FCL`s 2009 Annual Report - Co-op

Profile of…
Federated
Co-operatives
Limited
2009
Home Office:
Box 1050, Saskatoon, Saskatchewan, S7K 3M9
www.coopconnection.ca
Annual Report
Regional Offices:
Report to the 81st Annual Meeting of
Distribution Centres:
Federated Co-operatives Limited
Edmonton - Calgary - Saskatoon - Winnipeg
March 1 - 2, 2010
Feed Production Plants:
TCU Place, Saskatoon, Saskatchewan
Edmonton - Calgary - Moosomin - Melfort Saskatoon - Brandon
Federated Co-operatives Limited (FCL) provides
Forest Products Plants:
central wholesaling, manufacturing and administrative services to its owners... 264 locally-owned retail
co-operatives which operate in more than 500
communities across western Canada. FCL’s member
Edmonton - Calgary - Regina - Saskatoon - Winnipeg
Canoe, British Columbia
Petroleum Refinery/Heavy Oil Upgrader:
Regina, Saskatchewan
Wholly-Owned Subsidiaries:
retail co-operatives are owned by more than
Consumers’ Co-operative Refineries Limited, Regina
The Grocery People Ltd., Edmonton
1,300,000 active co-op members.Together,
Associated with:
FCL and its member retail co-operatives are known
Interprovincial Cooperative Limited
as the Co-operative Retailing System (CRS). FCL oper-
Trade-marks:
ates in accordance with its Mission and Objectives,
CO-OP and the CO-OP logo are registered trademarks of TMC Distributing Ltd., used under licence.
the Statement on the
Co-operative Identity, and the Code of Ethical Stan-
SUPER A FOODS, BIGWAY FOODS and TAGS are
trade-marks of The Grocery People Ltd.
dards for Co-operatives, which are all included within
this annual report.
table of contents
Board of Directors’ Report ................................................. 1
Consumers’ Co-operative Refineries Limited .......... 30
Mission & Objectives ........................................................... 6
Environmental & Technical Services Division .......... 32
Auditors’ Report & Financial Statements ..................... 7
Human Resources Division ............................................ 33
Retail Division ..................................................................... 19
Statement on the Co-operative Identity ................... 35
Consumer Products & Logistics Division .................. 21
Code of Ethical Standards for Co-operatives .......... 36
Agro Products Division .................................................... 25
Honorary Presidents .......................... Inside Back Cover
Forest Products Division ................................................. 28
C o m m u n i t y F o c u s e d • Va l u e D r i v e n
B o a r d of di r e ctors ’ r e p ort
2009 was a turbulent year. World-wide economic
turmoil and uncertainty resulted in a number of
challenges and opportunities.The theme of the 81st
annual meeting of Federated Co-operatives Limited
(FCL),“Community Focused – Value Driven”, speaks to
the way co-operatives have always operated. Our
history shows what can be accomplished, in good
times or bad times, when we follow our co-operative
values.These values are the anchors that will continue
to provide the strength required to meet the
challenges of the present and future.
PATRONAGE REFUNDS
The sum of $346.7 million was allocated to members as
patronage refunds on their 2009 purchases from FCL.
The 2009 patronage refund rates, with comparisons to
2008, were:
Commodity
2009
2008
Crop Supplies
5.624%
6.411%
Feed
1.229%
0.612%
Grocery
5.202%
5.301%
Meat
3.510%
3.483%
General Merchandise
4.302%
4.307%
Petroleum
– Fuels
6.523¢/L
12.384¢/L
– Propane
9.951¢/L
8.541¢/L
– Oil & Grease 13.773%
– Tires
6.738%
identify potential risks and opportunities, review the
long-term financial projection, and establish the
corporate priorities.
The direction determined by board and senior
management guides FCL’s operating divisions in the
development of business plans and annual goals.
Goals are categorized to be either corporate (impact
the co-operative as a whole) or divisional (regular,
ongoing activities).Twice a year the board receives a
report on the progress of the corporate goals. All goals
are expressed as action plans in the individual division
budgets.The overall budget, considered by the board
each December, translates these plans into a predicted
flow of revenue, expenses and savings for the
coming year.
FCL’s year-long planning process is continually being
refined in order to ensure there is a shared vision of
the direction for the coming year and commitment
to a common purpose among FCL’s board of directors
and employees.
The current and foreseeable future economic
conditions are significant in planning business
activities.The continued success and improvement
of retail co-operative operations is FCL’s top corporate
priority for 2010.
BOARD OF DIRECTORS
15.025%
6.526%
In 2009, the board authorized the redemption in
cash of members’ shares totalling $278.1 million.
PLANNING
FCL’s board of directors and senior management
begin the annual planning cycle with a joint meeting
in January.The purpose of this strategic meeting
is to review the corporate mission and objectives,
understand and review the business services that FCL
provides to the Co-operative Retailing System (CRS),
The board met nine times in 2009. In addition to their
regular and in-camera meetings, board members
increased their knowledge of FCL and its operations
by conducting nine division reviews.These reviews
provide an opportunity for discussion between the
board and other management employees within FCL.
The directors within each of the five regions also met
with their region manager, various region management
employees and the Executive Management Committee
representative four times last year.The board’s six
standing committees (identified on page 4) met
throughout the year.
1
2
B o a r d of di r e ctors ’ r e p ort
1A - Keith Corbould
1B - Judy Clavier
2 - Alice Marler
3 - Don Fluney
4 - Doug Potentier
Region Chair
5 - Johanna Bates
6 - Russell Wolf
Region Chair
7A - Donna Bourgoin
7B - Marilyn McKee
8 - Dusty MacDonald
Region Chair
9 - Herb Carlson
10 - Don Russell
11A - Sandy Richards
Region Chair
13A - John Sandborn
13B - Richard Lemoing
11B - Beryl Bauer
12 - Ed Dufault
Vice-Chair of the Board
14 - Barry Gosnell
15 - Glen Tully
Region Chair
President of the Board
3
C o m m u n i t y F o c u s e d • Va l u e D r i v e n
The board also began work on a project to build
a board competency framework and new board
evaluation process.The services of an external
consultant were retained in order to assist with the
process.The board identified and defined the
key functional areas of a board of directors of a
co-operative, and determined what skills, knowledge
and attributes are needed to effectively carry out
these functions.The board shared its discussions
with participants at the 2009 fall conferences.
Further work will be done on this project in 2010.
On October 9, 2009, CEO Art Postle announced his
retirement from FCL effective April 30, 2010.The board
immediately began the recruitment process for his
successor.
Throughout the year, board members also visited
retail co-operatives and participated in membership
meetings (such as fall conferences, June district
meetings and the annual meeting).This year’s July
board tour took place in British Columbia where
board members had the opportunity to visit a
number of retail co-operatives in district 4.
At the annual meeting, board members and delegates
bid farewell to retiring director Wilf Marcotte, who
served 6 years as the director of district 8. At the same
meeting, Dusty MacDonald was elected director of
district 8. In June, Johanna Bates replaced Randy Kott,
who served one year as the director for district 5.
At the 80th annual meeting, delegates approved the
resolution amending the term of office for the directors
in districts 1A and 11B to be a one year term in order
to facilitate the transition from 19 to 15 districts.The
directors in 7B, 11A and 13B earlier agreed to relinquish
the final year of their terms in order to match the term
expiry dates in the corresponding numbered district.
At the 81st annual meeting, director elections will be
held in the four combined districts, resulting in a 15
member board.
