financial group inc.
2 01 7 A N NUAL REPORT
financial group inc.
financial highlightS
Results from operations for the year
ended 2017
When compared to operations for the
year ended December 31, 2016:
• Total revenue increased 9% to
$45.04 million from $41.29 million due
to an increase in both interest revenue
and service revenue earned.
• Service revenue increased 6% to
$36.63 million from $34.70 million
mainly due to an increase in the
number of mortgages being funded
and new client set-ups in the
Registered Plans division.
• Interest revenue on monies held in
trust and on Olympia’s own cash
increased 27% to $8.41 million from
$6.60 million as a result of increases
in the Canadian prime rate and an
increase in off balance sheet cash
under administration.
• Earnings before income tax increased
20% to $8.33 million from $6.93 million.
• Direct and administrative expenses
(excluding depreciation and
amortization) increased 4% to
$35.44 million from $33.97 million
mainly due to an increase in salaries and
bonuses, allowance for bad debts, and
start-up costs in EEI.
• Other (losses)/gains, net, decreased
more than 100% to ($0.04) million
from $1.00 million, mainly due to
Olympia Trust’s FX division recording
a $0.03 million unrealized forward
foreign exchange contract gain
compared to $1.24 million in the
prior year, arising from a decrease in
transaction sizes.
This was partially offset by a
$0.15 million impairment in the ATM
division. The prior year’s impairment in
this division was $0.50 million.
Table of contents
PRESIDENT’S REPORT
MANAGEMENT’S DISCUSSION
AND ANALYSIS
MANAGEMENT’S RESPONSIBILITY
FOR CONSOLIDATED
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT
CONSOLIDATED
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
CORPORATE INFORMATION
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52
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OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT | president’s report
In March, Olympia Trust Company will begin its 23rd
year of business. 2017 pre-tax earnings were up 20%.
It was a good year. The Trust Company had a major
management reorganization that saw Rick Skauge, the
founder of Olympia Trust Company, give up his seat on
the board of directors and his President’s title. Rick will
still maintain his role as President of Olympia Financial
Group Inc. Brian Newman, CPA and the Chairman of
Olympia Financial Group Inc.’s audit committee was
appointed Chairman of Olympia Trust Company’s
Board of Directors and Craig Skauge was appointed
President of Olympia Trust Company.
Brian Newman was one of Olympia Trust Company’s
original shareholders. Brian has been on Olympia Trust
Company’s Board of Directors since 2004. He has sat on several boards and committees in both
corporate and charitable organizations. He is a Certified Professional Accountant who has his
own firm.
RICK SKAUGE
Chief Executive Officer & President
Craig Skauge has been employed at Olympia Trust Company for 15 years. He has served on both
the Ontario Securities Commission Exempt Market Advisory Committee and Small and Medium
Enterprises Committee, and is still serving on the Alberta Securities Commission Exempt Market
Dealer Advisory Committee. Craig founded the National Exempt Market Association and is regularly
quoted in financial newspapers and magazines for his thoughts on various issues with respect to the
Exempt Market. Craig has worked closely with Rick and the other management of the Trust Company
and is well suited for his new role in the company.
The Registered Plans Division of Olympia Trust Company experienced management changes with a
change of roles for our former Vice President Lori Ryan who is now a consultant to the Company. Lori
was with the company from the outset and was instrumental in building this division over 21 years.
Two new positions were created in the Registered Plans division. Andrea Gillis is now Vice President,
Client Services, and Kelly Revol is now Vice President, Operations. Both Andrea and Kelly have been
with the company for 15 years.
Olympia Benefits Inc., our wholly owned health benefits subsidiary, not only had a record year for
profitability and saw its pre-tax earnings grow by 25%, it also had some significant changes to its
management structure. Robin Fry, previously President of Olympia Benefits and another 21 year
veteran with the company has changed his role to Chief Executive Officer and has appointed Ken Fry
President. Ken has worked with Olympia Benefits for 10 years.
Finally, the last senior management change came with the reorganization of the IT Department. Ryan
McKenna is the new Vice President Information Technology. Ryan has overseen the decentralizing of
the IT department which has resulted in each division having direct control over their programmers
and IT expenses. As a result of these changes each division can affect the pace of development of
their various projects. Senior IT personnel are available to assist each division in assessing the quality
and quantity of work being performed by our programmers.
4
| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT Each of Olympia’s divisions has its own unique software solutions. We have approximately 20 staff
members (10% of our total staff) that are employed in Information Technology and as a result
of their good work our health division has a completely online health plan where people sign up,
make claims and get paid all through a totally electronic experience. Our Registered Plans division
has a proprietary system called Paragon that is designed specifically to assist the company with
working with issuers, customers and agents working in the exempt market. Exempt Edge, our newest
subsidiary, has developed a back office software solution for the exempt industry whereby issuers,
exempt market dealers, agents, their customers and Olympia all get real time information. This was
something that was missing in the exempt market and should make compliance a much easier task
for the industry. Our Foreign Exchange Division is about to release a software package that will allow
you to purchase from your Smart phone up to 72 different currencies and have the money delivered to
your door. Clearly, software development is instrumental in keeping us ahead of the competition.
The Registered Plans Division is by far our largest and most profitable division, contributing 89%
of the company’s pre-tax profits. This division holds significant cash in trust for its customers. The
company is a non-deposit taking trust company and does not pay interest on funds held in trust. The
recent increase in interest rates should have a very positive affect on earnings. In addition, the division
has recently gone through an internal assessment and, as a result of changes made has reduced its
staff count by 20% while maintaining excellent customer service.
Olympia Benefits Inc. had its best year ever!! Our new on line health plans have definitely been
accepted by the small business community. Our new large group plan is also being well received.
Both of these plans are marketed on the web and the majority of our sales are direct sales without
the involvement of a commissioned sales agent. The fact that online claims reporting allows us to pay
health benefits the next day has caused many of our customers who previously made paper claims go
the electronic route. Approximately 50% of our claims are now processed online by our customers
themselves. This has led to a decrease in staffing and a lowering of our costs to process. This
division is now expanding its online marketing efforts and will soon come out with an app that will let
employees covered under our health plans to simply take a picture of any medical bill and then push
send. No lost receipts, no lost time.
Our Foreign Exchange division had a challenging year. The recession in Alberta finally caught up with
them. Whereas the number of trades remained close to the same, overall trade volumes decreased
substantially. The division continued to experiment with our ATMFX machines and is starting to
identify profitable areas.
Olympia ATM Inc. had a better year than 2016, but still struggled. We did land several larger accounts
and are now in the process of installing more machines. In 2017 we made the decision to do our own
cash loading and so we now have two new trucks, drivers, and should eventually be saving around
$10,000 per month while offering much better service to our customers and creating more profitable
sites for any new ATMs placed in the Calgary area. We do believe that 2018 will have the turnaround
we had expected in 2017.
5
OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT | Exempt Edge Inc. is a subsidiary of Olympia Financial Group Inc. Exempt Edge has created a back
office and customer relationship software programs that are used by the Exempt Market Dealers,
Advisors, Issuers, allowing all participants to use a real time electronic solution to record keeping
and awareness. In late 2016, Exempt Edge purchased the back office software program that had been
developed and used for six years by one of the largest Exempt Market Dealer in the country. We have
retained the lawyer and programmer that worked on this project for new product development as well
as maintaining existing programs. Our current marketing strategy has users paying a monthly fee for
access to the system. We expect this company will be profitable in 2018.
Olympia Charitable Foundation has two major fundraising events. In June of each year (unless it
snows), The Olympia Charitable Foundation Golf Tournament takes place. This year, thanks to the
generous support of our many customers and friends, that support we raised $50,000. Our second
major fundraising event involves the company matching employee donations. This year we added
$250,000 to the fundraising and in total, Olympia Charitable Foundation raised approximately
$300,000. The Charity decided to give the proceeds from the golf tournament to two charities and
promise to help them out for a minimum of three years. To this end Stephen’s Back Packs Society and
Dreams Take Flight are our chosen charities for the next two years. In addition to supporting these
two great charities, the foundation gave money to more than 30 other charities throughout the year.
There have also been initiatives taken to deploy Olympia staff delivering frontline services to help out
in our various communities.
2018 is looking like it could be the best year in the company’s history. We are looking to make Olympia
ATM and Exempt Edge profitable for the year. We do expect to continue to generate more business
from Quebec. We do expect Ontario issuers to take advantage of new securities rules established
in 2016.
The company is in good shape with some new experienced management on board and we are looking
forward to the challenges and opportunities that will present themselves.
6
| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT management’s discussion and analysis
This Management’s Discussion and Analysis (“MD&A”) is provided to enable a reader to assess
the financial position and results of operations of Olympia Financial Group Inc. (“Olympia”) for
the year ended December 31, 2017.
This MD&A should be read in conjunction with Olympia’s audited consolidated financial
statements for the year ended December 31, 2017 (“consolidated financial statements”),
as well as the the MD&A found in Olympia’s 2016 Annual Report, together with the audited
consolidated financial statements and accompanying notes found therein. Olympia’s audited
consolidated financial statements have been prepared in accordance with International
Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards
Board (“IASB”).
Amounts are presented in Canadian dollars, Olympia’s functional currency. All references to
$ are to Canadian dollars and references to US$ are to United States dollars.
This report, and the information provided herein, is dated as at February 22, 2018. Additional
information about Olympia, including quarterly and annual reports, is available on Olympia’s
website at www.olympiafinancial.com and on SEDAR at www.sedar.com.
Cautionary note regarding forward-looking statements
Certain statements contained in this MD&A may constitute forward-looking statements. These
statements relate to future events or Olympia’s future performance. All statements, other than
statements of historical fact, may be forward-looking statements. Forward-looking statements
are often, but not always, identified by the use of words such as “seek,” “anticipate,” “plan,”
“continue,” “estimate,” “expect,” “may,” “will,” “project,” “predict,” “propose,” “potential,”
“targeting,” “intend,” “could,” “might,” “should,” “believe” and similar expressions. These
statements involve known and unknown risks, uncertainties and other factors that may cause
actual results or events to differ materially from those anticipated in such forward-looking
statements. Olympia believes that the expectations reflected in those forward-looking
statements are reasonable, but no assurance can be given that these expectations will prove to
be correct. Any forward-looking statements included in this MD&A should not be unduly relied
upon by investors, as actual results may vary. These statements speak only as of the date of this
MD&A and are expressly qualified, in their entirety, by this cautionary statement.
With respect to forward-looking statements contained herein, Olympia has made assumptions
regarding, among other things:
• general business and economic conditions in Canada;
• fluctuations in interest rates and currency values;
• changes in monetary policy;
• changes in economic and political conditions;
• legislative and regulatory developments;
• results from legal proceedings and disputes;
7
management’s discussion and analysisOLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT | • the level of competition in Olympia’s markets;
• the occurrence of weather related and other natural catastrophies;
• changes in accounting standards and policies;
• the accuracy and completeness of information Olympia receives about customers
and counterparties;
• the ability to attract and retain key personnel;
• changes in tax laws;
• technological developments;
• costs related to operations remaining consistent with historical experiences; and
• management’s ability to anticipate and manage risks associated with these factors.
Olympia’s actual results could differ materially from those anticipated in the forward-looking
statements contained herein as a result of the risk factors set forth herein.
Although Olympia’s management has attempted to identify important factors that could
cause actual results to differ materially from those contained in forward-looking statements,
there may be other factors that cause results to not be as anticipated, estimated or intended.
Forward-looking statements contained herein are made as of the date of this MD&A and
Olympia disclaims any obligation to update any forward-looking statements if circumstances
or management’s beliefs, expectations or opinions should change, whether as a result of new
information, future events or otherwise, unless required by applicable securities laws.
Olympia’s business
Olympia was formed under the Business Corporations Act (Alberta) and is headquartered in
Calgary, Alberta. Olympia is a reporting issuer in British Columbia, Alberta and Ontario and its
common shares are listed on the Toronto Stock Exchange (“TSX”). The majority of Olympia’s
business is conducted through its wholly owned subsidiary Olympia Trust Company (“Olympia
Trust”), a non-deposit taking trust corporation.
Olympia Trust received its letters patent on September 6, 1995, authorizing the formation of
a trust company to be registered under the Loan and Trust Corporations Act (Alberta). Olympia
Trust is licensed to conduct trust activities in Alberta, British Columbia, Saskatchewan,
Manitoba, Quebec, Newfoundland and Labrador, Prince Edward Island, New Brunswick and Nova
Scotia. The Registered Plans division and Foreign Exchange division conduct business under
Olympia Trust. Olympia Trust acts as a trustee of self-directed registered plans administered by
the Registered Plans division.
The Private Health Services Plan division conducts business under Olympia Benefits Inc. (“OBI”),
a wholly owned subsidiary of Olympia. OBI was incorporated on May 4, 2006, under the Business
Corporations Act (Alberta).
8
| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT The ATM division conducts business under Olympia ATM Inc. (“ATM”), a wholly owned
subsidiary of Olympia. ATM was incorporated on November 17, 2014, under the Business
Corporations Act (Alberta). On May 13, 2015, ATM incorporated ATM1SOURCE Inc.
(“ATM1SOURCE”) under the Business Corporations Act (Alberta). This wholly owned subsidiary of
ATM was focussed on the repair and maintenance of ATMs.
The Exempt Edge division conducts business under Exempt Edge Inc. (“EEI”). EEI was
incorporated under the Business Corporations Act (Alberta) on November 28, 2016, as a
subsidiary of Olympia. EEI focuses on the provision of information technology services to
exempt market dealers, registrants and issuers.
Non-controlling interests in less than wholly owned subsidiaries of Olympia comprise a 20%
interest held by a third party in EEI. The non-controlling interest is presented separately in the
consolidated statement of net earnings and comprehensive income, and within equity in the
consolidated balance sheets, but separately from Olympia’s equity.
Summary of financial results
Overview and financial highlights of the year ended December 31, 2017
• Total revenue increased 9% to $45.04 million from $41.29 million when compared to the
year ended December 31, 2016, due to an increase in both service revenue and interest earned.
• Service revenue increased 6% to $36.63 million from $34.70 million when compared to the
year ended December 31, 2016, mainly due to an increase in the number of mortgages being
funded, as well as new client set-ups in the Registered Plans division.
• Olympia’s interest revenue is subject to fluctuations depending on account balances and
changes in the Canadian prime rate. Interest revenue on monies held in trust and interest
on Olympia’s own cash increased 27% to $8.41 million from $6.60 million when compared
to the year ended December 31, 2016, due to an increase in off-balance sheet cash under
administration and increases in the Canadian prime rate. The Canadian prime rate was 3.20%
on December 31, 2017, and 2.70% on December 31, 2016.
• Earnings before income tax increased 20% to $8.33 million from $6.93 million when compared
to the year ended December 31, 2016.
• Direct and administrative expenses (excluding depreciation and amortization) increased 4%
to $35.44 million from $33.97 million when compared to the year ended December 31, 2016,
mainly due to an increase in salaries and bonuses and allowance for bad debts, as well as
start-up costs in the Exempt Edge division.
• Income tax expense is recognized based on the estimated average annual income tax rate
for the full financial year. The rate used as at December 31, 2017, was 27%
(December 31, 2016 – 27%).
9
OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT | • Net earnings and comprehensive income increased 8% to $6.04 million from $5.59 million
when compared to the year ended December 31, 2016.
• Basic and diluted earnings per share attributable to shareholders of Olympia increased 9% to
$2.53 per share from $2.32 per share when compared to the year ended December 31, 2016.
• Cash flow from operating activities increased 87% to $8.66 million from $4.62 million when
compared to the year ended December 31, 2016, as a result of changes in non-cash working
capital balances of other long-term liabilities, trade and other payables, inventory, current tax
payable and prepaid expenses. The increase is also attributable to higher net earnings.
Summary of quarterly results
The following table sets forth a summary of Olympia’s quarterly results for each of the last
eight quarters. The quarterly results have been derived from financial information prepared in
accordance with IFRS.
QUARTERLY SUMMARY
Dec. 31
2017
Sep. 30
2017
Jun. 30
2017
Mar. 31
2017
Dec. 31
2016
Sep. 30
2016
Jun. 30
2016
Mar. 31
2016
9,747 8,916 9,096 8,871 8,482 8,649 8,623 8,942
1,519
2,455 2,170
(9,341 ) (9,027 ) (9,355 ) (8,947 ) (8,673 ) (8,858 ) (9,082 ) (8,744 )
127
1,948
1,835
1,735
1,671
1,671
(399 )
259
532
274
82
78
7
2,462 2,066
1,443
1,798
1,963
1,462
1,558 2,058
1,439
1,532
1,471
1,844
1,304
1,315
0.75
0.61
0.61
0.63
0.60
0.54
0.55
1,841
1,335
0.56
($ thousands)
Service revenue
Interest revenue
Expenses
Other (losses)/gains, net
Earnings before income taxes
Net earnings
Per share attributable to
shareholders of Olympia -
basic and diluted ($)
Dividends per share ($)
0.51
0.51
0.51
0.51 0.50 0.50 0.50 0.65
Quarterly results in 2017
Olympia’s revenue increased 20% when comparing the current year’s quarterly revenue to the
quarters ended December 31, 2016. This increase is largely due to an increase in interest earned.
Interest earned increased due to increases in the Canadian prime rate from 2.70% to 3.20%, as
well as from an increase in off-balance sheet cash under administration. Total off-balance sheet
cash under administration increased 2% to $497 million from $486 million.
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| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT
Direct and administrative expenses (including depreciation and amortization) increased by 8%
to $9.34 million from $8.67 million mainly due to an increase in bonus expense and allowance for
bad debts.
Fourth quarter results
Service revenue in the fourth quarter was $9.75 million, up from $8.92 million in the third quarter
of 2017, mainly due to an increase in transactional volume in the Foreign Exchange and Private
Health Services Plan divisions. Interest revenue was $2.46 million, up from $2.17 million in the
third quarter of 2017, due to increased interest rates being in effect for the entire quarter.
For the Private Health Services Plan division, the first and fourth quarters remained
seasonally strong. Total revenue in the fourth quarter for the Private Health Services Plan
division increased 20% to $2.31 million from $1.93 million when compared to the third quarter
of 2017. Total expenses and depreciation increased to $1.71 million from $1.51 million when
comparing the fourth quarter to the third quarter of 2017. The increase is due mainly to higher
commission expenses.
The Registered Plans division administers approximately 90,000 accounts. Total revenue for
the division increased 6% to $6.90 million from $6.49 million when compared to the third
quarter of 2017. Total expenses and depreciation increased 5% to $4.77 million from
$4.56 million when comparing the fourth quarter to the third quarter of 2017. The increase in
expenses is primarily due to an increase in bonuses expense (a result of higher revenue), as well
as in allowance for bad debts.
The Foreign Exchange division’s total revenue increased by 23% to $2.13 million from
$1.73 million when comparing the fourth quarter to the third quarter of 2017, due to higher
transaction volume. Expenses, commissions, depreciation and amortization increased by 4% to
$1.69 million from $1.62 million when comparing the fourth quarter to the third quarter of 2017,
due to an increase in commission expense and bonus expense.
In November 2014, Olympia established the ATM division, which focuses on building a portfolio
of ATMs. The ATM division’s total revenue decreased by 13% to $0.75 million from
$0.86 million when comparing the fourth quarter to the third quarter of 2017. Total expenses,
including depreciation, decreased to $0.96 million from $1.17 million when comparing the fourth
quarter to the third quarter of 2017.
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OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT |
Objectives for 2018
Management has set the following major objectives for 2018:
• Continue to invest in Olympia’s online presence;
• Enhance our Foreign Exchange division with an online trading platform;
• Continue to grow our Health Spending Account (“HSA”) business;
• Continue to grow the ATM division; and
• Continue to grow the Exempt Edge division.
Continue to invest in Olympia’s online presence
Olympia continues to enhance its online platforms to better serve its customers with performance
and usability improvements. Olympia has devoted specialized resources to application
development for the purpose of enhancing its online presence. Olympia continues to invest in its
cyber security initiatives to ensure the safety and security of client information and prevention of
malicious activity.
Enhance our Foreign Exchange division with an online trading platform
In the first quarter of 2018, the Foreign Exchange division will be launching a new product on
PayFX.com that will cater to individual consumers on our platform. This new product will allow
Canadians to purchase from more than 72 currencies on PayFX.com, choose their desired
denominations and pay online with their Interac card. The FX cash will be sent via Purolator for
next day delivery to the individual’s home or office. With the addition of several new products
such as market orders, limit orders and forward contracts, PayFX.com will continue to grow in
market share throughout 2018.
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| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT Grow our Health Spending Account (“HSA”) business
Olympia’s Private Health Services Plan division continues to add to its innovative suite of digital
products. A new app is being developed to improve client experience and increase sales. This
app will strengthen the entire digital platform and position the division to build on existing
competitive advantages.
The HSA group product continues to gain market share. Small corporate clients appreciate how
this product is affordable, easy to understand, and 100% digital. Unique online marketing efforts
will reinforce inherent product advantages and attract new clients.
Continue to grow the ATM division
Despite tight economic conditions in Western Canada the ATM division continued to focus on
organic growth to increase service. This, combined with maximizing the returns on its existing
portfolio, resulted in year over year growth in revenue and gross margin. In 2017, ATM renewed it’s
contract with The City of Calgary. It is also working with major national partners to expand into the
transportation space across Canada. In 2018, ATM plans to continue to expand its ATM business
operations across Canada.
Continue to grow the Exempt Edge division
Exempt Edge will continue to build on the momentum it generated in 2017 by expanding its
initial product offerings and introducing a data hub that will transform the private capital market
of Canada.
Outlook for 2018
Olympia is confident that its current operations will be able to generate sufficient amounts of
cash and cash equivalents in the short and long term to maintain and meet Olympia’s planned
growth and development activities. Olympia is well diversified, with its Registered Plans division,
Private Health Services Plan division, FX division, ATM division and newly formed Exempt
Edge division.
