our
While our priority during 2021 remained focused on our existing
restaurants, distribution centers and production facilities. I would also
network, we did shift our capital allocation strategy during the
like to sincerely thank our shareholders for their continued support.
year. In the early days of the pandemic, we predominantly focused
our capital resources towards paying down our debt and reducing
Thank you again for your trust and I wish you all good health as we
the risk associated to leverage. As a result, we paid down a further
move to the other side of the pandemic.
$102.2 million of our debt in 2021. During 2021, we also started looking
for accretive acquisitions more aggressively, resumed our NCIB and
restored our dividend payments. We completed the acquisition of
Küto Comptoir à Tartares shortly after the year-end and we now find
ourselves in a good position to realize acquisitions of any size.
All this was largely made possible by the resilience and courage of
Éric Lefebvre
our franchise partners, who faced constant uncertainty in many
President and Chief Executive Officer
5
FI N AN C I AL PER F OR MANC E
CASH FLOWS FROM OPERATIONS & FREE CASH FLOWS
(in millions of $)
CAPITAL DEPLOYMENT
(in millions of $)
141
134
139
139
362
117
113
94
94
98
93
146
37
48
18
2017
2018
2019
2020
2021
2017
2018
2019
2020
2021
CFO
FCF
Capex & Intangible
Dividends
Acquisitions & joint ventures
Share repurchases
GENERATED ROBUST FREE CASH FLOWS
REVIEWED CAPITAL ALLOCATION STRATEGY
In fiscal 2021, cash flows generated by operating activities reached
In July 2021, given an improved financial situation and a more
$139.3 million, compared to $133.7 million in 2020. Excluding
favourable outlook MTY reviewed its capital allocation strategy.
the variation in non-cash working capital items, income taxes,
The Company reinstated its quarterly dividend and renewed its
interest paid and other, operations generated $170.1 million in
Normal Course Issuer Bid.
cash flows, compared to $141.9 million in 2020.
In December 2021 MTY announced the acquisition of Küto
Free cash flows amounted to $139.0 million in fiscal 2021, in line
Comptoir à Tartares.
with $140.7 million generated for the same period last year, and
higher than pre-pandemic levels.
6
RETURN TO SHAREHOLDERS
(in millions of $)
NET DEBT TO ADJUSTED EBITDA
(in millions of $, except per ratio)
23
22
490
416
15
10
11
243
1.9x
171
1.8x
3.3x
299
3.0x
1.8x
2017
2018
2019
2020
2021
2017
2018
2019
2020
2021
Dividends
Share repurchases
Net debt
Net debt / Adjusted EBITDA
REINSTATED THE QUARTERLY DIVIDEND
REDUCED DEBT AND IMPROVED LEVERAGE
MTY reinstated its quarterly dividend of $0.185 per share in August
In fiscal 2021, we repaid $102.2 million of long-term debt. We
2021, after having suspended it at the onset of the COVID-19
ended the year with a healthy financial position with a net
pandemic. In fiscal 2021, it paid $9.1 million in dividends.
debt to adjusted EBITDA ratio of 2.1x and available credit of
$255.0 million.
MTY renewed its Normal Course Issuer Bid until July 2022. In
fiscal 2021, it invested $2.2 million in share repurchases.
On January 18, 2022, the Company announced an increase of
14% of its quarterly dividend to $0.21 per share, continuing its
trend of growth. This increase represents the 9th increase since
the first quarterly dividend of $0.045 was declared in November
2020.
7
88
Management’s Discussion and Analysis
For the year ended November 30, 2021
Key highlights
• Adjusted EBITDA(1) of $42.8 million in the quarter, compared to $35.2 million in Q4-20.
• Cash flows from operating activities of $31.9 million in the quarter.
• Free cash flows per diluted share(2) reached $1.44.
• Net income attributable to shareholders of $24.9 million in the quarter, or $1.00 per diluted
share, up from a net income attributable to shareholders of $20.1 million, or $0.81 per diluted
share, in Q4-20.
• Long-term debt repayments of $22.7 million for the quarter.
• System sales(3) of $962.5 million, up 8% compared to Q4-20. System sales up 24% in Canada
and 12% Internationally, down 1% in the US due to unfavourable impact of foreign exchange
variation.
• 164 restaurants were temporarily closed at the beginning of the quarter and 82 at the end of
the quarter.
• Although temporary closures increased during the first quarter of 2022 due to additional
government mandated restrictions, as at February 16, 2022, only 71 locations remained
temporarily closed, a decrease of 11 since November 30, 2021.
• 259 locations were closed one or more days during the quarter, representing approximately
9,500 lost business days.
• Repurchased and cancelled 36,600 shares for a total consideration of $2.2 million in Q4-21.
• Quarterly dividend payment of $0.185 per share on November 15, 2021.
• Acquisition of Küto Comptoir à Tartares in December 2021.
(1) See section “Definition of non-GAAP measures” found in the Supplemental Information section for definition.
(2) See section “Definition of non-GAAP ratios” found in the Supplemental Information section for definition.
(3) See section “Definition of supplementary financial measures” found in the Supplemental Information section for
definition.
Management’s Discussion and Analysis
For the fiscal year ended November 30, 2021
General
This Management's Discussion and Analysis of the financial position and financial performance ("MD&A") of MTY Food
Group Inc. ("MTY") is supplementary information and should be read in conjunction with the Company’s consolidated
financial statements and accompanying notes for the fiscal year ended November 30, 2021.
In the MD&A, MTY Food Group Inc., MTY, or the Company, designates, as the case may be, MTY Food Group Inc. and
its Subsidiaries, or MTY Food Group Inc., or one of its subsidiaries.
The disclosures and values in this MD&A were prepared in accordance with International Financial Reporting Standards
(“IFRS”) and with current issued and adopted interpretations applied to fiscal years beginning on or after December 1,
2020.
This MD&A was prepared as at February 16, 2022. Supplementary information about MTY, including its latest annual
and quarterly reports, and press releases, is available on SEDAR’s website at www.sedar.com.
FORWARD-LOOKING STATEMENTS AND USE OF ESTIMATES
This MD&A and, in particular but without limitation, the sections of this MD&A entitled “Near-Term Outlook”, “Same-Store
Sales” and “Contingent Liabilities”, contain forward-looking statements. These forward-looking statements include, but
are not limited to, statements relating to certain aspects of the business outlook of the Company during the course of
2021. Forward-looking statements also include any other statements that do not refer to independently verifiable historical
facts. A statement made is forward-looking when it uses what is known and expected today to make a statement about
the future. Forward-looking statements may include words such as aim, anticipate, assumption, believe, could, expect,
goal, guidance, intend, may, objective, outlook, plan, project, seek, should, strategy, strive, target and will. All such
forward-looking statements are made pursuant to the ‘safe harbour’ provisions of applicable Canadian securities laws.
Unless otherwise indicated, forward-looking statements in this MD&A describe the Company’s expectations as at
February 16, 2022 and, accordingly, are subject to change after such date. Except as may be required by Canadian
securities laws, the Company does not undertake any obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
Forward-looking statements, by their very nature, are subject to inherent risks and uncertainties and are based on several
assumptions, which give rise to the possibility that actual results or events could differ materially from the expectations
expressed in or implied by such forward-looking statements and that the business outlook, objectives, plans and strategic
priorities may not be achieved. As a result, the Company cannot guarantee that any forward-looking statement will
materialize, and readers are cautioned not to place undue reliance on these forward-looking statements. Forward-looking
statements are provided in this MD&A for the purpose of giving information about management’s current strategic
priorities, expectations and plans and allowing investors and others to get a better understanding of the business outlook
and operating environment. Readers are cautioned, however, that such information may not be appropriate for other
purposes. In addition, the impact of COVID-19 on the operational cash flows and financial condition of the industry in
which the Company operates and on the Company itself continues to evolve and any forward-looking information set
forth herein with respect to such matters is subject to change and actual impact may differ from expectations in a material
way.
Forward-looking statements made in this MD&A are based on a number of assumptions that are believed to be
reasonable on February 16, 2022. Refer, in particular, to the section of this MD&A entitled “Risks and Uncertainties” for
a description of certain key economic, market and operational assumptions the Company has used in making forward-
Page 2
looking statements contained in this MD&A. If the assumptions turn out to be inaccurate, the actual results could be
materially different from what is expected.
In preparing the consolidated financial statements in accordance with IFRS and the MD&A, management must exercise
judgment when applying accounting policies and use assumptions and estimates that have an impact on the amounts of
assets, liabilities, sales and expenses reported and information on contingent liabilities and contingent assets provided.
Unless otherwise indicated in this MD&A, the strategic priorities, business outlooks and assumptions described in the
previous MD&A remain substantially unchanged.
Important risk factors that could cause actual results or events to differ materially from those expressed in or implied by
the above-mentioned forward-looking statements and other forward-looking statements included in this MD&A include,
but are not limited to: the intensity of competitive activity, and the resulting impact on the ability to attract customers’
disposable income; the Company’s ability to secure advantageous locations and renew existing leases at sustainable
rates; the arrival of foreign concepts, the ability to attract new franchisees; changes in customer tastes, demographic
trends and in the attractiveness of concepts, traffic patterns, occupancy cost and occupancy level of malls and office
towers; general economic and financial market conditions, the level of consumer confidence and spending, and the
demand for, and prices of, the products; the duration and impact of the COVID-19 pandemic, its impact on the ability to
re-open locations as well as on consumer demand upon re-opening and its macro-economic impact; the ability to
implement strategies and plans in order to produce the expected benefits; events affecting the ability of third-party
suppliers to provide essential products and services; labour availability and cost; stock market volatility; volatility in foreign
exchange rates or borrowing rates; foodborne illness; operational constraints, government orders and the event of the
occurrence of epidemics, other pandemics and health risks.
These and other risk factors that could cause actual results or events to differ materially from the expectations expressed
in or implied by these forward-looking statements are discussed in this MD&A.
Readers are cautioned that the risks described above are not the only ones that could impact the Company. Additional
risks and uncertainties not currently known or that are currently deemed to be immaterial may also have a material
adverse effect on the business, financial condition or results of operations.
Except as otherwise indicated by the Company, forward-looking statements do not reflect the potential impact of any
non-recurring or other special items or of any dispositions, monetizations, mergers, acquisitions, other business
combinations or other transactions that may be announced or that may occur after February 16, 2022. The financial
impact of these transactions and non-recurring and other special items can be complex and depend on the facts particular
to each of them. The Company therefore cannot describe the expected impact in a meaningful way or in the same way
that present known risks affecting the business.
CORE BUSINESS
MTY franchises and operates quick service, fast casual and casual dining restaurants. MTY aims to be the franchisor of
choice in North America and offers the market a range of offering through its many brands. MTY currently operates under
the following banners: Tiki-Ming, Sukiyaki, La Crémière, Panini Pizza Pasta, Villa Madina, Cultures, Thaï Express,
Vanellis, Kim Chi, “TCBY”, Sushi Shop, Koya Japan, Vie & Nam, Tandori, O’Burger, Tutti Frutti, Taco Time, Country
Style, Buns Master, Valentine, Jugo Juice, Mr. Sub, Koryo Korean Barbeque, Mr. Souvlaki, Sushi Go, Mucho Burrito,
Extreme Pita, PurBlendz, ThaïZone, Madisons New York Grill & Bar, Café Dépôt, Muffin Plus, Sushi-Man, Van Houtte,
Manchu Wok, Wasabi Grill & Noodle, Tosto, Big Smoke Burger, Cold Stone Creamery, Blimpie, Surf City Squeeze, The
Great Steak & Potato Company, NrGize Lifestyle Café, Samurai Sam’s Teriyaki Grill, Frullati Café & Bakery, Rollerz,
Johnnie’s New York Pizzeria, Ranch One, America’s Taco Shop, Tasti D-Lite, Planet Smoothie, Maui Wowi, Pinkberry,
Baja Fresh Mexican Grill, La Salsa Fresh Mexican Grill, La Diperie, Steak Frites St-Paul, Giorgio Ristorante, The Works
Gourmet Burger Bistro, Dagwoods Sandwiches and Salads, The Counter Custom Burgers, Built Custom Burgers, Baton
Rouge, Pizza Delight, Scores, Toujours Mikes, Ben & Florentine, Grabbagreen, Timothy’s World Coffee, Mmmuffins,
SweetFrog, Casa Grecque, South Street Burger, Papa Murphy’s, Yuzu Sushi, Allô! Mon Coco, La Boite Verte, Turtle
Jack’s Muskoka Grill and COOP Wicked Chicken.
As at November 30, 2021, MTY had 6,719 locations in operation, of which 6,603 were franchised or under operator
agreements, 23 were operated through the joint venture and the remaining 93 locations were operated by MTY.
MTY’s locations can be found in: i) mall and office tower food courts and shopping malls; ii) street front; and, iii) non-
traditional format within airports, petroleum retailers, convenience stores, cinemas, amusement parks, in other venues
or retailers shared sites, hospitals, universities, grocery stores, and food-truck carts. Over the last 40 years, MTY has
developed several restaurant concepts, including Tiki-Ming, which was the first concept it franchised. Details on other
banners added through acquisitions can be found in the supplemental section of this MD&A.
Page 3
In the wake of COVID-19, MTY has also launched multiple ghost kitchens in existing restaurant locations. These ghost
kitchens and the pre-existing MTY restaurant locations are benefiting from the synergies of shared costs, streamlined
workflows as well as being able to respond to the increase in delivery and takeout orders.
Revenues from franchise locations are generated from royalty fees, franchise fees, sales of turnkey projects, rent, sign
rental, supplier contributions, gift card breakage and program fees and sales of other goods and services. Operating
expenses related to franchising include salaries, general and administrative costs associated with existing and new
franchisees, expenses in the development of new markets, costs of setting up turnkey projects, rent, supplies, finished
products and equipment sold.
Revenues and expenses from corporate owned locations include sales generated and cost incurred from their operations.
Promotional funds contributions are based on a percentage of gross sales as reported by the franchisees. The Company
is not entitled to retain these promotional fund payments received and is obligated to transfer these funds to be used
solely in promotional and marketing-related costs for specific restaurant banners.
MTY generates revenues from the food processing businesses discussed herein. The two plants produce various
products that range from ingredients and ready to eat food sold to restaurants or other food processing plants to prepared
food sold in retail stores. The plants generate most of their revenues selling their products to distributors, retailers and
franchisees. The Company also generates revenue from its distribution centers that serve primarily the Valentine and
Casa Grecque franchisees. Furthermore, the Company generates revenues from the sale of retail products under various
brand names, which are sold at a variety of retailers.
COMPLIANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS
Unless otherwise indicated, the financial information presented below, including tabular amounts, is prepared in
accordance with IFRS. Definitions of all non-GAAP (“generally accepted accounting principles”) measures, non-GAAP
ratios and supplemental financial measures can be found in the supplemental information section of this MD&A. The
non-GAAP measures, non-GAAP ratios and supplemental financial measures used within the context of this MD&A do
not have a standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures
presented by other issuers. The Company believes that non-GAAP measures, non-GAAP ratios and supplemental
financial measures are useful because they are consistent with the indicators management uses internally to measure
the Company’s performance, to prepare operating budgets and to determine components of executive compensation.
The Company also believes that these measures are used by securities analysts, investors and other interested parties
and that these measures allow them to compare the Company’s operations and financial performance from period to
period and provide them with a supplemental measure of the operating performance and financial position and thus
highlight trends in the core business that may not otherwise be apparent when relying solely on GAAP measures.
HIGHLIGHTS OF SIGNIFICANT EVENTS
COVID-19
During the year ended November 30, 2021, the COVID-19 pandemic continued to impact the markets in which MTY and
its franchise partners and suppliers operate. Canada and certain parts of the United States (“US”) continued to be
impacted by the continuation of government-imposed restrictions including restrictions on dine-in guests, reduced
operating hours and/or temporary closures. The year saw the ramp-up of the global vaccination campaign, which led to
the gradual lifting of restrictions in some territories, including the resumption of indoor and outdoor dining, and the
reopening of a number of restaurants. However, the end of the year saw the rise of a fourth wave driven by the Delta
variant, resulting in more infections and certain additional public health measures, including the mandatory presentation
of a vaccine passport for seated dining in restaurants in some territories. The disruptions are expected to persist into
2022 with uncertainty surrounding the rollout of the vaccine boosters and the spread of the Omicron variant. The longer-
term impact on the economy and the rules and restrictions that will apply to MTY’s restaurants are expected to fluctuate
and impact the network for the foreseeable future.
As at November 30, 2021, MTY had 82 locations temporarily closed due to the pandemic, with many of those open
operating with some restrictions. During the months of September, October and November of 2021, MTY’s network lost
approximately 9,500 days (approximately 8,000 in Canada and 1,500 in the US) of combined operations with a total of
259 locations closed one or more days during the quarter. Locations that are still temporarily closed are mostly located
in malls, office towers and non-traditional locations such as airports, gyms and universities.
As previously reported, MTY is continuing its measures set out in 2020 to continually assist franchisees and ensure the
safety and well-being of its employees, guests, and partners. Management continues to adapt and respond to the
challenges presented by the current pandemic and monitors on a regular basis capital and operational spending to
manage cash flows and ensure continued liquidity in the face of these uncertainties.
Page 4
The consolidated financial statements have been impacted with respect to the following as a result of COVID-19:
- Changes to lease liabilities and finance lease receivables were made to reflect changes in lease payment terms;
- Reduction in wage expense, presented in Wage and rent subsidies as part of Operating expenses in the
consolidated financial statements, for the year ending November 30, 2021, of $4.1 million (2020 – $6.8 million)
resulting from the Canada Emergency Wage Subsidy, and of $0.3 million (2020 – nil) resulting from the
Employee Retention Credit available to US taxpayers under the Coronavirus Aid, Relief and Economic Security
Act; and
- Reduction in rent expense, presented in Wage and rent subsidies as part of Operating expenses in the
consolidated financial statements for the year ending November 30, 2021, of $1.4 million (2020 – $0.2 million)
resulting from the Canada Emergency Rent Subsidy.
Further information on these changes can be found in the November 30, 2021 consolidated financial statements.
DESCRIPTION OF RECENT ACQUISITION
On December 3, 2019, one of the Company’s wholly owned subsidiaries completed its acquisition of a 70% interest in a
joint venture that acquired Turtle Jack's Muskoka Grill, COOP Wicked Chicken and Frat’s Cucina (together “Tortoise
Group”), three casual dining concepts operating in the province of Ontario, for a consideration of $26.1 million. The
consideration includes a deferred contingent consideration amounting to $4.1 million, an obligation for the repurchase of
its partner in a joint venture of $2.9 million and cash consideration of $19.1 million. The Company has recorded its interest
as an investment in a joint venture. The Company has guaranteed liabilities of the joint venture amounting to $7.9 million,
which are payable to Tortoise Group, upon the repurchase of the 30% joint venture partner. At closing, there were 20
franchised restaurants in operation and three corporate-owned stores.
SUMMARY OF ANNUAL FINANCIAL METRICS
(In thousands $, except EPS, dividend per common share and
number of common shares)
Year ended
November 30, 2021
Year ended
November 30, 2020
Total assets
Total long-term financial liabilities
Revenue
Income (loss) before taxes
Net income (loss) attributable to owners
Total comprehensive income (loss) attributable to owners
Cash flows from operations
Net income (loss) per share – basic
Net income (loss) per share – diluted
Dividends paid on common stock
Dividends per common share
1,904,594
347,612
551,903
112,072
85,639
77,673
139,299
3.47
3.46
9,141
0.370
2,013,697
447,654
511,117
(51,949)
(37,108)
(49,726)
133,652
(1.50)
(1.50)
4,633
0.185
Weighted daily average number of common shares
Weighted average number of diluted common shares
24,704,866
24,745,131
24,755,351
24,755,351
Page 5
SUMMARY OF ANNUAL OPERATING METRICS
(In thousands $, except per share amounts)
Adjusted EBITDA (1)
Income before taxes, excluding impairment charges and reversals (1)
Cash flows from operations per diluted share (2)
Year ended
November 30, 2021
Year ended
November 30, 2020
168,622
119,525
5.63
137,819
75,168
5.40
Free cash flows (1)
139,001
140,652
(1) See section “Definition of non-GAAP measures” found in the Supplemental Information section for definition.
(2) See section “Definition of supplementary financial measures” found in the Supplemental Information section for
definition.
SUMMARY OF QUARTERLY FINANCIAL METRICS
Quarters ended
(In thousands $, except per
share information)
February
2020
May
2020
August
November
February
2020
2020
2021
May
2021
August November
2021
2021
Revenue
150,780
97,808
135,366
127,163
118,960
135,857
150,801
146,285
Net income (loss)
attributable to owners
Total comprehensive
income (loss)
attributable to owners
Net income (loss)
per share
Net income (loss)
per diluted share
Cash flows provided by
operating activities
19,008
(99,126)
22,932
20,078
13,397
23,028
24,337
24,877
26,476
(80,422)
(10,691)
14,911
(953)
(7,588)
52,026
34,188
0.76
(4.01)
0.93
0.81
0.54
0.93
0.99
1.01
0.76
(4.01)
0.93
0.81
0.54
0.93
0.98
1.00
30,980
19,207
38,624
44,841
31,307
29,541
46,553
31,898
Page 6
SUMMARY OF QUARTERLY OPERATING METRICS
(In thousands $, except
system sales, # of
locations and per share
information)
System sales (1 & 2)
Quarters ended
February
May
August November February
May
August November
2020
2020
2020
2020
2021
2021
2021
2021
999.5
670.7
897.5
891.4
761.1
891.5
1,016.2
962.5
# of locations
7,300
7,236
7,123
7,001
6,949
6,907
6,848
6,719
Adjusted EBITDA (3)
Free cash flows (3)
Free cash flows per
diluted share (4)
41,037
18,213
43,388
35,181
32,637
43,481
49,673
42,831
30,738
28,926
37,078
43,910
30,300
27,497
45,601
35,603
1.23
1.17
1.50
1.78
1.23
1.11
1.84
1.44
(1) See section “Definition of supplementary financial measures” found in the Supplemental Information section for
definition.
In millions $.
(2)
(3) See section “Definition of non-GAAP measures” found in the Supplemental Information section for definition.
(4) See section “Definition of non-GAAP ratios” found in the Supplemental Information section for definition.
SEGMENT NOTE DISCLOSURE
Management monitors and evaluates the Company’s results based on geographical segments; these two segments
being Canada and US & International. The Company and its chief operating decision maker assess the performance of
each operating segment based on its segment profit and loss, which is equal to revenue less operating expenses. Within
those geographical segments, the Company’s chief operating decision maker also assesses the performance of
subdivisions based on the type of product or service provided. These subdivisions include franchising, corporate store,
food processing, retail and distribution and promotional funds revenues and expenses.
RESULTS OF OPERATIONS FOR THE FISCAL YEAR ENDED NOVEMBER 30, 2021
Revenue
During the 2021 fiscal year, the Company’s total revenue increased to $551.9 million, from $511.1 million a year earlier.
Revenue for the two segments of business are broken down as follows:
Segment
Canada
Total Canada
US &
International
Subdivision
Franchise operation
Corporate stores
Food processing, distribution and retail
Promotional funds
Intercompany transactions
Franchise operation
Corporate stores
Food processing, distribution and retail
Promotional funds
Intercompany transactions
Total US & International
Total revenue
November 30, 2021
($ millions)
November 30, 2020
($ millions)
107.3
19.4
125.0
32.2
(3.7)
280.2
167.2
40.2
5.0
61.2
(1.9)
271.7
551.9
105.6
18.4
104.2
30.4
(4.6)
254.0
152.2
46.3
4.6
56.4
(2.4)
257.1
511.1
Variation
2%
5%
20%
6%
N/A
10%
10%
(13%)
9%
9%
N/A
6%
8%
Page 7
Canada revenue analysis:
Revenue from franchise locations in Canada increased by 2%. Several factors contributed to the variation, as listed
below:
Revenue, 2020 fiscal year
(In millions $)
105.6
3.9
(0.7)
(0.4)
(1.1)
107.3
Revenue, 2021 fiscal year
(1) See section “Definition of supplementary financial measures” found in the Supplemental Information section for definition.
Increase in recurring revenue streams (1)
Decrease in initial franchise fees, renewal fees and transfer fees
Decrease in turnkey, sales of material to franchisees and rent revenues
Other non-material variations
The franchising segment in Canada benefitted from the re-opening of restaurants and gradual lifting of government-
imposed restrictions, despite vaccine passport requirements in some provinces. System sales increased by 4.5%
compared to prior year, which correlates to the increase in recurring revenue streams. This was partially offset by a
decline in turnkey revenues. As at November 30, 2021, the Company still had 64 locations temporarily closed in Canada
(2020 – 197 locations).
Revenue from corporate-owned locations increased by 5% to $19.4 million year-to-date. The increase is due to the
gradual lifting of government-imposed restrictions, despite vaccine passport requirements in some provinces as well as
an increase in the number of corporate restaurants held over the course of the year.
Food processing, distribution and retail revenues increased by 20%. The increase is partially explained by the re-opening
of restaurants, which has increased sales in our distribution and food processing channels. The impact of increased
consumer spending in grocery stores that has continued throughout the waves of the pandemic, coupled with the launch
of new products in the retail division, as well as expansion into new provinces, also helped generate new sales channels.
In 2021, 181 products were sold in the Canadian retail market, compared to 147 in 2020.
The promotional fund revenue increase of 6% is partly due to the 4.5% increase in system sales compared to prior year
as well as the impact of the various contribution rates.
US & International revenue analysis:
Revenue from franchise locations in the US and International increased by 10%. Several factors contributed to the
variation, as listed below:
Revenue, 2020 fiscal year
(In millions $)
152.2
21.4
0.3
3.0
0.3
(9.2)
(0.8)
167.2
(1) See section “Definition of supplementary financial measures” found in the Supplemental Information section for definition.
Increase in recurring revenue streams (1)
Increase in initial franchise fees, renewal fees and transfer fees
Increase in sales of material and services to franchisees
Increase in gift card breakage income
Impact of variation in foreign exchange rates
Other non-material variations
Revenue, 2021 fiscal year
The franchising segment benefited from the reopening and lifting of government-imposed restrictions in most of the states
compared to 2020. Despite 18 US & International locations temporarily closed as at November 30, 2021, year-to-date
system sales increased by 5.3% compared to prior year. Sales of material and services to franchisees also increased by
$3.0 million, stemming primarily from the sale of equipment to franchisees. This was partially offset by an unfavourable
impact of $9.2 million due to an unfavourable variation in the foreign exchange rate.
The decrease of $6.1 million in corporate-owned location revenues is explained by the sale of several Papa Murphy’s
corporately-owned locations that were converted into franchises as well as the negative impact of foreign exchange rates
amounting to $2.9 million.
The promotional fund revenue increase of 9% is partly due to the increase in system sales as well as the impact of the
various contribution rates.
Page 8
Operating expenses
During the 2021 fiscal year, operating expenses increased by 2% to $382.6 million, from $373.8 million a year ago.
Operating expenses for the two business segments were incurred as follows:
Segment
Canada
Total Canada
US &
International
Subdivision
Franchise operation
Corporate stores
Food processing, distribution and retail
Promotional funds
Intercompany transactions
Franchise operation
Corporate stores
Promotional funds
Intercompany transactions
Total US & International
Total operating expenses
Canada operating expenses analysis:
November 30, 2021
($ millions)
November 30, 2020
($ millions)
50.4
17.3
114.0
32.2
(1.8)
212.1
71.4
41.7
61.2
(3.8)
170.5
382.6
56.6
17.7
92.5
30.4
(2.5)
194.7
78.9
48.3
56.4
(4.5)
179.1
373.8
Variation
(11%)
(2%)
23%
6%
N/A
9%
(10%)
(14%)
9%
N/A
(5%)
2%
Operating expenses from franchise locations in Canada decreased by $6.2 million or 11%. Several factors contributed
to the variation, as listed below:
Operating expenses, 2020 fiscal year
Increase in non-controllable expenses (1)
Decrease in turnkey cost, cost of sale of material and services to franchisees and rent
Increase in recurring controllable expenses (1) including wages,
professional and consulting services and other office expenses
Decrease in expected credit loss provision
Decrease due to impact of IFRS 16 on rent expense
Decrease due to impact of IFRS 16 on impairment of lease receivables
2.5
(1.9)
(0.8)
(4.7)
50.4
(1) See section “Definition of supplementary financial measures” found in the Supplemental Information section for definition.
