2013 annual report
Here’s to full service in a self-serve world. To providing high quality in a humble way. To keeping 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 our Co-op 3 Message from the Board 5 Message from the CEO and Meet the Executive Leadership Team 6 Board Governance 10 Report on Operations 18 Member Refund and Reports 19 Report on Co-operative Social Responsibility 22 Officers’ Report 23 Independent Auditors’ Report 24 Consolidated Financial Statements
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Terry Geib
Laura Sullivan
Peggy LeSueur
Board Chair
Vice Chair
Board Secretary
Johanna Bates
Stuart Cantrill
Myra D’Souza Kormann
Elaine Smith
Rick Smith
Lisa Wise
Calgary Co-op 2013 Annual Report
Message from the Board What is the co-operative difference?
T
o some, it is the opportunity to contribute and share in the profits of a successful organization. To have a voice within the association. To know that your opinion counts.
To others, it is knowing you are doing something more than just shopping. By supporting Calgary Co-op, you are giving back to the community. You are supporting local ranchers and growers, supporting your local community, supporting a local company. At Calgary Co-op, you are shopping where you belong. As a member and an owner. This past year is one we will never forget. The rising floodwaters may have come as a shock last summer, but what was truly astonishing was the reaction of the community. The help from our neighbours. And the generosity of strangers, who soon became friends. As a co-operative, we believe in standing together in a time of neighbours’ need. Even as the flood was approaching our High River Centre, our team was already in action providing desperately needed food and supplies. And we did not stop there. We held free breakfasts in Blackie for those displaced by the flood, our food centres continued to provide much needed supplies and food, we made a corporate donation to the Red Cross and encouraged our members and employees to help raise funds as well. This was where we discovered the true heroes in our community. One story that stands out is the story of the daughter of one of our members. She wanted to help raise funds for the Red Cross flood relief efforts. So she and her friend put together a lemonade stand. Her proud parents delivered us the cheque for $2,014 from that one lemonade stand.
We were overwhelmed by this display of generosity and the incredible donations received from our members, employees and partners for the Red Cross. That is truly the co-operative difference. It is those who not only share in good fortunes, it is those who come together in a time of need. It is those who care about their neighbours and are willing to work together. It is those that want something more than just a place to shop. This summer truly showed us what it meant to be a Calgary Co-op member and owner. And we are honoured to stand alongside you. On behalf of the Board, I am pleased to report that for the 2013 financial year that ended on November 2, 2013, Calgary Co-op members will share $34.0 million in member refunds. This represents $23.3 million paid in cash and $10.7 million in share equity. As a member of Calgary Co-op, you enjoy the benefits of membership including the best fresh products at competitive prices, the chance to run for the Board and the opportunity to vote in the annual Director Election. As an owner, you share in our profits each year through the annual member refund. Thank you for supporting your local Calgary Co-op. And thank you for giving your Board the opportunity to act as your representative voice. On behalf of the Board of Directors,
Terry Geib Board Chair
Message from the Board
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Calgary Co-op 2013 Annual Report
Message from the CEO
A
t Calgary Co-op, we believe in possibilities. That is how our co-op started: people thinking differently about providing essentials while building a business that gives back to the community. This is our community. It is up to us all to support it. And you can be satisfied knowing every purchase you make goes back into our community, to support our local farmers and ranchers, and to help our neighbours and friends. Imagine Canada* suggests 1 per cent of an organization’s gross pre-tax domestic profits should be allocated to the community. Calgary Co-op and our members give back over 6 per cent. In 2013, Calgary Co-op launched your Co-op Community Foundation. Together with Calgary Co-op, your Foundation was able to make a significant difference with over $4.2 million donated to the community including the Red Cross, the Mustard Seed and Meals on Wheels. The men of Calgary Co-op were also recognized as the third highest fundraisers for “Walk a Mile in Her Shoes”—a unique YWCA event to help women and children walk away from family violence. Our support of education and youth continues with annual sponsorships of bursaries to students attending Mount Royal University, the Southern Alberta Institute of Technology and the University of Calgary. We provide over 3,500 jobs to people living
in Calgary and area, and support our local producers, ranchers and growers through our Localize program. We also share our profits with our members each year. These elements are key to Calgary Co-op’s Co-operative Social Responsibility which will be focusing our efforts on three pillars: People Leadership, Protecting our Planet, Profits for Sharing. We invite you to review our Report on Co-operative Social Responsibility found on pages 19-21 to learn more about our commitment to social responsibility. When you shop at Calgary Co-op, you are supporting a local company and our local community while enjoying the best fresh products and incredible service at competitive prices. Thank you for shopping where you belong—at Calgary Co-op.