District
Director
Meeting Term
Days Expires
1A
Keith Corbould, Bella Coola, BC
18
2010
1B
Judy Clavier, Sunset Prairie, BC
21
2010
2
Alice Marler, Camrose, AB
17
2011
3
Don Fluney, Dewberry, AB
20
2012
4
Doug Potentier, Victoria, BC
21
2011
5
Johanna Bates, Calgary, AB
6
Russell Wolf, Markerville, AB
18
2010
7A
Donna Bourgoin, Swift Current, SK
21
2010
7B
Marilyn McKee, Mossbank, SK
21
2010
8
Dusty MacDonald, Carlyle, SK
14**
2012
9
Herb Carlson, Buchanan, SK
20½
2011
10
Don Russell, Rosetown, SK
21
2012
11A
Sandy Richards, Unity, SK
21
2010
11B
Beryl Bauer, Lake Lenore, SK
21
2010
12
9*
2011
Ed Dufault, Naicam, SK
21
2010
13A
John Sandborn, Benito, MB
17
2010
13B
Richard Lemoing, Minnedosa, MB
19
2010
14
Barry Gosnell, Carman, MB
21
2012
15
Glen Tully, Saskatoon, SK
21
2010
* Appointed at the June board meeting.
** Elected at the 80th annual meeting.
4
B o a r d of di r e ctors ’ r e p ort
Board Committees
Executive & Governance Committee – Acts for the board,
as may be required, between scheduled board meetings.
Oversees the processes and structures used to manage
the business of the Co-operative’s operations and
activities, and any other governance related issues.
Board Representative to Central Learning &
Development Committee
R. Wolf
Board Representatives on Region Learning &
Development Committees
Audit Committee – Ensures that the operations and financial
position of the Co-operative are appropriately audited.
Edmonton
Calgary
Regina
Saskatoon
Winnipeg
K. Corbould (chair), J. Clavier, D. Bourgoin, E. Dufault,
J. Sandborn
FCL MEMBERSHIP CHANGES
G.Tully (chair), B. Bauer, A. Marler, D. Potentier, M. McKee,
D. Russell, B. Gosnell
Compensation Committee – The broad responsibility
of studying any and all compensation matters for the
Co-operative and its subsidiaries, submitted to it by the
board of directors or by the chief executive officer, and
for making recommendations with respect to such
matters to the board of directors as may be appropriate.
D. Russell (chair), D. Potentier, B. Bauer, B. Gosnell
P. Zakreski (staff representative)
Environmental Committee – Reviews the environmental
practices of the Co-operative, and ensures that policies and
procedures are in place.
H. Carlson (chair), D. Fluney, M. McKee, E. Dufault
E. Lawrenz, S. Stener (staff representatives)
Learning and Development Committee – Provides leadership
in analyzing learning and development needs of the FCL
board of directors and delegates. Recommends policies and
programs that will develop the leadership potential of elected
officials in the Co-operative Retailing System.
R. Wolf (chair), J. Bates, D. MacDonald, S. Richards
P. Zakreski (staff representative)
Member Relations Committee – Reviews events and
activities that involve the FCL membership. Considers
issues related to the profile of the Co-operative Retailing
System in the broader community. Reviews requests for
grants and donations on behalf of the board of directors.
J. Clavier (chair), D. MacDonald, S. Richards, R. Lemoing
S. Banda (staff representative)
President of the Board G.Tully serves as an ex-officio
member of all committees.
J. Clavier, D. Fluney
D. Potentier, J. Bates
D. Bourgoin
E. Dufault
B. Gosnell
At October 31, 2009, the members of FCL were made up of
264 member retail co-operatives, 2 affiliate members and 17
associate members. Four changes occurred during the year.
Kenaston and Riverbend Co-ops amalgamated to form
Riverbend Co-op. Homewood and Pembina Co-ops
amalgamated to form Pembina Co-op. Lipton and Prairie
Co-ops amalgamated to form Prairie Co-op. Consumers
and Otter Co-ops amalgamated to form Otter Co-op.
MEMBER AND PUBLIC RELATIONS
Democratic Process
Member communication and participation are extremely
important for good governance.The FCL board of directors
strives to ensure that the democratic process,member relations
and communications programs maintain an effective link with
member retail co-operatives and their members.
Forums such as the annual meeting,June meetings and fall
conferences are ideal for reviewing activities,discussing
opportunities and solutions,and putting ideas forward.
Throughout the year,board members utilized these meetings
as opportunities to engage the democratic body in a number
of different discussions on topics such as delegate entitlement,
purchase thresholds for payment of annual meeting expenses,
voting at fall conferences,delegate training and director
competencies.
Resolutions are a part of the democratic decision making process
and a means of communication between retail co-operatives and
FCL.Resolutions intended for debate at annual meetings are first
considered by fall conferences.Approved resolutions are then
reviewed by the Resolutions Committee during its January meeting and sent to retail co-ops and their delegates in late January.
Community Focused • Value Driven
This ensures that retail co-operative boards of directors have the
opportunity to discuss the resolutions and give guidance to their
delegates prior to the consideration of motions at the annual
meeting.A report on approved resolutions is provided at fall
conferences and a final report is prepared for the next year’s
annual meeting.
In addition to these formal opportunities,our System utilizes
a number of other communication vehicles.The President’s
Newsletter is issued to directors of member retail co-operatives
and contains information on FCL operations and board
activities,as well as highlights from various retail co-operative
operations and activities.This annual report offers a
comprehensive review of the results of the past year.FCL’s
new website,launched in the fall of 2009,is also a source for
information.Extensive work over the past year has gone into
the design and development of the website.The goal is to
continually enhance the communication services available
within the Co-operative Retailing System and to make tools
available to improve business processes.
Co-operative Education
FCL has always been involved in the development of youth
leaders.Examples of this involvement are the youth camp
programs which FCL sponsors through provincial co-operative
associations every summer and donations made to provincial
4-H associations in the four western provinces.FCL also
contributes time and sponsorship funds to the annual
Canadian Western Agribition,which helps to educate school
children about the role of agriculture and co-operative
business in the economy.
At the post-secondary level,FCL assists in the advancement
of co-operative theory and practice through financial
contributions to the Centre for the Study of Co-operatives
at the University of Saskatchewan and the British Columbia
Institute for Co-operative Studies at the University of Victoria.
Through board representation,FCL also supports the activities
of the Co-operative Chair in Agricultural Marketing and Business
at the University of Alberta and the Agribusiness Chair in
Co-operatives and Group Marketing at the University
of Manitoba.
In addition,FCL regions host,in alternate years and where
numbers warrant,a New Directors’Orientation Program where
newly elected directors gather to learn more about their role and
responsibilities,region services,FCL,and the history of the CRS.
The Saskatoon Region hosted this orientation program in 2009.
5
THE CO-OPERATIVE SECTOR
Throughout the year,members of the board represented the
CRS at gatherings of other co-operatives.By attending these
meetings,directors gain a broader understanding of the
co-operative sector and the issues being confronted.The
board also participated in representation to governments
in order to advance the positions of the co-op sector either
directly or indirectly through co-operative associations.
FCL participates in the larger co-operative sector through its
membership in the Ottawa-based Canadian Co-operative
Association (CCA) and through CCA’s membership in the
International Co-operative Alliance.CCA represents the
interests of co-operatives at home and abroad on matters of
economic and social policy,and international development.
Vice-Chair of the Board Beryl Bauer represents FCL on CCA’s
board of directors.Board members also represent FCL on
provincial co-operative associations in the four western provinces.
The provincial bodies co-ordinate youth programs,educational
activities and provincial government relations.
During CCA’s National Congress,held in Ottawa,Ontario
last June,FCL President Glen Tully was honoured with a
“Canadian Co-operative Achievement Award”in recognition
of his willingness to serve,strong work ethic,dedication to
high ideals and outstanding leadership skills to the national
and international Co-operative Movement.
Merit/Distinguished Co-operator Awards
During the year, individuals and organizations were
recognized for their contributions to co-operatives.
Congratulations to those honoured:
Alberta:
Terry Semeniuk (posthumous), Calgary
Central Alberta Rural Electrification
Association, Innisfail
Sundance Housing Co-operative, Edmonton
Saskatchewan:
Karl Baumgardner, Saskatoon
Manitoba:
Sandy Francis, Winnipeg
Allen Merritt, Portage la Prairie
Harold Stitt, Erickson
Mel Willis, Winnipeg
6
Mission and objectives
“THE MISSION of Federated Co-operatives Limited is to
improve the economic position of its member-owners
within a responsible democratic structure.”
