against the
grain we went
2012 annual report
driven to build something
for people. against the attitudes of the day. against the naysayers and against the norm. In a time of neighbours’ need, we stood up. And we stood together. We built a store to earn people over profit. To provide for kitchen tables over boardroom tables. So, here’s to believing in the essentials. on the table. In the home.
in our neighbourhoods. and in life.
b
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Calgary Co-op 2012 Annual Report 2 Message from the Board 4 Message from the CEO and Meet the Executive Leadership Team
| 6 Board Governance | 10 Report on Operations
Here’s to those bold enough to
offer full service in a self-serve world. To provide high quality in a humble way. To keep prices down while still investing in people. And to supporting the local farmers and ranchers who grow the food we eat.
Here’s to sharing our good
fortunes with each other and with our neighbours. To those who want not a company, but a collective. Creating owners, where elsewhere they are simply shoppers.
Here’s to a store built around
the community, and not just in it. “Here’s to a lost cause…” wrote one of our first members about Co-op in its infancy. 56 years, 3,500 employees and over 440,000 members later, here’s to never losing sight of our cause.
here’s to our co-op 21 Member Refund and Reports
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22 Officers’ Report
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23 Independent Auditors’ Report
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24 Consolidated Financial Statements
“WE MUST NEVER LOSE SIGHT
OF WHY CALGARY CO-OP WAS FORMED— TO SERVE ITS MEMBERS AND BE A CONTRIBUTING PART OF THE COMMUNITY” ~ Gordon Barker
2
Calgary Co-op 2012 Annual Report
Message from the Board
Back row L to R:
Lisa Wise ~ Johanna Bates ~ Peggy LeSueur, Board Secretary ~ Myra D’Souza Kormann ~ Terry Geib ~ Laura Sullivan Front row L to R:
Roy Goodall, Vice Chair ~ Stuart Cantrill, Chair ~ Randy Kott
in Calgary and offers a full selection of tasting classes for our northern neighbours to enjoy. While we enjoyed many successes in 2012, we are looking forward to the exciting new developments 2013 will bring. As your Board, we are honoured to serve as your representative voice for Calgary Co-op. On behalf of the Board of Directors,
Stuart Cantrill Board Chair
Message from the Board
3
When calgary Co-op first opened its doors in 1956, we had a vision. A vision that was different from other retailers. We were a co-operative. We were owned by our members. we had a responsibility to our community. that vision holds true today.
4
Calgary Co-op 2012 Annual Report
Message from the CEO
We do not believe that you have to sacrifice service or quality for price. We believe in providing our members with the products they want at prices they can afford. We believe in supporting local producers. And, we believe in giving back to our community. In 2012, Calgary Co-op proudly donated more than $4 million to local not-for-profits, community and charitable organizations. We increased the number of localized products we offer, and are proud to exclusively carry many products from Calgary favourites including Simple Simon Soups and Pies, and King’s Wonton Soup. We also continue to provide our members with the products they want. We have increased our line of organic products and
expanded our gluten-free offerings. We also introduced a selection of World Foods at our Hamptons and Taradale Centres to serve our members’ ever-changing tastes. This past year, Calgary Co-op also introduced a new visual identity. The opening of our High River Centre showcased the design of Calgary Co-op stores going forward and provides a fresh, welcoming atmosphere where our members can enjoy their shopping experience. At Calgary Co-op, our members come first. Because at Calgary Co-op, you are not just a member, you are also an owner.
N. Deane Collinson Chief Executive Officer
Meet the Executive Leadership Team
Barry Heinrich
Jeff Ambrose
Lee Gonsalves
Laurie Schild
Dallas Wingerak
Chief Financial Officer
Vice President, Operations and Merchandising
Vice President, Human Resources
Vice President, Marketing and Member Relations
Vice President, Facilities Development and Real Estate
Message from the CEO
5
Board Governance
2012 Board of Directors and Officers
The following sections include summaries of each of the board’s standing committee’s accomplishments over the past year.
Stuart Cantrill, Chair
Randy Kott Laura Sullivan
Roy Goodall, Vice Chair
Audit Committee
Lisa Wise Deane Collinson, Officer
Board committee members: Roy Goodall, Chair; Peggy LeSueur; Laura Sullivan; Lisa Wise
Barry Heinrich, Officer
Ex officio: Stuart Cantrill, Deane Collinson
Peggy LeSueur, Board Secretary Johanna Bates Myra D’Souza Kormann
Each year, following the conclusion of the Annual General Meeting in March, the Board of Directors appoints its board officers and committee representatives for the coming year. In 2012, the Board of Directors held a board-only planning session, a planning session with executive management, six regular meetings and six in-camera meetings. The Board approved operating strategies and budgets for the current year, as well as various large capital projects throughout the year such as the wine, spirits and beer stores in the Edmonton area.
6
Calgary Co-op 2012 Annual Report
Management resource: Barry Heinrich; Terry Anderson, Internal Audit Director; Llyle Toews, Corporate Controller. The external auditors also attended a portion of all committee meetings. Audit Committee members are independent and financially literate. Committee members availed themselves of opportunities to improve their understanding of financial reporting by attending formal training sessions such as the Audit Committee Effectiveness seminar offered by the Institute of Corporate Directors. This committee assists the Board in ensuring that risk management and internal control systems are in place and operating effectively. In addition, the committee monitors the quality and integrity of financial and management reporting processes;
oversees the independence, qualifications and performance of the external auditor and the Internal Audit Director; ensures that environmental management policy and systems are in place and effective; and examines compliance with all legislation and regulation. The committee also ensures that a code of conduct and conflict of interest guidelines are in place, analyzes their effectiveness and provides an avenue of communication among the external auditors, management, the Internal Audit department, members and the Board. Each year the Audit Committee reviews Management’s options for the distribution of earnings and makes a recommendation to the Board on the annual member refund paid to members. During the 2011-2012 financial year, the committee met in-camera once and held five regular meetings during which it addressed all of the items on its work plan. The Audit Committee’s primary responsibilities and duties can be found at www.calgarycoop.com (About Us).
Governance Committee Board committee members: Lisa Wise, Chair; Johanna Bates; Roy Goodall; Peggy LeSueur Ex officio: Stuart Cantrill, Deane Collinson Committee members availed themselves of opportunities to improve their understanding of governance issues. The committee held five full committee meetings and three smaller working sessions during the year in order to complete work on various assignments, including the research, formulation, structure, processes and timeline for the establishment of the Nominating Committee and the implementation of its first recommendations to members. The committee also addressed boardsuccession planning, researching best practices required for a high-performing board, reviewing and streamlining sections of the Directors’ Manual, and continuing work on an online board document portal.