Operating expenses, 2021 fiscal year
(In millions $)
56.6
2.0
(3.3)
Non-controllable expenses increased by $2.0 million compared to prior year due to a decrease in wage subsidies. The $3.3
million decrease in turnkey costs and cost of material and services to franchisees and rent is the impact of $1.8 million lease
guarantee provision recorded at the onset of the pandemic with the remaining $1.5 million explained by a decrease in turnkeys’
costs that are correlated with the decrease in revenues as well as a decrease in rent. Controllable expenses increased by
$2.5 million, mostly due to an increase in wages, which was partially offset by a decrease in professional and consulting
services. During the year, expenses were also favourably impacted by: higher expected credit loss provisions taken in the
prior year at the onset of the pandemic; and reversals of expected credit loss provisions on accounts receivable and lease
receivables, which stems from a change in the assessment of the collection risk and better than expected collection from
franchisees.
Corporate store expenses for the year were favorably impacted by rent subsidies received from the government offset by an
increase in operating expenses due to the gradual lifting of government-imposed restrictions as well as an increase in the
number of corporate restaurants held over the course of the year.
Food processing, distribution and retail cost increased due to increases in revenues but also as a result of a retroactive
environmental contribution rates adjustment during the first quarter that required a cumulative adjustment.
Promotional funds expense activities were tightly correlated to the related revenues.
Page 9
US & International operating expenses analysis:
Operating expenses from franchise locations in the US & International decreased by $7.5 million. Several factors
contributed to the variation, as listed below:
Operating expenses, 2020 fiscal year
Increase in non-controllable expenses (1)
Increase in cost of sale of material and services to franchisees and rent
Decrease in recurring controllable expenses (1) including wages,
professional and consulting services and other office expenses
(2.8)
(2.4)
Decrease in expected credit loss provision
(0.5)
Decrease due to impact of IFRS 16 on rent expense
(2.6)
Decrease due to impact of IFRS 16 on impairment of lease receivables
(4.7)
Impact of variation in foreign exchange rates
(0.4)
Other non-material variations
Operating expenses, 2021 fiscal year
71.4
(1) See section “Definition of supplementary financial measures” found in the Supplemental Information section for definition.
(In millions $)
78.9
1.8
4.1
The non-controllable expenses increase of $1.8 million stems from an increase in royalties paid to area developers. The $4.1
million increase in cost of sale of material and services to franchises and rent is primarily from the sale of equipment to
franchisees, which is correlated with revenues, as well as an increase in rent expense and the costs related to the sale of gift
cards.
The reduction in controllable expenses was due to reductions in wages, professional fees, franchising, and travel expenses,
all of which were reduced as part of cost reduction initiatives put into place in response to COVID-19. Expenses were also
favourably impacted by: higher expected credit loss provisions taken in the prior year at the onset of the pandemic; and
reversals of expected credit loss provisions on accounts receivable and lease receivables, which stems from a change in the
assessment of the collection risk and better than expected collection from franchisees.
The variations from corporate stores and promotional funds fluctuated in correlation to the related revenues.
Segment profit (loss) and Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted
EBITDA”) (1)
Fiscal year ended November 30, 2021
(In millions $)
Revenue
Operating expenses
Segment profit
Segment profit as a % of Revenue
Segment profit
Net loss in joint venture
Adjusted EBITDA
Adjusted EBITDA as a % of Revenue (2)
(In millions $)
Revenue
Operating expenses
Segment profit
Segment profit as a % of Revenue
Segment profit
Net profit in joint venture
Adjusted EBITDA
Adjusted EBITDA as a % of Revenue (2)
Canada
280.2
212.1
68.1
24%
68.1
(0.7)
67.4
24%
US & International
271.7
170.5
101.2
37%
101.2
—
101.2
37%
Fiscal year ended November 30, 2020
Canada
254.0
194.7
59.3
23%
59.3
0.5
59.8
24%
US & International
257.1
179.1
78.0
30%
78.0
—
78.0
30%
Total
551.9
382.6
169.3
31%
169.3
(0.7)
168.6
31%
Total
511.1
373.8
137.3
27%
137.3
0.5
137.8
27%
Page 10
Below is a summary of performance segmented by product/service:
Fiscal year ended November 30, 2021
(In millions $)
Revenue
Operating expenses
Segment profit
Segment profit as a % of Revenue
Franchise
274.5
121.8
152.7
56%
Corporate
59.6
59.0
0.6
1%
Processing,
distribution
and retail
130.0
114.0
16.0
12%
Promotional
funds
93.4
93.4
—
N/A
Intercompany
transactions
(5.6)
(5.6)
—
N/A
Segment profit
Net loss in joint venture
Adjusted EBITDA
Adjusted EBITDA as a % of Revenue (2)
152.7
(0.7)
152.0
55%
0.6
—
0.6
1%
16.0
—
16.0
12%
—
—
—
N/A
—
—
—
N/A
Fiscal year ended November 30, 2020
(In millions $)
Revenue
Operating expenses
Segment profit (loss)
Segment profit (loss) as a % of Revenue
Franchise
257.8
135.5
122.3
47%
Corporate
64.7
66.0
(1.3)
N/A
Processing,
distribution
and retail
108.8
92.5
16.3
15%
Promotional
funds
86.8
86.8
—
N/A
Intercompany
transactions
(7.0)
(7.0)
—
N/A
Segment profit (loss)
Net profit in joint venture
Adjusted EBITDA
Adjusted EBITDA as a % of Revenue (2)
122.3
0.5
122.8
48%
(1.3)
—
(1.3)
N/A
16.3
—
16.3
15%
—
—
—
N/A
—
—
—
N/A
(1) See section “Definition of non-GAAP measures” found in the Supplemental Information section for definition.
(2) See section “Definition of non-GAAP ratios” found in the Supplemental Information section for definition.
Total
551.9
382.6
169.3
31%
169.3
(0.7)
168.6
31%
Total
511.1
373.8
137.3
27%
137.3
0.5
137.8
27%
Page 11
Several factors contributed to the variation, as listed below:
(In millions $)
Segment profit, 2020 fiscal year
Variance in recurring revenues and expenses (1)
Variance in turnkey, sales of material and services
to franchisees and rent for franchising segment
Variance in initial franchise fees, renewal fees and
transfer fees
Variance in nonrecurring non-controllable
expenses (1)
Variance in expected credit loss provision
Variance due to impact of IFRS 16 on rent revenue
& expense
Variance due to impact of IFRS 16 on impairment
of lease receivables
Impact of variation in foreign exchange rates
Other non-material variations
Segment profit, 2021 fiscal year
Adjusted EBITDA (2), 2020 fiscal year
Variances in segment profit
Variance due to net impact of joint venture
Canada
59.3
0.3
US &
International
78.0
23.3
2.9
(0.7)
(1.2)
2.3
1.0
4.7
—
(0.5)
68.1
(1.1)
0.3
0.3
2.4
(0.1)
2.6
(4.1)
(0.4)
101.2
Total
137.3
23.6
1.8
(0.4)
(0.9)
4.7
0.9
7.3
(4.1)
(0.9)
169.3
59.8
8.8
(1.2)
67.4
78.0
23.2
—
101.2
137.8
32.0
(1.2)
168.6
Adjusted EBITDA (2), 2021 fiscal year
(1) See section “Definition of supplementary financial measures” found in the Supplemental Information section for
definition.
(2) See section “Definition of non-GAAP measures” found in the Supplemental Information section for definition.
Total segment profit for the year ended November 30, 2021, was $169.3 million, an increase of 23% compared to the
same period last year. Total adjusted EBITDA for the same period was $168.6 million, an increase of 22% compared to
the same period last year. The loosening of COVID-19 restrictions in both geographic segments and positive system
sales growth as well as the decrease in expected credit loss provisions are the primary reasons for the increase.
Canada contributed 40% of total adjusted EBITDA and a year-over-year increase of $7.6 million. This increase of 13%
was mostly due to an increase in recurring revenues, which stems from higher systems sales, as well as the impact of
one-time lease guarantee provisions taken in 2020, the reversals of expected credit loss provisions and lower
professional and consulting fees.
The US & International adjusted EBITDA grew by 30% mainly from an increase in recurring revenue, in conjunction with
cost reduction measures put in place and reversals of expected credit loss provisions on accounts receivable and lease
receivables.
Net income (loss)
For the year ended November 30, 2021, a net income attributable to owners of $85.6 million was recorded, or $3.47 per
share ($3.46 per diluted share) compared to a net loss attributable to owners of $37.1 million or $1.50 per share ($1.50
per diluted share) last year. The increase was primarily due to a non-cash impairment charge to the Company’s property,
plant and equipment, intangible assets and goodwill of $122.8 million recorded in the prior year. This compares to a non-
cash net impairment charge of $5.9 million to the Company’s property, plant and equipment and intangible assets
recorded in the current year.
Page 12
Calculation of Adjusted EBITDA (1)
(In thousands $)
Year ended
November 30, 2021
Year ended
November 30, 2020
112,072
16,174
28,442
10,111
2,295
1,550
Income (loss) before taxes
Depreciation – property, plant and equipment and
right-of-use assets
Amortization – intangible assets
Interest on long-term debt
Net interest expense on leases
Impairment charge – right-of-use assets
Net impairment charge – property, plant and equipment,
intangible assets and goodwill
Unrealized and realized foreign exchange loss (gain)
Interest income
Gain on de-recognition/lease modification of lease
liabilities
(Gain) loss on disposal of property, plant and equipment
and assets held for sale
Revaluation of financial liabilities recorded at
fair value through profit and loss
Other income
Adjusted EBITDA
(1) See section “Definition of non-GAAP measures” found in the Supplemental Information section for definition.
(3,034)
(125)
168,622
5,903
300
(198)
(3,549)
(1,319)
(51,949)
16,998
30,876
16,756
2,481
4,291
122,826
(3,230)
(408)
(2,890)
466
1,602
—
137,819
Other income and expenses
Interest on long-term debt decreased by $6.6 million as a result of repayments made on the revolving credit facility over
the course of the last 12 months and the positive impact of cross-currency interest rate swaps.
The Company recorded a gain on disposal of property, plant and equipment of $3.5 million during the year ended
November 30, 2021, mostly resulting from the disposal of two portfolios of Papa Murphy’s corporately-owned locations
in the US that were converted into franchises upon completion of the sale. This compares to a loss on disposal of property,
plant and equipment and assets held for sale of $0.5 million in the prior year.
Page 13
RESULTS OF OPERATIONS FOR THE THREE-MONTH PERIOD ENDED NOVEMBER 30, 2021
Revenue
During the fourth quarter of 2021, the Company’s total revenue increased to $146.3 million, from $127.2 million a year
earlier. Revenue for the two segments of business are broken down as follows:
Segment
Canada
Total Canada
US &
International
Subdivision
Franchise operation
Corporate stores
Food processing, distribution and retail
Promotional funds
Intercompany transactions
Franchise operation
Corporate stores
Food processing, distribution and retail
Promotional funds
Intercompany transactions
Total US & International
Total revenue
Canada revenue analysis:
November 30, 2021
($ millions)
November 30, 2020
($ millions)
33.7
5.9
34.6
9.6
(2.7)
81.1
39.7
9.4
1.3
15.2
(0.4)
65.2
146.3
27.7
4.1
24.8
8.0
(3.4)
61.2
40.4
11.1
1.1
14.2
(0.8)
66.0
127.2
Variation
22%
44%
40%
20%
N/A
33%
(2%)
(15%)
18%
7%
N/A
(1%)
15%
Revenue from franchise locations in Canada increased by 22%. Several factors contributed to the variation, as listed
below:
Revenue, fourth quarter of 2020
(In millions $)
27.7
Increase in recurring revenue streams (1)
6.3
0.2
Increase in initial franchise fees, renewal fees and transfer fees
0.4
Increase in turnkey, sales of material to franchisees and rent revenues
(0.9)
Other non-material variations
Revenue, fourth quarter of 2021
33.7
(1) See section “Definition of supplementary financial measures” found in the Supplemental Information section for definition.
The increase to franchising revenues was mostly attributable to the recovery from the onset of the second wave and
increased government-imposed restrictions in the fourth quarter of 2020. Malls and office towers outperformed prior year
with sales growth of 41% and 58%, respectively, while street-front locations had a year-over-year growth of 21%. Street-
front locations had the largest increase in the casual dining division, with a quarterly sales increase of 36%. The network’s
digital sales also continued to rise, reaching $60.6 million during the quarter, compared to $53.7 million in the same
period last year.
Revenue from corporate-owned locations increased by 44% to $5.9 million during the quarter. The increase is mostly
due to the re-opening of corporate locations in the fourth quarter compared to their temporary closures in the same period
last year as a result of the onset of the second wave in the fourth quarter of 2020.
Food processing, distribution and retail revenues increased by 40% mainly due to new listings in retail and expansion to
new territories, as well as higher revenues generated by our processing and distribution centers. The year-over-year
improvement is the result of increased restaurant sales during the quarter, which is a driver for this segment.
The promotional fund revenue increase of 20% is partly due to the increase in system sales, which increased by 24%,
as well as the impact of the various contribution rates.
Page 14
US & International revenue analysis:
Revenue from franchise locations in the US and International decreased by 2%. Several factors contributed to the
variation, as listed below:
Revenue, fourth quarter of 2020
(In millions $)
40.4
Increase in recurring revenue streams (1)
1.8
0.3
Increase in initial franchise fees, renewal fees and transfer fees
Decrease in sales of material and services to franchisees
(0.2)
(1.7)
Impact of variation in foreign exchange rates
(0.9)
Other non-material variations
Revenue, fourth quarter of 2021
39.7
(1) See section “Definition of supplementary financial measures” found in the Supplemental Information section for definition.
Despite the overall decrease in franchising revenues, mostly due to the unfavourable impact of variation in foreign
exchange rates, recurring revenue streams were higher compared to the same period last year, partially attributable to
the momentum in the recovery from the pandemic, with the removal of government-imposed restrictions in key states
and territories. For the three-month period ended November 30 , 2021, excluding the impact of foreign exchange rates,
system sales increased by 4% compared to prior year. California, the largest territory in the US network, also saw an
increase of 7% compared to prior year.
The decrease of $1.7 million in corporate-owned location revenues is due to the sale of several Papa Murphy’s
corporately-owned locations that were converted into franchises.
The promotional fund revenue increase of 7% is partly due to the impact of the various contribution rates.
Operating expenses
During the fourth quarter of 2021, operating expenses increased by 12% to $103.2 million, up from $92.0 million a year
ago. Operating expenses for the two business segments were incurred as follows:
Segment
Canada
Total Canada
US &
International
Subdivision
Franchise operation
Corporate stores
Food processing, distribution and retail
Promotional funds
Intercompany transactions
Franchise operation
Corporate stores
Promotional funds
Intercompany transactions
Total US & International
Total operating expenses
November 30, 2021
($ millions)
November 30, 2020
($ millions)
13.8
5.8
32.0
9.6
(0.5)
60.7
19.2
10.7
15.2
(2.6)
42.5
103.2
14.6
3.6
21.8
8.0
(1.1)
46.9
22.2
11.8
14.2
(3.1)
45.1
92.0
Variation
(5%)
61%
47%
20%
N/A
29%
(14%)
(9%)
7%
N/A
(6%)
12%
Page 15
Canada operating expenses analysis:
Operating expenses from franchise locations in Canada decreased by $0.8 million, due to several factors listed below:
Operating expenses, fourth quarter of 2020
Increase in non-controllable expenses (1)
Increase in turnkey cost, cost of sale of material and services to franchisees and rent
Increase in recurring controllable expenses (1) including wages,
professional and consulting services and other office expenses
Increase in expected credit loss provision
Decrease due to impact of IFRS 16 on rent expense
Decrease due to impact of IFRS 16 on impairment of lease receivables
Other non-material variations
0.4
0.3
(0.5)
(1.5)
(0.4)
Operating expenses, fourth quarter of 2021
13.8
(1) See section “Definition of supplementary financial measures” found in the Supplemental Information section for definition.
(In millions $)
14.6
0.8
0.1
Non-controllable expenses increased by $0.8 million compared to prior year due to a decrease in wage subsidies. Cost of
sales and materials to franchisees overall increased, correlated with revenues, and were offset by a decrease in turnkey costs
and rent.
Controllable expenses increased by $0.4 million as, in 2020, management took certain actions to reduce expenditures within
the organization, many of which were scaled down as the segment recovers, which has resulted in the increase in recurring
controllable expenses. The quarter also saw the reversals of expected credit loss provisions on lease receivables, which
stems from a change in the assessment of the collection risk and better than expected collection from franchisees.
The variations of expenses from corporate stores were tightly correlated to the related revenues and partially offset by the
impact of wage and rent subsidies received from the government.
Food processing, distribution and retail costs exceeded related revenue growth due to current supply chain costs and wage
increases.
The variations of promotional funds expense were tightly correlated to the related revenues.
US & International operating expenses analysis:
Operating expenses from franchise locations in the US & International decreased by $3.0 million. Several factors
contributed to the variation, as listed below:
Operating expenses, fourth quarter of 2020
Increase in non-controllable expenses (1)
Decrease in cost of sale of material and services to franchisees and rent
Increase in recurring controllable expenses (1) including wages,
professional and consulting services and other office expenses
Decrease in expected credit loss provision
Decrease due to impact of IFRS 16 on rent expense
Decrease due to impact of IFRS 16 on impairment of lease receivables
Impact of variation in foreign exchange rates
Other non-material variations
0.2
(0.2)
(0.3)
(1.3)
(0.9)
(0.5)
19.2
Operating expenses, fourth quarter of 2021
(1) See section “Definition of supplementary financial measures” found in the Supplemental Information section for definition.
(In millions $)
22.2
0.1
(0.1)
Operating expenses for the fourth quarter decreased by $3.0 million, mostly due to the unfavourable variation in foreign
exchange rates, as well as a reduction in expected credit losses on accounts receivable and lease receivables. The decrease
in expected credit losses stems from a change in the assessment of the collection risk and better than expected collection
from franchisees.
The decrease of $1.2 million in corporate-owned location revenues is due to the sale of several Papa Murphy’s
corporately-owned locations that were converted into franchises.
The variation from promotional funds fluctuated in correlation to the related revenues.
Page 16
Segment profit (loss) and Adjusted EBITDA (1)
Three-month period ended November 30, 2021
(In millions $)
Revenue
Operating expenses
Segment profit
Segment profit as a % of Revenue
Segment profit
Net loss in joint venture
Adjusted EBITDA
Adjusted EBITDA as a % of Revenue (2)
Canada
81.1
60.7
20.4
25%
20.4
(0.3)
20.1
25%
US & International
65.2
42.5
22.7
35%
22.7
—
22.7
35%
Three-month period ended November 30, 2020
(In millions $)
Revenue
Operating expenses
Segment profit
Segment profit as a % of Revenue
Segment profit
Net profit in joint venture
Adjusted EBITDA
Adjusted EBITDA as a % of Revenue (2)
Canada
61.2
46.9
14.3
23%
14.3
—
14.3
23%
US & International
66.0
45.1
20.9
32%
20.9
—
20.9
32%
Total
146.3
103.2
43.1
29%
43.1
(0.3)
42.8
29%
Total
127.2
92.0
35.2
28%
35.2
—
35.2
28%
Page 17
Below is a summary of performance segmented by product/service:
Three-month period ended November 30, 2021
(In millions $)
Revenue
Operating expenses
Segment profit (loss)
Segment profit (loss) as a % of Revenue
Franchise
73.4
33.0
40.4
55%
Corporate
15.3
16.5
(1.2)
N/A
Processing,
distribution
and retail
35.9
32.0
3.9
11%
Promotional
funds
24.8
24.8
—
N/A
Intercompany
transactions
(3.1)
(3.1)
—
N/A
Segment profit (loss)
Net loss in joint venture
Adjusted EBITDA
Adjusted EBITDA as a % of Revenue (2)
40.4
(0.3)
40.1
55%
(1.2)
—
(1.2)
N/A
3.9
—
3.9
11%
—
—
—
N/A
—
—
—
N/A
Three-month period ended November 30, 2020
(In millions $)
Revenue
Operating expenses
Segment profit (loss)
Segment profit (loss) as a % of Revenue
Franchise
68.1
36.8
31.3
46%
Corporate
15.2
15.4
(0.2)
N/A
Processing,
distribution
and retail
25.9
21.8
4.1
16%
Promotional
funds
22.2
22.2
—
N/A
Intercompany
transactions
(4.2)
(4.2)
—
N/A
Segment profit (loss)
Net profit in joint venture
Adjusted EBITDA
Adjusted EBITDA as a % of Revenue (2)
31.3
—
31.3
46%
(0.2)
—
(0.2)
N/A
4.1
—
4.1
16%
—
—
—
N/A
—
—
—
N/A
(1) See section “Definition of non-GAAP measures” found in the Supplemental Information section for definition.
(2) See section “Definition of non-GAAP ratios” found in the Supplemental Information section for definition
Total
146.3
103.2
43.1
29%
43.1
(0.3)
42.8
29%
Total
127.2
92.0
35.2
28%
35.2
—
35.2
28%
Page 18
Several factors contributed to the variation, as listed below:
(In millions $)
Segment profit, fourth quarter of 2020
Variance in recurring revenues and expenses (1)
Variance in turnkey, sales of material and services
to franchisees and rent for franchising segment
Variance in initial franchise fees, renewal fees and
transfer fees
Variance in nonrecurring non-controllable
expenses (1)
Variance in expected credit loss provision
Variance due to impact of IFRS 16 on rent revenue
& expense
Variance due to impact of IFRS 16 on impairment
of lease receivables
Impact of variation in foreign exchange rates
Other non-material variations
Segment profit, fourth quarter of 2021
Adjusted EBITDA (2), fourth quarter of 2020
Variances in segment profit
Variance due to net impact of joint venture
Canada
14.3
4.8
US &
International
20.9
0.7
0.3
0.2
(0.8)
(0.3)
0.4
1.5
—
—
20.4
(0.1)
0.3
—
0.2
—
1.3
(0.4)
(0.2)
22.7
Total
35.2
5.5
0.2
0.5
(0.8)
(0.1)
0.4
2.8
(0.4)
(0.2)
43.1
14.3
6.1
(0.3)
20.1
20.9
1.8
—
22.7
35.2
7.9
(0.3)
42.8
Adjusted EBITDA (2), fourth quarter of 2021
(1) See section “Definition of supplementary financial measures” found in the Supplemental Information section for
definition.
(2) See section “Definition of non-GAAP measures” found in the Supplemental Information section for definition.
Total segment profit for the three-month period ending November 30, 2021, was $43.1 million, up by 22% compared to
the same period last year. Total adjusted EBITDA for the same period was $42.8 million, up by 22% compared to the
same period last year. Canada contributed 47% of total adjusted EBITDA and a year-over-year increase of $5.8 million
while the US & International adjusted EBITDA increased by 9% or $1.8 million. Major brands such as Cold Stone,
SweetFrog, Baton Rouge, Thai Express and Sushi Shop, to name a few, greatly outperformed prior year as mall and
street locations generated year-over-year growth of 31% and 4%, respectively. The network’s overall scalability through
cost management also allowed margins to increase to 55% for the franchising division, from 45% the year before.
Net income
For the three months ended November 30, 2021, a net income attributable to owners of $24.9 million was recorded, or
$1.01 per share ($1.00 per diluted share) compared to net income attributable to owners of $20.1 million or $0.81 per
share ($0.81 per diluted share) last year.
Page 19
Calculation of Adjusted EBITDA (1)
(In thousands $)
Quarter ended
November 30, 2021
Quarter ended
November 30, 2020
33,831
4,073
6,962
1,724
561
628
Income before taxes
Depreciation – property, plant and equipment and
right-of-use assets
Amortization – intangible assets
Interest on long-term debt
Net interest expense on leases
Impairment charge – right-of-use assets
Net impairment charge – property, plant and equipment,
intangible assets and goodwill
Unrealized and realized foreign exchange loss (gain)
Interest expense (income)
Gain on de-recognition/lease modification of lease
liabilities
(Gain) loss on disposal of property, plant and equipment
and assets held for sale
Revaluation of financial liabilities recorded at
fair value through profit and loss
Other income
Adjusted EBITDA
(1) See section “Definition of non-GAAP measures” found in the Supplemental Information section for definition.
(4,153)
(110)
42,831
549
1,758
(40)
(2,487)
(465)
12,882
3,904
8,013
3,754
585
1,170
2,560
(599)
(139)
(42)
297
2,796
—
35,181
Other income and expenses
Interest on long-term debt decreased by $2.0 million because of repayments made on the revolving credit facility over
the course of the last 12 months.
The stronger Canadian dollar relative to the US dollar resulted in an unfavourable variation in the foreign exchange on
intercompany loans. The Company recorded unrealized foreign exchange losses of $1.8 million on intercompany loans
during the quarter ended November 30, 2021.
The Company recorded a gain on disposal of property, plant and equipment of $2.5 million in the fourth quarter, related
to the sale of several Papa Murphy’s corporately-owned locations that were converted into franchises, compared to a
loss of $0.3 million in the same period last year.
The Company also recognized a gain on revaluation of financial liabilities recorded at fair value of $4.2 million in the
fourth quarter related to its contingent consideration on investment in a joint venture and to its obligation to repurchase
a partner in a joint venture. This compares to a loss of $2.8 million in the same period last year, primarily attributable to
its contingent considerations on acquisitions and investment in a joint venture.
Page 20
CONTRACTUAL OBLIGATIONS
The obligations pertaining to the long-term debt and the minimum net rentals for the leases are as follows:
(In millions $)
0 – 6
Months
$
6 – 12
Months
$
12 – 24
Months
$
24 – 36
Months
$
36 – 48
Months
$
48 – 60
Months Thereafter
$
$
Accounts payable and accrued
liabilities
Long-term debt (1)
Interest on long-term debt (2)
Net lease liabilities (3)
Total contractual obligations
—
—
2.9
6.3
9.2
(1) Amounts shown represent the total amount payable at maturity and are therefore undiscounted. Long-term debt includes
interest-bearing loans related to acquisitions, promissory notes, contingent consideration on acquisitions, minority put
options, non-interest-bearing holdbacks on acquisitions and non-interest-bearing contract cancellation fees.
119.5
13.7
2.9
6.3
142.4
—
345.0
2.3
9.7
357.0
—
1.4
—
8.8
10.2
—
2.0
5.7
11.3
19.0
—
—
—
7.9
7.9
—
—
—
22.3
22.3
(2) When future interest cash flows are variable, they are calculated using the interest rates prevailing at the end of the
reporting period.
(3) Net lease liabilities include the total undiscounted lease payments of leases, offset by finance lease receivables and
operating subleases.
LIQUIDITY AND CAPITAL RESOURCES
As at November 30, 2021, the amount held in cash totaled $61.2 million, an increase of $16.9 million since the end of
the 2020 fiscal period.
During the third and fourth quarters of 2021, MTY paid $9.1 million in dividends to its shareholders. The dividend payment
had previously been suspended since the second quarter of 2020. The Company also repurchased and cancelled 36,600
(2020 – 364,774) of its shares for $2.2 million (2020 – $18.9 million) through its normal course issuer bid (“NCIB”) during
the 2021 fiscal year.
During the year ended November 30, 2021, cash flows generated by operating activities were $139.3 million, compared
to $133.7 million in 2020. Excluding the variation in non-cash working capital items, income taxes, interest paid and other,
operations generated $170.1 million in cash flows, compared to $141.9 million in 2020.
The revolving credit facility has an authorized amount of $600.0 million (November 30, 2020 – $700.0 million), of which
$345.0 million was drawn as at November 30, 2021 (November 30, 2020 – $433.0 million).
Under this facility, the Company is required to comply with certain financial covenants, including:
•
•
•
a debt to EBITDA ratio (1) that must be less than or equal to 3.50:1.00;
a debt to EBITDA ratio (1) that must be less than or equal to 4.00:1.00 in the twelve months following acquisitions
with a consideration exceeding $150.0 million; and
an interest and rent coverage ratio that must be at least 2.00:1.00 at all times.
(1) See section “Definition of non-GAAP ratios” found in the Supplemental Information section for definition.
The revolving credit facility is repayable without penalty with the balance due on the date of maturity April 22, 2024.
As at November 30, 2021, the Company was in compliance with the covenants of the credit agreement.
LOCATION INFORMATION
MTY’s locations can be found in: i) food courts and shopping malls; ii) street front; and iii) non-traditional format within
petroleum retailers, convenience stores, grocery stores, cinemas, amusement parks, in other venues or retailers shared
sites, hospitals, universities and airports. The non-traditional locations are typically smaller in size, require lower
investment and generate lower revenue than the shopping malls, food courts and street front locations.