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OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT | Financial analysis
CONSOLIDATED BALANCE SHEETS AS AT
($)
ASSETS
Current assets
Cash & cash equivalents
Restricted cash in circulation
Trade & other receivables
Inventory
Prepaid expenses
Current taxes receivable
Derivative financial instruments
Total current assets
Non-current assets
Restricted cash & investments
Equipment & other
Intangible assets
Available for sale investments
Prepaid expenses
Derivative financial instruments
Deferred tax assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade & other payables
Deferred revenue
Other liabilities & charges
Cash in circulation due to bank
Revolving credit facility
Derivative financial instruments
Current tax liability
Total current liabilities
Other liabilities
Derivative financial instruments
Total liabilities
EQUITY
Share capital
Contributed surplus
Retained earnings
Equity attributable to owners of Olympia
Non-controlling interests
Total equity
Total equity & liabilities
14
December 31, 2017
December 31, 2016
$ 10,140,523
3,823,110
1,413,359
223,114
732,914
-
9,236,934
25,569,954
500,000
2,232,396
1,849,693
48,932
-
729,459
1,435,531
6,796,011
$ 32,365,965
$
1,278,144
313,256
1,648,081
3,823,110
4,812,347
7,796,036
102,212
19,773,186
1,068,776
543,073
$ 21,385,035
$ 7,886,989
86,373
3,048,996
11,022,358
(41,428 )
10,980,930
$ 32,365,965
$
5,350,154
5,119,920
1,061,513
455,973
840,563
117,683
1,264,644
14,210,450
2,430,000
2,342,644
2,140,497
108,517
73,432
5,478,746
983,750
13,557,586
$ 27,768,036
$
$
969,106
221,912
1,540,538
5,119,920
3,935,045
870,403
-
12,656,924
194,110
4,271,471
17,122,505
$
7,886,989
86,373
2,672,169
10,645,531
-
10,645,531
$ 27,768,036
| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT
Cash, cash equivalents and restricted cash and investments
Olympia continues to generate cash from its core businesses, except for the ATM and Exempt
Edge divisions. As at December 31, 2017, cash reserves increased by 89% to $10.14 million
(December 31, 2016 - $5.35 million). This increase results mainly from Olympia Trust’s FX division’s
collateral requirements being reduced by $1.93 million. In addition, Olympia utilized its line of
credit to facilitate the expansion of ATM business.
Restricted cash and investments as at December 31, 2017, of $0.50 million (December 31, 2016
- $2.43 million), comprises collateral provided to a financial institution securing Olympia Trust’s
foreign exchange trading platform. Restricted cash and investments decrease is due to lower
collateral requirements. The restricted cash and investments consists of a Treasury bond that has a
term of one year from issuance and earns interest at a rate of 0.59% (December 31, 2016 - 1.43%).
Restricted cash and investments are not readily accessible for use in operations and are reported
separately from cash and cash equivalents on the balance sheet.
Olympia’s cash is placed with a Canadian financial institution where it generates interest. Cash
and cash equivalents comprise 40% of the total current assets of Olympia at December 31, 2017,
compared to 38% at December 31, 2016.
Restricted cash in circulation
ATM has entered into a bailment agreement with a financial institution to provide the ATM division
with cash that can only be used in ATMs. ATM pays a fee for using the cash based on the total
amount of cash outstanding at any given time, as well as paying fees related to the bundling and
preparation of such cash prior to it being loaded in the ATMs. ATM has access and rights to the
cash and bears the risk in the case of loss. ATM has obtained the required insurance coverage in
the event of loss of cash while in circulation.
ATM’s cash bailment agreement is for a term of five years, through to November 2020, and bears
interest at the Canadian prime rate. In December 2016, ATM obtained an increase to the available
bailment cash limit from $5.00 million to $20.00 million.
Based on the foregoing, the cash in circulation and the related obligation due to the bank are
reflected separately on the balance sheet. Restricted cash in circulation for the year ended
December 31, 2017, was $3.82 million (December 31, 2016 - $5.12 million).
15
OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT | Inventory
Inventory consists primarily of ATMs not in service and related spare ATM parts and accessories.
Inventory is measured at the lower of cost and net realizable value.
Trade and other receivables
Trade and other receivables are comprised largely of receivables from the Registered Plans
division’s clients (52%). Included in trade and other receivables at December 31, 2017, is a
$0.12 million demand loan to Tarman Inc., a company controlled by the president and CEO of
Olympia, which is to be fully repaid by June 30, 2018, with interest accruing at 4% per annum.
Olympia has made allowances for doubtful accounts of $0.61 million, compared to $0.24 million
as at December 31, 2016. Management is committed to a policy of closely monitoring risk and
exposure in this area and is actively pursuing past due accounts through its internal collection
process.
Intangible assets
The capital additions of $0.25 million in internally generated software relate to the continued
development and enhancement of cloud based online systems in the Exempt Edge division. The
Exempt Edge division offers exempt market dealers access to the systems in order to facilitate
their compliance with certain regulatory requirements.
As at December 31, 2017, Olympia noted indicators of impairment in its ATM division stemming
from losses incurred. The impairment analysis indicated that the recoverable amount of the cash
generating unit did not exceed its carrying value. The recoverable amount was based on a fair
value less costs of disposal calculation using the present value of expected future cash flows.
For the year ended December 31, 2017, Olympia recorded an impairment of $0.15 million.
The primary sources of cash flow information are derived from macroeconomic factors such as
industry demand fundamentals, which include transaction volumes and growth rates, benchmark
interchange and surcharge pricing and inflation rates. Cash flow forecasts are also based on past
experience, historical trends, operating costs and maintenance expenditures.
Forward foreign exchange contracts
Olympia purchases forward exchange contracts when its Foreign Exchange division enters into
a transaction to buy or sell foreign currency in the future. These contracts are both short term
and long term in nature, are in the normal course of business and are used to manage foreign
exchange exposures. Forward foreign exchange contracts are not designated as hedges and they
are recorded using the mark-to-market method of accounting.
16
| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT Forward foreign exchange contracts are recorded on Olympia’s balance sheet as either an
asset or liability, with changes in fair value included in net earnings. This accounting treatment
resulted in the disclosure of a forward foreign exchange contract asset of $9.97 million on
the balance sheet, compared to $6.74 million as at December 31, 2016, and a forward foreign
exchange contract liability of $8.34 million, compared to $5.14 million as at December 31, 2016.
The movement in the derivative financial instruments assets and liabilities on the balance sheet
is due to the fluctuation of the Canadian and United States dollar exchange rates, as the vast
majority of the Foreign Exchange division’s trades are in Canadian and United States dollars. The
number and size of outstanding forward foreign exchange contracts also impacts the movement
in the derivative financial instrument assets and liabilities on the balance sheet.
Current liabilities
The breakdown of Olympia’s trade and other payables consists of trade payables (34%),
government taxes and other payables (42%), amounts due to agents, clients and commission
payable (17%) and amounts due to related parties (7%).
The balance in other liabilities and charges consists of professional fees payable, bonuses
payable, accrued vacation pay, employee benefits payable, legal fees payable, onerous contract
obligation and leasehold inducements.
Deferred revenue
At December 31, 2017, deferred revenue totaled $0.31 million compared to $0.22 million as at
December 31, 2016. This consists mainly of Private Health Services Plan division’s annual fees
for maintaining customer health saving accounts. The unearned portion of these annual fees is
recognized as deferred revenue at the time of billing and revenue is recognized on a straight-line
basis in relation to Olympia rendering these services.
Other (losses)/gains, net
Other (losses)/gains, net, has decreased, mainly due to a decrease in transaction sizes in the
FX division, resulting in unrealized forward contract gains of $0.03 million compared to the
$1.24 million in the prior year. In addition, Olympia had an impairment of ATM processing
contracts as discussed previously.
Restraint of trade income of $0.11 million relates to monies received from a consultant for the
release from a restraint of trade agreement in the ATM division.
17
OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT | The lawsuit settlement refund for the year ended December 31, 2016 relates to Olympia’s dispute
resolution with the Canada Revenue Agency (“CRA”). On April 11, 2016, Olympia received
communication from the CRA confirming that ongoing disputes relating to certain claims for
withholding taxes owing in accordance with Section 116(5) of the Income Tax Act (Canada) have
been resolved.
The settlement loss for the year ended December 31, 2016, is due to a legal claim by a client of
Olympia’s former Corporate and Shareholder Services division. The client had been claiming loss
of income on funds held in trust that were subject to a dispute. The claim was settled through an
arbitration process and Olympia was deemed liable for $0.52 million for loss of income, including
legal costs.
Employee Share Ownership Plan (ESOP)
Olympia has established an Employee Share Ownership Plan (“ESOP”). Under this plan,
Olympia contributes $1 for each $1 contributed by an employee up to a maximum that is
based on the employee’s earnings and years of service. The employee and Olympia’s
contributions are used to purchase common shares of Olympia through the facilities of the TSX.
Olympia’s contribution is included as an administrative expense in the statement of net earnings
and comprehensive income and amounted to $0.21 million for the year ended December 31, 2017
(December 31, 2016 - $0.20 million).
Contingencies
Olympia is not a money lender nor does it guarantee or participate in loans or mortgages of any
type, except in its capacity as trustee of mortgages held on behalf of its clients.
Olympia is a defendant and plaintiff in a number of legal actions that arise in the normal course
of business, the losses or gains from which, if any, are not anticipated to have a material effect on
the consolidated financial statements.
Related Party Transactions
Olympia’s chief executive officer (“CEO”) and president owns and controls 29.14% of Olympia’s
shares. During the year, Olympia entered into transactions with the following related parties:
• Companies and businesses controlled by the president and CEO of Olympia;
• Companies and businesses associated with the directors of Olympia;
• Companies and businesses controlled by management of Olympia;
• Family members of the president, management and directors; and
• Key management and directors.
18
| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT The following transactions with related parties were measured at the exchange amount, which is
the amount of consideration agreed to by the parties:
Service revenue
Companies and businesses controlled by the president
and CEO
December 31, 2017
December 31, 2016
$
$
20,736
20,736
$
$
5,844
5,844
Revenue from associated entities totaled $20,736 for the year ended December 31, 2017
(December 31, 2016 - $5,844), and consisted mainly of the following:
• Olympia earned revenue in the amount of $nil (December 31, 2016 - $191) from health benefit
administration revenue provided to Eyelogic Systems Inc., a company of which Olympia’s
president and CEO was the largest shareholder.
• Olympia earned revenue in the amount of $20,736 (December 31, 2016 - $5,653) from legal
services provided by Olympia’s in-house general counsel to Tarman Inc., Target Capital Inc.
(“Target”) and Apple Creek Golf Course Inc., companies controlled by the president and CEO.
Interest revenue
Companies and businesses controlled by the president
and CEO
December 31, 2017
December 31, 2016
$
$
5,276
5,276
$
$
17,500
17,500
Interest revenue from associated entities totaled $5,276 for the year ended December 31, 2017,
(December 31, 2016 - $17,500) and consists of interest earned from outstanding receivables
and the loan provided to Tarman Inc., a company controlled by the president and CEO of Olympia.
19
OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT |
Administrative expenses
Companies and businesses controlled by the president
and CEO
Olympia Charitable Foundation
December 31, 2017
December 31, 2016
$
2,617,874
$
2,449,546
58,899
65,037
$
2,676,773
$
2,514,583
Administrative expenses paid to associated entities totaled $2.68 million for the year ended
December 31, 2017 (December 31, 2016 - $2.51 million), and consisted of the following:
• The Olympia Charitable Foundation is funded by Olympia and the employees of
Olympia. Olympia donated a total of $58,899 for the year ended December 31, 2017
(December 31, 2016 - $65,037).
• Management fees are paid to Tarman Inc., a company controlled by Olympia’s president and
CEO, based on a percentage of pre-tax profits of Olympia’s divisions, except for the Private Health
Services Plan division, where the management fee is based on a percentage of health claims
administered. These fees are for services provided as president and CEO of Olympia. For the year
ended December 31, 2017, this amounted to $2.62 million (December 31, 2016 - $2.45 million)
20
| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT
Trade and other receivables include amounts receivable from related parties
Companies and businesses controlled by the president
and CEO
Companies and businesses controlled by directors
December 31, 2017
December 31, 2016
$
$
365,028
-
365,028
$
$
611,408
17,268
628,676
Receivables from associated entities totaled $365,028 for the year ended December 31, 2017
(December 31, 2016 - $628,676), and consisted mainly of the following:
• A receivable in the amount of $7,388 (December 31, 2016 - $411) from Target, a company
controlled by the president and CEO of Olympia, reflects an arrangement whereby Olympia
pays a portion of the remuneration for Target’s personnel who deliver services to both Olympia
and Target.
• A receivable in the amount of $231,106 (December 31, 2016 - $81,882) from Tarman Inc.,
a company controlled by Olympia’s president and CEO, reflects the legal and other services
provided to Tarman Inc.
• A receivable in the amount of $5,133 (December 31, 2016 - $5,109) from Apple Creek
Golf Course Inc., a company controlled by the president and CEO of Olympia, for expense
recoveries.
• A receivable in the amount of $264 (December 31, 2016 - $398) from Bearspaw Tree Farm Inc.,
a company controlled by the president and CEO of Olympia, for expense recoveries.
• A receivable in the amount of $716 (December 31, 2016 - $6,108) from Namena Island,
Toy Box II and Camera 2 Canvas, companies controlled by the president and CEO of Olympia,
for expense recoveries.
• On November 29, 2017, Olympia obtained approval from the Board of Directors for a $120,000
demand loan to Tarman Inc., a company controlled by the president and CEO of Olympia. The
secured demand loan is scheduled for repayment on June 30, 2018, and accrues interest at
4.00% per annum. As at December 31, 2017, Olympia has accrued $421 of interest.
All the receivables from related parties are current.
21
OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT |
Trade and other payables and provision for other liabilities and charges include amounts
payable to related parties
Companies and businesses controlled by the president
and CEO
Directors' fees
Management
Olympia Charitable Foundation
December 31, 2017
December 31, 2016
$
160,298
$
107,890
45,377
-
-
28,204
924
3,100
$
205,675
$
140,118
Payables to associated entities totaled $205,675 for the year ended December 31, 2017
(December 31, 2016 - $140,118), and consisted mainly of the following:
• A payable in the amount of $36,473 (December 31, 2016 - $39,807) to Tarman Inc., a company
controlled by the president and CEO of Olympia, for commissions related to the sale of health
plans offered by OBI.
• A payable in the amount of $1,538 (December 31, 2016 - $11,353) to Target, a company
controlled by the president and CEO of Olympia, for expense recoveries.
• A management fee payable in the amount of $122,287 (December 31, 2016 - $51,468)
to Tarman Inc., a company controlled by the president and CEO of Olympia, based on a
percentage of pre-tax profits of Olympia’s divisions.
• A payable in the amount of $nil (December 31, 2016 - $3,100) to Olympia Charitable
Foundation, a not for profit foundation funded by Olympia and the employees of Olympia.
• A payable for directors’ fees of $45,377 (December 31, 2016 - $28,204).
These payables are all current.
Share capital
On March 24, 2017, Target, of which Olympia’s president and CEO was the controlling
stakeholder, sold an aggregate of 55,200 common shares of Olympia to several arm’s-length
private parties, through a private sale. The shares were sold at a price of $29.00 per Olympia
common share (the “Disposition”). After giving effect to the Disposition, the president and CEO
of Olympia owns and controls 701,127 common shares of Olympia, representing 29.14% of the
issued and outstanding common shares of Olympia on a non-diluted and fully diluted basis.
22
| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT
Key management compensation
Compensation paid to key management is included in Note 22 and Note 23 of the consolidated
financial statements. Key management includes the Board of Directors, the presidents of OBI,
ATM, Olympia Trust and Olympia, the executive vice president and vice presidents. Olympia
uses management or employment contracts as a means to incent certain executives to maximize
the profitability of their applicable business units and the profitability of Olympia as a whole. The
compensation paid or payable to key management is shown in the following table:
Salaries, bonuses and profit sharing
$
4,002,357
$
3,807,383
December 31, 2017
December 31, 2016
Management fees
Directors’ fees
Short-term employee benefits
2,617,874
211,755
232,171
2,449,546
147,760
224,789
$
7,064,157
$
6,629,478
The increase in salaries, bonuses and profit sharing and management fees in the current
year is attributable to an increase in earnings, resulting in higher management profit sharing
entitlements to executive management.
Shareholders’ equity
As at December 31, 2017, and December 31, 2016, Olympia had 2,406,352 outstanding shares,
with a carrying value of $7.89 million.
Income taxes
Deferred income tax assets are recognized for loss carry-forward and other deductible
temporary differences to the extent that the realization of the related tax benefit is probable
through future taxable profits or other tax planning opportunities. The average corporate rate
used for the year ended December 31, 2017, was 27% (December 31, 2016 - 27%).
23
OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT |
Analysis of results by division
Registered Plans Division
SUMMARY OF DIVISIONAL RESULTS FOR THE YEAR ENDED DECEMBER 31
($ thousands)
Service revenue
Interest revenue
Direct expenses
Administrative expenses
Depreciation and amortization
Other (losses)/gains, net
Earnings before income tax
Income taxes
Net earnings
Self-Directed Plans
(thousands)
90
80
70
60
50
40
30
20
10
0
24
2007 2008 2009 2010
2011 2012
2013 2014
2015
2016 2017
2017
18,233
8,024
(103 )
26,154
(18,185 )
(516 )
(1 )
7,452
(1,974 )
5,478
2016
16,906
6,308
(92 )
23,122
(16,551 )
(518 )
782
6,835
(1,706 )
5,129
Variation
8%
27%
12%
13%
10%
-
-100%
9%
16%
7%
The Registered Plans division (“RRSP”)
specializes in the administration of registered
plan accounts, including RRSPs, RRIFs, LIRAs,
LIFs and TFSAs. In contrast to traditional
registered plan account administrators,
Olympia’s focus is on exempt market
securities, including arm’s-length mortgages.
The holder of a registered plan account with
Olympia will typically hold multiple exempt
market securities or mortgages in their
Olympia registered plan account.
RRSP service revenue increased 8% to
$18.23 million from $16.91 million when
compared to the year ended December 31,
2016. The increase is mainly attributable
to the continued increase in the number of
mortgages being funded, as well as new
client set-ups.
| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT
LORI HERNANDEZ, DANIELA LAMARDO, HARVEY KRAFT, CHRISTINE WAGNER, RICK SKAUGE
Amaryllis competition winners
Interest revenue includes interest income on cash held in trust. Interest revenue increased
27% to $8.02 million from $6.31 million when compared to the year ended December 31, 2016,
reflecting an increase in off-balance sheet cash under administration, as well as increases in the
Canadian prime interest rate.
Direct, administrative, depreciation and amortization expenses increased 10% to $18.80 million
from $17.16 million when compared to the year ended December 31, 2016. This increase is largely
due to an increase in operating expenses, such as salaries and bonuses, office supplies and
allowance for doubtful accounts.
Earnings before income tax increased 9% to $7.45 million from $6.84 million when compared to
the year ended December 31, 2016.
RRSP net earnings increased 7% to $5.48 million from $5.13 million when compared to the year
ended December 31, 2016.
RRSP is responsible for 58% of Olympia’s total revenue (including interest), an increase from
56% when compared to the year ended December 31, 2016.
25
OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT | Private Health Services Plan Division
SUMMARY OF DIVISIONAL RESULTS FOR THE YEAR ENDED DECEMBER 31
2017
8,264
158
(2,446 )
5,976
(3,921 )
(121 )
1,934
(499 )
1,435
2016
8,169
134
(2,372 )
5,931
(4,161 )
(223 )
1,547
(440)
1,107
Variation
1%
18%
3%
1%
-6%
-46%
25%
13%
30%
The Private Health Services Plan division
(“Health”) markets, sells and administers
health and dental benefits to business owners
through OBI, a wholly owned subsidiary of
Olympia. Health’s primary focus remains on
health and dental plans for small businesses.
Health’s launch of MY Online Claim in late
2012 marked a significant step in digitizing
Health’s services. This digital overhaul
of Health assisted with the launch of the
Health Spending Account (“HSA”) product
in January 2014. The HSA product has
gained momentum and continues to receive
a positive response from the market. The
company has now completed the digitization
of all its products with the recent release of
Group HSA Online. The product’s innovative
interfaces, pricing models and digital nature
provide a competitive advantage for Health
as it continues to expand into the Ontario and
Eastern Canadian markets.
($ thousands)
Service revenue
Interest revenue
Direct expenses
Administrative expenses
Depreciation and amortization
Earnings before income tax
Income taxes
Net earnings
Private Health Plan Services Claims
(millions of dollars)
2007 2008 2009
2010 2011 2012 2013
2014
2015
2016
2017
80
70
60
50
40
30
20
10
0
26
| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT
SUPPORT SERVICES TEAM BUILDING
Health’s service revenue increased 1% to $8.26 million from $8.17 million when compared to the
year ended December 31, 2016. This results from more customers migrating to the HSA product,
with revenue from that product being recognized over the term of the agreement.
Direct, administrative, depreciation and amortization expenses decreased 4% to $6.49 million
from $6.76 million when compared to the year ended December 31, 2016. This decrease results
from a decrease in operating expenses such as depreciation, salaries, computer maintenance,
rent and travel.
Earnings before income tax increased 25% to $1.93 million from $1.55 million when compared to
the year ended December 31, 2016.
Health’s net earnings increased 30% to $1.44 million from $1.11 million when compared to the
year ended December 31, 2016.
Health is responsible for 19% of Olympia’s total revenue (including interest), a decrease from
20% when compared to the year ended December 31, 2016.
