2009
A nnual Re p o rt
2009 Annual Report
Our Vision: To be the premier shopping destination in the communities we serve. Our Mission: To provide outstanding service, quality products, superior facilities and exceptional value. Our Values: Integrity, Respect, Commitment, Leadership, Community.
A nnua l R ep ort Contents Me s s a g e fro m the Bo ard Me s s a g e fro m the C EO I n Me m o r i u m - Mr. Go rdo n Barke r B o a rd G o v e r n anc e Me e t t h e E x e c utiv e Te am R e p o r t o n B u s ine s s P a t ro n a g e R e t urn and Me mb e r Re p o rts Offi ce r s ’ R e p o rt Au d i t o r s ’ R e p o rt Au d i t e d F i n a nc ial State me nts L o ca t i o n s
3 5 6 7 10 11 17 18 19 20 33
2009 Annual Report
...we will respond to the changing market conditions by continuing to focus on what our member-owners want.
2 | 2009 Annual Report
Back Row L-R: Terry Geib (Vice Chair) Laura Sullivan Lisa Wise (Board Secretary) Myra Kormann Johanna Bates Front Row L-R: Rick Smith Barry Ashton Stuart Cantrill (Chair) Alex Ingram
M essa g e f rom t h e Board On behalf of the Board of Directors, I am pleased to report that for 2009, Calgary Co-op member-owners will share $44.4 million in patronage returns. This represents $29.9 million paid in cash and $14.5 million in share equity. On a percentage basis, this equates to an overall patronage return of 5.07% per cent for 2009 compared to 5.41 per cent in 2008. During the past year, your Board achieved their governance plans and objectives, including the hiring of a new chief executive officer during the latter part of 2009. Highlights about the Board’s achievements for the year are included in this annual report. In January of this year, we were notified of the passing of Mr. Gordon Barker, who served as the Chair of Calgary Co-op from 1956 until his retirement in 1986. We were deeply saddened by his death, and sincerely appreciate the many contributions he made to Calgary Co-op for over 30 years. We will miss him. A tribute to Mr. Barker is on page 6 of this report. The past year has presented a number of challenges for Calgary Co-op as a result of the economy, but we will respond to the changing market conditions by continuing to focus on what our member-owners want. The Board is honoured to represent the member-owners of Calgary Co-op and is committed to representing your collective interests in the year ahead. On behalf of the Board of Directors,
Stuart Cantrill, Board Chair
2009 Annual Report | 3
I am proud to have joined the Calgary Co-op team and look forward to leading our company in its continued success.
4 | 2009 Annual Report
Mess age f ro m the C E O The effects of the economic recession in 2009 continued to affect retail businesses across Canada. While the impact in Alberta was less severe than in other provinces, consumer uncertainty continued, with many retailers, including Calgary Co-op, feeling the impact through decreased sales and mounting pressures on margins and profitability. While the 2009 financial year was successful for Calgary Co-op, we recognized early on that it would be difficult to maintain that momentum as consumers began to feel the lingering effects of the slumping economy. The result has been a decline in sales and gross margin in some areas of our operations. Financial results for our 2009 financial year ended October 31, saw sales decrease to just over $1 billion compared to $1.06 billion in 2008. Assets were $393 million compared to $374 million in 2008. Membership continued to grow from 434,446 in 2008 to 438,980 in 2009. A copy of the audited financial statements for our 2009 financial year starts on page 20 of this report. In 2010, our plans are to increase sales, enhance our marketing programs and better promote our products and services in order to retain current members and attract new members. Store renovations and development plans will continue to capitalize on opportunities for growing our lines of business to position the company for future success. Although the company continues to do well overall, we know we must continue to focus our efforts on reducing costs, reducing or eliminating discretionary spending, reducing waste, and increasing operational efficiencies and effectiveness in order to sustain that success going forward. Increased sales are critical to long term success so we must also ensure that we are operating at the top of our game by offering best quality products and unique variety combined with superior member / customer service delivery. While our facilities and product offerings attract people to our stores, it is the friendly, professional service from employees and our quality products that bring them back. I believe that our employees embody the expertise, skills and commitment necessary to carry out the business strategies that will best meet the needs of our memberowners and the greater community, and help Calgary Co-op to achieve its Vision of being the premier shopping destination in the communities we serve. I am proud to have joined the Calgary Co-op team and look forward to leading our company in its continued success.
N. Deane Collinson, Chief Executive Officer
2009 Annual Report | 5
In Memorium – Mr. Gordon Barker On January 27, 2009, Mr. Gordon Barker, past President and Chair, passed away at the age of 91 years. Known as “Mr. Co-op”, Mr. Barker was one of the founding members of Calgary Co-op and served as president and chair for thirty years from 1956 to 1986. During that time, he and those who served with him, experienced many exciting changes as Calgary Co-op grew from one small store in downtown Calgary into the local success story it is today. Mr. Barker was extremely proud of Calgary Co-op, and the employees and board members who truly believed that by working together towards a common vision, a small retail cooperative could thrive and prosper and become an integral part of Calgary’s history and future. Mr. Barker’s philosophy was to always look after our memberowners. This philosophy remains as true today as it was in 1956. When speaking about Calgary Co-op, you could hear the pride in his voice. When he retired, he believed that Calgary Co-op was left in good hands and his hope for the future was that it would grow and prosper while never losing sight of its roots, values and reason for being. Mr. Barker was a visionary and a true co-operative pioneer who left an indelible mark on the history of Calgary Co-op. He is missed by everyone who had the pleasure of knowing him.
Mr. Barker was a visionary and a true co-operative pioneer who left an indelible mark on the history of Calgary Co-op. 6 | 2009 Annual Report
Following the annual general meeting each year, the Board of Directors appoints its Board officers and committee representatives for the coming year. This report provides the names and committee appointments, and a summary of Board and committee activities during the past year.
other intangibles, the transition of new reporting standards that will take effect for the 2012 financial year, the structure, function and tasks of the internal audit department, this committee’s charter, and policy and standards for management reporting to the Board. Members of the committee also attended training to ensure they are kept abreast of accounting and auditing developments.
2009 Board of Directors and Officers
Governance Committee
B o a r d Governance
Stuart Cantrill, Chair Terry Geib, Vice Chair Lisa Wise, Board Secretary Barry Ashton Johanna Bates
Alex Ingram Myra Kormann Rick Smith Laura Sullivan
In 2009, the Board held a planning session with executive management, seven regular meetings followed by five in-camera meetings, and four extraordinary meetings to address matters relating to the recruitment of a new CEO. At the planning meeting, the Mission, Vision and Values were re-affirmed, adjustments were recommended to the three year strategic plan to reflect current economic conditions, and a review of market information, development and renovation projects, member relations and human resources programs was undertaken. Below is a summary of the key accomplishments for the Board’s four standing committees during 2009.