THE OBJECTIVES of Federated Co-operatives Limited are:
(a) TO co-ordinate the procurement, processing,
(g) TO play an active role in the establishment of
manufacturing and distribution of goods and
services for the Co-operative Retailing System.
facilities for the manufacturing and marketing
of products.
(b) TO provide positive, responsible, and effective
(h) TO initiate and maintain effective human
leadership.
resource programs.
(c) TO apply prudent fiscal management policies and
(i) TO promote and provide co-operative learning
practices designed to generate adequate levels of
earnings, members’ equity and other appropriate
financial strengths.
and educational opportunities.
(j) TO explore, consider and participate in
appropriate business opportunities which offer
benefits to the Co-operative Retailing System.
(d) TO conduct activities in a safe, socially and
environmentally responsible manner, ensuring
compliance with the law.
(k) TO increase member and public awareness
of Federated Co-operatives Limited and the
Co-operative Retailing System.
(e) TO supply merchandise to retail co-operatives
that is competitive considering price, quality, terms
of payment, guarantee and other distinctive services
or advantages.
(f) TO assist retail co-operatives in the achievement
NOTE: No ranking of objectives according to priority
or importance is implied by the order in which they
are listed. Each objective is important.
of growth in an economically viable manner.
Art Postle
Randy Boyer
Scott Banda
Chief Executive Officer
Vice-President
Treasurer
Vice-President
Corporate & Legal Affairs
Auditors’ report
To the Members of Federated Co-operatives Limited
We have audited the consolidated balance sheet of Federated Co-operatives Limited
as at October 31, 2009 and the consolidated statements of savings and retained
savings and cash flows for the year then ended.These financial statements are the
responsibility of the Co-operative’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 Co-operative 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.
Saskatoon, Saskatchewan
December 9, 2009
Chartered Accountants
7
8
A u d i t e d f i n a n c i a l S tat e m e n t s
Federated Co-operatives Limited, October 31, 2009
Consolidated Statement of Savings and Retained Savings
2009
2008
Sales ........................................................................................................ $ 6,539,995,000
Cost of products sold ..................................................................
5,757,561,000
$ 8,400,368,000
782,434,000
1,020,895,000
Operating and administration ..............................................................
260,727,000
228,195,000
Interest revenue ..................................................................................
(16,709,000)
(30,182,000)
Income taxes - current (Note 6) ............................................................
68,530,000
106,694,000
Income taxes - future (Note 6) ..............................................................
(7,797,000)
7,379,473,000
Expenses
(1,344,000)
304,751,000
303,363,000
477,683,000
717,532,000
Other income ....................................................................................
13,891,000
38,011,000
Net savings before patronage allocation ........................
491,574,000
755,543,000
Patronage allocation ....................................................................
(341,419,000)
(523,506,000)
Net savings after patronage allocation ............................
150,155,000
Retained savings, beginning of year ..................................
1,464,903,000
Change in accounting policy (Note 3) ....................................
(1,066,000)
Retained savings, end of year ................................................ $ 1,613,992,000
232,037,000
1,232,866,000
$ 1,464,903,000
9
A u d i t e d f i n a n c i a l S tat e m e n t s
Federated Co-operatives Limited, October 31, 2009
Consolidated Statement of Cash Flows
2009
2008
Operating activities
Net savings before patronage allocation ..................................................
$
491,574,000
$
755,543,000
Adjustments for:
Depreciation and depletion ......................................................................
124,216,000
119,605,000
Gain on disposal of property, plant and equipment..........................
(2,758,000)
(3,345,000)
Future income taxes ......................................................................................
(7,797,000)
(1,344,000)
Accounts receivable ......................................................................................
112,026,000
(161,036,000)
Inventories ........................................................................................................
13,180,000
(14,650,000)
Other current assets ......................................................................................
221,000
1,075,000
Changes in non-cash operating working capital:
(96,727,000)
131,064,000
633,935,000
826,912,000
Investments and advances..........................................................................
(13,348,000)
(13,858,000)
Additions to property, plant and equipment ......................................
(397,216,000)
(160,393,000)
Accounts payable ..........................................................................................
Cash provided by operating activities ........................................................
Investing activities
Purchase of NewGrade Energy Inc. ..........................................................
-
Proceeds from sale of property, plant and equipment ....................
8,035,000
(325,000,000)
9,716,000
(402,529,000)
(489,535,000)
Redemption of share capital ......................................................................
(273,891,000)
(422,450,000)
Cash used in financing activities ..................................................................
(273,891,000)
(422,450,000)
Net decrease in cash and cash equivalents ..............................
(42,485,000)
Cash and cash equivalents, beginning of year ..............
1,096,960,000
Cash and cash equivalents, end of year ................................ $ 1,054,475,000
(85,073,000)
Cash used in investing activities....................................................................
Financing activities
1,182,033,000
$ 1,096,960,000
10
A u d i t e d f i n a n c i a l S tat e m e n t s
Federated Co-operatives Limited, October 31, 2009
Consolidated Balance Sheet
2009
2008
Current assets
Cash and cash equivalents (Note 2) .............................................................. $ 1,054,475,000
216,479,000
341,207,000
187,048,000
522,857,000
1,997,000
68,000
54,232,000
2,378,363,000
$ 1,096,960,000
205,024,000
375,378,000
264,903,000
537,284,000
2,286,000
96,621,000
2,578,456,000
Investments and advances (Note 7) ................................................
Future income taxes (Note 6) ................................................................
Property, plant and equipment, at cost,
94,917,000
20,658,000
81,569,000
32,117,000
less accumulated depreciation (Note 2) ......................................................
1,290,651,000
$ 3,784,589,000
1,022,747,000
$ 3,714,889,000
Members' funds on deposit (Note 2) ............................................................
Members' accounts receivable........................................................................
Non-members' accounts receivable..............................................................
Inventories (Note 2) ............................................................................................
Prepaid expenses ................................................................................................
Income taxes receivable ....................................................................................
Future income taxes (Note 6) ..........................................................................
Current liabilities
Accounts payable ................................................................................................ $
Share capital redemption..................................................................................
Members' funds....................................................................................................
Income taxes payable ........................................................................................
Future income taxes (Note 6) ..........................................................................
Future income taxes (Note 6) ................................................................
704,146,000
258,889,000
216,479,000
55,023,000
1,234,537,000
$
644,292,000
407,332,000
205,024,000
8,138,000
97,370,000
1,362,156,000
137,504,000
156,802,000
798,556,000
Retained savings ............................................................................................
1,613,992,000
2,412,548,000
$ 3,784,589,000
731,028,000
1,464,903,000
2,195,931,000
$ 3,714,889,000
Members' equity
Share capital (Note 8)
Membership shares of $100 par value each ..........................................
On behalf of the Board
Director
Director
11
A u d i t e d f i n a n c i a l S tat e m e n t s
Federated Co-operatives Limited, October 31, 2009
Notes to the Consolidated Financial Statements
1. Description of Business
The Co-operative is incorporated under the Canada Cooperatives Act.The Co-operative provides central wholesaling,
manufacturing and administrative services to 264 locally owned retail co-operatives across western Canada.
2. Significant Accounting Policies
(a) Principles of consolidation
The consolidated financial statements include the accounts of the Co-operative, its subsidiaries and its joint ventures
to the extent of the Co-operative's interest in their respective assets, liabilities, revenues and expenses. All significant
inter-company transactions and balances have been eliminated.
(b) Cash and cash equivalents and members’ funds on deposit
Cash and cash equivalents and members’ funds on deposit are comprised of cash, bank balances, less outstanding
cheques, and short-term investments. Short-term investments of $1,204,123,000 (2008 - $1,325,324,000) are classified
as held-to-maturity and are recorded at cost.
(c) Inventories
Inventories are valued at the lower of cost and net realizable value.
Cost is determined by the first-in, first-out and weighted average
method. Inventories consist of the following:
Manufactured products ................................................................................................
