Recipe Unlimited Corporation

Income Statements

For the 52 weeks ended December 29, 2019 and December 30, 201

(in thousands of Canadian dollars)

December 29, 2019December 30, 2018

Sales.................................................................................$ 1,065,928$ 1,006,672

Franchise revenues ....................................................................186,523185,260

Total revenue.......................................................................$ 1,252,451$ 1,191,932

Cost of inventories sold........................................................... (452,222)(419,671)

Selling, general and administrative expenses ..........................(656,871)(624,938)

Impairment................................................................................(57,243)(8,107)

Restructuring costs..................................................................... (6,644)(12,280)

Operating income ....................................................................$ 79,471$ 126,936

Net interest expense and other financing charges ...................(23,241) (11,914)

Share of loss from investment in joint ventures......................... (1,442)(586)

Earnings before change in fair value and income taxes.......... $ 54,788 $ 114,436

Change in fair value of non-controlling interest liability............... 277 (3,500)

Change in fair value of contingent liability..................................10,000

Change in fair value of Exchangeable Keg Partnership units and Keg Royalty

Income Fund units...................................................................... (4,286) (6,368)

Earnings before income taxes...................................................$ 60,779 $ 104,568

Current income tax expense .....................................................(24,847)(14,409)

Deferred income tax expense.........................................................7,980(16,368)

Net earnings..............................................................................$ 43,912 $ 73,791

Recipe Unlimited Corporation

Consolidated Balance Sheets

As at December 29, 2019 and December 30, 2018

(in thousands of Canadian dollars)

December 29, 2019December 30, 2018

Assets

Current Assets

Cash........................................................................... $ 40,351$ 49,272

Accounts receivable .................................................... 117,279 103,514

Inventories .....................................................................39,804 36,586

Prepaid expenses and other assets................................ 6,5369,395

Current portion of long-term receivables ......................80,347 4,900

Total Current Assets.................................................$ 284,317$ 203,667

Long-term receivables.................................................... 400,883 30,069

Property, plant and equipment ..................................602,914 399,990

Investment in the Keg Limited Partnership ................128,640 122,125

Brands and other assets.................................................611,490 616,183

Goodwill ......................................................................... 198,313 196,638

Deferred tax asset ...........................................................37,50922,411

Total Assets.........................................................$ 2,264,066$1,591,083

Liabilities

Current Liabilities

Accounts payable and accrued liabilities...............$ 124,590 $ 134,930

Provisions ...........................................................................4,7219,679

Gift card liability ......................................................167,585 153,832

Income taxes payable ................................................12,0155,697

Current portion of long-term debt ............................... 154,000

Current portion of lease liabilities ............................ 121,847 3,192

Total Current Liabilities........................................ $ 430,758 $ 461,330

Long-term debt ...........................................................475,742235,566

Note payable to The Keg Royalties Income Fund.....57,000 57,000

Provisions .........................................................................3,589 13,796

Lease liabilities.............................................................646,602 22,824

Other long-term liabilities............................................66,973 87,667

Deferred gain on sale of The Keg Rights .................139,315134,257

Deferred tax liability.....................................................99,101 92,831

Total Liabilities.................................................$ 1,919,080$ 1,105,271

Shareholders' Equity

Common share capital ..........................................$ 617,126$ 769,662

Contributed surplus................................................10,61713,546

Merger reserve .......................................................(216,728)(216,728)

Accumulated other comprehensive loss.................(3,404) (2,556)

Deficit....................................................................(62,625) (78,112)

Total Shareholders' Equity ................................$ 344,986$ 485,812

Total Liabilities and Equity ............................ $ 2,264,066 $ 1,591,083

Homework

These statements are from the Canadian company,(based in Vaughan, ON) that now owns all the following restaurant chains: Swiss Chalet, Harvey's, Milestones, Montana's, Kelsey's, East Side Mario's, St.-Hubert, Prime Restaurants, New York Fries, The Keg and The Pickle Barrel. (Whew, what a list!!!)

Because the creation of this large corporation in its current form is quite recent, and required buying some of these restaurants from their previous owners, there is a lot of debt to pay off. So some of the values you calculate will look not so great, but do not worry..... things are moving in the right direction!

Questions:

1.Why did it seem like Recipe Unlimited had only $40,351 in cash as of the end of 2019?