N. Deane Collinson Chief Executive Officer * Imagine Canada is a national charitable organization whose cause is Canada’s charities and not-for-profits. www.imaginecanada.ca
M e et th e Executive Leade rsh i p Team
Barry Heinrich
Jeff Ambrose
Lee Gonsalves
Laurie Schild
Doug Stone
Ken Woo
Chief Financial Officer
Vice President, Petroleum, Wine Spirits Beer, Home Health Care, Travel and Business Development
Vice President, Human Resources
Vice President, Marketing and Member Relations
Vice President, Facilities Development and Real Estate
Vice President, Food Centre Operations and Merchandising
Message from the CEO
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Board Governance 2013 Board of Directors and Officers Terry Geib, Board Chair
Myra D’Souza Kormann
Laura Sullivan, Vice Chair
Elaine Smith
Peggy LeSueur, Board Secretary
Lisa Wise
Johanna Bates Stuart Cantrill
Rick Smith Deane Collinson, Officer Barry Heinrich, Officer
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 2013, the Board of Directors held a board planning session, a full-day training session, a planning session with executive management, a board and director assessment session, six regular meetings and seven in-camera meetings. In addition, directors attended a variety of member events including Stampede Breakfasts, Seniors’ Day and the Charity Golf Classic. The Board also took a direct role in risk assessment; in particular, risks associated with strategy. In addition, the Board approved operating strategies and budget for the current year, analyzed its
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Calgary Co-op 2013 Annual Report
governance system and upheld its fiduciary duty to protect the organization’s assets and members’ investment. The following sections include summaries of each of the Board’s standing committee’s accomplishments over the past year.
Audit Committee Board committee members: Peggy LeSueur, Chair; Johanna Bates; Stuart Cantrill; Rick Smith Ex Officio: Terry Geib, Deane Collinson Management resources: Barry Heinrich; Terry Anderson, Internal Audit Director; Llyle Toews, Corporate Controller. The external auditors from KPMG and the Internal Audit Director reported to the committee at all committee meetings. The Audit Committee’s top priorities are to maintain a sharp focus on management’s financial reporting processes and internal controls. Co-op’s External Auditors, KPMG, and our Internal Audit Director, are two principal resources utilized by the Audit Committee to ensure full integrity and accuracy for all financial reporting. This committee assists the Board in ensuring that risk management and internal control systems are in place and operating effectively.
The committee oversees the independence, qualifications and performance of the External Auditor and the Internal Audit Director. It examines compliance with all legislation and regulations and the possible impact of any legislative or regulatory changes to the financial position of Calgary Co-op. The committee ensures that a code of conduct and conflict of interest guidelines are in place and plays an oversight role to ensure that Calgary Co-op is in compliance with these policies. The committee also provides a key avenue of communication among the external auditors, management, the internal audit department, members and the Board. Each year, the Audit Committee completes a detailed evaluation of proposed operating and capital budgets, prepared by the management team, prior to recommending approval by the Board. The committee reviews management’s options for the allocation of earnings and makes a recommendation to the Board on the annual member refund paid to members. During the 2012-2013 financial year, the committee held five regular meetings during which it addressed all of the items on its work plan. A copy of the Audit Committee Charter can be found on www.calgarycoop.com (About Us).
Co-operative Relations Committee
Governance Committee
Nominating Committee
Board committee members: Lisa Wise, Chair for part of the year; Stuart Cantrill, Chair for part of the year; Myra D’Souza Kormann; Elaine Smith
Board committee members: Lisa Wise, Chair; Peggy LeSueur; Elaine Smith; Rick Smith
Board committee members: Myra D’Souza Kormann, Chair; Rick Smith; Lisa Wise
Ex officio: Terry Geib, Deane Collinson
This committee does not have any ex-officio members.
Ex officio: Terry Geib, Deane Collinson Management resource: Jeff Ambrose, VP, Petroleum, Wine Spirits Beer, Home Health Care, Travel & Business Development 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 once in the 2013 fiscal year.
The committee held five full committee meetings and two ad hoc committee sessions during the year in order to complete work on various projects, including the utilization of a consultant to guide the research and subsequent realignment of committee duties and responsibilities. Specifically, the Governance, Performance and Compensation Committees and the Nominating Committee’s roles and responsibilities were realigned to achieve an improved and more effective structure for Board governance. The committee also addressed the Annual General Meeting and established multiple improvements to this important event. As well, the Governance Committee continued work on the director election process, reviewing and streamlining sections of the Directors’ Manual. In keeping with governance standards of practice, the bylaws were updated to establish procedures for resignation and removal of Directors and bring up to date generic references to bring precision to the meaning of standard terms.
In June 2012, the Board of Directors approved the formation of a Nominating Committee. The Board is mindful that it serves and oversees an increasingly diverse community, a challenging and competitive retail industry, and a growing retail co-operative. In 2013, the Nominating Committee retained the services of a governance adviser. Based on the findings of the adviser, the Board will analyse its composition, term limits, and identify potential gaps in its skills matrix and communicate the qualifications sought in board candidates for the 2015 election year. Candidates who do not possess the required competencies will still be able to run in the election. To discharge its fiduciary duty, the Board will continue its strong commitment to the community base of Calgary Co-op and provide the membership with the information needed to ensure they can make an informed election decision that will provide our co-operative with effective board leadership and succession. Board Governance
7
Performance and Compensation Committee
Other Representation
Board committee members: Laura Sullivan, Chair; Stuart Cantrill; Myra D’Souza Kormann; Rick Smith
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:
Ex officio: Terry Geib, Deane Collinson Management resource: Lee Gonsalves, VP, Human Resources; Bart Willmore, Employee Relations Director Committee members met five times during the year to assist the board in reviewing board and non-union employee compensation programs, ensuring effective board and CEO evaluations, supporting board training and development programs, and supporting effective succession planning.