Page 21
Number of locations:
Franchises, beginning of the period
Corporate-owned, beginning of the period
Canada
US
Joint venture
Total, beginning of the period
Opened during the period
Closed during the period
Three months
ended November 30,
2020
2021
Twelve months
ended November 30,
2020
2021
6,701
6,989
6,867
7,229
42
82
23
6,848
35
78
21
7,123
37
76
21
7,001
50
94
—
7,373
60
39
218
185
(189)
(161)
(489)
(578)
Joint venture opened or acquired during the period
Joint venture closed during the period
Disposed of during the period
Total, end of the period
—
—
—
6,719
—
—
—
7,001
Franchises, end of the period
Corporate-owned, end of the period
Canada
US
Joint venture
Total, end of the period
3
(1)
(13)
6,719
23
(2)
—
7,001
6,603
6,867
42
51
23
6,719
37
76
21
7,001
The Company’s network opened 221 locations for the year ended November 30, 2021 (2020 – 185 locations opened and
23 joint venture locations acquired). For the fourth quarter of 2021, the Company’s network opened 60 locations (2020 –
39 locations). The geographical breakdown is as follows:
Canada
US
International
Opened or acquired
Three months ended
November 30,
Twelve months ended
November 30,
2021
2020
2021
2020
27
24
9
60
19
14
6
39
102
73
46
221
112
70
26
208
During the year ended November 30, 2021, the Company’s network closed 490 locations (2020 – 578 locations and 2
locations through the joint venture). Of the locations closed during the period, 49% were located on street front, 23% in
malls and office towers and 28% in other non-traditional formats. For the fourth quarter of 2021, the Company’s network
closed 189 locations (2020 – 161 locations). Of the locations closed during the quarter, 46% were located on street front,
26% in malls and office towers and 28% in other non-traditional formats. The geographical breakdown is as follows:
Canada
US
International
Closed
Three months ended
November 30,
Twelve months ended
November 30,
2021
2020
2021
2020
68
95
26
189
85
68
8
161
205
229
56
490
262
276
42
580
Page 22
As at November 30, 2021, the Company’s network had a total of 82 locations temporarily closed as a result of COVID-
19 (November 30, 2020 – 338 locations). Of these temporarily closed locations, 64 are in Canada (November 30, 2020
– 197 locations), 9 in the US (November 30, 2020 – 108 locations) and the remaining 9 are located Internationally
(November 30, 2020 – 33 locations). As at February 16, 2022, MTY has 71 temporarily closed locations. Although these
locations are expected to reopen, the timing of these re-openings is uncertain.
The chart below provides the breakdown of MTY’s locations and system sales by type:
Location type
Shopping mall & office tower food courts
Street front
Non-traditional format
% of location count
November 30,
% of system sales
Twelve months ended
November 30,
2021
14%
64%
22%
2020
15%
63%
22%
2021
9%
82%
9%
2020
10%
82%
8%
The geographical breakdown of MTY’s locations and system sales is as follows:
Geographical location
Canada
US
International
% of location count
November 30,
2021
39%
54%
7%
2020
38%
55%
7%
% of system sales
Twelve months ended
November 30,
2021
35%
62%
3%
2020
35%
61%
4%
In Canada, Quebec had the largest portion of total system sales with 18% followed by Ontario with 9%. In the US, only
the state of California exceeded 10% of US system sales for the period, followed by Washington and Oregon, which
contributed to the network’s sales with 10% and 8% of US system sales respectively.
The geographical distribution of system sales is as follows:
% of total system sales
% of total US system sales
Canada 35%
Central US 16%
East Coast US 12%
West Coast US 34%
International 3%
Central 26%
East Coast 19%
West Coast 55%
The breakdown by the types of concepts for the system sales is as follows:
Concept type
Quick service restaurant
Fast casual
Casual dining
% of location count
November 30,
2021
83%
10%
7%
2020
83%
10%
7%
% of system sales
Twelve months ended
November 30,
2021
73%
13%
14%
2020
73%
12%
15%
Page 23
System sales
During the three and twelve-month periods ended November 30, 2021, MTY’s network generated $962.5 million and
$3,631.3 million in sales, respectively. The breakdown of system sales is as follows:
(millions of $)
Canada
US
International
TOTAL
First quarter of 2021
First quarter of 2020
Variance
Second quarter of 2021
Second quarter of 2020
Variance
Third quarter of 2021
Third quarter of 2020
Variance
Fourth quarter of 2021
Fourth quarter of 2020
Variance
Year-to-date 2021
Year-to-date 2020
Variance
219.4
425.2
(48%)
270.9
173.2
56%
391.3
302.6
29%
378.9
305.7
24%
511.8
530.5
(4%)
592.3
477.0
24%
594.2
566.2
5%
551.3
556.8
(1%)
1,260.5
1,206.7
4%
2,249.6
2,130.5
6%
29.9
43.8
(32%)
28.3
20.5
38%
30.7
28.7
7%
32.3
28.9
12%
121.2
121.9
(1%)
761.1
999.5
(24%)
891.5
670.7
33%
1,016.2
897.5
13%
962.5
891.4
8%
3,631.3
3,459.1
5%
The overall movement in sales is distributed as follows:
Three month sales
ended November 30
Twelve month sales
ended November 30
(millions of $) Canada
US
International TOTAL
Canada
US
International TOTAL
Reported sales – 2020
305.7
556.8
28.9
891.4
1,206.7
2,130.5
121.9
3,459.1
Net variance in system sales
Cumulative impact of foreign
exchange variation
73.2
20.6
4.7
98.5
53.8
258.5
6.3
318.6
—
(26.1)
(1.3)
(27.4)
— (139.4)
(7.0)
(146.4)
Reported sales – 2021
378.9
551.3
32.3
962.5
1,260.5
2,249.6
121.2
3,631.3
System sales for the three-month period ended November 30, 2021 increased by 8% mainly due to the impacts of
government-imposed restrictions during the second wave of COVID-19 in the prior year, and an increase in customer
traffic. The casual dining concepts contributed $41.7 million to the increase, or a quarterly sales increase of 36%.
For the twelve-month period ended November 30, 2021, system sales were up by 5% compared to 2020. The quick
service restaurant concepts drove the increase, representing 82% of the total year-over-year growth, or a 6% increase.
MTY started the quarter with 164 temporarily closed locations because of COVID-19 and ended with 82 closed as at
November 30, 2021 (November 30, 2020 – 338 locations). This resulted in approximately 9,500 days of lost business.
Of the closed locations, 64 were in Canada (November 30, 2020 – 197 locations), 9 in the US (November 30, 2020 –
108 locations) and 9 were Internationally located (November 30, 2020 – 33 locations).
Page 24
During the three and twelve-month periods ended November 30, 2021, a stronger Canadian dollar relative to the US
dollar also decreased sales and resulted in an unfavorable variation of $27.4 million and $146.4 million, respectively, in
reported sales.
Papa Murphy’s and Cold Stone Creamery are the only concepts that currently represent more than 10% of system sales,
generating approximately 28% and 20% respectively of the total sales of MTY’s network for the twelve-month period
ended November 30, 2021. Taco Time, Thai Express and Sushi Shop are the third, fourth and fifth largest concepts in
terms of systems sales, generating less than 10% each of the network’s sales.
System wide sales include sales for corporate and franchise locations and excludes sales realized by the distribution
centers, by the food processing plants and by the retail division. System sales are converted from the currency in which
they are generated into Canadian dollars for presentation purposes; they are therefore subject to variations in foreign
exchange rates.
Digital sales
The pandemic accelerated consumer shifts to online ordering for delivery or take-out. For the year ended November 30,
2021, digital sales grew to $803.6 million, from $636.4 million the year before and represented 23% of sales. The digital
sales pertained mostly to take-out orders, as well as delivery sales, which have benefited from the Company’s increased
investments in online ordering and third-party delivery options.
System sales versus digital sales breakdown is as follows for the fiscal years ended November 30, 2021, and 2020:
Digital sales for the fourth quarter decreased slightly to reach $193.7 million, compared to $194.2 million the year before.
The breakdown for the three months ended November 30, 2021, and 2020 is as follows:
Page 25
Although overall digital sales decreased for the quarter as a % of total sales, the Canadian segment continued to be
strong with fourth quarter year -over-year improvement of 16% or $6.9 million. This is being driven by significant
investment by MTY in online digital platforms for the Canadian market. The US decline was partially impacted by a
negative foreign exchange impact of $6.5 million.
The lower proportion of digital sales as a % of total sales in the fourth quarter compared to the same period last year is
mainly attributable to the re-opening of more traditional sales channels, which were affected by pandemic-related
restrictions in the prior year. The Company continues to endeavor to grow digital sales in parallel with the resumption of
in store sales as restrictions are gradually lifted.
Same-Store Sales
Due to the impacts of COVID-19 and the number of locations that have closed temporarily, providing same-store sales
information could be misleading as what would be presented would not be a fair representation of the Company’s royalty
earning potential and would also not be a fair indication of the health of the network. Management directs investors to
system sales as a better indication.
Management continues to expect system sales and same- store sales to be impacted well into 2022. Although the
Company had great momentum prior to COVID-19, current world events will continue to have a drastic impact on both
system and same-store sales in the quarters to come. The Company does expect however that results will eventually
return to normal.
CAPITAL STOCK INFORMATION
Stock options
As at November 30, 2021, there were 440,000 options outstanding and 66,666 that are exercisable.
Share trading
MTY’s stock is traded on the Toronto Stock Exchange (“TSX”) under the ticker symbol “MTY”. From December 1, 2020
to November 30, 2021, MTY’s share price fluctuated between $47.15 and $72.10. On November 30, 2021, MTY’s
shares closed at $55.19.
Capital stock
The Company’s outstanding share capital is comprised of common shares. An unlimited number of common shares are
authorized.
As at February 16, 2022, the Company’s issued and outstanding capital stock consisted of 24,422,361 shares (November
30, 2020 – 24,706,461) and 440,000 granted and outstanding stock options (November 30, 2020 – 400,000). During the
year ended November 30, 2021, MTY repurchased 36,600 (2020 – 364,774) shares for cancellation through its NCIB.
Normal Course Issuer Bid Program
On June 28, 2021, the Company announced the renewal of the NCIB. The NCIB began on July 3, 2021 and will end on
July 2, 2022 or on such earlier date when the Company completes its purchases or elects to terminate the NCIB. The
renewed period allows the Company to purchase 1,235,323 of its common shares. These purchases will be made on the
open market plus brokerage fees through the facilities of the TSX and/or alternative trading systems at the prevailing
market price at the time of the transaction, in accordance with the TSX’s applicable policies. All common shares
purchased pursuant to the NCIB will be cancelled.
During both the three and twelve-month periods ended November 30, 2021, the Company repurchased and cancelled a
total of 36,600 common shares (2020 – nil and 364,774 common shares, respectively) under the current NCIB, at a
weighted average price of $59.68 per common share (2020 – nil and $51.72 per common share, respectively), for a total
consideration of $2.2 million (2020 – nil and $18.9 million, respectively). An excess of $1.7 million (2020 – nil and $14.3
million, respectively) of the shares’ repurchase value over their carrying amount was charged to retained earnings as
share repurchase premiums.
Page 26
SUBSEQUENT EVENTS
Acquisition of Küto Comptoir à Tartares
On December 1, 2021, one of the Company’s wholly owned subsidiaries completed its acquisition of the assets of Küto
Comptoir à Tartares, a fast-growing chain of tartare restaurants operating in the province of Quebec, for a total cash
consideration of $9.0 million plus a deferred contingent consideration based on royalties and retail sales. There are
currently 31 franchised Küto Comptoir à Tartares restaurants in operation.
Dividends
On January 18, 2022, the Company announced an increase to its quarterly dividend payment, from $0.185 per common
share to $0.210 per common share. The dividend of $0.210 per common share was paid on February 15, 2022.
SEASONALITY
Results of operations for any interim period are not necessarily indicative of the results of operations for the full year. The
Company expects that seasonality will continue to be a factor in the quarterly variation of its results. For example, the
Frozen treat category, which is a significant category in the US market, varies significantly during the winter season as a
result of weather conditions. This risk is offset by other brands that have better performance during winter seasons such
as Papa Murphy’s, which typically does better during winter months. Sales for shopping mall locations are also higher
than average in December during the holiday shopping period. For 2022, the normal seasonal trends might be affected
by the shifts in consumer behavior caused by the pandemic or government regulations.
OFF-BALANCE SHEET ARRANGEMENTS
MTY has no off-balance sheet arrangements.
CONTINGENT LIABILITIES
The Company is involved in legal claims associated with its current business activities. The timing of the outflows, if any,
is out of the control of the Company and is as a result undetermined at the moment. Contingent liabilities are disclosed
as provisions on the consolidated statement of financial position.
Included in provisions are the following amounts:
(In thousands $)
2021
$
2020
$
Litigations, disputes and other contingencies
Closed stores
2,878
187
3,065
The provision for litigation, disputes and other contingencies represents management’s best estimate of the outcome of
litigations and disputes that are ongoing at the date of the statement of financial position. This provision is made of
multiple items; the timing of the settlement of this provision is unknown given its nature, as the Company does not control
the litigation timelines.
1,636
56
1,692
The payables related to closed stores mainly represent amounts that are expected to be disbursed to exit leases of
underperforming or closed stores. The negotiations with the various stakeholders are typically short in duration and are
expected to be settled within a few months following the recognition of the provision.
The provisions also varied in part due to foreign exchange fluctuations related to the US subsidiaries.
GUARANTEE
The Company has guaranteed leases on certain franchise stores in the event the franchisees are unable to meet their
remaining lease commitments. The maximum amount the Company may be required to pay under these agreements is
$19.3 million as at November 30, 2021 (November 30, 2020 - $13.3 million). In addition, the Company could be required
to make payments for percentage rents, realty taxes and common area costs. As at November 30, 2021, the Company
has accrued $1.8 million (November 30, 2020 - $1.8 million), included in Accounts payable and accrued liabilities in the
consolidated financial statements, with respect to these guarantees.
Page 27
RELATED PARTY TRANSACTIONS
Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have
been eliminated on consolidation. Details of transactions between the Company and other related parties are disclosed
below.
Remuneration of key management personnel and directors
The remuneration of key management personnel and directors, presented in Wages and benefits and Other as part of
Operating expenses in the consolidated financial statements, was as follows:
Short-term benefits
Share-based compensation
Consulting fees
Board member fees
Total remuneration of key management personnel and directors
(In thousands $)
2021
$
2,670
924
57
78
3,729
2020
$
2,619
963
—
75
3,657
Key management personnel is composed of the Company’s CEO, COOs and CFO. The remuneration of directors and
key executives is determined by the Board of Directors having regard to the performance of individuals and market
conditions.
Given its widely held share base, the Company does not have an ultimate controlling party; one of its most important
shareholders is its Chair of the Board of Directors, who controls 16.2% of the outstanding shares.
The Company also pays employment benefits to individuals related to members of the key management personnel
described above. Their total remuneration, presented in Wages and benefits as part of Operating expenses in the
consolidated financial statements, was as follows:
Short-term benefits
Share-based compensation
Total remuneration of individuals related to key management personnel
(In thousands $)
2021
$
489
19
508
2020
$
505
10
515
The Company has entered into a consulting agreement with one of its joint venture associates to perform corporate
business development and management consulting services, and paid consulting fees to this associate of $0.2 million
for the year ended November 30, 2021 (2020 – $0.2 million), presented in Consulting and professional fees as part of
Operating expenses in the consolidated financial statements. The Company has a current net payable due to its joint
venture associate of $0.1 million as at November 30, 2021 (November 30, 2020 – net receivable of $0.1 million), included
in Accounts payable and accrued liabilities in the consolidated financial statements.
During the year ended November 30, 2021, the Company paid consulting fees to a commercial real estate consulting
firm employing one of its Board members of $0.3 million (2020 – nil).
Page 28
CHANGES IN ACCOUNTING POLICIES
Policies applicable beginning December 1, 2020
IFRS 3, Business Combinations
In October 2018, the International Accounting Standards Board (“IASB”) issued amendments to the definition of a
business in IFRS 3. The amendments are intended to assist entities to determine whether a transaction should be
accounted for as a business combination or as an asset acquisition.
The amendments to IFRS 3 were adopted effective December 1, 2020 and did not result in any adjustment.
IFRS 9, Financial Instruments, IAS 39, Financial Instruments: Recognition and Measurement, and IFRS 7,
Financial Instruments: Disclosures
In September 2019, the IASB published Interest Rate Benchmark Reform (Amendments to IFRS 9, International
Accounting Standard (“IAS”) 39, and IFRS 7) as a first reaction to the potential effects the Interbank offered rates (“IBOR”)
reform could have on financial reporting. Recent market developments have brought into question the long-term viability
of the IBOR benchmarks. The amendments deal with issues affecting financial reporting in the period before the
replacement of an existing interest rate benchmark with an alternative interest rate and address the implications for
specific hedge accounting requirements in IFRS 9 and IAS 39, which require forward-looking analysis. There are also
amendments to IFRS 7 regarding additional disclosures around uncertainty arising from the interest rate benchmark
reform.
The amendments to IFRS 9, IAS 39 and IFRS 7 were adopted effective December 1, 2020 and resulted in no significant
adjustment.
CRITICAL ACCOUNTING JUDGMENTS AND ESTIMATES
In the application of the Company’s accounting policies, which are described in Note 3 of the consolidated financial
statements, management is required to make judgments and to make estimates and assumptions about the carrying
amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated
assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may
differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the
revision and future periods if the revision affects both current and future periods.
The following are the critical judgments, apart from those involving estimations, that management has made in the
process of applying the Company’s accounting policies and that have the most significant effect on the amounts
recognized in the financial statements.
Impairment of long-lived assets
The Company assesses whether there are any indicators of impairment for all long-lived assets at each reporting
period date. In addition, management is required to use judgment in determining the grouping of assets to identify a
cash-generating unit (“CGU”); the determination is done based on management’s best estimation of what constitutes
the lowest level at which an asset or group of assets has the possibility of generating cash inflows.
Key sources of estimation uncertainty
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end
of the year ended November 30, 2021, that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year.
Business combinations
For business combinations, the Company must make assumptions and estimates to determine the purchase price
accounting of the business being acquired. To do so, the Company must determine the acquisition date fair value of
the identifiable assets acquired, including such intangible assets as franchise rights and master franchise rights,
trademarks, step-in rights and liabilities assumed. Among other things, the determination of these fair market values
involves the use of discounted cash flow analyses and future system sales growth. Goodwill is measured as the
excess of the fair value of the consideration transferred including the recognized amount of any non-controlling
Page 29
interest in the acquiree over the net recognized amount of the identifiable assets acquired and liabilities assumed, all
measured at the acquisition date. These assumptions and estimates have an impact on the asset and liability amounts
recorded in the statement of financial position on the acquisition date. In addition, the estimated useful lives of the
acquired amortizable assets, the identification of intangible assets and the determination of the indefinite or finite
useful lives of intangible assets acquired will have an impact on the Company’s future profit or loss.
Impairment
The Company uses judgment in determining the grouping of assets to identify its CGUs for purposes of testing for
impairment of property, plant and equipment, right-of-use assets, goodwill, trademarks and franchise rights.
In testing for impairment of property, plant and equipment and right-of-use assets, the Company determined that its
CGUs mostly comprise of individual stores or groups of stores and the assets are thereby allocated to each CGU.
In testing for impairment, goodwill acquired in a business combination is allocated to the CGUs that are expected to
benefit from the synergies of the business combination. In testing for impairment, trademarks and franchise rights are
allocated to the CGUs to which they relate. Furthermore, on a quarterly basis, judgment is used in determining
whether there has been an indication of impairment, which would require the completion of a quarterly impairment
test, in addition to the annual requirement.
Impairment of property, plant and equipment and right-of-use assets
The Company performs an impairment test of its property, plant and equipment and right-of-use assets when
there is an indicator of impairment. The recoverable amounts of the Company’s corporate store assets are
generally estimated based on fair value less cost of disposal as this was determined to be higher than their value
in use. The fair value less cost of disposal of corporate stores is generally determined by estimating the liquidation
value of the restaurant equipment and any costs associated with exiting the lease.
During the years ended November 30, 2021 and 2020, the Company recognized impairment charges on its
property, plant and equipment (Note 15 of the consolidated financial statements). The total impairment on
property, plant and equipment of $0.1 million (2020 – $3.2 million) represents a write-down of the carrying value
of the leasehold improvements and equipment to their fair value less cost of disposal, which was higher than their
value in use.
During the years ended November 30, 2021 and 2020, the Company also recognized impairment charges on its
right-of-use assets (Note 10 of the consolidated financial statements) of $1.6 million (2020 – $4.3 million).
Impairment of franchise rights and trademarks
The Company performs at least annually an impairment test of its trademarks. The recoverable amounts of the
Company’s assets are generally estimated based on value in use calculations using a discounted cash flow
approach as this was determined to be higher than fair value less cost of disposal.
Discount rates are based on pre-tax rates that reflect the current market assessments, taking the time value of
money and the risks specific to the CGU into account.
During the years ended November 30, 2021 and 2020, the Company recognized net impairment charges on its
franchise rights and trademarks (Note 15 of the consolidated financial statements). The total net impairment
charge of $5.8 million (2020 – $51.7 million) includes: an impairment charge of $15.1 million (2020 – $51.7 million),
representing a write-down of the carrying value to the fair value of the trademarks and franchise rights; partially
offset by a reversal of impairment charge of $9.3 million (2020 – nil). The fair value was determined using
significant unobservable inputs such as discount rates and projected operating cash flows. The fair value is
classified as level 3 in the fair value hierarchy. During the year ended November 30, 2021, the Company also
carried out a review of the recoverable amount allocated to the intangible assets associated with the “Houston
Avenue Bar & Grill” and “Industria Pizza + Bar” brands, where the recoverable amount was measured at fair value
less costs of disposal.
These calculations take into account our best estimate of projected operating cash flows. Projected operating
cash flows are estimated based on a multiyear extrapolation of the most recent historical actual results or budgets
and a terminal value calculated by discounting the final year in perpetuity.
Impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the recoverable amount in use of the goodwill
unit to which goodwill has been allocated. The value in use calculation requires management to estimate the
projected operating cash flows expected to arise from the goodwill unit and a suitable discount rate in order to
calculate present value.
Page 30
During the year ended November 30, 2021, no impairment charge (2020 – impairment charge of $68.0 million)
on goodwill was required (Note 15 of the consolidated financial statements).
Gift card liabilities
Management is required to make certain assumptions in both the prorated recognition based on redemption pattern
and remoteness recognition of gift card breakage. The significant estimates are breakage rate and the redemption
patterns.
Impact of COVID-19
During the year ended November 30, 2021, the COVID-19 pandemic continued to impact the markets in which MTY and
its franchise partners and suppliers operate. Canada and certain parts of the US continued to be impacted by the
continuation of government-imposed restrictions including restrictions on dine-in guests, reduced operating hours and/or
temporary closures. The year saw the ramp-up of the global vaccination campaign, which led to the gradual lifting of
restrictions in some territories, including the resumption of indoor and outdoor dining, and the reopening of a number of
restaurants. However, the end of the year saw the rise of a fourth wave driven by the Delta variant, resulting in more
infections and certain additional public health measures, including the mandatory presentation of a vaccine passport for
seated dining in restaurants in some territories. The disruptions are expected to persist into 2022 with uncertainty
surrounding the rollout of the vaccine boosters and the spread of the Omicron variant. The longer-term impact on the
economy and the rules and restrictions that will apply to MTY’s restaurants are expected to fluctuate and impact the
network for the foreseeable future.
As a result of the continued and uncertain economic and business impacts of the COVID-19 pandemic, the Company
continues to monitor the estimates, judgments and assumptions used in the financial statements. For the year ended
November 30, 2021, the Company determined that there was no indication of impairment attributable to COVID-19.
Accordingly, the Company did not record impairment charges on its property, plant and equipment, intangible assets,
and goodwill attributable to COVID-19. These estimates, judgments and assumptions are subject to change.
The consolidated financial statements have been impacted with respect to the following as a result of COVID-19:
- Changes to lease liabilities and finance lease receivables were made to reflect changes in lease payment terms;
- Reduction in wage expense, presented in Wage and rent subsidies in Note 27 of the consolidated financial
statements, for the year ending November 30, 2021 of $3.6 million (2020 – $6.8 million) resulting from the
Canadian Employment Wage Subsidies, and of $0.3 million (2020 – nil) resulting from the Employee Retention
Credit available to US taxpayers under the Coronavirus Aid, Relief and Economic Security Act; and
- Reduction in rent expense, presented in Wage and rent subsidies in Note 27 of the consolidated financial
statements, for the year ending November 30, 2021 of $1.4 million (2020 – $0.2 million) resulting from the
Canadian Emergency Rent Subsidies.
FUTURE ACCOUNTING CHANGES
A number of new standards, interpretations and amendments to existing standards were issued by the IASB that are not
yet effective for the year ended November 30, 2021 and have not been applied in preparing the consolidated financial
statements.
The following standards or amendments, may have a material impact on the consolidated financial statements of the
Company:
Standard
IAS 37, Provisions, Contingent Liabilities and
Contingent Assets
IAS 1, Presentation of Financial Statements
IAS 8, Accounting Policies, Changes in
Accounting Estimates and Errors
IAS 12, Income Taxes
Issue date
Effective date for
the Company
December 1, 2022
May 2020
January 2020,
July 2020 &
February 2021 December 1, 2023
February 2021 December 1, 2023
Impact
In assessment
In assessment
In assessment
May 2021
December 1, 2023
In assessment
IAS 37, Provisions, Contingent Liabilities and Contingent Assets
In May 2020, the IASB published Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37) amending
the standard regarding costs a company should include as the cost of fulfilling a contract when assessing whether a
Page 31
contract is onerous. The changes in Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37) specify
that the “cost of fulfilling” a contract comprises the “costs that relate directly to the contract”. Costs that relate directly to
a contract can either be incremental costs of fulfilling that contract or an allocation of other costs that relate directly to
fulfilling contracts. The amendments to IAS 37 are effective for annual reporting periods beginning on or after January 1,
2022. Earlier application is permitted. The Company will adopt the amendments on December 1, 2022.
IAS 1, Presentation of Financial Statements
In January 2020, the IASB issued Classification of Liabilities as Current or Non-current (Amendments to IAS 1) providing
a more general approach to the classification of liabilities under IAS 1 based on the contractual arrangements in place at
the reporting date. The amendments in Classification of Liabilities as Current or Non-current (Amendments to IAS 1)
affect only the presentation of liabilities in the statement of financial position, not the amount or timing of recognition of
any asset, liability income or expenses, or the information that entities disclose about those items.
In July 2020, the IASB published Classification of Liabilities as Current or Non-current – Deferral of Effective Date
(Amendment to IAS 1) deferring the effective date of the January 2020 amendments to IAS 1 by one year.
In February 2021, the IASB issued Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement
2) with amendments that are intended to help preparers in deciding which accounting policies to disclose in their financial
statements. An entity is now required to disclose its material accounting policy information instead of its significant
accounting policies and several paragraphs are added to IAS 1 to explain how an entity can identify material accounting
policy information and to give examples of when accounting policy information is likely to be material. The amendments
also clarify that: accounting policy information may be material because of its nature, even if the related amounts are
immaterial; accounting policy information is material if users of an entity’s financial statements would need it to
understand other material information in the financial statements; and if an entity discloses immaterial accounting policy
information, such information shall not obscure material accounting policy information.
The amendments to IAS 1 are effective for annual reporting periods beginning on or after January 1, 2023. Earlier
application is permitted. The Company will adopt the amendments on December 1, 2023.
IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors
In February 2021, the IASB issued Definition of Accounting Estimates (Amendments to IAS 8) with amendments that are
intended to help entities to distinguish between accounting policies and accounting estimates. The changes to IAS 8
focus entirely on accounting estimates and clarify that: the definition of a change in accounting estimates is replaced with
a definition of accounting estimates; entities develop accounting estimates if accounting policies require items in financial
statements to be measured in a way that involves measurement uncertainty; a change in accounting estimate that results
from new information or new developments is not the correction of an error; and a change in an accounting estimate may
affect only the current period’s profit or loss, or the profit or loss of both the current period and future periods. The
amendments to IAS 8 are effective for annual reporting periods beginning on or after January 1, 2023. Earlier application
is permitted. The Company will adopt the amendments on December 1, 2023.
IAS 12, Income Taxes
In May 2021, the IASB published Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction
(Amendments to IAS 12) that clarifies how companies account for deferred tax on transactions such as leases and
decommissioning obligations. The main change is an exemption from the initial recognition exemption, which does not
apply to transactions in which both deductible and taxable temporary differences arise on initial recognition that result in
the recognition of equal deferred tax assets and liabilities. The amendments to IAS 12 are effective for annual reporting
periods beginning on or after January 1, 2023. Earlier application is permitted. The Company will adopt the amendments
on December 1, 2023.