27
OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT | Foreign Exchange Division
SUMMARY OF DIVISIONAL RESULTS FOR THE YEAR ENDED DECEMBER 31
($ thousands)
Service revenue
Interest revenue
Direct expenses
Administrative expenses
Depreciation and amortization
Other gains, net
Earnings before income tax
Income taxes
Net earnings
The FX division allows corporations and
private clients to buy and sell foreign
currencies at competitive rates. The
division offers its clients same-day
transactions as well as long-term forward
contracts. With offices in Vancouver,
Surrey, Calgary and Winnipeg, the FX
division is well situated to service Western
Canada.
FX’s service revenue remained similar at
$6.84 million when compared to the year
ended December 31, 2016.
Direct, administrative, depreciation and
amortization expenses decreased 8% to
$6.43 million from $6.99 million when
compared to the year ended December 31,
2016. The decrease is mainly due to lower
employee commissions and bonuses, and
bank charges and interest.
28
2017
6,840
117
(863 )
6,094
(5,429 )
(133 )
26
558
(148)
410
2016
6,851
71
(1,165 )
5,757
(5,610 )
(215 )
1,243
1,175
(293 )
882
Variation
-
65%
-26%
6%
-3%
-38%
-98%
-53%
-49%
-54%
DARCI JACOBS AND DERICK KACHUIK
Darci has ten years of dedicated service
| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT
MATTHEW SHEWCHUK, JOSHUA SCHLEBACH, TAYLOR LAHEY, NEIL MCCULLAGH, ROSS LYNCH, AND SHUBRAT DUTTA
Other gains, net, decreased 98% to $0.03 million from $1.24 million, arising from a decrease in
forward contract transactions compared to the prior year.
Earnings before income tax decreased 53% to $0.56 million from $1.18 million when compared to
the year ended December 31, 2016.
FX’s net earnings decreased 53% to $0.41 million from $0.88 million when compared to the year
ended December 31, 2016.
FX is responsible for 15% of Olympia’s total revenue (including interest), a decrease from 17%
when compared to the year ended December 31, 2016.
29
OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT | ATM Division
SUMMARY OF DIVISIONAL RESULTS FOR THE YEAR ENDED DECEMBER 31
($ thousands)
Service revenue
Interest revenue
Direct expenses
Administrative expenses
Depreciation and amortization
Other losses, net
Loss before income tax
Income tax recovery
Net loss
2017
3,074
7
(2,355 )
726
(1,511 )
(408 )
(61 )
(1,254 )
374
(880 )
2016
2,727
4
(2,108 )
623
(1,555 )
(391 )
(518 )
(1,841 )
470
(1,371 )
Variation
13%
75%
12%
17%
-3%
4%
-88%
-32%
-20%
-36%
The ATM division is focused on building a portfolio of ATMs in Canada.
Service revenue relates mainly to interchange and surcharge fees charged for the use of
ATMs managed by the ATM division. Service revenue increased 12% to $3.07 million from
$2.73 million when compared to the year ended December 31, 2016, due to the growth in the
number of locations where the ATM division provides processing, cash loading, maintenance and
other services.
Direct, administrative, depreciation and amortization expenses increased 5% to $4.27 million
from $4.05 million when compared to the year ended December 31, 2016, due to an increase in
personnel, depreciation and amortization, bad debts, interest expense and legal fees.
Loss before income tax decreased 32% to ($1.25) million from ($1.84) million when compared to
the year ended December 31, 2016.
ATM’s net loss decreased 36% to ($0.88) million from ($1.37) million when compared to the
year ended December 31, 2016.
ATM is responsible for 7% of Olympia’s total revenue (including interest), compared to 7% for
the year ended December 31, 2016.
30
| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT
Exempt Edge Division
SUMMARY OF DIVISIONAL RESULTS FOR THE YEAR ENDED DECEMBER 31
($ thousands)
Service revenue
Direct expenses
Administrative expenses
Depreciation and amortization
Loss before income tax
Income taxes recovery
Net loss
2017
210
(142 )
68
(315 )
(45 )
(292 )
83
(209)
Exempt Edge focuses on the provision of information technology services to exempt market
dealers, registrants and issuers.
Service revenue for the year ended December 31, 2017, mainly relates to continued customer
support fees and customer onboarding fees.
For the year ended December 31, 2017, the Exempt Edge division incurred direct, administrative,
depreciation and amortization expenses of $0.50 million. These relate mainly to employee
salaries, legal and start-up costs.
Loss before income tax for the year ended December 31, 2017, amounted to ($0.29) million, and
the net loss amounted to ($0.21) million.
31
OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT |
Corporate Division
SUMMARY OF DIVISIONAL RESULTS FOR THE YEAR ENDED DECEMBER 31
2017
8
102
110
(174 )
(5 )
-
(69 )
(131 )
(200 )
2016
Variation
43
80
123
(359 )
(36 )
(511 )
(783 )
629
(154 )
-81%
28%
-11%
-52%
-86%
-100%
91%
>100%
30%
BAKTASH KHIDRI, NICK MANUEL, AND MATTHEW SHEWCHUK
($ thousands)
Service revenue
Interest revenue
Administrative expenses
Depreciation and amortization
Other losses, net
Loss before income tax
Income taxes (expense)/recovery
Net loss
The Corporate division carries out
support functions in the areas of
accounting, information technology,
legal services, human resources, payroll
and internal audit. Support function
remuneration is allocated, based on usage,
to the various divisions.
Total revenue earned is incidental to
Olympia’s activities.
Administrative, depreciation and
amortization expenses for the year ended
December 31, 2017, have decreased 55%
to $0.18 million from $0.40 million
when compared to the year ended
December 31, 2016, due to the other
divisions absorbing more costs.
The Corporate division’s net loss
increased 33% to ($0.20) million from
($0.15) million when compared to the year
ended December 31, 2016.
32
| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT
Off-balance sheet arrangements
During the normal course of operations, Olympia administers client assets that are not reported
on its balance sheet. The cash component of the off-balance sheet arrangements represents the
cash and cash equivalents held in trust.
OFF-BALANCE SHEET ARRANGEMENTS UNDER ADMINISTRATION
December 31, 2017
December 31, 2016
Cash & public
securities at
estimated
fair value
Private
securities,
mortgages and
mutual funds
at cost
Cash & public
securities at
estimated
fair value
Private
securities,
mortgages and
mutual funds
at cost
535,348
4,090,555
518,460
3,786,987
10,124
18,900
-
-
564,372
4,090,555
9,529
13,118
541,107
-
-
3,786,987
($ thousands)
RRSP
Health
FX
RRSP division
At December 31, 2017, RRSP administered self-directed registered plans consisting of private
company securities and mortgages with a cost value of $4.09 billion (December 31, 2016 –
$3.79 billion) plus cash, public securities, term deposits and outstanding cheques with an
estimated fair value of $535.35 million (December 31, 2016 – $518.46 million). These assets are
the property of the account holders and Olympia Trust does not maintain effective control over
the assets. Therefore, the assets are not reflected in the consolidated financial statements.
Olympia earned interest income from funds held in trust of $7.81 million for the year ended
December 31, 2017 (December 31, 2016 - $6.18 million).
Health division
At December 31, 2017, Health held funds in trust of $10.12 million (December 31, 2016 -
$9.53 million) on behalf of its self-insured private health clients. These assets are the property
of the plan holders and OBI does not maintain effective control over the assets. Therefore, the
assets are not reflected in the consolidated financial statements.
FX division
At December 31, 2017, FX held funds in trust of $5.31 million (December 31, 2016 – $6.38 million)
for clients who have paid margin requirements on forward foreign exchange contracts and
$13.59 million (December 31, 2016 - $6.74 million) of outstanding payments. These assets are
the property of the contract holders and Olympia Trust does not maintain effective control over
the assets. Therefore, the assets are not reflected in the consolidated financial statements.
33
OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT |
Management of capital resources
Olympia includes shareholders’ equity, which comprises share capital, contributed surplus and
retained earnings, in the definition of capital. Olympia’s main objectives when managing its
capital structure are to:
• Maintain sufficient cash and cash equivalents over the short and medium term in order to
finance its growth and development, including capital expenditures;
• Maintain investor and creditor confidence to sustain future development of the business;
• Maintain regulatory capital for Olympia Trust as required by the Loan and Trust Corporations Act
(Alberta) ($2 million). Similar regulatory capital is required by legislation in Nova Scotia
($5 million). Regulatory capital is defined as share capital and retained earnings. Olympia
Trust has maintained these minimum capital requirements throughout the year ended
December 31, 2017; and
• Maintain compliance with financial covenants. The financial covenants are reviewed and
controls are in place to maintain compliance with the covenants. Olympia complied with its
financial covenants for the year ended December 31, 2017.
In managing capital, Olympia estimates its future dividend payments and capital expenditures,
which are compared to planned business growth for purposes of sustainability. The capital
structure of Olympia is managed and adjusted to reflect changes in economic conditions. In
order to maintain or adjust the capital structure, adjustments may be made to the amount of
dividends (if any) to shareholders, in addition to the number of new common shares issued
or common shares repurchased. Management reviews the financial position of Olympia on a
monthly and cumulative basis.
Financing decisions are set based on the timing and extent of expected operating and capital
cash outlays. Factors considered when determining capital and the amount of operational cash
required are weighed against the costs associated with excess cash, its terms and availability,
whether to issue equity and the creation of value for the shareholders. Olympia works towards
managing its capital objectives to the extent possible while facing the challenges of market
conditions and the public’s assessment of Olympia’s risk profile.
Olympia maintains a strong capital base to maintain investor and creditor confidence and to
sustain future development of the business.
Olympia has committed capital resources to its 2018 Objectives (set out previously) and has
sufficient capital through internally generated cash flows and its credit facility to meet these
spending objectives.
Completing and fulfilling its 2018 Objectives will help Olympia meet its growth and
development activities. No other significant expenditure is required to maintain growth and
development activities.
34
| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT Olympia’s Foreign Exchange division maintains various foreign currency bank accounts of
which Canadian dollar and United States dollar bank accounts are the most significant. It is
Olympia Trust’s policy to limit the amount of foreign currencies on hand to $1.25 million to
reduce exposure to foreign currency risk.
Olympia’s capital management objectives have remained substantively unchanged over the
years presented.
Liquidity
Liquidity risk is the risk that Olympia will encounter difficulties in meeting its financial
obligations. Olympia manages its liquidity risk by keeping surplus cash in liquid investments
and fixed term deposits with highly rated financial institutions. This allows Olympia to earn
interest on surplus cash while having access to it within a short time. Olympia seeks to ensure
the security and liquidity of these investments.
Olympia has a healthy current ratio (current assets: current liabilities). The ratio is 1.29:1 as
at December 31, 2017, compared to 1.12:1 as at December 31, 2016, and indicates that Olympia
should not have difficulty in meeting working capital requirements.
There are no legal or practical restrictions on the ability of subsidiaries to transfer cash
to Olympia or between subsidiaries of Olympia.
Cash flows
• Operating activities
The movement in cash flow from operating activities for the year ended December 31, 2017,
is a result of changes in non-cash working capital balances of other long-term liabilities, trade
and other payables, inventory, current taxes payable and prepaid expenses. The increase is also
attributable to higher net earnings.
• Investing activities
The movement in cash from/(used) in investing activities during the year ended
December 31, 2017, is mainly attributable to the release of $1.93 million of Treasury bonds
as collateral. Capital asset expenditure relates primarily to the continued growth of the ATM
division and software development in the Exempt Edge division.
35
OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT | • Financing activities
Cash used in financing activities during the year ended December 31, 2017, increased, mainly due
to dividends being paid out monthly compared to quarterly in the year ended December 31, 2016,
and to Olympia having decreased its cash in circulation due to bank. This was partially offset by
the increase in the revolving credit facility.
Cash
Cash is placed with Canadian financial institutions where it generates interest. Cash and cash
equivalents comprise 40% of the total current assets of Olympia, compared to 38% as at
December 31, 2016.
One factor that affects Olympia’s profitability is effective interest rates. Although Olympia Trust
is not a deposit taking trust company, it does earn interest on cash held in trust. Cash held in
trust generated interest of $7.81 million, a 26% increase from $6.18 million when compared
to the year ended December 31, 2016, due to an increase in off-balance sheet cash under
administration and increases in the Canadian prime rate. The Canadian prime rate was 3.20% on
December 31, 2017, and 2.70% on December 31, 2016.
Olympia, through its operational cash flow and line of credit, has sufficient funds to meet its
Objectives for 2018.
Liquidity risks associated with financial instruments are addressed in the notes to the
accompanying consolidated financial statements. Management understands that currency
markets are volatile and therefore subject to higher risk. Olympia’s FX division mitigates currency
risk through its policy of limiting the amount of foreign currencies on hand to $1.25 million.
36
| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT Commitments
Olympia leases various offices under operating lease agreements. The initial lease terms are
between twelve months and fifty months and the majority of lease agreements are renewable at
market rates when the lease period ends.
During the year ended December 31, 2017, Olympia extended its office rental agreement in
Calgary. The original lease was due to expire on August 31, 2018, but has been extended to
February 28, 2022.
Future aggregate minimum lease payments under operating leases are listed in the table below:
2018
2019
2020
2021
2022
December 31, 2017
$
1,107,459
1,004,325
995,013
923,397
147,932
$
4,178,126
In November 2017, Target, a related party, assigned its lease contract to Olympia. Olympia
subleased the office space at a rate below its lease obligation, resulting in Olympia having an
onerous contract obligation based on the present value of future cash flows.
Olympia’s Earnings from Operations
Before Income Taxes
(millions of dollars)
Olympia’s Total Revenue
(millions of dollars)
50
45
40
35
30
25
20
15
10
5
0
10
9
8
7
6
5
4
3
2
1
0
2007 2008 2009 2010
2011 2012
2013 2014
2015
2016 2017
2007 2008 2009 2010
2011 2012
2013 2014
2015
2016 2017
37
OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT |
Credit facility
As at December 31, 2017, Olympia had drawn $4.81 million on its credit facility, compared to
$3.94 million as at December 31, 2016. Amounts drawn in the current year have been used
primarily to finance the expansion of the ATM division. Amounts drawn in previous years were
utilized for capital expenditures related to the ATM division and Olympia’s Normal Course
Issuer Bid (“NCIB”). The credit facility provides a maximum of $8.50 million and bears interest at
the Canadian prime rate plus 0.25%. The Canadian prime rate at December 31, 2017 was 3.20%
(December 31, 2016 - 2.70%). The credit facility is subject to review at any time, and in any event
will be reviewed annually based on Olympia’s audited consolidated financial statements for the
year ended December 31, 2017.
The credit facility contains a number of affirmative covenants, including maintaining specific
security and maintenance of a specific financial ratio. The financial ratio is an annual cash flow
coverage ratio of not less than 1.50:1. At December 31, 2017, Olympia’s cash flow coverage ratio
under the terms of the credit facility was calculated to be 2.13:1 (December 31, 2016 - 1.89:1).
This calculation is based on Olympia’s twelve month revolving EBITDA less cash taxes paid
(“revolving EBITDA”). This revolving EBITDA for the year ended December 31, 2017, has been
calculated at $7.00 million (December 31, 2016 – $6.10 million), after adjusting for finance
expenses of $0.14 million (December 31, 2016 - $0.11 million). The coverage required is based on
an annualized average of the scheduled facility principal of $8.50 million and interest payments
calculated at 5.29% (December 31, 2016 - 4.59%) over a period of 36 months. As at December
31, 2017, this was calculated to be $3.28 million (December 31, 2016 -$3.22 million). Should the
covenants and other limitations be breached, it could cause a default, which might result in a
requirement for immediate repayment of all amounts outstanding.
Security for the credit facility includes a general security agreement providing a first security
charge over all present and after acquired property.
On May 16, 2016, Olympia Trust entered into a contingent credit facility to be used only by the
FX division. The contingent credit facility has a maximum of $5.00 million, which can only be
used to enter into spot, forward or foreign exchange transactions with the issuing financial
institution. The contingent credit facility bears interest at the Canadian prime rate. The
contingent credit facility is currently undrawn.
Credit facility
Available balance at January 1
Drawn
Available at the end of the year
December 31, 2017
December 31, 2016
$
8,500,000
(4,812,347 )
$
3,687,653
$
$
8,500,000
(3,935,045 )
4,564,955
38
| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT
Risk framework
Olympia is exposed to various types of risks owing to the nature of the commercial activities it
pursues. Management has identified the following risks:
Liquidity risk
Liquidity risk is the risk that Olympia will encounter difficulties in meeting its financial liability
obligations. Olympia manages its liquidity risk by keeping surplus cash in liquid investments and
fixed term deposits with a highly rated financial institution. This allows Olympia to earn interest
on surplus cash while having access to it within a very short time.
The timing of cash outflows is outlined in the following tables:
At December 31, 2017
Current
31 to 60 days 61 to 90 days Over 90 days
Total
Trade and other payables
$ 1,251,312
$
16,033
$
10,799
$
- $ 1,278,144
Other liabilities and charges
1,356,208
Cash in circulation due to bank 3,823,110
-
-
-
-
-
-
1,356,208
3,823,110
Total
$ 6,430,630 $
16,033
$
10,799
$
- $ 6,457,462
At December 31, 2016
Current
31 to 60 days 61 to 90 days Over 90 days
Total
Trade and other payables
$ 857,210
$ 79,082
$
- $
32,814
$ 969,106
Other liabilities and charges
1,170,968
Cash in circulation due to bank 5,119,920
-
-
-
-
-
-
1,170,968
5,119,920
Total
$ 7,148,098
$ 79,082
$
- $
32,814
$ 7,259,994
At December 31, 2017, trade and other payables totaled $1.28 million (December 31, 2016 -
$0.97 million). Olympia continues to meet all of the obligations associated with its financial
liabilities. Other liabilities and charges with a cash outflow are identified in Note 19 of the
consolidated financial statements, except for leasehold inducements, straight-line rent and
onerous contract obligation.
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OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT |
The liquidity risk relating to derivative financial instruments payable is outlined in the
table below:
Current
31 to 60 days
61 to 90 days
Over 90 days
Non-current (1-3 years)
December 31, 2017
December 31, 2016
$
$
$
501,075
539,665
565,106
6,190,190
7,796,036
543,073
$
$
$
15,821
130,803
54,728
669,051
870,403
4,271,471
The previous table presents the expected maturity dates of the foreign exchange contracts.
Liquidity risk is associated with Olympia’s credit facility. The credit facility is available to finance
day-to-day operations to a maximum principal amount of $8.50 million (December 31, 2016 -
$8.50 million), and bears interest at the Canadian prime rate plus 0.25%. For the year ended
December 31, 2017, a balance of $4.81 million remains outstanding (December 31, 2016 -
$3.94 million). Olympia has determined the principal and interest to be current.
Security for the credit facility includes a general security agreement providing a first security
interest in all present and after acquired property.
Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market prices, following variations in the parameters underlying
their evaluation, such as interest rates, exchange rates or quoted stock market prices, and is
comprised of foreign currency exchange risk, interest rate risk, management’s assessment and
operational risks.
Foreign currency exchange risk
Olympia is exposed to changes in foreign exchange rates when, and if, revenues or financial
instruments fluctuate because of changing rates. Transactions in the applicable financial market
are executed consistent with established risk management policies. Olympia purchases forward
contracts whenever it enters into a transaction to buy or sell foreign currency in the future. These
contracts are both short term and long term in nature and are in the normal course of business.
Management understands that the currency markets are volatile and therefore subject to higher
risk. Olympia Trust applies the following policy to mitigate the currency risk.
• For forward contracts, a margin of 5% is payable on signature of the contract.
• Olympia Trust sets up a corresponding position with its currency supplier.
40
| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT
• If market rates vary by 4% or more, the client is required to adjust their margin to match the
variance by the end of the next trading day.
Olympia’s FX division maintains various foreign currency bank accounts, of which Canadian
dollar and United States dollar bank accounts are the most significant. It is Olympia’s FX
division’s policy to limit the amount of foreign currencies on hand to $1.25 million to reduce
exposure to foreign currency risk.
If the United States dollar to Canadian dollar exchange rate at December 31, 2017, were to
have increased by $0.10, it is estimated that Olympia’s after-tax earnings for the year ended
December 31, 2017, would have decreased by approximately $118,792 (December 31, 2016
-$116,911). A $0.10 decrease in the United States dollar to Canadian dollar exchange rate would
have had an equal but opposite effect. The vast majority of Olympia’s Foreign Exchange division’s
trades are Canadian dollars traded for United States dollars and vice versa, although it trades
in various other currencies. This sensitivity analysis assumes that all other variables remain
constant.
Interest rate risk
Interest rate risk is the risk that the value of a financial instrument will fluctuate because of
changes in market interest rates. Olympia is exposed to interest rate risk as the cash flows
generated from interest bearing instruments fluctuate in response to changes in market interest
rates. The primary exposure is related to cash balances and fixed term deposits.
If the interest rates were to have increased by 1%, it is estimated that Olympia’s after-tax
earnings for the year ended December 31, 2017, would have increased by approximately
$3.94 million (December 31, 2016 - $3.64 million). A 1% decrease in interest rates would have
had an equal but opposite effect. This sensitivity analysis assumes that all other variables
remain constant.
Credit risk
Credit risk is the risk that the counterparty to a financial asset will default, resulting in Olympia
incurring a financial loss. Before transactions begin with a new customer or counterparty,
the counterparty’s creditworthiness is assessed by the FX division. The assessment practice
considers both quantitative and qualitative factors. Olympia constantly monitors the exposure
to any single customer or counterparty along with the financial position of the customer or
counterparty. If it is deemed that a customer or counterparty has become materially weaker,
Olympia will work to reduce the credit exposure and lower the credit limit allocated. Olympia
is exposed to credit risk on its cash and cash equivalents, restricted cash and investments,
restricted cash in circulation, trade and other receivables and derivative financial instruments
receivable. The maximum exposure to credit risk of Olympia at the end of the year is the
carrying value of cash and cash equivalents, restricted cash and investments, restricted cash in
circulation, trade and other receivables and derivative financial instruments receivable.