AGM Management Committee: Stuart Cantrill; Laurie Schild, VP, Marketing and Member Relations, Chair Ex officio: Terry Geib The Alberta Community and Co-operative Association: Myra D’Souza Kormann, Director and First Delegate; Rick Smith, Second Delegate Co-op Community Foundation: Terry Geib, Rick Smith, Lisa Wise Management Trustees: Laurie Schild; Llyle Toews, Chair Federated Co-operatives Board Representative for District 5: Laura Sullivan
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Calgary Co-op 2013 Annual Report
Federated Co-operatives Resolutions Committee: Myra D’Souza Kormann (Delegate), Elaine Smith (alternate) The Produce People Board of Directors: Deane Collinson; Ken Woo, VP, Food Centre Operations and Merchandising Stampede Management Committee: Stuart Cantrill; Karen Allan, Communication Manager, Chair Ex officio: Terry Geib Delegates to Federated Co-operatives Limited 84th Annual General Meeting: Myra D’Souza Kormann, Terry Geib, Elaine Smith, Rick Smith, Laura Sullivan, Lisa Wise Visitors: Johanna Bates, Peggy LeSueur, Stuart Cantrill Observers to the Canadian Co-operative Association Annual Meeting: Terry Geib, Peggy LeSueur, Elaine Smith, Laura Sullivan
Board Remuneration and Annual Purchases
Report on Federated Co-operatives Limited
Board remuneration for the 2013 financial year (November 2012 through October 2013) 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 General 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 2013 financial year Director Remuneration
Johanna Bates Stuart Cantrill Myra D’Souza Kormann Terry Geib (Chair) Roy Goodall 1 Randy Kott 1 Peggy LeSueur Elaine Smith 2 Rick Smith 2 Laura Sullivan Lisa Wise Total Remuneration
Annual Purchases
2013
2012
2013
36,816
35,605
6,347
51,736
81,590
6,504
37,162
32,823
4,849
65,202
37,045
26,780
15,284
40,932
N/A3
12,153
33,619
N/A3
40,324
37,608
10,326
21,642
–
24,042
24,852
13,382
9,883
38,272
24,191
21,017
40,061
39,397
26,071
$ 383,504
$ 376,192
FCL sales for its 2013 fiscal year were $9.4 billion; net earnings were $879 million. This represents an increase in sales from $8.8 billion in 2012 and an increase in earnings which were $783 million in 2012. As reported in the financial statements in this annual report, Calgary Co-op received $47 million in patronage refunds from FCL for 2013 compared to $45 million in 2012.
1. Remuneration for period November 2012 through March 2013. Director’s term ended March 2013. 2. Remuneration for period March 2013 through October 2013. Director’s term commenced March 2013. 3. The 2013 Annual Purchases are only reported for those directors currently sitting on the Board.
Board Governance
9
Calgary Co-op currently has 24 food centres and pharmacies, 28 gas bars, 24 car washes, three commercial cardlocks, two home health care centres, eight travel offices and 23 wine, spirits and beer locations, including five tasting centres, in Calgary, Airdrie, Cochrane, High River, Okotoks, Strathmore and Edmonton. 10 Calgary Co-op 2013 Annual Report
O
Report on Operations
wned by our members, Calgary Co-op is one of the largest retail co-operatives in North America. With over 440,000 members, over 3,500 employees, assets of $486 million and annual sales approaching $1.2 billion, Calgary Co-op is committed to lead in food, petroleum, home health care, pharmacy, travel and wine, spirits and beer. Calgary Co-op supports numerous not-forprofit and charitable organizations in Calgary and area with your Co-op Community Foundation and invested over $4.2 million into the local community in 2013.
On September 14, 2013, Calgary Co-op celebrated the grand re-opening of our Food Crowfoot food centre after four months of extensive renovations. The result was an anchor store which will be our model for excellence going forward. At 72,000 square feet, our Crowfoot food centre is our largest store and is now the third store to feature our brand new visual identity. This store encompasses all of the new offerings from Calgary Co-op including Fresh to Go, Local Roast, World Foods, a fresh bakery case and even a cheese island. We also expanded our full service meat case and seafood offerings and now display a 28-day dry aged meat case. These renovations have provided our members with a fresh shopping destination that highlights a broad selection of products, quality and service. We were very pleased to launch our Localize program in 2013 which assigns food items with a score between zero and 10, with 10 being considered the most local based on location of production and ownership, source of ingredients and local sustainability. Calgary Co-op now offers more than 1,000 Localize products at our food centres. We have also continued with our seafood sustainability program “Reel in the Solution” which supports responsible seafood choices, and are working with our suppliers to source even more options for our members. In 2013, we increased the offering in this department by 16 per cent. Watch for labels on these products which clearly state their impact on the environment:
Awards and Accolades Locally owned and operated, Calgary Co-op believes in providing the freshest, best quality products and incredible service at competitive prices. In 2013, we were honoured to be recognized for the following awards: • Best Grocery Store in the Calgary Herald Readers’ Choice Awards for the 13th consecutive year. In addition to Best Grocery store, we were voted as the Best Car Wash, Deli, Florist, Liquor Store and Travel Agency. We were also secondary winners in the Bakery, Drug Store and Wine Store categories. • 2013 Consumer Choice Award for our Home Health Care centres. This is the fourth consecutive year we have won this award.
• Our Board Chair, Terry Geib, was presented with the Co-operative Visionary Leadership Award from the 2013 Alberta Co-operative Leadership Awards. • Our VP of Marketing and Member Relations, Laurie Schild, was recognized as one of Canadian Grocer’s Star Women of 2013. • One of our employees, Eileen Purcell from our Brentwood food centre, was presented with a Calgary White Hat Award for Best Customer Service: Retail. Calgary Co-op was pleased to have 12 individuals from our organization nominated for these awards. • We were also pleased to win multiple awards in the Readers’ Choice Awards by Airdrie City View and the Okotoks Western Wheel.