RISKS AND UNCERTAINTIES
Despite the fact that the Company has various numbers of concepts, diversified in type of locations and geographies
across Canada and the US, the performance of the Company is also influenced by changes in demographic trends, traffic
patterns, occupancy level of malls and office towers and the type, number, and location of competing restaurants. In
addition, factors such as innovation, increased food costs, labour and benefits costs, occupancy costs and the availability
of experienced management and hourly employees may adversely affect the Company. Changing consumer preferences
and discretionary spending patterns could oblige the Company to modify or discontinue concepts and/or menus and
could result in a reduction of revenue and operating income. Even if the Company was able to compete successfully with
other restaurant companies with similar concepts, it may be forced to make changes in one or more of its concepts in
order to respond to changes in consumer tastes or dining patterns. If the Company changes a concept, it may lose
additional customers who do not prefer the new concept and menu, and it may not be able to attract a sufficient new
customer base to produce the revenue needed to make the concept profitable. Similarly, the Company may have different
Page 32
or additional competitors for its intended customers as a result of such a concept change and may not be able to
successfully compete against such competitors. The Company's success also depends on numerous factors affecting
discretionary consumer spending, including economic conditions, disposable consumer income and consumer
confidence. Adverse changes in these factors could reduce customer traffic or impose practical limits on pricing, either
of which could reduce revenue and operating income.
The growth of MTY is dependent on maintaining the current franchise system, which is subject to many factors including
but not limited to the renewal of existing leases at sustainable rates, MTY’s ability to continue to expand by obtaining
acceptable store sites and lease terms, obtaining qualified franchisees, increasing comparable store sales and
completing acquisitions. The time, energy and resources involved in the integration of the acquired businesses into the
MTY system and culture could also have an impact on MTY’s results.
MTY is currently materially and adversely affected by the outbreak of COVID-19. Such a widespread health epidemic or
pandemic, including arising from various strains of avian flu or swine flu, such as H1N1, or COVID-19, particularly if
located in regions from which the Company derives a significant amount of revenue or profit could continue to impact the
Company in the future. The occurrence of such an outbreak or other adverse public health developments can and could
continue to materially disrupt the business and operations. Such events could also significantly impact the industry and
cause a temporary closure of restaurants, which could severely disrupt MTY’s or the Company’s franchisees' operations
and have a material adverse effect on the business, financial condition and results of operations.
At this time, the Company is unable to accurately predict the future impact that a pandemic, including that of COVID-19,
will have on the results of operations due to uncertainties including the severity of the disease, the duration of the
outbreak, and further actions that may be taken by governmental authorities to contain the virus or to treat its impact.
However, while it is premature to accurately predict the ultimate impact of these developments, the Company expects
the results for the 2022 fiscal year to continue to be impacted with potential continuing adverse impacts beyond this.
In addition, the operations can and could continue to be disrupted if any of MTY’s employees or employees of MTY’s
business partners were suspected of having COVID-19, the avian flu or swine flu, or other illnesses such as hepatitis A,
and other variants of the norovirus or coronavirus, since this could require the Company or business partners to
quarantine some or all of such employees or disinfect the restaurant facilities. Outbreaks of avian flu occur from time to
time around the world, and such outbreaks have resulted in confirmed human cases. Public concern over avian flu
generally may cause fear about the consumption of chicken, eggs and other products derived from poultry, which could
cause customers to consume less poultry and related products. Because poultry is a menu offering for many of the
Company’s Concepts, this would likely result in lower revenues and profits to both MTY and franchisee partners. Avian
flu outbreaks could also adversely affect the price and availability of poultry, which could negatively impact profit margins
and revenues.
Furthermore, other viruses may be transmitted through human contact, and the risk of contracting viruses could cause
employees or guests to avoid gathering in public places, which could adversely affect restaurant guest traffic or the ability
to adequately staff restaurants. MTY could also be adversely affected if government authorities impose mandatory
closures, seek voluntary closures, impose restrictions on operations of restaurants, impose restrictions on customers via
a vaccine passport to dine-in, or restrict the import or export of products, or if suppliers issue mass recalls of products.
Even if such measures are not implemented and a virus or other disease does not spread significantly, the perceived risk
of infection or health risk may adversely affect the business and operating results.
Labour is a key factor in the success of the Company. If the Company was unable to attract, motivate and retain a
sufficient number of qualified individuals, this could materially disrupt the Company’s business and operations and
adversely impact its operating results, including the delay of planned restaurant openings, the Company’s ability to grow
sales at existing restaurants and expand its concepts effectively. 2021 saw a shortage of qualified workers, as well as an
increase in labour costs due to competition and increased wages. Many individuals have left the restaurant industry
altogether due to difficult pandemic-related operating demands and, in some cases, the availability of government
subsidies and thus creating high employee turnover. These conditions have resulted in aggressive competition for talent,
wage inflation and pressure to improve benefits and workplace conditions to remain competitive and attract talent
affecting the Company and its franchisees. Restaurants in the Company’s network could be short staffed, the ability to
meet customer demand could be limited and operational efficiency could also be adversely impacted.
The Company’s operating results substantially depend upon its ability to obtain frequent deliveries of sufficient quantities
of products such as beef, chicken, and other products used in the production of items served and sold to customers. The
COVID-19 pandemic has led to interruptions in the delivery of food or other supplies to the Company’s restaurants,
arising from delays or restrictions on shipping or manufacturing, closures of supplier or distributor facilities or financial
distress or insolvency of suppliers or distributors. These delays or interruptions could impact the availability of certain
food and packaging items at the Company’s restaurants, including beef, chicken, pork and other core menu products
and could require the Company’s restaurants to serve a limited menu. The Company’s results of operations and those
of its franchisees could be adversely affected if its key suppliers or distributors are unable to fulfill their responsibilities
Page 33
and the Company were unable to identify alternative suppliers or distributors in a timely manner or effectively transition
the impacted business to new suppliers or distributors. If a disruption of service from any of its key suppliers or distributors
were to occur, the Company could experience short-term increases in costs while supply and distribution channels were
adjusted, and may be unable to identify or negotiate with new suppliers or distributors on terms that are commercially
reasonable.
Please refer to the November 30, 2021 Annual Information Form for further discussion on all risks and uncertainties.
ECONOMIC ENVIRONMENT RISK
The business of the Company is dependent upon numerous aspects of a healthy general economic environment, from
strong consumer spending to provide sales revenue, to available credit to finance the franchisees and the Company. In
case of turmoil in economic, credit and capital markets, the Company’s performance and market price may be adversely
affected. The Company’s current planning assumptions forecast that the restaurant industry will be impacted by the
current economic uncertainty in certain regions in which it operates. Exposure to health epidemics and pandemics, such
as the current COVID-19, are a risk to the Company and its franchise partners. Within a normal economic cycle,
management is of the opinion that these risks will not have a major impact on the Company due to the following reasons:
1) the Company generates strong cash flows and has a healthy balance sheet; and 2) the Company has several concepts
offering affordable dining out options for consumers in an economic slowdown. During extreme economic turmoil,
management believes that the Company has the ability to overcome these risks until the economy re-establishes itself.
FINANCIAL INSTRUMENTS
In the normal course of business, the Company uses various financial instruments, which by their nature involve risk,
including market risk and the credit risk of non-performance by counterparties. These financial instruments are subject
to normal credit standards, financial controls, risk management as well as monitoring procedures.
The Company has determined that the fair values of its financial assets and financial liabilities with short-term and long-
term maturities approximate their carrying value. These financial instruments include cash, accounts receivable, accounts
payable and accrued liabilities, deposits and other liabilities. The table below shows the fair value and the carrying amount
of other financial instruments as at November 30, 2021 and 2020. Since estimates are used to determine fair value, they
must not be interpreted as being realizable in the event of a settlement of the instruments.
The classification, carrying value and fair value of financial instruments are as follows:
Financial assets
Loans and other receivables
Finance lease receivables
Financial liabilities
Long-term debt (1)
(In thousands $)
Carrying
amount
$
4,238
399,269
2021
Fair
value
$
4,238
399,269
Carrying
amount
$
4,760
468,127
2020
Fair
value
$
4,760
468,127
357,171
357,189
445,500
455,045
(1) Excludes promissory notes, contingent consideration on acquisitions, interest rate swap, cross currency
interest rate swaps, credit facility financing costs and obligations to repurchase non-controlling interests
The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date. It is established based on market
information available at the date of the consolidated statement of financial position. In the absence of an active market
for a financial instrument, the Company uses the valuation methods described below to determine the fair value of the
instrument. To make the assumptions required by certain valuation models, the Company relies mainly on external,
readily observable market inputs. Assumptions or inputs that are not based on observable market data are used in the
absence of external data. These assumptions or factors represent management’s best estimates of the assumptions or
factors that would be used by market participants for these instruments. The credit risk of the counterparty and the
Company’s own credit risk have been taken into account in estimating the fair value of all financial assets and financial
liabilities, including derivatives.
The following methods and assumptions were used to estimate the fair values of each class of financial instrument:
Loans and other receivables and Finance lease receivables – The carrying amount for these financial
instruments approximates fair value due to the short-term maturity of these instruments and/or the use of
market interest rates.
Page 34
Long-term debt – The fair value of long-term debt is determined using the present value of future cash flows
under current financing agreements based on the Company’s current estimated borrowing rate for similar
debt.
Promissory notes issued as part of its consideration for the acquisition of Houston Avenue Bar & Grill and
Industria Pizzeria + Bar
In 2021, the Company sold its 80% interest in 10220396 Canada Inc. and, as such, disposed of the promissory notes
that were recorded as part of the acquisition of Houston Avenue Bar & Grill and Industria Pizzeria + Bar.
A fair value remeasurement loss of $0.1 million was recorded for these promissory notes for the year ended November
30, 2021 (2020 – gain of $0.1 million).
Contingent considerations on acquisitions
The Company issued as part of its consideration for the acquisition of Yuzu Sushi and investment in Tortoise Group,
contingent considerations to the vendors. These contingent considerations are subject to earn-out provisions, which are
based on future earnings; the contingent consideration for Tortoise Group is repayable in December 2022. These
contingent considerations have been recorded at fair value and are remeasured on a recurring basis. The contingent
consideration for Yuzu Sushi was repaid during the year ended November 30, 2021 for a total repayment amount of $5.1
million.
A fair value remeasurement gain of $1.7 million was recorded for the contingent considerations for the year ended
November 30, 2021 (2020 – loss of $1.0 million).
Obligation to repurchase non-controlling interest
The Company has entered into an agreement to purchase the shares of a minority interest shareholder of 9974644
Canada Inc. at the option of the holder at any time after December 9, 2017. The consideration is based on a multiplier of
EBITDA, as prescribed by the terms of the shareholder agreement. The Company records a liability at fair value (Note
20 of the consolidated financial statements) which is remeasured at each reporting period.
A fair value remeasurement loss of $0.4 million (2020 – loss of $0.2 million) was recorded for this non-controlling interest
obligation.
Obligation to repurchase partner in a joint venture
The Company, in conjunction with the acquisition of its 70% interest in a joint venture that acquired Tortoise Group,
entered into an agreement to acquire the remaining 30% interest by December 2025. The consideration to be paid for
this acquisition will be based on future earnings. The Company recorded a liability at fair value (Note 20 of the
consolidated financial statements) which is remeasured at each reporting period. An increase or decrease by 1% in the
discount rates used would have an impact of less than $0.1 million on the carrying amount as at November 30, 2021
(2020 – $0.1 million).
A fair value remeasurement gain of $1.9 million (2020 – loss of $0.5 million) was recorded for this obligation to repurchase
a partner in a joint venture.
Interest rate swap
The Company held an interest rate swap contracted to a fix rate on a notional amount of $100.0 million (2020 – $100.0
million) that matured on July 21, 2021. The Company recorded a fair value remeasurement loss of $0.1 million for the
year ended November 30, 2021 (2020 – loss of $1.6 million). The Company classified this as level 2 in the fair value
hierarchy.
Cross currency interest rate swaps
On November 26, 2021 and November 29, 2021, the Company entered into three (2020 – two) floating to floating 1-
month cross currency interest rate swaps. A fair value of nil was recorded as at November 30, 2021 (2020 – nil). The
Company has classified this as level 2 in the fair value hierarchy.
2021
2020
Receive – Notional
Receive – Rate
Pay – Notional
Pay – Rate
US$78.9 million US$180.8 million
1.29%
CA$100.0 million CA$230.0 million
1.09%
1.23%
1.29%
1.29%
US$11.8 million US$137.6 million
2.44%
US$95.4 million
1.85%
CA$15.0 million CA$180.0 million CA$125.0 million
1.94%
1.38%
2.45%
Page 35
Fair value hierarchy
(In thousands $)
Promissory notes related to buyback obligation of Houston Avenue Bar & Grill
and Industria Pizzeria + Bar
Contingent consideration on acquisitions and investment in a joint venture
Non-controlling interest buyback options
Obligation to repurchase partner in a joint venture
Financial liabilities
Level 3
2021
$
2020
$
—
1,961
1,575
1,416
4,952
2,928
8,075
1,171
3,364
15,538
FINANCIAL RISK EXPOSURE
The Company, through its financial assets and financial liabilities, is exposed to various risks. The following analysis
provides a measurement of risks as at November 30, 2021.
Credit risk
The Company’s credit risk is primarily attributable to its trade receivables. The amounts disclosed in the consolidated
statement of financial position represent the maximum exposure to credit risk for each respective financial asset as at
the relevant dates. The Company believes that the credit risk of accounts receivable is limited as other than receivables
from international locations, the Company’s broad client base is spread mostly across Canada and the US, which limits
the concentration of credit risk.
The credit risk on the Company’s loans and other receivables is similar to that of its accounts receivable.
Interest rate risk
Interest rate risk is the Company’s exposure to increases and decreases in financial instrument values caused by the
fluctuation in interest rates. The Company is exposed to cash flow risk due to the interest rate fluctuation in its floating-
rate interest-bearing financial obligations.
Furthermore, upon refinancing of a borrowing, depending on the availability of funds in the market and lender perception
of the Company’s risk, the margin that is added to the reference rate, such as LIBOR or prime rates, could vary and
thereby directly influence the interest rate payable by the Company.
Long-term debt stems mainly from acquisitions of long-term assets and business combinations. The Company is exposed
to interest rate risk with its revolving credit facility which is used to finance the Company’s acquisitions. The facility bears
interest at a variable rate and as such the interest burden could change materially. $345.0 million (November 30, 2020 –
$433.0 million) of the credit facility was used as at November 30, 2021. A 100 basis points increase in the bank’s prime
rate would result in additional interest of $3.5 million per annum (November 30, 2020 – $4.3 million) on the outstanding
credit facility.
Foreign exchange risk
Foreign exchange risk is the Company’s exposure to decreases or increases in financial instrument values caused by
fluctuations in exchange rates. The Company’s exposure to foreign exchange risk mainly comes from sales denominated
in foreign currencies. The Company’s US and foreign operations use the US dollar (“USD”) as functional currency. The
Company’s exposure to foreign exchange risk stems mainly from cash, accounts receivable, long-term debt denominated
in USD, other working capital items and financial obligations from its US operations. As at November 30, 2021, the long-
term debt denominated in USD is not exposed to foreign exchange risk as a result of three (2020 – two) cross currency
interest rate swaps.
Fluctuations in USD exchange rates are deemed to have minimal risk as they are mostly offset by the stand-alone
operations of the Company’s US entities.
Page 36
As at November 30, 2021, the Company has the following financial instruments denominated in foreign currencies:
Financial assets
Cash
Accounts receivable
Financial liabilities
Accounts payable and deposits
(In thousands $)
USD
$
3,744
378
2021
CAD
$
4,789
484
USD
$
4,748
645
2020
CAD
$
6,156
836
(82)
(105)
(85)
(110)
Net financial assets
4,040
5,168
5,308
6,882
All other factors being equal, a reasonable possible 5% rise in foreign currency exchange rates per Canadian dollar
would result in a profit of C$0.2 million (2020 – profit of C$0.3 million) on the consolidated statements of income and
comprehensive income.
Liquidity risk
Liquidity risk refers to the possibility of the Company not being able to meet its financial obligations when they become
due. The Company has contractual and fiscal obligations as well as financial liabilities and is therefore exposed to liquidity
risk. Such risk can result, for example, from a market disruption or a lack of liquidity. The Company actively maintains its
credit facility to ensure it has sufficient available funds to meet current and foreseeable financial requirements at a
reasonable cost.
As at November 30, 2021, the Company had an authorized revolving credit facility for which the available amount may
not exceed $600.0 million (November 30, 2020 – $700.0 million) to ensure that sufficient funds are available to meet its
financial requirements.
The following are the contractual maturities of financial liabilities as at November 30, 2021:
(In millions $)
Carrying Contractual
amount cash flows
$
$
0 – 6
Months
$
6 – 12
Months
$
12 – 24
Months Thereafter
$
$
Accounts payable and accrued liabilities
Long-term debt (1)
Interest on long-term debt (1)
Lease liabilities
Total contractual obligations
119.5
360.7
n/a
473.5
953.7
119.5
362.1
13.8
510.8
1,006.2
119.5
13.7
2.9
56.3
192.4
—
—
2.9
56.2
59.1
—
2.0
5.7
100.5
108.2
—
346.4
2.3
297.8
646.5
(1) When future interest cash flows are variable, they are calculated using the interest rates prevailing at the end of the
reporting period.
NEAR-TERM OUTLOOK
The Company is closely monitoring the global situation surrounding COVID-19 and taking proactive steps to adapt to the
changes for the well-being and safety of its employees, franchisees and customers, and the continuity of its operations
and businesses. Given the dynamic nature of the situation, it is not possible to ascertain what impact there may be on
the Company’s long-term financial performance. MTY is taking the necessary steps to mitigate the potential
consequences that this situation may have on its operations, franchisees, partners and service to MTY’s customers.
Please refer to section “Highlights of Significant Events” for further details on actions taken in response to COVID-19.
Despite the lingering impacts of the pandemic and the obvious obligations to address the related short-term challenges,
management’s focus is now shifting back to a longer-term growth perspective. Sales are back to pre-pandemic levels for
many of the brands and progressing in the right direction for the others. The restaurant industry will remain challenging
in the future, with labour shortages and supply chain disruptions being felt across the network, adding to the existing
pressure of competing in a market approaching saturation. Management believes however that the brands’ continued
focus on innovation, product quality, innovation, consistency and store design combined with the adjustments made
during the pandemic to adjust to new customer expectations positions the network well for the future.
Page 37
Before the pandemic, MTY’s objectives were to generate organic growth while actively seeking potential accretive
acquisitions. Those objectives have not changed and remain at the center of MTY’s actions. To the extent possible,
MTY’s teams are focused on helping franchise partners generate positive same store sales, open new locations of
existing concepts and ultimately achieve their profitability objectives. The individual success of franchisees is the basis
for the success of MTY for the years to come. In the wake of COVID-19, MTY has diversified its sources of revenue by
expanding into other sales channels, such as: launching multiple ghost kitchens in existing restaurant locations, thus
benefitting from the synergies of shared costs, streamlined workflows as well as being able to respond to the increase in
delivery and takeout orders; and launching new products in the retail division and expanding into new territories, in
response to increased consumer spending in grocery stores that has continued throughout the waves of the pandemic.
Given the Company’s capital allocation since the onset of the pandemic and the amount of debt that was repaid since,
the Company is financially well positioned to seize acquisition opportunities that are presented to management. However,
despite its appetite to make acquisitions and grow its network, the Company will remain disciplined in its search for the
right acquisition targets, at the right price and with the right synergies.
CONTROLS & PROCEDURES
Disclosure controls and procedures
Disclosure controls and procedures should be designed to provide reasonable assurance that information required to be
disclosed by the Company in its annual filings, interim filings or other reports filed or submitted by it under securities
legislation is recorded, processed, summarized and reported within the time periods specified in the securities legislation.
It should include controls and procedures designed to ensure that information required to be disclosed by the Company
in its annual filings, interim filings or other reports filed or submitted under securities legislation is accumulated and
communicated to the Company’s management, including its certifying officers, namely the Chief Executive Officer
("CEO") and the Chief Financial Officer ("CFO"), as appropriate to allow timely decisions regarding required disclosure.
The CEO and the CFO, along with Management, after evaluating the effectiveness of the Company’s disclosure controls
and procedures as at November 30, 2021, have concluded that the Company’s disclosure controls and procedures were
effective.
Internal controls over financial reporting
Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements in accordance with IFRS. Management is responsible for
establishing adequate internal control over financial reporting for the Company.
An evaluation of the effectiveness of the design and operation of the Company's internal control over financial reporting
was conducted as of November 30, 2021. Based on the evaluation, the CEO and the CFO concluded that the internal
control over financial reporting, as defined by National Instrument 52-109, was appropriately designed and was operating
effectively. The evaluations were conducted in accordance with the framework and criteria established in Internal Control
- Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
("COSO"), a recognized control model, and the requirements of National Instrument 52-109 - Certification of Disclosure
in Issuers' Annual and Interim Filings.
Limitations of Controls and Procedures
There are inherent limitations in the effectiveness of any control system, including the potential for human error and the
possible circumvention or overriding of controls and procedures. Additionally, judgments in decision-making can be faulty
and breakdowns can occur because of a simple error or mistake. An effective control system can provide only reasonable,
not absolute, assurance that the control objectives of the system are adequately met. Accordingly, the management of
the Company, including its Chief Executive Officer and Chief Financial Officer, does not expect that the control system
can prevent or detect all error or fraud. Finally, projections of any evaluation or assessment of effectiveness of a control
system to future periods are subject to the risks that, over time, controls may become inadequate because of changes in
an entity’s operating environment or deterioration in the degree of compliance with policies or procedures.
Page 38
Limitation on scope of design
The Company’s management, with the participation of its CEO and CFO, has limited the scope of the design of the
Company’s DC&P and internal controls over financial reporting to exclude controls, policies and procedures and internal
controls over financial reporting of certain special purpose entities (“SPEs”) on which the Company has the ability to
exercise de facto control and which have as a result been consolidated in the Company’s consolidated financial
statements. For the year ended November 30, 2021, these SPEs represent less than 0.1% of the Company’s current
assets, less than 0.1% of its non-current assets, less than 0.1% of the Company’s current liabilities, less than 0.1% of
long-term liabilities, 0.3% of the Company’s revenue and less than 0.1% of the Company’s net income.
__________________________
Eric Lefebvre, CPA, CA, MBA Chief Executive Officer
__________________________
Renee St-Onge, CPA, CA Chief Financial Officer
Page 39
SUPPLEMENTAL INFORMATION
List of acquisitions
Other banners added through acquisitions include:
Acquisition
year
1999
2001
2002
2003
May 2004
June 2004
September 2005
September 2006
October 2006
September 2007
September 2008
October 2008
May 2009
September 2010
August 2011
November 2011
November 2011
September 2012
June 2013
September 2013
September 2013
March 2015
July 2014
September 2018
October 2014
%
ownership
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
80% +
20%
90% +
10%
100%
November 2014
100%
December 2014
100%
September 2015
September 2016
July 2016
60% +
40%
100%
# of franchised
locations
18
71
18
24
6
103
91
42
24
—
29
117
475
86
134
338
19
14
3
300 - 34 of which
in the US
25 and 3 mobile
restaurants
14
88
51
115
13
2,839
Brand
Fontaine Santé/Veggirama
La Crémière
Croissant Plus
Cultures
Thaï Express
Mrs. Vanelli’s
TCBY – Canadian master franchise right
Sushi Shop
Koya Japan
Sushi Shop – existing franchise locations
Tutti Frutti
Taco Time – Canadian master franchise
rights
Country Style Food Services Holdings Inc.
Groupe Valentine inc.
Jugo Juice
Mr. Submarine
Koryo Korean BBQ
Mr. Souvlaki
SushiGo
Extreme Pita, PurBlendz and Mucho
Burrito ("Extreme Brandz")
ThaïZone
Madisons
Café Dépôt, Muffin Plus, Sushi-Man and
Fabrika
Van Houtte Café Bistros – perpetual
franchising license
Manchu Wok, Wasabi Grill & Noodle and
SenseAsian
Big Smoke Burger
- Cold Stone
Kahala Brands Ltd
Creamery, Blimpie, Taco Time, Surf City
Squeeze, The Great Steak & Potato
Company, NrGize Lifestyle Café,
Samurai Sam’s Teriyaki Grill, Frullati
Café & Bakery, Rollerz, Johnnie`s New
York Pizzeria, Ranch One, America’s
Taco Shop, Cereality, Tasti D-Lite,
Planet Smoothie, Maui Wowi and
Pinkberry
# of corporate
locations
—
3
2
—
—
—
—
5
—
15
—
—
5
9
2
—
1
—
2
5
—
—
13
1
17
4
40
Page 40
Brand
BF Acquisition Holdings, LLC – Baja
Fresh Mexican Grill and La Salsa Fresh
Mexican Grill
La Diperie
Steak Frites St-Paul and Giorgio
Ristorante
The Works Gourmet Burger Bistro
Dagwoods Sandwiches and Salads
The Counter Custom Burgers
Built Custom Burgers
Imvescor Restaurant Group - Baton
Rouge, Pizza Delight, Scores, Toujours
Mikes, and Ben & Florentine
Grabbagreen
Timothy’s World Coffee and Mmmuffins -
perpetual franchising license
SweetFrog Premium Frozen Yogurt
Casa Grecque
South Street Burger
Papa Murphy’s
Yuzu Sushi
Allô! Mon Coco
Turtle Jack’s Muskoka Grill, COOP
Wicked Chicken and Frat’s Cucina
Definition of non-GAAP measures
Acquisition
year
October 2016
%
ownership
100%
# of franchised
locations
167
# of corporate
locations
16
December 2016
March 2019
May 2017
September 2018
June 2017
September 2017
December 2017
December 2017
March 2018
March 2018
April 2018
September 2018
December 2018
March 2019
May 2019
July 2019
July 2019
December 2019
60%+
5%
83.25% +
9.25%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
70%
5
15
23
20
36
5
253
26
32
331
31
24
1,301
129
40
20
—
—
4
2
3
—
8
1
7
—
—
13
103
—
—
3
Management discloses the following non-GAAP measures as they have been identified as relevant metrics to evaluate
the performance of the Company.
The following non-GAAP measures can be found in the analysis of the MD&A:
Adjusted EBITDA
Income (loss) before
taxes, excluding
impairment charges
and reversals
Represents net income (loss), excluding income tax, all other income (expenses), interest,
depreciation and amortization, and net impairment charges. See reconciliation of adjusted
EBITDA to Income before taxes on pages 13 and 20.
Represents net income (loss) before taxes, excluding impairment charges and reversals
on right-of-use assets, property, plant and equipment, intangible assets and goodwill.
Free cash flows
Represents the sum total cash flows from operating activities less capital expenditures net
of disposals.
Definition of non-GAAP ratios
Management discloses the following non-GAAP ratios as they have been identified as relevant metrics to evaluate the
performance of the Company.
The following non-GAAP ratios can be found in the analysis of the MD&A:
Adjusted EBITDA as
a % of revenue
Represents adjusted EBITDA divided by revenue.
Page 41
Free cash flows per
diluted share
Represents free cash flows divided by diluted shares.
Debt-to-EBITDA
Defined as current and long-term debt divided by EBITDA as defined in the credit
agreement.
Definition of supplementary financial measures
Management discloses the following supplementary financial measures as they have been identified as relevant metrics
to evaluate the performance of the Company.
The following supplementary financial measures can be found in the analysis of the MD&A:
Cash flows from
operations per diluted
share
Represents cash flows provided by operating activities divided by diluted shares.
Recurring revenue
streams
Comprised of royalties and other franchising revenues that are earned on a regular basis
in accordance with franchise agreements in place.
Non-controllable
expenses
Comprised of government subsidies that are not directly in control of management and
royalties paid to third parties.
Controllable expenses
Comprised of wages, professional and consulting services and other office expenses,
that are directly in the control of management.
Variance in recurring
revenue and expenses
Nonrecurring non-
controllable expenses
Comprised of recurring revenue streams, controllable expenses, royalties paid to third
parties, rent (excluding impact of IFRS 16), corporate store revenue and expenses, food
processing, distribution and retail revenue and expenses, promotional fund revenue and
expenses.
Comprised of government subsidies that are not directly in control of management.
Same-store sales
Comparative sales generated by stores that have been open for at least thirteen months
or that have been acquired more than thirteen months ago.
System sales
System sales are sales of all existing restaurants including those that have closed or
have opened during the period, as well as the sales of new concepts acquired from the
closing date of the transaction and forward.
Digital sales
Digital sales are sales made by customers through online ordering platforms.