Goods purchased for resale ........................................................................................
Parts and supplies............................................................................................................
2009
$ 289,839,000
182,396,000
50,622,000
$ 522,857,000
2008
$
314,512,000
173,082,000
49,690,000
$
537,284,000
(d) Income taxes
The Co-operative follows the liability method of accounting for income taxes. Under this method, future income
taxes are recognized based on the expected future tax consequences of differences between the carrying amount
of balance sheet items and their corresponding tax basis, using the enacted and substantively enacted income tax
rates for the years in which the differences are expected to reverse.
(e) Property, plant and equipment
Property, plant and equipment are recorded at cost. Depreciation is recorded on a straight line basis over the estimated
useful life of the asset or on a diminishing balance basis using varying rates.
The major categories of the Co-operative’s property, plant and equipment are:
Net Book Value
Accumulated
Cost
Depreciation
Category
2008
2009
Wholesaling ................................ $
Manufacturing ............................
Assets under construction......
488,505,000
1,892,662,000
449,489,000
$
$
2,830,656,000
$
349,314,000
1,190,691,000
1,540,005,000
$ 139,191,000
701,971,000
449,489,000
$1,290,651,000
$
121,695,000
790,518,000
110,534,000
$
1,022,747,000
(f) Impairment of long-lived assets
An impairment loss is recognized when the carrying amount of a long-lived asset is not recoverable and exceeds its fair
value. No such impairment loss was recorded in 2009.
(g) Employee benefit plans
The costs of the Co-operative's defined benefit plan are determined periodically by independent actuaries.The costs
charged to earnings for the year include the costs for benefits provided for services rendered during the year, using the
projected benefit method pro-rated on services and amortization of the cost of benefits for past service and actuarial
gains or losses. Amortization is calculated over the expected average remaining service life of the employee group
covered by the plan, namely 15 years.
Defined contribution plan costs are charged to savings for services rendered by employees during the year.
12
A u d i t e d f i n a n c i a l S tat e m e n t s
Federated Co-operatives Limited, October 31, 2009
Notes to the Consolidated Financial Statements
(h) Foreign currency translations
Monetary assets and liabilities denominated in foreign currencies are translated at the year-end exchange rate.
Revenues and expenses are translated at rates of exchange prevailing on the transaction dates.
(i) Revenue recognition
The Co-operative recognizes revenue when evidence of an arrangement exists, delivery has occurred, and the
price to the buyer is determined.
(j) Use of estimates
The preparation of consolidated financial statements requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.The amounts of such items are
based upon the Co-operative's best information and judgment. Actual amounts could differ from these estimates.
(k) Asset retirement obligations
The Co-operative is required to comply with governing environmental legislation pertaining to the remediation of
contaminated property and the decommissioning of assets.The fair value of asset retirement obligations cannot be
reasonably estimated as the timing, extent and method of any such remediation or decommissioning is not known.
(l) Comprehensive income
Comprehensive income consists of net savings and other comprehensive income.The Co-operative does not have
other comprehensive income. Since comprehensive income is the same as net savings after patronage allocation,
a statement of comprehensive income is not provided.
3. Change in Accounting Policy
Effective November 1, 2008, the Co-operative adopted the Canadian Institute of Chartered Accountants section 3031,
“Inventories”, which replaced section 3030 of the same name.The new standard includes more specific guidance on the
costs to include in the cost of inventory and additional measurement and disclosure requirements.The Co-operative
adopted the standard prospectively using the permitted transitional provisions.These provisions resulted in applying
the impact of adopting the new standard to opening inventory on November 1, 2008 with an offsetting change to
opening retained savings. As a result of this accounting standard change, inventory and opening retained savings
were decreased by $1,066,000 on November 1, 2008.
4. Generally Accepted Accounting Principles for Private Enterprises
In October 2009 the Accounting Standards Board approved the final accounting standards for Private Enterprises
in Canada.The standards are expected to be issued by the end of 2009 as part of the CICA Accounting Handbook
effective for annual financial statements relating to fiscal years beginning on or after January 1, 2011. At this time,
the impact on the Co-operative’s financial statements is not reasonably determinable.
5. Financial Instruments and Risk Management
(a) Capital management
The Co-operative applies prudent fiscal management policies and practices designed to generate adequate levels of
savings and members’ equity.The Co-operative builds retained savings so there are adequate levels of assets on hand
to meet its short and long-term requirements.
(b) Currency risk
The Co-operative incurs a relatively small portion of its sales and purchases in U.S. dollars and is expected in the
next fiscal year to incur large capital expenditures in U.S. dollars related to the refinery expansion. As a result, the
Co-operative is exposed to foreign exchange fluctuations.The Co-operative's exposure to fluctuations in the value
of the U.S. dollar is partially mitigated by the fact that it has both U.S. dollar denominated accounts receivable and
U.S. dollar denominated accounts payable. Although the Co-operative will from time to time purchase U.S. dollars it
does not actively hedge this risk.
(c) Credit risk
The majority of the Co-operative's sales are in western Canada and a significant portion of its customers are impacted
by the agricultural industry.The Co-operative manages the credit risk through an active credit management program.
13
A u d i t e d f i n a n c i a l S tat e m e n t s
Federated Co-operatives Limited, October 31, 2009
Notes to the Consolidated Financial Statements
(d) Interest rate risk
The Co-operative does not have a significant exposure to interest rate risk.
(e) Fair value
The fair values of cash, members' funds on deposit, accounts receivable, finance agreements, accounts payable,
and share capital redemption approximate their carrying values.
6. Corporate Income Taxes
2009
The Co-operative's effective tax rate is determined as follows:
Net savings before corporate taxes ..................................................................................
Combined federal and provincial income tax rate ......................................................
Computed tax expense based on the combined rate ................................................
Increase resulting from:
Other non-deductible items..........................................................................................
Future income tax benefit resulting from changes in tax rates ..............................
Provision for income taxes ....................................................................................................
Provincial capital taxes ..........................................................................................................
Provision for corporate taxes................................................................................................
$ 210,888,000
29.11%
61,389,000
Effective tax rate on savings before corporate taxes ..................................................
28.80%
$
829,000
(1,505,000)
60,713,000
20,000
60,733,000
2008
$
$
337,387,000
31.62%
106,665,000
261,000
(1,602,000)
105,324,000
26,000
105,350,000
31.23%
Classified in the consolidated financial statements as:
Income taxes - current ............................................................................................................
Income taxes - future ..............................................................................................................
Provision for corporate taxes................................................................................................
$
68,530,000
(7,797,000)
60,733,000
$
$
44,224,000
4,605,000
10,008,000
(128,628,000)
(47,846,000)
$ (117,637,000)
$
$
$
$
$
106,694,000
(1,344,000)
105,350,000
Income taxes allocated to future years are comprised
of the following:
Non-capital loss and deductible patronage allocation carryforwards..................
Tax value of resource pools in excess of net book value ............................................
Miscellaneous accruals and reserves ................................................................................
Net book value in excess of undepreciated capital cost ............................................
Patronage allocations deferred for income tax purposes..........................................
Total future tax liability ..........................................................................................................
95,869,000
4,769,000
7,583,000
(132,509,000)
(101,146,000)
$ (125,434,000)
Classified in the consolidated financial statements as:
Current future income tax assets........................................................................................
Long-term future income tax assets..................................................................................
Current future income tax liabilities ..................................................................................
Long-term future income tax liabilities ............................................................................
Total future tax liability ..........................................................................................................
54,232,000
20,658,000
(55,023,000)
(137,504,000)
$ (117,637,000)
96,621,000
32,117,000
(97,370,000)
(156,802,000)
$ (125,434,000)
14
A u d i t e d f i n a n c i a l S tat e m e n t s
Federated Co-operatives Limited, October 31, 2009
Notes to the Consolidated Financial Statements
7. Investments and Advances
Investments and advances are recorded at the lower of cost and net realizable value.
2009
2008
Investments
The Co-operators Group Limited......................................................................
$
Interprovincial Cooperative Limited................................................................