Audit Committee Board committee members: Barry Ashton, Chair; Lisa Wise; Alex Ingram; Rick Smith. Ex officio: Board Chair; CEO. Management resource: Chief Financial Officer; Corporate Controller; Internal Audit Director. The external auditors may also attend meetings of the committee. This committee assists the Board in fulfilling its responsibilities for oversight and accountability in risk management and internal control systems, financial and management reporting, internal and external audit performance, environmental management policy and performance, conflict of interest and code of conduct effectiveness.
Board committee members: Laura Sullivan, Chair; Terry Geib; Lisa Wise; Alex Ingram. Ex officio: Board Chair. Resource: CEO. The committee assists the Board in developing and implementing its governance model. The committee met five times. Highlights included reviewing the director election process and options for the director election including a nomination committee, involvement with other co-operatives, succession planning for the Board, Board composition and effectiveness, and updating the governance manual for the Board.
Member Relations Committee Board committee members: Myra Kormann, Chair; Terry Geib; Johanna Bates. Members at large: Darrin Kendall; Christopher Dunlap; Fred Robinson; Dave Usherwood; Aaron Hull; Roy Goodall; Peggy LaSueur; Elaine Smith. Ex officio: Board Chair; CEO. Management resource: Vice President, Member and Public Relations; Manager, Communications. The Member Relations Committee includes Board members and up to 12 members-at-large. The purpose of the committee is to educate members about the democratic process and co-operatives, specifically Calgary Co-op, and to uphold the values of the co-operative movement by listening to member concerns and suggestions, and conveying them to the committee chair. The committee met four times. Tasks included learning about other co-operatives, discussing ways to involve members in the democratic process, and reviewing proposed changes to Board remuneration. Committee members also participated in various Calgary Co-op events, such as Stampede week breakfasts and Seniors’ Day.
During the year, the committee met to review the impact of new accounting standards for inventory, goodwill and
2009 Annual Report | 7
Board of Directors members Barry Ashton and Terry Geib at the Monterey Centre Stampede breakfast.
Performance and Compensation Committee
CEO Selection Committee
Board committee members: Johanna Bates, Chair; Barry Ashton; Rick Smith; Myra Kormann. Ex officio: Board Chair; CEO. Management resource: Vice President, Human Resources.
Board committee members: Terry Geib (chair); Laura Sullivan; Rick Smith. Ex officio: Board Chair.
The committee met five times to review employee performance, compensation and incentive plans including engaging an external compensation consultant to review Executive and Board remuneration. The committee also reviewed Board training and development programs, and evaluation forms for Board members.
8 | 2009 Annual Report
Following notice of the resignation of Ken McCullough, CEO, effective at the end of September 2009, the Board struck an ad hoc committee to conduct the search for a new chief executive officer. This included communications, reviewing applications, interviewing and selecting the successful candidate.
Board Remuneration Board remuneration is based on recommendations made by the 2007 Members’ Compensation Committee and approved by members at the 50th annual general meeting in March 2007. A further change to chair remuneration was recommended by the Board and approved by members at the 51st annual general meeting in March 2008. The following reflects remuneration paid to directors in the financial year November 2008 through October 2009. Director Re mu n e ra tio n Barry Ashton Johanna Bates Stuart Cantrill (Chair) Terry Geib Alex Ingram Myra Kormann 1 Terry Semeniuk Randy Kott 2 Rick Smith 3 Laura Sullivan Lisa Wise Sub-Total Remuneration Less: FCL Conf. Fee Reimbursement Total Remuneration
2009
2008
$ 24,073 19,873 76,640 35,473 18,650 16,913 N/A 4,341 14,540 20,698 23,098 $254,299 (5,359) $248,940
$ 18,350 15,502 79,800 30,598 17,950 N/A 23,323 18,237 N/A 22,047 23,122 $248,929 (3,515) $245,414
Notes: 1. Remuneration for period March 2009 through October 2009. 2. Remuneration for period November 2008 to March 2009. 3. Remuneration for period March 2009 to October 2009.
Total remuneration for the 2009 financial year was $248,940 compared to $245,414 for the 2008 financial year as reported in the annual report for 2008. Each Board member continues to maintain or surpass the $2,400 requirement in annual purchases at Calgary Co-op to be eligible for election to the Board.
Other Representation Each year, Board members and senior management participate on a number of other committees and organizations on behalf of Calgary Co-op. These include: • •
Calgary Co-op Trust Fund: Trustees: Barry Ashton; Rick Smith; Lisa Wise. Management Trustees: Barry Heinrich; Llyle Toews, Chair. The Produce People Board of Directors: Johanna Bates; Chief Executive Officer.
• • • • • • • •
• •
The Alberta Community and Co-operative Association: Terry Geib; Myra Kormann. AGM Management Committee: Laura Sullivan; Donna Burn, Chair. Community Investment Management Committee: Myra Kormann; Donna Burn, Chair. Meet Your Directors Committee: Lisa Wise; Sarah Boutron, Chair. Stampede Management Committee: Alex Ingram; Sarah Boutron, Chair. Federated Co-operatives Board Representative for District 5: Johanna Bates. Federated Co-operatives Resolutions Committee: Rick Smith; Lisa Wise (alternate). Delegates to Federated Co-operatives Limited 80th Annual General Meeting: Barry Ashton; Lisa Wise; Stuart Cantrill; Terry Geib. Laura Sullivan; Johanna Bates (observers). Observers to the Canadian Co-operative Association Annual Meeting: Myra Kormann; Terry Geib. Alex Ingram (alternate). Calgary Co-op Home Health Care Board Members: Chief Executive Officer; Barry Heinrich; Jeff Ambrose; Rick Noonan; Laura Sullivan.
Report on Federated Co-operatives Limited Calgary Co-op owns approximately eleven percent of the shares in Federated Co-operatives Limited (FCL). FCL is the major grocery and petroleum supplier for Calgary Co-op, in addition to providing 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, appoints delegates and observers to its annual meeting, and appoints delegates to attend the regional fall conference. FCL revenues for its 2009 fiscal year were $ 6.5 billion, and net savings were $491.6 million. As reported in the financial statements in this annual report, Calgary Co-op received $33.9 million in patronage refunds from FCL for 2009 compared to $50.9 million in 2008.
2009 Annual Report | 9
EX ECU T I VE TE A M Calgary Co-op has a unique history and ability to differentiate itself in the marketplace because of its co-operative roots and business model, member ownership, and dedicated employees. As a local company deeply entrenched in the communities it serves, Calgary Co-op shares its success with its member-owners, employees and the community.