Page 42
Free cash flows (1) loop to cash flows provided by operating activities
(In thousands $)
February
2020
May
2020
Three months ended
August November February
2021
2020
2020
May
2021
August November
2021
2021
30,980
19,207
38,624
44,841
31,307
29,541
46,553
31,898
(1,119)
(649)
(316)
(618)
(1,764)
(63)
(998)
(97)
(1,213)
(47)
(2,301)
(156)
(1,248)
(65)
(1,677)
(56)
1,153
10,536
—
—
—
—
—
—
Cash flows provided by
operating activities
Additions to property, plant and
equipment
Additions to intangible assets
Proceeds on disposal of assets
held for sale
Proceeds on disposal of property,
plant and equipment and
intangible assets
Free cash flows (1)
27,497
28,926
(1) See section “Definition of non-GAAP measures” found in the Supplemental Information section for definition.
30,300
37,078
30,738
43,910
373
117
281
164
253
413
361
45,601
5,438
35,603
Income before taxes, excluding impairment charges and reversals (1)
(in thousands $)
Year ended
November 30, 2021
Year ended
November 30, 2020
Income (loss) before taxes
Impairment charge – right-of-use assets
Net impairment charge – property, plant and equipment, intangible
assets and goodwill
Income before taxes, excluding impairment charges and reversals (1)
112,072
1,550
5,903
119,525
(51,949)
4,291
122,826
75,168
(1) See section “Definition of non-GAAP measures” found in the Supplemental Information section for definition.
Page 43
System sales (1) to royalties
Sales for the twelve months ended
November 30, 2021
Canada
US & International
(millions of $)
Corporate Franchised
Total
Corporate Franchised
Total
System sales (1)
Franchise royalty income
as a % of franchise sales
Royalties
19.4
1,241.1
1,260.5
40.2
2,330.6
2,370.8
—
—
5.00%
62.1
—
—
—
—
5.09%
118.6
—
—
Sales for the twelve months ended
November 30, 2020
Canada
US & International
(millions of $)
Corporate Franchised
Total
Corporate Franchised
Total
System sales (1)
Franchise royalty income
as a % of franchise sales
Royalties
18.4
1,188.3
1,206.7
46.3
2,206.1
2,252.4
—
—
4.86%
57.8
—
—
—
—
4.87%
107.3
—
—
TOTAL
3,631.3
N/A
180.7
TOTAL
3,459.1
N/A
165.1
(millions of $)
Corporate Franchised
Canada
System sales (1)
Franchise royalty income
as a % of franchise sales
Royalties
5.9
—
—
373.0
5.12%
19.1
Sales for the three months ended
November 30, 2021
Total
378.9
—
—
US & International
Corporate Franchised
9.4
—
—
574.2
5.03%
28.9
Total
583.6
—
—
TOTAL
962.5
N/A
48.0
Sales for the three months ended
November 30, 2020
Canada
US & International
(millions of $)
Corporate Franchised
System sales (1)
Franchise royalty income
as a % of franchise sales
Royalties
4.1
—
—
301.6
4.74%
14.3
Total
305.7
Corporate Franchised
11.1
574.6
Total
585.7
—
—
—
—
4.87%
28.0
—
—
TOTAL
891.4
N/A
42.3
(1) See section “Definition of supplementary financial measures” found in the Supplemental Information section for definition.
Page 44
Consolidated financial statements of
MTY Food Group Inc.
November 30, 2021 and 2020
Independent auditor’s report
To the Shareholders of MTY Food Group Inc.
Our opinion
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,
the financial position of MTY Food Group Inc. and its subsidiaries (together, the Company) as at
November 30, 2021 and 2020, and its financial performance and its cash flows for the years then ended in
accordance with International Financial Reporting Standards (IFRS).
What we have audited
The Company’s consolidated financial statements comprise:
the consolidated statements of income (loss) for the years ended November 30, 2021 and 2020;
the consolidated statements of comprehensive income (loss) for the years ended November 30, 2021
and 2020;
the consolidated statements of changes in shareholders’ equity for the years ended
November 30, 2021 and 2020;
the consolidated statements of financial position as at November 30, 2021 and 2020;
the consolidated statements of cash flows for the years then ended; and
the notes to the consolidated financial statements, which include significant accounting policies and
other explanatory information.
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of
the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Company in accordance with the ethical requirements that are relevant to our
audit of the consolidated financial statements in Canada. We have fulfilled our other ethical responsibilities
in accordance with these requirements.
PricewaterhouseCoopers LLP/s.r.l./s.e.n.c.r.l.
1250 René-Lévesque Boulevard West, Suite 2500, Montréal, Quebec, Canada H3B 4Y1
T: +1 514 205 5000, F: +1 514 876 1502
“PwC” refers to PricewaterhouseCoopers LLP/s.r.l./s.e.n.c.r.l., an Ontario limited liability partnership.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements for the year ended November 30, 2021. These matters were
addressed in the context of our audit of the consolidated financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Impairments and reversals of impairment
assessment of goodwill, trademarks and
franchise and master franchise rights
Refer to note 3 – Accounting policies, note 5 –
Critical accounting judgments and key sources of
estimation uncertainty, note 13 – Intangible assets,
note 14 – Goodwill and note 15 – Net impairment
charge - property, plant and equipment, intangible
assets and goodwill to the consolidated financial
statements.
As at November 30, 2021, the Company had
goodwill, trademarks (intangible assets with
indefinite useful lives) and franchise and master
franchise rights (intangible assets with definite
useful lives) balances totalling $428.4 million,
$608.4 million and $199.9 million, respectively. For
the purposes of impairment testing, goodwill is
allocated to the Cash Generating Unit (CGU) or a
group of CGUs (“goodwill unit”) that are considered
to represent the lowest level within the group at
which the goodwill is monitored for internal
management purposes. For the purpose of the
franchise and master franchise rights and
trademarks, the smallest group of CGUs for which a
reasonable and consistent allocation basis can be
identified is the brand level and constitutes the
lowest level at which an asset or group of assets
has the possibility of generating cash inflows.
Our approach to addressing the matter included the
following procedures, among others:
● Evaluated how management determined the
recoverable amounts of the goodwill units and
CGUs, which included the following:
– Tested the mathematical accuracy of the
discounted cash flow models.
– Tested the reasonableness of the projected
operating cash flows applied by
management in the discounted cash flow
models by comparing them to the budget
approved by the Board of Directors and by
considering the past and current
performance of the CGUs.
– Professionals with specialized skill and
knowledge in the field of valuation assisted
in testing the appropriateness of the models
used and the reasonableness of the
discount rates applied by management
based on available data of comparable
companies.
– Tested the underlying data used in the
discounted cash flow models.
Key audit matter
How our audit addressed the key audit matter
Goodwill and trademarks are tested for impairment
annually as at August 31, or more frequently when
there is an indicator of impairment. Franchise and
master franchise rights are tested annually in
connection with goodwill and trademarks annual
testing, or whenever there is an indication that the
asset may be impaired.
At the end of each reporting period, the Company
reviews whether there is any indication that the
events and circumstances which led to the prior
years’ impairment loss for its franchise rights,
master franchise rights and trademarks may no
longer exist. If any such indication exists, the
Company shall estimate the recoverable amount of
that asset. An impairment loss recognized for
goodwill is not reversed in subsequent periods.
If the recoverable amount of a CGU or a goodwill
unit is estimated to be less than its carrying amount,
the carrying amount of the CGU or goodwill unit is
reduced to its recoverable amount. An impairment
loss is recognized immediately in profit or loss.
Where an impairment loss subsequently reverses,
the carrying amount of the asset (or CGU) is
increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount
does not exceed the carrying amount that would
have been determined had no impairment loss been
recognized for the asset (or CGU) in prior years. A
reversal of an impairment loss is recognized
immediately in profit or loss.
The recoverable amounts of the CGUs or goodwill
units are estimated based on value-in-use
calculations using a discounted cash flow model.
The key assumptions used were the projected
operating cash flows and the discount rates.
Key audit matter
How our audit addressed the key audit matter
The annual impairment test resulted in an
impairment charge of $9.9 million, offset by
reversals of impairment of $9.4 million.
We considered this a key audit matter due to (i) the
significance of the goodwill, trademarks and
franchise and master franchise rights balances and
(ii) the significant judgment made by management in
determining the recoverable amount of the goodwill
units and CGUs, including the use of key
assumptions. This has resulted in a high degree of
subjectivity and audit effort in performing audit
procedures relating to the key assumptions.
Professionals with specialized skill and knowledge
in the field of valuation assisted us in performing our
procedures.
Other information
Management is responsible for the other information. The other information comprises the Management’s
Discussion and Analysis, which we obtained prior to the date of this auditor’s report and the information,
other than the consolidated financial statements and our auditor’s report thereon, included in the annual
report, which is expected to be made available to us after that date.
Our opinion on the consolidated financial statements does not cover the other information and we do not
and will not express an opinion or any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of this
auditor’s report, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard. When we read the information, other
than the consolidated financial statements and our auditor’s report thereon, included in the annual report,
if we conclude that there is a material misstatement therein, we are required to communicate the matter to
those charged with governance.
Responsibilities of management and those charged with governance for the
consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with IFRS, and for such internal control as management determines is
necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends to liquidate
the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial
reporting process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report
to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Company to
cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Company to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the group audit. We
remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the consolidated financial statements of the current period and
are therefore the key audit matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Sonia Boisvert.
/s/PricewaterhouseCoopers LLP1
Montréal Quebec
February 16, 2022
1 FCPA auditor, FCA, public accountancy permit No. A116853
MTY Food Group Inc.
Consolidated statements of income (loss)
Years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts)
Revenue
Expenses
Operating expenses
Depreciation – property, plant and equipment and right-of-use assets
Amortization – intangible assets
Interest on long-term debt
Net interest expense on leases
Impairment charge – right-of-use assets
Net impairment charge – property, plant and equipment, intangible assets
and goodwill
Share of net (loss) profit of a joint venture accounted for using the equity
method
Other (expenses) income
Unrealized and realized foreign exchange (loss) gain
Interest income
Gain on de-recognition/lease modification of lease liabilities
Gain (loss) on disposal of property, plant and equipment and assets
held for sale
Revaluation of financial liabilities recorded at fair value
Other income
Income (loss) before taxes
Income tax expense (recovery)
Current
Deferred
Net income (loss)
Net income (loss) attributable to:
Owners
Non-controlling interests
Net income (loss) per share
Basic
Diluted
27 & 31
10 & 12
13
10
10
15
24
30
23
The accompanying notes are an integral part of the consolidated financial statements.
Notes
2021
$
2020
$
26 & 31
551,903
511,117
382,572
16,174
28,442
10,111
2,295
1,550
5,903
447,047
373,806
16,998
30,876
16,756
2,481
4,291
122,826
568,034
(709)
508
(300)
198
1,319
3,549
3,034
125
7,925
3,230
408
2,890
(466)
(1,602)
—
4,460
112,072
(51,949)
21,036
5,093
26,129
85,943
85,639
304
85,943
3.47
3.46
8,360
(23,414)
(15,054)
(36,895)
(37,108)
213
(36,895)
(1.50)
(1.50)
Page 6
MTY Food Group Inc.
Consolidated statements of comprehensive income (loss)
Years ended November 30, 2021 and 2020
(In thousands of Canadian dollars)
Notes
2021
$
2020
$
Net income (loss)
85,943
(36,895)
Items that may be reclassified subsequently to net income (loss)
Unrealized loss on translation of foreign operations
Deferred tax recovery on foreign currency translation adjustments
Other comprehensive loss
Total comprehensive income (loss)
30
Total comprehensive income (loss) attributable to:
Owners
Non-controlling interests
(7,966)
—
(7,966)
77,977
77,673
304
77,977
(12,660)
42
(12,618)
(49,513)
(49,726)
213
(49,513)
The accompanying notes are an integral part of the consolidated financial statements.
Page 7
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(
MTY Food Group Inc.
Consolidated statements of financial position
As at November 30, 2021 and 2020
(In thousands of Canadian dollars)
Notes
2021
$
2020
$
Assets
Current assets
Cash
Accounts receivable
Inventories
Current portion of loans and other receivables
Current portion of finance lease receivables
Income taxes receivable
Other assets
Prepaid expenses and deposits
Loans and other receivables
Finance lease receivables
Contract cost asset
Deferred income taxes
Investment in a joint venture
Property, plant and equipment
Right-of-use assets
Intangible assets
Goodwill
Liabilities and Shareholders' equity
Liabilities
Current liabilities
Accounts payable and accrued liabilities
Provisions
Gift card and loyalty program liabilities
Income taxes payable
Current portion of deferred revenue and deposits
Current portion of long-term debt
Current portion of lease liabilities
Long-term debt
Lease liabilities
Deferred revenue and deposits
Deferred income taxes
Other liabilities
7
8
9
10
9
10
30
11
12
10
13
14
18
19
20
10
20
10
19
30
61,231
57,459
10,707
1,189
89,046
3,712
2,403
7,721
233,468
3,049
310,223
5,631
185
25,911
17,526
59,937
820,274
428,390
1,904,594
119,462
1,692
101,889
4,256
16,100
13,116
101,973
358,488
347,612
371,575
44,339
132,653
1,029
1,255,696
The accompanying notes are an integral part of the consolidated financial statements.
44,302
55,886
9,415
1,527
90,303
420
2,792
6,750
211,395
3,233
377,824
5,171
207
26,612
16,551
69,223
864,029
439,452
2,013,697
111,372
3,065
95,233
18,335
13,747
12,888
114,915
369,555
447,654
443,834
41,367
128,773
—
1,431,183
Page 9
MTY Food Group Inc.
Consolidated statements of financial position (continued)
As at November 30, 2021 and 2020
(In thousands of Canadian dollars)
Shareholders' equity
Equity attributable to owners
Capital stock
Reserves
Retained earnings
Equity attributable to non-controlling interests
Notes
21
2021
$
2020
$
305,961
(18,315)
359,993
647,639
1,259
648,898
1,904,594
306,415
(11,185)
286,525
581,755
759
582,514
2,013,697
Approved by the Board on February 16, 2022
_________________________________________________ , Director
_________________________________________________ , Director
The accompanying notes are an integral part of the consolidated financial statements.
Page 10
MTY Food Group Inc.
Consolidated statements of cash flows
Years ended November 30, 2021 and 2020
(In thousands of Canadian dollars)
Operating activities
Net income (loss)
Adjusting items:
Interest on long-term debt
Net interest expense on leases
Depreciation – property, plant and equipment and right-of-use assets
Amortization – intangible assets
Impairment charge – property, plant and equipment
Impairment charge – right-of-use assets
Net impairment charge – intangible assets and goodwill
Share of net loss (profit) of a joint venture accounted for using the
equity method
Gain on de-recognition/lease modification of lease liabilities
(Gain) loss on disposal of property, plant and equipment and assets
held for sale
Revaluation of financial liabilities recorded at fair value through profit
or loss
Other income
Income tax expense (recovery)
Share-based expense
Income taxes paid
Interest paid
Other
Changes in non-cash working capital items
Cash flows provided by operating activities
Investing activities
Proceeds on disposal of interest in 10220396 Canada Inc.
Additions to property, plant and equipment
Additions to intangible assets
Proceeds on disposal of property, plant and equipment
Proceeds on disposal of assets held for sale
Investment in a joint venture
Cash flows provided by (used in) investing activities
Notes
2021
$
2020
$
85,943
(36,895)
10
10 & 12
13
15
10
15
24
22
32
16
12
13
11
10,111
2,295
16,174
28,442
131
1,550
5,772
709
(1,319)
(3,549)
(3,034)
(125)
26,129
836
170,065
(27,448)
(10,079)
(3,797)
10,558
139,299
7,500
(6,439)
(324)
6,465
—
—
7,202
16,756
2,481
16,998
30,876
3,166
4,291
119,660
(508)
(2,890)
466
1,602
—
(15,054)
924
141,873
(10,303)
(15,832)
573
17,341
133,652
—
(4,197)
(1,427)
935
11,689
(19,105)
(12,105)
Page 11
MTY Food Group Inc.
Consolidated statements of cash flows (continued)
Years ended November 30, 2021 and 2020
(In thousands of Canadian dollars)
Financing activities
Issuance of long-term debt
Repayment of long-term debt
Net lease payments
Shares repurchased and cancelled
Capitalized financing costs
Dividends paid to non-controlling shareholders of subsidiaries
Dividends paid
Cash flows used in financing activities
Net increase (decrease) in cash
Cash disposed of through disposal
Effect of foreign exchange rate changes on cash
Cash, beginning of period
Cash, end of period
Notes
2021
$
2020
$
32
10
21
32
—
(102,238)
(15,354)
(2,184)
(665)
—
(9,141)
(129,582)
16,919
(131)
141
44,302
61,231
20,000
(109,137)
(13,026)
(18,866)
(525)
(186)
(4,633)
(126,373)
(4,826)
—
(1,609)
50,737
44,302
The accompanying notes are an integral part of the consolidated financial statements.
Page 12
MTY Food Group Inc.
Table of contents
Independent Auditor’s Report
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
Description of the business
Basis of preparation
Accounting policies
Changes in accounting policies
Critical accounting judgments and key sources of estimation uncertainty
Future accounting changes
Accounts receivable
Inventories
Loans and other receivables
Leases
Investment in a joint venture
Property, plant and equipment
Intangible assets
Goodwill
Net impairment charge – property, plant and equipment, intangible assets and goodwill
Disposal of interest in 10220396 Canada Inc.
Credit facility
Provisions
Deferred revenue and deposits
Long-term debt
Capital stock
Stock options
Net income (loss) per share
Financial instruments
Capital disclosures
Revenue
Operating expenses
Guarantee
Contingent liabilities
Income taxes
Segmented information
Statement of cash flows
Related party transactions
Subsequent events
2
14
14
15
27
28
30
32
32
33
33
35
36
37
38
38
40
41
41
42
43
43
44
45
45
49
50
51
51
51
52
53
55
56
57
Page 13
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
1. Description of the business
MTY Food Group Inc. (the “Company”) is a franchisor in the quick service and casual dining food industry. Its activities
consist of franchising and operating corporate-owned locations as well as the sale of retail products under a multitude
of banners. The Company also operates a distribution center and a food processing plant, both of which are located
in the province of Quebec.
The Company is incorporated under the Canada Business Corporations Act and is listed on the Toronto Stock
Exchange (“TSX”). The Company’s head office is located at 8210, Trans-Canada Highway, Ville Saint-Laurent,
Quebec.
2. Basis of preparation
The consolidated financial statements (“financial statements”) have been prepared on the historical cost basis except
for certain financial instruments that are measured at revalued amounts or fair values at the end of each reporting
period, as explained in the accounting policies below.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date, regardless of whether that price is directly observable or
estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes
into account the characteristics of the asset or liability if market participants would take those characteristics into
account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure
purposes in these financial statements is determined on such a basis, except for:
share-based payment transactions, that are within the scope of International Financial Reporting Standards
(“IFRS”) 2, Share-based Payment;
leasing transactions, that are within the scope of IFRS 16, Leases; and
measurements that have some similarities to fair value but are not fair value, such as net realizable value in
International Accounting Standards (“IAS”) 2, Inventories, or value in use in IAS 36, Impairment of Assets.
In addition, for financial reporting purposes, fair value measurements are categorized into Level 1, 2 or 3 based on
the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the
fair value measurement in its entirety, which are described as follows:
• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can
access at the measurement date;
• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or
liability, either directly or indirectly; and
• Level 3 inputs are unobservable inputs for the asset or liability.
The financial statements are presented in Canadian dollars, which is the functional currency of the Company, and
tabular amounts are rounded to the nearest thousand ($000) except when otherwise indicated.
Statement of compliance
The Company’s financial statements have been prepared in accordance with IFRS as issued by the International
Accounting Standard Board (“IASB”).
These financial statements were authorized for issue by the Board of Directors on February 16, 2022.
The accounting policies set out below have been applied consistently to all periods presented in the consolidated
financial statements.
Page 14
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
3. Accounting policies
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities (including
special purpose entities) controlled by the Company and its subsidiaries. Control is achieved when the Company:
• has power over the investee;
•
• has the ability to use its power to affect its returns.
is exposed, or has rights, to variable returns from its involvement with the investee; and
Principal subsidiaries are as follows:
Principal subsidiaries
MTY Franchising Inc.
MTY Franchising USA, Inc.
BF Acquisition Holdings, LLC
Built Franchise Systems, LLC
CB Franchise Systems, LLC
Papa Murphy’s Holdings Inc.
9974644 Canada Inc.
Percentage of equity interest
2021
2020
%
100
100
100
100
100
100
65
%
100
100
100
100
100
100
65
The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are
changes to one or more of the three elements of control listed above.
When the Company has less than a majority of the voting rights of an investee, it has power over the investee when
the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally.
The Company considers all relevant facts and circumstances in assessing whether or not the Company's voting rights
in an investee are sufficient to give it power, including:
•
the size of the Company's holding of voting rights relative to the size and dispersion of holdings of the other vote-
holders;
• potential voting rights held by the Company, other vote-holders or other parties;
•
rights arising from other contractual arrangements; and
• any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to
direct the relevant activities at the time that decisions need to be made, including voting patterns at previous
shareholders' meetings.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the
Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of
during the year are included in the statements of income and other comprehensive income from the date the Company
gains control until the date when the Company ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and
to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company
and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies
into line with the Company's accounting policies.
All intercompany transactions, balances, revenue and expenses are eliminated in full on consolidation.
Page 15
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
3.
Accounting policies (continued)
Changes in the Company's ownership interests in existing subsidiaries
Changes in the Company's ownership interests in subsidiaries that do not result in the Company losing control over
the subsidiaries are accounted for as equity transactions. The carrying amounts of the Company's interests and the
non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference
between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or
received is recognized directly in equity and attributed to owners of the Company.
When the Company loses control of a subsidiary, a gain or loss is recognized in profit or loss and is calculated as the
difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained
interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and
any non-controlling interests. All amounts previously recognized in other comprehensive income (loss) in relation to
that subsidiary are accounted for as if the Company had directly disposed of the related assets or liabilities of the
subsidiary (i.e. reclassified to profit or loss or transferred to another category of equity as specified/permitted by
applicable IFRSs). The fair value of any investment retained in the former subsidiary at the date when control is lost
is regarded as the fair value on initial recognition for subsequent accounting under IFRS 9, Financial Instruments:
Recognition and Measurement when applicable, or the cost on initial recognition of an investment in an associate or
a joint venture.
Business combinations
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business
combination is measured at fair value. This is calculated as the sum of the acquisition date fair values of the assets
transferred by the Company and liabilities incurred by the Company to the former owners of the acquiree in exchange
for control of the acquiree. Acquisition-related costs are recognized in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognized at their fair value,
except for deferred tax assets or liabilities, which are recognized and measured in accordance with IAS 12, Income
Taxes.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling
interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over
the net of the acquisition date amounts of the identifiable assets acquired and the liabilities assumed. If, after
reassessment, the net of the acquisition date amounts of the identifiable assets acquired and liabilities assumed
exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the
fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognized immediately in
profit or loss as a bargain purchase gain.
Goodwill reflects how the acquisition will impact the Company’s ability to generate future profits in excess of existing
profits. The consideration paid mostly relates to combined synergies, related mainly to revenue growth. These benefits
are not recognized separately from goodwill as they do not meet the recognition criteria for identifiable intangible
assets.
Non-controlling interest are present ownership interests and entitle their holders to a proportionate share of the
Company’s net assets in the event of liquidation. These may be initially measured either at fair value or at the non-
controlling interests’ proportionate share of the recognized amounts of the acquiree’s identifiable net assets. The
choice of measurement basis is made on a transaction-by-transaction basis.
When the consideration transferred by the Company in a business combination includes assets or liabilities resulting
from a contingent consideration arrangement, the contingent consideration is measured at its acquisition date fair
value and included as part of the consideration transferred in a business combination. Changes in the fair value of the
contingent consideration that qualify as “measurement period” adjustments are adjusted retrospectively, with
corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from
additional information obtained during the ‘measurement period’ (which cannot exceed one year from the acquisition
date) about facts and circumstances that existed at the acquisition date.
Page 16
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
3.
Accounting policies (continued)
Business combinations (continued)
The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as
measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration
that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted
for within equity. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent
reporting dates in accordance with IFRS 9 or IAS 37, Provisions, Contingent Liabilities and Contingent Assets, as
appropriate, with the corresponding gain or loss being recognized in profit or loss.
When a business combination is achieved in stages, the Company’s previously held equity interest in the acquiree is
remeasured at fair value at the acquisition date (i.e. the date when the Company obtains control) and the resulting
gain or loss, if any, is recognized in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition
date that have previously been recognized in other comprehensive income (loss) are reclassified to profit or loss where
such treatment would be appropriate if that interest were disposed of.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the
combination occurs, the Company reports provisional amounts for the items for which the accounting is incomplete.
Those provisional amounts are adjusted retrospectively during the measurement period (see above), or additional
assets or liabilities are recognized, to reflect new information obtained about facts and circumstances that existed at
the acquisition date that, if known, would have affected the amounts recognized at that date.
Goodwill
Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the
business less accumulated impairment losses, if any.
Where goodwill forms part of a cash-generating unit (“CGU”) and part of the operation within the unit is disposed of,
the goodwill associated with the operation disposed of is included in the carrying amount of the operation when
determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based
on the relative values of the operation and the portion of the CGU retained.
Revenue recognition
The Company’s accounting policies are summarized below:
Revenue from franchise locations
i)
ii)
iii)
iv)
v)
vi)
vii)
Royalties are based either on a percentage of gross sales as reported by the franchisees or on a fixed
monthly fee. They are recognized on an accrual basis in accordance with the substance of the relevant
agreement, as they are earned.
Initial franchise fees are recognized on a straight-line basis over the term of the franchise agreement as
the performance obligation relating to franchise rights is fulfilled. Amortization begins once the restaurant
has opened.
Upfront fees related to master license agreements are recognized over the term of the master license
agreements on a straight-line basis.
Renewal fees and transfer fees are recognized on a straight-line basis over the term of the related
franchise agreement.
Restaurant construction and renovation revenue is recognized when the construction and renovation are
completed.
The Company earns rent revenue on certain leases it holds and sign rental revenue. Rental income that
is not included in the measurement of the finance lease receivable under IFRS 16 is recognized on a
straight-line basis over the term of the relevant lease.
The Company recognizes breakage income proportionately as each gift card is redeemed, based on the
historical redemption pattern of the gift cards. The Company also charges various program fees to its
franchisees as gift cards are redeemed. Notably, this does not apply to gift card liabilities assumed in a
business acquisition, which are accounted for at fair value at the acquisition date.
Page 17
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
3.
Accounting policies (continued)
Revenue recognition (continued)
Revenue from franchise locations (continued)
viii)
The Company receives considerations from certain suppliers. Fees are generally earned based on the
value of purchases during the year. Agreements that contain an initial upfront fee, in addition to ongoing
fees, are recognized on a straight-line basis over the term of the respective agreement. Supplier
contributions are recognized as revenue as they are earned and are recorded in other franchising
revenue.
Revenue from food processing, distribution and retail
Food processing, distribution and retail revenue is recognized when the customer takes control of the product,
which usually occurs upon shipment or receipt of the goods by the customer, depending on the specific terms of
the agreement.
Revenue from promotional fund contributions
Promotional fund contributions are based on a percentage of gross sales as reported by the franchisees.
Corresponding promotional fund transfers to the promotional funds are reported separately and included in
accounts payable and accrued liabilities. The Company is not entitled to retain these promotional fund payments
received and is obligated to transfer these funds to be used solely for use in promotional and marketing-related
costs for specific restaurant banners. The Company sometimes charges a fee for the administration of the
promotional funds. The combined amount payable resulting from the promotional fund reserves amounts to a
surplus of $30,481 (2020 – $20,529). These amounts are included in accounts payable and accrued liabilities.
Revenue from corporate-owned locations
Revenue from corporate-owned locations is recorded when goods are delivered to customers.
Contract cost asset
The Company recognizes incremental costs of obtaining a contract as an asset if they are expected to be recoverable,
unless their amortization period would be less than one year, in which case a practical expedient is used to expense
them as incurred. The costs are amortized to operating expenses over the term of the related franchise agreement.
Assets held for sale
Judgment is required in determining whether an asset meets the criteria for classification as “assets held for sale” in
the consolidated statements of financial position. Criteria considered by management include the existence of and
commitment to a plan to dispose of the assets, the expected selling price of the assets, the expected timeframe of the
completion of the anticipated sale and the period of time any amounts have been classified within assets held for sale.
The Company reviews the criteria for assets held for sale each period and reclassifies such assets to or from this
category as appropriate. In addition, there is a requirement to evaluate and record assets held for sale at the lower of
their carrying value and fair value less costs to sell.
Leasing
The Company enters into leases for franchised and corporately-owned locations, offices, and equipment in the normal
course of business.