Co-operative Relations Committee
Performance and Compensation Committee
Board committee members: Terry Geib, Chair; Myra D’Souza Kormann; Randy Kott
Board committee members: Laura Sullivan, Chair; Johanna Bates for part of the year; Myra D’Souza Kormann for part of the year; Randy Kott; Lisa Wise; attending member Roy Goodall
Ex officio: Stuart Cantrill, Deane Collinson Management resource: Laurie Schild, VP, Marketing and Member Relations In 2012, the Member Relations Committee disbanded and the Co-operative Relations Committee was formed to provide strategic oversight and give due consideration to opportunities that align with the overarching co-operative principles and Calgary Co-op’s business plans and strategies. The committee met four times and more than 40 hours went into background work. In November 2012, the Board approved the Terms of Reference. The first order of business was a survey to better understand Calgary Co-op’s strengths and weaknesses as a co-operative business. The results will help form the committee work plan for year two.
Ex officio: Stuart Cantrill, Deane Collinson Management resource: Lee Gonsalves, VP, Human Resources Committee members availed themselves of opportunities to improve their understanding of compensation issues by attending courses and educational sessions such as the Institute of Corporate Directors Human Resources and Compensation Committee Effectiveness seminar. The committee met eight times during the year to review board and employee compensation programs, employee performance and incentive plans, and board training and development programs.
Board Governance
7
Nominating Committee
Other Representation
Board committee members: Johanna Bates, Chair; Peggy LeSueur; Lisa Wise
Each year, board members and senior management participate on a number of other committees and/or organizations on behalf of Calgary Co-op. These include:
This committee does not have any Ex-officio members. Management resource: Laurie Schild In June 2012, the Board of directors approved the formation of a Nominating Committee. The mandate of the committee is the creation of a board profile. Based on this profile, the board will analyze its composition in terms of skills and attributes and use that opportunity to identify potential gaps in board strength. It is critical that the board possesses the skills to oversee our growing retail co-operative. Its size and complexity creates challenges that the board must be able to understand as it discharges its fiduciary duty to the membership and its strong commitment to the community base of Calgary Co-op. To discharge its fiduciary duty, the board is mindful that it serves a community that is increasingly diverse. To that end, the board will communicate continuously with members by telephone, in print and through the Internet so that qualifying members will be fully informed.
8
Calgary Co-op 2012 Annual Report
Calgary Co-op Charitable Trust Fund: Trustees: Roy Goodall, Laura Sullivan, Lisa Wise Management Trustees: Laurie Schild; Llyle Toews, Chair The Produce People Board of Directors: Laura Sullivan, Deane Collinson The Alberta Community and Co-operative Association: Terry Geib, Director and First Delegate; Myra D’Souza Kormann, Second Delegate AGM Management Committee: Terry Geib; Laurie Schild, Chair Ex officio: Stuart Cantrill
Stampede Management Committee: Lisa Wise; Karen Allan, Communication Manager, Chair Ex officio: Stuart Cantrill Federated Co-operatives Board Representative for District 5: Randy Kott Federated Co-operatives Resolutions Committee: Myra D’Souza Kormann (Delegate); Roy Goodall (Alternate) Delegates to Federated Co-operatives Limited 83rd Annual General Meeting: Stuart Cantrill, Roy Goodall, Myra D’Souza Kormann, Peggy LeSueur, Lisa Wise Visitors: Johanna Bates, Terry Geib, Laura Sullivan Observers to the Canadian Co-operative Association Annual Meeting: Terry Geib, Myra D’Souza Kormann
Board Remuneration and Annual Purchases
Report on Federated Co-operatives Limited
Board remuneration for the 2012 financial year (November 2011 through October 2012) was based on a recommendation approved by members at the March 2011 Annual General Meeting. An additional recommendation approved was an increase of the annual purchase requirement of directors to $3,600 per annum.
Calgary Co-op owns approximately 11 per cent of the shares in Federated Co-operatives Limited (FCL). FCL is the major grocery and petroleum supplier for Calgary Co-op, in addition to other commodities. The Grocery People (an FCL subsidiary) and Calgary Co-op jointly own The Produce People, which is the major supplier of produce to Calgary Co-op and other co-operatives in southern Alberta. Calgary Co-op elects one director to the FCL board and appoints delegates and observers to its annual meeting and regional fall conference.
Each board member continues to maintain or surpass the $3,600 requirement for annual purchases at Calgary Co-op to be eligible for election to the board. The following reflects remuneration paid to directors in the 2012 financial year. Director Remuneration
Barry Ashton 1 Johanna Bates Stuart Cantrill (Chair) Myra D’Souza Kormann Terry Geib Roy Goodall Randy Kott Peggy LeSueur Rick Smith 2 Laura Sullivan 3 Lisa Wise Total Remuneration
Annual Purchases
2012
2011
–
13,050
2012
35,605
32,831
4,812
81,590
81,590
14,718
32,823
34,641
10,097
37,045
38,443
23,190
40,932
37,335
11,842
33,619
33,831
11,786
37,608
22,762
8,779
13,382
39,193
N/A4
24,191
–
13,523
39,397
38,370
20,746
376,192
372,046
N/A4
FCL sales for its 2011-2012 fiscal year were $8.8 billion; net savings were $827 million. This represents an increase in sales from $8.3 billion in 2010-2011 and a decrease in savings which were $839 million in 2010-2011. As reported in the financial statements in this annual report, Calgary Co-op received $45 million in patronage refunds from FCL for 2012 compared to $47 million in 2011.
1. Remuneration for period November 2010 to March 2011. Director’s term ended March 2011. 2. Remuneration for period November 2011 through March 2012. Director’s term ended March 2012. 3. Remuneration for period March 2012 through October 2012. Director’s term commenced March 2012. 4. The 2012 Annual Purchases are only reported for those directors currently sitting on the board.
Board Governance
9
calgary co-op is one of the largest retail co-operatives in north america. with over 440,000 members, 3,500 employees, assets of $457 million and annual sales of over $1.1 billion, Calgary Co-op is committed to lead in food, petroleum, home health care, pharmacy, travel and wine, spirits and beer.
10 Calgary Co-op 2012 Annual Report
Report on Operations
Calgary Co-op currently has 24 food centres and pharmacies, 28 gas bars, 23 car washes, two home health care centres, seven travel offices and 22 wine, spirits and beer locations, including four tasting centres, in Calgary, Airdrie, High River, Okotoks, Strathmore and Edmonton.
Awards and Accolades
Food
Calgary Co-op believes in providing our members with the best quality products and exceptional service at competitive prices. In 2012, we were honoured to discover that we had won:
On August 1, 2012, Calgary Co-op officially opened the doors to our new 35,000 square foot food centre in High River. This store features Calgary Co-op’s newest design. We also completed an interior upgrade at our Macleod Trail Centre which now features the décor, paint and flooring to match our new store design. Our Deer Valley Centre received an exterior facelift and features our new visual identity as our landlord continued upgrades to the mall facility.
