Annual report 2012

Transcription

Annual report 2012

IMAGINE WHAT WE COULD ACHIEVE TOGETHER
Annual Report 2012 ■
IMAGINE WHAT WE COULD
ACHIEVE TOGETHER
Founded in 1922, La Coop is a provider of agricultural supplies and food products
with a focus on the well-being of communities. Guided by the values and principles of
the cooperative movement, La Coop evolves, innovates and grows to improve the quality
of life of its members and the fair and sustainable development of our resources.
Experience the value of cooperation
IMAGINE
WHAT WE
COULD ACHIEVE
TOGETHER
Annual Report 2012
Head Office
La Coop fédérée
9001 de l’Acadie Blvd.
Suite 200
Montréal, Québec H4N 3H7
Telephone: 514 384-6450
Fax: 514 858-2025
Website
www.lacoop.coop
Twitter (@LaCoop_federee)
YouTube (LaCoop)
Vime (La Coop fédérée)
LinkedIn (La Coop fédérée)
On peut obtenir la version française de
ce rapport sur le site Internet de La Coop
fédérée à l’adresse www.lacoop.coop
ou obtenir une copie imprimée
en communiquant avec le Service
des communications au 514 384-6450.
Contents
6
Denis Duquet
Creative director
President’s message
16
Cooperative overview
22
Management Discussion and Analysis
34
Olymel overview
42
Management report
43
Independent auditors’ report
44
Consolidated balance sheets
45
Consolidated statements of earnings
45
Consolidated statements of reserve
46
Consolidated statements of cash flows
47
Notes to consolidated financial statements
64
Financial review
65
Affiliated Cooperatives
66
Our locations
Bernard Diamant
Artistic director/graphic designer
Pierre Cadoret
Graphic designer
Martine Doyon
Photographer
(www.martinedoyon.com)
Text
Ben Marc Diendéré
Communications manager
Stéphanie Couturier
Communication advisor
Guylaine Gagnon
Patrick Dupuis
Le Cooperateur agricole
Mont-Roy L’Imprimeur
Colour separation and printing
106888_02-13
La Coop fédérée’s Creative Services
OUR
ORGANIZATION
La Coop fédérée contributes to the economic, social and
environmental development of cooperative agricultural
producers and its affiliated cooperatives by:
Developing an integrated cooperative network owned
and operated by member agricultural producers to supply
professional use products and services;
Operating a network of complementary businesses
controlled by them that generate competitive earnings,
primarily in the hardware, energy and meat processing sectors;
Enabling member producers to join together in
democratically coordinating the value added
production chain they are part of;
Promoting cooperative education and bringing
cooperative values to life.
Annual Report 2012 - La Coop fédérée
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IMAGINE
WHAT WE COULD
ACHIEVE
TOGETHER
“The fact that La Coop is investing
in an industry with high strategic
value for farms shows that it is
really looking to the future.”
Frédéric Laforce
Crop producer in Saint-Elphège
Member of La Coop Covilac
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Vision
La Coop
visionary and ready to seize
business opportunities
In partnership with IFFCO, an Indian cooperative, La Coop fédérée has
invested in the first phase of a large-scale project to build a urea plant
in Bécancour. That gives a good idea of La Coop leaders’ visionary
spirit. The benefits? Supply of quality urea for our agricultural
producers year round; strategic positioning in a value chain with a
promising future; presence in new markets; and market
diversification amid globalization.
An investment in Bécancour of
$1.2 billion
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Vision
PRESIDENT’S
MESSAGE
Sustained
growth amid
economic
uncertainty
Denis Richard
President,
Executive Committee Member,
and Audit Committee Member
Ghislain Cloutier
1st Vice-president and
Executive Committee Member
Luc Forget
2nd Vice-president and
Executive Committee
Member
S
hrugging off global economic uncertainty, La Coop fédérée built on its strong
performance in recent years and generated record results in 2012.
With sales of more than $4.9 billion and earnings before patronage refunds and income
taxes of $96.6 million, La Coop achieved its best ever year in fiscal 2012.
These consolidated results were driven by continuing robust growth in operating
income in Supply Operations, including crop production and grains. Although results
were less impressive for retail sales, they matched expectations.
Marketing (meat) sectors also posted solid results, for both poultry and pork, although
conditions in the fresh pork and bacon sectors in Québec remain difficult.
Overall, fiscal 2012 was also highlighted by La Coop’s increased institutional visibility
resulting from the International Year of Cooperatives events, capital-raising transactions
and the unveiling of large-scale investment projects.
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Vision
Cooperative businesses dealt better with
the financial crisis that emerged in 2008.
Cooperative businesses
La Coop is at the heart of an organizational model
that brings together agriculture producers, individual
consumers, and food processors and distributors. This,
I believe, gives us a unique vantage point over the agriculture and agri-food industry.
The fact that La Coop is not only a federation of
cooperatives but also one of Canada’s largest agriculture and agri-food businesses makes our position even
more unique.
Fiscal 2012 was an intense year for our business
operations.
First, regarding capitalization, La Coop announced in
June 2012 that Fonds de solidarité des travailleurs du
Québec and Capital régional et coopératif Desjardins
were investing $100 million in its share capital.
The Fonds de solidarité des travailleurs du Québec
acquired preferred shares for a total amount of $50 million. Capital régional et coopératif Desjardins invested
$50 million in preferred shares for which $30 million
was received in 2012. The balance of $20 million in preferred shares will be issued by 2015 as repayment for
the unsecured debenture.
A few weeks later, an agreement was entered into
with Farm Credit Canada to renew a credit facility and
increase it to $60 million.
We are very pleased that key institutions in the Québec
and Canadian economies, namely Fonds de solidarité
FTQ, Desjardins and Farm Credit Canada, have placed
their trust in us.
Such a show of trust is particularly significant in the
fast evolving agriculture and agri-food industry, which
is offering excellent opportunities to those who know
best how to seize them.
The support of such high quality partners with
excellent knowledge of issues related to cooperative
movement development augurs very well for our future.
The show of trust was very likely inspired by the quality
of La Coop’s management team and its track record of
constantly improving results in recent years.
Noteworthy of mention is the near 50% growth in
our sales over the past six fiscal years, allowing us to
distribute more patronage refunds to our members and
to make significant investments in the La Coop network.
The show of trust was probably also influenced by
the findings made by several organizations in finance
relating to the resiliency of the cooperative model. An
International Labour Organization study published in
2009 showed that in general cooperative businesses
dealt better with the financial crisis that emerged in
2008.
Why are cooperatives so resilient? The reasons are
many. First, they are unwilling to lay off their workforce
and move their operations in order to increase their
profits by 1% or 2%. Second, cooperative businesses are
not subject to the vagaries of the stock market, so their
values do not plunge on temporary dips in operating
surpluses, and their members do not abandon ship at
the first hint of trouble.
to the real economy, in contrast to the financial economy
that has wreaked havoc in recent years.
In light of the above, I’m always surprised that the
cooperative sector is not considered when taking stock
of Québec’s economy or worse still, by the resistance to
including our members in the business people category.
If our aggregate sales of more than $8.5 billion, which
is twice as much as for Facebook, are not sufficient to
classify us as business people, I really don’t know what
it will take!
Another highlight of the last fiscal year was undoubtedly the announcement at the International Summit
of Cooperatives of a partnership with a large Indian
cooperative for the construction of a urea plant in
Bécancour.
The near $1.2 billion investment should enable us to
secure our urea supplies as early as in 2017 and partially
protect us from market volatility for this product.
Our partner, the Indian Farmers Fertiliser Co-operative
(IFFCO), comprises nearly 40,000 agriculture cooperatives serving over 55 million members, and is a globally
recognized leader in the construction and operation of
fertilizer plants.
Following its recent acquisitions in Ontario and in the
Maritime provinces, La Coop is now the largest fertilizer distributor in Eastern Canada. With this investment,
La Coop will be positioned to sell half of the plant’s
output in its distribution network and its markets in
North Eastern United States.
I believe these points demonstrate well how the
cooperative approach is grounded in and contributes
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Vision
Marc A. Turcotte
Sophie Bédard
Executive Committee
Member
Executive Committee
Member
Françoise Mongrain
Marc Quesnel
Jean Bissonnette
Serge Boivin
Audit Committee Member
Ghislain Gervais
Muriel Dubois
Benoit Massicotte
Mathieu Couture
Normand Marcil
Charles Proulx
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Vision
Last, at the end of the fiscal year, La Coop’s Board of
Directors authorized a bid to acquire a large hog production company in Saskatchewan.
This bid, which was accepted in early 2013, is above
all a defensive action to secure supplies for our Red Deer
facility in Alberta and protect the value of our assets in
Western Canada.
The acquisition of Big Sky Farms Inc., the second largest
hog producer in Canada, combined with our supply operations in Western Canada should allow us to consolidate
our expansion in this part of the country.
Our success in business is not driven by acquisitions alone but is mostly the result of long and patient
management and improvements to our policies and
procedures.
That’s how we have stayed the course with the
Chrysalide project in animal production implemented
nearly five years ago.
The restructuring project’s last phase will be launched
this year as planned and on budget.
Although our market shares are generally on the rise,
production volumes have fallen short of expectations,
amid the crisis affecting the red meat industry.
That said, for the majority of La Coop network cooperatives, the consequences of persisting with the status
quo can be easily imagined had we not been courageous
enough, nearly five years ago, to order our managers to
reduce the number of feedmills in an orderly manner.
industry, provided all players in the Cooperative Pork
Chain continue to build on the work accomplished.
Other major structural projects in La Coop’s network
are well on track. These include, Fidelio, a project aimed
at standardizing the information systems and preparing La Coop’s network for the future, and the Chrysalide
project in energy, slated for rollout in the next fiscal year.
I take this opportunity to offer my sincere thanks
to Claude Lafleur, Réjean Nadeau and their respective
teams, who provided sound leadership to our businesses
and produced excellent results in tough economic times.
Under the long and patient improvements to our policies and procedures, the activities of the Cooperative
Pork Chain certainly merit mention.
We would have liked to see a more radical turnaround
but, in the context of a crisis in pork production related
to higher cereal prices, progress clearly has been made.
Following improvement in La Coop pork quality
resulting from Pork Chain efforts, we have maintained
and even won back market share in Asia.
The number of Pork Chain members is on the rise and
the coordination of producers means that they can adapt
more quickly to market needs. The problem related to
hogs awaiting slaughter during the festive period was
resolved to a great extent while the revenues generated
by the Pork Chain made possible a highly appreciated
patronage refund for the first-time last year.
That said, much needs to be done before we can rest
on our laurels, but I remain optimistic about this audacious effort to turn around the Québec cooperative pork
I also express my heartfelt gratitude to my colleagues
on the Board of Directors for their support, drive and
willingness to do things differently for the greater good
of all members of La Coop’s network.
Finally, I extend warm thanks to the leaders of affiliated cooperatives for their commitment, openness and
solidarity. La Coop’s success is closely tied to the prosperity of our affiliated cooperatives, and their support and
determination give us great confidence in our future.
The federation of cooperatives
For community life and institutional events, the past
fiscal year was no less active than for operations; on the
contrary, it was an exceptional year.
The designation of 2012 as the International Year of
Cooperatives by the United Nations gave us the opportunity to spread the cooperative message in a number
of forums.
During various events in a number of forums such
as the House of Commons Special Committee on
Following improvement in La Coop pork quality resulting
from Cooperative Pork Chain efforts, we have maintained
and even won back market share in Asia.
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Vision
Cooperatives, the prestigious Canadian Club of Montreal
and the Montreal Council on Foreign Relations, La Coop
fédérée seized the opportunity to highlight the cooperative difference.
It’s a little known fact that the world of cooperatives
and mutual organizations is currently made up of a
million businesses, 100 million employees and a billion
voting members.
Together with other cooperative networks, we also
participated in the national “Je Coop” campaign. This
campaign launched in January 2012 in Montréal using
social media, web platforms and regional events enabled
representatives of different cooperative organizations to
discuss the different facets of cooperation.
This makes the world cooperative movement one of
the largest democracies on the planet. It also makes the
world cooperative movement a key agent of change for
the democratization of our economy.
I also wish to acknowledge the initiative taken by several cooperatives as part of the Cooperation Week to
organize a tour of employees to talk to members about
cooperation.
This initiative was apparently appreciated by both
participants and members and such discussions should
be held regularly since it’s this type of closeness and dialogue that sets us apart from the competition.
The flagship event of the International Year of
Cooperatives was the International Summit of
Cooperatives held in Québec City in October 2012.
This momentous cooperative meeting brought
together over 2,800 persons from 91 countries to discuss
and reflect on the astonishing power of cooperatives and
how we can help build a better world.
The world’s 300 largest cooperatives, including
Desjardins, La Coop fédérée and Agropur, represent an
economic weight comparable to the 9th largest economy
in the world, that is, the GDP of Canada. This gives us
an idea of the economic and social impact of a million
cooperatives, even though many of them are smaller
in size.
Clearly, the Summit owes its success to a range of
factors, particularly the impressive line-up of 163 internationally renowned speakers and the unveiling of nine
unpublished studies on cooperatives.
Above all, these studies shed new light on the global
positioning of cooperatives and the major challenges
facing them, and we will be drawing on them greatly in
the coming months.
The year 2012 also saw a new government take the
helm in Québec. With a new experienced Premier and a
new minister of Agriculture, who is also the Vice-premier,
known for his capacity to listen and understanding of
regional issues, we hope that the long awaited agricultural policy will finally see light of day.
Québec needs a comprehensive agriculture and agrifood policy to ensure food security as well as the survival
and development of its second largest industry.
During numerous consultations on the issue, La Coop
has always presented a position centred on three
priorities:
- Promote a value chain approach, that is, foster
coordination among all the components of a given sector
- Improve competitiveness with structural investments instead of cyclical funding
- Foster a province-wide agricultural business climate
conducive to investment, innovation and recruiting
The future Québec agriculture policy must factor in
the needs to develop proximity agriculture and market
niches, and must also and above all make a strategic contribution towards the preservation of a large agricultural
sector as a major sector in our economy that can ensure
an adequate level of food self-sufficiency and facilitate
entry into accessible world markets.
Last, 2012 was also highlighted by the work of the
commission of inquiry on the awarding and management of public contracts in the construction industry,
also known as the Charbonneau Commission.
We are the heirs of hundreds of thousands of people
who believed in cooperation and not
“every man for himself.”
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Vision
Among other things, this Commission will serve to
remind us of the weaknesses of some men and women
in our society and by contrast, the courage of many
others.