Report on Operations 11
green means they are caught using the most sustainable practices and yellow labels are for those items that have some concerns, but are still sustainable options.
Our meat department offers a variety of beef programs to suit every taste including 28 day, 21 day and 14 day aged beef. During our Annual General Meeting in March of 2013, our members voted in favour of a resolution brought forth to phase out the sale of eggs and pork sourced from intensive confinement cages within the next five years. While we already offer a wide variety of eggs including free range, free run, organic and comfort coop, we now have a new option for pork as well— Co-op Perfect Pork. Juicy and tender, Co-op Perfect Pork is fresh, open pen raised Alberta pork that is 100 per cent vegetable grain fed with no hormones. Co-op Perfect Pork is marbled, aged 14 days for extra tenderness, and is now exclusively available at all Calgary Co-op food centres. In addition, we now offer fresh organic chicken and pork at eight of our food centres.
This year, Calgary Co-op sold nearly 30 per cent of all the organic produce sold in Calgary.
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Calgary Co-op 2013 Annual Report
Organics continue to be the focus in our fresh produce department. Certified Organic produce has exploded in popularity over the past few years and we provide exceptional value with staple organic items advertised in the Calgary Herald and Metro every week. This year Calgary Co-op sold nearly 30 per cent of all the organic produce sold in Calgary (source: Nielsen) and we will continue to offer excellent quality organic produce in 2014. Local produce is also abundant thanks to our established relationships with many Alberta growers including Paradise Hill Farm tomatoes which are exclusively available at Calgary Co-op. In addition, we increased the display sizes at all food centres this year for our value added cut fruit sections where we promoted several new items including Kiss variety melons and Golden Glory cantaloupes, also exclusive to Calgary Co-op.
In 2013, we offered an increased selection of natural, gluten-free and local products. Our Deli departments led the market in 2013 with our specialty, unique and local cheeses, along with an increased selection of natural, gluten-free and local products, many of which are only available at Calgary Co-op. We are currently working to train our Deli team to become certified Cheese Specialists that are qualified to identify the characteristics, origins and perfect pairings of our vast array of cheeses, including Parmigiano Reggiano from Italy which is a 35 kg. wheel that our team is trained to portion. In addition, we now exclusively offer a line of products that specialize in Indian and Thai cuisine from a local company, Shef’s Fiery Kitchen, and continue to offer exciting new varieties of quality
olives from around the world to our olive cart on a regular basis. Our Bakery department has undergone a dramatic change with a focus on improving the quality of our baked goods, enhancing our service levels and meeting our members’ requests. We launched several new breakfast items including our Signature Cinnamon Knots, all Butter Croissants, scones, Danishes, fresh baked bulk bagels and new selection of muffins that are fresh baked every day. We launched a new seven inch Triple Layer Cake and Cupcake program with unique new flavours and designs. We also now offer two new pies—a Premium Apple Pie made with BC fruit and a Rustic Open Faced Pie filled with BC raspberries and rhubarb. Our focus is using the best quality ingredients to differentiate our fresh baked products while partnering with local companies and producers. Report on Operations
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Our World Foods department continues to grow. In addition to our initial offerings at Hamptons, Taradale and Village Square, we now offer this department at our Crowfoot and West Springs centres with more locations soon to offer a diversified selection of products from around the world.
Throughout our stores, our ultimate goal is to provide our members with the options they are looking for. We now offer our Fresh to Go and Local Roast operations in our Macleod Trail and Crowfoot locations, with plans underway for a third in Shawnessy. True to our vision, we have been bringing in fresh, green organic coffee beans to roast on the sales floor. We make our own pizza dough, smoke our own bacon, and over 10,000 people have already enjoyed our self-serve fresh curry bars. We are serving over 6,000 hot meals every month out of just one of our hot cases, and we are offering spectacular value with our $10 features each week night including Fresh Prime Rib with Two Sides on Wednesdays and Whole Maple Leaf Prime Rotisserie Chicken with Four Sides on Thursdays— two of our most popular $10 features. Throughout our stores, our ultimate goal is to provide our members with the options they want. As a result, we continue to source more local, glutenfree, organic and good for you products in addition to our already extensive
selection. Watch for more exciting and exclusive products throughout 2014.
petroleum It was a year of renovations and upgrades at our gas bar facilities with our largest project being the complete rebuilding of our Forest Lawn gas bar. We resumed operations at this site July 24 with a 2,500 sq. ft. convenience store, 20 fueling locations and diesel at every pump. With the opening of the double bay touchless car wash on August 20, Calgary Co-op now offers car washes at 24 of our 28 locations. We were honoured to receive an award for Best Site Improvement for this location from the International Avenue Business Revitalization Zone (BRZ). Calgary Co-op was up against all businesses located along International Avenue, for a total of 35 blocks.