• Best Grocery Store in the Calgary Herald Readers’ Choice Awards for the 12th consecutive year. In addition to Best Grocery Store, we won Best Bakery, Car Wash, Deli, Florist, Liquor Store and Travel Agency. We were also secondary winners in the drug store and wine store categories. • Best Birthday Cakes by the 2012 Calgary’s Child Magazine Parents’ Choice Awards. • Our Home Health Care centres were honoured to receive a Platinum Award from Bruno Independent Living Aids. Only five dealers in Canada can win this award. • 2012 Consumer Choice Award for our Home Health Care centres. • Our gas bars won multiple awards in the Readers’ Choice Awards by Airdrie City View and the Okotoks Western Wheel Readers’ Choice Awards.
Our fresh meat program was rated best in the Calgary market by our members and consumers who shop at our competitors. In 2012, Calgary Co-op launched a seafood sustainability program “Reel in the Solution” at all food centres in an effort to support responsible seafood choices. We have ranked our seafood selection with green labels for seafood caught using the most sustainable practices, yellow labels for those items that have some concerns and removed red labelled items including Atlantic Halibut, Chilean Sea Bass, Orange Roughy and other products Report on Operations
11
we continue to source “good for you” products and review organic, gluten-free, low sodium and low sugar products to add to our centres.
that are caught using environmentallydamaging practices. Through this program, sustainable alternatives are being offered to our members for those items that have been removed. In the produce department, we focused on driving our organic sales. We expanded our current offering and continued with a weekly advertising program which resulted in a 25 per cent sales increase in organic fruit and vegetables. Calgary Co-op maintains a 30 per cent share of the organic sales in the Calgary marketplace. In addition, we now offer a four foot section in every store that offers convenient fresh cut fruit and vegetables which has resulted in an 88 per cent sales increase and became one of our top 10 categories in sales for the first time. Our bakery continues to see great results with our Cake of the Month program. 12
Calgary Co-op 2012 Annual Report
Each month we feature a different cake at a reduced price for our members to enjoy. This past year also saw the addition of many new products including Ace Bakery artisan and organic breads which are baked using only the finest ingredients and no preservatives. We also expanded our line of gluten-free products with the addition of Udi’s, Glutino and LaTorte products. In our deli, we continue to offer more than 400 selections of cheese and a Cheese of the Month program which highlights a new selection each month. Wok N Grill Asian bowls are available at all food centres and we continue to offer fresh new sushi products, including cooked tuna products. In 2012, we began to exclusively offer Simple Simon Pies, Soups and Tourtieres as well as King’s Wonton Soup. Our deli also offers a full selection of natural preservative-free meats and gluten-free products.
We introduced a World Foods section at our Taradale and Hamptons Centres to enhance our diversified food offerings to better meet the changing demographics and ethnicities of our members. We will continue to add these selections to our other food centres. To maintain our competitive positioning in an aggressive retail market, we
continually review our pricing strategies. Our Price Drop program provided quality products with competitive pricing during key seasonal periods in 2012 including back to school and baby essentials. Our members have been noticing our lower prices! In 2012, Calgary Co-op hired Executive Chef John Humphreys for a new prepared foods division—Fresh to Go. Plans are currently underway for store-roasted organic coffee, houseboiled bagels, stone hearth pizzas, artisan sandwiches, hot foods and prepared meals. Construction on our Local Roast offering began in 2012 with the location at our Macleod Trail Centre officially opening in December. Along with store-roasted organic coffee, bulk beans and espresso drinks from Columbia, Costa Rica, Guatamala, Peru and Ethiopia, Local Roast offers chef-made pastries and Mighty Leaf teas.
Petroleum Over the past year, Calgary Co-op was pleased to add two new gas bar locations. Our first opened in the community of Panorama Hills and features eight pumps with 16 fuelling stations, a 3,000 square foot convenience store and touchless car wash. Our second new location opened in High River and features eight pumps with 16 fuelling stations, a 2,600 square foot convenience store and touchless car wash. We also opened a new double bay touchless car wash at our Village Square gas bar.
In 2012, Calgary Co-op pumped 344 million litres of fuel. Our lease expired at our downtown gas bar location, and, as the site did not offer the expansion opportunity to meet our high standards, we declined to renew
the land lease. This location closed in December of 2011. The touchless car wash at our Hamptons gas bar was upgraded from a single bay to double bay. We also added two fuel dispensers, increased fuel storage, added diesel to all fuel dispensers at this location and expanded the convenience store to 2,500 square feet. The carwash equipment at our Crowfoot and Eastfield locations was upgraded due to age and volume and now features energy efficient equipment and lighting. Upgrades continued at our Deer Valley gas bar which included an expansion to 400,000 litres of underground fuel storage and two additional pumps. Construction also began on a double bay touchless car wash at our Forest Lawn location and plans were developed to demolish our existing gas bar and replace with a larger, upgraded convenience store and additional pumps in 2013.
Report on Operations
13
here’s to our teams at co-op
14 Calgary Co-op 2012 Annual Report
Travel The travel industry faced a number of challenges in 2012 from the London Olympic impact, high fuel prices, taxes affecting margin, financial turmoil in Greece and Italy, a surplus of inventory, warm winter weather and the Costa Cruises incident. Through it all, our travel division displayed a firm commitment to member satisfaction, operational efficiency and flexibility. We have introduced new business models with the kiosk travel office environment and outside sales position, and embraced online technology and social media as a means to create awareness and attract business opportunities.
Our values are member oriented and are based on effectiveness and teamwork. Our focus is to secure and protect our division, leverage our position as a leader through partnerships and preferred suppliers, and increase member and employee loyalty and engagement.
Pharmacy Calgary Co-op pharmacies continue to provide professional patient care services focused on better health. Pharmacists with specialized certifications provide clinics and consultations on Diabetes Health, Respiratory Health, anticoagulation and Injections Services (including flu shots, shingles and travel vaccines). Under the new Alberta Pharmacy Services framework, all pharmacists can provide comprehensive Medication Reviews and perform patient assessment services (including prescription renewal and adaptation and prescribing in an emergency). We offer a prescription compounding service if you require a specialty formulation of your medication (e.g. for difficulty swallowing pills, liquid or gummy bear preparations may be available.) Our individualized complimentary compliance packaging helps you to take the right medication at the right time of day.
Our Pharmacy team continued to expand our professional services to meet the health and wellness needs of our patients.
Report on Operations
15
Home Health Care Our Home Health Care division continued to focus on expanding our rehabilitation equipment sales in 2012. We became certified to sell new lines of vehicle lift products from Bruno’s Manufacturing which include both personal and equipment lifts. This new line of products has been very successful, not only in sales, but also in improving our members’ quality of life. We have equipped a van with four of the new vehicle lifts which will enable us to promote the products to vehicle dealerships in Calgary and surrounding area, as well as dealing directly with clientele at their residences. We were honoured to install an operational stair lift in a Stepper show home which was designed for someone that may develop or already have mobility issues. This is Calgary’s first accessible-designed new show home and Stepper will be promoting it with members from the accessibility industry. In 2012, Home Health Care participated in the Buildex, Home Expo and the Home and Design tradeshows. This was a new avenue of promotion that gave us the opportunity to create awareness of our business and products directly with consumers, builders, architects, municipalities and the automotive industry. We also participated in the Canadian Paraplegic Association Conference and supplied the equipment for the Muscular Dystrophy Conference that was held in Calgary this year.