41
OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT | • Cash and cash equivalents
Olympia mitigates its exposure to credit risk by maintaining its bank accounts with highly rated
financial institutions.
• Restricted cash and investments and restricted cash in circulation
Olympia limits its counterparty credit risk on these assets by dealing with reputable
counterparties and assessing their credit ratings utilizing the services of an independent ratings
agency. The Treasury bonds are “AAA” rated.
• Trade and other receivables
Olympia has policies and procedures in place to govern the credit risk it will assume. Trade
receivables over 90 days are considered past due. As of December 31, 2017, net trade receivables
of $0.62 million (December 31, 2016 - $0.95 million) were past due but deemed not impaired.
Included in trade and other receivables at December 31, 2017 is a $0.12 million demand loan to
Tarman Inc., a company controlled by the president and CEO of Olympia, which is to be fully
repaid by June 30, 2018, with interest accruing at 4% per annum. Olympia has made allowances
for doubtful accounts of $0.61 million, compared to $0.24 million as at December 31, 2016.
The remaining balance relates to a number of independent clients which Olympia is actively
pursuing through its internal collection process.
The aging of trade and other receivables is as follows:
Current
31 to 60 days
61 to 90 days
Over 90 days
Allowance for doubtful accounts
December 31, 2017
December 31, 2016
$
753,939
$
15,579
28,407
1,229,256
(613,822 )
89,210
8,207
14,191
1,194,059
(244,154 )
$
1,413,359
$
1,061,513
The allowance for doubtful accounts is based on an account portfolio analysis. Movements on
Olympia’s provision for impairment of trade receivables are as follows:
At January 1
Increase in provision
Receivables written off
Allowance for doubtful accounts
December 31, 2017
December 31, 2016
$
$
$
244,154
616,733
(247,065 )
373,423
519,322
(648,591 )
613,822
$
244,154
42
| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT
The provision for impaired receivables has been included in administrative expenses in the
consolidated statements of net earnings and comprehensive income. Amounts charged to
the allowance account are generally written off when there is no expectation of recovering
additional cash.
• Derivative financial instruments receivable
The expected maturity relating to derivative financial instruments receivable and foreign
exchange contracts is outlined in the table below
December 31, 2017
December 31, 2016
Current
31 to 60 days
61 to 90 days
Over 90 days
Non-current (1-3 years)
Capital risk management
$
572,398
$
648,240
636,671
7,379,625
9,236,934
729,459
$
$
24,643
199,847
78,120
962,034
$
$
1,264,644
5,478,746
Olympia’s objectives when managing capital are to safeguard Olympia’s ability to continue
as a going concern in order to provide returns and benefits to shareholders and to maintain
an optimal capital structure to reduce the cost of capital and to meet regulatory capital
requirements. In order to maintain or adjust the capital structure, Olympia may adjust the
amount of dividends paid to shareholders, return capital to shareholders, issue new shares,
repurchase shares, sell assets or make further use of its credit facility. Refer to Note 13 in the
accompanying consolidated financial statements for a detailed discussion on the revolving credit
facility.
Olympia includes shareholders’ equity (December 31, 2017 - $11.02 million: December 31,
2016 -$10.65 million) in the definition of capital. Shareholders’ equity comprises share capital,
contributed surplus and retained earnings.
Olympia’s main objectives when managing its capital structure are to:
• Maintain sufficient cash and cash equivalents over the short and medium term in order to
finance its growth and development, including capital expenditures;
• Maintain investor and creditor confidence to sustain future development of the business.
Olympia does not use financial ratios to manage its capital structure. Olympia’s objective
when managing capital is to maintain adequate financial flexibility to preserve its ability
to meet financial obligations. In managing capital, Olympia estimates its future dividend
payments and capital expenditures, which is compared to planned business growth for
purposes of sustainability;
43
OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT |
• Maintain regulatory capital for Olympia Trust as required by the Loan and Trust Corporations
Act (Alberta) ($2.00 million). Similar regulatory capital is required by legislation in Nova
Scotia ($5.00 million). Regulatory capital is defined as share capital and retained earnings.
Olympia Trust has maintained these minimum capital requirements throughout the year ended
December 31, 2017; and
• Maintain compliance with financial covenants. The financial covenants are reviewed and
controls are in place to maintain compliance with the covenants. Olympia complied with
financial covenants for the year ended December 31, 2017.
The capital structure of Olympia is managed and adjusted to reflect changes in economic
conditions. Capital structure adjustments could include adjusting the level of dividends and/or
issuance or repurchase of common shares. In support thereof, management reviews the financial
position of Olympia on a monthly and cumulative basis. Financing decisions are set based on
the timing and extent of expected operating and capital cash outlays. Factors considered when
determining capital and the amount of operational cash required are weighed against the costs
associated with excess cash, its terms and availability and whether to issue equity. Olympia
works towards managing its capital objectives to the extent possible while facing the challenges
of market conditions and the public’s assessment of Olympia’s risk profile. Olympia’s capital
management objectives have remained substantively unchanged over the periods presented.
Operational risks
Management has identified the following major operational risks which could negatively affect
Olympia’s future strategies and objectives:
• The risk of fluctuations in interest rates and currency values negatively affecting Olympia’s
business;
• Legal developments and changes in tax laws;
• The occurrence of weather related and other natural catastrophies;
• The risk that the regulatory environment in which Olympia carries out commercial activities
may change;
• The level of competition in Olympia’s markets;
• The risk that new markets may fail to produce estimated revenues;
• The risk of changes in accounting standards and policies;
• The risk that negative stakeholder impressions about Olympia’s business practices, actions or
inaction, whether true or not, could cause deterioration in Olympia’s value, brand, liquidity, or
customer base;
• The risk that general economic conditions could deteriorate and any significant downturn in
capital markets or the general economy could negatively affect financial results;
44
| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT • The cybersecurity risk that failure of computer hardware, data processing systems, network
access and software could interrupt operations or materially impact Olympia’s ability to deliver
its services;
• The accuracy and completeness of information Olympia receives about customers and
counterparties;
• The risk that reliance on banks to provide cash to load in Olympia’s ATMs under bailment
terms and conditions could interrupt operations or materially impact Olympia’s ability to
deliver its services; and
• The risk that failure of third party networks and cash delivery counterparties in the conduct
of ATM could interrupt data operations or materially impact Olympia’s ability to deliver its
services.
Olympia’s corporate insurance program further mitigates certain operational risk exposures.
Olympia looks to industry benchmarks as well as legal, regulatory and contractual requirements
when deciding on types of coverage and limits. Coverage is placed at limits considered
appropriate for Olympia’s size, structure and type of operations. Olympia reviews the insurance
program annually to ensure it remains well suited and compliant with regulations and
requirements.
Critical accounting estimates
The preparation of financial statements requires management to make judgments, estimates and
assumptions based on currently available information that affects the application of accounting
policies and the reported amounts of assets, liabilities, income and expenses. Estimates and
judgments are evaluated and are based on management’s experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances.
However, actual results could differ from these estimates. By their very nature, these estimates
are subject to measurement uncertainty, and the effect on the financial statements of future
periods could be material. Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognized in the period in which the estimates are
revised and in any future periods affected.
In the process of applying Olympia’s accounting policies, management has made the following
judgments, estimates and assumptions which have the most significant effect on the amounts
recognized in the consolidated financial statements.
(i)
Business combination
Olympia uses the acquisition method to account for business combinations. Assets
acquired and liabilities assumed in a business combination are recorded at fair value at the
time of acquisition. The determination of fair value requires Olympia to make estimates,
assumptions and judgments that are subject to measurement uncertainty. The allocation
process is inherently subjective and impacts the amounts assigned to individually
identifiable assets and liabilities, including the fair value of customer relationships, non-
45
OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT |
compete agreements and ATM equipment, together with deferred income tax effects.
Consequently, the purchase price allocation impacts Olympia’s reported assets and
liabilities and future net earnings, due to the impact on future amortization and depreciation
expense and impairment tests.
(ii) Allowance for doubtful accounts (Note 6)
Olympia regularly performs a review of outstanding accounts receivable balances to
determine eventual collectability. A provision for bad debt is recorded based on
historical information or if an account is deemed uncollectable. Olympia analyzes the bad
debt provision regularly to determine if any of the accounts provided for should be written
off. Those accounts which are deemed uncollectable could materially change as a result of
changes in a customer’s financial situation. This includes risks associated with the gross
receivable position on foreign exchange forward contracts, all assessed regularly
for impairment.
(iii) Depreciation and amortization methods (Notes 15 and 16)
Olympia estimates the useful lives of property, plant and equipment and intangible assets,
other than ATM processing contracts, based on the period over which the assets are
expected to be available for use. Olympia estimates the useful lives of ATM processing
contracts included in intangible assets based on the average remaining primary term of
the contracts acquired and assigns an estimated retention period based on historical
information in the applicable market.
The estimated useful lives are reviewed periodically and are updated if expectations
differ from previous estimates due to physical wear and tear, technical or commercial
obsolescence and legal or other limits on the use of the relevant assets. In addition, the
estimation of the useful lives is based on internal technical evaluation, current facts and
past experience with similar assets, and takes into consideration the anticipated expected
life of the asset, existing long-term agreements and contracts, current and forecasted
demand and the potential for technological obsolescence. It is possible, however, that future
results of operations could be materially affected by changes in the estimates brought about
by changes in factors mentioned above. The amounts and timing of recorded expenses for
any period would be affected by changes in these factors and circumstances.
(iv) Impairments (Note 16)
Olympia performs impairment tests of assets when indications of impairment exist.
Application of judgment is required in determining whether an impairment test is
warranted. Impairment exists when the carrying value of an asset or Cash-Generating
Unit (“CGU”) exceeds its recoverable amount, which is the higher of (a) its fair value less
costs of disposal and (b) its value in use. The fair value less costs of disposal calculation is
estimated using valuation techniques such as a discounted cash flow model, adjusted to
reflect the considerations of a prospective third-party buyer. The value in use calculation is
based on the present value of expected cash flows. The cash flows are derived from internal
budgets and do not include restructuring activities that Olympia is not yet committed to or
46
| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT
significant future investments that will enhance the asset’s performance of the CGU being
tested. The recoverable amount is most sensitive to the discount rate used for the present
value of expected cash flows, as well as expected transaction volumes, future operating
costs, tax rates, margins and the growth rate used for extrapolation purposes. There is a
certain amount of subjectivity and judgment in the determination of the recoverable amount
calculation. Judgments and assumptions, described in Notes 6, 15 and 16, are subject to
measurement uncertainty and the impact of differences between actual and estimated
amounts on the consolidated financial statements of future periods could be material.
When indicators support that the asset is no longer impaired, Olympia will reverse
impairment losses. Similar to the impairment, application of judgment is required to
determine whether a reversal should be considered.
(v) Income taxes (Note 21)
Olympia calculates an income tax provision in each of the jurisdictions in which it operates.
Estimation of income taxes includes evaluating the recoverability of deferred tax assets
based on an assessment of the ability to use the underlying future tax deductions against
future taxable income before the deductions expire. The assessment is based upon existing
tax laws and estimates of future taxable income. Further, there are transactions and
calculations for which the ultimate tax determination is uncertain during the ordinary course
of business. Provisions are made using the best estimate of the amount expected to be paid
based on a qualitative assessment of all relevant factors. Olympia reviews the adequacy of
these provisions at each reporting period. However, it is possible that at some future date an
additional liability could result from audits by taxation authorities. Where the final outcome
of these tax-related matters is different from the amounts that were initially recorded, such
differences will affect the tax provisions in the period in which such determination is made.
(vi) Revenue
In connection with the ATM division’s operating or processing arrangements, Olympia
applies judgment to determine whether interchange and surcharge fee revenue should be
recognized on a gross basis, or net of fees paid to the merchant for providing, processing,
placing and maintaining the ATM unit. Pursuant to the guidance in IFRS, Olympia has
assessed whether to record such payments as a reduction of associated ATM service
revenues or as a direct expense. Specific factors considered were, whether Olympia acts as
the principal and is the primary obligor in the ATM transactions, provides the processing for
the ATM transactions, has significant influence over pricing and has the risks and rewards
of ownership, including a variable earnings component and the risk of loss for collection.
Olympia recognizes the surcharge and interchange fees on a gross basis and does not
reduce its reported revenues for payments made to the various merchants where the ATM
units are housed. As a result, for agreements under which Olympia acts as the principal,
Olympia records the total amounts earned from the underlying ATM transactions as ATM
service revenues and records the related merchant expense as a direct expense of ATM
operating revenues. However, for those agreements in which Olympia does not meet the
47
OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT |
criteria to qualify as the principal in the transaction, Olympia does not record the related
surcharge and interchange fee revenue, as the rights associated with this revenue stream
are attributable to the benefit of the merchant. Olympia records surcharge and interchange
fee revenue under these arrangements on a net basis.
Whether Olympia is considered to be the principal or an agent in the transaction depends
on analysis by management of both the legal form and substance of the agreement between
Olympia and the merchant. Such judgments impact the amount of reported revenue and
expenses, but do not impact reported assets, liabilities or cash flows.
Future accounting pronouncements
A number of new standards and amendments to standards and interpretations are effective for
annual periods beginning after January 1, 2018, and have not been applied in preparing these
consolidated financial statements.
In May 2014, the IASB published IFRS 15, “Revenue from Contracts with Customers” (“IFRS 15”)
replacing IAS 11, “Construction Contracts” and IAS 18, “Revenue” and several revenue-related
interpretations. IFRS 15 establishes a single revenue recognition framework that applies to
contracts with customers. The standard requires an entity to recognize revenue to reflect the
transfer of goods and services for the amount it expects to receive when control is transferred to
the purchaser. Disclosure requirements have also been expanded. The new standard is effective
for annual periods beginning on or after January 1, 2018, with earlier adoption permitted. The
standard may be applied retrospectively or using a modified retrospective approach.
It is expected that the standard will have an impact on the amounts and timing of revenue
recognized, as it relates to up-front fees and collectability. Olympia is still evaluating the final
impact on the consolidated financial statements.
IFRS 9, “Financial Instruments,” (“IFRS 9”) addresses the classification, measurement and
recognition of financial assets and financial liabilities. IFRS 9 was issued in November 2009 and
October 2010. It replaces the parts of IAS 39 that relate to the classification and measurement
of financial instruments. IFRS 9 requires financial assets to be classified into two measurement
categories: those measured at fair value and those measured at amortized cost. The
determination is made at initial recognition. The classification depends on the entity’s business
model for managing its financial instruments and the contractual cash flow characteristics of
the instrument. For financial liabilities, the standard retains most of the IAS 39 requirements.
The main change is that, in cases where the fair value option is taken for financial liabilities, the
part of a fair value change due to an entity’s own credit risk is recorded in other comprehensive
income rather than the income statement, unless this creates an accounting mismatch. This
standard is effective for first interim periods within years beginning on or after January 1, 2018.
Olympia Olympia is still evaluating the final impact on the consolidated financial statements.
48
| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT
On January 13, 2016, the IASB published IFRS 16, “Leases” (“IFRS 16”) replacing IAS 17, “Leases.”
IFRS 16 now requires lessees to recognize a lease liability reflecting future lease payments and a
“right-of-use asset” for virtually all lease contracts. The IASB has included an optional exemption
for certain short-term leases and leases of low-value assets; however, this exemption can only
be applied by lessees. For lessors, the IASB has updated the guidance on the definition of a lease
(as well as the guidance on the combination and separation of contracts). The new standard will
affect both the balance sheet and related ratios, such as debt/equity ratio, and may result in a
significant increase in debt on the balance sheet. IFRS 16 is effective for annual reporting periods
beginning on or after January 1, 2019. Earlier application is permitted, but only in conjunction
with IFRS 15, “Revenue from Contracts with Customers.” Olympia is currently evaluating the
impact that the standard will have on the consolidated financial statements.
Evaluation of disclosure controls and procedures and internal control over
financial reporting
The President and Chief Executive Officer (“CEO”) and Vice President, Finance and Chief
Financial Officer (“CFO”) of Olympia are responsible for establishing and maintaining
Disclosure Controls and Procedures (“DC&P”) and Internal Control over Financial Reporting
(“ICFR”) for Olympia.
DC&P are designed to provide reasonable assurance that material information relating to
Olympia is made known to the CEO and CFO by others, particularly in the period in which the
annual filings are being prepared, and that information required to be disclosed in documents
filed with securities regulatory authorities is recorded, processed, summarized and reported
within the time periods specified in securities legislation, and include controls and procedures
designed to ensure that such information is accumulated and communicated to Olympia’s
management, including the CEO and CFO, as appropriate, to allow timely decisions regarding
required disclosure. ICFR is designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in
accordance with IFRS.
In accordance with the requirements of National Instrument 52-109 “Certification of Disclosures
in Issuer’s Annual and Interim Filings,” an evaluation of the effectiveness of DC&P and ICFR
was carried out under the supervision of the CEO and CFO at December 31, 2017. Based on this
evaluation, the CEO and CFO have concluded that, subject to certain inherent limitations noted
below, Olympia’s DC&P and ICFR are effectively designed and operating as intended.
Olympia’s management, including the CEO and CFO, does not expect that Olympia’s DC&P and
ICFR will prevent or detect all misstatements or instances of fraud. The inherent limitations in all
control systems are such that they can provide only reasonable, not absolute, assurance that all
control issues, misstatements or instances of fraud, if any, within Olympia have been detected.
There was no change to Olympia’s ICFR during the most recent annual period that has materially
affected, or is reasonably likely to materially affect, Olympia’s ICFR.
49
OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT | Outstanding share data
As at February 22, 2018, Olympia has an aggregate of 2,406,352 common shares issued
and outstanding.
Additional information
Further information regarding Olympia can be accessed under Olympia’s public filings found at
www.sedar.com.
Shareholders seeking to contact Olympia’s independent directors may do so by calling Rick Skauge,
Olympia’s President and CEO, at 403-261-7501 or by email at ricks@olympiafinancial.com.
50
| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT Management’s responsibility for consolidated
financial statements
For the years ended December 31, 2017 and December 31, 2016
The accompanying consolidated financial statements and all of the data included in this
annual report have been prepared by and are the responsibility of the Board of Directors and
management of Olympia Financial Group Inc. (“Olympia”).
The consolidated financial statements have been prepared in accordance with International
Financial Reporting Standards as set out in the Handbook of the Chartered Professional
Accountants of Canada and reflect management’s best estimates and judgments based on
currently available information. In the opinion of management, the consolidated financial
statements have been prepared within acceptable limits of materiality and are in accordance
with International Financial Reporting Standards appropriate in the circumstances. The financial
information elsewhere in the Annual Report has been reviewed to ensure consistency with that in
the consolidated financial statements.
The Board of Directors has reviewed and approved the accompanying consolidated financial
statements for the years ended December 31, 2017, and December 31, 2016.
The Audit Committee, comprised of non-management directors, acts on behalf of the Board
of Directors to ensure that management fulfills its financial reporting and internal control
responsibilities. Management maintains appropriate systems of internal control. Policies and
procedures are designed to give reasonable assurance that transactions are properly authorized,
assets are safeguarded and financial records properly maintained to provide reliable information
for the preparation of the consolidated financial statements.
Internal controls are further supported by an internal audit function which conducts periodic
audits of Olympia’s financial reporting and internal controls. The internal audit function reports
to the Audit Committee. In performing its duties, the Audit Committee acts only in an oversight
capacity and necessarily relies on the work and assurances of Olympia’s management.
Olympia’s independent auditor, PricewaterhouseCoopers LLP, has performed an audit on
these consolidated financial statements in accordance with the standards established by
the Chartered Professional Accountants of Canada. Their report outlines the scope of their
examination and opinion.
Signed Rick Skauge
Signed Gerhard Barnard
Rick Skauge
PRESIDENT & CHIEF EXECUTIVE OFFICER
Calgary, Canada, February 22, 2018
Gerhard Barnard, CPA, CMA
CHIEF FINANCIAL OFFICER
51
OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT | Independent Auditor’s Report
52
| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT Independent Auditor’s Report
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of Olympia Trust Company and its subsidiaries as at December 31, 2013 and December 31, 2012
and their financial performance and their cash flows for the year ended in accordance with International
Financial Reporting Standards.