Our gas bars and cardlocks pumped over 350 million litres of fuel, the equivalent of 6,250 semi-truck loads. We also completed renovations at our Deer Valley gas bar, replaced the car wash equipment at our Oakridge gas bar and introduced our new brand visual identity at our Deer Valley and Forest Lawn locations. In an effort to make transactions more secure for our members, and to meet the deadlines set forth by debit and credit card companies, we have now installed or Report on Operations
15
upgraded pumps at 21 of our 28 locations to accept Chip & PIN at our pumps and inside our convenience stores. The deadline for all retailers to implement these changes is December 31, 2015. In order to meet this deadlines, Calgary Co-op has been proactive with this change, implementing the new technology as we upgrade our sites. The travel industry continues to undergo an unprecedented period of change as we face increasingly complex issues with emerging technologies and growth.
travel
The cornerstone of our business approach is the expertise and insight from seasoned travel professionals who are engaged in providing customized service to our members. We have expanded our reach with the addition of a booking engine web link to our rural partner Co-ops’ individual websites in Alberta and B.C. which enables us to reach more travellers on a national basis. Our commitment to market research, employee development and preferred supplier relations makes Co-op Travel the primary choice for booking leisure travel. Whether shopping online or through our eight retail travel offices, members will enjoy personalized, convenient expertise. Remember, all travel purchases apply to your annual member refund.
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Calgary Co-op 2013 Annual Report
pharmacy The Pharmacy profession experienced some significant changes in 2013 when national and provincial reductions in generic drug pricing impacted prescription sales and margins. Under the new Alberta Pharmacy Services Framework, pharmacists can now perform Medication Reviews and expanded patient assessment services. Calgary Co-op Pharmacies were recognized nationally in Drugstore Canada magazine for our outstanding Professional Services in patient care areas including diabetes health, respiratory health, injections, compounding, adherence packaging, gluten-free awareness and heart health. We also have specialized pharmacists with a Certificate in Travel Health®, with Additional Prescribing Authority and in Clinical Pharmacist roles. A number of pharmacy employees have achieved status as Regulated Technicians with the Alberta
Calgary Co-op pharmacies continue to provide a unique service offering to our members.
College of Pharmacists allowing an expanded scope of responsibilities. Our Pharmacy team continues to provide optimal patient care by putting our patients first. Visit your Calgary Co-op pharmacy today to learn more about our many unique services that can help meet your individual health and wellness needs.
Home Health Care Our Home Health Care division continued to concentrate on meeting the needs of our members by introducing new products and services. We received our Alberta Motor Vehicle Industry Council license which allows us to sell Sidewinder vans. These are vans that have been completely modified to allow people that are permanently confined to a wheelchair access to the vehicle. In addition, we expanded our line of barrier-free showers and tubs and became the preferred vendor for Exciton Technology which manufactures a new format of silver based wound care dressings. In partnership with First Calgary Financial, we introduced a financing agreement to provide members an option when purchasing major equipment. Throughout the year we were dedicated to the development of not only our team, but the professionals we work with. This included certification in surgical and compression garments, vehicle lifts and stair lifts, as well as holding numerous sessions focused on developing product knowledge and employee confidence including “lunch and learns” dedicated to providing development opportunities for occupational therapists, Aids to Daily Living employees and pharmacy students.
wine spirits beer Co-op Wine Spirits Beer opened our new 7,500 square foot tasting centre at our Shawnessy centre this year which has been exceeding expectations in every way since its opening this past summer. Our spring and fall Grape Escapes continue to be extremely well-attended and have been expanded to the Edmonton market. We also introduced a new tasting event – our World of Whisky & Cognac Galas which are now held each spring in both Calgary and Edmonton and proving to be a popular ticket.
We have expanded our popular Grape Escape events to the Edmonton market, and added a new Whisky & Cognac Gala tasting event.
In addition, we have expanded our private label wine selection of products by adding Argentina and now carry a Co-op Private Reserve Malbec and Chardonnay/ Torrontes. Both of these wines deliver exceptional taste and value.
Report on Operations
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member refund and reports Member Refunds
E
ach year Calgary Co-op shares our profits with our members through the member refund. This year our members will share $34.0 million in member refunds. Of this, $10.7 million was paid in share equity and $23.3 million was paid in cash. In the face of increasing competitive market pressure, significant capital investment is required in the food and other lines of business to further differentiate and solidify our organization. We have made significant progress on many initiatives and now are ready to invest capital to position our stores for the future. The prudent option is to retain earnings which will allow Calgary Co-op to invest while minimizing debt financing and still provide strong member refunds.
2.5% 1.0% 1.0% 6.0¢ 18
Five year comparison 2009 – 2013 ($ millions) 2013
23.3
10.7
2012
23.2
10.8
2011
20.7
9.3
2010
20.3
9.3 14.5
29.9
2009 0
10
Cash
20
30
40
50
Shares
Member Refund History Cumulative totals since 1957. Five year comparison 2009 – 2013 ($ millions)
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.
member refund paid in cash and shares to members based on travel purchases.
2009
639 610 0
home health care
per litre member refund paid in cash and shares to members based on petroleum purchases, in addition to the 3¢ per litre grocery coupons instantly issued each time you fuel up at our gas bars through the Revved Up Rewards program, for a total of 9¢ per litre.
669
2011 2010
Petroleum
703
2012
travel
member refund paid in cash and shares to members based on home health care purchases.