Top left to right: N. Deane Collinson, Chief Executive Officer Jeff Ambrose, Vice President, Operations and Marketing Donna Burn, Vice President, Member and Public Relations Bottom left to right: Wilf Harms, Vice President, Facilities, Development and Real Estate Barry Heinrich, Chief Financial Officer Rick Noonan, Vice President, Human Resources
10 | 2009 Annual Report
Construction on the Kingsland gas bar.
R e p or t o n Bus iness Calgary Co-op believes in serving the needs of its member-owners through exceptional service, quality products, variety, selection, choice and value. For the 9th consecutive year, Calgary Co-op was selected Best Grocery Store in the Calgary Herald Readers’ Choice Awards 2009. Also taking top honours were our Deli, Liquor Stores and Car Washes, while our wine offerings and travel offices received awards in their respective categories. Also in 2009, Calgary Co-op was honoured to receive the 2009 Most Respected Corporation’s award for Environmental Stewardship in Alberta in a poll conducted by Alberta Venture magazine. Calgary Co-op also received an Achievement Award for our Waste Management Program in 2009 from Calgary-based Metro Waste Management Services. Member-owners participating in our annual focus groups and telephone survey continue to give high marks for customer service, quality products and value-added offerings such as carry out service, employee friendliness, locations, fueling services, self scan options and the Kiddies Korral. They also indicated high support for the financial, product and other contributions provided throughout the year to local charities, community organizations, youth and family programs and initiatives.
Store Development and Renovations A number of renovations and upgrades occurred in 2009 to food centres, gas bars, liquor stores and the home health care centre. Richmond Road Centre underwent a major interior and exterior renovation. Work was completed in late fall and includes energy efficient coolers, freezers and lighting, enhanced meat department and fresh cases, renovated pharmacy and travel areas, expanded deli, bakery and produce areas, fresh sushi bar and “Wok n’ Grill”, a new in-store Asian fresh food offering. The Oakridge, South Trail, Beddington, Airdrie, Dalhousie, Strathmore and Eastfield gas bars were also upgraded, as were the Shawnessy and Airdrie car washes, and a new two-bay car wash was constructed at Beddington Centre. Construction is nearing completion on the new Kingsland Gas Bar on Macleod Trail South, which will offer 12 pumps with 24 fueling stations, a 3,000 square foot convenience store, and a touchless tunnel car wash. This location will also include a new liquor store to open in early 2010. Improvements made to the home health care centre on Macleod Trail include new storage shelving and upgrades to the offices and other work areas.
2009 Annual Report | 11
The newly renovated Richmond road centre. Construction of Quarry Park Centre.
12 | 2009 Annual Report
Quarry Park Wines & Spirits.
New construction was well underway on a major retail development for Calgary Co-op at Quarry Park in southeast Calgary that includes a new food centre, liquor store and home health care centre, which will open in early 2010. The new 5,000 square foot liquor store at this location opened October 30, 2009. Upgrades were completed on the interior dĂŠcor at our Richmond Road, Midtown Market and Beddington liquor stores. Our new liquor store opened at the Hamptons Centre location in late 2008 and underwent renovations in early 2009 that included a new interior dĂŠcor package and expanded floor space and product offering. Development work continues for the major re-development at the Brentwood Centre location, plans are being finalized for the new food centre and gas bar in High River, and the new gas bar and convenience store in the community of Panorama in northwest Calgary.
Store Operations and Marketing In grocery, the Value Priced Every Day program was enhanced by adding over 1,000 products, bringing the total number of highly competitive products that are price-checked regularly to over 3,500. Pricing strategies were evaluated to ensure that products are priced competitively with those offered by other major food retailers that offer similar products and services to those offered at Calgary Co-op. Emphasis was placed on deli operations in an effort to increase appeal and options for shoppers, including increasing the selection of imported cheeses and expanding the overall cheese program. Our line of Signature cakes increased in popularity in the bakery, and the meat department was expanded to incorporate more value-added selections of beef, poultry, pork, seafood and a selection of ready-to-cook marinated meats. A new seasonal fruit stand concept was introduced in the produce area to better highlight fresh, local and Canadian grown fruit. The popularity of our gas bars continued to increase, with over 300 million litres of fuel pumped in 2009. Consumers continue to take advantage of our Revved Up Rewards fuel program, while full service options returned to many of our locations that had experienced staffing shortages in 2008. Renovations to existing stores, the opening of new liquor stores and the enhancement of our wines, spirits, beers and
ales offerings contributed to a very successful year for the liquor division. Also during the year, a number of special events were added, including a second Grape Escape tasting event for members now offered in the spring and fall, educational dinners for members, and a new online wine selection program called Buyersvine that assists in selecting and pairing various wines with meals. A new Cellar Selection program was also introduced to identify wines that received a tasting score of 90 points or higher by The Wine Spectator or Robert Parker. Pharmacy continues to offer a number of health and wellness clinics throughout the year, including blood pressure, heart health, asthma and other clinics. To date, fourteen pharmacists have received training and certification to administer vaccinations, further enhancing the services our pharmacists can offer to their clients. Celebrating its 35th anniversary, the travel department continued to face a number of challenges in 2009 resulting from the effects of the downturn in the economy and the unexpected closures of tour operators. While this impacted sales, there were also numerous opportunities for travelers to take advantage of travel specials and promotions, particularly towards the end of the year when consultants began to see an increase in telephone, online and in-person inquiries and bookings.
Finance and Technology Safeguarding assets, ensuring the financial health of the organization, and providing cost effective and efficient accounting, information technology and administrative systems to support the organization remained the primary focus of this division. Ensuring proper systems of internal control and risk management are in place is critical to ensuring good governance. In 2009, work was undertaken on a number of critical information technology initiatives, particularly those relating to Payment Card Industry Data Security Standard - a global data security standard developed by the major credit card companies to standardize credit card data protection, requiring a major investment in security infrastructure for necessary hardware and software. A corporate-wide initiative was undertaken in respect to assessing print needs and a strategy for streamlining equipment to reduce
2009 Annual Report | 13
costs and increase efficiencies. An agreement was reached with a new provider for a disaster recovery site. Various system upgrades were also made to implement or enhance internal systems resulting in increased efficiencies and effectiveness. Considerable work was done at our home health care subsidiary to introduce new computers, systems and accounting technology. Work continues in this area. Calgary Co-op will be required to adopt a new set of accounting standards for fiscal 2012. The choice of standards include International Financial Reporting Standards (IFRS) and Canadian Accounting Standards for Private Enterprises.