16 Calgary Co-op 2012 Annual Report
Wine Spirits Beer Co-op Wine Spirits Beer opened two new locations in 2012 including a 5,000 square foot location in High River and a 10,000 square foot location in Edmonton, complete with a tasting centre. Our spring and fall Grape Escapes continue to be extremely popular and sell out on a regular basis as do our dinner events which are held at various restaurants across the city throughout the year. Both of these events will be added to the Edmonton market as we continue to expand our presence. We are currently in the planning stages to open a 10,000 square foot wine, spirits and beer tasting centre at our Shawnessy location in the spring of 2013 which will feature an elevated mezzanine.
Environment As a socially responsible company, Calgary Co-op strives to reduce waste and increase diversion of recyclable materials. For 2012, we generated 7,933 tonnes of waste (wet and recyclable) and diverted 3,805 tonnes for recycling. Of this diversion, approximately 54 tonnes was plastics. With relatively the same sales from the previous year across all stores in 2012, we generated 18 per cent less wet waste. This number reflects improved efficiencies in our waste generation practices with 12 of our stores hitting a 50 per cent waste diversion ratio for the year.
Community Investment In 2012, we donated over $4 million to community organizations.
As a locally owned and operated co-operative, Calgary Co-op remains committed to assisting local not-for-profits, community and charitable organizations that align with our business and values. In 2012, we donated over $4 million to community organizations. While we realize these contributions can make a big impact on our community, we also recognize the importance of dedicating time. This was never more apparent than when a devastating fire hit Paradise Hill Farm in
January 2012. Many of our members enjoy the Paradise Hill Farm tomatoes each summer exclusively carried by Calgary Co-op. After the fire, Calgary Co-op was one of the first to provide support. With the help of 20 Calgary Co-op employees, Paradise Hill Farm unloaded 5,500 seedlings of Big Dena beefsteak tomatoes from B.C. and planted them in March. This planting represented approximately two thirds of their usual production. Our members once again have Report on Operations
17
the opportunity to enjoy fresh, delicious Paradise Hill Farm tomatoes and a local family farm was saved. The United Nations designated 2012 as the International Year of Cooperatives. To recognize this achievement, Calgary Co-op and First Calgary Financial announced a $500,000 joint legacy cash and in-kind donation in the form of health, nutrition and financial literacy education over the next five years to The Mustard Seed Affordable Housing Project and Life Skills Program. Our 19th Annual Charity Golf Classic was held on June 5, 2012, at Heritage Pointe. With the help of our suppliers, we raised a record amount of $329,000. Recipients of our golf classic included: The Calgary Zoo, the Mustard Seed, Meals on Wheels, Accessible Housing, Brown Bagging for Calgary’s Kids, EMS Foundation, Enviros, the Calgary Women’s Centre and the Drop-In Centre. Calgary Co-op also provides a 5 per cent discount for registered charities through our Charity Plus Program; a 5 per cent gift card discount for community fundraising groups; post-secondary bursaries at MRU, SAIT and U of C; and employee scholarships.
18 Calgary Co-op 2012 Annual Report
Calgary Co-op hosted nine Stampede Breakfasts this year and co-sponsored a 10th breakfast with our fellow co-operative, First Calgary Financial. Each of these breakfasts featured musical entertainment, local partners including the Calgary Flames and Shakers, and delicious food for the whole family to enjoy. The Calgary Food Bank joined us for each breakfast and accepted donations for their “Put the Boots to Hunger” initiative.
Report on Operations
19
Seniors’ Day was once again a tremendous success with 1,500 of our most valued members enjoying a barbecue lunch and free rides at Heritage Park. Calgary Co-op also continues to offer our free bussing service that transports seniors from 87 assisted living centres in Calgary to 13 different Calgary Co-op locations and averages approximately 2,300 riders per month. We are the only grocery store retailer that offers this service. Our CEO, Deane Collinson, recruited a few good men to participate in the annual Walk a Mile in her Shoes fundraising event. This event, organized by the YWCA, raised funds to help women and children walk away from family violence. The Co-op Straight Shoe-ters team of seven put on high heels, went for a walk they will never forget and raised over $12,000. Our 20th annual Stuff-a-Bus for the holidays food drive took place at all 24 food centre locations. We teamed up again with our event partners, Calgary Transit and XL103 FM to raise over $180,000. All of the proceeds from this event are in support of the Calgary Food Bank.
20 Calgary Co-op 2012 Annual Report
Member Refund and Reports
Each year Calgary Co-op shares our profits with our members through the member refund. For 2012, Calgary Co-op is pleased to offer our members a higher annual member refund than the rates paid in 2011. This year our members will share $34 million in member refunds. Of this, $10.8 million was paid in share equity and $23.2 million was paid in cash. In the face of increasing competitive market pressure, significant capital investment is required in the food and other lines of business to further differentiate and solidify our organization. We have made significant progress on many initiatives and now are ready to invest capital to position our stores for the future. The prudent option is to retain earnings which will allow Calgary Co-op to invest while minimizing debt financing and still provide strong member refunds.
2.5
%
1.0% 1.0% 6.0¢
retail member refund paid in cash and shares to members based on retail purchases at food centres, convenience stores and wine, spirits and beer locations. travel
Member Refunds Five year comparison 2008 – 2012 (millions)
23.2
2012
10.8
2011
20.7
9.3
2010
20.3
9.3 14.5
29.9
2009
32.8
2008 0
10
Cash
20
17.7
30
40
60
50
Shares
Member Refund History Cumulative totals since 1957. Five year comparison 2008 – 2012 (millions)
703
2012
669
2011
639
2010
610
2009
566
2008 0
member refund paid in cash and shares to members based on travel purchases.
100
200
300
400
500
600
700
800
How Earnings are Allocated (millions)
home health care member refund paid in cash and shares to members based on home health care purchases.
34.0
2012 2011
30.0
2010
29.6
Petroleum
2009
per litre member refund paid in cash and shares to members based on petroleum purchases.
