2017 Annual Report - Consolidated Balance Sheet | UFA Co-operative Ltd.

2017 Annual Report

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Net Income from Continuing Operations

For 2017, UFA has allocated a Patronage Dividend of $12.5 million for declaration at the Annual General Meeting of the Co-operative in March 2018. Consolidated net income from continuing operations before income tax and patronage dividend in 2017 was $31.0 million compared to a net loss of $2.4 million in 2016. In December 2017, UFA completed the closure of Wholesale Sports Canada. The operating results for Wholesale Sports Canada combined with the associated wind down costs net of the future tax benefits resulted in a net loss from discontinued operations of $10.1 million in 2017 ($0.9 million 2016). An analysis of the loss is provided in note 22 to the Consolidated Financial Statements.

Capital Spending and Depreciation

During 2017, UFA invested $14.4 million in capital additions compared to $14.0 million in 2016. The additions included $8.1 million in investments in petroleum assets including the new Beaverlodge site as well as important investments in AgriBusiness, new rolling stock and information technology assets. In 2017, UFA commenced a significant multi-year investment in a new point of sale system at the stores and a new enterprise reporting system for AgriBusiness. A depreciation and amortization charge from continuing operations of $23.7 million was incurred in 2017, a $3.9 million reduction from the prior year charge of $27.6 million. As at December 31, 2017, UFA had capital assets of $200.6 million.

Long-Term Debt

As at December 31, 2017, UFA had long-term debt of $47.7 million, including a current portion of $40.3 million. Long-term debt is primarily comprised of an asset-based lending agreement with a banking syndicate (Credit Agreement). The Credit Agreement is due for renewal in December 2018 and is shown as a current liability. The remainder of long term debt is comprised of capital leases for rolling stock and information technology assets. The decrease from 2016 is due to cash generated from sale of inventory relating to the closure of Wholesale Sports Canada.

Members’ Equity

UFA’s equity structure is a source of capital and considerable financial strength. As a co-operative, UFA provides members’ benefits by allocating a portion of its taxable earnings to members in the form of a Patronage Dividend. Under UFA’s by-laws, a Patronage Dividend for the year is declared at the next annual meeting of the co-operative. Up to December 31, 2017, Member Entitlements consisted of Member Shares, the current period’s Patronage Dividend, Revolving Equity, Class A Investment Shares (Investment Shares) and Contributed Surplus.

At the annual meeting of the Co-operative in March 2017, the delegates approved changes to UFA’s bylaws governing Member Entitlements. Effective January 1, 2018, Member Entitlements consist of Member Shares, the current period’s Patronage Dividend, Investment Shares and Contributed Surplus. In accordance with the revised by-laws, effective January 1, 2018, $36.6 million, representing the total of individual members’ Revolving Equity was repaid by the issuance of Member Shares and $0.6 million was repaid in cash. A summary of Member Entitlements is outlined in the notes to the Financial Statements.

For 2017, a Patronage Dividend of $12.5 million has been proposed for declaration at the 2018 Annual General Meeting of the Co-operative. Effective January 1, 2018, Patronage Dividends declared are applied 60 per cent in Member Shares and 40 per cent in cash less withholding taxes for individual members’ balances less than $30,000. For members who are at the $30,000 cap, the Dividend is paid in cash less withholding taxes. In 2017, Dividends on investment shares totalled $2.9 million compared to $2.8 million in 2016.

CONSOLIDATED BALANCE SHEET

As at (Stated in thousands of Canadian dollars) December 31, 2017 December 25, 2016
Assets
Current Assets
Cash $13,760 $16,727
Accounts receivable (note 3) 110,131 102,618
Inventories 150,177 128,262
Prepaid expenses and deposits 28,972 19,052
Property held for sale (note 4) 6,029 -
Future income tax asset (note 10) 3,930 2,912
312,999 269,571
Property held for sale (note 4) - 7,230
Investments (note 5) 542 2,259
Other long-term assets (note 6) 29,271 10,119
Goodwill and intangible assets (note 7) 6,473 8,754
Future income tax asset (note 10) 19,297 8,260
Property and equipment (note 8) 194,147 197,413
Current assets of discontinued operations (note 22) 700 45,572
Long-term assets of discontinued operations (note 22) - 10,679
$563,429 $559,857
Liabilities and Members’ Equity
Current Liabilities
Accounts payable and accrued liabilities (note 18) $93,812 $83,782
Deferred revenue 13,088 13,285
Current portion of member loans (note 9) 29,384 15,005
Demand member loans (note 9) 10,877 10,377
Current portion of long-term debt (note 11) 40,257 2,893
Current portion of long-term liabilities (note 13) 15,141 -
202,559 125,342
Long-term debt (note 11) 7,441 66,731
Member loans (note 9) 30,544 44,536
Asset retirement obligations (note 12) 24,720 23,959
Long-term liabilities (note 13) 5,152 19,898
Current liabilities of discontinued operations (note 22) 15,240 6,253
Long-term liabilities of discontinued operations (note 22) - 1,126
285,656 287,845
Members’ Equity
Member entitlements (note 15) 214,144 207,127
Retained earnings 63,629 64,885
277,773 272,012
$563,429 $559,857

The full Member Report, including the Consolidated Financial Statements, MD&A and accompanying notes are available at UFA.com

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