Courage is one of the qualities required in our profession of cooperative directors: courage to ask all the
questions necessary to know and understand the issues
underlying decisions, courage to constructively challenge management on its recommendations, courage
to denounce conflicts of interest, courage to abstain or
withdraw when a decision is not aligned with our values.
Courage is also what our leaders had in abundance in
2008 to get moving on the Chrysalide project in animal
production and even more courage will be needed to
complete the reform of our policies and procedures currently underway in several sectors, namely energy, crop
production and hardware.
The economic forces that disrupted our sector and
prompted us to implement the Chrysalide project are
still present and have even gathered strength.
The same forces are also prompting businesses to
consolidate and boost their critical mass. The business
environment in which we operate is evolving at an
unprecedented speed.
During the 1930s when La Coop fédérée was eight
years old, the S&P 500 listed companies had a life of
75 years compared with just 15 at the beginning of the
new millennium.
For businesses, both corporations and cooperatives,
adapting to this rapidly changing world is no longer a
choice, but a necessity.
The Chrysalide project provides us with an original
approach that can deliver the benefits of critical mass
and operational efficiency of a large organization while
preserving our managers’ entrepreneurial dynamism as
well as our cooperatives’ independence and community
roots.
and not “every man for himself.” We must live up to
their expectations and ensure that future generations
will also take part in this beautiful and noble human
adventure.
We can do so by drawing on La Coop network’s strong
democratic tradition and our willingness to find solutions instead of simply raising issues.
While La Coop’s network has gathered strength over
the years through its cohesion and member solidarity,
cooperative values will ensure its survival and relevance
in the years to come.
With the Chrysalide project, we now have the ability
to put into practice one of the fundamental cooperative
principles and ensure greater intercooperation among
ourselves.
Should and can this approach be adapted for our other
operating sectors? That’s one of the many questions
we will have to deal with in the coming year during the
strategic planning exercise in La Coop’s network, initiated last fall.
Denis Richard
President
By expanding their operations and continuously
improving the tangible benefits for their members,
cooperatives will fully participate in the emergence of
a fairer, more just society.
We are the heirs of this invaluable legacy of hundreds
of thousands of people who believed in cooperation
IMAGINE
WHAT WE COULD
ACHIEVE
TOGETHER
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IMAGINE
WHAT WE COULD
ACHIEVE
TOGETHER
“Investing in the Cooperative
Investment Plan is a smart move
and what’s more, I’m contributing
capital to my cooperative at the
same time. What can be safer
and more reassuring!”
Annie Geoffroy
Executive secretary
La Coop Profid’Or
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La Coop
inspires trust and
ensures prosperity
Time is money, so is the Cooperative Investment Plan, offered exclusively to cooperative members and employees. And over time, this
investment vehicle with highly competitive return has spawned many
plans. This fund, which gets bigger year after year, is a major source
of financing for La Coop’s network. Many thanks to all those who, by
entrusting their savings to La Coop, have helped their organization
to grow.
The Cooperative Investment Plan
is currently worth
$73 million
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COOPERATIVE
OVERVIEW
D
uring the year, La Coop fédérée introduced a code of
ethics, which restated cooperative values. La Coop
also adheres to the principles set out in the Statement
of Cooperative Identity adopted by the International
Cooperative Alliance and strives to integrate them in
the administration and day-to-day management of its
affairs.
Free and open membership
At year-end, La Coop fédérée brought together 101
member cooperatives, which in turn boasted some
64,000 regular members and 39,000 auxiliary or associate members, all willing partners of the extensive La
Coop network.
Democratic member control
As at October 31, 2012, 689 members elected by
their peers managed La Coop-affiliated cooperatives.
79 cooperatives were entitled, as regular members, to
appoint 331 delegates to represent them at meetings.
Of this number, 276 delegates availed themselves of this
right at La Coop’s Annual General Meeting in March 2012,
resulting in a participation rate of 83%.
Other meetings throughout the year also provided
cooperative executives with opportunities to enter into
open dialogue and guide La Coop’s actions. The President’s
Tour, the Presidents’ Forum and the semi-annual meeting
In the past 5 years, La Coop has
paid cooperatives $125 million
in patronage refunds.
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were such opportunities for leaders of the network to
meet and talk with their peers. La Coop also ensures an
additional structural link with its members by setting
up various committees and inviting representatives of
affiliated cooperatives to serve on them.
Member economic participation
The member cooperatives hold $145.3 million in
common shares of La Coop and $327.8 million in the
form of a collective reserve. This reserve is used to
ensure La Coop’s future development and to support a
range of undertakings related to the needs of affiliated
cooperatives.
In 2012, La Coop also declared patronage refunds to
its members for a total amount of $32 million, bringing
total patronage refunds to cooperatives to $125 million
for the past five years.
Last, La Coop fédérée resolved to redeem Class B
common shares issued to members in 2000 and 2001
for a cash consideration of $9.7 million.
Autonomy and independence
La Coop ensures its independence from lenders
by maintaining conservative financial ratios. La Coop
promotes sound governance practices, most notably
by separating the positions of president and general
manager, by fostering directors’ independence from
management and by pursuing sustainable results.
In addition, La Coop recognizes the autonomy and
independence of its member cooperatives. La Coop
has implemented various initiatives to meet the needs
of a minimum number of its member cooperatives,
while making program participation optional for each
cooperative.
Cooperative Overview
■
Trust
Education, training and information
La Coop communicates with all members of affiliated agricultural cooperatives through its magazine,
Le Coopérateur agricole. The magazine, published nine
times a year, is La Coop’s main educational and informational tool. An online news brief, La Coop en ligne,
allows La Coop to communicate rapidly and frequently
with all its employees and network leaders; 58 issues
were sent out last year.
To promote information exchange, La Coop has also
made several intranet sites available to different internal
professional groups. Presidents, general managers and
anyone interested in cooperative affairs can have access
to a dedicated site.
La Coop also provides training for all elected representatives to support their role within the agricultural
cooperative network. In total, 354 elected representatives are currently taking part in this program. Of that
number, 67 have earned formal designations as members
after accumulating 15 training credits; 45 are companions (30 credits) and 96 are commanders (45 credits or
more). Employees have access to 99 training courses
tailored to their needs offered by Académie La Coop.
La Coop fédérée invested $8.8 million in training during
the year.
Moreover, La Coop pursues its education and training
objectives among a number of target groups, such as
young and/or female agricultural producers, by offering
scholarships to students and financial support to educational establishments. Efforts are also made to educate
opinion leaders and the general public on the relevance
of the cooperative agricultural model.
Cooperation among cooperatives
La Coop’s involvement in a variety of organizations
and associations enhances its member services and
strengthens the cooperative movement. These groups
include the Conseil québécois de la coopération et de la
mutualité, the Conseil canadien de la coopération et de la
mutualité, the Fondation québécoise pour l’éducation à
la coopération et à la mutualité, la Société de coopération
pour le développement international (SOCODEVI), the
Chair in management and governance of cooperatives
and mutual organizations of the Institut de recherche
sur les coopératives et les mutuelles de l’Université
de Sherbrooke (IRECUS) as well as Co-operators Life
Insurance Company, Cooperative Research Farms,
Gene +, Interprovincial Co-operative and Independent
Lumber Dealers Co-operative.
Through personnel secondments, La Coop also participated in several missions to help overseas cooperatives
supported by SOCODEVI.
to assist worthy organizations and events. Promoting the
agriculture profession, sports, health and assistance to
disadvantaged groups were the main causes supported
by La Coop while Olymel focused on alleviating poverty.
In addition to donations and sponsorships, half of the
$760,000 awarded during the year to the young recipients of the Fonds coopératif d’aide à la relève agricole,
was borne by La Coop. During the year, 52 new young
agricultural producers met the required conditions,
bringing the total number of recipients of the fund to
195 in 2012. La Coop aims to train and ensure a solid new
generation of agricultural producers for the extensive
La Coop network.
Within its own network, La Coop strives to foster collaborative efforts between cooperatives to maximize
the benefits of intercooperation.
Commitment to the community
Over the year, La Coop (including Olymel) spent an
amount of $1.3 million on donations and sponsorships
$1.3 million in donations
and sponsorships for worthy
organizations and events
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IMAGINE
WHAT WE COULD
ACHIEVE
TOGETHER
“Chrysalide is a large-scale project
that calls for strict discipline and
lots of efforts. But the main thing
is that the network will become
more efficient and effective.”
Karl Bissonnette
Sales manager
La Coop Excel and La Coop Saint-Damase
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La Coop
dynamic and
efficiency-focused
“What cannot be measured cannot be managed.” It’s with this in
mind that La Coop fédérée implemented the Chrysalide project. This
large-scale optimization project – which also integrates sustainable
development principles – has proved its worth with agricultural
producers benefiting from high quality products at lower cost.
Chrysalide – an audacious project that will eventually generate annual savings of approximately
$30 million
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MANAGEMENT
DISCUSSION AND ANALYSIS
Claude Lafleur
Chief Executive Officer
La Coop fédérée generated $4.9 billion in sales and $96.6 million in
earnings before patronage refunds and income taxes for the fiscal year
ended October 27, 2012, compared with $4.4 billion and $92.7 million,
respectively, for fiscal 2011. For the second consecutive year, La Coop has
generated record results, for both sales and earnings before patronage
refunds and income taxes.
Paul Noiseux
[in thousands of dollars]
Revenues
2012*
$4,867,113
2011*
Chief Financial Officer
$ 4,442,438
Operating earnings
67,936
73,286
Earnings before patronage refunds
and income taxes
96,585
92,686
Patronage refunds
32,216
36,500
Net earnings
53,893
44,272
Net earnings attribuable
to members of La Coop
39,649
31,652
Accounts receivable and inventories 732,656
689,756
Current assets 781,112
716,014
Working capital 212,606
170,068
Gaétan Desroches
Chief Operating Officer
Property, plant and equipment,
at cost1,129,975 1,117,101
Property, plant and equipment,
net carrying amount 446,903
459,458
Jean-François Harel
Secretary General
Total assets1,517,054 1,393,285
Long-term debt, including current portion 162,671
212,478
Preferred shares and La Coop’s equity 590,372
457,121
9,583
9,662
Number of employees
* In accordance with Part II – Accounting Standards for Private Enterprises of the CICA Handbook
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Discipline
Revenues
D
espite market volatility, certain sectors made
particularly strong contributions to these results.
Agronomy Company of Canada Ltd. and Agrico Canada
Limited, which was acquired in September 2011, reported
significantly higher results. Olymel’s Poultry Sector also
reported stellar results, exceeding prior year performance, due to better input margins. To a lesser extent, the
Hardware and Construction Materials Department and
the Sonic Energy Sector also made solid contributions
to overall performance. However, results at Olymel’s
Pork Sector, which is affected by lower hog production
in Québec and Western Canada, fell below previous
year levels with the 2012 margins falling well short of
the exceptional margins obtained in 2011. In addition
to these contributions, La Coop recorded a net gain of
$13.1 million resulting from the insurance benefit related
to the Princeville plant fire. For comparison purposes, the
2011 results included a net gain of $8.8 million from the
sale of supply rights.
Sales growth was driven by a $52 million increase
in sales at Olymel L.P., stemming mainly from strong
market prices in the Poultry Sector, and by additional
sales of $250 million generated by Agrico Canada Limited
and Grower Direct Exports, two companies acquired in
September and July 2011, respectively. The remaining
difference of $123 million resulted from higher sales
volumes and selling prices for most of the Supply
Operations departments.
Cost of sales and selling and administrative expenses
totalled $4.8 billion compared with $4.4 billion for the
previous year, due primarily to the inclusion of Agrico
Canada and Grower Direct operations for the full
12-month period combined with higher input costs
stemming from increases in input prices and in sales
volumes.
Financial expenses for fiscal 2012 amounted to
$12.1 million compared with $11.1 million for the previous fiscal year. Although our interest rates dipped
slightly, the average debt rose in fiscal 2012, resulting
in the higher expense.
Including the results of all of our operating segments,
La Coop reported consolidated operating income of
$67.9 million compared with $73.3 million in 2011.
The other results are discussed below.
The share of results of joint ventures – entities in
which we have 50% interest – amounted to $11.9 million, compared with $6.3 million for the previous fiscal
year. These results demonstrate improved performance
at joint ventures, particularly Agronomy and Agrico.
*2012
$ 4,867,113
*2011
$ 4,442,438
2010
$ 3,947,871
2009
$ 3,919,963
2008
$ 3,606,101
Earnings before patronage refunds and income taxes
*2012
$ 96,585
*2011
$ 92,686
2010
$ 36,077
2009
$ 53,346
2008
$ 70,992
Patronage refunds
*2012
$ 32,216
*2011
$ 36,500
2010
$ 11,500
2009
$ 15,000
2008
$ 30,000
Working capital
*2012
$212,606
*2011
$170,068
2010
$ 92,898
2009
$191,178
2008
$181,421
Preferred shares and equity
*2012
$ 590,372
*2011
$ 457,121
Sébastien Léveillé
Bertrand Gagnon
Mario Leclerc
Alain Garneau
2010
$ 440,518
Chief, Business Development
and Communications
Chief, Business Solutions
and Information Technologies
Chief, Human Resources
Head Legal Counsel
and Chief, Legal Affairs
2009
$ 412,482
2008
$ 383,528
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Discipline
The share of results of entities subject to significant
influence – entities in which we have a less than 50%
interest – amounted to $2.1 million, compared with
$1.9 million for the previous fiscal year.
After deducting the share of net earnings attributable
to the non-controlling interest, the earnings attributable
to members of La Coop totalled $39.6 million, compared
with $31.7 million for fiscal 2011.
Other investments, which represent interest and dividend income from other investments, remained stable
at $1.6 million.
Segmented Information
Gains (losses) on disposal of assets amounted to a loss
of $305,000 in 2012 compared with a gain of $9.5 million in 2011. The loss in 2012 was caused primarily by
a writedown of investments while the 2011 gain was
mostly related to the sale of supply rights of two farms.
Supply Operations
The gain arising from the insurance benefit, representing the net monetary consideration received from
the insurance companies following a fire at a plant,
amounted to $13.2 million in 2012. The carrying amount
of the disposed building and equipment amounted to
$4.7 million compared with the corresponding monetary
insurance benefit of $17.9 million.
For fiscal 2012, earnings before patronage refunds
and income taxes totalled $96.6 million compared with
$92.7 million last year.
For the year ended October 27, 2012, after deducting
$32 million in declared patronage refunds and $10.5 million in income taxes, La Coop reported $53.9 million in
net earnings compared with $44.3 million in fiscal 2011.
Segmented information relating to Marketing operations is discussed under the Olymel Overview.
Supply Operations sales and revenues, after eliminating intersegment transactions, reached a new high of
over $2.6 billion, up $373 million or 16.6% from $2.3 billion last year.