The Company as lessee
The Company recognizes lease liabilities with corresponding right-of-use assets, except for short-term leases and
leases of low value assets, which are expensed on a straight-line basis over the lease term. The Company
recognizes depreciation of right-of-use assets and interest on lease liabilities. Under IFRS 16, right-of-use assets
are tested for impairment in accordance with IAS 36.
Page 18
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
3.
Accounting policies (continued)
Leasing (continued)
The Company as lessor
When the Company enters into a sublease arrangement as an intermediate lessor, the Company accounts for the
head lease and the sublease as two separate contracts. The Company is required to classify the sublease as a
finance or operating lease by reference to the right-of-use asset arising from the head lease. For finance subleases,
the Company derecognizes the right-of-use asset relating to the head lease that is transferred to the sublessee
and recognizes a finance lease receivable in the sublease. As the intermediate lessor, the Company retains the
lease liability on the head lease in its consolidated statement of financial position. During the term of the sublease,
the Company recognizes both finance income on the sublease and interest expense on the head lease.
COVID-19 accounting implications on leases
In response to the COVID-19 pandemic, in May 2020 the IASB issued amendments to IFRS 16 to allow entities to not
account for rent concessions as lease modifications if they are a direct consequence of COVID-19 and meet certain
conditions:
the revised consideration is substantially the same or less than the original consideration;
the reduction in lease payments relates to payments due on or before June 30, 2021; and
no other substantive changes have been made to the terms of the lease.
In March 2021, the IASB published COVID-19-Related Rent Concessions beyond 30 June 2021 (Amendment to IFRS
16), extending the May 2020 amendments by one year. Accordingly, the amendment permits a lessee to apply the
practical expedient regarding COVID-19-related rent concessions to rent concessions for which any reduction in lease
payments affects only payments originally due on or before June 30, 2022.
The Company has adopted these amendments and applied the practicable expedient to all eligible rent concessions.
The Company has recognized negative variable lease payments of $933 (2020 – $617) as part of rent expense,
presented in Cost of goods sold and rent in Note 27 of the consolidated financial statements.
Government grants
Government grants are recognised in profit or loss on a systematic basis over the periods in which the Company
recognises expenses for the related costs for which the grants are intended to compensate.
Functional and presentation currency
These financial statements are presented using the Company’s functional currency, which is the Canadian dollar.
Each entity of the Company determines its own functional currency, and the financial statement items of each entity
are measured using that functional currency. Functional currency is the currency of the primary economic environment
in which the entity operates.
The assets and liabilities of a foreign operation with a functional currency different from that of the Company are
translated into the presentation currency using the exchange rate in effect on the reporting date. Revenue and
expenses are translated into the presentation currency using the average exchange rate for the period. Exchange
differences arising from the translation of a foreign operation are recognized in reserves. Upon complete or partial
disposal of the investment in the foreign operation, the foreign currency translation reserve or a portion of it will be
recognized in the statement of income (loss) in other income (charges).
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year and adjustments to prior year provisions. Taxable
profit differs from profit as reported in the consolidated statement of income (loss) because of items of income or
expense that are taxable or deductible in other years and items that are never taxable or deductible. The
Company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by
the end of the reporting period.
Page 19
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
3.
Accounting policies (continued)
Taxation (continued)
Deferred tax
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the
financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax
liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally
recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be
available against which those deductible temporary differences can be utilized. Such deferred tax assets and
liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition (other
than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit
nor the accounting profit. In addition, deferred tax liabilities are not recognised if the temporary difference arises
from the initial recognition of goodwill.
Deferred tax liabilities are recognized for taxable temporary differences associated with investments in
subsidiaries, except where the Company is able to control the reversal of the temporary difference and it is probable
that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible
temporary differences associated with such investments and interests are only recognized to the extent that it is
probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences
and they are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the
extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to
be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which
the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or
substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets
reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the
reporting period, to recover or settle the carrying amount of its assets and liabilities.
Current and deferred tax for the year
Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in
other comprehensive income (loss) or directly in equity, in which case, the current and deferred tax are also
recognized in other comprehensive income (loss) or directly in equity respectively. Where current tax or deferred
tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the
business combination.
Property, plant and equipment
Land and buildings held for use in the production or supply of goods or services, or for administrative purposes, are
stated in the consolidated statement of financial position at their historical costs less accumulated depreciation
(buildings) and accumulated impairment losses. Cost includes expenditures that are directly attributable to the
acquisition of the asset, including any costs directly attributable to bringing the asset to a working condition for its
intended use.
Equipment, leasehold improvements, rolling stock and computer hardware are stated at cost less accumulated
depreciation and accumulated impairment losses.
Depreciation is recognized so as to write off the cost or valuation of assets (other than land) less their residual values
over their useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation
methods are reviewed at the end of each year, with the effect of any changes in estimate accounted for on a
prospective basis.
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item
of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount
of the asset and is recognized in profit or loss.
Page 20
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
3.
Accounting policies (continued)
Property, plant and equipment (continued)
Depreciation is based on the following terms:
Straight-line
Buildings
Equipment
Straight-line
Leasehold improvements Straight-line
Straight-line
Rolling stock
Straight-line
Computer hardware
25 to 50 years
Three to 10 years
Lesser of the term of the lease or useful life
Five to seven years
Three to seven years
Intangible assets
Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated
amortization and accumulated impairment losses, if applicable. Amortization is recognized on a straight-line basis
over their estimated useful lives. The estimated useful lives and amortization methods are reviewed at the end of
each year, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets
with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses, if
applicable.
Intangible assets acquired in a business combination
Intangible assets acquired in a business combination and recognized separately from goodwill are initially
recognized at their fair value at the acquisition date.
Subsequent to initial recognition, intangible assets having a finite life acquired in a business combination are
reported at cost less accumulated amortization and accumulated impairment losses, if applicable, on the same
basis as intangible assets that are acquired separately. Intangible assets having an indefinite life are not amortized
and are therefore carried at cost less accumulated impairment losses, if applicable.
Derecognition of intangible assets
An intangible asset is derecognized on disposal, or when no future economic benefits are expected from use or
disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between
the net disposal proceeds and the carrying amount of the asset, are recognized in profit or loss when the asset is
derecognized.
The Company reviews each reporting period the amortization periods of its intangible assets with finite useful lives.
The Company also reviews each reporting period the useful lives of its intangible assets with indefinite useful lives to
determine whether events and circumstances continue to support an indefinite useful life assessment for those assets.
The Company currently carries the following intangible assets on its books:
Franchise rights and master franchise rights
The franchise rights and master franchise rights acquired through business combinations were recognized at the fair
value of the estimated future cash inflows related to the acquisition of franchises. The franchise rights and master
franchise rights are generally amortized on a straight-line basis over the terms of the agreements, which typically
range between 10 to 20 years.
Step-in rights
Step-in rights are the rights of the Company to take over the premises and associated lease of a franchised location
in the event the franchise is in default of payments. These are acquired through business combinations and are
recognized at their fair value at the time of the acquisition. They are amortized over the term of the franchise
agreement.
Page 21
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
3.
Accounting policies (continued)
Trademarks
Trademarks acquired through business combinations were recognized at their fair value at the time of the acquisition
and are not amortized. Trademarks were determined to have an indefinite useful life based on their strong brand
recognition and their ability to generate revenue through changing economic conditions with no foreseeable time limit.
Other
Included in other intangible assets is primarily purchased software, which is being amortized over its expected useful
life on a straight-line basis.
Impairment and reversal of impairment of long-lived assets
At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets
to determine whether there is any indication of impairment. If any such indication exists, the recoverable amount of
the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to
estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the CGU
to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets
are also allocated to individual CGU, or otherwise they are allocated to the smallest group of CGUs for which a
reasonable and consistent allocation basis can be identified. A majority of the Company’s intangible assets do not
have cash inflows independent of those from other assets and as such are tested within their respective CGU. For the
purpose of the franchise and master franchise rights and trademarks, the smallest group of CGUs for which a
reasonable and consistent allocation basis can be identified is the brand level and constitutes the lowest level at which
an asset or group of assets has the possibility of generating cash inflows.
Intangible assets with indefinite useful lives are tested for impairment at least annually, and whenever there is an
indication that the asset may be impaired. Franchise rights and master franchise rights are tested annually as part of
the CGU annual testing or whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the
estimated projected operating cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset for which the
estimates of projected operating cash flows have not been adjusted.
If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount
of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognized immediately in profit or
loss. The Company does not reduce the carrying value of an asset below the highest of its fair value less cost of
disposal and its value in use.
At the end of each reporting period, the Company reviews whether there is any indication that the events and
circumstances which led to prior years’ impairment losses for its franchise rights, master franchise rights and
trademarks may no longer exist. If any such indication exists, the Company shall estimate the recoverable amount of
that asset.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or CGU) is increased to the
revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been recognized for the asset (or CGU) in prior
years. A reversal of an impairment loss is recognized immediately in profit or loss.
Page 22
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
3.
Accounting policies (continued)
Impairment of goodwill
For the purposes of impairment testing, goodwill is allocated to the CGU or a group of CGUs (“goodwill unit”) that are
considered to represent the lowest level within the group at which the goodwill is monitored for internal management
purposes. As at November 30, 2021, goodwill is allocated as follows:
Canada goodwill
US & International excluding Papa Murphy’s goodwill
Goodwill unit description
A group of CGUs comprised of acquired brands in
Canada’s operating segment
A group of CGUs comprised of acquired brands in the
US & International operating segment, excluding the
Papa Murphy’s brand
Papa Murphy’s goodwill
One CGU comprised of Papa Murphy’s brand
Goodwill and trademarks are tested for impairment annually as at August 31, or more frequently when there is an
indicator of impairment. If the recoverable amount of the goodwill unit is less than its carrying amount, the impairment
loss reduces the carrying amount of any goodwill allocated to the goodwill unit. Any impairment loss for goodwill is
recognized directly in profit or loss in the consolidated statement of income (loss). An impairment loss recognized for
goodwill is not reversed in subsequent periods.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the
estimated projected operating cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset for which the
estimates of projected operating cash flows have not been adjusted.
Cash and restricted cash
Cash and restricted cash includes cash on hand and short-term investments, if any, with maturities upon acquisition
of generally three months or less or that are redeemable at any time at full value and for which the risk of a change in
value is not significant. As at November 30, 2021, cash and restricted cash included $462 of restricted cash (2020 –
$468) that is required as part of guarantees on certain lease commitments.
Inventories
Inventories are measured at the lower of cost and net realizable value. Costs of inventories are determined on a first-
in-first-out basis and include acquisition costs, conversion costs and other costs incurred to bring inventories to their
present location and condition. The cost of finished goods includes a pro-rata share of production overhead based on
normal production capacity.
In the normal course of business, the Company enters into contracts for the construction and sale of franchise
locations. The related work in progress inventory includes all direct costs relating to the construction of these locations
and is recorded at the lower of cost and net realizable value.
Net realizable value represents the estimated selling price for inventories less all estimated costs of completion and
costs necessary to make the sale.
Financial instruments
Classification of financial assets
Financial assets are recognized when the Company becomes a party to the contractual provisions of the instrument.
Financial assets are initially measured at fair value. Transaction costs that are directly attributable to the acquisition
or issue of financial assets (other than financial assets at fair value through profit or loss “FVTPL”) are added to or
deducted from the fair value of the financial assets, as appropriate, on initial recognition. Transaction costs directly
attributable to the acquisition of financial assets at FVTPL are recognized immediately in profit or loss.
Page 23
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
3.
Accounting policies (continued)
Financial instruments (continued)
Classification of financial assets (continued)
On initial recognition, the Company classifies its financial assets as subsequently measured at either amortized cost,
Fair Value through Other Comprehensive Income “FVOCI” or FVTPL, depending on its business model for managing
the financial assets and the contractual cash flow characteristics of the financial assets.
A financial asset is subsequently measured at amortized cost if the asset is held within a business model whose
objective is to hold assets in order to collect contractual cash flows and the contractual terms of the financial asset
give rise, on specified dates, to cash flows that are solely payments of principal and interest. Unless a financial asset
is designated at FVTPL, a financial asset is subsequently measured at FVOCI if the asset is held within a business
model in order to collect contractual cash flows and sell financial assets and the contractual terms of the instrument
give rise, on specified dates, to cash flows that are solely payments of principal and interest. Financial assets that do
not meet either the contractual cash flow characteristics of solely payments of principal and interest or the business
model of held to collect or held to collect and sell are measured at FVTPL. Financial assets measured at FVTPL and
any subsequent changes therein are recognized in net income.
The Company currently classifies its cash, accounts receivable and loans receivable as assets measured at amortized
cost.
Effective interest method
The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating
interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future
cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate,
transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where
appropriate, a shorter period, to the net carrying amount on initial recognition.
Income is recognized on an effective interest basis for debt instruments other than those financial assets classified as
at FVTPL.
Impairment of financial assets
The Company uses the simplified expected credit-loss (“ECL”) model for its trade receivables, as permitted by IFRS
9. The simplified approach under IFRS 9 permits the use of the lifetime expected loss provision for all trade receivables
and also incorporates forward-looking information. Lifetime ECL represents the ECL that will result from all probable
default events over the expected life of a financial instrument.
For its loans receivable balance carried at amortized cost, the Company has applied the general ECL model. Unlike
the simplified approach, the general ECL model depends on whether there has been a significant increase in credit
risk. The Company considers the probability of default upon initial recognition of the financial asset and whether there
has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether
there is a significant increase in credit risk, the Company compares the risk of a default occurring on the asset as at
the reporting date with the risk of default as at the date of initial recognition of the financial asset.
A significant increase in credit risk is assessed based on changes in the probability of default since initial recognition
along with borrower-specific qualitative information, or when loans are more than 30 days past due. Loans are
considered impaired and in default when they are 90 days past due or there is sufficient doubt regarding the ultimate
collectability of principal and/or interest. Loans that are 180 days past due are written down to the present value of the
expected future cash flows. Impairment under the IFRS 9 general ECL model is assessed on an individual basis. In
assessing the risk of default, the Company also incorporates available reasonable and supportive forward-looking
information.
When credit risk is assessed as being low or when there has not been a significant increase in credit risk since initial
recognition, the ECL is based on a 12-month ECL which represents the portion of lifetime ECL expected to occur from
default events that are possible within 12 months after the reporting date. If a significant increase in credit risk has
occurred throughout a reporting period, impairment is based on lifetime ECL.
Page 24
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
3.
Accounting policies (continued)
Financial instruments (continued)
Derecognition of financial assets
The Company derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire,
or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another
entity. On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the
sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other
comprehensive income (loss) and accumulated in equity is recognized in profit or loss.
Derecognition of financial liabilities
The Company derecognizes financial liabilities when, and only when, the Company’s obligations are discharged,
cancelled or they expire. The difference between the carrying amount of the financial liability derecognized and the
consideration paid and payable is recognized in profit or loss.
Classification of financial liabilities
Financial liabilities are initially recorded at fair value and subsequently measured at amortized cost using the effective
interest rate method with gains and losses recognized in net income in the period that the liability is derecognized,
except for financial liabilities classified as FVTPL. These financial liabilities, including derivative liabilities and certain
obligations, are subsequently measured at fair value with changes in fair value recorded in net income in the period
in which they arise. Financial liabilities designated as FVTPL are recorded at fair value with changes in fair value
attributable to changes in the Company’s own credit risk recorded in net income.
Financial liabilities classification:
Accounts payable and accrued liabilities
Revolving credit facility
Non-interest-bearing contract cancellation fees
and holdbacks
Contingent consideration related to the acquisition
of Allô! Mon Coco
Non-controlling interest buyback obligation
Non-controlling interest option
Obligation to repurchase a partner in a joint
venture
Provisions
Amortized cost
Amortized cost
Amortized cost
FVTPL
FVTPL
FVTPL
FVTPL
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past
event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of
the amount of the obligation.
The Company makes assumptions and estimations based on its current knowledge of future disbursements it will
have to make in connection with various events that have occurred in the past and for which the amount to be
disbursed and the timing of such disbursement are uncertain at the date of producing its financial statements. This
includes provisions for onerous contracts, litigations and disputes and contingencies. The amount recognized as a
provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting
period, taking into account the risks and uncertainties surrounding the obligation. Provisions are measured at
management’s best estimate of the expenditure required to settle the obligation at the end of the reporting period, and
are discounted to present value when the effect is material. This is recorded in cost of goods sold and rent (Note 27)
on the consolidated statement of income (loss).
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third
party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount
of the receivable can be measured reliably.
Page 25
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
3.
Accounting policies (continued)
Provisions (continued)
Onerous contracts
Present obligations arising under onerous contracts are recognized and measured as provisions. An onerous
contract is considered to exist where the Company has a contract under which the unavoidable costs of meeting
the obligations under the contract exceed the economic benefits expected to be received from the contract.
Litigation, disputes and closed stores
Provisions for the expected cost of litigation, disputes and the cost of settling leases for closed stores, with the
exception of lease liabilities already recorded pursuant to IFRS 16, are recognized when it becomes probable the
Company will be required to settle the obligation, at management’s best estimate of the expenditure required to
settle the Company’s obligation.
Contingent liabilities acquired in a business combination
Contingent liabilities acquired in a business combination are initially measured at fair value at the acquisition date.
At the end of subsequent reporting periods, such contingent liabilities are measured at the higher of the amount
that would be recognized in accordance with IAS 37 and the amount initially recognized less cumulative
amortization recognized, if any.
Gift card and loyalty program liabilities
Gift card liability represents liabilities related to unused balances on reloadable payment cards. Loyalty program
liabilities represent the dollar value of the loyalty points earned and unused by customers.
The Company’s various franchised and corporate-owned locations, in addition to third-party companies, sell gift cards
to be redeemed at the Company’s corporate and franchised locations for food and beverages only. Proceeds from the
sale of gift cards are included in gift card liability until redeemed by the gift cardholder as a method of payment for
food and beverage purchases.
Due to the inherent nature of gift cards, it is not possible for the Company to determine what portion of the gift card
liability will be redeemed in the next 12 months and, therefore, the entire unredeemed gift card liability is considered
to be a current liability.
Deferred revenue and deposits
The Company has deferred revenue and deposits for amounts received for which the service or sale of goods
associated with these revenues have not yet been rendered. These are comprised mainly of franchise fee deposits,
unearned rent, and supplier contributions. Revenues on these are recorded once the service or contract terms have
been met and the services or goods have been delivered. The Company recognizes certain supplier contribution
revenues based on estimated considerations to be received from suppliers. These estimates are based on historical
patterns of purchase and earned revenues.
Share-based payment arrangements
The Company measures stock options granted to employees that vest in specified installments over the service period
based on the fair value of each tranche on the grant date by using the Black-Scholes option-pricing model. Based on
the Company’s estimate of equity instruments that will eventually vest, a compensation expense is recognized over
the vesting period applicable to the tranche with a corresponding increase to contributed surplus. Details regarding
the determination of the fair value of equity-settled share-based transactions are set out in Note 22.
At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected
to vest. The impact of the revision of the original estimates, if any, is recognized in profit or loss such that the cumulative
expense reflects the revised estimate, with a corresponding adjustment in contributed surplus. When the stock options
are exercised, share capital is credited by the sum of the consideration paid and the related portion previously recorded
in contributed surplus.
Page 26
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
3.
Accounting policies (continued)
Operating segments
An operating segment is a distinguishable component of the Company that engages in business activities from which
it may earn revenue and incur expenses, including revenue and expenses that relate to transactions with any of the
Company’s other components, and for which separate financial information is available. Segment disclosures are
provided for the Company’s operating segments (Note 31). The operating segments are determined based on the
Company’s management and internal reporting structure. All operating segments’ operating results are regularly
reviewed by the Chief Operating Officers (“COOs”) to make decisions on resources to be allocated to the segment
and to assess its performance.
Joint arrangements
Joint arrangements are arrangements in which the Company exercises joint control as established by contracts
requiring unanimous consent for decisions about the activities that significantly affect the arrangement’s returns. When
the Company has the rights to the net assets of the arrangement, the arrangement is classified as a joint venture and
is accounted for using the equity method. When the Company has rights to the assets and obligations for the liabilities
relating to an arrangement, the arrangement is classified as a joint operation and the Company accounts for each of
its assets, liabilities and transactions, including its share of those held or incurred jointly, in relation to the joint
operation.
Under the equity method of accounting, interests in joint ventures are initially recognized at cost and adjusted
thereafter to recognize the Company’s share of the profits or losses and movements in other comprehensive income
of the investee. When the Company’s share of losses in a joint venture equals or exceeds its interests in the joint
ventures, the Company does not recognize further losses unless it will incur obligations or make payments on behalf
of the joint ventures.
Unrealized gains resulting from transactions with joint ventures are eliminated, to the extent of the Company’s share
in the joint venture. For sales of products or services from the Company to its joint ventures, the elimination of
unrealized profits is considered in the carrying value of the investment in equity-accounted investees in the
consolidated statements of financial position and in the share in profit or loss of equity-accounted investees in the
consolidated statements of income.
Deferred consideration receivable
The Company’s deferred consideration receivable consists of a deferred consideration in conjunction with the sale of
its interest in 10220396 Canada Inc. The deferred consideration is a financial instrument measured at amortized cost
and is included in Loans and other receivables.
4. Changes in accounting policies
IFRS 3, Business Combinations
In October 2018, the IASB issued amendments to the definition of a business in IFRS 3. The amendments are intended
to assist entities to determine whether a transaction should be accounted for as a business combination or as an asset
acquisition.
The amendments to IFRS 3 were adopted effective December 1, 2020 and did not result in any adjustment.
IFRS 9, Financial Instruments, IAS 39, Financial Instruments: Recognition and Measurement, and IFRS 7,
Financial Instruments: Disclosures
In September 2019, the IASB published Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS
7) as a first reaction to the potential effects the Interbank offered rates (“IBOR”) reform could have on financial
reporting. Recent market developments have brought into question the long-term viability of the IBOR benchmarks.
The amendments deal with issues affecting financial reporting in the period before the replacement of an existing
interest rate benchmark with an alternative interest rate and address the implications for specific hedge accounting
requirements in IFRS 9 and IAS 39, which require forward-looking analysis. There are also amendments to IFRS 7
regarding additional disclosures around uncertainty arising from the interest rate benchmark reform.
The amendments to IFRS 9, IAS 39 and IFRS 7 were adopted effective December 1, 2020 and resulted in no
significant adjustment.
Page 27
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
5. Critical accounting judgments and key sources of estimation uncertainty
In the application of the Company’s accounting policies, which are described in Note 3, management is required to
make judgments and to make estimates and assumptions about the carrying amounts of assets and liabilities that are
not readily apparent from other sources. The estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the
revision and future periods if the revision affects both current and future periods.
The following are the critical judgments, apart from those involving estimations, that management has made in the
process of applying the Company’s accounting policies and that have the most significant effect on the amounts
recognized in the financial statements.
Impairment of long-lived assets
The Company assesses whether there are any indicators of impairment for all long-lived assets at each reporting
period date. In addition, management is required to use judgment in determining the grouping of assets to identify
a CGU; the determination is done based on management’s best estimation of what constitutes the lowest level at
which an asset or group of assets has the possibility of generating cash inflows.
Key sources of estimation uncertainty
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the
end of the year ended November 30, 2021, that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year.
Business combinations
For business combinations, the Company must make assumptions and estimates to determine the purchase price
accounting of the business being acquired. To do so, the Company must determine the acquisition date fair value
of the identifiable assets acquired, including such intangible assets as franchise rights and master franchise rights,
trademarks, step-in rights and liabilities assumed. Among other things, the determination of these fair market
values involves the use of discounted cash flow analyses and future system sales growth. Goodwill is measured
as the excess of the fair value of the consideration transferred including the recognized amount of any non-
controlling interest in the acquiree over the net recognized amount of the identifiable assets acquired and liabilities
assumed, all measured at the acquisition date. These assumptions and estimates have an impact on the asset
and liability amounts recorded in the statement of financial position on the acquisition date. In addition, the
estimated useful lives of the acquired amortizable assets, the identification of intangible assets and the
determination of the indefinite or finite useful lives of intangible assets acquired will have an impact on the
Company’s future profit or loss.
Impairment
The Company uses judgment in determining the grouping of assets to identify its CGUs for purposes of testing for
impairment of property, plant and equipment, right-of-use assets, goodwill, trademarks and franchise rights.
In testing for impairment of property, plant and equipment and right-of-use assets, the Company determined that
its CGUs mostly comprise of individual stores or groups of stores and the assets are thereby allocated to each
CGU.
In testing for impairment, goodwill acquired in a business combination is allocated to the CGUs that are expected
to benefit from the synergies of the business combination. In testing for impairment, trademarks and franchise
rights are allocated to the CGUs to which they relate. Furthermore, on a quarterly basis, judgment is used in
determining whether there has been an indication of impairment, which would require the completion of a quarterly
impairment test, in addition to the annual requirement.
Page 28
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
5. Critical accounting judgments and key sources of estimation uncertainty (continued)
Key sources of estimation uncertainty (continued)
Impairment (continued)
Impairment of property, plant and equipment and right-of-use assets
The Company performs an impairment test of its property, plant and equipment and right-of-use assets when
there is an indicator of impairment. The recoverable amounts of the Company’s corporate store assets are
generally estimated based on fair value less cost of disposal as this was determined to be higher than their
value in use. The fair value less cost of disposal of corporate stores is generally determined by estimating the
liquidation value of the restaurant equipment and any costs associated with exiting the lease.
During the years ended November 30, 2021 and 2020, the Company recognized impairment charges on its
property, plant and equipment (Note 15). The total impairment on property, plant and equipment of $131 (2020
– $3,166) represents a write-down of the carrying value of the leasehold improvements and equipment to their
fair value less cost of disposal, which was higher than their value in use.
During the years ended November 30, 2021 and 2020, the Company also recognized impairment charges on
its right-of-use assets (Note 10) of $1,550 (2020 – $4,291).
Impairment of franchise rights and trademarks
The Company performs at least annually an impairment test of its trademarks. The recoverable amounts of the
Company’s assets are generally estimated based on value in use calculations using a discounted cash flow
approach as this was determined to be higher than fair value less cost of disposal.
Discount rates are based on pre-tax rates that reflect the current market assessments, taking the time value of
money and the risks specific to the CGU into account.
During the years ended November 30, 2021 and 2020, the Company recognized net impairment charges on
its franchise rights and trademarks (Note 15). The total net impairment charge of $5,772 (2020 – $51,693)
includes: an impairment charge of $15,135 (2020 – $51,693), representing a write-down of the carrying value
to the fair value of the trademarks and franchise rights; partially offset by a reversal of impairment charge of
$9,363 (2020 – nil). The fair value was determined using significant unobservable inputs such as discount rates
and projected operating cash flows. The fair value is classified as level 3 in the fair value hierarchy. During the
year ended November 30, 2021, the Company also carried out a review of the recoverable amount allocated
to the intangible assets associated with the “Houston Avenue Bar & Grill” and “Industria Pizza + Bar” brands,
where the recoverable amount was measured at fair value less costs of disposal.
These calculations take into account our best estimate of projected operating cash flows. Projected operating
cash flows are estimated based on a multiyear extrapolation of the most recent historical actual results or
budgets and a terminal value calculated by discounting the final year in perpetuity.
Impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the recoverable amount in use of the
goodwill unit to which goodwill has been allocated. The value in use calculation requires management to
estimate the projected operating cash flows expected to arise from the goodwill unit and a suitable discount
rate in order to calculate present value.
During the year ended November 30, 2021, no impairment charge (2020 – impairment charge of $67,967) on
goodwill was required (Note 15).
Gift card liabilities
Management is required to make certain assumptions in both the prorated recognition based on redemption pattern
and remoteness recognition of gift card breakage. The significant estimates are breakage rate and the redemption
patterns.
Page 29
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
5. Critical accounting judgments and key sources of estimation uncertainty (continued)
Impact of COVID-19
During the year ended November 30, 2021, the COVID-19 pandemic continued to impact the markets in which MTY
and its franchise partners and suppliers operate. Canada and certain parts of the United States (“US”) continued to
be impacted by the continuation of government-imposed restrictions including restrictions on dine-in guests, reduced
operating hours and/or temporary closures. The year saw the ramp-up of the global vaccination campaign, which led
to the gradual lifting of restrictions in some territories, including the resumption of indoor and outdoor dining, and the
reopening of a number of restaurants. However, the end of the year saw the rise of a fourth wave driven by the Delta
variant, resulting in more infections and certain additional public health measures, including the mandatory
presentation of a vaccine passport for seated dining in restaurants in some territories. The disruptions are expected
to persist into 2022 with uncertainty surrounding the rollout of the vaccine boosters and the spread of the Omicron
variant. The longer-term impact on the economy and the rules and restrictions that will apply to MTY’s restaurants are
expected to fluctuate and impact the network for the foreseeable future.