Chartered Accountants
53
OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT | CONSOLIDATED BALANCE SHEETs
ASSETS
Current assets
Cash & cash equivalents (note 10)
Restricted cash in circulation (note 11)
Trade & other receivables (note 6)
Inventory (note 12)
Prepaid expenses
Current taxes receivable
Derivative financial instruments (notes 6 and 14)
Total current assets
Non-current assets
Restricted cash & investments (note 9)
Equipment & other (note 15)
Intangible assets (note 16)
Available for sale investments (note 7)
Prepaid expenses
Derivative financial instruments (notes 6 and 14)
Deferred tax assets (note 21)
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade & other payables (notes 6 and 17)
Deferred revenue (note 18)
Other liabilities & charges (note 19)
Cash in circulation due to bank (note 11)
Revolving credit facility (note 13)
Derivative financial instruments (notes 6 and 14)
Current tax liability
Total current liabilities
Other liabilities (note 19)
Derivative financial instruments (notes 6 and 14)
Total liabilities
EQUITY
Share capital (note 20)
Contributed surplus (note 20)
Retained earnings
Equity attributable to owners of Olympia
Non-controlling interests
Total equity
Total equity & liabilities
Contingencies (note 31)
Approved on behalf of the Board of Directors
December 31, 2017
December 31, 2016
$
10,140,523
3,823,110
1,413,359
223,114
732,914
-
9,236,934
25,569,954
500,000
2,232,396
1,849,693
48,932
-
729,459
1,435,531
6,796,011
$ 32,365,965
$
1,278,144
313,256
1,648,081
3,823,110
4,812,347
7,796,036
102,212
19,773,186
1,068,776
543,073
$ 21,385,035
$
7,886,989
86,373
3,048,996
11,022,358
(41,428 )
10,980,930
$ 32,365,965
$
5,350,154
5,119,920
1,061,513
455,973
840,563
117,683
1,264,644
14,210,450
2,430,000
2,342,644
2,140,497
108,517
73,432
5,478,746
983,750
13,557,586
$ 27,768,036
$
$
969,106
221,912
1,540,538
5,119,920
3,935,045
870,403
-
12,656,924
194,110
4,271,471
17,122,505
$
7,886,989
86,373
2,672,169
10,645,531
-
10,645,531
$ 27,768,036
Signed Rick Skauge
Rick Skauge
DIRECTOR
Signed Brian Newman
Brian Newman
DIRECTOR
February 22, 2018
See accompanying notes to the consolidated financial statements
54
| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT
2017
2016
$ 36,629,780
$ 34,695,572
CONSOLIDATED STATEMENTs OF NET EARNINGS AND
COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31
Revenue
Service revenue (note 8)
Interest earned as trustee (note 8)
Interest (note 8)
Expenses
Direct expenses (notes 8 and 23)
Administrative expenses (notes 8 and 22)
Depreciation and amortization (note 8)
Other losses/(gains), net (notes 8 and 25)
Earnings before income tax
Income tax expense (notes 8 and 21)
Current
Deferred tax recovery
Total income tax expense
Net earnings and comprehensive income
attributable to:
Shareholders of Olympia
Non-controlling interests
Total net earnings and comprehensive income for
the year
Earnings per share attributable to shareholders of
Olympia
7,805,637
602,896
45,038,313
5,908,285
29,535,047
1,226,510
35,592
36,705,434
8,332,879
2,746,447
(451,782 )
2,294,665
$ 6,079,842
$
(41,628 )
$ 6,038,214
Basic and diluted (note 26)
$
2.53
See accompanying notes to the consolidated financial statements
6,177,689
418,323
41,291,584
5,736,989
28,235,900
1,383,145
(995,937 )
34,360,097
6,931,487
2,183,406
(842,913 )
1,340,493
5,590,994
-
5,590,994
2.32
$
$
$
$
55
OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT |
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Attributable to owners of Olympia
Share
Capital
Contributed
Surplus
Retained
Earnings
Non-
Controlling
Interest
Total
Equity
$
7,886,989 $
86,373 $
690,679 $
- $
8,664,041
-
-
-
5,590,994
-
5,590,994
-
(3,609,504 )
-
(3,609,504 )
$
7,886,989 $
86,373 $
2,672,169 $
- $
10,645,531
$
7,886,989
$
86,373 $
2,672,169 $
- $
10,645,531
-
-
-
-
-
-
200
200
6,079,842
(41,628 )
6,038,214
-
(5,703,015 )
-
(5,703,015 )
$
7,886,989
$
86,373 $
3,048,996 $
(41,428 ) $
10,980,930
Balance at
January 1, 2016
Net earnings and
comprehensive
income
Dividends
(note 27)
Balance as at
December 31, 2016
Balance as at
January 1, 2017
Share issuance
Net earnings and
comprehensive
income
Dividends
(note 27)
Balance as at
December 31, 2017
See accompanying notes to the consolidated financial statements
56
| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF CASH FLOWs
YEARS ENDED DECEMBER 31
Cash flows from operating activities
Net earnings
Items not affecting cash
Depreciation of equipment & other (note 15)
Amortization of intangible assets (note 16)
Impairment of intangible asset (notes 16 and 25)
Other
Fair value change in investments
Deferred income taxes recovery (note 21)
Foreign exchange gain (note 25)
Changes in non-cash working capital balances
(note 28)
Net cash from operating activities
Cash flows from investing activities
Purchase of equipment & other
Proceeds from sale of equipment & other
Purchase of intangible assets (note 16)
Release/(purchase) of restricted investment for
collateral, net (note 9)
Net cash from /(used) in investing activities
Cash flows from financing activities
Revolving credit facility (note 13)
Cash in circulation due to bank (note 11)
Dividends (note 27)
Net cash used in financing activities
Net change in cash position
Cash, beginning of year
Cash, end of year
Cash is represented by:
Cash & cash equivalents (note 10)
Restricted cash & restricted cash in circulation
(notes 9 and 11)
Other information for operations
Interest earned and received as trustee
Interest received
Income taxes paid
See accompanying notes to the consolidated financial statements
2017
2016
$ 6,038,214
$
5,590,994
837,776
388,734
150,417
6,785
53,000
(451,782 )
(25,768 )
1,664,581
1,000,907
382,238
500,000
829
50,000
(842,913 )
(1,243,209 )
(823,791 )
8,661,957
4,615,055
(803,882 )
76,354
(248,347 )
1,930,000
(984,108 )
23,573
(694,846 )
(1,300,000 )
954,125
(2,955,381 )
877,302
(1,296,810 )
(5,703,015 )
(6,122,523 )
3,493,559
10,470,074
$ 13,963,633
$ 10,140,523
3,823,110
(64,955 )
4,476,385
(5,173,623 )
(762,193 )
897,481
9,572,593
10,470,074
5,350,154
5,119,920
$
$
$ 13,963,633
$
10,470,074
6,717,922
$
$
812,240
$ 2,692,200
$
$
$
5,344,922
329,725
2,332,200
57
OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT |
1. NATURE OF BUSINESS
Olympia Financial Group Inc. (“Olympia”) is governed by the Business Corporations Act (Alberta).
Olympia is a reporting issuer in British Columbia, Alberta and Ontario, and its common shares are listed
on the Toronto Stock Exchange (“TSX”). Olympia’s registered and head office is 2300, 125 - 9th Avenue
SE, Calgary, Alberta T2G 0P6.
The majority of Olympia’s business is conducted through its wholly owned subsidiary Olympia Trust
Company (“Olympia Trust”), a non-deposit taking trust corporation.
Olympia Trust received its letters patent on September 6, 1995, authorizing the formation of a trust
company to be registered under the Loan and Trust Corporations Act (Alberta). Olympia Trust acts
as a trustee for self-directed registered plans and also provides foreign currency exchange services.
Olympia Trust is licensed to conduct trust activities in Alberta, British Columbia, Saskatchewan,
Manitoba, Quebec, Newfoundland and Labrador, Prince Edward Island, New Brunswick and Nova
Scotia. The Private Health Services Plan division conducts its business through Olympia Benefits Inc.
(“OBI”), a wholly owned subsidiary of Olympia. Olympia ATM Inc. (“ATM”) was incorporated under the
Business Corporations Act (Alberta) as a wholly owned subsidiary of Olympia, and is focussed on building
an automated teller machine (“ATM”) distribution network and on growing its portfolio of ATMs.
ATM incorporated ATM1SOURCE Inc. (“ATM1SOURCE”) under the Business Corporations Act (Alberta).
This wholly owned subsidiary of ATM focussed on the repair and maintenance of ATMs. Exempt Edge
Inc. (“EEI”) was incorporated under the Business Corporations Act (Alberta) on November 28, 2016, as
a subsidiary of Olympia. EEI focuses on the provision of information technology services to exempt
market dealers, registrants and issuers.
2. BASIS OF PREPARATION
These consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”)
applicable to the preparation of the consolidated financial statements. The accounting policies adopted
are consistent with those of the previous year.
These consolidated financial statements have been approved and authorized for issuance by the Board
of Directors as of February 22, 2018. The policies applied in these consolidated financial statements are
based on IFRS, issued, effective and outstanding as of December 31, 2017.
Olympia’s consolidated financial statements are presented in Canadian dollars, Olympia’s primary
operating currency. All references to $ are in Canadian dollars and references to US$ are in United
States dollars.
The preparation of the consolidated financial statements requires management to make judgments,
estimates and assumptions that affect the application of accounting policies and the reported amounts
of assets and liabilities, income and expenses. Actual results may differ from these estimates.
58
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT
3. SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies used in the preparation of these consolidated financial statements
are described below.
Basis of measurement
The consolidated financial statements have been prepared under the historical cost convention, except
for the revaluation of certain financial assets and financial liabilities to fair value, including derivative
instruments and available for sale investments.
Critical accounting estimates
The preparation of financial statements requires management to make judgments, estimates and
assumptions based on currently available information that affects the application of accounting
policies and the reported amounts of assets, liabilities, income and expenses. Estimates and judgments
are evaluated and are based on management’s experience and other factors, including expectations
of future events that are believed to be reasonable under the circumstances. However, actual results
could differ from these estimates. By their very nature, these estimates are subject to measurement
uncertainty, and the effect on the financial statements of future periods could be material. Estimates
and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognized in the period in which the estimates are revised and in any future periods affected.
In the process of applying Olympia’s accounting policies, management has made the following
judgments, estimates and assumptions which have the most significant effect on the amounts
recognized in the consolidated financial statements.
(i) Business combinations
Olympia uses the acquisition method to account for business combinations. Assets acquired and
liabilities assumed in a business combination are recorded at fair value at the time of acquisition.
The determination of fair value requires Olympia to make estimates, assumptions and judgments
that are subject to measurement uncertainty. The allocation process is inherently subjective and
impacts the amounts assigned to individually identifiable assets and liabilities, including the fair
value of customer relationships, non-compete agreements and ATM equipment, together with
deferred income tax effects. Consequently, the purchase price allocation impacts Olympia’s
reported assets and liabilities and future net earnings, due to the impact on future amortization
and depreciation expense and impairment tests.
(ii) Allowance for doubtful accounts (Note 6)
Olympia regularly performs a review of outstanding accounts receivable balances to determine
eventual collectability. A provision for bad debt is recorded based on historical information or if an
account is deemed uncollectable. Olympia analyzes the bad debt provision regularly to determine
if any of the accounts provided for should be written off. Those accounts which are deemed
uncollectable could materially change as a result of changes in a customer’s financial situation.
This includes risks associated with the gross receivable position on foreign exchange forward
contracts, all assessed regularly for impairment.
59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT |
(iii) Depreciation and amortization methods (Notes 15 and 16)
Olympia estimates the useful lives of property, plant and equipment and intangible assets, other
than ATM processing contracts, based on the period over which the assets are expected to be
available for use. Olympia estimates the useful lives of ATM processing contracts included in
intangible assets based on the average remaining primary term of the contracts acquired and
assigns an estimated retention period based on historical information in the applicable market.
The estimated useful lives are reviewed periodically and are updated if expectations differ from
previous estimates due to physical wear and tear, technical or commercial obsolescence and legal
or other limits on the use of the relevant assets. In addition, the estimation of the useful lives is
based on internal technical evaluation, current facts and past experience with similar assets, and
takes into consideration the anticipated expected life of the asset, existing long-term agreements
and contracts, current and forecasted demand and the potential for technological obsolescence.
It is possible, however, that future results of operations could be materially affected by changes in
the estimates brought about by changes in factors mentioned above. The amounts and timing of
recorded expenses for any period would be affected by changes in these factors and circumstances.
(iv) Impairments (Note 16)
Olympia performs impairment tests of assets when indications of impairment exist. Application of
judgment is required in determining whether an impairment test is warranted. Impairment exists
when the carrying value of an asset or Cash-Generating Unit (“CGU”) exceeds its recoverable
amount, which is the higher of (a) its fair value less costs of disposal and (b) its value in use.
The fair value less costs of disposal calculation is estimated using valuation techniques such
as a discounted cash flow model, adjusted to reflect the considerations of a prospective third-
party buyer. The value in use calculation is based on the present value of expected cash flows.
The cash flows are derived from internal budgets and do not include restructuring activities that
Olympia is not yet committed to or significant future investments that will enhance the asset’s
performance of the CGU being tested. The recoverable amount is most sensitive to the discount
rate used for the present value of expected cash flows, as well as expected transaction volumes,
future operating costs, tax rates, margins and the growth rate used for extrapolation purposes.
There is a certain amount of subjectivity and judgment in the determination of the recoverable
amount calculation. Judgments and assumptions, described in Notes 6, 15 and 16, are subject to
measurement uncertainty and the impact of differences between actual and estimated amounts
on the consolidated financial statements of future periods could be material.
When indicators support that the asset is no longer impaired, Olympia will reverse impairment
losses. Similar to the impairment, application of judgment is required to determine whether a
reversal should be considered.
(v) Income taxes (Note 21)
Olympia calculates an income tax provision in each of the jurisdictions in which it operates.
Estimation of income taxes includes evaluating the recoverability of deferred tax assets based
on a more likely than not assessment to use the underlying future tax deductions against future
taxable income before the deductions expire. The assessment is based upon existing tax laws and
60
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT
estimates of future taxable income. Further, there are transactions and calculations for which the
ultimate tax determination is uncertain during the ordinary course of business. Provisions are made
using the best estimate of the amount expected to be paid based on a qualitative assessment of
all relevant factors. Olympia reviews the adequacy of these provisions at each reporting period.
However, it is possible that at some future date an additional liability could result from audits by
taxation authorities. Where the final outcome of these tax-related matters is different from the
amounts that were initially recorded, such differences will affect the tax provisions in the period in
which such determination is made.
(vi) Revenue
In connection with the ATM division’s operating or processing arrangements, Olympia applies
judgment to determine whether interchange and surcharge fee revenue should be recognized on a
gross basis, or net of fees paid to the merchant for providing, processing, placing and maintaining
the ATM unit. Pursuant to the guidance in IFRS, Olympia has assessed whether to record such
payments as a reduction of associated ATM service revenues or as a direct expense. Specific
factors considered were whether Olympia acts as the principal and is the primary obligor in the
ATM transactions, provides the processing for the ATM transactions, has significant influence over
pricing and has the risks and rewards of ownership, including a variable earnings component and
the risk of loss for collection. Olympia recognizes the surcharge and interchange fees on a gross
basis and does not reduce its reported revenues for payments made to the various merchants
where the ATM units are housed. As a result, for agreements under which Olympia acts as the
principal, Olympia records the total amounts earned from the underlying ATM transactions as ATM
service revenues and records the related merchant expense as a direct expense of ATM operating
revenues. However, for those agreements in which Olympia does not meet the criteria to qualify
as the principal in the transaction, Olympia does not record the related surcharge and interchange
fee revenue, as the rights associated with this revenue stream are attributable to the benefit of the
merchant. Olympia records surcharge and interchange fee revenue under these arrangements on
a net basis.
Whether Olympia is considered to be the principal or an agent in the transaction depends on
analysis by management of both the legal form and substance of the agreement between Olympia
and the merchant. Such judgments impact the amount of reported revenue and expenses, but do
not impact reported assets, liabilities or cash flows.
Functional and presentation currency
These consolidated financial statements are presented in Canadian dollars, which is the functional
currency of Olympia and its subsidiaries. Transactions denominated in foreign currencies are translated
into Canadian dollars using the exchange rates prevailing at the dates of the transactions. Under this
method, monetary assets and liabilities denominated in foreign currencies are translated into Canadian
dollars at the rates in effect at the consolidated balance sheet dates. Revenues and expenses are
translated at the rates prevailing at the respective transaction dates.
61
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT |
Basis of consolidation
The consolidated financial statements include the accounts of Olympia and its subsidiaries. All
inter-company balances and unrealized income and expenses arising from inter-company transactions
have been eliminated.
The subsidiaries consist of Olympia Trust, OBI, ATM and EEI, which are subsidiaries of Olympia, and
ATM1Source, which is a wholly owned subsidiary of Olympia ATM.
Non-controlling interests in less than wholly owned subsidiaries of Olympia comprise a 20% interest
held by a third party in EEI. The non-controlling interest is presented separately in the consolidated
statement of net earnings and comprehensive income, and within equity in the consolidated balance
sheets, but separately from Olympia’s equity. Losses applicable to the non-controlling interest in excess
of their interest in the subsidiary’s equity is allocated against the non-controlling interest even if that
results in a deficit balance.
Segment reporting
Management has determined Olympia’s operating segments based on reports reviewed by the president
and other executive management to make strategic decisions. An operating segment is a component
of Olympia that engages in business activities from which it may earn revenues and incur expenses,
including revenues and expenses that relate to transactions with any of Olympia’s other components.
Operating results are regularly reviewed by the president and other executive management to make
decisions about resources to be allocated to the segment and to assess its performance. Discrete
financial information is available for each operating segment. Segment results that are reported to the
president and other executive management include items directly attributable to a segment, as well as
those that can be allocated on a reasonable basis.
Considering the business from a product and service perspective, Olympia has identified five operating
segments. The Private Health Services Plan division, operated through OBI, markets, sells and administers
health and dental benefits to business owners. The Registered Plans division, operated through Olympia
Trust, specializes in self-directed registered plans administration. Exempt market securities and arm’s-
length mortgages continue to be the main focus of many of the Registered Plans division’s clients. The
Foreign Exchange division, operated through Olympia Trust, provides corporations and private clients
a personalized service for buying and selling foreign currencies. The ATM division, operated through
ATM and ATM1Source, is focussed on growing its portfolio of ATMs and an ATM distribution network,
and was focussed on the retail sales, repair and maintenance of ATMs. The Corporate division is a cost
centre and earns incidental revenue.
Certain of the prior year comparative figures have been reclassified to conform to the presentation
adopted for the current year.
Equipment and other
Equipment and other is measured and accounted for at cost less accumulated depreciation. Additions
and subsequent expenditures are capitalized only in the event that they enhance the future economic
benefits to be derived from the assets.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT
Depreciation is provided on the depreciable amount of equipment and other on a straight-line basis
over the estimated useful economic life of each asset. The depreciable amount is the gross carrying
amount less the estimated residual value at the end of its useful economic life.
The annual depreciation rates and methods are as follows:
• Furniture and fixtures
Straight-line over 5 years
• Leasehold improvements
Straight-line over the lease term
• Computer equipment
Straight-line over 3 years
• ATM equipment
Straight-line over 5 years
Depreciation rates, methods and residual values used to calculate depreciation of items of equipment
and other are kept under review for any change in circumstances. The principal factors Olympia takes
into account when deciding on rates and methods of depreciation are the pattern of usage for each asset,
the lease term, the expected rate of developments in technology and expected market requirements.
When reviewing residual values, Olympia estimates the amount that it would currently obtain for the
disposal of the asset after deducting the estimated cost of disposal if the asset were already of the age
and condition expected at the end of its useful economic life.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and
are recognized in the statements of net earnings and comprehensive income. Assets are derecognized
on disposal or when no future economic benefits are expected from their use.
Intangible assets
Intangible assets consist primarily of internally developed software, purchased computer software,
ATM processing contracts and non-compete agreements.
Internally developed software is stated at cost, less accumulated amortization and impairment, if
any. The identifiable and directly associated external and internal costs of acquiring and developing
software are capitalized where the software is controlled by Olympia and where it is probable that
future economic benefits will flow from its use over more than one year.
The cost of purchase of computer software that is separable from an item of related hardware is
capitalized separately.
The cost of ATM processing contracts comprises the initial estimated fair value based on the estimated
net cash flows and useful lives of the underlying contracts/relationships, including their expected
retention periods.
ATM processing contracts have an average initial 3 to 7 year term and generally include an equivalent
average 3 to 7 year expected retention period. Contracts include a right of first refusal for any competing
offer on renewal.
Non-compete and trademark agreements are recognized at fair value at the acquisition date. These
agreements have a finite useful life and are carried at cost less accumulated amortization. Amortization
is calculated using the straight-line method over the expected term of the agreement.
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Impairments are recorded if the carrying amount of an asset exceeds the recoverable amount.
The annual amortization rates and methods are as follows:
• Purchased computer software
Straight-line over 3 to 5 years
• Internally developed software
Straight-line over 3 to 7 years
• ATM processing contracts
Straight-line over the expected life
of the contract
• Non-compete and trademark
Straight-line over the term of the agreement
agreements
Research costs and costs associated with maintaining software are recognized as an expense when
incurred. Development costs are capitalized under intangible assets if they can be identified as an
intangible asset that is expected to generate probable future economic benefit and if the costs of this
asset can be reliably calculated. Development costs include those costs directly attributable to the
development of the asset.
Impairment of non-financial assets
Non-financial assets are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the
amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount
is the higher of an asset’s fair value less costs of disposal or value in use. For the purpose of assessing
impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows.
Non-financial assets that suffered impairment are reviewed for possible reversal of the impairment at
each reporting date.
Olympia assesses all non-financial assets on an ongoing basis for indications of impairment and to
determine whether a previously recognized impairment loss should be reversed. If such indicators
are found to exist, then detailed impairment testing is carried out. Impairments and the reversal
of previously recognized impairments are recognized in the statement of net earnings and
comprehensive income.
Inventory
Inventory consists primarily of ATMs not in service and related spare parts and accessories. Inventory
is measured at the lower of cost and net realizable value. The cost of inventory is based on the first-in
first-out valuation method and includes expenditures incurred in acquiring the inventory, as well as
other costs incurred in bringing them to their existing location and condition. Net realizable value is the
estimated selling price in the ordinary course of business, less the estimated costs of completion and
selling expenses.
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Business combinations
Business combinations are accounted for using the acquisition method of accounting, in which the
identifiable assets acquired, liabilities assumed and any non-controlling interest are recognized and
measured at their fair value at the date of acquisition. Any excess of the purchase price, plus any non-
controlling interest over the fair value of the net assets acquired is recognized as goodwill. When the
excess is negative, a bargain purchase gain is recognized immediately in the statement of earnings and
comprehensive income/(loss). At acquisition, goodwill is allocated to each of the CGUs to which it
relates. Subsequent measurement of goodwill is at cost less any accumulated impairment losses.
Transaction costs that Olympia incurs in connection with a business combination are expensed
as incurred.