This year again, price increases for grains and petroleum products account for part of the growth in Supply
Operations sales. Nonetheless, sales growth was mostly
driven by the full year of operations at the wholly owned
subsidiaries Agrico Canada Limited and Grower Direct
Exports acquired during the past year as mentioned earlier. Growth in Grain Sector sales volume and ongoing
Chrysalide Animal Feed program implementation made
significant contributions to the higher sales.
Earnings before taxes and the gain on disposal of
assets amounted to $60.9 million, up nearly $9 million or
16.8% from last year, demonstrating Supply Operations’
profitable growth.
The Animal Production Sector generated sales of
$329.3 million this year, up $30.1 million from $299.2 million for the previous year.
This sales growth was driven partly by higher input
prices and partly by the near-completion of the Chrysalide
Animal Feed model in the Ruminant Feed Department.
Nearly all of the volume previously produced by a large
number of feedmills is currently accounted for by just
11 plants, generating significant savings for affiliated
cooperatives and member producers of the agricultural
cooperative network.
Low forage quality led to a slight increase in dairy feed
volumes. Market share remains stable despite some
disruptions and adjustments resulting from Chrysalide
model implementation.
Hog production in Québec continues to undergo transformation. Numerous acquisitions of farms by vertically
diversified businesses have resulted in a further shrinking
of the open market in this industry. Nonetheless, our
sales volumes remained stable, indicating an increase
in our market share, no doubt driven mainly by the
Cooperative Pork Chain, an innovation of great value.
The poultry feed volume is slightly down but our
market shares remained stable.
Fertilizer sales rose $23.3 million to $133.4 million from
$110.1 million for the previous year. Sales volumes in
Québec are up 3.4%, partly owing to higher demand
Supply Operations sales reached
a new high of over $2.6 billion
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■
Discipline
and partly to the greater market share achieved by our
Québec networks.
Seed sales rose 5% to $44.3 million. We estimate slight
increases in Québec market share for corn, soya and
canola. Land under corn and canola cultivation expanded
by nearly 10% over the previous season for both crops.
For the first time in several years, crop protection sales
increased, by $2.8 million, to $45.8 million. The market
shares of La Coop’s network also rose by nearly 4% from
last year. Demand for fungicides increased amid weather
conditions conducive to the breeding of insects harmful
to crops in the summer of 2012.
Consolidated sales at Agronomy reached $285.3 million, down slightly from $289.9 million last year due to
weaker fertilizer prices that offset the higher volumes.
Agrico ended its full fiscal year within La Coop with sales
totalling $220 million, compared with $26.3 million in
fiscal 2011 for two months of operations from its acquisition on September 1, 2011.
Total Grain sector sales amounted to $608.5 million, up
$113.1 million from $495.4 million for last year. Despite a
sharp decrease in the harvest in 2011, the volumes marketed in Québec by the Grain Sector held steady. Grain
price inflation resulted in sales going up to $345.2 million
by $22.3 million or 7% from last year.
Sales at Elite Grain also rose, by $22.6 million to $178 million, resulting from an average price increase of $38 per
metric tonne and a higher volume commercialized.
The acquisition of Grower Direct Exports on July 1,
2011 is paying off. This wholly owned subsidiary located
in Mitchell, Ontario, generated additional sales of
$85.3 million for the Grain Sector. Grower Direct’s sales
for the four months of operations following its acquisition by La Coop last year amounted to $17.1 million.
In the Hardware and Farm Machinery Sector, sales
grew by $9.5 million to $248.8 million from $239.3 million
for fiscal 2011. The Hardware and Construction Materials
Department accounted for $7.7 million of this increase,
mainly following the inclusion of new stores under the
Unimat banner and an 8.8% growth in farm hardware
sales.
Net sales of machinery and spare parts also increased,
by $2.7 million or 16.4%, to $19 million.
Sales in the Sonic Energy Sector totalled $763.7 million, up $26.9 million from $736.8 million for fiscal 2011,
primarily due to the impact of inflation on petroleum
product prices. Last year’s mild winter combined with
infrequent snowfalls led to a significant decline in gas
and diesel consumption. As a result, sales volumes in
the Energy Sector were down 10.1 million litres for the
Residential and Commercial Department and 7.8 million
litres for the Motorists Department.
Propane Department sales declined 13.6% with propane prices falling in the wake of weakening natural gas
prices and lower use of propane in agriculture for drying
the 2012 harvest.
The Innovation and Growth Department is dedicated
to identifying, anticipating and developing new and
promising activities for La Coop in the areas of bio products and renewable energy. As part of this new mandate
and with the aim of establishing leadership in Canada’s
agricultural biomass industry, La Coop entered into a
partnership in June 2012 with Prairie Bio-Energy Inc.,
a Manitoba-based company specializing in the handling
and transformation of agricultural biomass into valueadded products, mainly renewable fuels and a range
of products such as super absorbents. This partnership
also provides for the distribution of a reputed biomass
combustion system via the Sonic Energy Sector, which
owns all the rights.
AgriEst, Coop Agricultural Centre sustained its excellent performance in 2012 as well, with sales growing by
$10.6 million to $49.5 million. Grain and hardware sales
volumes increased significantly.
Administrative Departments
The net expenses of the Administrative Departments
and network development, including the results of the
real estate subsidiary, totalled $21.2 million compared
with $20.9 million for the previous fiscal year.
Business Solutions and Information Technologies Sector
The Business Solutions and Information Technologies
Sector is responsible for managing the transformation
programs of La Coop’s network, implementing Lean
continuous improvement projects, and delivering and
supporting business systems.
Chrysalide Programs
The governance committees of the Chrysalide Animal
Production program held 18 meetings during the fiscal
year. They approved management policies and oversaw
the implementation of emergency, environmental compliance and quality control measures in feedmills. The
cooperatives approved the terms and conditions for the
equalization of Ruminant transportation and the sharing
of gains and losses on inputs.
The FMM business system is now fully deployed in the
plants at Bic, Saint-Bruno and Saint-Romuald. For the
front office project, a pilot Gestion des interventions
application was successfully run on 36 users.
The final components of the Sonic Energy Chrysalide
program’s business and governance model were
approved by the cooperatives, opting to set up shared
services for partner groups.
The Crop Production Chrysalide program continued
with the pilot consolidation and finalized the deliverables
relating to sales force mobilization, risk management
and the mapping of fertilizer plans and related clients.
As part of the Chrysalide Grain Program, the Grain
Sector analyzed three potential business models and
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Discipline
To establish a leadership position in Canada’s
agricultural biomass industry, La Coop entered
into a partnership with Prairie Bio-Energy Inc.
these results were validated by the cooperatives active
in corn production.
A governance committee was set up under the
Chrysalide Hardware and Farm Machinery Program to
oversee the work of the Performance Mission.
The Operational Efficiency Department completed
nearly 25 Lean initiatives in different business departments and cooperatives, and also delivered 77 days of
Lean approach training.
Network of cooperatives
Fidelio was deployed in 18 cooperatives for a total
of 28 cooperatives using the financial system. Local
infrastructure upgrading has been completed in
35 cooperatives with 100 business locations. The Annual
General Meeting was held on September 27, 2012.
Infrastructure and IT systems
IT system and infrastructure modernization continued
with the migration to the storage area network (SAN)
technology. Upgrading of Exchange from version 2003 to
the 2010 version was completed as well as the design for
migrating from Windows XP to Windows 7. A number of
major contracts with the largest suppliers were renewed.
Last, all the information technology services were classified in a catalogue of services.
26
Business Development and Communications Sector
Set up in September 2011, the Business Development
and Communications Sector (BDC sector) comprises six
departments composing to its portfolio of services: communication, marketing, advisory services, environment,
agri-environment and sustainable development.
The BDC sector provides a finely-tuned global
approach that combines department with privileged
partner relationships. It can leverage its transversal role
and distinctive competencies to support and provide
strategic advice to sectors at La Coop and its network.
The BDC sector also issues business guidelines from
time to time, particularly business intelligence practices,
statistical research or branding strategies for La Coop
and its banners, thereby helping to improve business
processes. The BDC also ensures consistency and buy-in
for messages across the network and with various partners by serving as a catalyst, and supports structuring
projects and activities.
With its support for decisions related to strategic
acquisitions and new market development, the BDC
sector plays a key role in positioning La Coop and its
network and developing their organizational culture.
Human Resources
La Coop and its subsidiaries employed a total of
9,583 people as at fiscal year-end compared with 9,662 in
2011. Although these numbers show stable workforce
strength, numerous movements of employees took place
during the year to meet various operational needs.
Like most large businesses, La Coop is faced with
many challenges in hiring and retaining personnel.
Candidates are seeking employers with values similar
to theirs. In this respect, our values of honesty, fairness,
personal and mutual responsibility, and solidarity are
assets for hiring committed and competent employees.
Regarding training, 277 training sessions were offered to
2,793 employees and La Coop network administrators.
La Coop’s commitment to employee skills development
translates into an annual investment of over 2%.
The development program for elected members
continues to be provided to directors across La Coop’s
network. Among active directors, 67 are designated
members, 45 are companions and 46 are commanders,
all levels combined. Fifteen different courses were provided to directors under this program.
The setting up of human resources business partners
in its core sectors enables La Coop to properly understand the expectations of each sector and to tailor HR
strategies accordingly. Furthermore, this initiative allows
employees and managers to directly contact human
resource administrators, thereby supporting implementation of communication, mobilization, training
and coaching activities, and strengthening the sense of
belonging to the organization.
The need for tools to help achieve the retirement goals
of its employees as well as those of its network employees with a pension plan has prompted La Coop to work on
improving the Lifecycle strategies. Employees who sign
up for these strategies can use them to help maximize
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Discipline
Fidelio was deployed in 18 cooperatives
for a total of 28 cooperatives using the system.
retirement income, depending on their age and risk tolerance. The Master Trust Fund of La Coop network pension
plans has reached $338 million in assets, invested in six
investment funds and two deposit certificates.
Mandated by the member cooperatives of the insurance purchasing group, Human Resources has reviewed
the overall coverage provided to network employees
and has defined a new, more flexible plan tailored to
the needs of employees and their families and including
greater cost control measures.
The Work Relations Department’s support has helped
both La Coop and the cooperatives maintain a healthy
and conflict-free work environment. We are focusing on
developing a partnership with various union representatives to ensure our clients are provided with consistent,
high quality and market-competitive services. Also, a
health and safety audit process has been implemented
in all our facilities to ensure work accident prevention.
Although the primary goal of the Mutuelle de
prévention en santé-sécurité is to ensure a safe work
environment and while prevention efforts are made
on an ongoing basis, group participation in the health
and safety prevention mutual generated savings of over
$1.6 million for the 89 members.
Employees are a key and essential asset in our cooperatives’ success and since all the human resources related
activities cannot be discussed in this report, let it be
simply said that we all aim for the same goal, namely
making the La Coop network an employer of choice.
Financial position
As at October 27, 2012, La Coop’s consolidated balance sheet showed assets totalling more than $1.5 billion
compared with $1.4 billion as at the end of the previous
fiscal year. The growth in total assets resulted from the
investments in oil and poultry sector companies combined with increases in shares of results of joint ventures
and higher accounts receivable following expanded business volume.
Working capital increased to $212.6 million from
$170.1 million, representing ratios of 1.4 and 1.3,
respectively, attributable to higher accounts receivable
and prepaid expenses. La Coop reported a consolidated
debt ratio of 24:76 at the end of fiscal 2012 compared
with 36:64 at the end of the previous fiscal year.
Preferred shares, share capital and reserve totalled
$590.4 million as at year-end compared with $457.1 million as at the end of the preceding fiscal year. These items
accounted for 38.9% of total assets in 2012 compared
with 32.8% as at the previous year-end. In 2012, La Coop
issued two new series of preferred investment shares,
namely Series 1-FSTQ and Series 2-CRCD, for a cash
consideration of $80 million. These preferred shares
are non-voting with a cumulative semi-annual dividend.
La Coop also renegotiated, for a four-year period, repayments on the unsecured fixed-rate debenture. Effective
August 2012, the annual instalments are repayable in
Series 2-CRCD preferred investment shares. Share capital includes the $20 million balance on the unsecured
debenture as at October 27, 2012. La Coop’s reserve as
at October 27, 2012 amounted to $327.8 million, representing 55.5% of preferred shares and equity.
Liquidity and capital resources
La Coop fédérée has access to the capital resources
it needs through agreements with Canadian financial
institutions. The agreements with a syndicate of financial institutions provide for an overall credit facility of
$300 million, renewable in June 2016. Drawdowns
amounted to $58 million at the end of fiscal 2012 compared with $119.1 million for fiscal 2011.
In July 2012, La Coop refinanced a term credit facility
for an additional amount of $33.6 million. The fixed-rate
loan’s new term is 10 years and is repayable in three
annual instalments starting in July 2020. The balance as
at October 27, 2012 stood at $60 million compared with
$26.4 million as at October 29, 2011. La Coop also has a
fixed-rate term note with a balance of $13.6 million as at
October 27, 2012, compared with $15.6 million in 2011.
The credit facility, term credit facility and term note
are collateralized by first hypothecs on a majority of the
current and future property, plant and equipment and
intangible assets of Olymel L.P. and its subsidiaries.
In order to reduce its borrowing requirements, La Coop
manages working capital prudently and determines its
capacity to invest in property, plant and equipment
based on cash flows from each of its operating sectors.
La Coop fédérée met its financial obligations for each
quarter of fiscal 2012 and complied with financial covenants under its financing agreements.
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Discipline
Risks and uncertainties
La Coop is exposed to various risk factors that may
influence the profitability of its Marketing and Supply
Operations sectors in the normal course of business.
Input price fluctuation risks
Input prices are determined by several factors beyond
La Coop’s control. Extreme price volatility results from
constant changes in supply markets. La Coop’s economic
environment is regulated by national and provincial
policies affecting slaughterhouse supply. As a result,
changes in market policy influence livestock availability
and prices. La Coop strives to maintain stringent controls
over production costs to offset exposure to supply prices
and costs, which are beyond its control. La Coop mitigates this risk factor by operating in a variety of sectors.
Food safety risks
La Coop is exposed to a number of industry-related
risks, primarily in the normal course of its food processing and marketing operations. La Coop must manage
exposure to risks related to consumer product spoilage
and contamination, and any related liability. La Coop
ensures compliance with government requirements
through stringent food safety controls at all its plants.
Livestock health risks
The prospect of livestock contamination and epidemics is a crucial risk factor for La Coop. Epidemics can have
a major impact on production at processing plants and
their access to raw material supply. Quality management
is of utmost importance to La Coop. Accordingly, improving internal traceability procedures and collaborating on
a national strategy with government bodies are part of
sound livestock management.