Our People The labour market has changed significantly in the past year with the number of job seekers increasing dramatically. The emphasis on recruitment continues with the focus on attracting qualified, motivated employees. Training and development of employees was a priority in 2009 with 6,437 employees receiving training. The goal is to ensure employees receive the training they require to do their jobs efficiently and effectively. As part of this training, a new Calgary Co-op Learning Academy was introduced that encompasses a number of employee development and training programs offered through the City and Guilds Customer Service Award Program, the Chartered Management Institute Management Development Program, a variety of in-house courses, and courses offered by Federated Co-operatives. Customer service is vital to the success of the company, so a new partnership with City and Guilds, an internationally-accredited customer service training awarding body recognized in this field, was formed to develop a customized comprehensive customer service program for all employee levels. The Chartered Management Institute, a chartered professional body based in the United Kingdom, provides development and training dedicated to management and leadership. The aim of this program is to provide managers and supervisors with developmental opportunities in all facets of management by incorporating theory-based learning into practical application through work-based assignments and assessment. The Calgary Co-op Learning Academy is another integral part of the strategic plan to provide employees at all levels with development opportunities for future positions, improve employee engagement and reduce employee turnover.
14 | 2009 Annual Report
Groundbreaking ceremony for the Calgary Co-op Kids Zone. In addition, the focus continues on providing management and supervisors with the training, skills and tools necessary to properly deal with day-to-day challenges, including work performance, discipline, conflict resolution, harassment prevention, scheduling and other supervisory training. Through this training, managers and supervisors gain more confidence and knowledge in dealing with complex issues in the workplace.
Our Business, Our Community During the year, a number of initiatives were implemented to enhance the flow and frequency of communications within the company, including print, online and web-based bulletins and information. In addition to handling business continuity and emergency situations, the effects of the H1N1 pandemic situation that began in April 2009 required a significant amount of work and preparation for the implementation of the Pandemic Plan for the company, including regular employee communications and information bulletins, protocols, and other requirements necessary to address and manage the impact of the flu pandemic on the business.
Taradale employees shave their heads in support of cancer research.
Member and Public Relations also addressed a number of media issues relating to food safety resulting from national and international product recalls and incidents, other industry issues such as plastic bags and the environment, community involvement and other company-related matters of general interest. Donations, sponsorships and other support given to local charities, food banks, shelters, non-profits, community events and activities, youth, family, community and other programs increased to $2 million from $1.9 million in 2008. Our 16th Annual Charity Golf Classic in June raised over $260,000. Proceeds from the tournament were donated to the Alberta Children’s Hospital Bring in the Clowns program and the Calgary Zoo for the construction of the Calgary Co-op Kids Zone. The Calgary Co-op Kids Zone, exclusively sponsored by Calgary Co-op, will include the first wildlife carousel in western Canada, a toddler play area and a new train station for the zoo’s train for kids.
Stuff a Bus holiday food drive.
The Calgary Co-op Alberta Children’s Hospital Employee Fundraising Committee raised $16,200 by holding various fundraising initiatives for employees.
2009 Annual Report | 15
Calgary Co-op also donated $20,000 to bring the total donation to the Alberta Children’s Hospital to $36,200. We are proud of our employees for their commitment to this project and our community. The Calgary Co-op Trust Fund provided three $2,000 bursaries to students attending post secondary institutions in Calgary. One student from Mount Royal University, one student from the University of Calgary, and one student from the Southern Alberta Institute of Technology were selected to receive the bursaries. Corporately, Calgary Co-op provided $98,800 in scholarships to employees or children of employees compared to $70,000 in 2008.
Health, Safety and Environment Considerable work was done by this department and employees at all of our locations during the year in respect to implementing, managing and adhering to all health and safety policies and procedures. This resulted in the company achieving a 92% overall rating on the safety audit Certificate of Recognition. Lost time accident claims decreased by 24% over the previous year - a major accomplishment that reflects increased employee awareness about workplace safety, as well as employee buy-in and adherence to safety processes, procedures and standards. Environmental programs were enhanced throughout the year, resulting in increased usage and efficiencies. An increase to 43.6 % of cardboard to wet waste generation versus 42.7% last year was achieved, while cardboard recycling at our facilities also showed improvement. A new organic waste management program was successfully tested at our Creekside Centre, and the results of this testing will be evaluated for roll out to other locations in 2010.
A portion of the proceeds from Charity Hound sales presented to the Children’s Cottage Society by Airdrie gas bar employees.
16 | 2009 Annual Report
Calgary Co-op Home Health Care Limited On November 2, 2008, Calgary Co-op acquired the business assets of Home Health Care Medical Supply Centre located at 9309 Macleod Trail S.W. in Calgary, Alberta and began operating it as Calgary Co-op Home Health Care Limited, a wholly-owned subsidiary of Calgary Co-op. The purchase of this established home health care business with an existing client-base and well-known reputation within the health care industry provides Calgary Co-op with advantages and opportunities, eliminating the need to establish our new health care business from the ground up. Calgary Co-op Home Health Care Limited provides services to the public, nursing homes, hospitals and other health care facilities. The business offers a variety of medical aids and equipment for use in the home. This includes wheel chairs, walkers, scooters, adjustable beds, lift chairs, stair, porch and patient lifts, and bathroom safety aids. The business has professional services for mastectomy, compression garments, sports medicine supplies, pre and post natal products and diagnostic equipment such as blood pressure monitors. Calgary Co-op Home Health Care Limited also specializes in ostomy, incontinence and urinary care. This location serves as the main home health care facility for Calgary Co-op because of its central location, warehouse space and equipment repair facilities. It will also service the home health care facilities being built at the Calgary Co-op Quarry Park and Richmond Road centre locations which will open in 2010. The financial results for this subsidiary are included in the financial statements of Calgary Co-op.
calgary Co-op Home Health Care celebrates its first year anniversary as Calgary Co-op.
Patronage Returns
Patr on a g e Ret u rn and M embe r Re port s
Five year comparison 2005 - 2009. 29.9
2009
Patronage Returns on a Comparative Basis Since 1956, Calgary Co-op member-owners have received $610 million in patronage returns.
2008
32.8
2007
31.7
2006
2009 Patronage Return Retail
3.25%
20.0 12.9
2005 $0
A 3.25% patronage return paid in cash and shares to members based on retail purchases other than petroleum and travel.
Travel
14.5 17.7 20.2
13.0
9.0
$10
$20
($ millions)
Cash
$30
$40
$50
Shares
1.0%
A 1.0% patronage return paid in cash and shares to members based on travel purchases.
Petroleum
9.0¢
A 9.0¢ per litre patronage return paid in cash and shares to members based on petroleum purchases.
Patronage Return History Cumulative totals since 1957. Five year comparison 2005 - 2009.
2009
610
2008
Report on Membership Membership continued to increase, growing from 434,446 in 2008, to 438,980 members as of October 31, 2009.