Financial instruments
Olympia’s financial instruments included in the consolidated balance sheets are comprised of cash and
cash equivalents, restricted cash and investments, restricted cash in circulation, cash in circulation due
to bank, trade and other receivables, derivative financial instruments, available for sale investments,
trade and other payables, revolving credit facility and other liabilities and charges.
A derivative is a financial instrument whose value changes in response to a specified variable, requires
little or no net investment and is settled at a future date. An embedded derivative is a derivative that
is a part of a non-derivative contract and not directly related to that contract. Under this standard,
embedded derivatives must be accounted for as a separate financial instrument. A non-financial
derivative is a contract that can be settled net in cash or by other financial instruments. Olympia does
not apply hedge accounting to the derivative financial instruments.
Non-derivative financial instruments include cash and cash equivalents, restricted cash and
investments, restricted cash in circulation, trade and other receivables, available for sale investments,
revolving credit facility, trade and other payables and other liabilities and charges. Non-derivative
financial instruments are recognized initially at fair value, plus any directly attributable transaction
costs, except for financial assets at fair value through profit or loss, whereby any directly attributable
transaction costs are expensed as incurred.
Subsequent to initial recognition, non-derivative financial instruments are designated into one of the
following categories and measured as described below:
(i) Financial assets and liabilities at fair value through profit or loss
Financial assets and liabilities at fair value through profit or loss are financial assets or financial
liabilities held for trading. A financial asset is classified in this category if acquired principally for
the purpose of selling in the short term. A financial liability is classified in this category if acquired
principally for the purpose of repurchasing in the short term. Olympia’s derivative financial
instruments are designated as financial assets and liabilities at fair value through profit and loss as
they are not designated as hedges for accounting purposes.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT |
(ii) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments
that are not quoted in an active market and which are not classified as available for sale. Loans
and receivables are initially recognized at fair value, including direct and incremental transaction
costs. They are subsequently valued at amortized cost, using the effective interest method where
applicable, less allowances and write-downs for impairment. Assets in this category include
restricted cash and investments, restricted cash in circulation and trade and other receivables, the
fair value of which approximates its carrying amount due to its short-term maturity.
(iii) Held-to-maturity
Held-to-maturity investments are non-derivative financial assets with fixed or determinable
payments that Olympia’s management has the intention and ability to hold to maturity. They
are initially recognized at fair value, including direct and incremental transaction costs. They are
subsequently valued at amortized cost, using the effective interest method where applicable.
Olympia has no held-to-maturity investments.
(iv) Available for sale financial assets
Available for sale assets are non-derivative financial assets that are designated as available for
sale and are not categorized into any of the other categories described above. They are initially
recognized at fair value, including direct and incremental transaction costs. They are subsequently
recognized at fair value. Gains and losses arising from changes in fair value are included as a
separate component of equity until sale, when the cumulative gain or loss is transferred to the
statement of net earnings and comprehensive income. Interest is determined using the effective
interest method, and impairment losses and translation differences on monetary items are
recognized in the statement of net earnings and comprehensive income.
Available for sale investments represented Olympia’s investment in Q Jets Aviation LP and
represents securities of a private issuer.
(v) Other financial liabilities
Items classified as other financial liabilities on Olympia’s consolidated financial statements are
accounted for at amortized cost using the effective interest method. Any gains or losses in the
realization of other financial liabilities are included in earnings. Olympia’s trade and other payables,
other liabilities and charges, restricted cash in circulation due to bank and revolving credit facility
are designated as other financial liabilities. The fair value and charges approximate their carrying
values, due to the short-term nature of these instruments.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT
Cash and cash equivalents
Cash and cash equivalents are comprised of cash on hand, non-restricted cash in circulation, term
deposits held with banks and other short-term highly liquid investments with original maturities of
three months or less. Non-restricted cash in circulation refers to the aggregate amount of non-restricted
vault cash (cash in ATM cassettes) plus cash inventory (cash in transit from armoured car carriers).
Cash and cash equivalents are measured at amortized cost, which approximates fair value. Cash and
cash equivalents are reported separately from restricted cash and investments and restricted cash
in circulation.
Recognition and measurement
Regular purchases and sales of financial assets are recognized on the trade date on which Olympia
commits to purchase or sell the asset. Investments are initially recognized at fair value plus transaction
costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair
value through profit or loss are initially recognized at fair value and transaction costs are expensed in
the statement of net earnings and comprehensive income. Financial assets are derecognized when the
rights to receive cash flows from the investments have expired or have been transferred and Olympia
has substantially transferred all risks and rewards of ownership. Available for sale financial assets and
financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and
receivables are subsequently carried at amortized cost using the effective interest method.
Gains or losses arising from changes in the fair value of the financial assets at fair value through
profit or loss are presented in the statement of net earnings and comprehensive income within the
period in which they arise. When securities classified as available for sale are sold or impaired, the
accumulated fair value adjustments recognized in equity are included in the statement of net earnings
and comprehensive income as gains and losses.
Impairment of financial assets
Assets carried at amortized cost
At each balance sheet date, Olympia assesses whether there is objective evidence that a financial asset
or group of financial assets is impaired. A financial asset or group of financial assets is impaired and
impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of
one or more events that occurred after the initial recognition of the asset (a loss event), and that loss
event (or events) has an impact on the estimated future cash flows of the financial asset or group of
financial assets that can be reliably estimated.
If a loan and receivable or held-to-maturity asset has a variable interest rate, the discount rate for
measuring any impairment loss is the current effective interest rate determined under the contract. For
practical reasons, Olympia may measure impairment of an instrument’s fair value using an observable
market price. Calculation of the present value of estimated future cash flows of a collateralized financial
asset reflects the cash flows that may result from foreclosure, less cost for obtaining and selling the
collateral, whether or not foreclosure is probable.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT |
Evidence of impairment
The amount of the loss is measured as the difference between the asset’s carrying amount and the
present value of estimated future cash flows (excluding future credit losses) discounted at the financial
asset’s original effective interest rate. The asset’s carrying amount is reduced and the amount of the
loss is recognized in the statement of net earnings and comprehensive income. If a loan or held-to-
maturity investment has a variable interest rate, the discount rate for measuring any impairment loss
is the current effective interest rate determined under the contract. For practical reasons, Olympia may
measure impairment on the basis of an instrument’s fair value, using an observable market price.
Offsetting financial instrument
Financial assets and liabilities are offset and the net amount reported in the balance sheet where there
is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net
basis, or realize the asset and settle the liability simultaneously.
Foreign currency exchange forward contracts
Olympia Trust purchases forward contracts when it enters into a transaction to buy or sell foreign
currency in the future. These contracts are in the normal course of business and are used to manage
foreign exchange exposures. Foreign exchange forward contracts are not designated as hedges for
accounting purposes. They are initially recorded at fair value based on Bank of Canada published
rates and subsequently measured at fair value based on published foreign currency curves. They are
recorded in Olympia’s balance sheet as either an asset or liability, with changes in fair value recorded
to net earnings. The estimated fair value of all derivative instruments is based on quoted market prices,
or, in their absence, third-party indications and forecasts. Foreign exchange translation gains and losses
on these instruments are recognized as revenue when the contract is signed.
Revenue recognition
Olympia has six operating segments, of which five are business segments. Revenue is recognized
through these five business segments. The revenue of each business segment is distinctly unique
to that segment. Each business segment in return has revenue streams that originate from different
product and service offerings. Olympia earns interest income from funds held with financial institutions
and from term deposits and balances held in trust. Interest income is recorded on an accrual basis.
(A) Self-Directed Registered Plans division
(i) Account set-up fees
Client set-up fees are recognized upon creation of a client account in Olympia Trust’s records.
(ii) Annual administration fees
Annual fees for maintaining registered plan services are billed once a year. The annual fees are
recognized as deferred revenue and recognized as revenue on a straight-line basis in relation
to Olympia Trust’s expenditure for rendering these services. Where contractual services are
terminated by the customer, the unearned deferred revenue is recognized as revenue.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT
(iii) Transactional fees
Certain services are provided and billed on an ongoing basis. Such fees are recognized when
services are rendered.
(B) Private Health Services Plan division
(i) Medical benefit account set-up fees
Client set-up fees are recognized upon creation of a client account in OBI’s records.
(ii) Travel medical benefit insurance brokerage fees
Commissions earned on the selling of short-term medical insurance are recognized in full, on the
basis that no underwriting risks remain with OBI.
(iii) Monthly fees
Certain services are provided and billed on an ongoing monthly basis. Such fees are recognized
monthly at the time of billing, subsequent to the completion of services.
(iv) Life insurance brokerage fees
Commissions earned on the selling of long-term insurance related products are recognized in full,
on the basis that no underwriting risks remain with OBI.
(v) Annual health spending account fees (“HSA fees”)
Fees for maintaining health spending accounts are billed annually. The annual fees are recognized
as deferred revenue and recognized as revenue on a straight-line basis in relation to OBI rendering
these services. Where contractual services are terminated by the customer, the unearned deferred
revenue is recognized as revenue.
(C) Foreign Exchange division
(i) Trading profits and losses
Trading profits and losses from spot trading are recognized at the time the trade transaction settles.
Transaction fees and trading profits for foreign currency exchange services and transactions are
recognized at the time the transaction is entered into.
(ii) Unrealized profits and losses
Unrealized profits and losses in foreign exchange forward contracts are recognized on a net basis
at each period end, are measured at fair value and are recorded in the consolidated statement of
net earnings and comprehensive income as other gains, net.
(D) ATM division
(i)
Interchange, surcharge fee and contract service maintenance fee
Revenue from processing transactions and other services is recognized at the time the transactions
are processed and the services are provided.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT |
(ii) Non-contractual service maintenance fee
Certain services are provided and billed on an ongoing basis. Such fees are recognized at the time
services are rendered.
Finance costs
Finance costs comprise interest expense on borrowings from credit facilities, accrual of differences
between amounts advanced and the principal repayable (i.e. discounted obligations) and impairment
losses recognized on financial assets. Borrowing costs that are not directly attributable to the
acquisition, construction or production of a qualifying asset are recognized in profit or loss using the
effective interest method.
Common shares
Common shares are classified as equity. Incremental costs directly attributable to the issue of common
shares and share options are recognized as a deduction from equity, net of any tax effects. When
Olympia repurchases its own common shares, share capital is reduced by the average carrying value of
the shares purchased. The excess of the purchase price over the average carrying value is recognised
as a deduction from retained earnings. Shares are cancelled upon repurchase.
Restricted cash and investments
Restricted cash and investments are not readily accessible for use in operations and are reported
separately from cash and cash equivalents on the balance sheet. Restricted cash and investments
consist of a restricted bond investment, which is held as collateral securing Olympia Trust’s foreign
exchange trading platform.
Restricted cash in circulation
Restricted cash in circulation is not readily available for use except for use in Olympia’s ATMs. Olympia
pays a fee for using this cash based on the total amount of cash outstanding at any given time, as well
as paying fees related to the bundling and preparation of such cash prior to it being loaded in the ATMs.
Beneficial risk and rewards of ownership of the cash is retained by Olympia, as Olympia has access and
rights to the cash and bears the risk in the case of loss. The cash in circulation and the related obligation
due to the bank, are presented separately.
Provisions and contingencies
Provisions are recognized for present obligations arising as a consequence of past events where it is more
likely than not that a transfer of economic benefit will be necessary to settle the obligation and it can be
reliably estimated. Provisions are determined by discounting the expected future cash flows at a pre-tax
rate that reflects current market assessment of the time value of money and the risks specific to the
liability. The unwinding of the discount is recognized as a finance cost. Contingent liabilities are possible
obligations whose existence will be confirmed only by uncertain future events or present obligations
where the transfer of economic benefit is uncertain or cannot be reliably measured. Contingent liabilities
are not recognized, but are disclosed unless they are remote.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT
Employee benefits
(i) Short-term employee benefits
Wages, salaries, employment insurance premiums, Canada Pension Plan contributions, paid annual
leave and sick leave, bonuses, profit sharing and non-monetary benefits are accrued for pursuant
to contractual arrangements and in accordance with the nature of the constructive benefits
Olympia provides in addition to remuneration upon an employee joining or in the year in which
the associated services are rendered by employees of Olympia. The accruals of such constructive
benefits are derecognized pursuant to the contractual arrangements and in accordance with the
nature of constructive benefits when employee services terminate or as provided for in employee
contracts.
(ii) Other long-term employee benefits
All employees are entitled to long-term service monetary awards based on the number of years of
service with Olympia. Olympia recognizes long service award obligations on a straight-line basis in
accordance with the number of completed years of service and in accordance with the qualifying
criteria attached to having earned these awards. The award expense is therefore accrued and
recognized in profit or loss based on completed years of services.
Taxation
(i) Taxation and deferred taxation
Taxes, including deferred taxes, are income tax payable on taxable profits (tax reporting), and
are recognized as an expense in the period in which the profits arise. Deferred income tax on tax
allowable losses is recognized as an asset only to the extent that it is regarded as probable that
taxable profit or tax planning opportunities will be available in the future against which the unused
tax losses can be utilized before they expire. Deferred income tax is provided in full, using the
liability method, on temporary differences arising from the differences between the tax basis of
assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred
income tax is determined using tax rates and legislation enacted or substantially enacted by the
balance sheet date that is expected to apply when the deferred tax asset is realized or the deferred
tax liability is settled. Deferred and current tax assets and liabilities are only offset when they arise
in the same tax reporting group and where there is both the legal right and the intention to settle
on a net basis or to realize the asset and settle the liability simultaneously.
(ii) Investment tax credits
Certain expenditures qualify for Investment Tax Credits (“ITCs”) pursuant to the Scientific Research
and Experimental Development program, which is a federal tax incentive program to encourage
Canadian businesses of all sizes and in all sectors to conduct research and development in Canada
that will lead to new, improved, or technologically advanced products or processes. Based on
this, Olympia could be entitled to ITCs on certain research and experimental development costs
incurred, which currently consist of internally generated software.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT |
Refundable cash credits stemming from the ITCs is in respect of credits recognized in prior years
when there is reasonable assurance of their recovery using the cost reduction method. ITCs are
subject to assessment and approval by the CRA. Adjustments required, if any, are reflected in the
year when such assessments are received. Investment tax credits and other cost recoveries related
to computer and equipment and intangible assets are credited against the book value of such
assets and the credit is released to income on a straight-line basis as a reduction of depreciation
or amortization expense over the previously mentioned estimated useful economic lives of the
relevant assets.
Leases
Agreements under which payments are made to owners in return for the right to use an asset for a
period are accounted for as leases. A lease is classified as a finance lease if it transfers substantially all
the risks and rewards incidental to ownership. A lease is classified as an operating lease if it does not
transfer substantially all the risks and rewards incidental to ownership. At the commencement of the
lease term, finance leases are recognized as assets and liabilities at amounts equal to the fair value of
the leased property or, if lower, the present value of the minimum lease payments, each determined
at the inception of the lease. The discount rate to be used in calculating the present value of the
minimum lease payments is the interest rate implicit in the lease, if this is practicable to determine;
if not, the incremental borrowing rate is used. Failing that, the cost-of-equity rate is used. Any initial
direct costs attached to the lease are added to the amount recognized as an asset. Lease payments
under an operating lease are recognized as an expense on a straight-line basis over the lease term
unless another systematic basis is more representative of the time pattern of the lease benefit. Lease
incentives received are recognized as an integral part of the total lease expense, over the term of the
lease. Contingent rents, in respect of operating leases, are charged as expenses to profit and loss in the
periods in which they are incurred.
Related parties
Olympia enters into transactions with related parties, including key management compensation, in
the normal course of business except as otherwise noted in Note 32. Related party transactions are
recognized at the exchange amount. Olympia considers the following as related parties:
• Directors, president, vice presidents and key management personnel (post-employment benefit
plans where applicable);
• Associated entities;
• An entity controlled, jointly controlled or significantly being influenced by any of the
aforementioned; and
• Children, spouses or dependents related to any of the aforementioned persons.
Earnings per share (“EPS”)
The calculation of basic earnings per share is based on net earnings attributable to shareholders of
Olympia divided by the weighted average number of common shares outstanding during the period.
For the calculation of diluted EPS, the weighted average number of common shares is the same as for
basic EPS, with the addition of the weighted average number of common shares that would be issued on
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT
conversion of all the dilutive potential common shares. Dilutive potential common shares are deemed
to have been converted at the start of the period or at the date of their issue, if later. The number of
common shares that would be issued on conversion of dilutive potential common shares is determined
from their terms of conversion. Where the terms could vary, it is deemed that they would be exercised
at the rate or exercise price that would be most advantageous to the holder of such potentially dilutive
common shares.
Dividends
Dividends on common shares are recognized in equity in the period in which they are declared or
approved by Olympia’s Board of Directors.
4. FUTURE ACCOUNTING PRONOUNCEMENTS
A number of new standards and amendments to standards and interpretations are effective for annual
periods beginning after January 1, 2018, and have not been applied in preparing these consolidated
financial statements.
In May 2014, the IASB published IFRS 15, “Revenue from Contracts with Customers” (“IFRS 15”)
replacing IAS 11, “Construction Contracts” and IAS 18, “Revenue” and several revenue-related
interpretations. IFRS 15 establishes a single revenue recognition framework that applies to contracts
with customers. The standard requires an entity to recognize revenue to reflect the transfer of
goods and services for the amount it expects to receive when control is transferred to the purchaser.
Disclosure requirements have also been expanded. The new standard is effective for annual periods
beginning on or after January 1, 2018, with earlier adoption permitted. The standard may be applied
retrospectively or using a modified retrospective approach. It is expected that the standard will have
an impact on the amounts and timing of revenue recognized, as it relates to up-front fees and
collectability. Olympia is still evaluating the final impact on the consolidated financial statements.
IFRS 9, “Financial Instruments,” (“IFRS 9”) addresses the classification, measurement and recognition
of financial assets and financial liabilities. IFRS 9 was issued in November 2009 and October 2010. It
replaces the parts of IAS 39 that relate to the classification and measurement of financial instruments.
IFRS 9 requires financial assets to be classified into two measurement categories: those measured at
fair value and those measured at amortized cost. The determination is made at initial recognition. The
classification depends on the entity’s business model for managing its financial instruments and the
contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains
most of the IAS 39 requirements. The main change is that, in cases where the fair value option is taken
for financial liabilities, the part of a fair value change due to an entity’s own credit risk is recorded
in other comprehensive income rather than the income statement, unless this creates an accounting
mismatch. This standard is effective for first interim periods within years beginning on or after
January 1, 2018. Olympia is still evaluating the final impact on the consolidated financial statements.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT |
On January 13, 2016, the IASB published IFRS 16, “Leases” (“IFRS 16”) replacing IAS 17, “Leases.” IFRS
16 now requires lessees to recognize a lease liability reflecting future lease payments and a “right-of-
use asset” for virtually all lease contracts. The IASB has included an optional exemption for certain
short-term leases and leases of low-value assets; however, this exemption can only be applied by lessees.
For lessors, the IASB has updated the guidance on the definition of a lease (as well as the guidance on
the combination and separation of contracts). The new standard will affect both the balance sheet
and related ratios, such as debt/equity ratio and may result in a significant increase in debt on the
balance sheet. IFRS 16 is effective for annual reporting periods beginning on or after January 1, 2019.
Earlier application is permitted, but only in conjunction with IFRS 15, “Revenue from Contracts with
Customers.” Olympia is currently evaluating the impact that the standard will have on the consolidated
financial statements.
5. FUNDS IN TRUST
Self-Directed Registered Plans division (“RRSP”)
At December 31, 2017, RRSP administered self-directed registered plans consisting of private company
securities and mortgages with a cost value of $4.09 billion (December 31, 2016 – $3.79 billion)
plus cash, public securities, term deposits and outstanding cheques with an estimated fair value of
$535.35 million (December 31, 2016 – $518.46 million). These assets are the property of the account
holders and Olympia Trust does not maintain effective control over the assets. Therefore, the assets are
not reflected in these consolidated financial statements. Olympia earned interest income from funds
held in trust of $7.81 million for the year ended December 31, 2017 (December 31, 2016 - $6.18 million).
Private Health Services Plan division (“Health”)
At December 31, 2017, Health held funds in trust of $10.12 million (December 31, 2016 - $9.53 million)
on behalf of its self-insured private health clients. These assets are the property of the plan holders and
OBI does not maintain effective control over the assets. Therefore, the assets are not reflected in these
consolidated financial statements.
Foreign Exchange division (“FX”)
At December 31, 2017, FX held funds in trust of $5.31 million (December 31, 2016 – $6.38 million) for
clients who have paid margin requirements on forward foreign exchange contracts and $13.59 million
(December 31, 2016 - $6.74 million) of outstanding payments. These assets are the property of the
contract holders and Olympia Trust does not maintain effective control over the assets. Therefore, the
assets are not reflected in these consolidated financial statements.
74
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT
6. FINANCIAL INSTRUMENTS AND FINANCIAL RISK FACTORS
Fair value of financial instruments
The fair value of cash and cash equivalents, restricted cash and investments, restricted cash in
circulation and cash in circulation due to the bank, trade and other receivables, trade and other
payables, revolving credit facility and other liabilities and charges approximate their carrying amounts
due to the short-term maturity of these instruments. Derivative financial instruments are measured
at fair value through profit or loss. The fair value of all forward foreign exchange contracts is based on
current bid prices for their respective terms to maturity in an active market.
Risks associated with financial instruments
Olympia is exposed to financial risks arising from normal course business operations and its financial
assets and liabilities. The financial risks include liquidity risk and market risk relating to foreign currency
exchange rates, interest rates and credit risk.
(i) Liquidity risk
Liquidity risk is the risk that Olympia will encounter difficulties in meeting its financial obligations.
Olympia manages its liquidity risk by keeping surplus cash in liquid investments and fixed term
deposits with a highly rated financial institution. This allows Olympia to earn interest on surplus
cash while having access to it within a very short time.