Environmental risks
La Coop is a socially responsible cooperative that
constantly takes measures to reduce the environmental
28
impact of its operations, products and services. Its
environmental policy also demonstrates the commitments made by La Coop with respect to prevailing
government regulatory requirements and best practices
in its operating sectors.
Its facilities are continuously inspected under
environmental compliance audits. For instance, in fiscal
2011-2012, La Coop’s environmental advisors visited
54 facilities and issued applicable improvement recommendations to their respective managers. La Coop
reports on environmental issues to the Board of Directors
every quarter through its committee for cooperative education and sustainable development and the
Environment Department’s annual report.
Also, to ensure regulatory compliance and best
environmental practices, the Environment Department
implemented, in cooperation with the chief operating
officer, an ISO 14001-based environmental management
system in five La Coop facilities.
Also, through its environmental advisory service,
the Environment Department carried out more than
125 mandates in different La Coop sectors of operations
and over 60 in cooperatives and business partners.
Last, given its cooperative nature, La Coop is particularly sensitive to the needs of communities in
which it operates and understands the importance of
harmonious cohabitation. We must keep in mind that
a cooperative business is rooted in its territory and is
owned and democratically managed by the community.
It cannot therefore disregard the impacts of its operations on the physical and human landscape it is part of.
That is why La Coop wanted to make a contribution to
promote best practices in cohabitation. Its concern for
awareness-raising and education led La Coop to publish
the Guide d’aide au bon voisinage, a guide for maintaining
sound relationships with the community. This guide is
intended for all establishments in La Coop’s network
that could potentially generate harmful effects (feedmills, fertilizer plants, grain storage facilities, etc.) and
applies to various situations: existing facilities, facility
modification projects or new project design. The guide
recommends a simple process for profiling a business
and its facilities, identifying issues related to good neighbourliness and drawing up action plans, and also includes
work methods and advice to ensure good relationships
with the community.
Global market risks
La Coop’s exports are affected by a number of variables that influence global economic markets. Export
volumes are dependent on prevailing economic conditions in importing countries and, in some cases, on
trade barriers. Export growth and profitability are closely
linked to the strength of these markets and their compliance with international trade treaties and rules.
Financial instrument risks
La Coop has provided information on its exposure to
financial instrument risks, including credit risk, interest
rate risk, liquidity risk, foreign exchange risk and the other
price risks. Note 26 to the consolidated financial statements discloses the nature and extent of risks arising
from financial instruments and related risk management.
New accounting standards
These consolidated financial statements are La Coop’s
first financial statements prepared in accordance with
Part II of the CICA Handbook – Accounting, which sets out
GAAP for Canadian non-publicly accountable entities. In
preparing its opening consolidated balance sheet as at
October 31, 2010 [“transition date”], La Coop has applied
Section 1500, First-time Adoption.
The first-time adoption of accounting standards for
private enterprises in the consolidated opening balance
sheet led to certain adjustments to the balances reported
in the consolidated balance sheet prepared under Part V
of the CICA Handbook – Accounting [“Previous GAAP”].
The adjustments required by the adoption of the new
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Discipline
standards are discussed in detail in the notes to consolidated financial statements, under Note 2B, First-time
adoption of accounting standards for private enterprises.
Conclusion
La Coop, the affiliated cooperatives and the subsidiaries have fared well, amid a fast-evolving environment
disrupted by increasing price instability. Ending the year
with such a strong balance sheet is reassuring.
How will we remember 2012? Besides the record financial results, mention must be made of the ongoing major
Chrysalide projects that are profoundly transforming
network practices and its business culture. Market
structures require us to work differently, to fine-tune
our processes and reduce our operating expenses by generating synergies and identifying underutilized assets.
In this respect, during the year, La Coop transferred its
agri-food analysis operations to Laboratoires d’analyses
S.M., a subsidiary of S.M. Group International, under a
business partnership agreement. By partnering with a
leader in laboratory analyses, we can, via a partnership
agreement, continue to offer the very best laboratory
services to the entire network.
Day after day, we are patiently building the network of
tomorrow. I would like to take this opportunity to offer
warm thanks to my colleagues, and the leaders across
our network of affiliated cooperatives and at our Olymel
subsidiary as well as all the employees for their loyalty,
their commitment and their support in achieving these
results.
And I would be remiss in concluding this report without
extending my heartfelt thanks to our president, Denis
Richard, and all Board members of La Coop fédérée, for
their unfailing support and trust throughout the year.
Claude Lafleur
Also worthy of mention is the accelerated expansion into the Canadian market. Considering the limited
size of the Québec market, we must invest intelligently
and continuously seek opportunities to better use our
Québec facilities, realize our people’s immense potential
and further capitalize on the competitive advantages in
our operating sectors. That’s what we hope to achieve
with our agreement of intent with the Indian Farmers
Fertiliser Co-operative (IFFCO) to build a urea production
plant in Bécancour.
Last, we will remember our initial foray into the relatively undeveloped field of agricultural biomass. This is
La Coop’s first investment in this new industry considered to be very promising, but not without risk as it
is also affected by major changes in energy prices.
29
30
31
IMAGINE
WHAT WE COULD
ACHIEVE
TOGETHER
“That these two leading Québec
organizations have invested so
much shows that La Coop is
recognized for its business sense.”
François Drainville
President
La Coop Agrivert
32
La Coop
reliable and
results-oriented
The International Year of Cooperatives showcased the full strength
and dynamism of cooperative enterprises that are building a
better world – validating the permanent slogan adopted by the
International Cooperative Alliance. But what can we say of La Coop
fédérée, which on top of having celebrated its 90 years in 2012, saw
Desjardins Group and the Fonds FTQ invest $100 million in its capital!
Clearly, credibility is a value that has been developed over the years
and it is synonymous with La Coop.
The Fonds FTQ and Capital régional
et coopératif Desjardins have invested
$100 million
33
OLYMEL
OVERVIEW
W
ith sales of $2,302 billion, up $52 million from last
year, Olymel reported strong financial results for
fiscal 2012.
Denis Richard
President, La Coop fédérée
and Chairman of the Board,
Olymel L.P.
Réjean Nadeau
Claude Lafleur
Paul Noiseux
President and Chief Executive
Officer, Olymel L.P.
La Coop fédérée
La Coop fédérée/Olymel L.P.
The results were mainly driven by satisfactory meat
margins in the Processed Pork Sector and the Poultry
Sector as well as in the Fresh Pork Sector for the fourth
quarter both in Eastern and Western Canada. The performance was all the more encouraging given the fragile
market conditions, a U.S. economy that struggled to
recover and European financial woes that continued
to create much uncertainty for the entire global
economy. Olymel’s sustained efforts over a number of
years to increase added value and reduce costs also contributed to these results.
Overall, external market demand was maintained at
comparable levels to last year with Olymel accounting for
28.2% of Canadian pork exports to all countries. However,
new bilateral free trade agreements are increasingly
favouring our competitors, particularly U.S. companies
in South Korea, which is one of Olymel’s largest external
markets. Canada should quickly follow the U.S. example
and enter into similar trade agreements that will allow
Canadian pork to stay in the game.
Fiscal 2012 also saw plenty of challenges at the
domestic level. Other than the value of our currency
that continues to favour U.S. products in the Canadian
market, hog production in the country was disrupted by a
number of factors. Spiralling grain prices and their financial impact on hog producers, and lower hog production
in Québec are among the most important trends in 2012
34
Olymel Overview
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Credibility
The acquisition of Big Sky Farms: an initial
foray into hog production for Olymel
that prompted Olymel to review its strategies and take
action to adapt to these difficult situations. Against this
background, our priority was and remains, to secure our
supplies and continue to meet client demand.
FRESH PORK
Despite a lower meat margin, the Eastern Fresh Pork
sector generated profits in 2012, although less than in
the prior year. The increase in hog weight mitigated the
impact of lower volume for the third consecutive year.
To reduce the impact of this decrease, Olymel increased
its hog volume sourced from Ontario and also resorted
to the federal Work Sharing program at its Princeville
slaughterhouse for a third year.
The Western Fresh Pork Sector reported positive
results for the fifth consecutive year, although below
the previous year level. The meat margin obtained in
the West remains higher than in the East, stemming
from lower cost of supplies and a more advantageous
client portfolio due to geographical proximity. Similarly
to the East, hog weight increased and slaughter volumes
declined in the West.
In 2012, the precarious situation of hog producers
in Western Canada, caused by spiralling grain prices
and weak market conditions, resulted in a number of
businesses going bankrupt. Big Sky Farms Inc., which
produces a million hogs per year, sought protection
under the Companies’ Creditors Arrangement Act in
September 2012. Olymel’s purchase bid of $65.25 million for this company in October 2012 made under the
process provided for in this act was selected and the
transaction was completed on January 20, 2013. With
this initial foray into hog production, Olymel can secure
its supplies in the West as Big Sky Farms was already the
largest supplier for the Red Deer plant. Olymel intends
to capitalize fully on the owners’ expertise to maximize
the synergies of these new operations.
The hog industry will face numerous challenges in
the coming years, including the issue of animal welfare,
particularly the abolition of sow gestation crates. Olymel
analyzed this issue in depth and concluded that change
is inevitable and is already taking place in a number of
countries. However, Canadian hog producers will need
the time and means to adapt. Olymel expects that
the Canadian industry, too, will be obliged to phase in
compliance with this new market requirement over a
10-year period.
PROCESSED PORK AND BACON
In 2012, the secondary pork sector recorded strong
growth in volumes, compared with past fiscal years,
driven largely by the major long-term contract entered
into last year. In contrast, the bacon sector generated
negative results once again this year amid a substantial
decline in volume and persistently fierce competition
from the U.S. The 2012 loss was however considerably
less than in the previous year, mostly due to insurance compensation. Encouraging signs emerged in the
last few months of the fiscal year, pointing to a sharp
improvement in results in 2013. Following the fire at the
35
Olymel Overview
■
Credibility
Olymel expects that the Canadian industry will
be required to phase out gestation crates from
hog production over a 10-year period.
Princeville bacon plant on May 6, 2012, Olymel reviewed
its reorganization plan for this sector and decided to
consolidate its operations in the two remaining bacon
plants at Drummondville and Cornwall. The plan includes
plant specialization by product type and expanding the
Cornwall plant by building a smokehouse and adding
capacity for meat processing operations.
FRESH AND PROCESSED POULTRY
The primary poultry processing sector generated
positive results in 2012, more than doubling prior year
performance. As in fiscal 2011, higher grain prices applied
upward pressure on live poultry cost, but this factor combined with better production volume management led
to higher selling prices and stronger margins. The coming
into force of the new joint poultry marketing plan in
Québec should allow us to stabilize our market shares,
limit inter-provincial trade and eventually reduce premiums paid to producers. Meanwhile, the new Sunnymel
chicken slaughterhouse and cutting plant in Clair, New
Brunswick, co-owned by Olymel and producer Groupe
Westco, launched its operations on November 30, 2012.
The turkey sector generated record profits in 2012.
The stellar performance was driven by several factors,
including an increase in male turkey weight following
implementation of the CO2 anaesthesia procedure in
2011, the slaughtering of turkey sourced from Nova
Scotia, growth in demand for value added products and
impact of higher selling prices on the meat margin.
36
Last, although positive, results in the processed poultry
sector declined in 2012 with higher supply cost leading to
a decrease in the meat margin and lower sales volume.
INCREASINGLY SOLID FOUNDATIONS AND GROWING
COMPLEXITY OF CHALLENGES
In just under a quarter century, Olymel has become
an undisputed leader in agri-food processing in Canada
and also a major exporter for our pork products in
international markets. With a solid base in Québec, our
organization is now operating across Canada with large
facilities in Ontario, Alberta, Saskatchewan and New
Brunswick. Each region and each market has its own
specific challenges and business opportunities.
Olymel must constantly innovate regarding new products and marketing. We did so in 2012 with the launch
of Olymel Smart Nature, a range of products popular in
the natural deli products niche. This new product range
won the Prix Innovation Marketing 2012 awarded by the
Conseil de la transformation alimentaire et des produits
de consommation, a food industry umbrella association. We also innovated by reformulating the recipes
for Flamingo and Lafleur deli products. The Lafleur brand,
which is celebrating its centenary year, was inducted into
the Hall of Fame of the Association des détaillants en
alimentation du Québec, a food retailer association – the
first brand to ever receive this honour. We must keep
building on our innovation efforts.
Olymel Overview
■
Credibility
Hiring quality personnel still remains the key to
success. That is why, in personnel management, we
are continuing with a large-scale deployment of our
human resource mobilization plan launched several
years ago and through which we offer numerous skills
development programs for our managers’ continuing
education as well as service recognition awards for our
employees. We are also in the process of implementing a
program to instil a genuine culture of occupational accident and disease prevention with results showing clear
improvement: the 2012 indicators for absenteeism, for
occupational injuries and their severity are all declining.
We are also continuing with our internal communication initiatives to ensure our employees, who are spread
across the country in various facilities, get to better know
the organization and its goals. In 2012, we entered into
eight collective bargaining agreements in as many facilities for terms varying from five to nine years, which make
for a stable outlook.
Food safety of our products, respect for the environment in our operations and animal welfare remain
priorities for us. Olymel keeps abreast of changes and
technical progress in these three areas, and is constantly
updating its policies and practices to improve performance and meet the highest standards.
Last, Olymel’s strong performance in the past year
would not have been possible without the dedicated
efforts of all our employees. I am very grateful to them.
I would also like to express my gratitude to the Board of
Directors and its Chairman, Denis Richard, and I thank
them for their invaluable advice and steadfast support
for everything we undertake to create success for Olymel.
Réjean Nadeau
President and Chief Executive Officer, Olymel L.P.
37
38
39
IMAGINE
WHAT WE COULD
ACHIEVE
TOGETHER
“With the deployment of the Fidelio
platform, day-to-day management
has been streamlined. It’s rewarding
to work with people who have a lot
of expertise in technology.”
Patrick Therrien
General manager
La Coop AgriEst and La Coop Agrodor
40
La Coop
innovative and up-to-date
on the latest technology
It’s well known that technological advances allow us to work more
effectively, making it easier to achieve better performance. Fidelio, the
IT platform soon to be deployed across La Coop’s network, will provide
users with a work environment worthy of an authentic network.
Fidelio is already deployed in 28 cooperatives
with total sales of
$860 million
41
Consolidated financial statements
Management report
T
he consolidated financial statements and other financial information included in the Annual Report of La Coop fédérée (“La Coop”) for the
years ended October 27, 2012 and October 29, 2011 are management’s responsibility and have been approved by the Board of Directors. This
responsibility involves the selection of appropriate accounting methods as well as the use of sound judgment in the establishment of reasonable
and fair estimates according to Canadian accounting standards for private enterprises.