As a result of the continued and uncertain economic and business impacts of the COVID-19 pandemic, the Company
continues to monitor the estimates, judgments and assumptions used in the financial statements. For the year ended
November 30, 2021, the Company determined that there was no indication of impairment attributable to COVID-19.
Accordingly, the Company did not record impairment charges on its property, plant and equipment, intangible assets,
and goodwill attributable to COVID-19. These estimates, judgments and assumptions are subject to change.
The consolidated financial statements have been impacted with respect to the following as a result of COVID-19:
- Changes to lease liabilities and finance lease receivables were made to reflect changes in lease payment terms;
- Reduction in wage expense, presented in Wage and rent subsidies in Note 27 of these consolidated financial
statements, for the year ending November 30, 2021 of $4,073 (2020 – $6,775) resulting from the Canadian
Employment Wage Subsidies, and of $291 (2020 – nil) resulting from the Employee Retention Credit available to
US taxpayers under the Coronavirus Aid, Relief and Economic Security Act; and
- Reduction in rent expense, presented in Wage and rent subsidies in Note 27 of these consolidated financial
statements, for the year ending November 30, 2021 of $1,385 (2020 – $245) resulting from the Canadian
Emergency Rent Subsidies.
6.
Future accounting changes
A number of new standards, interpretations and amendments to existing standards were issued by the IASB that are
not yet effective for the period ended November 30, 2021 and have not been applied in preparing these consolidated
financial statements.
The following amendments may have a material impact on the consolidated financial statements of the Company:
Standard
IAS 37, Provisions, Contingent Liabilities and
Contingent Assets
IAS 1, Presentation of Financial Statements
IAS 8, Accounting Policies, Changes in Accounting
Estimates and Errors
IAS 12, Income Taxes
Issue date
Effective date for
the Company
Impact
May 2020
January 2020,
July 2020 &
February 2021
December 1, 2022
In assessment
December 1, 2023
In assessment
February 2021
May 2021
December 1, 2023
December 1, 2023
In assessment
In assessment
IAS 37, Provisions, Contingent Liabilities and Contingent Assets
In May 2020, the IASB published Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37) amending
the standard regarding costs a company should include as the cost of fulfilling a contract when assessing whether a
contract is onerous. The changes in Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37) specify
that the “cost of fulfilling” a contract comprises the “costs that relate directly to the contract”. Costs that relate directly
to a contract can either be incremental costs of fulfilling that contract or an allocation of other costs that relate directly
to fulfilling contracts. The amendments to IAS 37 are effective for annual reporting periods beginning on or after
January 1, 2022. Earlier application is permitted. The Company will adopt the amendments on December 1, 2022.
Page 30
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
6.
Future accounting changes (continued)
IAS 1, Presentation of Financial Statements
In January 2020, the IASB issued Classification of Liabilities as Current or Non-current (Amendments to IAS 1)
providing a more general approach to the classification of liabilities under IAS 1 based on the contractual arrangements
in place at the reporting date. The amendments in Classification of Liabilities as Current or Non-current (Amendments
to IAS 1) affect only the presentation of liabilities in the statement of financial position, not the amount or timing of
recognition of any asset, liability income or expenses, or the information that entities disclose about those items.
In July 2020, the IASB published Classification of Liabilities as Current or Non-current – Deferral of Effective Date
(Amendment to IAS 1) deferring the effective date of the January 2020 amendments to IAS 1 by one year.
In February 2021, the IASB issued Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice
Statement 2) with amendments that are intended to help preparers in deciding which accounting policies to disclose
in their financial statements. An entity is now required to disclose its material accounting policy information instead of
its significant accounting policies and several paragraphs are added to IAS 1 to explain how an entity can identify
material accounting policy information and to give examples of when accounting policy information is likely to be
material. The amendments also clarify that: accounting policy information may be material because of its nature, even
if the related amounts are immaterial; accounting policy information is material if users of an entity’s financial
statements would need it to understand other material information in the financial statements; and if an entity discloses
immaterial accounting policy information, such information shall not obscure material accounting policy information.
The amendments to IAS 1 are effective for annual reporting periods beginning on or after January 1, 2023. Earlier
application is permitted. The Company will adopt the amendments on December 1, 2023.
IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors
In February 2021, the IASB issued Definition of Accounting Estimates (Amendments to IAS 8) with amendments that
are intended to help entities to distinguish between accounting policies and accounting estimates. The changes to IAS
8 focus entirely on accounting estimates and clarify that: the definition of a change in accounting estimates is replaced
with a definition of accounting estimates; entities develop accounting estimates if accounting policies require items in
financial statements to be measured in a way that involves measurement uncertainty; a change in accounting estimate
that results from new information or new developments is not the correction of an error; and a change in an accounting
estimate may affect only the current period’s profit or loss, or the profit or loss of both the current period and future
periods. The amendments to IAS 8 are effective for annual reporting periods beginning on or after January 1, 2023.
Earlier application is permitted. The Company will adopt the amendments on December 1, 2023.
IAS 12, Income Taxes
In May 2021, the IASB published Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction
(Amendments to IAS 12) that clarifies how companies account for deferred tax on transactions such as leases and
decommissioning obligations. The main change is an exemption from the initial recognition exemption, which does
not apply to transactions in which both deductible and taxable temporary differences arise on initial recognition that
result in the recognition of equal deferred tax assets and liabilities. The amendments to IAS 12 are effective for annual
reporting periods beginning on or after January 1, 2023. Earlier application is permitted. The Company will adopt the
amendments on December 1, 2023.
Page 31
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
7. Accounts receivable
The following table provides details on trade accounts receivable not past due, past due and the related credit loss
allowance.
Total accounts receivable
Less: Allowance for credit losses
Total accounts receivable, net
Of which:
Not past due
Past due for more than one day but no more than 30 days
Past due for more than 31 days but no more than 60 days
Past due for more than 61 days
Total accounts receivable, net
Allowance for credit losses, beginning of year
(Decrease) increase to current year provision
Reversal of amounts previously written off
Write-offs
Impact of foreign exchange
Allowance for credit losses, end of year
8.
Inventories
Raw materials
Work in progress
Finished goods
Total inventories
2021
$
65,915
8,456
57,459
42,257
2,549
2,131
10,522
57,459
2021
$
12,531
(1,324)
41
(2,697)
(95)
8,456
2021
$
4,057
513
6,137
10,707
2020
$
68,417
12,531
55,886
35,946
3,818
2,731
13,391
55,886
2020
$
8,176
5,459
12
(1,950)
834
12,531
2020
$
3,505
466
5,444
9,415
Inventories are presented net of a $27 allowance for obsolescence (2020 – $51). All of the inventories are expected
to be sold within the next 12 months.
Inventories expensed during the year ended November 30, 2021 were $127,657 (2020 – $107,798).
Page 32
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
9.
Loans and other receivables
Loans and other receivables generally result from: the sales of franchises and of various advances to certain
franchisees; and a deferred consideration receivable from the disposal of the Company’s 80% interest in 10220396
Canada Inc. Loans and other receivables consist of the following:
2021
$
2020
$
4,057
1,569
2,488
(1,189)
1,299
1,750
3,049
6,871
2,111
4,760
(1,527)
3,233
—
3,233
Loans receivable bearing interest between 0% and 8% per annum,
receivable in monthly installments of $156 in aggregate, including
principal and interest, ending in 2028
Less: Allowance for credit losses on loans receivable
Current portion of loans receivable
Loans receivable
Deferred consideration receivable
Loans and other receivables
The capital repayments of loans receivable in subsequent years will be:
2022
2023
2024
2025
2026
Thereafter
$
1,189
485
283
170
360
1
2,488
10.
Leases
Leases as a lessee relate primarily to leases of premises in relation to the Company’s operations and its corporate
store locations. For many of the leases related to its franchised locations, the Company is on the head lease of the
premises and a corresponding sublease contract was entered into between the Company and its unrelated franchisee.
The sublease contract is substantially based on the same terms and conditions as the head lease.
Leases and subleases typically have terms ranging between five and 10 years at inception. The Company does not
have options to purchase the premises on any of its leases.
Page 33
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
10.
Leases (continued)
Right-of-use assets
The following table provides the net carrying amounts of the right-of-use assets by class of underlying asset and the
changes in the years ended November 30, 2021 and 2020:
Offices,
corporate and
dark stores
$
Store locations
subject to
operating
subleases
$
Balance as at December 1, 2019
Additions
Depreciation expense
Impairment charge
De-recognition/lease modification of lease liabilities
Foreign exchange
Balance as at November 30, 2020
Additions
Depreciation expense
Impairment charge
De-recognition/lease modification of lease liabilities
Foreign exchange
Balance as at November 30, 2021
55,937
17,452
(10,951)
(4,090)
893
(905)
58,336
14,658
(10,615)
(1,550)
(14,493)
(538)
45,798
12,088
—
(1,120)
(201)
(489)
—
10,278
—
(1,428)
—
4,211
6
13,067
Other
$
813
92
(273)
—
3
(26)
609
834
(460)
—
93
(4)
1,072
Total
$
68,838
17,544
(12,344)
(4,291)
407
(931)
69,223
15,492
(12,503)
(1,550)
(10,189)
(536)
59,937
Finance lease receivables and lease liabilities
The following table provides the net carrying amounts of the finance lease receivables and lease liabilities, and the
changes in the years ended November 30, 2021 and 2020:
Balance as at December 1, 2019
Additions
Lease renewals and modifications
Lease terminations
Other adjustments
Interest income (expense)
(Receipts) payments
Foreign exchange
Balance as at November 30, 2020
Additions
Lease renewals and modifications
Lease terminations
Other adjustments
Interest income (expense)
(Receipts) payments
Foreign exchange
Balance as at November 30, 2021
Finance lease
receivables
$
526,421
22,792
47,467
(22,636)
(3,090)
13,234
(113,016)
(3,045)
468,127
8,379
35,622
(16,082)
1,722
11,553
(108,142)
(1,910)
399,269
Lease
liabilities
$
(611,079)
(26,409)
(51,303)
15,781
—
(15,715)
126,042
3,934
(558,749)
(14,649)
(35,110)
18,717
4,037
(13,848)
123,496
2,558
(473,548)
Page 34
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
10.
Leases (continued)
Recorded in the consolidated statements of financial position as follows:
Current portion
Long-term portion
November 30, 2020
Current portion
Long-term portion
November 30, 2021
Maturity analysis
Finance lease
receivables
$
90,303
377,824
468,127
89,046
310,223
399,269
Lease
liabilities
$
(114,915)
(443,834)
(558,749)
(101,973)
(371,575)
(473,548)
The following table sets out a maturity analysis of lease payments, showing the undiscounted lease payments to be
paid or received after November 30, 2021:
2022
2023
2024
2025
2026
Thereafter
Total undiscounted lease payments
Unguaranteed residual values
Gross investment in the lease
Less: Unearned finance income
Present value of minimum lease payment receivables
Allowance for credit losses
Current portion of finance lease receivables
Finance lease receivables
Lease
liabilities
$
Finance lease
receivables
$
Operating
subleases
$
112,485
100,480
83,178
68,361
53,337
92,928
510,769
—
—
—
—
—
—
—
98,449
87,889
72,524
58,648
44,657
69,399
431,566
2,636
434,202
(30,995)
403,207
(3,938)
(89,046)
310,223
1,489
1,282
975
873
744
1,193
6,556
—
—
—
—
—
—
—
The Company has recognized net rent expense of $2,914 (2020 – $5,839) related to its short-term leases, leases of
low-value assets, and variable lease payments.
11.
Investment in a joint venture
On December 3, 2019, one of the Company’s wholly owned subsidiaries completed its acquisition of a 70% interest
in a joint venture that had acquired Turtle Jack’s Muskoka Grill, COOP Wicked Chicken and Frat’s Cucina (together,
“Tortoise Group”), three casual dining concepts operating in the province of Ontario, for a consideration of $26,104.
This consideration includes a deferred contingent consideration amounting to $4,129, an obligation for the repurchase
of its partner in a joint venture of $2,870 and cash consideration of $19,105. The Company has recorded its interest
as an investment in a joint venture. The Company has guaranteed liabilities of the joint venture amounting to $7,867,
which is payable to Tortoise Group upon the repurchase of the 30% joint venture partner.
Page 35
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
12. Property, plant and equipment
Cost
Balance as at November 30, 2019
Additions
Disposals
Impairment (Note 15)
Foreign exchange
Balance as at November 30, 2020
Additions
Disposals (2)
Impairment (Note 15)
Foreign exchange
Balance as at November 30, 2021
Accumulated depreciation
Balance as at November 30, 2019
Eliminated on disposal of assets
Foreign exchange
Depreciation expense
Balance as at November 30, 2020
Eliminated on disposal of assets (2)
Foreign exchange
Depreciation expense
Balance as at November 30, 2021
Carrying amounts
November 30, 2020
November 30, 2021
Land
$
Buildings
$
Leasehold
improve-
ments
$
Equipment
(1)
Computer
hardware
(1)
$
$
Rolling
stock
$
1,236
—
—
—
—
1,236
—
—
—
—
1,236
5,223
30
—
—
—
5,253
12
(131)
—
—
5,134
11,537
707
(309)
(2,147)
(91)
9,697
1,336
(2,703)
(20)
(75)
8,235
12,562
2,802
(1,918)
(1,019)
(55)
12,372
3,811
(693)
(111)
(16)
15,363
2,612
658
(6)
—
(18)
3,246
1,170
(2)
—
8
4,422
567
—
(13)
—
(2)
552
110
(65)
—
(1)
596
Land
$
Buildings
$
Leasehold
improve-
ments
$
Equipment
(1)
Computer
hardware
(1)
$
$
Rolling
stock
$
—
—
—
—
—
—
—
—
—
1,393
—
—
231
1,624
(32)
—
221
1,813
3,726
(162)
(42)
1,813
5,335
(1,819)
(10)
1,219
4,725
5,758
(945)
(52)
1,956
6,717
(89)
(15)
1,616
8,229
1,337
(1)
(7)
561
1,890
(14)
1
528
2,405
160
(13)
(1)
93
239
(38)
—
87
288
Total
$
33,737
4,197
(2,246)
(3,166)
(166)
32,356
6,439
(3,594)
(131)
(84)
34,986
Total
$
12,374
(1,121)
(102)
4,654
15,805
(1,992)
(24)
3,671
17,460
Land
$
Buildings
$
Leasehold
improve-
ments
$
Equipment
(1)
Computer
hardware
(1)
$
$
Rolling
stock
$
Total
$
1,236
1,236
3,629
3,321
4,362
3,510
5,655
7,134
1,356
2,017
313
308
16,551
17,526
(1) Prior year amounts have been restated to reflect a reclassification between equipment and computer hardware.
(2) During the year ended November 30, 2021, the Company disposed of two (2020 – two) portfolios comprised of
seven and 24 (2020 – seven and nine) corporately-owned locations in the US segment that were converted into
franchises upon completion of the sale. The Company received a total consideration of $4,201 (2020 – $11,689)
for both portfolios and recognized a gain on disposal of $1,374 (2020 – loss of $140), presented in Gain (loss) on
disposal of property, plant and equipment and assets held for sale in its consolidated statements of income (loss).
Page 36
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
13.
Intangible assets
Cost
Balance as at November 30, 2019
Additions (2)
Foreign exchange
Impairment (Note 15)
Balance as at November 30, 2020
Additions (2)
Disposals
Foreign exchange
Net impairment (Note 15)
Balance as at November 30, 2021
Accumulated amortization
Balance as at November 30, 2019
Foreign exchange
Amortization
Balance as at November 30, 2020
Disposals
Foreign exchange
Amortization
Balance as at November 30, 2021
Carrying amounts
November 30, 2020
November 30, 2021
Franchise
and master
franchise
rights Trademarks Step-in rights Customer list
$
$
$
$
663,394
—
(9,244)
(34,537)
619,613
—
(1,270)
(5,202)
(4,788)
608,353
1,199
—
—
—
1,199
—
—
—
—
1,199
10,318
—
—
—
10,318
—
—
—
—
10,318
393,234
11
(5,367)
(17,156)
370,722
—
(2,180)
(2,997)
(752)
364,793
Franchise
and master
franchise
rights Trademarks Step-in rights Customer list
$
$
$
$
—
—
—
—
—
—
—
—
740
—
119
859
—
—
119
978
819
—
819
1,638
—
—
818
2,456
113,545
(1,849)
28,923
140,619
(1,259)
(553)
26,136
164,943
Franchise
and master
franchise
rights Trademarks Step-in rights Customer list
$
$
$
$
Other (1)
$
Total
$
6,612
1,288
(53)
—
7,847
324
—
(33)
(232)
7,906
1,074,757
1,299
(14,664)
(51,693)
1,009,699
324
(3,450)
(8,232)
(5,772)
992,569
Other (1)
$
1,554
(15)
1,015
2,554
—
(5)
1,369
3,918
Total
$
116,658
(1,864)
30,876
145,670
(1,259)
(558)
28,442
172,295
Other (1)
$
Total
$
230,103
199,850
619,613
608,353
340
221
8,680
7,862
5,293
3,988
864,029
820,274
(1) Other items include $579 (2020 – $579) of licenses with an indefinite term that are not amortized.
(2) Non-cash items are included in additions to intangible assets amounting to nil (2020 – $128).
Page 37
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
13.
Intangible assets (continued)
Indefinite life intangible assets consist of trademarks and perpetual licenses, where each brand represents a separate
CGU for impairment testing, for 56 CGUs (2020 – 58 CGUs) totalling $608,932 (2020 – $620,192).
14. Goodwill
The changes in the carrying amount of goodwill are as follows:
Goodwill, beginning of year
Disposal (Note 16)
Foreign exchange
Goodwill, end of year
Accumulated impairment, beginning of year
Impairment (Note 15)
Foreign exchange
Accumulated impairment, end of year
2021
$
502,531
(7,807)
(4,097)
490,627
63,079
—
(842)
62,237
2020
$
510,171
—
(7,640)
502,531
—
67,967
(4,888)
63,079
Carrying amount
428,390
439,452
As at November 30, 2021, goodwill was allocated to three (2020 – three) goodwill units as follows:
Canada (1)
US & International excluding Papa Murphy's (2)
Papa Murphy's (2)
2021
$
2020
$
187,543
119,385
121,462
428,390
195,350
121,000
123,102
439,452
(1) Variance from prior year due to disposal of interest in 10220396 Canada Inc. (see Note 16)
(2) Variance from prior year due to foreign exchange conversion.
15. Net impairment charge – property, plant and equipment, intangible assets and goodwill
During the year ended November 30, 2021, there were indicators of impairment that led the Company to carry out a
review of the recoverable amount allocated to the intangible assets associated with the “Houston Avenue Bar & Grill”
and “Industria Pizza + Bar” brands (see Note 16). The recoverable amount was measured at fair value less costs of
disposal. The review led to the recognition of a non-cash impairment charge of $5,274 (comprised of $2,229 and
$3,045 of impairment of franchise rights and trademarks, respectively) for the Canada geographical segment.
Furthermore, the Company performed its annual impairment test as at August 31, 2021:
-
-
For seven of its brands (four and three brands in the Canada and US & International geographical segments,
respectively), an additional impairment charge was required in the amount of $9,861.
For five of its brands (three and two brands in the Canada and US & International geographical segments,
respectively), the Company reversed the prior year’s impairment charges in the amount of $9,363, based on the
Company’s conclusion that the events and circumstances which led to the previous year’s impairment charges
no longer exist. Those events and circumstances, which included the expected adverse impacts of COVID-19,
including temporary store closures and reduction in sales at franchised locations in the prior year, were favorably
resolved, with the brands’ performances exceeding the sales forecasts for cash flows that had been used in the
prior year’s impairment review.
Page 38
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
15.
Net impairment charge – property, plant and equipment, intangible assets and goodwill (continued)
Additionally, the Company recorded $131 of impairment losses on its property, plant and equipment, for a total of
$5,903 of net impairment charges on its property, plant and equipment and intangible assets for the year ended
November 30, 2021, which have been recognized in the consolidated statements of comprehensive income (loss).
Impairment charges were based on the amount by which the carrying values of the assets exceeded the recoverable
amounts, determined using expected discounted projected operating cash flows for trademarks and franchise rights.
Impairment (reversal of impairment) by geographical segment for the year ended November 30, 2021:
Intangible assets
Property,
plant and
equipment
$
Franchise
rights
$
Trademarks
$
Other
$
Total
$
11,634
3,632
15,266
(2,323)
(7,040)
(9,363)
Canada
US & International
Impairment charge
Canada
US & International
Reversal of impairment charge
Net impairment charge
97
34
131
—
—
—
131
2,809
667
3,476
(531)
(2,193)
(2,724)
8,496
2,931
11,427
(1,792)
(4,847)
(6,639)
232
—
232
—
—
—
752
4,788
232
5,903
Impairment by geographical segment for the year ended November 30, 2020:
Intangible assets
Property,
plant and
equipment
$
Franchise
rights
$
Trademarks
$
Goodwill (1)
$
Canada
US & International
Impairment charge
2,379
787
3,166
10,898
6,258
17,156
22,003
12,534
34,537
—
67,967
67,967
Total
$
35,280
87,546
122,826
(1) Impairment was recorded on the goodwill allocated to the US & International excluding Papa Murphy’s goodwill
unit.
The key assumptions used, where the recoverable amount was measured as a goodwill unit’s value in use, are those
related to projected operating cash flows, as well as the discount rates. The sales forecasts for cash flows were based
on the subsequent fiscal year’s budgeted operating results, which were prepared by management and approved by
the Board, and internal forecasts for subsequent years, which were prepared by management and developed from
the budgeted operating results.
Page 39
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
15.
Net impairment charge – property, plant and equipment, intangible assets and goodwill (continued)
The following table presents the key assumptions used in the Company’s impairment tests, as well as the recoverable
amounts measured at value in use as at August 31, 2021 and 2020:
($, except percentage data)
Canada
US &
International
excluding
Papa
Murphy's
2021
2020
Papa
Murphy's
Canada
US &
International
excluding
Papa
Murphy's
Papa
Murphy's
Discount rates after tax
8.1%
8.0%
8.0%
8.2%
8.3%
8.3%
Discount rates pre-tax
10.4%
10.1%
10.2%
10.7%
10.5%
10.5%
Recoverable amounts
1,109,172
877,544
384,986
1,113,541
563,568
422,463
Long-term growth rates ranging from 0% to 2% (2020 – 0% to 2%) were used in the impairment test for Canada. A
change of 100 basis points in discount rates in Canada would result in additional impairment charges on intangible
assets of four brands (2020 – four brands) representing 0.1% (2020 – 0.5%) of the total carrying value of the franchise
rights and trademarks in that goodwill unit. A change of 100 basis points in discount rates in Canada would not result
in additional impairment charges on goodwill for the years ended November 30, 2021 and 2020. For the Canada
goodwill unit, an increase of 860 basis points in the discount rate would have resulted in its recoverable amount being
equal to its carrying value.
Long-term growth rates ranging from 0% to 2% (2020 – 0% to 2%) were used in the impairment test for the US &
International excluding Papa Murphy’s. A change of 100 basis points in discount rates in the US & International
excluding Papa Murphy’s would result in additional impairment charges on intangible assets of three brands (2020 –
11 brands) representing less than 0.1% (2020 – 2.9%) of the total carrying value of the franchise rights and trademarks
in that goodwill unit. A change of 100 basis points in discount rates in the US & International excluding Papa Murphy’s
would not result in additional impairment charges on goodwill (2020 – additional impairment charges on goodwill
representing 5.3% of the total carrying value of goodwill in that goodwill unit). For the US & International excluding
Papa Murphy’s goodwill unit, an increase of 500 basis points (2020 – 60 basis points) in the discount rate would have
resulted in its recoverable amount being equal to its carrying value.
A long-term growth rate of 1.5% (2020 – 1.5%) was used in the impairment test for Papa Murphy’s. A change of 100
basis points in discount rates in Papa Murphy’s would not result in additional impairment charges on intangible assets
or goodwill for the years ended November 30, 2021 and 2020. For the Papa Murphy’s goodwill unit, an increase of
230 basis points (2020 – 300 basis points) in the discount rate would have resulted in its recoverable amount being
equal to its carrying value.
16. Disposal of interest in 10220396 Canada Inc.
During the year ended November 30, 2021, the Company sold its 80% interest in 10220396 Canada Inc., whose
activities consist of franchising for the banners “Houston Avenue Bar & Grill” and “Industria Pizza + Bar”, for a cash
consideration of $7,500 and a deferred consideration of $1,693. The deferred consideration has a contractual amount
of up to $3,000, to be repaid in two tranches: the first tranche of $1,500 will be repaid in variable instalments based
on royalties collected, beginning in July 2022; the second tranche will also be repaid in variable instalments based on
royalties collected, which will begin once the first tranche is fully repaid, and will end on the earlier of such time $1,500
is repaid, or a period of 10 years has elapsed. The Company recorded a gain on the disposal of its shares of 10220396
Canada Inc. of $141, presented in Other income in the consolidated statement of income (loss).
Page 40
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
17. Credit facility
During the year ended November 30, 2021, the Company modified its existing credit facility payable to a syndicate of
lenders. The modification resulted in a decrease to the revolving credit facility, which now has an authorized amount
of $600,000 (2020 – $700,000), an increase to the accordion feature, which now amounts to $300,000 (2020 –
$200,000), and an extension of its maturity by three years, until April 22, 2024. Transaction costs of $665 were incurred
and will be deferred and amortized over the remaining three years of the life of the revolving credit facility. As at
November 30, 2021, $345,000 was drawn from the revolving credit facility (2020 – $433,000).
Under this facility, the Company is required to comply with certain financial covenants, including:
a debt to EBITDA (earnings before interest, taxes, depreciation, and amortization) ratio that must be less
than or equal to 3.50:1.00;
a debt to EBITDA ratio that must be less than or equal to 4.00:1.00 in the twelve months following acquisitions
with a consideration exceeding $150,000; and
an interest and rent coverage ratio that must be at least 2.00:1.00 at all times.
As at November 30, 2021, the Company was in compliance with its financial covenants.
18. Provisions
Included in provisions are the following amounts:
Litigations, disputes and other contingencies
Closed stores
2021
$
1,636
56
1,692
2020
$
2,878
187
3,065
The provision for litigation, disputes and other contingencies represents management’s best estimate of the outcome
of litigations and disputes that are ongoing at the date of the statement of financial position. This provision is made of
multiple items; the timing of the settlement of this provision is unknown given its nature, as the Company does not
control the litigation timelines.
The payables related to closed stores mainly represent amounts that are expected to be disbursed to exit leases of
underperforming or closed stores. The negotiations with the various stakeholders are typically short in duration and
are expected to be settled within a few months following the recognition of the provision. The Company has recognized
a liability of $56 (2020 – $187) for the leases of premises in which it no longer has operations but retains the obligations
contained in the lease agreement, with the exception of leases for which the lease liabilities are already recorded
pursuant to IFRS 16.
The provisions also varied in part due to foreign exchange fluctuations related to the US subsidiaries.
Provision for litigations, disputes and closed stores, beginning balance
Reversals
Transfer to right-of-use assets upon application of IFRS 16
Amounts used
Additions
Impact of foreign exchange
Provision for litigations, disputes and closed stores, ending balance
2021
$
3,065
(541)
—
(1,116)
305
(21)
1,692
2020
$
13,421
(1,141)
(1,274)
(10,169)
2,255
(27)
3,065
Page 41
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
19. Deferred revenue and deposits
Franchise fee deposits
Unearned rent, advances for restaurant construction and renovation
Supplier contributions and other allowances
Less: Current portion
2021
$
49,266
2,364
8,809
60,439
(16,100)
44,339
2020
$
44,279
938
9,897
55,114
(13,747)
41,367
Deferred revenues consist mostly of initial, transfer and renewal franchise fees paid by franchisees, as well as upfront
fees paid by master franchisees, which are generally recognized on a straight-line basis over the term of the related
agreement. Deferred revenues also include amounts paid in advance for restaurant construction and renovation, as
well as upfront fees received from agreements with suppliers, which are amortized over the term of the related
agreement.
There were no significant changes to contract liabilities during the year.
$12,853 (2020 – $16,927) of revenue recognized in the current year was included in the deferred revenue balance at
the beginning of the year.
The following table provides estimated revenues expected to be recognized in future years related to performance
obligations that are unsatisfied as at November 30, 2021:
Estimate for fiscal year:
2022
2023
2024
2025
2026
Thereafter
$
16,100
8,192
6,811
4,809
3,706
20,821
60,439
Page 42
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
20.