The timing of cash outflows is outlined in the following tables:
At December 31, 2017
Current 31 to 60 days
61 to 90 days Over 90 days
Total
Trade and other payables
$
1,251,312
$
16,033
$
10,799
$
- $
1,278,144
Other liabilities and charges
Cash in circulation due to bank
1,356,208
3,823,110
-
-
-
-
-
-
1,356,208
3,823,110
Total
$ 6,430,630
$
16,033
$
10,799
$
- $ 6,457,462
At December 31, 2016
Current 31 to 60 days
61 to 90 days Over 90 days
Total
Trade and other payables
$
857,210
$
79,082
$
- $
32,814
$
969,106
Other liabilities and charges
Cash in circulation due to bank
1,170,968
5,119,920
-
-
-
-
-
-
1,170,968
5,119,920
Total
$ 7,148,098
$
79,082
$
- $
32,814
$ 7,259,994
At December 31, 2017, trade and other payables totaled $1.28 million (December 31, 2016 -
$0.97 million). Olympia continues to meet all of the obligations associated with its financial
liabilities. Other liabilities and charges with a cash outflow are identified in Note 19, except for
leasehold inducement, straight-line rent and onerous contract obligation.
75
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT |
The liquidity risk relating to derivative financial instruments payable is outlined in the table below:
Current
31 to 60 days
61 to 90 days
Over 90 days
Non-current (1-3 years)
December 31,
2017
December 31,
2016
$
501,075
$
15,821
539,665
565,106
6,190,190
130,803
54,728
669,051
$ 7,796,036
$
870,403
$
543,073
$ 4,271,471
The previous table presents the expected maturity dates of the foreign exchange contracts.
Liquidity risk is associated with Olympia’s credit facility. The credit facility is available to finance
day-to-day operations to a maximum principal amount of $8.50 million (December 31, 2016 -
$8.50 million), and bears interest at the Canadian prime rate plus 0.25%. For the year ended
December 31, 2017, a balance of $4.81 million is outstanding (December 31, 2016 - $3.94 million).
Olympia has determined the principal and interest to be current.
Security for the credit facility includes a general security agreement providing a first security
interest in all present and after acquired property.
(ii) Market risk
Market risk is the risk that the fair value of future cash flows of financial instruments will fluctuate
because of changes in market prices and is composed of the following:
Foreign currency exchange risk
Olympia is exposed to changes in foreign exchange rates when, and if, revenues or financial
instruments fluctuate because of changing rates. Transactions in the applicable financial market
are executed consistent with established risk management policies. Olympia purchases forward
contracts whenever it enters into a transaction to buy or sell foreign currency in the future. These
contracts are both short term and long term in nature and are in the normal course of business.
Management understands that the currency markets are volatile and therefore subject to higher
risk. Olympia applies the following policy to mitigate the currency risk:
• For forward contracts, a margin of 5% is payable on signature of the contract;
• Olympia sets up a corresponding position with its currency supplier; and
• If market rates vary by 4% or more, the client is required to adjust their margin to match the
variance by the end of the trading day.
Olympia’s FX division maintains various foreign currency bank accounts of which Canadian dollar
and United States dollar bank accounts are the most significant. It is Olympia Trust’s policy to limit
the amount of foreign currencies on hand to $1.25 million to reduce exposure to foreign currency
risk.
76
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT
If the United States dollar to Canadian dollar exchange rate at December 31, 2017, were to have
increased by $0.10, it is estimated that Olympia’s after-tax earnings for the year ended December
31, 2017, would have decreased by approximately $118,792 (December 31, 2016 -$116,911). A $0.10
decrease in the United States dollar to Canadian dollar exchange rate would have had an equal
but opposite effect. The vast majority of Olympia Trust’s Foreign Exchange division’s trades are
Canadian dollars traded for United States dollars and vice versa, although it trades in various other
currencies. This sensitivity analysis assumes that all other variables remain constant.
Interest rate risk
Interest rate risk is the risk that the value of a financial instrument will fluctuate because of changes
in market interest rates. Olympia is exposed to interest rate risk as the cash flows generated
from interest bearing instruments fluctuate in response to changes in market interest rates. The
primary exposure is related to cash balances and fixed term deposits.
If the interest rates were to have increased by 1%, it is estimated that Olympia’s after-tax earnings
for the year ended December 31, 2017, would have increased by approximately $3.94 million
(December 31, 2016 - $3.64 million). A 1% decrease in interest rates would have had an equal but
opposite effect. This sensitivity analysis assumes that all other variables remain constant.
Credit risk
Credit risk is the risk that the counterparty to a financial asset will default, resulting in Olympia
incurring a financial loss. Before material transactions begin with a new counterparty, the
counterparty’s creditworthiness is assessed by the FX division. The assessment practice considers
both quantitative and qualitative factors. Olympia constantly monitors the exposure to any single
customer or counterparty along with the financial position of the customer or counterparty. If it
is deemed that a customer or counterparty has become materially weaker, Olympia will work to
reduce the credit exposure and lower the credit limit allocated. Olympia is exposed to credit risk on
its cash and cash equivalents, restricted cash and investments, restricted cash in circulation, trade
and other receivables and derivative financial instruments receivable. The maximum exposure
to credit risk of Olympia at the end of the year is the carrying value of cash and cash equivalents,
restricted cash and investments, restricted cash in circulation, trade and other receivables and
derivative financial instruments receivable.
• Cash and cash equivalents
Olympia mitigates its exposure to credit risk by maintaining its bank accounts with a highly rated
financial institution.
• Restricted cash and investments and restricted cash in circulation
Olympia limits its counterparty credit risk on these assets by dealing with reputable counterparties
and assessing their credit ratings via the services of an independent ratings agency. The Treasury
bonds are “AAA” rated.
77
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT |
• Trade and other receivables
Olympia has policies and procedures in place to govern the credit risk it will assume. Trade
receivables over 90 days are considered past due. As of December 31, 2017, net trade receivables
of $0.62 million (December 31, 2016 - $0.95 million) were past due but deemed not impaired.
Included in trade and other receivables is a $0.12 million demand loan to Tarman Inc., a company
controlled by the president and CEO of Olympia. Refer to Note 32 for terms of the loan.
The remaining balance relates to a number of independent clients which Olympia is actively
pursuing through its internal collection process. As a result, management considers the
outstanding amounts to be recoverable.
The aging of these receivables is as follows:
Current
31 to 60 days
61 to 90 days
Over 90 days
Allowance for doubtful accounts
December 31,
2017
December 31,
2016
$
753,939
$
89,210
15,579
28,407
1,229,256
(613,822 )
8,207
14,191
1,194,059
(244,154 )
$
1,413,359
$
1,061,513
The allowance for doubtful accounts is based on an account portfolio analysis.
Movements on Olympia’s provision for impairment of trade receivables are as follows:
At January 1
Increase in provision
Receivables written off
Allowance for doubtful accounts
December 31,
2017
December 31,
2016
$
244,154
$
373,423
616,733
519,322
(247,065 )
(648,591 )
$
613,822
$
244,154
The provision for impaired receivables has been included in administrative expenses in
the consolidated statements of net earnings and comprehensive income. Amounts charged to
the allowance account are generally written off when there is no expectation of recovering
additional cash.
78
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT
• Derivative financial instruments receivable
The expected maturity relating to derivative financial instruments receivable and foreign exchange
contracts is outlined in the table below. The receivables can all be offset with one counterparty:
Current
31 to 60 days
61 to 90 days
Over 90 days
Non-current (1-3 years)
(iii) Capital risk management
December 31,
2017
December 31,
2016
$
572,398
$
24,643
648,240
636,671
7,379,625
199,847
78,120
962,034
$ 9,236,934
$
1,264,644
$
729,459
$ 5,478,746
Olympia’s objectives when managing capital are to safeguard Olympia’s ability to continue
as a going concern in order to provide returns and benefits to shareholders and to maintain an
optimal capital structure to reduce the cost of capital and to meet minimum regulatory capital
requirements. In order to maintain or adjust the capital structure, Olympia may adjust the amount
of dividends paid to shareholders, return capital to shareholders, issue new shares, repurchase
shares, sell assets or make further use of its credit facility.
Olympia includes shareholders’ equity of $11.02 million (December 31, 2016 - $10.65 million) in
the definition of capital. Shareholders’ equity comprises share capital, contributed surplus and
retained earnings.
Olympia’s main objectives when managing its capital structure are to:
• Maintain sufficient cash and cash equivalents over the short and medium term in order to finance
its growth and development, including capital expenditures;
• Maintain investor and creditor confidence to sustain future development of the business.
Olympia’s objective when managing capital is to maintain adequate financial flexibility to
preserve its ability to meet financial obligations. In managing capital, Olympia estimates its
future dividend payments and capital expenditures, which is compared to planned business
growth for purposes of sustainability;
• Maintain regulatory capital for Olympia Trust as required by the Loan and Trust Corporations
Act (Alberta) ($2.00 million). Similar regulatory capital is required by legislation in Nova
Scotia ($5.00 million). Regulatory capital is defined as share capital and retained earnings.
Olympia Trust has maintained these minimum capital requirements throughout the year ended
December 31, 2017; and
• Maintain compliance with financial covenants. The financial covenants are reviewed regularly
and controls are in place to maintain compliance with the covenants. Olympia complied with its
financial covenants for the year ended December 31, 2017.
79
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT |
The capital structure of Olympia is managed and adjusted to reflect changes in economic
conditions. Capital structure adjustments could include adjusting the level of dividends and/or
issuance or repurchase of common shares. In support thereof, management reviews the financial
position of Olympia on a monthly and cumulative basis. Financing decisions are set based on
the timing and extent of expected operating and capital cash outlays. Factors considered when
determining capital and the amount of operational cash requirements are weighed against the
costs associated with excess cash, its terms and availability and whether to issue equity. Olympia
works towards managing its capital objectives to the extent possible while facing the challenges
of market conditions and the public’s assessment of Olympia’s risk profile. Olympia’s capital
management objectives have remained substantively unchanged over the periods presented.
7. AVAILABLE FOR SALE INVESTMENTS
Investment in private issuer
Q Jets Aviation LP
December 31,
2017
December 31,
2016
$
$
48,932
$
-
55,517
53,000
48,932
$
108,517
The available for sale investments represents Olympia’s investment in securities of a private issuer.
As at December 31, 2017, Olympia has recorded a change in fair value of $53,000 in relation to its
investment in Q Jets Aviation LP. Q Jets was categorized as Level 3 of the fair value hierarchy.
The investment in the private issuer is recorded at the estimated fair value and is categorized as
Level 3 of the fair value hierarchy.
The three levels of fair value hierarchy are:
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities
Level 2 – Inputs other than quoted prices that are observable for assets or liabilities, either directly or
indirectly
Level 3 – Inputs that are not based on observable market data
For the year ended December 31, 2017, there were no transfers between Level 2 and Level 3 fair value.
80
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT
The following table presents Olympia’s available for sale investments measured at fair value and
categorized by level according to the significance of the inputs used in making these measurements:
Recurring measurements
Investment in private issuer
Q Jets Aviation LP
Recurring measurements
Investment in private issuer
Q Jets Aviation LP
8. OPERATING SEGMENTS
December 31,
2017
$
$
48,932
-
48,932
December 31,
2016
$
$
55,517
53,000
108,517
Level 1
Level 2
Level 3
-
-
-
-
-
-
$
$
48,932
-
48,932
Level 1
Level 2
Level 3
-
-
-
-
-
-
$
$
55,517
53,000
108,517
Olympia has six operating segments, of which five are business segments and offer different products
and services and are managed separately because they require different technology and marketing
strategies. The Corporate division is a cost centre and earns incidental revenue. For each of the
divisions, Olympia’s president, chief financial officer and other executive management review internal
management reports on a monthly basis.
Segment profit/(loss) is used to measure performance. Olympia’s president and other executive
management believe that such information is the most relevant in evaluating the results of certain
segments relative to other entities that operate within these industries. Inter-segmental transactions
consist mainly of cost recoveries, which are recognized at cost. In addition, reportable segments
are managed on a functional basis through regular reporting to the president and other executive
management.
Olympia does not disclose a measure of segment assets, because the president and other executive
management do not use this information to assess performance and allocate resources. Olympia
reports net earnings/(loss) information for all operating segments to the president and other executive
management. All other assets and liabilities are reported on a consolidated basis. Costs are allocated
to segments based on usage.
81
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT |
Net operations 2017
Health
RRSP
FX
ATM
EEI
Corporate
Total
Service revenue
$ 8,264,227
$ 18,233,291
$ 6,840,407
$ 3,073,901
$
209,754
$
8,200
$ 36,629,780
Interest revenue
157,871
8,023,713
116,890
7,312
769
101,978
8,408,533
Direct expenses
(2,446,191 )
(102,785 )
(862,683 )
(2,355,093 )
5,975,907
26,154,219
6,094,614
726,120
(141,533 )
68,990
-
(5,908,285 )
110,178
39,130,028
Administrative
expenses
Depreciation &
amortization
Other gains &
(losses), net
(note 25)
(3,920,714 )
(18,185,412 )
(5,429,383 )
(1,511,098 )
(314,829 )
(173,611 )
(29,535,047 )
(120,728 )
(515,583 )
(132,588 )
(407,964 )
(44,868 )
(4,779 )
(1,226,510 )
-
(873 )
25,781
(60,500 )
-
-
(35,592 )
1,934,465
Earnings/(loss)
before income
taxes
Income taxes
(expense)/
recovery(1)
Net earnings/(loss) $ 1,435,397
(499,068 )
7,452,351
558,424
(1,253,442 )
(290,707 )
(68,212 )
8,332,879
(1,973,643 )
(147,890 )
374,236
82,568
(130,868 )
(2,294,665 )
$ 5,478,708
$
410,534
$ (879,206 )
$ (208,139)
$ (199,080 )
$ 6,038,214
Net operations 2016
Health
RRSP
FX
ATM
Corporate
Total
Service revenue
$ 8,168,586
$ 16,906,170
$ 6,850,788
$ 2,727,251
$
42,777
$ 34,695,572
Interest revenue
133,926
6,307,630
70,803
3,986
79,667
6,596,012
Direct expenses
(2,372,196 )
(92,064 )
(1,164,758 )
(2,107,971 )
-
(5,736,989 )
5,930,316
23,121,736
5,756,833
623,266
122,444
35,554,595
(4,161,243 )
(16,551,479 )
(5,609,546 )
(1,555,036 )
(358,596 )
(28,235,900 )
(222,980 )
(518,406 )
(215,128 )
(391,066 )
(35,565 )
(1,383,145 )
-
782,419
1,243,209
(518,212 )
(511,479 )
995,937
1,546,093
6,834,270
1,175,368
(1,841,048 )
(783,196 )
6,931,487
(439,949 )
(1,705,694 )
(293,348 )
469,530
628,968
(1,340,493 )
Administrative
expenses
Depreciation and
amortization
Other gains &
(losses), net
(note 25)
Earnings/(loss)
before income
taxes
Income taxes
(expense)/
recovery(1)
Net earnings/(loss)
$
1,106,144
$ 5,128,576
$ 882,020
$ (1,371,518 )
$
(154,228 )
$ 5,590,994
No one client contributed more than 10% of Olympia’s revenue for the year ended December 31, 2017.
For the year ended December 31, 2016, revenues from one customer in the FX division represent
approximately $1.39 million of Olympia’s total revenue.
(1) No income tax adjustment has been made regarding the elimination of inter-company transactions.
82
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT
9. RESTRICTED CASH & INVESTMENTS
Foreign exchange trading deposits paid to a financial institution
December 31,
2017
December 31,
2016
$ 500,000
$ 2,430,000
$ 500,000
$ 2,430,000
Restricted cash and investments comprises a Treasury bond provided as collateral to a financial
institution securing Olympia Trust’s foreign exchange trading platform. During the year, at the request
of the financial institution, the collateral requirements were decreased by $1.93 million, resulting in
Olympia having a collateral Treasury bond investment of $0.50 million at December 31, 2017
(December 31, 2016 - $2.43 million). The Treasury bond has a term of one year from issuance and
earns interest at a rate of 0.59% (December 31, 2016 - 1.43%). Restricted cash and investments
are not readily accessible for use in operations and are therefore reported separately from cash and
cash equivalents.
10. CASH & CASH EQUIVALENTS
Cash at bank and on hand
Non-restricted cash in circulation
December 31,
2017
December 31,
2016
$ 9,167,957
$ 5,003,336
972,566
346,818
$ 10,140,523
$ 5,350,154
Cash at bank and on hand is readily convertible to known amounts of cash which are subject to an
insignificant risk of changes in value.
Non-restricted cash in circulation refers to Olympia’s cash in ATM cassettes and cash in transit. The
increase is due to the expansion of the ATM business.
11. RESTRICTED CASH IN CIRCULATION
ATM has entered into a bailment agreement with a financial institution to provide the ATM division
with cash that can only be used in ATMs. ATM pays a fee for using the cash based on the total amount
of cash outstanding at any given time, as well as paying fees related to the bundling and preparation of
such cash prior to it being loaded in the ATMs. ATM has access and rights to the cash and bears the risk
in the case of loss. ATM has obtained the required insurance coverage in the event of loss of cash while
in circulation.
While armoured courier operations have physical access to the cash loaded in ATMs, risk and rewards
of ownership of that cash remains with ATM at all times. ATM’s cash bailment agreement is for a
term of five years, through to November 2020, and bears interest at the Canadian prime rate. In
December 2016, ATM obtained an increase to the available bailment cash limit from $5.00 million to
$20.00 million.
Based on the foregoing, the cash in circulation and the related obligation due to the bank are reflected
separately on the balance sheet. Restricted cash in circulation for the year ended December 31, 2017,
was $3.82 million (December 31, 2016 - $5.12 million).
83
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT |
12. INVENTORY
ATMs not in service
ATM parts and accessories
December 31,
2017
December 31,
2016
$
144,400
$
362,630
78,714
93,343
$
223,114
$
455,973
Inventory consists primarily of ATMs not in service and related spare parts and accessories measured
at the lower of cost and net realizable value.
13. REVOLVING CREDIT FACILITY
As at December 31, 2017, Olympia has drawn $4.81 million (December 31, 2016 - $3.94 million) on
its established credit facility. The credit facility in place has a maximum amount of $8.50 million
(December 31, 2016 - $8.50 million) which can be drawn, and bears interest at the Canadian prime
rate plus 0.25%. The credit facility is subject to review at any time, and in any event will be reviewed
annually based on these financial statements. Additional funds drawn are to facilitate the expansion
of the ATM business.
The credit facility is subject to certain covenants and other limitations that, if breached, could cause
a default, which might result in a requirement for immediate repayment of all amounts outstanding.
Olympia considers that it has one significant covenant that is monitored on an ongoing basis, being the
cash flow coverage ratio. As at December 31, 2017, Olympia was in compliance with all covenants.
Security for the credit facility includes a general security agreement providing a first security charge
over all present and after acquired property.
Credit facility
Available balance at January 1
Drawn
Available at the end of the year
December 31,
2017
December 31,
2016
$ 8,500,000
$ 8,500,000
(4,812,347 )
(3,935,045 )
$ 3,687,653
$ 4,564,955
84
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT
14. DERIVATIVE FINANCIAL INSTRUMENTS
Fair value as at
December 31,
2017
Notional
amount as at
December 31,
2017
Fair value as at
December 31,
2016
Notional
amount as at
December 31,
2016
Current assets
$ 9,236,934
$ 112,034,573
$
1,264,644
$ 59,913,330
Non-current assets (1-3 years)
$
729,459
$ 8,810,123
$ 5,478,746
$ 87,763,144
Current liabilities
$ 7,796,036
$ 107,958,340 $
870,403
$ 49,279,562
Non-current liabilities (1-3 years)
$
543,073
$ 8,400,009
$ 4,271,471
$ 77,362,822
Olympia Trust has entered into foreign exchange contracts with its customers and currency suppliers.
The expiry dates of the above derivatives vary between January 5, 2018, and April 26, 2019. As a result,
a portion of the foreign exchange contracts are classified as non-current.
Forward foreign exchange contracts are measured at fair value through profit or loss based on contractual
maturities and are presented at their fair value on the balance sheet. Changes in fair values of forward
foreign exchange contracts at fair value through profit or loss are recorded in “other (losses)/gains,
net” in the consolidated statement of net earnings and comprehensive income. The fair value of all
forward foreign exchange contracts is based on current bid prices for their respective remaining terms
to maturity in an active market. As at December 31, 2017, Olympia has margins held in Canadian dollars
of $5.31 million (December 31, 2016 - $6.38 million).
For the year ended December 31, 2017, there were no transfers between Level 1 and Level 2 fair value
measurements and no transfers into or out of Level 3 fair value measurements.