Other ..........................................................................................................................
5,033,000
844,000
1,015,000
$
6,103,000
567,000
956,000
Advances
Interprovincial Cooperative Limited member loan at a floating interest rate ..............................................
844,000
567,000
Finance agreements ............................................................................................
87,181,000
73,376,000
$
94,917,000
$
81,569,000
8. Members' Share Capital
The Co-operative is authorized to issue an unlimited number of member shares of $100 par value each. Under
certain circumstances and with the approval of the Board of Directors, member shares may be redeemed at par value.
2009
2008
Balance, beginning of year ......................................................................................
$ 731,028,000
Current year’s savings allocated by allotment of shares................................
341,419,000
523,506,000
1,072,447,000
1,153,478,000
Shares redeemed ........................................................................................................
273,891,000
422,450,000
Balance, end of year ....................................................................................................
$ 798,556,000
$
$
629,972,000
731,028,000
A u d i t e d f i n a n c i a l S tat e m e n t s
15
Federated Co-operatives Limited, October 31, 2009
Notes to the Consolidated Financial Statements
9. Segmented Information
The Co-operative has six reportable business segments.
Sales
Crop Supplies
Feed
Food
Forest Products
General
Merchandise
Petroleum
Total
Upper Line - 2009
Lower Line - 2008
Income
Tax
Expense
Interest
Revenue
Depreciation
Net Savings
Before Patronage
Allocation
$
360,240,000
$
332,000
$
235,000
$
1,711,000
$ 27,825,000
$
293,019,000
$
315,000
$
508,000
$
1,233,000
$ 25,318,000
60,029,000
1,024,000
47,000
170,000
899,000
72,903,000
1,279,000
200,000
348,000
562,000
1,710,485,000
6,717,000
2,801,000
14,643,000
84,701,000
1,666,378,000
6,566,000
7,760,000
15,926,000
85,157,000
38,240,000
4,860,000
-
205,000
(8,793,000)
52,261,000
5,070,000
387,000
1,460,000
(11,461,000)
326,331,000
936,000
273,000
1,385,000
18,934,000
347,491,000
1,020,000
623,000
1,574,000
20,225,000
4,044,670,000
110,347,000
13,353,000
42,619,000
368,008,000
5,968,316,000
105,355,000
20,704,000
84,809,000
635,742,000
$ 6,539,995,000
$124,216,000
$ 16,709,000
$ 60,733,000
$ 491,574,000
$ 8,400,368,000
$119,605,000
$ 30,182,000
$ 105,350,000
$ 755,543,000
16
A u d i t e d f i n a n c i a l S tat e m e n t s
Federated Co-operatives Limited, October 31, 2009
Notes to the Consolidated Financial Statements
10. Pension Plan
(a) Defined contribution plan
The Co-operative and the majority of its employees make contributions to two multi-employer defined
contribution plans.The employee contribution rates are in the range of 2.5% to 6%, while the Co-operative’s
rates are in the range of 2.5% to 13%.The Co-operative’s total contribution expense for these plans in 2009
is $5,425,000 (2008 - $5,064,000).
(b) Defined benefit plan
The defined benefit plan covers the employees at the petroleum facility in Regina.The plan provides pensions
based on the number of years of service and the average of the best three years earnings.The employees do not
contribute to the plan.
The consolidated information presented in the table below is based on actuarial valuation results as of
December 31, 2007, with extrapolations to October 31, 2009.
2009
Plan assets
Fair value, beginning of year ........................................................
Contributions ....................................................................................
Benefits paid ......................................................................................
Actual return on plan assets ..........................................................
Fair value, end of year......................................................................
$ 112,117,000
12,177,000
(2,032,000)
11,962,000
$ 134,224,000
2008
$
$
118,666,000
10,712,000
(1,421,000)
(15,840,000)
112,117,000
Accrued benefit obligation
Balance, beginning of year................................................................
Current service cost ........................................................................
Interest cost ............................................................................................
Benefits paid ......................................................................................
Actuarial gain ....................................................................................
Balance, end of year ........................................................................
Funded status - plan deficit ..............................................................
Unamortized transitional obligation ............................................
Unamortized past service costs ......................................................
Unamortized (gains) losses ..............................................................
Accrued benefit liability ....................................................................
$ 159,842,000
7,878,000
9,766,000
(2,032,000)
(18,047,000)
$ 157,407,000
$
$ (23,183,000)
6,767,000
17,070,000
(12,049,000)
$ (11,395,000)
$
$
$
$
$
149,364,000
8,089,000
8,856,000
(1,421,000)
(5,046,000)
159,842,000
(47,725,000)
7,444,000
18,463,000
11,710,000
(10,108,000)
The defined benefit plan pension expense is as follows:
Current service cost ............................................................................
Interest on accrued benefit obligation ........................................
Interest on plan assets ........................................................................
Amortization of transitional obligation........................................
Amortization of past service costs ................................................
Amortization of (gains) and losses ................................................
$
7,854,000
9,766,000
(7,032,000)
677,000
1,393,000
781,000
13,439,000
$
8,074,000
8,856,000
(7,152,000)
677,000
1,393,000
(445,000)
11,403,000
The significant actuarial assumptions are as follows:
Discount rate for the pension expense ........................................
Discount rate for year-end accrued benefit obligation ..........
Expected long term rate of return on plan assets ....................
Rate of compensation increase ......................................................
6.00%
6.60%
6.00%
3.50%
5.80%
6.00%
5.80%
3.50%
17
Audited financial Statements
Federated Co-operatives Limited, October 31, 2009
Notes to the Consolidated Financial Statements
11. Contingencies
Various claims and lawsuits are pending against the Co-operative. While it is not possible to determine the ultimate
outcome of such actions at this time, it is management's opinion that the ultimate resolution of such matters will
not have a material adverse effect on the Co-operative's financial condition or results of operation.
12. Commitments
Lease Commitments
The Co-operative leases certain facilities and equipment under operating leases, the latest of which expires in 2018.
Future lease payments total $4,563,000 and include the following amounts over the next five years and thereafter:
$ 1,197,000
2013 ........................................................................
538,000
2011 ....................................................................
953,000
2014 ........................................................................
519,000
2012 ....................................................................
593,000
Thereafter ............................................................
763,000
2010 ....................................................................
Purchase Commitments
The Co-operative is also committed to capital expenditures of $619,085,000 for the refinery expansion project
in Regina.The expansion project is expected to be completed in 2012.
13. Comparative Figures
Certain prior period information has been reclassified to conform with the current period presentation.
19
retail Division report
RETAIL OPERATIONS
Final results for the 2009 fiscal year will be published in
the Retail Statistics Manual issued in June.This manual is
a useful tool for preparing business plans, budgets and
for comparing retail co-op operations.
The Co-op Membership Benefits Program continued
to be effectively and aggressively promoted by retail
co-ops. Over the last ten years, retail co-ops have paid
a combined total of more than $1.2 billion to members
in cash. Quality CO-OP® brand private label products,
personalized service and participation as a community
builder round out the Co-op Membership Benefits
Program. FCL makes a variety of materials available
to assist retail co-ops in promoting all four categories
of benefits.
Ken McCullough
Vice-President
Retail Operations
Retail co-operatives across western Canada are
continuously striving to improve their image,
merchandise standards, financial stability and
earnings for their members.That's an exciting
prospect, particularly for the more than 1.3 million
co-op members who reap the benefits of membership
every time they visit a co-op facility.
The Retail Division works directly with retail co-operatives
to help generate maximum membership benefits.The
division provides marketing, financial, human resources
and operational services to retail co-operatives from
region offices in Edmonton, Calgary, Regina, Saskatoon
and Winnipeg.
Ken McCullough was appointed Vice-President – Retail
Operations in October 2009. He replaced Ken Hart, who
retired after 44 years of service with the Co-operative
Retailing System.
The Retail Division encourages retail co-ops to work
together to create System efficiencies through the Area
Development Program. Many retail co-ops now share fuel
delivery, accounting and general management services.