2008
5.1 7.1 1.9
2.0
6.2 3.6 10.2
50.5 10
20
Member Refund
30
40
Income Tax
22.1
6.4
44.4
0
15.7
50
60
70
80
Retained Earnings
Member Refund and Reports
21
Officers’ Report
Preparing the accompanying financial statements and ensuring that all information in this annual report is consistent with these statements is the responsibility of Calgary Co-op management. This responsibility includes selecting appropriate accounting policies and making judgments and estimates consistent with Canadian accounting standards for private enterprises. Management has developed and maintains an extensive system of internal controls that provide reasonable assurance that all transactions are accurately recorded, that the financial statements realistically report the Association’s operating and financial results, and that the Association’s assets are safeguarded against unauthorized use or disposition. The Audit Committee reviews and evaluates the adequacy of, and compliance with, the Association’s internal controls. It is the policy of the Association to maintain the highest ethical standard in all activities, and the Chief Executive Officer and the Chief Financial Officer have signed a Management Compliance Letter stipulating the Association’s compliance with all regulatory requirements. Management of Calgary Co-op have also signed a Letter of Representation to KPMG acknowledging that it is responsible for the fair presentation in the financial statements of the Association’s financial position and that all accounting, financial records and related data have been made available. The Association’s Board of Directors has approved the information contained in the financial statements based on the recommendation of the Audit Committee following its detailed review with the external auditor and management. At each annual general meeting, the Association’s members appoint an independent auditor to provide a professional opinion on the fairness with which the financial statements are presented. The members’ auditor has full access to the Board of Directors and all of the Association’s records.
Stuart Cantrill Board Chair January 17, 2013
22 Calgary Co-op 2012 Annual Report
N. Deane Collinson Chief Executive Officer January 17, 2013
Independent Auditors’ Report
To the Members of Calgary Co-operative Association Limited We have audited the accompanying consolidated financial statements of Calgary Co-operative Association Limited, which comprise the consolidated balance sheets as at November 3, 2012, October 29, 2011, and October 31, 2010; the consolidated statements of earnings and retained earnings and cash flows for the years ended November 3, 2012, and October 29, 2011, and notes, comprising a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Canadian accounting standards for private enterprises, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Canadian Generally Accepted Auditing Standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of Calgary Co-operative Association Limited as at November 3, 2012, October 29, 2011, and October 31, 2010, and its consolidated results of operations and its consolidated cash flows for the years ended November 3, 2012, and October 29, 2011, in accordance with Canadian accounting standards for private enterprises.
Chartered Accountants January 17, 2013 Calgary, Canada
Independent Auditors’ Report
23
Consolidated Balance Sheet November 3, 2012, October 29, 2011 and October 31, 2010 (in thousands of dollars) November 3, 2012
Assets Current assets: Cash and short-term investments Accounts receivable Income taxes receivable Inventories (note 8) Prepaid expenses and deposits Total current assets Investments (note 4) Property and equipment (note 5) Goodwill (note 6) Future income taxes (note 9) Total assets Liabilities and Members’ Equity Current liabilities: Accounts payable and accrued liabilities (note 7) Government payables (note 16) Current portion of long-term debt (note 10(b)) Income taxes payable Future income taxes (note 9) Total current liabilities Long-term debt (note 10(b)) Other liabilities Members’ equity: Members’ shares (note 11) Retained earnings
October 29, 2011
October 31, 2010
(note 1)
(note 1)
$ 10,800 45,023 – 64,452 5,875 126,150 114,738 207,621 6,775 1,569 $ 456,853
$ 11,704 46,022 – 62,293 3,839 123,858 105,706 203,852 6,775 1,240 $ 441,431
$ 11,290 36,236 274 57,451 3,370 108,621 96,279 200,198 6,775 1,523 $ 413,396
$ 88,275 2,224 4,119 2,181 11,247 108,046 6,340 1,381
$ 98,449 2,130 5,795 1,700 11,869 119,943 3,068 1,233
$ 101,133 1,932 2,225 – 8,918 114,208 9,751 1,071
173,191 167,895 341,086
166,885 150,302 317,187
162,193 126,173 288,366
$ 456,853
$ 441,431
$ 413,396
Commitments and guarantees (notes 5 and 14) Subsequent event (note 7) Total liabilities and members’ equity See accompanying notes to financial statements.
Approved on Behalf of the Board: Director
24 Calgary Co-op 2012 Annual Report
Director
Consolidated Statement of Earnings and Retained Earnings Years ended November 3, 2012 and October 29, 2011 (in thousands of dollars) 2012
2011 (note 1)
Sales (note 17) Expenses: Cost of sales, selling and administrative (note 8) Amortization Patronage refund (note 3(b)) Other income (expenses): Rental income Rental expense Loss on disposal and write off of property and equipment (note 5) Interest income Interest expense Earnings before income taxes Income tax expense (reduction) (note 9): Current Future
$ 1,163,959
$ 1,096,813
(1,143,835)
(1,073,727)
(16,754)
(16,683)
44,991
47,010
9,343
9,015
(2,827)
(2,584)
(648)
(830)
660
370
(106)
(159)
54,783
59,225
6,063
3,863
(951)
3,234
5,112
7,097
49,671
52,128
Retained earnings, beginning of year
150,302
126,173
Patronage returns (note 7)
(33,960)
(30,000)
1,882
2,001
$ 167,895
$ 150,302
Net earnings
Inactive members’ shares transferred to retained earnings (note 11) Retained earnings, end of year See accompanying notes to financial statements.
Consolidated Financial Statements
25
Consolidated Statement of Cash Flows Years ended November 3, 2012 and October 29, 2011 (in thousands of dollars)
Cash provided by (used in): Operations: Net earnings Items not involving cash: Amortization Patronage refund to be received in FCL shares Future income tax (reduction) Loss on disposal and write off of property and equipment (note 5) Lease inducement amortization Accrued future rents
$
Change in non-cash operating working capital (note 12)
Financing: Repayment of long-term debt
Shares redeemed for cash Shares issued for cash Patronage return paid in cash
Investments: Expenditures on property and equipment Proceeds on disposal of property and equipment FCL shares redeemed for cash Other investments Change in non-cash working capital (note 12)
Change in cash and short-term investments Cash and short-term investments, beginning of year Cash and short-term investments, end of year See accompanying notes to financial statements.
26 Calgary Co-op 2012 Annual Report
$
2012
2011
49,671
$ 52,128
16,754
16,683
(11,144)
(11,349)
(951)
3,234
648
830
(120)
(126)
268
288
55,126
61,688
(3,038)
(23,137)
52,088
38,551
(5,461)
(3,993)
(2,598)
(2,625)
26
18
(23,200)
(20,700)
(31,233)
(27,300)
(14,204)
(20,300)
90
13
2,112
1,924
–
(2)
(9,757)
7,528
(21,759)
(10,837)
(904)
414
11,704
11,290
10,800
$ 11,704
Notes to the Consolidated Financial Statements Years ended November 3, 2012 and October 29, 2011 (in thousands of dollars) Calgary Co-operative Association Limited (the “Association”) is incorporated under the Cooperatives Act of Alberta. The primary business of the Association is operating retail food, pharmaceutical, petroleum, travel, home health care and liquor outlets in Calgary and area for the benefit of its members. As a percentage, 84 per cent (2011 – 86 per cent) of sales are to members.