2007
2006
400
$100
$200
44.4
2009 410
420
$300
$400
$500
$600
How Earnings are Allocated
405 390
430 ($ millions)
413
2005
463
$0
425
2006
515
2007
434
2008
566
2005
439
2009
380
$60
430
440
(thousands)
Management Discussion and Analysis (MD&A) To review the MD&A for Calgary Co-op, visit About Us on www.calgarycoop.com.
2.0 6.2
2008
50.5
2007
51.9
21.9
2005 $0
$10
$20
4.2 11.1
3.4 7.4
33.0
2006
3.6 10.2
2.2 3.0 $30
$40
$50
$60
$70
$80
($ millions)
Patronage Return
Income Tax
Retained Earnings
2009 Annual Report | 17
O f f ice r s’ Report The preparation of 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 generally accepted accounting principles. 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 12, 2010
18 | 2009 Annual Report
N. Deane Collinson, Chief Executive Officer January 12, 2010
Au ditor s’ Report To the Members of Calgary Co-operative Association Limited We have audited the consolidated balance sheet of Calgary Co-operative Association Limited as at October 31, 2009 and the consolidated statements of earnings, comprehensive income and retained earnings and cash flows for the year then ended. These financial statements are the responsibility of the Association’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Association as at October 31, 2009 and the results of its operations and its cash flows for the year then ended in accordance with Canadian generally accepted accounting principles.
Chartered Accountants Calgary, Canada January 4, 2010
2009 Annual Report | 19
Co n so l idated Balance Sh e e t October 31, 2009, with comparative figures as at November 1, 2008 (in thousands of dollars) 2008
2009
Assets Current assets: Cash and short-term investments (note 1(i)) Accounts receivable (note 2(b)) Inventories (note 1(e) and 8) Prepaid expenses and deposits Total Current Assets
$
Investments (notes 2(b) and 4) Property and equipment (notes 1(f), 3 and 5)
11,504 35,891 52,483 2,570 102,448
$
9,554 49,064 44,261 9,514 112,393
89,614
82,849
192,361
176,832
Goodwill (notes 1(g), 3, and 6)
6,850
75
Future income taxes (note 9)
1,556
2,052
Total Assets
$
392,829
$
374,201
$
95,432 575 4,036 9,557 109,600
$
89,402 1,589 1,115 14,812 106,918
Liabilities, Members’ Shares and Retained Earnings Current liabilities: Accounts payable and accrued liabilities (notes 2(a) and 7) 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))
9,819
7,350
Deferred lease inducements (note 1(h))
1,129
1,257
Members’ shares (note 11)
156,677
145,671
Retained earnings
118,073
110,536
Commitments and guarantees (notes 5 and 14) Total Liabilities, Members’ Shares and Retained Earnings See accompanying notes to financial statements. Approved on Behalf of the Board: Director Director
20 | 2009 Annual Report
$
392,829
$
374,201
Co n so l idated Stat ement of E arni ngs, C o m p re he nsi ve I ncome a n d Retained E arnings Year ended October 31, 2009, with comparative figures for the year ended November 1, 2008 (in thousands of dollars) 2008
2009 Sales (note 15)
$
Expenses: Cost of sales, selling and administrative (note 8) Amortization
1,002,239
$
1,058,606 (1,034,152) (15,526)
(973,951) (15,369)
Patronage refunds (note 2(b))
33,928
50,965
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 patronage returns and income taxes
8,488 (2,497) (587) 524 (167) 52,608
9,074 (2,807) (2,902) 1,451 (372) 64,337
Patronage returns (note 7)
44,360
50,530
6,819 (4,759) 2,060 6,188
2,974 653 3,627 10,180
110,536
99,226
1,349
1,130
Income tax expense (reduction) (note 9): Current Future Net earnings and comprehensive income Retained earnings, beginning of year Inactive members’ shares transferred to retained earnings Retained earnings, end of year
$
118,073
$
110,536
See accompanying notes to financial statements.
2009 Annual Report | 21
Co n so l idated Stat ement of C ash Flo w s Year ended October 31, 2009, with comparative figures for the year ended November 1, 2008 (in thousands of dollars) 2008
2009 Cash provided by (used in): Operations: Net earnings and comprehensive income Items not involving cash Amortization Patronage returns to be paid in shares Patronage refunds to be received in FCL shares Future income tax Loss on disposal and write off of property and equipment (note 5) Lease inducement amortization (note 1(h))
$
Change in non-cash operating working capital (note 12) Financing: Repayment of long-term debt Shares redeemed for cash Shares issued for cash Investments: Expenditures on property and equipment (note 2(c)) Business acquisition (note 3) Proceeds on disposal of property and equipment FCL shares redeemed for cash Change in non-cash working capital (note 12) Change in cash and short-term investments Cash and short-term investments, beginning of year
6,188
$
10,180
15,369 14,450 (8,421) (4,759) 587 (128) 23,286 17,931 41,217
15,526 17,750 (11,552) 653 2,902 (132) 35,327 (18,383) 16,944
(3,731) (2,117) 22 (5,826)
(3,907) (1,658) 26 (5,539)
(31,148) (6,898) 34 1,656 2,915 (33,441) 1,950
(11,223) – 149 1,453 3,150 (6,471) 4,934 4,620
9,554
Cash and short-term investments, end of year
$
11,504
$
9,554
Interest paid Income taxes paid
$
157 3,898
$
375 2,399
See accompanying notes to financial statements.
22 | 2009 Annual Report
N o te s to the C ons olidat ed Fi nanc i al State m e nts Year ended October 31, 2009, with comparative figures for the year ended November 1, 2008 (tabular amounts 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, 87% (2008 - 88%) of sales are to members. 1.
Summary of accounting policies: The preparation of financial statements in conformity with Canadian generally accepted accounting principles 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, its wholly owned subsidiary, Calgary Co-op Home Health Care Limited, and its proportionate share (50%) 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 years ended October 31, 2009 and November 1, 2008 consist of 52 weeks of operations each.
(c)
Financial instruments: All financial assets are classified as one of the following: held for trading, available for sale, held to maturity or loans and receivables. Financial liabilities are classified as either held for trading or other liabilities. The Association designates its cash and short term investments and investments as available for sale. These are measured at fair value with gains and losses, net of tax, being recognized in other comprehensive income until the asset is sold or there is a permanent impairment in value. Investments for which no fair market value can be determined have been measured at cost (note 4). Accounts receivable are designated as loans and receivables. Accounts payable, accrued liabilities and long-term debt are designated as other financial liabilities. Other financial liabilities and loans and receivables are measured at amortized cost and all transaction costs related to those assets or liabilities are recognized in net income when incurred. An embedded derivative is a component of a contract that also includes a non-derivative host contract, with the effect that some of the cash flows from the combined instrument vary in a way similar to a stand alone derivative. Embedded derivatives are separated from the host contract and recognized at fair value in the balance sheet if certain predetermined conditions are met. The Association has evaluated and determined that it has no contracts with embedded derivatives. Management has elected to treat utility service contracts as executory contracts, and thus are not required to be recognized at fair value in the balance sheet.