Long-term debt
Non-interest-bearing contract cancellation fees and holdbacks on acquisitions (1)
Contingent consideration on acquisitions and investment in a joint venture (2)
Fair value of promissory notes related to buyback obligation of Houston Avenue
Bar & Grill and Industria Pizzeria + Bar
Fair value of non-controlling interest option in 9974644 Canada Inc. (3)
Fair value of obligation to repurchase partner in a joint venture (4)
Fair value of interest rate swap
Revolving credit facility payable to a syndicate of lenders (5)
Credit facility financing costs
Less: Current portion
2021
$
12,171
1,961
—
1,575
1,416
—
345,000
(1,395)
360,728
(13,116)
347,612
2020
$
12,500
8,075
2,928
1,171
3,364
1,152
433,000
(1,648)
460,542
(12,888)
447,654
(1) During the year ended November 30, 2021, the Company reclassified non-interest-bearing holdbacks acquired
on acquisition of Kahala Brands Ltd. that were previously being applied to an income tax payable related to the
acquisition of Kahala Brands Ltd. The holdbacks will be repaid within the next 12 months.
(2) The balance as at November 30, 2021, consisted of a joint venture interest (payable December 2022).
(3) Payable on demand.
(4) Maximum maturity date of December 2024.
(5) Under the revolving credit facility, the Company has the option to draw funds in Canadian or in US dollars, at its
discretion. The facility’s maturity is April 22, 2024 and must be repaid in full at that time. The revolving credit facility
has an authorized amount of $600,000 (2020 – $700,000). As at November 30, 2021, the Company had drawn
US$271,470 (2020 – US$233,010 and CA$128,000) and has elected to pay interest based on the London Inter-
Bank Offered Rate (“LIBOR”) plus applicable margins.
21. Capital stock
Authorized, unlimited number of common shares without nominal or par value:
Number
2021
Amount
$
Number
Balance, beginning of year
Shares repurchased and cancelled
Balance, end of year
24,706,461
(36,600)
24,669,861
306,415
(454)
305,961
25,071,235
(364,774)
24,706,461
2020
Amount
$
310,939
(4,524)
306,415
On June 28, 2021, the Company announced the renewal of the normal course issuer bid (“NCIB”). The NCIB began
on July 3, 2021 and will end on July 2, 2022 or on such earlier date when the Company completes its purchases or
elects to terminate the NCIB. The renewed period allows the Company to purchase 1,235,323 of its common shares.
These purchases will be made on the open market plus brokerage fees through the facilities of the TSX and/or
alternative trading systems at the prevailing market price at the time of the transaction, in accordance with the TSX’s
applicable policies. All common shares purchased pursuant to the NCIB will be cancelled.
During the year ended November 30, 2021, the Company repurchased and cancelled a total of 36,600 common shares
(2020 – 364,774 common shares) under the current NCIB, at a weighted average price of $59.68 per common share
(2020 – $51.72 per common share), for a total consideration of $2,184 (2020 – $18,866). An excess of $1,730 (2020
– $14,342) of the shares’ repurchase value over their carrying amount was charged to retained earnings as share
repurchase premiums.
Page 43
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
22. Stock options
The Company offered for the benefit of certain key members of management and directors a stock option plan. In
accordance with the terms of the plan the Company may grant stock options on the common shares at the discretion
of the Board of Directors. 60,000 shares are available for issuance under the stock option plan as at November 30,
2021 (2020 – 100,000).
Under the stock option plan of the Company, the following options were granted and are outstanding as at November
30:
2021
2020
Number of
options
Weighted
average
exercise price
$
Number of
options
Weighted
average
exercise price
$
50.19
—
50.19
48.36
Outstanding, beginning of year
Granted
Outstanding, end of year
Vested, end of year
400,000
40,000
440,000
66,666
50.19
58.78
50.97
48.36
400,000
—
400,000
44,444
As at November 30, 2021, the range of exercise prices and the weighted average remaining contractual life of options
are as follows:
Range of
exercise prices
$
Number
outstanding
Weighted average
remaining contractual life
(years)
48.36
52.01
58.78
200,000
200,000
40,000
440,000
5.3
7.8
3.1
6.3
As at November 30, 2020, the range of exercise prices and the weighted average remaining contractual life of options
were as follows:
Range of
exercise prices
$
Number
outstanding
Weighted average
remaining contractual life
(years)
48.36
52.01
200,000
200,000
400,000
6.3
8.8
7.6
Options granted during the year ended November 30, 2021 have a service condition in order to vest. The options will
vest and be exercisable as to one third of the grant on each of July 1, 2022, July 1, 2023, and July 1, 2024. The options
will expire on December 31, 2024. No options were granted during the year ended November 30, 2020.
The weighted average fair value of the stock options granted for the year ended November 30, 2021 was $9.23 per
option. The fair value of the options granted was estimated at the grant date for purposes of determining share-based
payment expense using the Black-Scholes option pricing model.
Page 44
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
22.
Stock options (continued)
The following weighted average assumptions were used:
Acquisition date share price
Exercise price
Expected dividend yield
Expected volatility
Risk-free interest rate
Expected life (in years)
2021
$
$
58.78
58.78
1.26%
26.1%
1.15%
2.5 years
A compensation expense of $836 was recorded for the year ended November 30, 2021 (2020 – $924). The expense
is presented in wages and benefits in operating expenses in the consolidated statements of income (loss).
23. Net income (loss) per share
The following table provides the weighted average number of common shares used in the calculation of basic income
(loss) per share and that used for the purpose of diluted income (loss) per share:
Weighted daily average number of common shares – basic
Assumed exercise of stock options (1)
Weighted daily average number of common shares – diluted
2021
2020
24,704,866
24,755,351
40,265
24,745,131
—
24,755,351
(1) The calculation of the assumed exercise of stock options includes the effect of the average unrecognized future
compensation cost of dilutive options. The number of excluded options for the year ended November 30, 2021
was 200,000 (2020 – 400,000).
24.
Financial instruments
In the normal course of business, the Company uses various financial instruments which by their nature involve risk,
including market risk and the credit risk of non-performance by counterparties. These financial instruments are subject
to normal credit standards, financial controls, risk management and monitoring procedures.
Fair value of recognized financial instruments
Promissory notes issued as part of its consideration for the acquisition of Houston Avenue Bar & Grill and
Industria Pizzeria + Bar
In 2021, the Company sold its 80% interest in 10220396 Canada Inc. and, as such, disposed of the promissory notes
that were recorded as part of the acquisition of Houston Avenue Bar & Grill and Industria Pizzeria + Bar.
A fair value remeasurement loss of $104 was recorded for these promissory notes for the year ended November 30,
2021 (2020 – gain of $139).
Page 45
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
24.
Financial instruments (continued)
Fair value of recognized financial instruments (continued)
Contingent considerations on acquisitions
The Company issued as part of its consideration for the acquisition of Yuzu Sushi and investment in Tortoise Group,
contingent considerations to the vendors. These contingent considerations are subject to earn-out provisions, which
are based on future earnings; the contingent consideration for Tortoise Group is repayable in December 2022. These
contingent considerations have been recorded at fair value and are remeasured on a recurring basis. The contingent
consideration for Yuzu Sushi was repaid during the year ended November 30, 2021 for a total repayment amount of
$5,071.
A fair value remeasurement gain of $1,656 was recorded for the contingent considerations for the year ended
November 30, 2021 (2020 – loss of $997).
Obligation to repurchase non-controlling interest
The Company has entered into an agreement to purchase the shares of a minority interest shareholder of 9974644
Canada Inc. at the option of the holder at any time after December 9, 2017. The consideration is based on a multiplier
of EBITDA, as prescribed by the terms of the shareholder agreement. The Company records a liability at fair value
(Note 20) which is remeasured at each reporting period.
A fair value remeasurement loss of $404 (2020 – loss of $207) was recorded for this non-controlling interest obligation.
Obligation to repurchase partner in a joint venture
The Company, in conjunction with the acquisition of its 70% interest in a joint venture that acquired Tortoise Group,
entered into an agreement to acquire the remaining 30% interest by December 2025. The consideration to be paid for
this acquisition will be based on future earnings. The Company recorded a liability at fair value (Note 20) which is
remeasured at each reporting period. An increase or decrease by 1% in the discount rates used would have an impact
of $14 on the carrying amount as at November 30, 2021 (2020 – $67).
A fair value remeasurement gain of $1,948 (2020 – loss of $494) was recorded for this obligation to repurchase a
partner in a joint venture.
Interest rate swap
The Company held an interest rate swap contracted to a fix rate on a notional amount of $100,000 (2020 – $100,000)
that matured on July 21, 2021. The Company recorded a fair value remeasurement loss of $62 for the year ended
November 30, 2021 (2020 – loss of $1,592). The Company classified this as level 2 in the fair value hierarchy.
Cross currency interest rate swaps
On November 26, 2021 and November 29, 2021, the Company entered into three (2020 – two) floating to floating 1-
month cross currency interest rate swaps. A fair value of nil was recorded as at November 30, 2021 (2020 – nil). The
Company has classified this as level 2 in the fair value hierarchy.
2021
2020
Receive – Notional
Receive – Rate
Pay – Notional
Pay – Rate
US$78,920
1.29%
CA$100,000
1.23%
US$180,761
1.29%
CA$230,000
1.09%
US$11,789
1.29%
CA$15,000
1.38%
US$137,600
2.44%
CA$180,000
2.45%
US$95,410
1.85%
CA$125,000
1.94%
Page 46
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
24.
Financial instruments (continued)
Fair value of recognized financial instruments (continued)
Fair value hierarchy
Promissory notes related to buyback obligation of Houston Avenue Bar & Grill
and Industria Pizzeria + Bar
Contingent consideration on acquisitions and investment in a joint venture
Non-controlling interest buyback options
Obligation to repurchase partner in a joint venture
Financial liabilities
Level 3
2021
$
2020
$
—
1,961
1,575
1,416
4,952
2,928
8,075
1,171
3,364
15,538
The Company has determined that the fair values of its financial assets and financial liabilities with short-term and
long-term maturities approximate their carrying value. These financial instruments include cash, accounts receivables,
accounts payable and accrued liabilities, deposits and other liabilities. The table below shows the fair value and the
carrying amount of other financial instruments as at November 30, 2021 and 2020. Since estimates are used to
determine fair value, they must not be interpreted as being realizable in the event of a settlement of the instruments.
Financial assets
Loans and other receivables
Finance lease receivables
Financial liabilities
Long-term debt (1)
Carrying
amount
$
4,238
399,269
2021
Fair
value
$
4,238
399,269
Carrying
amount
$
4,760
468,127
2020
Fair
value
$
4,760
468,127
357,171
357,189
445,500
455,045
(1) Excludes promissory notes, contingent consideration on acquisitions, interest rate swap, cross currency interest
rate swaps, credit facility financing costs and obligations to repurchase non-controlling interests.
Determination of fair value
The following methods and assumptions were used to estimate the fair values of each class of financial instruments:
Loans and other receivables and Finance lease receivables – The carrying amount for these financial
instruments approximates fair value due to the short-term maturity of these instruments and/or the use of market
interest rates.
Long-term debt – The fair value of long-term debt is determined using the present value of future cash flows
under current financing agreements based on the Company’s current estimated borrowing rate for similar debt.
The Company, through its financial assets and financial liabilities, is exposed to various risks. The following analysis
provides a measurement of risks as at November 30, 2021.
Credit risk
The Company’s credit risk is primarily attributable to its trade receivables. The amounts disclosed in the consolidated
statement of financial position represent the maximum exposure to credit risk for each respective financial asset as at
the relevant dates. The Company believes that the credit risk of accounts receivable is limited as other than receivables
from international locations, the Company’s broad client base is spread mostly across Canada and the US, which
limits the concentration of credit risk.
The credit risk on the Company’s loans and other receivables is similar to that of its accounts receivable.
Page 47
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
24.
Financial instruments (continued)
Foreign exchange risk
Foreign exchange risk is the Company’s exposure to decreases or increases in financial instrument values caused by
fluctuations in exchange rates. The Company’s exposure to foreign exchange risk mainly comes from sales
denominated in foreign currencies. The Company’s US and foreign operations use the US dollar (“USD”) as functional
currency. The Company’s exposure to foreign exchange risk stems mainly from cash, accounts receivable, long-term
debt denominated in USD, other working capital items and financial obligations from its US operations. As at
November 30, 2021, the long-term debt denominated in USD is not exposed to foreign exchange risk as a result of
three (2020 – two) cross currency interest rate swaps.
Fluctuations in USD exchange rates are deemed to have minimal risk as they are mostly offset by the stand-alone
operations of the Company’s US entities.
As at November 30, 2021, the Company has the following financial instruments denominated in foreign currencies:
Financial assets
Cash
Accounts receivable
Financial liabilities
Accounts payable and deposits
USD
$
3,744
378
2021
CAD
$
4,789
484
USD
$
4,748
645
2020
CAD
$
6,156
836
(82)
(105)
(85)
(110)
Net financial assets
4,040
5,168
5,308
6,882
All other factors being equal, a reasonable possible 5% rise in foreign currency exchange rates per Canadian dollar
would result in a profit of C$202 (2020 – profit of C$265) on the consolidated statements of income and comprehensive
income.
Interest rate risk
Interest rate risk is the Company’s exposure to increases and decreases in financial instrument values caused by the
fluctuation in interest rates. The Company is exposed to cash flow risk due to the interest rate fluctuation in its floating-
rate interest-bearing financial obligations.
Furthermore, upon refinancing of a borrowing, depending on the availability of funds in the market and lender
perception of the Company’s risk, the margin that is added to the reference rate, such as LIBOR or prime rates, could
vary and thereby directly influence the interest rate payable by the Company.
Long-term debt stems mainly from acquisitions of long-term assets and business combinations. The Company is
exposed to interest rate risk with its revolving credit facility which is used to finance the Company’s acquisitions. The
facility bears interest at a variable rate and as such the interest burden could change materially. $345,000 (2020 –
$433,000) of the credit facility was used as at November 30, 2021. A 100 basis points increase in the bank’s prime
rate would result in additional interest of $3,450 per annum (2020 – $4,330) on the outstanding credit facility.
Liquidity risk
Liquidity risk refers to the possibility of the Company not being able to meet its financial obligations when they become
due. The Company has contractual and fiscal obligations as well as financial liabilities and is therefore exposed to
liquidity risk. Such risk can result, for example, from a market disruption or a lack of liquidity. The Company actively
maintains its credit facility to ensure it has sufficient available funds to meet current and foreseeable financial
requirements at a reasonable cost.
As at November 30, 2021, the Company had an authorized revolving credit facility for which the available amount may
not exceed $600,000 (2020 – $700,000) to ensure that sufficient funds are available to meet its financial requirements.
The terms and conditions related to this revolving credit facility are described in Note 17.
Page 48
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
24.
Financial instruments (continued)
Liquidity risk (continued)
The following are the contractual maturities of financial liabilities as at November 30, 2021:
Carrying Contractual
amount cash flows
$
$
0 to 6
months
$
6 to 12
months
$
12 to 24
months Thereafter
$
$
Accounts payable and accrued liabilities
Long-term debt (Note 20) (1)
Interest on long-term debt (1)
Lease liabilities
119,462
360,728
n/a
473,548
953,738
119,462
362,142
13,786
510,769
1,006,159
119,462
13,708
2,852
56,243
192,265
—
4
2,852
56,242
59,098
—
1,969
5,705
100,480
108,154
—
346,461
2,377
297,804
646,642
(1) When future interest cash flows are variable, they are calculated using the interest rates prevailing at the end of
the reporting period.
25. Capital disclosures
The Company’s objectives when managing capital are:
(a) To safeguard its ability to obtain financing should the need arise;
(b) To provide an adequate return to its shareholders; and
(c) To maintain financial flexibility in order to have access to capital in the event of future acquisitions.
The Company defines its capital as follows:
(a) Shareholders’ equity;
(b) Long-term debt including the current portion;
(c) Deferred revenue including the current portion; and
(d) Cash
The Company’s financial strategy is designed and formulated to maintain a flexible capital structure consistent with
the objectives stated above and to respond to changes in economic conditions and the risk characteristics of the
underlying assets. The Company may invest in longer or shorter-term investments depending on eventual liquidity
requirements.
The Company monitors capital on the basis of the debt-to-equity ratio. The debt-to-equity ratios at November 30, 2021
and 2020 were as follows:
Debt
Equity
Debt-to-equity ratio
2021
$
360,728
648,898
0.56
2020
$
460,542
582,514
0.79
Page 49
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
25.
Capital disclosures (continued)
Maintaining a low debt-to-equity ratio is a priority in order to preserve the Company’s ability to secure financing at a
reasonable cost for future acquisitions. The Company expects to maintain a low ratio by continuously using the
expected cash flows from the newly acquired business in both the US and Canada to reduce the level of long-term
debt.
The Company’s credit facility imposes a maximum debt-to-proforma EBITDA ratio of 4.00:1.00 after an acquisition in
excess of $150,000 for a period of twelve months after acquisition; 3.50:1.00 anytime thereafter and until the maturity
date of April 22, 2024.
26. Revenue
Royalties
Franchise and transfer fees
Retail, food processing and
distribution revenues
Sale of goods, including
construction revenue
Gift card breakage income
Promotional funds
Other franchising revenue
Other
For the year ended
November 30, 2021
November 30, 2020
US &
Canada International
$
$
TOTAL
$
Canada
$
US &
International
$
TOTAL
$
62,084
5,019
118,631
4,353
180,715
9,372
57,798
5,872
107,333
4,262
165,131
10,134
124,280
4,972
129,252
103,765
4,593
108,358
24,650
228
32,151
28,598
3,175
280,185
44,862
4,518
61,207
25,648
7,527
271,718
69,512
4,746
93,358
54,246
10,702
551,903
24,095
313
30,401
29,000
2,836
254,080
48,029
4,466
56,406
23,030
8,918
257,037
72,124
4,779
86,807
52,030
11,754
511,117
Page 50
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
27. Operating expenses
Cost of goods sold and rent
Retail, food processing and
distribution costs
Wages and benefits
Wage and rent subsidies
(Note 5)
Consulting and
professional fees
Gift cards – related costs
Royalties
Promotional funds (1)
(Reversal of) impairment for
expected credit losses
Other (2)
For the year ended
November 30, 2021
November 30, 2020
US &
Canada International
$
$
TOTAL
$
Canada
$
US &
International
$
TOTAL
$
12,044
19,829
31,873
15,888
20,315
36,203
113,992
42,477
—
55,004
113,992
97,481
91,865
39,619
—
62,412
91,865
102,031
(5,458)
(291)
(5,749)
(7,020)
—
(7,020)
6,760
—
44
7,018
6,245
7,401
32,151
61,207
13,778
6,245
7,445
93,358
7,599
—
16
7,694
5,522
5,890
30,401
56,406
(1,219)
(1,975)
(3,194)
11,322
212,113
16,021
170,459
27,343
382,572
5,497
10,870
194,735
3,300
17,532
179,071
15,293
5,522
5,906
86,807
8,797
28,402
373,806
(1) Promotional fund expenses include wages and benefits.
(2) Other operating expenses are comprised mainly of travel and promotional costs, and other office administration
expenses.
28. Guarantee
The Company has guaranteed leases on certain franchise stores in the event the franchisees are unable to meet their
remaining lease commitments. The maximum amount the Company may be required to pay under these agreements
was $19,260 as at November 30, 2021 (2020 – $13,374). In addition, the Company could be required to make
payments for percentage rents, realty taxes and common area costs. As at November 30, 2021, the Company has
accrued $1,796 (2020 – $1,796), included in Accounts payable and accrued liabilities, with respect to these
guarantees.
29. Contingent liabilities
The Company is involved in legal claims associated with its current business activities. The Company’s estimate of
the outcome of these claims is disclosed in Note 18. The timing of the outflows, if any, is out of the control of the
Company and is as a result undetermined at the moment.
Page 51
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
30.
Income taxes
Variations of income tax expense from the basic Canadian federal and provincial combined tax rates applicable to
income from operations before income taxes are as follows:
Combined income tax rate in Canada
Add effect of:
Difference between Canadian and foreign
statutory rate
Non-taxable portion of capital gains
Permanent differences
Recognition of previously unrecognized
deferred tax assets
Losses in subsidiaries for which no deferred
income tax assets is recognized
Rate variation on deferred income tax
Adjustment to prior year provisions
Revision of estimates for tax exposures
Other – net
Provision for income taxes
$
2021
%
$
29,699
26.5
(13,766)
(6,195)
16
(238)
(20)
1,645
1,851
428
—
(1,057)
26,129
(5.5)
—
(0.2)
—
1.5
2.4
(0.4)
—
(1.0)
23.3
(4,313)
(511)
12,196
(247)
161
(2,655)
183
(5,410)
(692)
(15,054)
2020
%
26.5
8.3
1.0
(23.5)
0.5
(0.3)
5.1
(0.4)
10.4
1.3
28.9
The variation in deferred income taxes during the years ended November 30, 2020 and 2021 were as follows:
November 30,
2020
$
Recognized
in profit or
loss
$
Foreign
exchange
$
November 30,
2021
$
Net deferred tax assets (liabilities) in relation to:
Property, plant and equipment and assets held for sale
Finance lease receivables
Right-of-use assets
Accounts receivable
Deferred costs
Inventory
Provisions and gift cards
Long-term debt
Non-capital losses
Intangible assets
Accrued expenses
Deferred revenue
Lease liabilities
(1,600)
(121,412)
(17,560)
455
(1,252)
100
18,665
282
828
(168,598)
8,562
9,377
143,587
(128,566)
(2,845)
17,408
2,144
(84)
(46)
(42)
1,487
(1,539)
(720)
(2,249)
1,502
491
(20,600)
(5,093)
8
517
149
(8)
—
—
(187)
2
(30)
1,538
(62)
(11)
(725)
1,191
(4,437)
(103,487)
(15,267)
363
(1,298)
58
19,965
(1,255)
78
(169,309)
10,002
9,857
122,262
(132,468)
Page 52
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
30.
Income taxes (continued)
November 30,
2019
$
Recognized
in profit or
loss
$
Recognized
in other
comprehen-
sive loss
$
Impact of
initial
application
of IFRS 16
Foreign
exchange
$
November 30,
2020
$
(2,383)
—
—
(51)
(1,352)
72
16,235
1,124
2,344
(191,027)
6,217
10,854
—
(157,967)
661
15,926
(187)
533
123
30
3,233
(907)
(1,539)
19,527
2,644
(848)
(15,782)
23,414
—
—
—
—
—
—
—
42
—
—
—
—
—
42
—
(138,019)
(17,573)
—
—
—
(329)
—
—
—
—
(538)
160,196
3,737
122
681
200
(27)
(23)
(2)
(474)
23
23
2,902
(299)
(91)
(827)
2,208
(1,600)
(121,412)
(17,560)
455
(1,252)
100
18,665
282
828
(168,598)
8,562
9,377
143,587
(128,566)
Net deferred tax assets
(liabilities) in relation to:
Property, plant and equipment
and assets held for sale
Finance lease receivables
Right-of-use assets
Accounts receivable
Deferred costs
Inventory
Provisions and gift cards
Long-term debt
Non-capital losses
Intangible assets
Accrued expenses
Deferred revenue
Lease liabilities
As at November 30, 2021, there were approximately $857 (2020 – $910) of capital losses which may be applied
against capital gains for future years and be carried forward indefinitely. The deferred income tax benefit of these
capital losses has not been recognized.
As at November 30, 2021, there were approximately $1,805 (2020 – $1,827) in non-capital losses accumulated in one
of the Company’s subsidiaries for which no deferred income tax asset was recognized. These capital losses will expire
between 2037 and 2040.
The deductible temporary difference in relation to foreign exchange on intercompany loans for which a deferred tax
asset has not been recognized amounts to $7,609 (2020 – $4,237).
No deferred income tax liability is recognized on unremitted earnings of $39,846 (2020 – $4,716) related to the
investments in subsidiaries. Such unremitted earnings are reinvested in the subsidiaries and will not be repatriated in
the foreseeable future.
The Company has an uncertain tax risk related to pre-acquisition periods whereby tax returns were filed by previous
owners.
31. Segmented information
Management monitors and evaluates results of the Company based on geographical segments, these two segments
being Canada and US & International. The Company and its chief operating decision maker assess the performance
of each operating segment based on its segment profit and loss, which is equal to revenue less operating expenses.
Within those geographical segments, the Company’s chief operating decision maker also assesses the performance
of subdivisions based on the type of product or service provided. These subdivisions include: franchising; corporate
stores; processing, distribution and retail; and promotional fund revenues and expenses. This information is disclosed
below.
Page 53
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MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
32.
Statement of cash flows (continued)
Changes in non-cash operating activities are as follows:
Accounts receivable
Inventories
Loans receivable
Other assets
Prepaid expenses and deposits
Accounts payable and accrued liabilities
Provisions
Gift card and loyalty program liabilities
Deferred revenue and deposits
2021
$
(3,746)
(1,366)
338
389
(1,512)
4,128
(1,348)
7,749
5,926
10,558
2020
$
7,941
(1,973)
2,555
(784)
1,440
11,597
(9,161)
4,625
1,101
17,341
Non-cash items are included in proceeds from dispositions of capital assets amounting to $1,314 (2020 – $136).
Non-cash items are included in additions to intangible assets amounting to nil (2020 – $128).
The variation of accounts receivables includes non-cash transfers from long-term debt amounting to $2,465
(2020 – nil).
33. Related party transactions
Balances and transactions between the Company and its subsidiaries, which are related parties of the
Company, have been eliminated on consolidation. Details of transactions between the Company and other
related parties are disclosed below.
Remuneration of key management personnel and directors
The remuneration of key management personnel and directors, presented in Wages and benefits and Other in
Note 27 of these consolidated financial statements, during the years ended November 30, 2021 and 2020 was
as follows:
Short-term benefits
Share-based compensation
Consulting fees
Board member fees
Total remuneration of key management personnel and directors
2021
$
2,670
924
57
78
3,729
2020
$
2,619
963
—
75
3,657
Key management personnel is composed of the Company’s CEO, COOs and CFO. The remuneration of
directors and key executives is determined by the Board of Directors having regard to the performance of
individuals and market conditions.
Given its widely held share base, the Company does not have an ultimate controlling party; one of its most
important shareholders is its Chair of the Board of Directors, who controls 16.24% of the outstanding shares.
Page 56
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2021 and 2020
(In thousands of Canadian dollars, except per share amounts and stock options)
33.
Related party transactions (continued)
The Company also pays employment benefits to individuals related to members of the key management
personnel described above. Their total remuneration, presented in Wages and benefits in Note 27 of these
consolidated financial statements, was as follows:
Short-term benefits
Share-based compensation
Total remuneration of individuals related to key management personnel
2021
$
489
19
508
2020
$
505
10
515
The Company has entered into a consulting agreement with one of its joint venture associates to perform
corporate business development and management consulting services, and paid consulting fees to this
associate of $151 for the year ended November 30, 2021 (2020 – $155), presented in Consulting and
professional fees in Note 27 of these consolidated financial statements. The Company has a current net payable
due to its joint venture associate of $83 as at November 30, 2021 (2020 – net receivable of $135), included in
Accounts payable and accrued liabilities.
During the year ended November 30, 2021, the Company paid consulting fees to a commercial real estate
consulting firm employing one of its Board members of $277 (2020 – nil).
34. Subsequent events
Acquisition of Küto Comptoir à Tartares
On December 1, 2021, one of the Company’s wholly owned subsidiaries completed its acquisition of the assets
of Küto Comptoir à Tartares, a fast-growing chain of tartare restaurants operating in the province of Quebec, for
a total cash consideration of $8,980 plus a deferred contingent consideration based on royalties and retail sales.
There are currently 31 franchised Küto Comptoir à Tartares restaurants in operation.
Dividends
On January 18, 2022, the Company announced an increase to its quarterly dividend payment, from $0.185 per
common share to $0.210 per common share. The dividend of $0.210 per common share was paid on February
15, 2022.
Page 57
C OR P O R ATE I N F OR MATI ON
HEAD OFFICE
8210 Transcanada Highway
Saint-Laurent
QC H4S 1M5 Canada
T. : 514 336-8885
F. : 514 336-9222
www.mtygroup.com
AUDITORS
PricewaterhouseCoopers LLP/s.r.l./s.e.n.c.r.l.
TRANSFER AGENT & REGISTRAR
Computershare Trust
Company of Canada
SOLICITORS
Fasken Martineau DuMoulin LLP
DIRECTORS
Stanley Ma
Claude St-Pierre
Eric Lefebvre
Dickie Orr*
Victor Mandel*
Murat Armutlu*
Suzan Zalter
*Audit Committee
INVESTOR RELATIONS
Eric Lefebvre
T. : 514 336-8885
F. : 514 336-9222
ir@mtygroup.com
M
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G
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P
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P
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T
8210 Transcanada Highway
Saint-Laurent QC H4S 1M5, Canada
T 514 336-8885
F 514 336-9222
www.mtygroup.com