1. First-time adoption of Canadian accounting standards for private enterprises On October 30, 2011, the Association adopted Canadian accounting standards for private enterprises (“ASPE”). These are the first financial statements prepared in accordance with ASPE. In accordance with the transitional provisions in ASPE, the Association has adopted the changes retrospectively, subject to certain exemptions allowed under these standards. The transition date is October 31, 2010 and all comparative information provided has been presented by applying ASPE. The Association has prepared the annual financial statements for the first time using the ASPE framework. The following outlines elections and changes on transition to ASPE: (a) Members’ shares Previously under Canadian Generally Accepted Accounting Principles, members’ shares were classified as long-term liabilities. Under ASPE, members’ shares are considered a component of equity. As a result, $162,193 of members’ shares was reclassified from long-term liabilities to equity on October 31, 2010, the date of transition ($166,885 – October 29, 2011). (b) Patronage returns Previously under Canadian Generally Accepted Accounting Principles, patronage returns to members were considered an expense in determining net earnings. Under ASPE, in connection with the reclassification of members’ shares from liability to equity, patronage returns are considered to be a distribution of retained earnings to members. The impact of this change was to reduce patronage returns by $30,000 for the year ended October 29, 2011 and to charge these amounts directly to retained earnings as a patronage distribution. There was no impact to opening retained earnings as at October 31, 2010.
(c) Business combinations The Association has elected to not apply the new ASPE standards for business combinations that closed prior to October 31, 2010.
2. Summary of accounting policies The preparation of financial statements in conformity with Canadian accounting standards for private enterprises requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates include the valuation of accounts receivable, the carrying value of property and equipment and its estimated useful life, the valuation of inventory, valuation of goodwill and the valuation of future taxes. Actual results could differ from these estimates. (a) Basis of presentation The financial statements include the accounts of the Association and its proportionate share (50 per cent) of the assets, liabilities, sales and expenses of The Produce People (“TPP”). TPP is a joint venture between the Association and The Grocery People, a wholly-owned subsidiary of Federated Co-operatives Limited (“FCL”). (b) Definition of financial year The Association’s financial year ends on the Saturday closest to October 31. Accordingly, the year ended November 3, 2012 consists of 53 weeks of operations while the year ended, October 29, 2011 and October 31, 2010 consist of 52 weeks of operations. (c) Financial instruments Financial instruments are recorded at fair value on initial recognition. Freestanding derivative instruments that are not in a qualifying hedging relationship and equity instruments that are quoted in an active market are subsequently measured at fair value. All other financial instruments are subsequently recorded at amortized cost, unless management has elected to carry the instruments at fair value. The Association has not elected to carry any such financial instruments at fair value. Transaction costs incurred on the acquisition of financial instruments measured subsequently at fair value are expensed as incurred. All other financial instruments are adjusted by
Notes to the Consolidated Financial Statements
27
transaction costs incurred on acquisition and financing costs, which are amortized using the straight-line method. Financial assets are assessed for impairment on an annual basis at the end of the fiscal year if there are indicators of impairment. If there is an indicator of impairment, the Association determines if there is a significant adverse change in the expected amount or timing of future cash flows from the financial asset. If there is a significant adverse change in the expected cash flows, the carrying value of the financial asset is reduced to the highest of the present value of the expected cash flows, the amount that could be realized from selling the financial asset or the amount the Association could realize by exercising its right to any collateral. If events and circumstances reverse in a future period, an impairment loss will be reversed to the extent of the improvement, not exceeding the initial carrying value. (d) Inventories Inventories are recorded at the lower of cost and net realizable value. Cost is determined using the retail method by discounting the retail value by normal profit margins. (e) Property and equipment Property and equipment are stated at cost net of grant funds received from FCL. Amortization is provided over the estimated useful lives of the assets using the following methods and rates: Buildings and parking lots Fixtures and equipment Computer Equipment
Declining Balance Declining Balance Straight Line
4-8% 20-100% 33%
Leasehold improvements and buildings on leased land are amortized on a straight-line basis over the shorter of the lease term and their estimated useful lives. Renovations to existing buildings and carwash equipment are amortized on a straight-line basis over ten years. Management assesses the carrying value of property and equipment on a periodic basis for indications of impairment. When an indication of impairment is present, a test for impairment is carried out by comparing the carrying value of the asset to its fair value.
28
Calgary Co-op 2012 Annual Report
(f) Goodwill Goodwill resulting from business combinations represents the portion of the purchase price that was in excess of the fair value of the net identifiable assets acquired. Goodwill is not amortized and is tested for impairment whenever changes in circumstances indicate that the carrying amount of the reporting unit to which goodwill is assigned exceeds the fair value of the reporting unit. If the carrying value of the reporting unit to which goodwill has been assigned exceeds its fair value, then, with respect to the reporting unit’s goodwill, any excess of its carrying value over its fair value is expensed. (g) Other liabilities Deferred lease inducements: Deferred lease inducements, representing the benefit of cash inducements, are amortized over the remaining term of the related lease. Accrued future rents: The Association uses the straight-line method of recognizing its lease expense, whereby the total of cash rents due over the term of a lease is recognized evenly over the life of the lease. The difference between the amount recognized as lease expense and cash paid is included in other liabilities. (h) Cash and short-term investments Cash and short-term investments are defined as cash and investments with an initial maturity of less than three months. (i) Revenue recognition Sales include revenue from member owners and other customers through stores operated by the Association. These sales are recognized at the point-of-sale. The Association receives rental income on properties from third party tenants. Rental income is recognized when services are provided. (j) Store opening expenses Store opening costs of new stores are expensed as incurred. (k) Income taxes The Association follows the liability method whereby income taxes reflect the expected future consequences of temporary differences between the carrying amounts of assets and liabilities and their
tax bases. Future income tax assets and liabilities are determined for each temporary difference based on the tax rates which are expected to be in effect when the underlying items of income and expense are expected to be realized. (l) Asset retirement obligation The Association recognizes a liability for an asset retirement obligation in the period in which a legal liability is incurred and records a corresponding increase in the carrying value of the related long-lived asset. The liability is based on management’s best estimate. The liability is subsequently adjusted for the passage of time, which is recognized as an accretion expense in the consolidated statement of earnings. The liability is also adjusted due to revisions in either the timing or the amount of the original estimated cash flows associated with the liability. Actual costs incurred upon settlement of the asset retirement obligations are charged against the asset retirement obligation to the extent of the liability recorded.
3. Related party transactions FCL is owned by retail co-operatives across Western Canada including the Association. FCL provides central wholesaling, manufacturing and administrative services to its owners. It is the major grocery and petroleum supplier to the Association, in addition to other commodities. The Association owns approximately 11 per cent of the shares in FCL. (a) Purchases For the year ended November 3, 2012, the Association made purchases from FCL in the amount of $703,187 (2011 – $672,489; 2010 – $616,385). These purchases represented 76 per cent (2011 – 77 per cent; 2010 – 77 per cent) of the Association’s total purchases and were transacted in the normal course of operations and were recorded at the exchange amount. Included in accounts payable and accrued liabilities are amounts owed to FCL of $28,610 at November 3, 2012 (2011 – $43,517; 2010 – $45,461). For the year ended November 3, 2012, the Association earned interest income at prime less 1.25 per cent (2011 – prime less 1.50 per cent) of $218 (2011 – $224) as a result of early payments on normal trade payable balances to FCL. The average early payment balance with FCL amounted to $12,778 (2011 – $14,899).