(d) Comprehensive income: Unrealized gains and losses on financial instruments that are held as available for sale are recognized in other comprehensive income and accumulated other comprehensive income, net of tax, until recognized in net income. The Association had no other comprehensive income in the year ended October 31, 2009 and no opening balance for accumulated other comprehensive income. (e)
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.
2009 Annual Report | 23
1.
Summary of accounting policies (continued): (f)
Property and equipment: Property and equipment are stated at cost net of grant funds received. 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 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 net fair value. (g)
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 recorded at cost and is not subject to amortization. The carrying value of goodwill is subject to an impairment test annually, or more frequently if events or circumstances indicate impairment. If the carrying value of the reporting unit to which goodwill has been assigned exceeds it fair value, then, with respect to the reporting unit’s goodwill, any excess of its carrying value over its fair value is expensed.
(h)
Deferred lease inducements: Deferred lease inducements, representing the benefit of cash inducements, are amortized over the remaining term of the related lease.
(i)
Cash and short-term investments: Cash and short-term investments are defined as cash and investments with a maturity of less than three months.
(j)
Revenue recognition: Sales include revenue from customers through stores operated by the Association. These sales are recognized at the point-of-sale.
(k)
Store opening expenses: Store opening costs of new stores are expensed as incurred.
(l)
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.
(m) Implementation of new accounting standards: Inventories: Effective November 2, 2008, the Association retrospectively implemented the Canadian Institute of Chartered Accountants (“CICA”) Handbook Section 3031 – Inventories which replaces Handbook Section 3030 – Inventories. The new section provides guidance on the basis and method of measurement of inventories and allows for reversal of previous write-downs. The section also establishes new standards on disclosure of accounting policies used, carrying amounts, amounts recognized as an expense, write-downs and the amount of any reversal of any write-downs. There were no significant adjustments to the carrying value of inventories upon adoption of this new standard.
24 | 2009 Annual Report
1.
Summary of accounting policies (continued): (m) Implementation of new accounting standards (continued): Goodwill and intangible assets: Effective November 2, 2008, the Association implemented CICA Handbook Section 3064 Goodwill and Intangible Assets, which replaces Handbook Sections 3062 and 3450. This section described the standards for recognizing and measuring internally developed intangible assets, including assets developed from research and development activities, ensuring consistent treatment of all intangible assets, whether separately acquired or internally developed. The Association is not impacted by this new standard. (n)
2.
Future accounting pronouncement: The Accounting Standards Board (AcSB) approved the final accounting standards for private enterprises in Canada (“PE GAAP”). The new standards were issued on December 15, 2009. The private enterprise standards give Canadian businesses the ability to choose to adopt new “made in Canada” standards or International Financial Reporting Standards (IFRS). Enterprises must decide which of the sets of standards to adopt for years beginning on or after January 1, 2011. The Association is currently assessing the impact of the choice of standard.
Related party transactions: (a)
Purchases: During financial year 2009, the Association made purchases from FCL in the amount of $588,720,000 (2008 - $664,358,000). These purchases represented 76% (2008 - 79%) of the Association’s total purchases and were transacted in the normal course of operations. Included in accounts payable and accrued liabilities are amounts owed to FCL of $17,926,000 at October 31, 2009 (2008 - $11,384,000). During financial year 2009, the Association earned interest income at prime less 1.75% (2008 - prime less 1.75%) of $79,000 (2008 - $402,000) as a result of early payments on normal trade payable balances to FCL. The average early payment balance with FCL amounted to $7,258,000 (2008 - $11,457,000).
b)
Patronage refund: Subsequent to October 31, 2009, the FCL Board approved the payment of a patronage refund to the Association in the amount of $33,925,000 (2008 - $50,935,000). The portion of the patronage refund to be received in cash in the amount of $25,504,000 (2008 - $39,383,000) is included in accounts receivable and the portion to be received in FCL shares in the amount of $8,421,000 (2008 $11,552,000) 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. During financial year 2009, the Association received interest-free loans of $248,000 (2008 - $1,698,000) and capital grants of $616,000 (2008 - $555,000) from FCL for this purpose. See also note 10(b). Included in property and equipment additions for the year is $1,116,000 (2008 - $2,400,000) which FCL paid on the Association’s behalf to assist in the construction of gas bars and related facilities.
(d) Short-term investments: During financial year 2009, the Association’s short-term investment with FCL earned interest revenue of $346,000 (2008 - $995,000), calculated at prime less 1.75% (2008 - prime less 1.50%). The balance of these investments was $nil at October 31, 2009 (2008 - $nil). (e) Leases: The Association has operating lease agreements in place with FCL for certain facilities which require payments of approximately $1,100,000 per year to October 2024 and $500,000 per year from November 2025 to October 2027. 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 November 1 of each year as follows. See also notes 5 and 10(b). 2010 2011 2012
$
– 544 1,100
2009 Annual Report | 25
3.
Acquisition: The Association acquired the business assets of a private company involved in the provision of home health care products and services. The allocation paid for the fair value of the identifiable assets is as follows: Fixtures and equipment Goodwill Consideration paid: Cash
4.
$
123 6,775
$
6,898
$
6,898
$
82,775 74 82,849
Investments: 2008
2009 Federated Co-operatives Limited Other
$ $
89,540 74 89,614
$
As there is no ready market for the Association’s 11% (2008 - 11%) investment in FCL shares and the fair value cannot be determined, they have 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:
Cost Land Buildings and parking lots Fixtures and equipment Leasehold improvements Joint venture leasehold improvements and equipment Assets under construction
2008 Net Book Value
2009 Net Book Value
Accumulated Amortization
$
50,802 159,144 99,109 9,692 1,132 2,854
$
– 61,332 63,544 4,390 1,106 –
$
50,802 97,812 35,565 5,302 26 2,854
$
41,259 95,581 33,610 5,994 38 350
$
322,733
$
130,372
$
192,361
$
176,832
Included in fixtures and equipment are assets held under capital lease with an original cost of $2,636,000 (2008 - $5,317,000) and a net book value of $1,421,000 (2008 - $2,741,000). As at October 31, 2009, the Association had contractual commitments to spend approximately $21,965,000 (2008 - $25,050,000) on capital expansion projects. The loss on disposal and write-off of property and equipment for the year ended October 31, 2009 comprises the disposal of food store equipment, write-down of obsolete assets in renovated shopping centres and gas bars and the write-down of computer and point of sale equipment. 6.