Management maintains accounting and administrative control systems designed to provide reasonable assurance regarding the accuracy, relevance
and reliability of financial information, as well as the efficient and orderly conduct of La Coop’s affairs. The Internal Audit Department evaluates all
its systems on an ongoing basis and regularly reports its findings and recommendations to management and the Audit Committee.
The Board of Directors ensures that management assumes its responsibilities with respect to financial reporting and the review of the consolidated
financial statements and Annual Report, mainly through its Audit Committee consisting of outside directors. The Audit Committee holds regular
meetings with the internal and external auditors and with management representatives to discuss the application of internal controls and
reviews the consolidated financial statements and other matters related to financial reporting. The Audit Committee reports and submits its
recommendations to the Board of Directors.
The auditors appointed by the members, Ernst & Young LLP, Chartered Professional Accountants, have audited the consolidated financial statements
and their report appearing hereinafter indicates the scope of their audit and their opinion thereon.
Claude LAFLEUR
Paul NOISEUX, CPA, CGA
Montréal, January 18, 2013
La ........44
To the members of
La Coop fédérée
We have audited the accompanying consolidated financial statements of La Coop fédérée, which comprise the consolidated balance sheets as at
October 27, 2012, October 29, 2011, and October 31, 2010, and the consolidated statements of earnings, reserve, and cash flows for the years
ended October 27, 2012 and October 29, 2011, and 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 audits. We conducted our audits in accordance
with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the
audits 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 the auditors’ 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, the auditors 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 in our audits 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 financial position of La Coop fédérée as at
October 27, 2012, October 29, 2011 and October 31, 2010, and the results of its operations and its cash flows for the years ended October 27, 2012
and October 29, 2011, in accordance with Canadian accounting standards for private enterprises.
Montréal, Canada
January 18, 2013
1
CPA auditor, CA, public accountancy permit no. A103843
La ........45
■
As at October 27, 2012, October 29, 2011 and October 31, 2010
2012
2011
2010
ASSETS
Current assets
Accounts receivable [notes 9 and 27]
Inventories [note 10]
Income taxes receivable
Prepaid expenses
Future income tax assets [note 8]
Investments – current portion [note 13]
Long-term assets
Interests in joint ventures [note 11]
Investments in entities subject to significant influence [note 12]
Investments [note 13]
Property, plant and equipment [note 14]
Employee future benefit asset [note 21]
Goodwill [note 15]
Intangible assets [note 16]
$
403,357
329,299
—
44,427
1,929
2,100
781,112
$
343,512
$
346,244
—
18,318
2,433
5,507
716,014
330,357
281,150
590
23,024
222
2,251
637,594
89,414
42,849
22,739
446,903
5,418
69,238
59,381
735,942
$ 1,517,054
58,090
50,310
20,287
16,250
22,367
16,791
459,458
441,837
4,620
—
69,114
62,583
43,335
25,304
677,271
613,075
$ 1,393,285
$ 1,250,669
$
34,311
15,623
415,501
81,175
2,104
229
6,400
3,073
1,384
8,706
568,506
$
25,667
$
26,690
380,572
69,475
5,460
472
7,300
1,559
1,176
27,575
545,946
22,767
10,352
344,101
48,702
—
488
2,300
3,970
—
132,782
565,462
11,728
153,965
10,749
56,896
16,359
—
249,697
818,203
12,332
184,903
—
56,801
20,816
3,073
277,925
823,871
—
75,998
—
52,093
14,672
4,632
147,395
712,857
LIABILITIES AND EQUITY
Current liabilities
Bank overdrafts
Bank borrowings [note 17]
Accounts payable and accrued liabilities [notes 18 and 27]
Deferred revenues
Income taxes payable
Derivative financial instruments [note 26]
Patronage refunds payable [note 7]
Redeemable preferred shares – current portion [note 22]
Obligation under capital leases – current portion [note 19]
Long-term debt – current portion [note 20]
Long-term liabilities
Obligation under capital leases [note 19]
Long-term debt [note 20]
Deferred credit [note 5]
Employee future benefit liability [note 21]
Future income tax liabilities [note 8]
Preferred shares [note 22]
Total liabilities
EQUITY
Share capital [note 22]
Reserve
Equity of La Coop
Non-controlling interest [note 4]
Total equity
Commitments and contingencies [note 24]
259,452
327,847
587,299
111,552
698,851
$ 1,517,054
138,598
111,396
313,891
306,275
452,489
417,671
116,925
120,141
569,414
537,812
$ 1,393,285
$ 1,250,669
The notes are an integral part of the consolidated financial statements.
On behalf of the Board,
Denis RICHARD, Director
La ........46
Ghislain CLOUTIER, Director
Years ended October 27, 2012 and October 29, 2011
■
2012 Revenues [note 27]
Operating expenses [note 6]
Cost of sales and selling and administrative expenses [note 27]
Financial expenses
Operating income
$ 4,867,113
$ 4,442,438
4,787,114
12,063
4,799,177
67,936
4,358,052
11,100
4,369,152
73,286
Other income and expenses
Share of results of joint ventures
Share of results of entities subject to significant influence
Other investments
Gains (losses) on disposal of assets [note 5]
Gain arising from insurance benefit [note 5]
11,948
2,158
1,654
(305)
13,194
28,649
96,585
6,347
1,866
1,654
9,533
—
19,400
92,686
Patronage refunds [note 7]
Income taxes [note 8]
Net earnings
$
32,216
10,476
53,893
$
36,500
11,914
44,272
Attributable to:
Members of La Coop Non-controlling interest
$
$
39,649
14,244
53,893
$
$
31,652
12,620
44,272
2011
■
2012 Reserve, beginning of year
Adjustment to reserve
Premium on redemption of non-controlling interest [note 4]
Net earnings attributable to members of La Coop
Reserve, end of year
$
313,891
$
306,275
$
(25,693)
39,649
327,847
$
(24,036)
31,652
313,891
2011
La ........47
■
OPERATING ACTIVITIES
2012
Net earnings
Non-cash items:
Amortization [note 6]
Losses (gains) on disposal of assets [note 5]
Future income taxes
Gain on derivative financial instruments
Change in employee future benefits
Share of results of joint ventures
Share of results of entities subject to significant influence
Patronage refunds paid in common shares
Net change in non-cash working capital [note 23]
Increase in deferred credit
Cash flows related to operating activities
$
53,893
$
44,272
51,965
5,007
(3,954)
(243)
(703)
(11,948)
(2,158)
25,773
117,632
(26,636)
10,749
101,745
54,727
(9,533)
(1,412)
(16)
88
(6,347)
(1,866)
29,200
109,113
926
—
110,039
—
(40,361)
(23,150)
(20,404)
(5,816)
—
8,588
3,774
(39,310)
2,887
—
(22,825)
87
(136,530)
(53,374)
(38,704)
—
(2,171)
(9,676)
12,904
7,044
975
(45,037)
1,874
(4,436)
—
9,786
(120,815)
Net change in bank borrowings
Repayment of obligation under capital leases
Proceeds from issuance of long-term debt
Repayment of long-term debt
Payment to non-controlling interest
Proceeds from issuance of preferred shares
Redemption of preferred shares
Proceeds from issuance of common shares
Redemption of common shares
Cash flows related to financing activities
(11,067)
(1,231)
41,527
(71,662)
(4,949)
83,041
(1,733)
46
(7,831)
26,141
13,961
(192)
8,451
(7,208)
(1,168)
4,100
(4,097)
73
(6,044)
7,876
Increase in bank overdrafts
Bank overdrafts, beginning of year
Bank overdrafts, end of year
$
(8,644)
(25,667)
(34,311)
$
(2,900)
(22,767)
(25,667)
2011
INVESTING ACTIVITIES
Business acquisitions [note 3]
Acquisition of shares in non-controlling interest in subsidiary [note 4]
Acquisitions of interests in joint ventures
Acquisitions of investments in entities subject to significant influence
Acquisitions of investments
Proceeds from disposal of interests in joint ventures
Proceeds from disposal of investments
Dividends received from joint ventures
Additions to property, plant and equipment
Proceeds from disposal of property, plant and equipment
Acquisition of goodwill
Additions to intangible assets
Proceeds from disposal of assets [note 5]
Cash flows related to investing activities
FINANCING ACTIVITIES
La ........48
Years ended October 27, 2012, October 29, 2011 and October 31, 2010
■
[All tabular amounts are in thousands of dollars.]
Investments
1. BUSINESS DESCRIPTION
La Coop fédérée [“La Coop”] was established under a special Act of the Province of Québec. It
is active mainly in Marketing and Supply Operations. The Marketing segment focuses on the
processing and sale of pork and poultry products. The Supply Operations segment provides
farmers with goods and services to support their farming operations, and distributes and sells
petroleum products and services.
Investments include investments in cooperatives that are measured at cost since they have
no quoted market price in an active market. Mortgage loans and notes receivable are initially
recognized at fair value and subsequently at amortized cost using the effective interest
method.
2. SIGNIFICANT ACCOUNTING POLICIES AND FIRST-TIME ADOPTION OF
ACCOUNTING STANDARDS FOR PRIVATE ENTERPRISES
A. SIGNIFICANT ACCOUNTING POLICIES
These consolidated financial statements have been prepared in accordance with Part II of the
Canadian Institute of Chartered Accountants [“CICA”] Handbook – Accounting, Accounting
Standards for Private Enterprises, which sets out the generally accepted accounting principles
[“GAAP”] for Canadian non-publicly accountable entities and include the significant
accounting policies described below.
Principles of consolidation
La Coop consolidates all the subsidiaries for which it has the continuing power to determine
the strategic operating, investing and financing policies without the co-operation of others.
The consolidated financial statements comprise the financial statements of La Coop fédérée
and the following significant subsidiaries:
Consolidated subsidiaries
Name
Description
Interest
Agrico Canada Limited
Distributor - Supply Operations
100%
Agronomy Company of Canada Ltd.
Distributor - Supply Operations
100%
Immeuble 9001 l’Acadie s.e.c.
Manager of building housing the head
office
Processing and marketing of pork and
poultry products
100%
Olymel L.P.
73.6%
Inventories
Raw materials and supply inventories are valued at the lower of cost established in accordance
with the first in, first out method and net realizable value, except for grain held for resale,
measured at fair value.
Goods in process and finished goods inventories are valued at the lower of cost under the first
in, first out or average cost method, depending on the segment, and net realizable value.
Interests in joint ventures
La Coop uses the equity method to account for its interests in joint ventures. None of
La Coop’s joint ventures represents more than 10% of earnings before the share of results of
joint ventures and income taxes.
Investments in entities subject to significant influence
La Coop uses the equity method to account for all entities in which it exercises significant
influence over the strategic operating, investing and financing policies. None of La Coop’s
entities subject to significant influence represents more than 10% of earnings before the share
of results of entities subject to significant influence and income taxes.
Property, plant and equipment
Property, plant and equipment are stated at cost. Assets under capital leases are capitalized
when substantially all the benefits and risks incident to ownership of the leased property have
been transferred to La Coop. The cost of assets under capital leases represents the present
value of minimum lease payments.
Property, plant and equipment are amortized over their estimated useful life on a straight-line
basis at the following rates:
Pavement
Buildings
Machinery and equipment
Automotive equipment
Leasehold improvements
Building under capital leases
4% to 20%
3 1/3% to 10%
5% to 33 1/3%
6 2/3% to 33 1/3%
Lease term
Lease term
Intangible assets
Intangible assets subject to amortization are recognized at cost and amortized on a straightline basis over their estimated useful life.
Trademarks
Trademarks are amortized on a straight-line basis over a period of 15 years.
Client lists
Client lists are amortized on a straight-line basis over periods of seven and 15 years.
Rights
Rights consist of production rights and exclusive supply rights. Production rights are
not amortized since they have an indefinite useful life while exclusive supply rights are
amortized on a straight-line basis over periods of three to 20 years.
Software
Software and information technology development project costs are capitalized and
amortized on a straight-line basis over periods of three to eight years. The amortization
of information technology development projects begins at project completion.
Impairment of assets
Financial assets
Allowances for doubtful accounts
Accounts receivable carried at amortized cost are subject to continuous impairment
review and are classified as impaired when, in the opinion of La Coop, there is
reasonable doubt that credit-related losses have occurred taking into consideration
all circumstances known at the review date. Reversals are permitted but the adjusted
carrying amount of the financial asset shall be no greater than the amount that would
have been reported at the date of the reversal had the impairment not been recognized
previously.
La ........49
■
ACCOUNTING STANDARDS FOR PRIVATE ENTERPRISES [cont’d]
A. SIGNIFICANT ACCOUNTING POLICIES [cont’d]
Impairment of assets [cont’d]
Financial assets [cont’d]
Allowances for credit losses
Investments in the cooperatives recognized at cost are written down if analyses
of cooperatives’ financial reports show they are experiencing financial difficulties.
Reversals are permitted but the adjusted carrying amount of the financial asset shall be
no greater than the amount that would have been reported at the date of the reversal
had the impairment not been recognized previously.
Mortgage loans and notes receivable carried at amortized cost are subject to continuous
impairment review and are classified as impaired when, in the opinion of La Coop, there
is reasonable doubt as to the ultimate collectibility of a portion of principal and interest.
An impairment is established by analyzing certain financial ratios of these entities.
Reversals are permitted but the adjusted carrying amount of the financial asset shall be
no greater than the amount that would have been reported at the date of the reversal
had the impairment not been recognized previously.
Long-lived assets subject to amortization
Property, plant and equipment and intangible assets subject to amortization are reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. Impairment is assessed by comparing the carrying amount
of an asset to be held and used with its expected future net undiscounted cash flows from use
together with its residual value. If such assets are considered to be impaired, the impairment
charge is measured by the amount by which the carrying amount of the assets exceeds
their fair value generally determined on a discounted cash flow basis. An impairment loss is
recognized and presented in the consolidated statement of earnings and the carrying amount
of the asset is adjusted to its fair value. An impairment loss may not be reversed if the fair
value of the long-lived asset in question subsequently increases.
Intangible assets with indefinite lives
Production rights must be reviewed for impairment if events or changes in circumstances
indicate that their carrying amount may not be recoverable. The impairment charge is
calculated by comparing the carrying amount of intangible assets with their fair value
generally determined on a discounted cash flow basis. When the carrying amount of an
intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to
such excess. An impairment loss may not be reversed if the fair value of the intangible asset in
question subsequently increases.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of net assets acquired.
