RI5-1 (Analysis of a company's statement of cash flows) Exhibits 5.19A and 5.19B contain the consolidated statements of cash flows and related note disclosure for The Second Cup Ltd. STATEMENTS OF CASH FLOWS For the periods ended December 31, 2016 and December 26, 2015 (Expressed in thousands of Canadian dollars) EXHIBIT 5.19A The Second Cup Ltd.'s 2016 Statements of Cash Flows 2016 2015 $ (975) $ (1,153) 1,168 403 1,091 374 86 53 238 211 (21) 225 CASH PROVIDED BY (USED IN) Operating activities Net loss for the period Items not involving cash Depreciation of property and equipment Amortization of Intangible assets Share-based compensation expense Deferred Income taxes (note 19) Loss (gain) on disposal of capital related items Change in fair value of Interest rate swap (note 5) Changes in non-cash working capital & other (note 21) Cash used in (provided by) operating activities Investing activities Proceeds from disposal of capital related items Cash payments for capital expenditures (note 21) Cash payments for Intangible assets (note 21) Notes receivable repayment (Issuance) Cash used in Investing activities (2,288) (1.177) (1,253) (585) 334 (382) (393) 76 (365) 497 (1,942) (733) (5) (2,183) continued 5-66 CHAPTER 5 The Statement of Cash Flows EXHIBIT 5.19A The Second Cup Ltd.'s 2016 Statements of Cash Flows (continued) 2016 2015 Financing activities Repayment of term loan (note 14) (6,000) (5,000) Repayment of swap (note 5) (70) Proceeds from new term loan 8,000 Transaction costs 14581 Cash provided by (used in) financing activities 1,542 5,070) Increase (decrease) In cash and cash equivalents during the period (76) (7,838) Cash and cash equivalents-Beginning of the period 3,080 10,918 Cash and cash equivalents-End of the period $ 3,004 $ 3,080 See accompanying notes to financial statements. Supplemental cash flow Information is provided in note 21. EXHIBIT 5.19B Excerpt from the Second Cup Ltd.'s 2016 Annual Report 21. Supplemental cash flow Information 2016 2015 $ 592 Changes in non-cash working capital & other Inflow (outflow)): Trade and other recelvables Inventories Prepaid expenses and other assets Accounts payable and accrued liabilities Provisions Other liabilities Gift card liability Deposits from franchisees & change in restricted cash Income taxes $ 411 29 176 (1,658) (483) (282) (70) (566) 155 $12,288) 58 (651) (388) (103) (172) (517) $(1,177) Cash payments for capital expenditures Cash payments for capital expenditures Cash payments for Intangible assets $ (382) (393) $ (775) $(1,942) (733) $(2,675) Supplementary Information Interest pald Income taxes paid $ $ 318 - $ 523 $ - Required a. In total, how much did Second Cup's cash and cash equivalents change during 2016? Was this an increase or a decrease? How did this compare with the previous year? b. Did Second Cup have net income or a net loss in 2016? How did this compare with the cash flows from operating activities? What was the largest difference between these two amounts? c. What effect did the change in the company's accounts payable and accrued liabilities have on cash flows from operating activities in 2016? What does this tell you about the balance owed to these creditors? Reading and Interpreting Published Financial Statements 5-67 d. Did the balance of outstanding gift cards increase or decrease during 2016? Was this considered to be an inflow or an outflow of cash? e. Did Second Cup purchase property, plant, and equipment during 2016? Did the company receive any proceeds from the sale of property, plant, and equipment during the period? I Calculate Second Cup's met free cash flow for 2016 and 2015. Is the trend positive or negative