Others share bulk plants and cardlocks, bakery and meat
cutting services, building estimating, credit and security
services.These types of efficiencies drive costs out of the
System, which results in more benefits for retail members.
RETAIL FACILITIES DEPARTMENT
Retail facility development remained a high priority
for the CRS.The Retail Facilities Department is
involved with the planning and development of
Keith Jones
Barry Manovich
Doug Wiebe
Gerard Muyres
Barry McPhail
Edmonton
Calgary
Regina
Saskatoon
Winnipeg
20
retail Division report
new construction, and expansion and renovation
projects for food stores, home centres, agro centres
and convenience stores. During the year, the
department assisted retail co-ops with 193 projects.
New and upgraded convenience stores continued to
be a key focus for retails with a total of 43 new facilities
either completed or at some stage of development.
Another 29 new facilities are in process. Seventeen of
these are home or agro centres and 12 are food stores.
The remainder of the projects include expansions,
major upgrades and renovations, quick store upgrades,
exterior facelifts, refrigeration improvements and new
tenant facilities.
This record number of projects clearly reflects the
commitment of retails to maintain and upgrade the
image of the CRS, and continues to demonstrate that
retail co-ops are community builders. Numerous
projects are also in the planning stage for 2010
and 2011.
MARKET DEVELOPMENT DEPARTMENT
The Market Development Department assists retail
co-ops by providing detailed demographic, market
and sales potential reports for their local trading
areas. A newsletter summarizing demographic, social,
economic, marketing and retailing trends is also issued
regularly. In addition, the department provides various
survey options to retail co-ops to assess market needs
and preferences, and assists retails with focus group
and board planning sessions and with various member
relations programs.
Cliff Irving
Vanderhoof, BC
Carol Rollheiser
Camrose, AB
Ted Rodych
Medicine Hat, AB
EXECUTIVE MANAGEMENT COMMITTEE
A thank you is extended to the members of the
Executive Management Committee (EMC) for their
contributions. Comprised of retail co-op General
Managers representing each region and Calgary
Co-op, the EMC advises FCL's Chief Executive Officer
and the senior management team on CRS marketing
and administrative programs.
Deane Collinson
Calgary, AB
Ken Bahuaud
Assiniboia, SK
Greg Schoonbaert
Nipawin, SK
Troy Verboom
Minnedosa, MB
Consumer Products & logistics Division report
FOOD DEPARTMENT
Terry Bell
Vice-President
Consumer Products & Logistics
The Consumer Products and Logistics Division is
comprised of the Food and General Merchandise
Departments, warehousing and trucking operations,
and The Grocery People Ltd. (a wholly-owned subsidiary).
The division helps retail co-operatives effectively respond
to the demands of today’s competitive marketplace by
supplying the right products at the right prices,
maintaining effective centralized advertising programs,
training retail co-operative employees in all aspects of
merchandising and operations, and ensuring the flow
of product from suppliers to FCL’s distribution centres,
which are located in Edmonton, Calgary, Saskatoon and
Winnipeg, and ultimately to retail co-operative facilities.
2009 was an interesting
year for the department.
In spite of the economic
recession, excellent results
were achieved. Very good
sales increases are directly
attributed to retail co-op
food stores being the best
in most communities that
they serve.
New initiatives continued to
be worked on throughout
the year.The number of products offered through the
CO-OP® Gold Organics program was dramatically
increased. Sales have surpassed expectations and
more products will be added in 2010.
Salad bars continued to be added to many food floors
and have achieved very good results.This program is
unique to the CRS in western Canada.
Signage was developed for produce departments
that advises customers which products have been
“locally grown”.
The very successful “warehouse sales” and “10 for $10
sales” continued to be promoted. Special coupon
promotions were also added which experienced very
good results.
Co-op gift cards and third party gift cards were introduced
late last year and continued to experience strong sales
in 2009.
Food safety continues to be very important. A Food Safety
Director position was added to the department in 2009 to
better assist both FCL and the CRS in this complex area.
The retail pricing project has been implemented for
dry groceries in all locations.The fresh departments are
currently being worked on with bakery expected to be
the first added.
21
22
Consumer Products & logistics Division report
Self-scanning point-of-sale equipment was added at
six retails with many more considering this in the near
future.This will assist retails in areas where hiring staff
is difficult.
GENERAL MERCHANDISE DEPARTMENT
Shelf management plans are now sent electronically to
each retail.This has significantly decreased the length
of time in getting new products on the shelf.
On January 1, 2009, FCL joined the Independent
Lumber Dealers Co-operative buying group.This
organization serves businesses across the country.
Major savings have been passed on to retails due
to this move.
THE GROCERY PEOPLE LTD.
The Grocery People Ltd. (TGP) supplies groceries to
independent retail outlets in the four western provinces,
western Ontario, Nunavut, the Yukon and the Northwest
Territories.TGP accounts operate under the SUPER A
FOODS™, BIGWAY FOODS™, and TAGS™ banners.TGP
also supplies fresh produce to retail co-ops in northern
British Columbia, Alberta, Saskatchewan, Manitoba and
western Ontario.
The department experienced a good year in the area
of sales.
The uniform program introduced in 2008 continued
to show great sales and acceptance.This program is
now up and running at most retails.
Buymarts continued to be well supported by both
retails and suppliers, and 2009 was no exception.
Consumer Products & logistics Division report
The “Responsible Choice” shopping bags continued
to show good acceptance by customers.These bags
are putting the CRS in a good position to dramatically
reduce plastic bag usage over the next few years.
Three types of bags are now available.
23
24
Consumer Products & logistics Division report
WAREHOUSING
TRUCKING
The addition of the freezer/cooler to the Calgary food
warehouse is now complete and adds approximately
90,000 sq. ft. to the facility.This has opened up over
70,000 sq. ft. at the general merchandise warehouse,
which will be converted to handle general
merchandise products.
The highway trucking fleet consists of 155 merchandising
trailers and 133 tankers pulled by 182 lease operators.
Product is delivered in an area extending from Thunder
Bay to the Queen Charlotte Islands, and from the United
States border to the Yukon and the Northwest
Territories.
Construction began on a new region office in Calgary.
It is being built on the food warehouse site and will
open in early 2010.
Fleet image continued to be a high priority.The two new
graphics introduced showcased CO-OP® Gold Organics
and High Performance Petroleum.
The merchandising fleet carries thirteen different
graphics and the petroleum fleet has eight. Overall,
almost 100% of both fleets carry graphics.
agro Products Division report
Mel Adams
Vice-President
Agro Products
The Agro Products Division encompasses the
Petroleum, Crop Supplies and Feed Departments.
The division procures and manufactures products in
order to ensure retail co-operatives have a reliable
source of quality products.The division also assists
retails by providing employee training, facility
development, and the development of effective
central advertising and marketing programs. Farm
contact programs and very high standards of image
and service continued to be a major focus.
PETROLEUM DEPARTMENT
Many new facility development and marketing
initiatives were introduced during 2009.This included
the introduction of LED (light emitting diode) under
canopy lighting, providing substantial energy savings
for retail co-ops and another step towards protecting
the environment.
Installation of the new cardlock system was also
completed at several locations during the year.
This new system utilizes a mag stripe card and
allows the customer to select their own PIN number.
It also provides both the customer and the retail
with improved security along with other benefits.
To ensure a smooth transition at retail locations,
the rollout of this new system will be completed
over an extended period of time.The new cardlock
system will have the capability to be enhanced and
improve customer benefits far into the future.
25
26
agro Products Division report
The new Internet-based “Service Starts
With Me” Gas Bar Training Program was
added to the Co-op Learning Centre and
has already been well utilized by retail
staff across the CRS.The department is
also working on another Internet-based
training seminar which will be directed at
gas bar managers called “Managing Your
People”. This new seminar will be available
through the Co-op Learning Centre
in 2010.
In order to reduce costs and improve
service, a new direct order program for
tires has been implemented.This allows
retails to access more tire lines and sizes
than they were able to in the past while
at the same time enabling FCL to reduce
the amount of inventory carried.