(b) Patronage refund Subsequent to November 3, 2012, the FCL Board approved the payment of a patronage refund to the Association in the amount of $44,988 (2011 – $47,006). The portion of the patronage refund to be received in cash in the amount of $33,844 (2011 – $35,657) is included in accounts receivable and the portion to be received in FCL shares in the amount of $11,144 (2011 – $11,349) is included in investments. (c) Capital grants and interest-free loans The Association receives interest-free loans and capital grants from FCL to assist in the construction of gas bars and related facilities. For the year ended November 3, 2012, the Association received interest-free loans of $7,057 (2011 – $880; 2010 – $6,476) and capital grants of $2,352 (2011 – $5,655; 2010 – $7,359) from FCL for this purpose. See also note 10(b). (d) Short-term investments The Association’s short-term investments with FCL earned interest revenue of $349 (2011 – $22), calculated at prime less 1.25 per cent (2011 – prime less 1.50 per cent). The balance of these investments was $nil (2011 – $nil; 2010 – $nil). (e) Leases The Association has operating lease agreements in place with FCL for certain facilities which require payments of approximately $1,400 per year to October 2024 and $800 per year from November 2025 to October 2027 and $400 per year from November 2028 to October 2032. This commitment is disclosed as part of note 14(a). The Association has capital leases with FCL for fixtures and equipment which require payments on July 1 of each year as follows. See also notes 5 and 10(b). 2013 2014 2015 2016 2017
$ 530 592 526 526 526
Notes to the Consolidated Financial Statements
29
4. Investments
Federated Co-operatives Limited Other
November 3, 2012
October 29, 2011
October 31, 2010
$ 114,660 78 $ 114,738
$ 105,628 78 $ 105,706
$ 96,203 76 $ 96,279
As there is no ready market for the Association’s 11 per cent (2011 – 11 per cent; 2010 – 11 per cent) investment in FCL shares and the fair value cannot be determined, it has been measured at cost. The FCL shares are redeemable, at cost, at the option of FCL or, over a maximum period of five years, upon the Association terminating its membership with FCL.
5. Property and equipment November 3, 2012
Land Buildings and parking lots Fixtures and equipment Leasehold improvements Joint venture leasehold improvements and equipment Assets under construction
October 29, 2011
Land Buildings and parking lots Fixtures and equipment Leasehold improvements Joint venture leasehold improvements and equipment Assets under construction
30 Calgary Co-op 2012 Annual Report
Cost
$
49,916
Accumulated amortization
$
–
Net book value
$
49,916
192,868
78,680
114,188
122,084
86,587
35,497
12,477
6,347
6,130
1,156 1,859 $ 380,360
1,125 – $ 172,739
31 1,859 $ 207,621
Cost
Accumulated amortization
Net book value
$ 48,970 184,163 113,754 10,869 1,111 3,618 $ 362,485
$ – 72,393 79,456 5,686 1,098 – $ 158,633
$ 48,970 111,770 34,298 5,183 13 3,618 $ 203,852
Cost
Accumulated amortization
Net book value
$ 48,357 171,874 108,664 11,009 1,124 4,104 $ 345,132
$ – 66,570 72,322 4,936 1,106 – $ 144,934
$ 48,357 105,304 36,342 6,073 18 4,104 $ 200,198
October 31, 2010
Land Buildings and parking lots Fixtures and equipment Leasehold improvements Joint venture leasehold improvements and equipment Assets under construction
Included in fixtures and equipment are assets held under capital lease with an original cost of $2,700 (2011 – $2,636; 2010 – $2,636) and a net book value of $2,430 (2011 – $881; 2010 – $1,105). As at November 3, 2012, the Association had contractual commitments to spend approximately $8,600 (2011 – $11,039; 2010 – $10,916) on capital expansion projects. The loss on disposal and write-off of property and equipment for the year ended November 3, 2012 comprises the disposal of equipment and the write-down of obsolete assets in renovated shopping centres, liquor stores and gas bars.
6. Goodwill November 3, 2012
Balance, beginning of year Write-down of goodwill Balance, end of year
$ $
6,775 – 6,775
October 29, 2011
$ 6,775 – $ 6,775
October 31, 2010
$ 6,850 (75) $ 6,775
7. Patronage returns Subsequent to November 3, 2012, the Board of Directors approved the payment of patronage returns in the amount of $33,960 (2011 – $30,000), which are to be paid subsequent to year end. The portion of the patronage returns to be paid in cash in the amount of $23,200 (2011 – $20,700) is included in accounts payable and accrued liabilities and the portion to be paid in shares in the amount of $10,760 (2011 – $9,300) is included in members’ shares.
8. Inventories The cost of inventories recognized as an expense during the year ended November 3, 2012 was $920,081 (2011 – $863,739). The Association recorded $nil (2011 – $nil) as an expense for the write-down of inventories below cost to net realizable value for inventories recorded as at November 3, 2012. There was no reversal of inventories written down previously that are no longer estimated to sell below cost.
