You work for an investment firm specializing in Atlantic Canadian based publicly traded companies.Your boss is looking into an investment in the seafood industry and has narrowed the selection down to two companies.
In Canada, High Liner Foods and Clearwater Seafoods are both in the seafood industry. Both companies harvest, process, and distribute seafood. Clearwater concentrates on shellfish such as lobster, scallops, clams, cold-water shrimp, and crab, whereas High Liner Foods has a broader product line and includes various species of fish as well as shellfish.
The statement of financial position and statement of income forHigh Liner Foods IncorporatedandClearwater Seafoods Incorporatedare inthe attached images.
You have been asked to calculate the common-size analysis of the statements of income (loss) for the two companies for both years in the attached Analysis image, explain why you think the profit margins are so different for the two companies, and explain which areas High Liner Foods seems to have an advantage and which areas Clearwater Seafoods has an advantage.
Additionally, you will need to compare the current and quick ratios for the two companies, determine which company is more liquid, and explain why there is a significant difference between the current ratio and the quick ratio for the companies.
Lastly please compare the inventory turnover ratio for each company.
B G K C D E F H 1 Please complete your analysis on this tab, please show formulas when used High Liner Foods Clearwater High Liner Foods Clearwater 2015 2016 2015 2016 Ratio Anaysis 2015 2016 2015 2016 Account 15 6 8 9 10 11 12 13 14 15 16 17 18 19 20 21 231 Clearwater Seafoods Incorporated's 2016 Consolidated Statement of Earnings (Loss) (In thousands of Canadian dollars) Year ended December 31 kOOOHChU'I-hUJN 10 11 12 13 14 15 16 17 18 19 20 21 22 Sales Cost of goods sold Administrative and selling costs Net nance costs (Note 8 (d)) Foreign exchange (gains) losses on long-term debt and working capital {Note 8 (9}) (Gains) losses on contract derivatives (Note 8 (3) Other (income) expense (Note 17) Research and development Earnings (loss) before income taxes Income tax expense (Note 13) Earnings (loss) for the year Earnings (loss) attributable to: Non-controlling interest Shareholders of Clearwater Basic earnings (loss) per share {Note 19) Diluted earnings (loss) per share (Note 19) 201 6 61 1,551 466,930 144,621 53,492 26,943 (7,295) (7 5279) (5,209) 2,922 63,579 76,042 16,446 59,596 15,663 43,923 59,596 0.71 0.71 2015 504,945 372,757 132,188 51,363 21,634 46,287 26,763 444 1,981 148,472 {16,284} 4,387 (20,671) 16,937 (37,608) {20,671} {0.65} {0.65} B C D E 1 Clearwater Seafoods Incorporated's 2016 Consolidated Statement of Financial Position (In thousands of Canadian dollars) As at December 31 w 2016 2015 ASSETS 5 Current assets Cash 39,514 51,106 Trade and other receivables (Note 5) 82, 108 81,734 Inventories (Note 6) 91,831 65,022 LD 00 Prepaids and other (Note 7) 5,414 9,587 Derivative financial instruments (Note 8) 4,821 3,788 223,688 211,237 12 Non-current assets 13 Long-term receivables (Note 9) 8,132 10,076 14 Other assets 81 1,164 Property, plant and equipment (Note 10) 233,807 251, 197 16 Investment in equity investee (Note 12) 10,496 9,311 Deferred tax assets (Note 13(c)) 6,429 14,184 18 Intangible assets (Note 11) 197,321 201,846 Goodwill (Note 11) 49,781 54,180 20 506,047 541,958 21 TOTAL ASSETS 729,735 753,195 22 LIABILITIES Current liabilities 24 Trade and other payables 75,953 82,870 25 Income taxes payable (Note 13) 4,303 454 Current portion of long-term debt (Note 14) 67,005 65,685 Derivative financial instruments (Note 8) 5,640 18,622 28 152,901 167,631 29 Non-current liabilities 30 Long-term debt (Note 14) 369,409 415,084 31 Other long-term liabilities 887 2,088 32 Deferred tax liabilities (Note 13 (c)) 18,053 19,317 33 388,349 436,489 34 SHAREHOLDERS' EQUITY 35 Share capital (Note 15) 210,860 157,161 36 Contributed surplus 1,419 547 37 Deficit (4,793) (36,333) 38 Accumulated other comprehensive loss (38,931) (1,625) 168,555 119,750 40 Non-controlling interest (Note 16) 19,930 29,325 41 188,485 149,075 TOTAL LIABILITIES AND SHAREHOLDERS' 42 EQUITY 729,735 753,1951 High Liner Foods Incorporated's 2016 Consolidated Statement of Income 2 (in thousands of United States dollars, exceptper share amounts) 3 Fifty-Mo weeks ended 4 31 -Dec-1 6 02-Jan-1 6 5 Revenues $ 976,016 $ 1,021,507 5 Cost of sales 773,179 819,843 2 Gross profit 202,837 201,664 a Distribution expenses 43,61 0 48,037 9 Selling, general and administrative expenses 96,978 93,597 10 Impairment of property, plant and equipment 2,327 11 Business acquisition, integration and other expenses 4,787 7,473 12 Results from operating activities 55,135 52,557 13 Finance costs 14,296 16,247 14 Income before income taxes 40,839 36,310 15 Income taxes 15 Current 8,737 5,707 17 Deferred (848) 1,022 13 Total income tax expense 7,889 6,729 19 Net income 6 32,950 29,581 20 Basic 1.07 0.96 21 Diluted 1.06 0.95 22 30,917,412 30,818,804 23 Diluted 31,174,788 31,264,671