CROP SUPPLIES DEPARTMENT
Once again the Crop Supplies Department
enjoyed a year of record results. With
continued growth, the demand for
well-trained agro managers, agronomists,
and staff continued to increase. As a result,
the department continued to place a
major focus on training.
2009 Agro Manager Group Trainees.
The first Agro Manager Group Training Program was developed and
held in the spring of 2009 with tremendous success. As a result, this
program will be continued and the second session will begin early
in 2010. In addition, the department continued to organize and
support many other internal and external training initiatives such as
“Selling to Farm Business”, the “Crop Production Home Study Course”,
and the “Grain Storage and Handling” clinic, to name a few.
In addition to strong customer contact and marketing programs
generating growth, retails also continued to upgrade existing
facilities, expand trading areas and construct or acquire new
facilities, filling market voids and increasing retail sales of crop
supplies products.
agro Products Division report
FEED DEPARTMENT
Livestock producers continued to be faced with
extremely difficult economic conditions. As a result,
the number of animals being raised on the Prairies
continued to be reduced which in turn substantially
reduced the demand for feed and other animal
supplies products.The department responded to
this situation very well and while sales have declined,
feed operations continued to be profitable.
Retails require a licensed employee to be on staff in
order to sell products with a Pest Control Product
classification of “Agricultural
or Commercial”.
As a result, the department has been working with
Saskatchewan provincial regulators who have decided
to issue a new class of license for people who handle
livestock pesticides and rodenticides but not crop
protection products.This is very positive and FCL will
continue to work with the Manitoba government
towards a similar type of program.
Pet food sales remained strong. Package sizes were
changed this past year, bringing them more in line
with sizes sold by most competitors.
27
28
forest Products Division report
Bill Van Bergeyk
Senior Vice-President
Forest Products
Forest Products’ manufacturing in Canoe, British
Columbia includes a plywood plant and sawmill,
supported by log harvesting and forestry operations
within the Okanagan Timber Supply Area surrounding
the Shuswap Lake.
The financial performance of the forest industry’s solid
wood sector remains adversely affected by continuing
poor product demand and oversupply.The North
American housing construction market declined
another 40% from that of the previous year’s 1.0 million
starts, establishing a new low over five decades. Market
prices were also negatively impacted by the higher
Canadian dollar against the U.S. currency, and the
15% export charge required by the Softwood
Lumber Agreement.
LOGGING AND FORESTRY
Harvesting operations were minimized in response to
reduced manufacturing operations. Log deliveries were
restricted to peelers for the plywood plant and saleable
poles, houselogs, sawlogs and pulpwood.The 230,743 m3
of logs delivered in 2009 was substantially lower than
the 317,809 m3 hauled in 2008 and the log inventory was
reduced a further 53,965 m3.The reduced deliveries still
required the construction of 19.0 km of roads for timber
access at a cost of $873,542 compared to $347,000 for
9.1 km in 2008.
Based on reduced harvest, 218 hectares of logged area
were prepared for reforestation and 167,000 seedlings
were planted, ensuring regulatory compliance.
However, environmental sustainability and responsible
forest stewardship goes beyond regulation and
29
forest Products Division report
replanting. An Environmental Management System
was developed and implemented during the year to
demonstrate commitment to environmental protection.
a vendor managed inventory program comprised of
40.1 million sq. ft. of the total shipments.
The only major capital expenditure was the installation
of an electrified filtration bed to control particulate
emissions to atmosphere from the veneer dryers to
complete the dryer replacement project.
Shipments From Forest Products Operations
Plywood
(per thousand square feet, 3/8” thickness)
Lumber
(per thousand foot board measure)
2009
2008
98,884
102,388
1,191
26,527
LUMBER
PLYWOOD
Plywood operations were impacted by market related
downtime during late spring. A three week curtailment
in May was followed by a reduced work week and
Work-Share Program for the month of June. Shipments
were correspondingly reduced and average prices were
3.5% below those of the prior year. Despite this erosion,
plywood prices provided a contribution margin.
Production of specialty items and adding value or
upgrading panels by solid patching or puttying
continued to be emphasized. Specialties represented
approximately half the annual plywood output,
mitigating commodity price decline and sales through
The sawmill remained curtailed throughout the year.
Lumber prices continued to fall in 2009, precluding any
opportunity to resume operations.The benchmark
Framing Lumber Composite Index bottomed at $195
in the year compared to last year’s low of $220.The
minimal sales volume represents disposition of the
residual inventory of fir lamination stock produced
in 2007.
30
Consumers’ co-operative Refineries limited Divisionreport
ENVIRONMENTAL MANAGEMENT
Bud Van Iderstine
Senior Vice-President
Refining
A wholly-owned subsidiary and the Refinery Division
of FCL, CCRL’s mission is to serve the Co-operative
Retailing System by providing petroleum product
supply. CCRL is one of the higher value-added petroleum
refining facilities in North America with plans for further
growth.The financial results for CCRL are consolidated
with those of the Petroleum Department.
OPERATIONS
In 2009, CCRL processed a record level of over 33 million
barrels of crude oil.With all process units operating,
total crude oil throughput was typically in the range
of 95,000 to 102,000 barrels per operating day.
Total Crude Processed
CCRL has actively prepared plans for the further
implementation of renewable fuels. Ethanol-blended
gasoline is already required in Saskatchewan and
Manitoba, and will be required in British Columbia and
Alberta in 2010. Diesel blended with bio-diesel will be
required in all four western provinces by no later than
2012, with Manitoba, Alberta and British Columbia
starting in 2010.
EXPANSION
(millions of barrels)
35
The Expansion Project, Section V and Associated
Revamps, is proceeding on schedule and is currently
within budgeted costs.
30
25
New Section V is well underway with the engineering
work well advanced.The majority of the new equipment
is ordered and underground work is progressing as
expected.This new process section is expected to be
complete and starting up in the summer of 2012.
20
15
10
The major revamps to several existing process units
are underway and will be completed by 2011.
5
0
CCRL has advanced plans to meet federal regulations
for the reduction of greenhouse gases. CCRL is a partner
in the Aquistore Project which will capture carbon
dioxide from each of the Refinery’s two hydrogen plants
and then store it underground. A project to capture the
carbon dioxide from the first hydrogen plant will be
submitted to the Board of Directors for approval in 2010,
with project completion planned for 2013. A project
for the second hydrogen plant will follow about two
years later.
2005
2006
2007
2008
2009
Consumers’ co-operative Refineries limited Divisionreport
The Expansion Project will initially increase CCRL’s
crude processing capacity from the current level of
100,000 barrels per day to 130,000 barrels per day.
The capacity is expected to eventually
mature to 145,000 barrels per day by
2015.The project is required in order
to allow CCRL to continue to meet the
ever-growing petroleum product
supply needs of the CRS.
31
32
Environmental & technical services Division report
Sustainability requires that these objectives are met while
operating in a manner that is financially and socially
beneficial for the long term.
Eric Lawrenz
Vice-President
Environmental &
Technical Services
The Environmental & Technical Services Division is
responsible for FCL's environmental sustainability
initiatives, operations research activities, crude oil and
gas operations, corporate and retail insurance programs,
energy management programs, and monitoring
alternative fuel issues.
ENVIRONMENTAL & TECHNICAL SERVICES
One of FCL’s objectives is to conduct activities in a safe,
socially and environmentally responsible manner, ensuring
compliance with the law.The focus on this objective was
sharpened during the year through the introduction of a
revised corporate policy on Environmental Sustainability.
To increase awareness of the Co-operative Retailing
System’s many environmental achievements, four
Enviro-News Bulletins were issued through the General
Managers’ Bulletins in 2009.These bulletins described many
of the environmental features that have been included in
the design and construction of new retail facilities and
they provided information for further distribution to
retail employees, co-op members and the public at large.