737
2013
100
200
300
400
500
600
700
800
How Earnings are Allocated ($ millions) 2013
34.0
2012
34.0
2011
30.0
2010
29.6
7.0 20.8 5.1
7.1 1.9
10
20
Member Refund
30
40
22.1
6.4 2.0
44.4
2009 0
15.7
50
Income Tax
6.2 60
70
Retained Earnings
Calgary Co-op 2013 Annual Report 50.5
80
Co-op Cares Co-operative Social Responsibility
Co-operative Social Responsibility
19
PEOPLE LEADERSHIP We built our first Co-op driven to build something that makes a difference. To provide life’s essentials. To keep prices down while still investing in people. Today, through the Co-op Community Foundation and our community initiatives, we have invested over $4.2 million into local youth programs, education, environment, preventative health and poverty relief. Calgary Co-op members make it all possible. So here’s to shopping where you belong.
Here’s to our Co-op 20
• We contributed $100,000 in employee scholarships in 2013. • We offer work/life balance including flexible schedules. • We provide competitive compensation, extensive retail and management training, and career advancement opportunities. • We offer fun volunteer activities including our Charity Golf Classic, YWCA Walk a Mile in Her Shoes and helping at the Mustard Seed. • We energize and activate our employees and members to fundraise for multiple causes including the June flood. • We had a Certificate of Recognition (COR) of 96% through the Partnership in Injury Reduction program—highest rating achieved.
Profits FOR SHARING • We provided our member-owners with refunds totalling $34 million in 2013. • We have shared more than $737 million in profits with member-owners since 1957. • We helped improve the lives of thousands of Calgarians in 2013 by donating more than $4.2 million. • We partner and support the Calgary Food Bank, the Mustard Seed and Meals on Wheels to provide food for those in need. • We have grown our membership from 1,000 in 1956 to over 440,000 members today.
Calgary Co-op believes in supporting our people— our members, our team, our community.
Protecting our planet We are demonstrating our commitment to the environment through our operations and purchasing practices.
We offer thousands of local, organic and gluten-free products as well as participate in the Reel in the Solution sustainable seafood program.
We engage and support local farmers and ranchers who grow the food we eat.
We recycled 8,500+ tonnes of recyclable and wet water, enough to fill 41 Calgary Towers and support a reusable bag program.
Legault Family – Paradise Hill Farm, Nanton, AB
As a local co-operative, we believe in sustaining our environment and supporting the local farmers and ranchers who grow the food we eat.
Collecting for the Calgary Food Bank for our annual Stuff-a-Bus.
Helping out at the Mustard Seed
Raising money for YWCA’s Walk a Mile in Her Shoes
Here’s to a store built around the community and not just in it. Creating owners, where elsewhere they are simply shoppers.
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.
Terry Geib, Board Chair January 16, 2014
22 Calgary Co-op 2013 Annual Report
N. Deane Collinson, Chief Executive Officer January 16, 2014
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 sheet as at November 2, 2013, the consolidated statements of earnings and retained earnings and cash flows for the year then ended, 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 2, 2013, and its consolidated results of operations and its consolidated cash flows for the year then ended in accordance with Canadian accounting standards for private enterprises.
Chartered Accountants January 16, 2014 Calgary, Canada
Independent Auditors’ Report
23
Consolidated Balance Sheet November 2, 2013, with comparative information for November 3, 2012 (in thousands of dollars) Assets Current assets: Cash and short-term investments Accounts receivable Inventories (note 7) Prepaid expenses and deposits Total current assets Investments (note 3) Property and equipment (note 4) Goodwill (note 5) Future income taxes (note 8) Total assets Liabilities and Members’ Equity Current liabilities: Accounts payable and accrued liabilities (note 6) Government payables (note 16) Current portion of long-term debt (note 9(b)) Income taxes payable Future income taxes (note 8) Total current liabilities Long-term debt (note 9(b)) Other liabilities (note 15) Members’ equity: Members’ shares (note 10) Retained earnings
2013
2012
$ 12,517
$ 10,800
47,515
45,023
69,340
64,452
5,015
5,875
134,387
126,150
124,193
114,738
217,941
207,621
6,775
6,775
2,553
1,569
$ 485,849
$ 456,853
$ 88,123
$ 88,275
2,388
2,224
4,787
4,119
2,589
2,181
11,819
11,247
109,706
108,046
3,394
6,340
2,834
1,381
179,048
173,191
190,867
167,895
369,915
341,086
$ 485,849
$ 456,853
Commitments and guarantees (notes 4 and 13) Subsequent event (note 6) Total liabilities and members’ equity See accompanying notes to financial statements.
Approved on Behalf of the Board: Director 24 Calgary Co-op 2013 Annual Report
Director
Consolidated Statement of Earnings and Retained Earnings Year ended November 2, 2013, with comparative information for November 3, 2012 (in thousands of dollars) Sales (note 17) Expenses: Cost of sales, selling and administrative (note 7) Amortization Patronage refund (note 2(b)) Other expenses (income): Rental income Rental expense Loss on disposal and write-off of property and equipment (note 4) Interest income Interest expense Earnings before income taxes Income tax expense (reduction) (note 8): Current Future
2013
2012
$ 1,187,119
$ 1,163,959
1,160,000
1,143,835
18,504
16,754
47,277
44,991
(9,629)
(9,343)
3,391
2,827
1,125
648
(879)
(660)
78
106
61,806
54,783
7,362
6,063
(412)
(951)
6,950
5,112
54,856
49,671
Retained earnings, beginning of year
167,895
150,302
Patronage returns (note 6)
(33,960)
(33,960)
2,076
1,882
$ 190,867
$ 167,895
Net earnings
Inactive members’ shares transferred to retained earnings (note 10) Retained earnings, end of year See accompanying notes to financial statements.