Notes to the Consolidated Financial Statements
31
9. Income taxes Income tax expense differs from the expected expense at the statutory tax rate as follows: 2012
Statutory rate Expected expense at statutory rate Difference resulting from: Reduction of future tax balances due to enacted tax rate reductions Other Income tax expense
2011
25.25%
26.76%
$ 5,258
$ 7,821
(112) (34) $ 5,112
(703) (21) $ 7,097
The tax effects of temporary differences that give rise to future tax assets and future tax liabilities are presented below: November 3, 2012
Future tax assets: Deferred lease inducements—difference between accounting and tax base Accrued future rents—difference between accounting and tax base Property and equipment—differences in net book value and undepreciated capital cost Loss carry forwards
October 29, 2011
October 31, 2010
236 139
$ 268 72
$ 302 –
$
1,194 – 1,569
900 – $ 1,240
917 304 $ 1,523
$
11,247
$ 11,869
$ 8,918
$
Future tax liabilities:
Patronage refund receivable
32 Calgary Co-op 2012 Annual Report
10. Debt (a) Operating loan The Association has available a $10,000 evergreen loan of which $nil had been drawn at November 3, 2012 (2011 – $nil; 2010 – $nil), with interest charged at lender’s prime less 0.25 per cent, with security as disclosed for the Credit Union Central facility, below. In addition, the Association has a $8,000 line of credit available, with interest charged at lender’s prime. The Association has provided letters of credit in the amount of $1,100 (2011 – $1,021; 2010 – $230) to support the purchase of certain inventory and capital items. These letters of credit are charged against the $8,000 line of credit. Security for the line of credit is a general assignment of book debts. (b) Long-term debt
Cre dit Union Central facility bearing interest at lender’s prime less 0.25% and is secured by a fixed charge debenture on certain shopping centres and a floating charge on the remainder of the Association’s assets, repayable in annual installments on November 1 of each year in the amount of $933, with a maturity date of November 1, 2015
November 3, 2012
October 29, 2011
October 31, 2010
2,775
$ 3,708
$ 4,641
4,984
4,597
6,235
$
Fed erated Co-operatives Limited unsecured interest-free loans, each payable in three equal annual payments with due dates to November 30, 2014 Obl igation under capital lease is non-interest bearing and is repayable in annual installments ending July 1, 2017 Current portion of long-term debt $
2,700
558
1,100
10,459 4,119 6,340
8,863 5,795 $ 3,068
11,976 2,225 $ 9,751
Aggregate principal repayments of long-term debt for each of the Association’s next five financial years are as follows:
2013 2014 2015 2016 2017
$ 4,119 3,846 534 1,434 526
Notes to the Consolidated Financial Statements
33
11. Members’ shares The Association is authorized to issue an unlimited number of shares with a par value of $1. Upon application to the Board of Directors, the par value of the member’s shares becomes payable when the member reaches age 65 or moves out of the trading area, or, at the request of the member’s estate, upon the member’s death. Changes in share capital are as follows: November 3, 2012
Balance, beginning of year Shares redeemed for cash Inactive members’ shares transferred to retained earnings Shares issued for cash Current year’s patronage returns to be paid in shares Balance, end of year
$ 166,885 (2,598) (1,882) 26 162,431 10,760 $ 173,191
October 29, 2011
$ 162,193 (2,625) (2,001) 18 157,585 9,300 $ 166,885
October 31, 2010
$ 156,677 (2,136) (1,718) 20 152,843 9,350 $ 162,193
12. Change in non-cash working capital November 3, 2012
Operating activities: Accounts receivable Inventories Prepaid expenses and deposits Accounts payable and accrued liabilities Income taxes payable/recoverable Government payable
October 29, 2011
$
999 (2,159) (2,036) (417) 481 94 (3,038)
$ (9,786) (4,842) (469) (10,212) 1,974 198 $ (23,137)
$
(9,757)
$ 7,528
$
Investing activities:
Accounts payable for capital expenditures
34 Calgary Co-op 2012 Annual Report
13. Pension plans The Association participates in a multi-employer defined contribution pension plan whereby the Association and participating employees contribute equal amounts to the maximum allowed under the Income Tax Act. The Association has no unfunded liability under this plan. During the year, the Association recorded $4,078 (2011 – $4,038) of expense relating to this plan. During the year, there were no significant changes to the rates of employer contributions. In addition, on January 1, 2003, the Association established a supplemental defined contribution employee retirement plan. For the year ended November 3, 2012, an expense of $106 (2011 – $103) has been recorded relating to this plan. The total liability at November 3, 2012 is $308 (2011 – $303; 2010 – $268).
14. Commitments and guarantees (a) Lease commitments The Association is committed to minimum lease payments under operating lease agreements for buildings and equipment over the next five years and beyond, as follows:
2013 2014 2015 2016 2017 Subsequently
$ 13,021 12,855 11,962 11,317 11,065 76,491 $ 136,711
(b) Utility service commitment The Association has a commitment to purchase electricity at fixed rates per kilowatt hour of approximately $3,500 for the financial years 2013 and 2014 and of approximately $600 for financial year 2015. The Association has a commitment to purchase natural gas at fixed rates per gigajoule of approximately $1,000 for the financial years 2013 and 2014 and of approximately $700 for financial year 2015.
(c) Petroleum product purchase commitment Under the terms of the agreement with FCL, the Association has committed to purchase petroleum products, at market price, from FCL for gas bar operations over a 10-year period commencing from the date of gas bar completion. Failure to meet this commitment would require the Association to pay outstanding gas bar loan balances owed to FCL plus repay any gas bar grants received, as described in note 3(c), plus interest on the grants, compounded annually at 10 per cent from the grant date. The total outstanding loan balances are disclosed in note 10(b). Total grants received over the prior 10-year period amount to approximately $25,100 (2011 – $24,100; 2010 – $22,400).
15. Financial Instruments (a) Credit risk The Association’s financial instruments consist of cash, short-term investments, investments, accounts receivable, accounts payable and accrued liabilities, long-term debt and other liabilities. The Association is exposed to credit risk resulting from the possibility that parties may default on their financial obligations. Management believes the credit risk associated with the FCL patronage refund is negligible based on the nature of the receivable. Management believes that the credit risk relating with the remaining financial assets is normal for the business and is limited due to the following reasons: • there is a broad base of customers, and therefore no significant concentration of credit risk exists; • the ratio of bad debt write-offs to total revenue has been less than 0.02 per cent for the last three years; • 75 per cent (2011 – 82 per cent) of trade receivables are current (less than 30 days) The Association’s credit risk exposure on cash is minimized substantially by ensuring that cash is held with credible financial institutions.
Notes to the Consolidated Financial Statements
35
(b) Liquidity risk Liquidity risk is the risk that the Association will not be able to meet a demand for cash or fund its obligations as they come due. The Association meets its liquidity requirements by anticipating operating, investing and financing activities and ensuring there are enough funds to cover these activities. In order to reduce liquidity risk, the Association has kept its financial leverage at low levels and maintained financial ratios that are conservative compared to the financial covenants within its credit facilities. (c) Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in interest rates. The Association’s sensitivity to fluctuations in interest rates is limited to certain of its cash and short-term investments and long-term debt.
16. Government payables November 3, 2012
Payroll deductions City of Calgary transit passes
$ $
1,004 1,220 2,224
October 29, 2011
October 31, 2010
$ 972 1,158 $ 2,130
$ 912 1,020 $ 1,932
17. Sales categories The Association’s business operations are grouped into three business categories, the principal activities of which are as follows: (a) Food, which consists of the sale and distribution of food and pharmaceutical products. (b) Petroleum, which consists of the sale of petroleum products and convenience store items. (c) Other, which consists of the provision of travel services, liquor products and home health care products.
Food Petroleum Other
2012
2011
$ 607,184 425,861 130,914
$ 594,439 396,631 105,743
$ 1,163,959
$ 1,096,813
18. Asset retirement obligation An asset retirement obligation has not been recorded in the financial statements since the Association participates in a contaminated site management program established by FCL. This program limits the co-operative’s liability to $25,000 per site as long as the association continues to exercise due diligence. Management believe that due diligence has been exercised and that the impact of the asset retirement obligation on the co-operative’s financial statement is not significant or is not reasonably determinable at this time.
36 Calgary Co-op 2012 Annual Report
vision To enhance everyday living with life’s essentials.
mission We deliver the great products and exceptional service our communities value.
we value Community commitment Caring service Great quality
Thank you for shopping where you belong.
Printed in Canada.