In keeping with FCL’s commitment to responsible
contaminated site management, the department
continued to apply innovative, science-based technologies,
giving priority to reducing the risks to human health and
safety while ensuring compliance with environmental
regulations. As a spinoff of this work, the department
published and presented two technical papers at an
international environment symposium and shared with
consultants, awards from Engineering Associations
in Manitoba (2008) and Saskatchewan (2009).
OPERATIONS RESEARCH
The Operations Research Department worked with the
commodity departments to select a new computerized
buying system with enhanced capabilities.The department
will also be involved in the implementation of the new
system and the training of users in the coming year.
CRUDE OIL
The concepts of environmental sustainability have been
incorporated into FCL’s business activities for decades.
It is FCL’s goal to support the growing environmental
consciousness of its employees and to continuously look
for ways to reduce the company’s environmental footprint.
Total oil and gas production averaged over 1,800 barrels
of oil equivalent per day. FCL participated in drilling 32
new oil and gas wells, most of these were in southern
Saskatchewan including eight wells in the Weyburn
enhanced oil recovery unit.The Weyburn unit utilizes
a combination of water-flood technology and carbon
dioxide injection to increase oil recovery.The technical
information that has been obtained by industry and
government from studying the Weyburn operation will
be very valuable in the development of future carbon
dioxide storage projects.
Human resources Division report
33
LEARNING & DEVELOPMENT
Peter Zakreski
Senior Vice-President
Human Resources
During the last year, the 19,000 plus employees in
the Co-operative Retailing System adjusted to the
challenges and opportunities presented by the
world-wide economic turmoil.The twenty-one Human
Capital Strategies adopted several years ago provided
the road map for the Human Resources Division to
remain “Community Focused – Value Driven” in the
delivery of the various services it is mandated to
provide on behalf of the CRS.The division is committed
to deliver these services in a timely, efficient and
economic manner.
RECRUITMENT
The staffing crunch faced by employers in the past
several years has eased, resulting in a more stable
workforce. During the last year, the CRS experienced
reduced turnover rates and more applicants to fill
vacant positions. Contributing to this success are
factors such as:
• the employment brand “Excellence Through People”;
• the engagement of an Aboriginal Employment
Development Officer;
• a stronger emphasis on the recruitment of students;
• mentorship programs for non-management retail
employees; and
• progressive policies and practices.
Learning and development continued to be a very
high priority for the CRS. Ongoing learning through
seminars, clinics, conferences and management
development programs remained a focus for the
System.The learning opportunities provided for
elected officials reinforces the commitment by the
CRS to being community focused.
The division is committed
to keeping seminars
current and informative.
This past year six employee
and three elected official
seminars were revised, and
one new seminar “Diversity
in the Workplace”
was developed.
In addition, to continue
Jason Ryden (right), General Manager One-to-One Trainee, and
being timely with learning
his trainer Gerald Gane (left), General Manager at Valleyview
and development offerings, Co-op in Virden, Manitoba.
e-Learning was a significant focus for employee and
elected official development.The Co-op Learning Centre
was launched this past year and now offers seven on-line
seminars and one petroleum seminar for employees.
Two on-line elected official seminars,“Understanding
Co-operatives” and “New Director Orientation” are also
offered. It is recommended that retail boards of directors
adopt a policy whereby a new director would be
required to complete these on-line seminars prior to
attending face-to-face seminars.
34
Human resources Division report
INDUSTRIAL RELATIONS
COMPENSATION & BENEFITS
Industrial Relations’ services were expanded
to provide arbitration and Labour Board
representation on behalf of retail co-operatives.
These expanded services are in addition to regular
services such as assistance in the negotiation and
administration of union contracts, the provision
of various educational seminars, the development
of safety programs and guidance on employee
relations matters.
Guidelines continued to be provided in wage
and salary administration in order for the CRS
to achieve policy objectives by rewarding
performance excellence. A significant dialogue
was initiated within the CRS on flex benefits.
35
International
Co-operative
Alliance
Statement on the Co-operative Identity
Definition
A co-operative is an autonomous association of persons
united voluntarily to meet their common economic,
social and cultural needs and aspirations through a
jointly-owned and democratically-controlled enterprise.
Values
Co-operatives are based on the values of self-help, selfresponsibility, democracy, equality, equity and solidarity.
In the tradition of their founders, co-operative members
believe in the ethical values of honesty, openness, social
responsibility and caring for others.
Principles
The co-operative principles are guidelines by which
co-operatives put their values into practice.
1.Voluntary and Open Membership
Co-operatives are voluntary organizations, open to all
persons able to use their services and willing to accept
the responsibilities of membership, without gender,
social, racial, political or religious discrimination.
2.Democratic Member Control
Co-operatives are democratic organizations controlled
by their members, who actively participate in setting their
policies and making decisions. Men and women serving
as elected representatives are accountable to the
membership. In primary co-operatives members have
equal voting rights (one member, one vote), and
co-operatives at other levels are also organized in a
democratic manner.
3. Member Economic Participation
Members contribute equitably to, and democratically
control, the capital of their co-operative. At least part
of that capital is usually the common property of
the co-operative. Members usually receive limited
compensation, if any, on capital subscribed as a condition
of membership. Members allocate surpluses for any or all
of the following purposes: developing their co-operative,
possibly by setting up reserves, part of which at least
would be indivisible; benefiting members in proportion
to their transactions with the co-operative; and supporting
other activities approved by the membership.
4. Autonomy and Independence
Co-operatives are autonomous, self-help organizations
controlled by their members. If they enter into agreements
with other organizations, including governments, or raise
capital from external sources, they do so on terms that
ensure democratic control by their members and maintain
their co-operative autonomy.
5.Education,Training and Information
Co-operatives provide education and training for their
members, elected representatives, managers, and
employees so they can contribute effectively to the
development of their co-operatives.They inform the
general public – particularly young people and opinion
leaders – about the nature and benefits of co-operation.
6.Co-operation Among Co-operatives
Co-operatives serve their members most effectively
and strengthen the co-operative movement by working
together through local, national, regional and international
structures.
7.Concern for Community
Co-operatives work for the sustainable development
of their communities through policies approved by
their members.
Manchester, United Kingdom, September 23, 1995
36
Code of Ethical Standards
for Co-operatives
We recognize that this consumer-owned co-operative has a responsibility to respect, to promote, and to
protect the rights of consumers, and that these rights include:
• The right to safety
• The right to be informed
• The right to choose
• The right to be heard
In support of its responsibility to appreciate the rights of consumers, this co-operative shall aim to observe
and apply in all of its activities, the following:
Ethical Standards
Application of the Code
1. All claims, statements, information, advice, and
proposals shall be honest and factual.
Having acknowledged that the consumer has certain
rights, and being resolved to conduct our activities in
the interests of the consumer, we shall, at all times,
when applying this code or interpreting its intent,
emphasize ethical human relations and values rather
than technicalities or legalisms.
2. Sufficient disclosure of pertinent facts and
information shall be made to enable others to
adequately judge the offered product, service,
or proposal, and its suitability for the purpose to
be served.
3. Due regard shall be given to public decency and
good taste.
4. Unfair exploitation in any form shall be avoided.
5. Comparison of co-operative merchandising,
products, services, philosophy, principles, or
practices, to those of others shall only be made
honestly and fairly, and without intent to harmfully
disparage.
6. The interests of the membership as a whole shall
be paramount to the interests of the institution.
7. The co-operative shall aim to be equitable in the
treatment of its members.
8. Knowingly advising or persuading individuals to
take action that may not be in their best interests
shall be avoided.
Our test for compliance to this Code of Ethical
Standards shall be the effect of a communication
or action on the ordinary or trusting mind. We
recognize that it is not sufficient that a discerning,
knowledgeable, or analytical person may derive
a correct interpretation if others may be misled.
The Code of Ethical Standards is adopted by the
board of directors as an official policy of Federated
Co-operatives Limited, and is recommended for
adoption by all retail co-operatives served by FCL.
Honorary Presidents
Vern Leland
Ed Klassen
Dennis Banda
C o m m u n i t y F o c u s e d • Va l u e D r i v e n