Goodwill is not amortized but is tested for impairment if events or changes in circumstances
indicate a possible impairment. The impairment test consists in comparing the carrying
amount of the reporting unit to which goodwill is assigned with its fair value. When the
carrying amount of a reporting unit exceeds its fair value, a goodwill impairment loss is
recognized in an amount that may not exceed the carrying amount of goodwill related to the
reporting unit. Any impairment of the carrying amount in relation to the fair value is charged
to consolidated earnings in the year in which the loss is incurred. Impairment losses on
goodwill may not be reversed.
La ........50
Research and development
Research and development costs are expensed in the consolidated statement of earnings in
the year in which they are incurred.
Long-lived asset retirement obligations
La Coop must recognize an asset retirement obligation during the period if a legal obligation
related to a long-lived asset retirement arises and if the amount of such obligation can
be reasonably estimated. The asset retirement obligation is initially measured using
best estimates of the expenditures to settle the current obligation as at the date of the
consolidated balance sheet, calculated using a risk-free interest rate for maturity dates
that match the timing of the projected cash flows required to settle the obligation. A
corresponding amount is added to the carrying amount of the asset in question and
subsequently amortized over its useful life. The liability is accreted over time, the accretion
expense being charged to earnings as financial expenses along with a corresponding increase
in the related liability.
Revenue recognition
Revenues are recognized when the significant risks and rewards of ownership of the goods
sold are transferred to the buyer, revenue can be reasonably estimated and collection is
reasonably assured. This usually coincides with the time of receipt of goods by the buyer.
Deferred revenues
Deferred revenues are amounts invoiced for goods whose ownership has not yet been
transferred to the buyer.
Foreign currency translation
Transactions in foreign currencies are translated into Canadian dollars using the temporal
method. Under this method, monetary items in the consolidated balance sheet are translated
at the rates of exchange prevailing at year-end while non-monetary items are translated at
the rates prevailing on the transaction dates. Revenue and expense items are translated at
the rates of exchange prevailing on the transaction dates. Gains and losses on translation of
foreign currencies are accounted for in consolidated earnings.
Employee future benefits
La Coop has a number of defined benefit and defined contribution plans providing pension
and post-retirement benefits to most of its employees. Defined benefit pension plans are
based on either average career earnings or average final earnings. Certain pension benefits are
indexed according to economic conditions.
Post-retirement benefits offered by La Coop to its retired employees include health care
benefits and life insurance.
The cost of pension and post-retirement benefits earned by employees is determined
using actuarial calculations under the projected benefit method prorated on service based
on management’s best long-term assumptions of salary escalation, the retirement and
termination ages of employees and estimated health care trend costs.
Plan assets are measured at fair value. Accrued benefit obligations are discounted based on
current market interest rates for investment grade debt securities that match the timing and
amounts of the expected benefit payments.
Past service costs arising from plan amendments are deferred and amortized on a straight-line
basis over the average remaining service period of active employees at the amendment date.
Employee future benefits [cont’d]
Actuarial gains or losses arise from the difference between the actual long-term rate of return
on plan assets for a period and the expected rate of return on plan assets for that period, or
from changes in the actuarial assumptions used to determine the accrued benefit obligation.
The excess of net actuarial gains and losses over 10% of the greater of accrued benefit
obligations and the fair value of plan assets is recorded in consolidated earnings over the
average remaining service period of active employees. The average remaining service period
of active employees covered by the seven pension plans ranges from eight years to 13 years
and the average remaining service period of active employees covered by the early retirement
program ranges from one year to six years. The average remaining service period of active
employees covered by the other post-retirement benefit plans is 14 and 15 years.
Patronage refunds
The amount and terms of payment of patronage refunds are determined by the Board of
Directors after year-end. Patronage refunds are calculated based on members’ purchased
volumes and are accounted for in the year to which they relate. Where patronage refunds are
paid in shares, such shares are considered to be issued at the year-end preceding the Board of
Directors’ resolution.
Financial instruments
Financial assets and liabilities are initially measured at fair value and subsequent
measurements are recorded at amortized cost using the effective interest method.
Financial assets measured at amortized cost using the effective interest method consist
of accounts receivable. Financial liabilities measured at amortized cost consist of bank
overdrafts, bank borrowings, accounts payable and accrued liabilities, deferred revenues and
patronage refunds payable.
Investments in cooperatives included under investments are measured at cost since they have
no quoted market price in an active market. Interests in joint ventures and investments in
entities subject to significant influence accounted for under the equity method are excluded
from these standards. Mortgage loans and notes receivable are initially recognized at fair
value and subsequently measured at amortized cost using the effective interest method.
Preferred shares and long-term debt are initially recognized at fair value and subsequently
measured at amortized cost using the effective interest method. For La Coop, this
measurement is generally equal to cost due either to the use of a floating rate for certain
borrowings or because management believes that the fair value of fixed-rate borrowings does
not differ greatly from their carrying amount given the short-term maturity of some and the
rates that could be obtained currently by La Coop for borrowings with similar conditions and
maturities.
Interest income and expense from financial assets and liabilities are recognized under
financial expenses in the consolidated statement of earnings. Gains and losses related to
financial assets and liabilities are recognized under cost of sales and selling and administrative
expenses. When related to disposition, these gains and losses are recognized under
gains (losses) on disposal of assets.
■
Derivative financial instruments
In accordance with its risk management strategy, La Coop uses derivative financial
instruments to manage foreign exchange risk, risk related to certain commodity prices and
interest rate risk. The derivative financial instruments consist of foreign exchange contracts,
foreign exchange swaps, commodity forward contracts and interest rate swaps. La Coop does
not use derivative financial instruments for speculative purposes.
Hedge accounting is used where La Coop documents its cash flow hedging relationships and
risk management objectives and strategy, and demonstrates that they are highly effective at
hedge inception and throughout the hedge period.
The derivative financial instruments that La Coop chose to designate as cash flow hedging
items are not recognized before their maturity. Gains and losses arising from the hedging
item are recognized when the hedged item affects consolidated earnings. They are measured
at fair value, which is the approximate amount that might be obtained in settlement of
such instruments at prevailing market rates. The gain or loss portion of a hedging item is
recognized as an adjustment to the revenues from or the expenses of the related hedged item.
Realized gains and losses on these contracts are presented in cost of sales and selling and
administrative expenses.
Foreign exchange contracts and currency swaps
La Coop often sells and buys outside Canada, mainly in US dollars, yen and Australian
dollars. To manage foreign exchange risk, La Coop uses foreign exchange contracts
and currency swaps. Gains and losses on foreign exchange contracts and currency
swaps entered into to hedge future transaction cash flows are accounted for in the
consolidated statement of earnings when these transactions occur.
Interest rate swap
La Coop may also use interest rate swaps to manage interest rate risk. Gains and
losses on interest rate swaps entered into to hedge future cash flow transactions are
accounted for in the consolidated statement of earnings when the hedged item affects
earnings.
A hedging relationship is terminated if the hedge ceases to be effective, and the unrealized
gain or loss on the related derivative financial instrument is recognized in the consolidated
statement of earnings.
Derivative financial instruments that are not designated as hedges are measured at fair value,
which is the approximate amount that might be obtained in settlement of such instruments
at prevailing market rates. Gains and losses resulting from remeasurement at year-end are
reported in the consolidated statement of earnings.
Commodity forward contracts
La Coop often buys and sells grain to cover certain identifiable future risks on the price
of these commodities. La Coop does not use hedge accounting for commodity forward
contracts. Therefore, gains and losses on these contracts, realized or not, are presented
in cost of sales and selling and administrative expenses.
Interest rate swap
La Coop also uses an interest rate swap to manage interest rate risk. La Coop does not
use hedge accounting for this derivative financial instrument. Therefore, gains and
losses on these contracts are recognized under financial expenses.
La ........51
■
Elected exemptions for the transition
Environmental obligations
[i]
Environmental costs related to current operations are expensed or capitalized according to
their nature. Current costs caused by past events that do not generate future revenues are
charged to consolidated earnings in the current year. Liabilities are recorded when costs are
likely to be incurred and may be reasonably estimated.
Fair value – La Coop elected to measure certain designated parcels of land at their
estimated fair value as at the transition date and to use such fair value as their deemed
cost.
[ii]
Business combinations – La Coop has elected to prospectively apply Section 1582,
Business Combinations, as well as Section 1601, Consolidated Financial Statements,
and Section 1602, Non-controlling Interests, to the subsidiaries acquired on or
after October 31, 2010. Accordingly, business combinations occurring prior to
October 31, 2010 have not been restated.
Section 1500 provides for a number of optional exemptions to the retrospective adoption of
GAAP. La Coop elected the following exemptions under the transition:
Income taxes
La Coop follows the future income taxes method of accounting for income taxes. Future
income tax assets and liabilities are recognized for the future tax consequences of temporary
differences between the carrying value and tax bases of assets and liabilities. Future income
tax assets and liabilities are measured using substantively enacted income tax rates applicable
in the years in which the temporary differences are expected to reverse. A valuation allowance
is recorded to reduce the carrying amount of future income tax assets, when it is more likely
than not that such assets will not be realized.
Year-end
[iii] Employee future benefits – La Coop elected to recognize all cumulative actuarial gains
and losses and past service costs in the opening balance of the reserve.
Reconciliations
The following table reconciles the reserve as at October 31, 2010 and net earnings for the year
ended October 29, 2011 reported under previous GAAP with the reserve and net earnings
reported under GAAP.
La Coop’s year-end is the last Saturday of October. The years ended October 27, 2012 and
October 29, 2011 include 52 weeks.
B. FIRST-TIME ADOPTION OF ACCOUNTING STANDARDS FOR PRIVATE ENTERPRISES
These consolidated financial statements are La Coop’s first financial statements prepared in
accordance with Part II of the CICA Handbook – Accounting, which sets out GAAP for Canadian
non-publicly accountable entities. In preparing its opening consolidated balance sheet as at
October 31, 2010 [“transition date”], the Corporation has applied Section 1500, First-time
Adoption, retrospectively [save the exceptions described below] based on the following four
principles, such that La Coop:
➢ accounted for all assets and liabilities whose recognition is required by GAAP;
➢ did not recognize items as assets or liabilities where not permitted under GAAP;
➢ reclassified items that were recognized previously as one type of asset, liability or
component of equity but that are now recognized as a different type of asset, liability
or component of equity;
➢ applied GAAP in measuring all recognized assets and liabilities.
The use of accounting policies by La Coop in preparing its opening consolidated balance sheet
based on the application of these principles has led to certain adjustments to the balances
reported in the consolidated balance sheet prepared under Part V of the CICA Handbook –
Accounting [“Previous GAAP”]. These adjustments were recorded directly in La Coop’s reserve
at the transition date under the transitional provisions set out in Section 1500.
Reserve and net earnings – Previous GAAP
Fair value option for property,
plant and equipment
Unrestated business combinations
Restated business combinations
Subtotal
Reserve and net earnings – GAAP
[a]
Reserve as at
October 31, 2010
$ 320,520
[a]
(22,407)
Net earnings for
the year ended
October 29, 2011
$ 28,992
1,530
[b]
8,162
—
[c]
[d]
—
—
(14,245)
$ 306,275
2,588
(1,458)
2,660
$ 31,652
La Coop elected to apply the immediate recognition approach to account for employee
benefit plans at the transition date only. Accordingly, the $36,523,000 deficit related
to the plan was recognized in the consolidated balance sheet as at the transition date.
As a result, the accrued benefit liability increased by $36,523,000, the long-term future
income tax liability decreased by $8,192,000, the non-controlling interest decreased by
$5,924,000 and the reserve recorded a net decrease of $22,407,000.
La Coop’s net earnings for the year ended October 29, 2011 increased by $2,302,000,
net of a $522,000 increase in the long-term future income tax liability and a $250,000
increase in the allocation to the non-controlling interests.
[b] Fair value option for property, plant and equipment
La Coop elected to measure certain designated parcels of land at their estimated
fair value as at the transition date. As at this date, the carrying amount of land was
increased by $10,658,000, the non-controlling interest was increased by $2,496,000 and
a $8,162,000 increase was recorded in the reserve.
La ........52
B. FIRST-TIME ADOPTION OF ACCOUNTING STANDARDS FOR
PRIVATE ENTERPRISES [cont’d]
Reconciliations [cont’d]
[c]
Unrestated business combinations
La Coop elected not to restate business combinations that occurred prior to
October 31, 2010. However, a first-time adopter is required to exclude from its opening
balance sheet any item recognized in accordance with previous GAAP that does not
meet the conditions for recognizing an asset or liability under Canadian accounting
standards for private enterprises. In addition, La Coop must account for all assets and
liabilities whose recognition is required by GAAP.
Goodwill is no longer amortized but is subject to impairment tests. Accordingly, the
$2,588,000 amortization expense recognized in fiscal 2011 was reversed, resulting in an
increase in net earnings in the same amount.
[d] Restated business combinations
Supply Operations segment
During fiscal 2011, La Coop acquired all the shares of several companies operating in the
Supply Operations segment. The restatement of this business combination to conform
to GAAP had the following impacts:
Transaction costs, which were recognized as part of the consideration paid under
previous GAAP, are expensed as incurred under GAAP. Accordingly, an amount of
$1,568,000 was recognized as an adjustment to net earnings. La Coop also finalized the
purchase price allocation for net assets acquired. An amortization expense of $127,000
was charged to net earnings.
Marketing segment
La Coop also restated the amounts reported upon the acquisition of the second 4.4%
portion of the 17.6% non-controlling interest in a subsidiary on August 1, 2011 for a
total consideration of $38,704,000. As required by GAAP, the difference between the
adjustment for the non-controllling interest, amounting to $14,668,000, and the fair
value of the consideration paid was charged against the reserve without allocation to
the net assets acquired.
As a result, property, plant and equipment, goodwill, intangible assets and the future
income tax liability decreased by $10,381,000, $12,863,000, $4,767,000 and $3,975,000,
respectively. The total impact of these changes amounted to a $24,036,000 decrease in
the reserve and a $237,000 increase in net earnings for the year ended October 29, 2011
corresponding to the reversal of the amortization expense.
Other comprehensive income
Under previous GAAP, gains and losses resulting from the year-end remeasurement of
derivative financial instruments that La Coop elected to designate as cash flow hedging items
were reported in other comprehensive income until they were reclassified to the consolidated
statement of earnings when the hedged item affected earnings. Since other comprehensive
income does not exist under GAAP, the reserve increased by $926,000 as at the transition date
of October 31, 2010 and by $661,000 as at October 29, 2011.