The following table presents Olympia’s derivative financial assets and liabilities measured at fair value
and categorized by level according to the significance of the inputs used in making these measurements:
December 31,
2017
Level 1
Level 2
Level 3
Recurring measurements
Financial assets - derivative financial instruments
$ 9,966,393
$
Financial liabilities - derivative financial instruments
(8,339,109 )
$ 1,627,284
$
December 31,
2016
-
-
-
$ 9,966,393
$
(8,339,109 )
$
1,627,284
$
-
-
-
Level 1
Level 2
Level 3
Recurring measurements
Financial assets - derivative financial instruments
$ 6,743,390
$
Financial liabilities - derivative financial instruments
(5,141,874 )
$
1,601,516
$
-
-
-
$ 6,743,390
$
(5,141,874 )
$
1,601,516
$
-
-
-
85
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT |
15. EQUIPMENT AND OTHER
December 31, 2017
Cost
Furniture &
fixtures
Leasehold
improvements
Computers &
equipment
ATM
equipment
Total
At beginning of year
$
1,378,869
$ 3,070,994
$ 2,375,129
$
1,253,666
$ 8,078,658
Additions
Disposals
At end of year
121,035
(600 )
236,508
124,436
321,903
-
(1,838 )
(108,009 )
803,882
(110,447 )
$ 1,499,304
$ 3,307,502
$ 2,497,727
$ 1,467,560
$ 8,772,093
Accumulated depreciation
At beginning of year
Disposals
Depreciation charge for the year
$
1,090,982
$ 2,359,557
$ 2,065,665
$
219,810
$ 5,736,014
(140 )
157,094
-
219,493
(419 )
179,637
(33,534 )
281,552
(34,093 )
837,776
At end of year
$ 1,247,936
$ 2,579,050
$ 2,244,883
Closing net book value
$
251,368
$
728,452
$
252,844
$
$
467,828
$ 6,539,697
999,732
$ 2,232,396
December 31, 2016
Cost
At beginning of year
$
1,347,496
$ 3,069,294
$
2,195,814
$
512,404
$ 7,125,008
Additions
Disposals
At end of year
Accumulated depreciation
At beginning of year
Disposals
31,373
-
1,700
-
179,315
-
771,720
(30,458 )
984,108
(30,458 )
$
1,378,869
$ 3,070,994
$ 2,375,129
$
1,253,666
$ 8,078,658
$
928,827
$
1,878,184
$
1,882,531
$
52,450
$ 4,741,992
-
-
-
(6,885 )
174,245
(6,885 )
1,000,907
219,810
$ 5,736,014
1,033,856
$ 2,342,644
$
$
Depreciation charge for the year
162,155
481,373
183,134
At end of year
Closing net book value
$
$
1,090,982
$ 2,359,557
$ 2,065,665
287,887
$
711,437
$
309,464
86
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT
16. INTANGIBLE ASSETS
December 31, 2017
Cost
Internally
generated
software
Computer
software
ATM
processing
contracts
Other
Total
At beginning of year
$
1,763,813
$
1,335,020
$
1,082,968
$
41,032
$ 4,222,833
Additions
Disposals
Reclassification
At end of year
Accumulated depreciation
At beginning of year
248,347
(286,200 )
-
-
125,000
(125,000)
-
-
-
-
-
-
248,347
(286,200 )
-
$ 1,850,960
$ 1,210,020
$ 1,082,968
$
41,032
$ 4,184,980
$
419,139
$
856,930
$
797,512
$
8,755
$ 2,082,336
Amortization charge for the year
221,984
85,785
-
(286,200 )
-
-
67,287
150,417
-
13,678
-
-
388,734
150,417
(286,200 )
$
354,923
$ 1,496,037
$
$
942,715
267,305
$
$
1,015,216
67,752
$
$
22,433
$ 2,335,287
18,599
$ 1,849,693
Impairment
Disposals
At end of year
Closing net book value
December 31, 2016
Cost
At beginning of year
$
1,359,318
$
1,069,669
$
1,082,968
$
16,032
$ 3,527,987
Additions
At end of year
404,495
265,351
-
25,000
694,846
$
1,763,813
$
1,335,020
$
1,082,968
$
41,032
$ 4,222,833
Accumulated depreciation
At beginning of year
$
268,400
$
811,270
$
117,017
$
3,411
$ 1,200,098
Amortization charge for the year
150,739
45,660
-
-
180,495
500,000
5,344
-
382,238
500,000
$
$
419,139
1,344,674
$
$
856,930
478,090
$
$
797,512
285,456
$
$
8,755
$ 2,082,336
32,277
$ 2,140,497
Impairment
At end of year
Closing book value
Additions
The capital additions of $0.25 million in internally generated software relates to the continued
development and enhancement of cloud based online systems in the EEI division. Olympia offers
exempt market dealers access to the systems in order to facilitate their compliance with certain
regulatory requirements.
87
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT |
Impairment
As at December 31, 2017, Olympia noted indicators of impairment in its ATM division stemming from
losses incurred. The impairment analysis indicated that the recoverable amount of the cash generating
unit did not exceed its carrying value. The recoverable amount was based on a fair value less costs of
disposal calculation using the present value of expected future cash flows. The primary sources of cash
flow information are derived from macroeconomic factors such as industry demand fundamentals,
which include transaction volumes and growth rates, benchmark interchange and surcharge pricing
and inflation rates. Cash flow forecasts are also based on past experience, historical trends, operating
costs and maintenance expenditures.
17. TRADE AND OTHER PAYABLES
Trade payables
Agents and commissions payable
Amounts due to related parties (note 32)
Government taxes and other payables
18. DEFERRED REVENUE
Annual registered plan services administration fees
Annual health spending account fee
December 31,
2017
December 31,
2016
$
437,742
$
483,695
213,819
83,388
543,195
233,589
88,649
163,173
$ 1,278,144
$
969,106
December 31,
2017
December 31,
2016
$
16,100
$
-
297,156
221,912
$
313,256
$
221,912
At December 31, 2017, deferred revenue totaled $0.31 million (December 31, 2016 - $0.22 million).
Deferred revenue is comprised mostly of Health’s annual fees for maintaining customers’ health
spending accounts. The unearned portion of these annual fees is recognized as deferred revenue at
the time of billing and revenue is recognized on a straight-line basis in relation to Olympia rendering
these services.
88
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT
19. OTHER LIABILITIES AND CHARGES
Other liabilities and charges (current)
Bonuses payable
Medical benefits payable
Professional fees accrual
General accruals
Straight-line rent
Onerous contract obligation
Leasehold inducements
Vacation payable
Other
Legal fees accrual
December 31,
2017
December 31,
2016
$
469,802
$
352,894
362,910
208,758
180,376
109,321
96,888
85,688
71,049
63,289
-
345,503
126,786
200,712
87,636
-
281,934
96,016
47,957
1,100
$ 1,648,081
$
1,540,538
Leasehold inducements received are being amortized on a straight-line basis over the life of the lease.
The current portion of this liability is recorded in other liabilities and charges and the long-term portion
is recorded in other liabilities. In November 2017, Target Capital Inc. a related party, assigned its lease
contract to Olympia. Olympia has subleased the office space at a rate below its lease obligation resulting
in Olympia having an onerous contract obligation based on the present value of future cash flows.
Other liabilities (non-current)
Leasehold inducements
December 31,
2017
December 31,
2016
$ 1,068,776
$
194,110
20. SHARE CAPITAL AND CONTRIBUTED SURPLUS
Number of
common
shares
Share
capital
Contributed
surplus
Total
At January 1, 2016 and January 1, 2017
2,406,352
$ 7,886,989
Balance at December 31, 2016 and 2017
2,406,352
$ 7,886,989
$
$
86,373
$ 7,973,362
86,373
$ 7,973,362
The total authorized number of common shares is unlimited (December 31, 2016 - unlimited common
shares). All issued shares are fully paid.
89
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT |
21. INCOME TAXES
a) The significant components which give rise to deferred income tax assets and liabilities are as
follows:
Bad debts and other provision
Non-capital losses
Carrying amount of equipment higher than the tax basis
Cumulative eligible capital available for tax purposes
December 31,
2017
December 31,
2016
$
129,961
$
65,922
1,360,561
1,009,797
(54,991 )
-
(226,418 )
134,449
$
1,435,531
$
983,750
b) Income tax expense is recognized based on management’s best estimate of the weighted average
annual income tax rate expected for the full financial year. The average annual rate used for the year
ended December 31, 2017, was 27% (December 31, 2016 - 27%).
Earnings before income tax
Anticipated income tax expense
Non-deductible expenses
Non-taxable income
Tax losses from prior years recognized
Adjustment in respect of prior years
Other
Current tax expense
Deferred tax recovery
December 31,
2017
December 31,
2016
$ 8,332,879
$ 6,931,487
2,249,877
1,871,501
32,777
-
-
13,015
(1,004 )
32,451
(199,045 )
(319,568 )
(45,147 )
301
$ 2,294,665
$
1,340,493
$ 2,746,447
$ 2,183,406
(451,782 )
(842,913 )
$ 2,294,665
$
1,340,493
Deferred income tax assets are recognized for loss carry-forwards and other deductible temporary
differences to the extent that the realization of the related tax benefit is probable through future taxable
profits or other tax planning opportunities. The non-capital losses will start to expire in 2034.
90
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT
22. ADMINISTRATIVE EXPENSES
Salaries, management fees and bonuses
General administration
Management compensation (note 32)
Rent
Employee benefits expense (note 24)
Bad debts
23. DIRECT EXPENSES
Commission expense
Service costs paid
Health trailer commissions
Other
24. EMPLOYEE BENEFITS
Benefit expenses
Medical benefits
Other benefits
Share ownership assistance scheme
Long-term service awards and education assistance
December 31,
2017
December 31,
2016
$ 15,829,307
$ 15,284,459
6,941,430
6,566,757
2,617,874
2,449,546
2,159,240
1,444,401
542,795
2,471,429
1,357,826
105,883
$ 29,535,047
$ 28,235,900
December 31,
2017
December 31,
2016
$ 1,700,261
$
1,961,683
2,755,743
1,452,281
-
2,277,107
1,493,689
4,510
$ 5,908,285
$ 5,736,989
December 31,
2017
December 31,
2016
$
705,116
$
655,904
392,395
214,964
131,926
385,201
198,594
118,127
$ 1,444,401
$
1,357,826
91
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT |
25. OTHER (LOSSES)/GAINS, NET
Unrealized foreign exchange gain
CRA lawsuit settlement refund
Settlement (loss)
Impairment of intangible asset (note 16)
Restraint of trade income
Other
December 31,
2017
December 31,
2016
$
25,768
$
1,243,209
-
-
782,438
(511,479 )
(150,417 )
(500,000 )
114,918
(25,861 )
-
(18,231 )
$
(35,592 ) $
995,937
The unrealized forward exchange gain decreased due to smaller forward contracts being entered into
by the FX division.
Restraint of trade income relates to monies received from a consultant for the release from a restraint
of trade agreement in the ATM division.
The lawsuit settlement refund for the year ended December 31, 2016, relates to Olympia’s dispute
resolution with the Canada Revenue Agency (“CRA”). On April 11, 2016, Olympia received
communication from the CRA confirming that ongoing disputes relating to certain claims for withholding
taxes owing in accordance with Section 116(5) of the Income Tax Act (Canada) have been resolved.
The settlement loss for the year ended December 31, 2016, is due to a legal claim by a client of Olympia’s
former Corporate and Shareholder Services division. The client had been claiming loss of income on
funds held in trust that were subject to a dispute. The claim was settled through an arbitration process
and Olympia was deemed liable for $0.52 million for loss of income, including legal costs.
26. EARNINGS PER SHARE
Basic and diluted
Basic earnings per share is calculated by dividing the profit attributable to equity holders of Olympia
by the weighted average number of common shares in issue during the year.
Net earnings attributable to shareholders of Olympia
Weighted average number of shares (basic and diluted)
Basic and diluted earnings per share
27. DIVIDENDS PER SHARE
December 31,
2017
December 31,
2016
$ 6,079,842
$ 5,590,994
2,406,352
2,406,352
$
2.53
$
2.32
The aggregate quarterly dividends declared amounted to $5.70 million (December 31, 2016 -
$3.61 million). The lower amount declared in 2016 was due to Olympia’s Board of Directors approving
and Olympia announcing the fourth quarter 2015 dividend in 2015.
92
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT
28. CHANGES IN NON-CASH WORKING CAPITAL
Trade and other receivables
Current taxes receivable
Prepaid expenses
Inventory
Trade and other payables
Deferred revenue
Current taxes payable
Other liabilities & charges
Other liabilities
December 31,
2017
December 31,
2016
$
(351,846 ) $
(222,726 )
117,683
181,081
232,859
309,039
91,344
102,212
107,543
874,666
203,582
(108,112 )
(143,352 )
(19,134 )
82,498
-
(330,921 )
(285,626 )
$ 1,664,581
$
(823,791 )
29. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
Revolving credit facility
Cash in circulation due to bank
30. COMMITMENTS
Operating lease commitments
2016
Cash flows
2017
$ 3,935,045
$
877,302
$ 4,812,347
5,119,920
(1,296,810 )
3,823,110
$ 9,054,965
$
(419,508 ) $ 8,635,457
Olympia leases various offices under operating lease agreements. The initial lease terms are between
twelve months and fifty months and the majority of lease agreements are renewable at market rates
when the lease period ends.
During the year ended December 31, 2017, Olympia extended its office rental agreement in Calgary.
The original lease was due to expire on August 31, 2018, but has been extended to February 28, 2022.
Future aggregate minimum lease payments under operating leases are listed in the table below:
2018
2019
2020
2021
2022
December 31,
2017
$
1,107,459
1,004,325
995,013
923,397
147,932
$ 4,178,126
93
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT |
31. CONTINGENCIES
Olympia is not a money lender nor does it guarantee or participate in loans or mortgages of any
type, except in its capacity as trustee of mortgages held on behalf of its clients. Olympia is defendant
and plaintiff in a number of legal actions that arise in the normal course of business, the losses or
gains from which, if any, are not anticipated to have a material effect on the consolidated financial
statements.
32. RELATED PARTY TRANSACTIONS
Olympia’s president and chief executive officer (“CEO”) owns and controls 29.14% of Olympia’s shares.
During the year, Olympia entered into transactions with the following related parties:
• Companies and businesses controlled by the president and CEO of Olympia;
• Companies and businesses associated with the directors of Olympia;
• Companies and businesses controlled by management of Olympia;
• Family members of the president, management and directors; and
• Key management and directors.
The following transactions with related parties were measured at the exchange amount, which is the
amount of consideration agreed to by the parties:
Service revenue
Companies and businesses controlled by the president and CEO
December 31,
2017
December 31,
2016
$
$
20,736
20,736
$
$
5,844
5,844
Revenue from associated entities totaled $20,736 for the year ended December 31, 2017
(December 31, 2016 - $5,844), and consisted mainly of the following:
• Olympia earned revenue in the amount of $nil (December 31, 2016 - $191) from health benefit
administration revenue provided to Eyelogic Systems Inc., a company of which Olympia’s president
and CEO was the largest shareholder.
• Olympia earned revenue in the amount of $20,736 (December 31, 2016 - $5,653) from legal services
provided by Olympia’s in-house general counsel to Tarman Inc., Target Capital Inc. (“Target”) and
Apple Creek Golf Course Inc., companies controlled by the president and CEO.
94
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT
Interest revenue
Companies and businesses controlled by the president and CEO
December 31,
2017
December 31,
2016
$
$
5,276
5,276
$
$
17,500
17,500
Interest revenue from associated entities totalled $5,276 for the year ended December 31, 2017,
(December 31, 2016 - $17,500) and consists of interest earned from outstanding receivables and the
loan provided to Tarman Inc., a company controlled by the president and CEO, and interest on
outstanding receivables.
Administrative expenses
Companies and businesses controlled by the president and CEO
Olympia Charitable Foundation
December 31,
2017
December 31,
2016
$ 2,617,874
$ 2,449,546
58,899
65,037
$ 2,676,773
$ 2,514,583
Administrative expenses paid to associated entities totaled $2.68 million for the year ended
December 31, 2017 (December 31, 2016 - $2.51 million), and consisted of the following:
• The Olympia Charitable Foundation is funded by Olympia and the employees of Olympia. Olympia
donated a total of $58,899 for the year ended December 31, 2017 (December 31, 2016 - $65,037).
• Management fees are paid to Tarman Inc., a company controlled by Olympia’s president and CEO,
based on a percentage of pre-tax profits of Olympia’s divisions, except for the Private Health Services
Plan division, where the management fee is based on a percentage of health claims administered. These
fees are for services provided as president and CEO of Olympia. For the year ended December 31, 2017,
this amounted to $2.62 million (December 31, 2016 - $2.45 million).
Trade and other receivables include amounts receivable from related parties
Companies and businesses controlled by the president and CEO
Companies and businesses controlled by directors
December 31,
2017
December 31,
2016
$
365,028
$
611,408
-
17,268
$
365,028
$
628,676
Receivables from associated entities totaled $365,028 for the year ended December 31, 2017 (December
31, 2016 - $628,676), and consisted mainly of the following:
• A receivable in the amount of $7,388 (December 31, 2016 - $411) from Target, a company controlled
by the president and CEO of Olympia, reflects an arrangement whereby Olympia pays a portion of the
remuneration for Target’s personnel who deliver services to both Olympia and Target.
• A receivable in the amount of $231,106 (December 31, 2016 - $81,882) from Tarman Inc., a company
controlled by Olympia’s president and CEO, reflects the legal and other services provided to
Tarman Inc.
95
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT |
• A receivable in the amount of $5,133 (December 31, 2016 - $5,109) from Apple Creek Golf Course Inc.,
a company controlled by the president and CEO of Olympia, for expense recoveries.
• A receivable in the amount of $264 (December 31, 2016 - $398) from Bearspaw Tree Farm Inc., a
company controlled by the president and CEO of Olympia, for expense recoveries.
• A receivable in the amount of $716 (December 31, 2016 - $6,108) from Namena Island, Toy Box II
and Camera 2 Canvas Inc., companies controlled by the president and CEO of Olympia, for expense
recoveries.
• On November 29, 2017, Olympia obtained approval from the Board of Directors for a $120,000
demand loan to Tarman Inc., a company controlled by the president and CEO of Olympia. The secured
demand loan is scheduled for repayment on June 30, 2018, and accrues interest at 4.00% per annum.
As at December 31, 2017, Olympia has accrued $421 of interest.
All the receivables from related parties are current.
Trade and other payables and provision for other liabilities and charges include amounts payable to
related parties
Companies and businesses controlled by the president and CEO
Directors' fees
Management
Olympia Charitable Foundation
December 31,
2017
December 31,
2016
$
160,298
$
107,890
45,377
28,204
-
-
924
3,100
$
205,675
$
140,118
• Payables to associated entities totaled $205,675 for the year ended December 31, 2017
(December 31, 2016 - $140,118), and consisted mainly of the following:
• A payable in the amount of $36,473 (December 31, 2016 - $39,807) to Tarman Inc., a company
controlled by the president and CEO of Olympia, for commissions related to the sale of health plans
offered by OBI.
• A payable in the amount of $1,538 (December 31, 2016 - $11,353) to Target and Camera 2 Canvas Inc.,
companies controlled by the president and CEO of Olympia, for expense recoveries.
• A management fee payable in the amount of $122,287 (December 31, 2016 - $51,468) to Tarman Inc.,
a company controlled by the president and CEO of Olympia, based on a percentage of pre-tax profits
of Olympia’s divisions.
• A payable in the amount of $nil (December 31, 2016 - $3,100) to Olympia Charitable Foundation, a not
for profit foundation funded by Olympia and the employees of Olympia.
• A payable for directors’ fees of $45,377 (December 31, 2016 - $28,204).
These payables are all current.
96
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT
Share capital
On March 24, 2017, Target, of which Olympia’s president and CEO is the controlling stakeholder, sold
an aggregate of 55,200 common shares of Olympia to several arm’s-length private parties, through a
private sale. The shares were sold at a price of $29.00 per Olympia common share (the “Disposition”).
After giving effect to the Disposition, the president and CEO of Olympia owns and controls 701,127
common shares of Olympia, representing 29.14% of the issued and outstanding common shares of
Olympia on a non-diluted and fully diluted basis.
Key management compensation
Compensation paid to key management is included in Note 22 and Note 23. Key management includes
the Board of Directors, the presidents of OBI, ATM, Olympia Trust and Olympia, the executive vice
president and vice presidents. Olympia uses management or employment contracts as a means
to incent certain executives to maximize the profitability of their applicable business units and the
profitability of Olympia as a whole. The compensation paid or payable to key management is shown in
the following table:
Salaries, bonuses and profit sharing
Management fees
Directors’ fees
Short-term employee benefits
December 31,
2017
December 31,
2016
$ 4,002,357
$ 3,807,383
2,617,874
2,449,546
211,755
232,171
147,760
224,789
$ 7,064,157
$ 6,629,478
97
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT |
Transfer Agent
AST Trust Company
600, 333 – 7th Avenue SW
Calgary, AB T2P 2Z1
Tel: 403-776-3900
Fax: 403-776-3916
Auditors
PricewaterhouseCoopers LLP
Chartered Professional Accountants
Suite 3100, 111 – 5th Avenue SW
Calgary, AB T2P 5L3
corporate information
Directors
Rick Skauge
Gerard Janssen1 2 3 4
Brian Newman1 2 3 4
Craig Skauge
Diana Wolfe1 2 3 4
Dennis Nerland
Tony Lanzl
Board Committees
1 Audit Committee
2 Corporate Governance Committee
3 Executive Compensation Committee
4 Investment Committee
Head Office
2300, 125 – 9th Avenue SE
Calgary, AB T2G 0P6
Tel: 403-261-0900
Fax: 403-265-1455
www.olympiafinancial.com
info@olympiafinancial.com
98
| OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT executive team
RICK SKAUGE
President and Chief
Executive Officer
CRAIG SKAUGE
Executive Vice President
and President, Olympia
Trust Company
GERHARD BARNARD
Chief Financial Officer and
Vice President, Finance
ROBIN FRY
CEO, Olympia Benefits Inc.
KEN FRY
President,
Olympia Benefits Inc.
DERICK KACHUIK
Vice President,
Foreign Exchange
ANDREA GILLIS
Vice President, Client Services
Registered Plans
KELLY REVOL
Vice President, Operations
Registered Plans
JIM WILSON
President, Olympia ATM Inc.
JONATHAN BAHNUIK
General Counsel
RYAN MCKENNA
Vice President,
Information Technology
99
OLYMPIA FINANCIAL GROUP INC. | 2017 ANNUAL REPORT | 2300, 125 - 9th Avenue SE Calgary, Alberta T2G 0P6
Tel: 403-261-0900 • Fax: 403-265-1455
www.olympiafinancial.com info@olympiafinancial.com