Web Case 14 - Northern Lights Communications 1 Web Case 14 Northern Lights Communications Phone Problems The following financial statements are for the Northern Lights Corporation. The company provides pay phone service at many of the small convenience stores in Ontario and Manitoba. The business was "meeting plan" until 2014 when a problem developed. Balance Sheet ASSETS 2013 2014 $ 668,778 4,453,192 137,036 411.990 $ 592,491 3,888,621 112,699 407 274 Current Assets: Cash and cash equivalents Accounts receivable Inventories Prepaid expenses and other current assets Total current assets: Fixed assets: Property, plant, and equipment (net) Site licenses Investments in affiliates $ 5,670,996 $5,001,085 $12,935,453 $16,466,001 Total fixed assets Other assets TOTAL ASSETS 1,941,467 164,549 $15,041,469 681.754 $21,394,219 3,771,571 251,672 $20,489,244 455.488 $25,945,817 DEBT (LIABILITIES) AND EQUITY Current Liabilities Notes payable Current portion of other $ 659,604 1,491,767 $3,320,197 Web Case 14 - Northern Lights Communications 2 1,094,381 668,826 310,358 2,971,935 835,384 3,036,633 256,140 $ 6,784,185 475.945 $ 8,336,985 $ 6,605,835 $10,030,963 notes payable Current portion of capital lease obligations Accounts payable Accrued telecommunications and other expenses Income taxes payable Total current liabilities Long-term liabilities: Notes payable, less current portion Capital lease obligations Deferred income tax liability Total long-term liabilities Preferred stock Common stockholders' equity: Common Stock Additional paid-in capital Retained earnings Total ownership equity TOTAL DEBT AND EQUITY 780,593 342.359 $ 7,728,787 $ 2,400,000 56,219 306.021 $10,393,203 $ 2,400,000 $ 1,438,903 10,630 $ 1,438,903 10,630 3,031,714 $_4481247 $21.394,219 3,366,096 $ 4815629 $25.945,817 Web Case 14 - Northern Lights Communications 3 Income Statements for Northern Lights Communications, Inc. 2013 2014 $14,036,665 17.049,394 $17,615,069 15,932, 154 505.581 $31,591,640 1.363.738 $34,910,951 $ 7,851,842 4,909,445 1,821,930 4,298,090 $ 9,078,851 5,627,288 1,519,095 5,353,797 Sales Revenue Pay-phone coin calls Automated operator, routed calls Other Total revenues Operating expenses: Telephone charges Commissions Telecommunications fees Depreciation and amortization Field operations personnel Chargebacks and doubtful accounts General and administrative expenses Total operating expenses Operating income Other income (expenses): Interest expense Interest income Losses on affiliates Unusual gains Total other income (expenses) Income before taxes 2,016,935 1,104,896 2,988,456 1,111,857 5,520.405 6,435,919 $27,523,543 $ 4,068,097 32.115.263 $2,795,688 ($1,816,222) 5.069 ($1,631,416) 57.278 ( 34,608) 1.160.238 ($ 448,508) ( 108,556) 27.234 ($ 1,892,475) Provision for income taxes Net income $3,619,589 1.339.140 $2.220.449 $ 903,213 424.831 $ 478.382 Web Case 14 - Northern Lights Communications 4 Questions 1. Using financial ratios, compare the firm's financial performance for 2013 and 2014. What do you think might have happened from 2013 to 2014