Goodwill: 2008
2009 Balance, beginning of year Goodwill acquired
$
75 6,775
$
– 75
Balance, end of year
$
6,850
$
å75
26 | 2009 Annual Report
7.
Patronage returns: Subsequent to October 31, 2009, the Board of Directors approved the payment of patronage returns in the amount of $44,360,000 (2008 - $50,530,000), which are to be paid subsequent to year end. The portion of the patronage returns to be paid in cash in the amount of $29,910,000 (2008 - $32,780,000) is included in accounts payable and accrued liabilities and the portion to be paid in shares in the amount of $14,450,000 (2008 - $17,750,000) is included in members’ shares.
8.
Inventory: The cost of inventories recognized as an expense during the year ended October 31, 2009 was $770,334,000 (2008 – $836,512,000). The Association recorded $nil (2008 – $nil) as an expense for the write-down of inventories below cost to net realizable value for inventories recorded as at October 31, 2009. There was no reversal of inventories written down previously that are no longer estimated to sell below cost.
9.
Income taxes: Income tax expense differs from the expected expense at the statutory tax rate as follows: 2008
2009 Statutory rate
29.92%
29.08%
Expected expense at statutory rate Difference resulting from: Reduction of future tax balances due to enacted tax rate reductions Other
$
Income tax expense
$
2,399
$
(523) 19
(438) 99 2,060
4,131
$
3,627
The tax effects of temporary differences that give rise to future tax assets and future tax liabilities are presented below: 2008
2009 Future tax assets: Deferred lease inducements – differences between accounting and tax base Property and equipment – differences in net book value and undepreciated capital cost
$
321 1,235
$
$2,052
$1,556 Future tax liabilities: Patronage refund receivable 10.
$
9,557
359 1,693
$
14, 812
Debt: (a)
Operating loan: The Association has available a $10,000,000 evergreen loan of which $nil had been drawn at October 31, 2009 (November 1, 2008 - $nil), with interest charged at lender’s prime less 0.25%, with security as disclosed for the Credit Union Central facility, below. In addition, the Association has a $8,000,000 line of credit available, with interest charged at lender’s prime. The Association has provided letters of credit in the amount of $3,159,000 (2008 – $3,059,000) to support the purchase of certain inventory items. These letters of credit are charged against the $8,000,000 line of credit. Security for the line of credit is a general assignment of book debts.
2009 Annual Report | 27
10.
Debt (continued): (b)
Long-term debt: 2008
2009 Credit 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 due date of November 1, 2015 Federated Co-operatives Limited unsecured interest-free loans, each payable in three equal annual payments with due dates to October 31, 2011 Obligation under capital lease is non-interest bearing and is repayable in annual installments ending November 1, 2012 Other
$
Current portion of long-term debt
5,575
$
706
2,130
1,644 – 7,925
2,683 87 11,408 1,589
575 $
6,508
7,350
$
9,819
Aggregate principal repayments of long-term debt for each of the Association’s next five financial years are as follows: 2010 2011 2012 2013 2014 11.
$
575 1,543 3,033 933 933
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: 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
12.
$
$
2009 145,671 (2,117) (1,349) 22 142,227 14,450 156,677
$
$
2008 130,683 (1,658) (1,130) 26 127,921 17,750 145,671
Change in non-cash working capital: Operating activities: Accounts receivable Inventories Prepaid expenses and deposits Accounts payable and accrued liabilities Income taxes payable Investing activities: Accounts payable for capital expenditures
28 | 2009 Annual Report
2008
2009 $
13,173 (8,222) 6,944 3,115 2,921
$
(3,386) (2,719) (6,725) (6,114) 561
$
17,931
$
(18,383)
$
2,915
$
3,150
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 $3,564,000 (2008 - $3,362,000) 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 financial year ended October 31, 2009, an expense and related liability of $123,200 (2008 - $57,300) has been recorded relating to this plan.
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: 2010 2011 2012 2013 2014 Subsequently
(b)
$
10,861 11,242 10,292 10,042 9,825 87,565
$
139,827
Utility service commitment: The Association has an annual commitment to purchase electricity at fixed rates per KWH to the end of financial year 2010 of approximately $3,200,000. The Association has an annual commitment to purchase natural gas at fixed rates per GJ to the end of the financial year 2010 of approximately $1,400,000.
(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 ten-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 2(c), plus interest on the grants, compounded annually at 10% from the grant date. The total outstanding loan balances are disclosed in note 10(b). Total grants received over the prior ten year period amount to approximately $15,000,000 (2008 - $15,300,000).
(d) Guarantee: The Association has committed to purchase a minimum level of product from a supplier at market prices, and should this minimum not be purchased, a liability becomes due. This agreement, signed in 2000, has not resulted in any shortfall to date and it is management’s opinion that this will be the case throughout the duration of the contract to 2010. The maximum liability would be $87,000 in 2010. (e)
Lease revenues: Minimum future revenues from operating leases on commercial real estate rentals are: 2010 2011 2012 2013 2014
$
5,475 4,884 4,683 3,797 2,572
2009 Annual Report | 29
15.
Segmented information: The Association’s business operations are grouped into three business segments, the principal activities of which are as follows: (a) (b) (c)
Food, which consists of the sale and distribution of food and pharmaceutical products. Petroleum, which consists of the sale of petroleum products and convenience store items. Other, which consists of the provision of travel services, liquor products, home health care products and commercial real estate rentals. 2008
2009 Sales: Food Petroleum Other Earnings before patronage returns and income taxes: Food Petroleum Other
$
623,683 293,096 85,460
$
634,984 353,068 70,554
$
1,002,239
$
1,058,606
$
25,859 12,702 14,047
$
34,020 15,310 15,007
$
52,608
$
64,337
All sales are generated in Canada and all property and equipment is attributable to Canadian operations. All sales are to external customers and no single customer accounts for more than 10% of total sales. 16.
Financial instruments: Fair value disclosures The following tables provide a comparison of carrying and fair values for each classification of financial instruments as at October 31, 2009 and November 1, 2008: Available for sale instruments
2009
Other financial liabilities
Loans and receivables
Total carrying amount
Total fair value
Cash and short-term investments Accounts receivable
$
11,504 –
$
– 35,891
$
– –
$
11,504 35,891
$
11,504 35,891
Total financial assets
$
11,504
$
35,891
$
–
$
47,395
$
47,395
Accounts payable and accrued liabilities Interest bearing long-term debt
$
– –
$
– –
$
95,432 5,575
$
95,432 5,575
$
95,432 5,575
Total financial liabilities
$
–
$
–
$
101,007
$
101,007
$
101,007
.
30 | 2009 Annual Report
16.