Consolidated Financial Statements
25
Consolidated Statement of Cash Flows Year ended November 2, 2013, with comparative information for November 3, 2012 (in thousands of dollars)
Cash provided by (used in): Operations: Net earnings Items not involving cash: Amortization Patronage refunds to be received in FCL shares Future income tax (reduction) Loss on disposal and write-off of property and equipment (note 4) Lease inducement amortization Accrued future rents
Change in non-cash operating working capital (note 11)
Financing: Repayment of long-term debt Shares redeemed for cash Shares issued for cash Increase in contract commitments (note 15) Patronage return paid in cash Investments: Expenditures on property and equipment Proceeds on disposal of property and equipment FCL shares redeemed for cash Change in non-cash working capital (note 11)
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 2013 Annual Report
2013
2012
$ 54,856
$ 49,671
18,504
16,754
(11,748)
(11,144)
(412)
(951)
1,125
648
(120)
(120)
310
268
62,515
55,126
(7,542)
(3,038)
54,973
52,088
(5,060)
(5,461)
(2,800)
(2,598)
23
26
1,263
–
(23,250)
(23,200)
(29,824)
(31,233)
(27,173)
(14,204)
6
90
2,293
2,112
1,442
(9,757)
(23,432)
(21,759)
1,717
(904)
10,800
11,704
$ 12,517
$ 10,800
Notes to the Consolidated Financial Statements Year ended November 2, 2013 (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, 83% (2012 – 84%) of sales are to members.
1. 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%) 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 2, 2013 consists of 52 weeks of operations while the year ended, November 3, 2012 consists of 53 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 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 10 years.
Notes to the Consolidated Financial Statements
27
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.
Periodically, the Company will receive payments for entering into a long-term commitment to do business with specific vendors. These amounts are deferred in current and other long-term liabilities and are recognized over the term of the commitment when performance is achieved.
(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.
(j) Store opening expenses: Store opening costs of new stores are expensed as incurred.
(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.
28
Calgary Co-op 2013 Annual Report
(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.
2. Related party transactions: Federated Co-operatives Limited (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% of the shares in FCL.
(a) Purchases: For the year ended November 2, 2013, the Association made purchases from FCL in the amount of $720,976 (2012 – $703,187). These purchases represented 77% (2012 – 76%) 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 $24,973 (2012 – $28,610). For the year ended November 2, 2013, the Association earned interest income at prime less 1.25% (2012 – prime less 1.25%) of $215 (2012 – $218) as a result of early payments on normal trade payable balances to FCL. The average early payment balance with FCL amounted to $12,293 (2012 – $12,778). (b) Patronage refund: Subsequent to November 2, 2013, the FCL Board approved the payment of a patronage refund to the Association in the amount of $47,276 (2012 – $44,988). The portion of the patronage refund to be received in cash in the amount of $35,528 (2012 – $33,844) is included in accounts receivable and the portion to be received in FCL shares in the amount of $11,748 (2012 – $11,144) 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 2, 2013, the Association received interest-free loans of $2,782 (2012 – $7,057) and capital grants of $3,323 (2012 – $2,352) from FCL for this purpose. See also note 9(b). (d) Short-term investments: The Association’s short-term investment with FCL earned interest revenue of $504 (2012 – $349), calculated at prime less 1.25% (2012 - prime less 1.25%). The balance of these investments was $nil (2012 – $nil). (e) Leases: The Association has operating lease agreements in place with FCL for certain facilities which require payments of approximately $1,350 per year to October 2024 and $700 per year from November 2025 to October 2027 and $300 per year from November 2028 to October 2032. This commitment is disclosed as part of note 13(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 4 and 9(b)). 2014 2015 2016 2017
$ 592 526 526 532
3. Investments: Federated Co-operatives Limited Other
2013
2012
$ 124,115 78 $ 124,193
$ 114,660 78 $ 114,738
As there is no ready market for the Association’s 11% (2012 – 11%) 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.
Notes to the Consolidated Financial Statements
29
4. Property and equipment: 2013
2012
Cost
Accumulated amortization
Net book value
Net book value
Land Buildings and parking lots Fixtures and equipment Leasehold improvements Joint venture leasehold improvements and equipment
$ 51,799 208,310 131,372 12,328
$ – 86,015 92,671 7,206
$ 51,799 122,295 38,701 5,122
$ 49,916 114,188 35,497 6,130
1,156
1,132
24
31
Assets under construction
– $ 404,965
– $ 187,024
– $ 217,941
1,859 $ 207,621
Included in fixtures and equipment are assets held under capital lease with an original cost of $2,700 (2012 – $2,700) and a net book value of $1,858 (2012 – $2,430). As at November 2, 2013, the Association had contractual commitments to spend approximately $10,100 (2012 – $8,600) on capital expansion projects. The loss on disposal and write-off of property and equipment for the year ended November 2, 2013 comprises the disposal of equipment and the write-down of obsolete assets in renovated food centres, liquor stores and gas bars.
5. Goodwill: Balance, beginning of year Balance, end of year
2013
2012
$ 6,775 $ 6,775
$ 6,775 $ 6,775
6. Patronage returns: Subsequent to November 2, 2013, the Board of Directors approved the payment of patronage returns in the amount of $33,960 (2012 – $33,960), which are to be paid subsequent to year end. The portion of the patronage returns to be paid in cash in the amount of $23,250 (2012 – $23,200) is included in accounts payable and accrued liabilities and the portion to be paid in shares in the amount of $10,710 (2012 – $10,760) is included in members’ shares.