■
Presentation differences
Joint ventures
La Coop elected to use the equity method to account for interests in joint ventures. Under
previous GAAP, La Coop used the proportionate consolidation method to report its interests
in joint ventures. Following these changes, a new item – interests in joint ventures –
was reported in the consolidated balance sheet in the amounts of $50,310,000 as at
October 31, 2010 and $58,090,000 as at October 29, 2011. This election also had an impact on
the presentation of the consolidated statement of earnings, i.e. the results of joint ventures
were combined into a single item, namely the share of results of joint ventures, which
amounted to $6,347,000 for the year ended October 29, 2011.
Consolidated statement of cash flows for the year ended October 29, 2011
The adjustments discussed above did not lead to any significant changes in La Coop’s cash
flows related to operating, investing and financing activities compared with the consolidated
statement of cash flows under previous GAAP, except for a reclassification of interests in joint
ventures to reflect the use of the equity method to account for these interests.
3. BUSINESS ACQUISITIONS
During fiscal 2011, La Coop acquired all the shares of several companies operating in the Supply
Operations segment for a total consideration of $53,374,000. The net asset allocation of one
of our acquisitions was temporary and subject to adjustments upon final allocation. As the
external valuation process for property, plant and equipment has now been performed, final
adjustments were made to the purchase price allocation of these acquisitions. The carrying
amount of property, plant and equipment was increased by $6,429,000 while goodwill was
decreased by the same amount.
These acquisitions were accounted for using the purchase method and consolidated as of their
respective acquisition dates.
The breakdown of the total value of net assets acquired and the total consideration paid are as
follows:
Net assets acquired
Current assets
Interests in joint ventures
Goodwill
Intangible assets
Other long-lived assets
Total assets acquired
Current liabilities
Long-term debt
Future income tax liabilities
Total liabilities assumed
Consideration paid
Cash consideration
Total
$ 35,200
15,213
10,805
6,529
18,110
5,869
91,726
30,924
2,083
5,345
38,352
$ 53,374
La ........53
■
4. ACQUISITION OF NON-CONTROLLING INTEREST IN SUBSIDIARY
During fiscal 2010, La Coop acquired from a group of a subsidiary’s non-controlling
shareholders a 17.6% interest in that subsidiary. The purchase price of $146,880,000 will be
paid out in four equal and consecutive annual portions or sooner, at La Coop’s discretion, plus
a consideration amounting to the non-acquired portions multiplied by the prime rate of a
financial institution plus 1 ½%. The acquisition of the first portion was accounted for using
the purchase method.
The first 4.4% portion of the 17.6% interest was acquired on August 2, 2010 for a total
consideration of $36,720,000. The second 4.4% portion of the 17.6% interest was acquired on
August 1, 2011 for a total consideration of $38,704,000. The third 4.4% portion of the 17.6%
interest was acquired on August 1, 2012 for a total consideration of $40,361,000. The excess
of the fair value of the consideration paid over the carrying amount of the non-controlling
interest was recognized as a reduction of the reserve in the amount of $25,693,000 in 2012
[$24,036,000 in 2011] and the non-controlling interest was decreased by $14,668,000
[$14,668,000 in 2011].
5. GAINS (LOSSES) ON DISPOSAL OF ASSETS AND GAIN ARISING FROM INSURANCE BENEFIT
In fiscal 2012, a fire broke out at one of La Coop’s plants in the Marketing segment. Property,
During fiscal 2011, La Coop disposed of some investments and other intangible assets for a
plant and equipment, i.e. the building and equipment, with a carrying amount of $4,702,000
total monetary consideration of $18,981,000, generating gains on disposals of assets in the
was disposed of, generating a net gain of $13,194,000 taking into account the cash insurance
amount of $9,533,000.
proceeds at impaired value of $17,896,000. Plant replacement value was evaluated at
$28,895,000, of which $10,749,000 was recorded as deferred credit. This amount will be
recognized as revenue at the same rate as the amortization of property, plant and equipment.
6. OPERATING EXPENSES
Operating expenses include the following items:
Cost of inventories
Amortization of property, plant and equipment
Amortization of intangible assets
Amortization of transaction costs
Interest on bank borrowings
Interest on obligation under capital leases
Interest on long-term debt
Interest on preferred shares
Interest income
2012
$ 4,467,081
45,069
6,568
328
212
452
11,630
628
(1,187)
2011
$ 4,080,436
49,845
4,510
372
509
78
11,106
633
(1,598)
7. PATRONAGE REFUNDS
In accordance with the provisions of the Act governing La Coop, at their meeting on January 18, 2013, the directors declared patronage refunds of $32,216,000 to be paid from earnings for the
year. They authorized the patronage refunds to be paid in the following proportions:
2012
2011
2010
Cash
$
6,443
$
7,300
$
2,300
Class B-1 common shares
4,832
5,475
1,725
Class D-1 common shares
20,941
23,725
7,475
$
32,216
$
36,500
$
11,500
These consolidated financial statements reflect this directors’ resolution.
La ........54
8. INCOME TAXES
The significant components of income tax expense are as follows:
Current
Future
Income taxes
$
$
■
2012
14,430
(3,954)
10,476
$
$
2011
13,326
(1,412)
11,914
The reconciliation of income tax expense with the amount obtained from multiplying earnings after patronage refunds by the statutory income tax rates is summarized as follows:
Patronage refunds
Earnings for the calculation of income tax expense
$
2012
96,585
32,216
64,369
$
2011
92,686
36,500
56,186
Income taxes at combined federal and provincial rates of 27% [28.51% in 2011]
Share of non-controlling interest
Effect of non-deductible expenses for tax purposes
Interest in joint ventures
Investment in taxable entities subject to significant influence
Other items
Income taxes
$
17,380
(3,845)
496
(3,225)
(277)
(53)
10,476
$
16,019
(3,598)
564
(1,810)
(223)
962
11,914
The significant components of future income tax assets and liabilities are as follows:
Non-deductible provisions and reserves for tax purposes
Inventories
Other items – net
Current future income tax assets
$
$
2012
2,328
116
(515)
1,929
$
$
2011
2,675 $
169
(411)
2,433
$
2010
3,218
(2,722)
(274)
222
Investments
Intangible assets
Patronage refunds carried forward
Long-term future income tax liabilities
$
$
(25,379)
(1,950)
(4,272)
12,024
3,218
(16,359)
$
$
(26,244)
$
(1,556)
(4,852)
11,836
—
(20,816)
$
(23,971)
(1,920)
(1,112)
11,488
843
(14,672)
9. ACCOUNTS RECEIVABLE
Trade receivables
Allowances for doubtful accounts
$
$
2012
406,854
3,497
403,357
$
$
2011
345,954
$
2,442
343,512
$
2010
333,069
2,712
330,357
$
$
2011
149,923
$
196,321
346,244
$
2010
135,460
145,690
281,150
Excess of carrying amount over tax basis:
As at October 27, 2012, the carrying amount of impaired trade receivables totalled $8,854,000 [$10,780,000 in 2011 and $8,352,000 in 2010].
10. INVENTORIES
Inventories are as follows:
Marketing inventories
Supply inventories
$
$
2012
157,604
171,695
329,299
The carrying amount of inventories recognized at net realizable value is $149,384,000 [$179,753,000 in 2011 and $136,631,000 in 2010].
An inventory write-down of $7,910,000 was recognized as an expense during the year [$7,800,000 in 2011].
No write-down reversal was recorded in inventory for fiscal 2012 and fiscal 2011.
Marketing inventories are pledged as collateral for long-term debt [note 20].
La ........55
■
11.INTERESTS IN JOINT VENTURES
Shares of 50%–owned joint ventures in the Supply Operations segment
$
2012
57,881
$
2011
52,407
$
2010
46,343
Shares of 50%–67.7% owned joint ventures in the Marketing segment
$
31,533
89,414
$
5,683
58,090
$
3,967
50,310
2011
12.INVESTMENTS IN ENTITIES SUBJECT TO SIGNIFICANT INFLUENCE
Shares of 7.58%–50% owned entities in the Supply Operations segment
[7.58%–40% in 2011 and 7.58%–33% in 2010] 13. INVESTMENTS
Investments in cooperatives
Shares and other securities of supply cooperatives
Shares and other securities of affiliated cooperatives
Mortgage loans and notes receivable
Investments – current portion
14.PROPERTY, PLANT AND EQUIPMENT
$
Carrying amount
Cost
Cost
Amortized cost
2012
42,849
$
$
2012
2012
752
4,597
5,349
19,490
24,839
2,100
22,739
$
$
2011
$
$
813
$
4,071
4,884
22,990
27,874
5,507
22,367
$
Accumulated
Net
Cost amortization
carrying amount
Land
$
33,685
$
—
$
33,685
Pavement
13,459
9,059
4,400
Buildings
365,385
163,262
202,123
Machinery and equipment
672,768
484,879
187,889
Automotive equipment
23,879
19,223
4,656
Leasehold improvements
6,264
5,685
579
Building under capital leases
14,535
964
13,571
$ 1,129,975
$ 683,072
$ 446,903
20,287
2011
2010
16,250
2010
912
1,257
2,169
16,873
19,042
2,251
16,791
2010
Net
Net
carrying amount
carrying amount
$
33,414
$
33,348
3,445
3,224
207,717
202,340
195,341
194,851
5,574
5,913
461
2,161
13,506
—
$ 459,458
$ 441,837
In fiscal 2011, La Coop decided to no longer account for the building housing the head office as an asset held for sale as initially decided in fiscal 2008. Accordingly, La Coop recognized an amortization expense of $2,853,000 in its statement of earnings in fiscal 2011. This is the amortization expense that would have been recognized had the building been considered as an asset held for use
since fiscal 2008.
15. GOODWILL
The carrying amount of goodwill is as follows:
Goodwill
16.INTANGIBLE ASSETS
Intangible assets are detailed as follows:
$
2012
2012
69,238
Accumulated
Net
Cost amortization
carrying amount
Trademarks
$
12,787
$
4,699
$
8,088
Client lists
19,844
5,645
14,199
Exclusive supply rights
32,417
5,239
27,178
Production rights
3,636
—
3,636
Software
15,586
9,306
6,280
$
84,270
$
24,889
$
59,381
$
2011
69,114
$
2011
2010
62,583
2010
Net
Net
carrying amount
carrying amount
$
8,665
$
5,955
14,861
2,193
10,149
7,365
3,636
3,609
6,024
6,182
$
43,335
$
25,304
Software and information technology development projects are internally developed.
La ........56
17. BANK BORROWINGS
Bank borrowings consist of demand credit facilities for four subsidiaries.
For the first subsidiary, the demand credit facility, renewable annually, may be drawn down
under bank overdrafts, advances, letters of credit and standby letters of credit and totalled
$12,000,000 in 2012, 2011 and 2010, up to a maximum aggregate amount of $6,000,000
under letters of credit and standby letters of credit. Drawdowns under bank overdrafts as at
October 27, 2012 totalled $10,209,000 [$2,059,000 in 2011 and $4,914,000 in 2010] and bore
interest at the prime rate, which was 3% in 2012, 2011 and 2010. La Coop is joint and several
guarantor for all amounts owing under this agreement.
The second subsidiary had a credit facility which was combined with La Coop’s credit facility
in 2012. The demand credit facility was renewable annually with an authorized amount of
$45,000,000 from December 1, 2010 to June 30, 2011 and $35,000,000 from July 1, 2011
to November 30, 2011. Drawdowns totalled $18,432,000 in 2011 and nil in 2010 and bore
interest at the prime rate plus 1.5%, which equalled 4.5% in 2011 and nil in 2010. The credit
facility was secured by a first rank hypothec on accounts receivable and inventories and a
second rank hypothec on the subsidiary’s intangible assets.
18.ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities
Government remittances
Accrued interest on long-term debt
19. OBLIGATION UNDER CAPITAL LEASES
Obligation under a capital lease bearing interest at a fixed rate of 3% and prime plus 1%,
for a rate of 4%, as at October 27, 2012 [fixed rate of 3% and prime rate of 4% in 2011, nil in 2010],
repayable in blended monthly instalments of $135,005, maturing in July 2018
Obligation under a capital lease bearing interest at a fixed rate of 3%, repayable in
blended monthly instalments of $13,917, maturing in June 2017
Obligation under capital leases – current portion ■
The third subsidiary had a demand loan facility which was combined with La Coop’s credit
facility in 2012. This annually renewable demand loan had an authorized amount of $875,000
of which $675,000 was drawn down in 2011, nil in 2010. The interest rate was equal to the
prime rate plus 1%, representing a rate of 4% in 2011, nil in 2010. This demand loan was
secured by the subsidiary’s accounts receivable, inventories and equipment.
The fourth subsidiary has an annually renewable demand loan with an authorized amount of
$6,500,000 in 2012, 2011 and 2010, of which $5,414,000 was drawn down in 2012 [$5,524,000
in 2011 and $5,438,000 in 2010] for which two portions were set at fixed rates of 2.64% and
2.71% in 2012 [2.64% in 2011, nil in 2010] and another portion was set at the prime rate
plus 0.25%, for a total of 3.25% in 2012, 2011 and 2010. This demand loan is secured by the
subsidiary’s accounts receivable and inventories.
$
$
2012
394,201
20,631
669
415,501
2012
$
$
2011
350,743
$
29,273
556
380,572
$
2011
2010
316,136
27,346
619
344,101
2010
$
12,333
$
13,508
$
—
$
779
13,112
1,384
11,728 $
—
13,508
1,176
12,332
$
—
—
—
—
Minimum lease payments in upcoming years are as follows:
2013
2014
2015
2016
2017
2018
$
1,808,000
1,791,000
1,789,000
1,800,000
1,744,000
6,261,000
Minimum payments under capital leases include interest in the amount of $2,082,000.
