LifeWorks : 2021 2nd Quarter - Financial Statements

Unaudited condensed consolidated interim financial statements

LifeWorks Inc.

(Formerly Morneau Shepell Inc.)

Three and six months ended June 30, 2021 and 2020

(In thousands of Canadian dollars)

Unaudited condensed consolidated interim financial statements

Unaudited condensed consolidated interim statements of financial position

As at June 30, 2021 and December 31, 2020

(In thousands of Canadian dollars)	June 30, 2021	December 31, 2020
Assets
Current assets:
Cash (note 8)	$	16,240	$	8,736
Trade and other receivables		110,393		98,684
Unbilled fees		102,031		97,823
Finance lease receivables		1,439		1,396
Prepaid expenses and other		16,323		14,429
Cash and investments held in trust		15,298		11,351
Income taxes receivable		-		4,753
Deferred implementation costs		15,296		13,273
Total return swaps (note 9)		203		-
Total current assets		277,223		250,445
Non-current assets:
Deferred implementation costs		58,891		60,356
Finance lease receivables		778		1,391
Capital assets		153,071		157,503
Intangible assets (note 11)		377,985		452,538
Goodwill		588,871		585,879
Investments in joint ventures		7,305		6,394
Interest rate swaps (note 9)		302		-
Total non-current assets		1,187,203		1,264,061
Total assets	$	1,464,426	$	1,514,506

See accompanying notes to the unaudited condensed consolidated interim financial statements.

LifeWorks Inc. | Q2, 2021

1

Unaudited condensed consolidated interim financial statements

Unaudited condensed consolidated interim statements of financial position (continued)

As at June 30, 2021 and December 31, 2020

(In thousands of Canadian dollars)	June 30, 2021	December 31, 2020
Liabilities and equity
Current liabilities:
Bank indebtedness (note 8)	$	11,082	$	12,784
Dividends payable		4,477		4,470
Trade and other payables		92,176		93,646
Deferred revenue		17,738		18,258
Short-term debt (note 4)		99,871		-
Insurance premium liabilities		15,298		11,351
Interest rate swaps (note 9)		2,783		2,786
Future consideration related to acquisitions (note 9)		2,862		505
Provisions		4,958		4,100
Income taxes payable		1,263		-
Lease liabilities		21,701		19,506
Total current liabilities		274,209		167,406
Non-current liabilities:
Deferred revenue		30,620		26,408
Long-term debt (note 4)		343,394		411,924
Interest rate swaps (note 9)		2,147		4,150
Future consideration related to acquisitions (note 9)		789		49
Provisions		7,955		8,964
Deferred tax liability		94,828		116,254
Lease liabilities		115,238		122,644
Total non-current liabilities		594,971		690,393
Equity:
Share capital		924,617		922,189
Contributed surplus		26,362		25,481
Accumulated other comprehensive loss		(17,274)		(9,977)
Deficit		(338,459)		(280,986)
Total equity		595,246		656,707
Total liabilities and equity	$	1,464,426	$	1,514,506

See accompanying notes to the unaudited condensed consolidated interim financial statements.

2 LifeWorks Inc. | Q2, 2021

Unaudited condensed consolidated interim financial statements

Unaudited condensed consolidated interim statements of (loss) income and comprehensive (loss) income

For the three and six months ended June 30, 2021 and 2020

		Three months ended June 30,		Six months ended June 30,
(In thousands of Canadian dollars, except per share amounts)		2021		2020		2021		2020
Operating revenue (note 10)	$	257,734	$	246,175	$	514,873	$	489,223
Operating expenses:
Salaries, benefits and contractors		179,152		164,632		356,014		328,957
Other operating expenses		35,679		37,420		69,286		74,837
Depreciation and amortization (note 11)		95,568		26,223		122,785		52,462
Total operating expenses		310,399		228,275		548,085		456,256
Finance costs		5,695		6,861		11,629		14,297
Gain on business divestiture		-		-		-		39,843
Share of income of joint ventures		452		92		968		102
(Loss) profit before income taxes		(57,908)		11,131		(43,873)		58,615
Income taxes:
Current		(153)		2,306		4,725		7,665
Deferred (note 11)		(16,948)		567		(17,964)		3,787
Total income tax (recovery) expense		(17,101)		2,873		(13,239)		11,452
(Loss) profit for the period		(40,807)		8,258		(30,634)		47,163
Other comprehensive (loss) income:
Items that may be reclassified subsequently to profit:
Effective portion of change in total return swaps and
interest rate cash flow hedges (note 9)		1,242		(270)		2,445		(5,734)
Foreign currency translation differences for
foreign operations		(4,945)		(15,421)		(9,084)		11,109
Income tax (recovery) expense on the above items		(340)		72		(667)		1,520
		(4,043)		(15,619)		(7,306)		6,895
Items that will not be reclassified to profit:
Actuarial (loss) gain on post-employment benefit plans		(4)		(131)		12		103
Income tax expense (recovery) on the above item		1		34		(3)		(28)
		(3)		(97)		9		75
Other comprehensive (loss) income, net of tax effect		(4,046)		(15,716)		(7,297)		6,970
Comprehensive (loss) income for the period	$	(44,853)	$	(7,458)	$	(37,931)	$	54,133
(Loss) earnings per share (note 6):
Basic	$	(0.58)	$	0.12	$	(0.44)	$	0.68
Diluted	$	(0.58)	$	0.12	$	(0.44)	$	0.67

See accompanying notes to the unaudited condensed consolidated interim financial statements.

LifeWorks Inc. | Q2, 2021

3

Unaudited condensed consolidated interim financial statements

Unaudited condensed consolidated interim statements of changes in equity

For the six months ended June 30, 2021 and 2020

2021											Accumulated
		Share		Contributed				other compre-		Total
(In thousands of Canadian dollars)			capital			surplus		Deficit		hensive loss		equity
Balance, January 1, 2021		$	922,189		$	25,481	$ (280,986)		$	(9,977)	$	656,707
Long-term incentive plan - issuance			-			3,235		-			-		3,235
Long-term incentive plan - redemption,
net of taxes			2,428			(2,354)	-			-		74
Loss for the period			-				-		(30,634)			-		(30,634)
Dividends (note 5)			-				-		(26,839)			-		(26,839)
Other comprehensive loss			-				-		-			(7,297)		(7,297)
Balance, June 30, 2021		$	924,617		$	26,362	$ (338,459)		$ (17,274)	$	595,246
									Equity		Accumu-
2020									component of		lated other
		Share	Contributed				convertible	comprehensive		Total
(In thousands of Canadian dollars)			capital		surplus			Deficit	debentures		income		equity
Balance, January 1, 2020	$	872,981	$	27,667	$	(283,551)	$	495	$	796	$	618,388
Long-term incentive plan - issuance			-		3,672			-		-		-		3,672
Long-term incentive plan - redemption,
net of taxes			5,267		(5,184)		-		-		-		83
Shares issued upon conversion of
convertible debentures		39,672		-			-		(495)		-		39,177
Profit for the period			-		-			47,163		-		-		47,163
Dividends (note 5)			-		-			(26,614)		-		-		(26,614)
Other comprehensive income			-		-			-		-		6,970		6,970
Balance, June 30, 2020	$	917,920	$	26,155	$	(263,002)	$	-	$	7,766	$	688,839

See accompanying notes to the unaudited condensed consolidated interim financial statements.

4 LifeWorks Inc. | Q2, 2021