30
Calgary Co-op 2013 Annual Report
7. Inventories: The cost of inventories recognized as an expense during the year ended November 2, 2013 was $936,408 (2012 – $920,081). The Association recorded $nil (2012 – $nil) as an expense for the write-down of inventories below cost to net realizable value for inventories recorded as at November 2, 2013. There was no reversal of inventories written down previously that are no longer estimated to sell below cost.
8. Income taxes: Income tax expense differs from the expected expense at the statutory tax rate as follows:
Statutory rate Net income before tax excluding the patronage return to members Expected expense at statutory rate Difference resulting from: Reduction of future tax balances due to enacted tax rate reductions Other Income tax expense
2013
2012
25.00%
25.25%
$ 27,846 6,962
$ 20,823 5,258
– (12) $ 6,950
(112) (34) $ 5,112
The tax effects of temporary differences that give rise to future tax assets and future tax liabilities are presented below:
Future tax assets: Deferred lease inducements—difference between accounting and tax base Accrued future rents—difference between accounting and tax base Contract commitments—difference between accounting and tax base Property and equipment—differences in net book value and undepreciated capital cost Future tax liabilities: Patronage refund receivable
2013
2012
$ 207 216 422 1,708 $ 2,553
$ 236 139 – 1,194 $ 1,569
$ 11,819
$ 11,247
Notes to the Consolidated Financial Statements
31
9. Debt: (a) Operating loan: The Association has available a $10,000 evergreen loan of which $nil had been drawn at November 2, 2013 (2012 – $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 line of credit available, with interest charged at lender’s prime. The Association has provided letters of credit in the amount of $124 (2012 – $1,100) 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: Credit Union Central facility bearing interest at lender’s prime less 0.25% and is secured by a fixed charge debenture on certain food 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 Federated Co-operatives Limited unsecured interest-free loans, each payable in three equal annual payments with due dates to October 31, 2015 Obligation under capital lease is non-interest bearing and is repayable in annual installments ending July 1, 2017 Current portion of long-term debt
2013
2012
$ 1,841
$ 2,775
4,164
4,984
2,176 8,181
2,700 10,459
4,787 $ 3,394
4,119 $ 6,340
Aggregate principal repayments of long-term debt for each of the Association’s next four financial years are as follows: 2014 2015 2016 2017
32
$ 4,787 1,428 1,434 532
Calgary Co-op 2013 Annual Report
10. 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: 2013
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
2012
$ 173,191 (2,800) (2,076) 23 168,338 10,710 $ 179,048
$ 166,885 (2,598) (1,882) 26 162,431 10,760 $ 173,191
2013
2012
11. Change in non-cash working capital: Operating activities: Accounts receivable Inventories Prepaid expenses and deposits Accounts payable and accrued liabilities Income taxes payable
Government payable
Investing activities: Accounts payable for capital expenditures
$ (2,492) (4,888) 860 (1,594) 408
$ 999 (2,159) (2,036) (417) 481
164 $ (7,542)
94 $ (3,038)
$ 1,442
$ (9,757)
Notes to the Consolidated Financial Statements
33
12. 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 $4,082 (2012 – $4,078) 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 2, 2013, an expense of $188 (2012 – $106) has been recorded relating to this plan. The total liability at November 2, 2013 is $496 (2012 – $308).
13. 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: 2014 2015 2016 2017 2018 Subsequently
$ 12,921 12,009 11,352 11,090 10,852 64,544 $ 122,768
(b) Utility service commitment: The Association has a commitment to purchase electricity at fixed rates per KWH of approximately $3,500 for financial year 2014 and of approximately $600 for financial year 2015. The Association has a commitment to purchase natural gas at fixed rates per GJ of approximately $1,000 for financial year 2014 and of approximately $700 for financial year 2015.
34
Calgary Co-op 2013 Annual Report
(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 2(c), plus interest on the grants, compounded annually at 10% from the grant date. The total outstanding loan balances are disclosed in note 9(b). Total grants received over the prior 10-year period amount to approximately $27,100 (2012 – $25,100).
14. 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 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 0.02% for the last three years; • 78% (2012 – 75%) 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.
(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.
15. Other liabilities: Included in other liabilities is an amount related to contract commitments. During the year, the Association entered into two, five-year vendor commitment contracts. At the time of signing these contracts, the Association received payments of $2,000 and $125 respectively. Should the Association terminate these contracts prior to their expiry date, the Association is required to reimburse each vendor a pro-rated portion of their initial payment based on the number of days remaining in the contract. As at November 2, 2013 the Association has recorded deferred revenue related to these payments of $1,688, of which $425 is included in accounts payable and accrued liabilities and $1,263 is included in other liabilities.
16. Government payables: Payroll deductions City of Calgary transit passes
2013
2012
$ 1,150 1,238 $ 2,388
$ 1,004 1,220 $ 2,224
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
2013
2012
$ 616,462 431,493 139,164 $ 1,187,119
$ 607,184 425,861 130,914 $ 1,163,959
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 Association’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 Association’s financial statement is not significant or is not reasonably determinable at this time.
Notes to the Consolidated Financial Statements
35
vision To enhance everyday living with life’s essentials
mission We deliver great products and exceptional service our communities value
we value Community commitment Caring service Great quality
Thank you for shopping where you belong
36 Calgary Co-op 2013 Annual Report
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