Financial instruments (continued): Available for sale instruments
2008
Other financial liabilities
Loans and receivables
Total carrying amount
Total fair value
Cash and short-term investments Accounts receivable
$
9,554 –
$
– 49,064
$
– –
$
9,554 49,064
$
9,554 49,064
Total financial assets
$
9,554
$
49,064
$
–
$
58,618
$
58,618
Accounts payable and accrued liabilities Interest bearing long-term debt
$
– –
$
– –
$
89,402 6,595
$
89,402 6,595
$
89,402 6,595
Total financial liabilities
$
–
$
–
$
95,997
$
95,997
$
95,997
Investments are not included in financial assets in the tables above as there is no ready market for the Association’s investment in FCL shares. Accordingly, the fair value of this investment cannot be determined and therefore has been measured at cost Non-interest bearing long-term debt is not included in financial liabilities in the tables above as the fair value of the interest free loans from FCL are not determinable due to the related party nature of the instruments. Accordingly, these debt instruments have been recorded at amortized cost. Risk management: The Association is exposed to the following risks as a result of holding financial instruments: (a)
Interest rate risk: The Association’s sensitivity to fluctuations in interest rates is limited to certain of its cash and short-term investments and longterm debt. During the 2009 financial year, if interest rates had been 100 basis points higher relating to the long-term debt, net earnings would have been $65,000 lower.
(b)
Credit risk: 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 to 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 0.04% for the last three years; -90% of trade receivables are current (less than 30 days)
(c)
Liquidity risk: Liquidity risk is the risk that the Association will not be able to meet its obligations as they become due. The Association has available credit facilities at levels sufficient to ensure funds are available to meet its medium term funding requirements. 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. As well, the Association has made additional voluntary payments on its outstanding long-term debt over the last several years.
2009 Annual Report | 31
16.
Financial instruments (continued): (c)
Liquidity risk (continued): The following are the undiscounted contractual maturities of significant financial liabilities as at October 31, 2009: 2010 Accounts payable and accrued liabilities Long-term debt
17.
2011
2012
2013
2014
Thereafter
Total
$
95,432 575
$
– 1,543
$
– 3,033
$
– 933
$
– 933
$
– 908
$
95,432 7,925
$
96,007
$
1,543
$
3,033
$
933
$
933
$
908
$
103,357
Capital management: The Association’s policy is to maintain a strong capital base so as to sustain the future cash requirements of the Association’s operations. The Association considers its capital structure to include members’ shares, retained earnings and long-term debt. The Association manages its capital and makes adjustments to it in light of the changes in economic conditions and growth opportunities available. In order to facilitate the management of its capital requirements, the Association prepares annual operating and capital expenditure budgets which are approved by the Board of Directors. The Association uses the following measures to monitor its capital:
Net debt to equity Return on equity
2009
2008
(0.01):1
0.01:1
19.7%
26.4%
For purposes of the net debt to equity ratio, net debt is defined as long and short-term debt, less cash and short term investments, and equity is defined as members’ shares and retained earnings. Management uses the net debt to equity ratio to identify the amount of financial leverage employed by the Association, and will use the ratio to help guide future capital management decisions. Return on equity is calculated as earnings before patronage return divided by opening members’ shares and opening retained earnings. Management uses the return on equity measure to gauge the amount of profit earned on each member’s investment. The Association issues an annual patronage return to its members based on its earnings. The cash and share portions of the annual patronage return are approved by the Board of Directors and may be adjusted in order to maintain the capital structure. The Association’s capital is not subject to any external restrictions, and there were no significant changes in the Association’s approach to capital management during the year. 18.
Comparative information: Certain 2008 comparative figures have been reclassified to conform with the financial statement presentation adopted in the current year.
32 | 2009 Annual Report
Ca lg a ry Co - op Loc at ions Ca lg a ry So ut h wes t
C algary N o rthe ast
Kingsland Gas Bar, 6905 Macleod Trail South
403-299-4110
Beddington, 8220 Centre Street NE
403-299-4445
Liquor Store, 121, 7015 Macleod Trail South
403-252-2447
Monterey, 2220 – 68 Street NE
403-299-2600
Midtown Market, 1130 – 11 Avenue SW
403-299-4257
North Hill, 540 – 16 Avenue NE
403-299-4276
Oakridge, 2580 Southland Drive SW
403-299-4355
Taradale, 6520 Falconridge Boulevard NE
403-299-4012
Richmond Road, 4940 Richmond Road SW
403-299-4490
Village Square, 2520 – 52 Street NE
403-299-5332
Shawnessy, 250 Shawville Boulevard SW
403-299-4426
West Springs, 917 – 85 Street SW
403-299-4151
Ai rd ri e 2700 Main Street
Ca lg a ry So ut h eas t Copperfield Gas Bar, 15566 McIvor Blvd. SE
403-299-4113
Deer Valley, 1221 Canyon Meadows Drive SE
403-299-4350
Downtown Gas Bar, 1111 – 1 Street SE
403-299-4261
Eastfield Gas Bar, 5250 – 50 Avenue SE
403-299-4443
Forest Lawn, 3330 – 17 Avenue SE
403-299-4470
Heritage Towne Centre Gas Bar, 6 Heritage Gate SE
403-299-4341
Heritage Towne Centre Liquor Store, 76 Heritage Gate SE
403-299-2656
Macleod Trail, 8818 Macleod Trail SE
403-299-4292
Quarry Park, 163 Quarry Park Blvd. SE
403-203-4825
South Trail Crossing, 4307 – 130 Avenue SE
403-257-7272
Ca lg a ry No rt hwes t Brentwood, 4122 Brentwood Road NW
403-299-4311
Creekside, 12000 Symons Valley Road NW
403-299-4491
Crowfoot, 35 Crowfoot Way NW
403-299-5353
Dalhousie, 5505 Shaganappi Trail NW
403-299-4331
Hamptons, 1000 Hamptons Drive NW
403-299-6711
Montgomery Gas Bar, 4608 – 16 Avenue NW
403-299-2602
Rocky Ridge, 11595 Rockyvalley Drive NW
403-299-5450
403-912-3700
O ko to ks Gas Bar, 111 – 31 Southridge Drive
403-995-4573
Strathm o re Food Store, 320 Second Street
403-934-3121
Gas Bar, 715 Wheatland Trail
403-934-3044
C algary C o -o p H o m e H e alt h C are L i m i te d 9309 Macleod Trail South
403-252-2266
Quarry Park, 430 - 163 Quarry Park Blvd. S.E
403-203-4830
Richmond Road, 4938 Richmond Road S.W
403-299-4488
Petroleum
Diesel
Car Wash
Travel
Liquor
2009 Annual Report | 33
Cal gary Co -o p e rat iv e Assoc iat ion Limit ed # 110, 151 - 86 Av en ue S.E. Cal g ary, Albert a T2H 3A5 P ho n e: 403- 219- 6025 www.calgaryc oop.c om