La ........57
■
20. LONG-TERM DEBT
Credit facility1 drawn under margin loans at the prime rate of 3% and under bankers’ acceptances at
rates ranging from 2.59% to 2.60% [2.56% to 2.60% in 2011 and 2.54% to 3% in 2010], renewable in June 2016
2012
2011
2010
$
57,966
$
Term credit, at a fixed rate of 5% [6.29% in 2011 and 2010], repayable in annual principal instalments
of $20,000,000 from July 11, 2020 through July 2022, [repayable in an annual principal instalment of
$3,600,000, one instalment of $4,800,000 and three instalments of $7,200,000, from August 2011
through August 2015 in 2011 and 2010]
60,000
26,400
30,000
Unsecured debenture, at a fixed rate of 6.72%, subordinated to the credit facility, repayable in an
annual principal instalment of $5,000,000, one instalment of $6,000,000 and two instalments of $7,000,000
from August 2012 through August 2015 in 2011 and 2010. Repayable in Series 2 – CRCD
preferred investment shares as from August 2012 [note 22]
—
25,000
25,000
Term note, at a fixed rate of 7.75%, repayable in blended monthly instalments of $263,621,
maturing on January 1, 2018
13,608
15,630
17,502
Mortgage loans of the real estate subsidiary, secured by movable and immovable hypothecs, at prime plus 0.25%,
for a rate of 3.25% as at October 27, 2012 [fixed rate of 5.55% and a prime rate of 3% in 2011 and 2010],
repayable in monthly principal instalments of $81,518 [repayable in monthly principal instalments of $26,153 and
$74,860 in 2011 and 2010], maturing on October 31, 2016
10,082
11,045
11,826
Mortgage loan of a subsidiary, secured by a hypothec on a building and land of the subsidiary
with a carrying value of $10,771,000 as at October 27, 2012 [$10,889,000 in 2011 and $10,411,000 in 2010],
bearing interest at a fixed rate of 7.76% in 2012, 2011 and 2010, repayable in blended monthly instalments
of $83,404, maturing in March 2023
8,327
8,667
8,981
Mortgage loans and other debts, at rates ranging from 0% to 8% [0% to 9% in 2011 and 4% to 9% in 2010],
maturing from November 2012 to July 2022
Transaction costs
Long-term debt – current portion
$
$
8,242
214,104
(1,626)
212,478
27,575
184,903
$
14,013
163,996
(1,325)
162,671
8,706
153,965
119,120
$
111,170
4,566
209,045
(265)
208,780
132,782
75,998
1. La Coop has an overall revolving credit facility of $300,000,000. La Coop can use this credit facility as follows: US- and Canadian-dollar margin loans, bankers’ acceptances, LIBOR advances and letters of guarantee.
The interest rate is based on a rate schedule that varies according to a financial ratio calculated quarterly on a consolidated basis.
The credit facility, the term credit and the term note, which totalled $131,574,000 as at October 27, 2012 [$161,150,000 in 2011 and $158,672,000 in 2010], are collateralized by first rank
hypothecs over a majority of the property, plant and equipment and intangible assets, both present and future, of the subsidiary Olymel L.P. and its subsidiaries.
La Coop’s long-term debt is subject to compliance with certain financial ratios based on La Coop’s consolidated financial statements. As at October 27, 2012, La Coop was in compliance with
these financial ratios.
The principal repayments required over the next five years are as follows: 2013 – $8,707,000; 2014 – $4,607,000; 2015 – $4,706,000; 2016 – $69,208,000; 2017 – $4,641,000.
La ........58
■
21.EMPLOYEE FUTURE BENEFITS
La Coop measures its accrued benefit obligations and the fair value of plan assets at each year-end. The most recent actuarial valuations of the pension funds for funding purposes were as of
December 31, 2011. The actuarial valuation of the other post-retirement benefit plans was carried out as at May 31, 2011. The next required actuarial valuation will be as at December 31, 2012
for the pension plans and as at May 31, 2014 for the other post-retirement benefit plans.
Information on La Coop’s pension plans and other post-retirement benefits is as follows:
2012
Accrued benefit obligations
Fair value of plan assets
Funded status – plan deficit
Unamortized net actuarial loss Unamortized past service cost
Accrued benefit liability
$
$
Other
Pension
post-retirement
plans benefits
188,969
$
25,972
$
138,088
—
(50,881)
(25,972)
24,258
455
662
—
(25,961)
$
(25,517)
$
Total
214,941
138,088
(76,853)
24,713
662
(51,478)
$
$
Other
Pension
post-retirement
plans benefits
5,418
$
—
$
(31,379)
(25,517)
(25,961)
$
(25,517)
$
Total
5,418
(56,896)
(51,478)
Other
Pension
post-retirement
2011
plans benefits
$ 158,058
$
21,036
$
122,724
—
Funded status – plan deficit
(35,334)
(21,036)
Unamortized net actuarial loss (gain)
6,333
(2,896)
Unamortized past service cost
752
—
$
(28,249)
$
(23,932)
$
Total
179,094
122,724
(56,370)
3,437
752
(52,181)
The accrued benefit asset (liability) in La Coop’s consolidated balance sheet is presented as follows:
Other
Pension
post-retirement
plans benefits
Accrued benefit asset
$
4,620
$
—
$
(32,869)
(23,932)
$
(28,249)
$
(23,932)
$
Total
4,620
(56,801)
(52,181)
Other
Pension
post-retirement
2010
plans benefits
$ 153,110
$
22,219
$
123,236
—
$
(29,874)
$
(22,219)
$
Total
175,329
123,236
(52,093)
The accrued benefit asset (liability) in La Coop’s consolidated balance sheet is presented as follows:
Accrued benefit asset
La ........59
■
22. SHARE CAPITAL
La Coop’s share capital is variable and unlimited with regard to the number of shares issuable.
The rights, restrictions and conditions relating to each type of share are determined by the
Board of Directors. The share capital consists of:
Common shares
Preferred shares
Class B common shares, with a par value of $1, non-voting and redeemable at their par
value upon a decision of the Board of Directors. However, the Board of Directors cannot
redeem Class B common shares if there are shares outstanding other than Class B-1,
D-1 common shares or Class A common shares. These shares were issued to members as
partial payment of patronage refunds.
Class A preferred shares, with a par value of $1, non-voting and redeemable at their par value
upon a decision of the Board of Directors. They are issued upon the conversion of common
shares held by a member who does not fulfill the commitments of its contract with La Coop or
if the contract commitments are not renewed.
Preferred investment shares
Series 1 – FSTQ preferred investment shares with a par value of $100, non-voting and redeemable
at their par value upon a decision of the Board of Directors on or after May 31, 2015, with
an annual dividend, payable semi-annually, at a rate set under the Series 1 – subscription
agreement, cumulative and preferential except for the interest on Cooperative Investment
Plan shares.
Series 2 – CRCD preferred investment shares with a par value of $100, non-voting and
redeemable at their par value upon a decision of the Board of Directors on or after
May 31, 2016, with an annual dividend, payable semi-annually, at a rate set under the Series 2 –
subscription agreement, cumulative and preferential except for the interest on Cooperative
Investment Plan shares. An unsecured debenture in the amount of $20,000,000 at a fixed
rate of 6.72%, repayable annually in Series 2 – CRCD preferred investment shares with a par
value of $100 in one amount of $6,000,000 and two amounts of $7,000,000 from August 2013
through August 2015.
Preferred shares with a par value of $10, issued to members and employees of La Coop in
accordance with the Cooperative Investment Plan, bearing interest at a rate determined by
the Board of Directors. These shares are redeemable at their par value upon a decision of
the Board of Directors. The 2005, 2008, 2009, 2010 and 2011 issues are only redeemable by
La Coop as of the fifth anniversary of their issuance. The 2006 and 2007 issues are redeemable
at the option of La Coop as of the fifth anniversary of their issuance, or at the holder’s option,
provided that certain conditions are met.
La ........60
Class A common shares, with a par value of $25. Holding such shares is an essential condition
to qualify as a member and obtain voting rights. They are redeemable at their par value upon
a decision of the Board of Directors.
Class B-1 common shares, with a par value of $1, non-voting and redeemable at their par value
upon a decision of the Board of Directors, starting the day after the fifth anniversary of their
issuance. However, the Board of Directors may not redeem Class B-1 common shares if there
are any outstanding Class B, D and D-1 common shares. These shares were issued to members
as partial payment of patronage refunds.
Class D common shares, with a par value of $1, non-voting and redeemable at their par value
upon a decision of the Board of Directors. These shares were issued to members as partial
payment of patronage refunds.
Class D-1 common shares, with a par value of $1, non-voting and redeemable at their par
value upon a decision of the Board of Directors, starting the day after the fifth anniversary of
their issuance. However, the Board of Directors may not redeem Class D-1 common shares if
any Class B and D common shares are outstanding. These shares were issued to members as
partial payment of patronage refunds.
Class auxiliary members common shares, with a par value of $25, non-voting and redeemable at
their par value upon a decision of the Board of Directors.
Class auxiliary federation members common shares, with a par value of $25, non-voting and
redeemable at their par value upon a decision of the Board of Directors.
■
22.SHARE CAPITAL [cont’d]
At year-end, the issued and fully paid shares were as follows:
2012
PREFERRED SHARES
Class A
1,097,629
Series 1 – FSTQ investment shares 500,000
Series 2 – CRCD investment shares 300,000
Debenture repayable in Series 2 – CRCD
investment shares —
Cooperative Investment Plan
2005 Series, redeemable as of 2011, 4.75%
—
—
307,332
2008 Series, redeemable as of 2014, 4%
231,449
359,729
410,014
373,662
3,579,815
Transaction costs
—
3,579,815
Preferred shares recognized as a financial liability
(307,332)
3,272,483
COMMON SHARES
Class A
38,201
Class B
29,055,599
Class B-1
26,088,410
Class D
—
Class D-1
89,191,408
auxiliary members
290
auxiliary federation members
100
144,374,008
147,646,491
Number
2011
2010
2012
$
1,098
50,000
30,000
$
20,000
Amount
2011
1,272
$
—
—
2010
1,271,565
—
—
1,398,981
—
—
—
—
—
155,853
307,332
231,449
359,729
410,014
—
2,735,942
—
2,735,942
(463,185)
2,272,757
396,969
155,853 307,332
231,449
359,729
—
—
2,850,313
—
2,850,313
(860,154)
1,990,159
$
—
—
3,073
2,314
3,597
4,100
3,737
117,919
(696)
117,223
(3,073)
114,150
$
—
1,559
3,073
2,314
3,597
4,100
—
15,915
—
15,915
(4,632)
11,283
$
3,970
1,559
3,073
2,314
3,597
—
—
15,912
—
15,912
(8,602)
7,310
36,648
36,878,946
21,256,048
—
68,250,831
290
100
126,422,863
128,695,620
34,368
39,971,402
15,785,154
2,924,165
44,537,130
180
100
103,252,499
105,242,658
$
$
956
29,056
26,088
—
89,191
8
3
145,302
259,452
$
$
918
$
36,879
21,256
—
68,251
8
3
127,315
138,598
$
861
39,971
15,785
2,924
44,537
5
3
104,086
111,396
—
1,399
—
—
—
La ........61
■
These transactions were as follows:
PREFERRED SHARES
Balance, beginning of year
Issued:
Series 1 – FSTQ preferred investment shares
Series 2 – CRCD preferred investment shares
Preferred shares, Cooperative Investment Plan
Redeemed:
Preferred shares, Cooperative Investment Plan
Preferred shares, Class A
Transaction costs
Debenture repayable in Series 2 – CRCD preferred
investment shares
Redeemable preferred shares, 2007 Series
[2006 Series in 2011 and 2005 Series in 2010] –
current portion
Balance, end of year
COMMON SHARES
Balance, beginning of year
Issued:
Class A common shares
Patronage refunds paid in Class B-1 common shares Patronage refunds paid in Class D-1 common shares Class auxiliary members common shares
Class auxiliary federation members common shares
Redeemed:
Class A common shares
Class B common shares
Class B-1 common shares
Class D common shares
Class D-1 common shares
Balance, end of year
La ........62
2012
Number
2011
2010 2012
$
15,915
$
Amount
2011
2010
2,735,942
2,850,313
2,840,724
500,000
300,000
373,662
1,173,662
—
—
410,014
410,014
—
—
359,729
359,729
50,000
30,000
3,737
83,737
—
—
4,100
4,100
—
—
3,597
3,597
(155,853)
(173,936)
(329,789)
3,579,815
—
3,579,815
(396,969)
(127,416)
(524,385)
2,735,942
—
2,735,942
(350,140)
—
(350,140)
2,850,313
—
2,850,313
(1,559)
(174)
(1,733)
97,919
(696)
97,223
(3,970)
(127)
(4,097)
15,915 —
15,915
(3,501)
—
(3,501)
15,912
—
15,912
—
—
—
20,000
—
—
(307,332)
3,272,483
(155,853)
2,580,089
(396,969)
2,453,344
$
(3,073)
114,150
$
126,422,863
103,252,499
94,051,951
$
127,315
$
1,839
4,832,395
20,940,598
—
—
25,774,832
32,032
5,475,000
23,725,000
110
—
29,232,142
781
1,725,000
7,475,000
—
100
9,200,881
46
4,832
20,940
—
—
25,818
70
5,475
23,725
3
—
29,273
(286)
(7,823,347)
(33)
—
(21)
(7,823,687)
144,374,008
(29,752)
(3,092,456)
(4,106)
(2,924,165)
(11,299)
(6,061,778)
126,422,863
(254)
—
(40)
—
(39)
(333)
103,252,499
$
(8)
(7,823)
—
—
—
(7,831)
145,302
$
(13)
(3,092)
(4)
(2,924)
(11)
(6,044)
127,315
$
15,912
$
(1,559)
14,356
$
104,086
$
15,816
(3,970)
11,942
94,869
20
1,725
7,475
—
3
9,223
(6)
—
—
—
—
(6)
104,086
During fiscal 2012, La Coop incurred interest in the amount of $335,000 on the debenture
repayable in Series 2 – CRCD preferred investment shares. Also, on November 21, 2012, the
directors resolved to declare payment of a 5% dividend, payable as of November 30, 2012,
on Series 1 — FSTQ preferred investment shares for an amount of $1,253,000 and on
Series 2 — CRCD preferred investment shares for an amount of $690,000.
On September 4, 2012, the directors authorized a preferred share issue pursuant to
the Cooperative Investment Plan, 2012 Series, as of November 30, 2012, under which
454,680 preferred shares were issued for a cash consideration of $4,547,000. On
September 4, 2012, the directors also resolved to redeem, starting November 30, 2012,
307,332 preferred shares issued under the Cooperative Investment Plan, 2007 Series, for a
cash consideration of $3,073,000. In addition, on January 18, 2013, the directors resolved to
redeem 9,685,166 Class B common shares issued in 2000 and 2001 for a cash consideration of
$9,685,000.
155,853 preferred shares issued under the Cooperative Investment Plan, 2006 Series, for a
cash consideration of $1,559,000. In addition, on January 13, 2012, the directors resolved to
redeem 7,997,283 Class B common shares issued in 1998 and 1999 for a cash consideration
of $7,997,000.
396,969 preferred shares issued under the Cooperative Investment Plan, 2005 Series, for a cash
consideration of $3,970,000. In addition, on January 13, 2011, the directors resolved to redeem
2,924,165 Class D common shares issued in 2005 and 3,087,321 Class B common shares issued
from 1995 to 1997 for a cash consideration of $6,011,486.
2012
$ (59,845)
16,945
(26,109)
(3,356)
34,929
11,700
(900)
$ (26,636)
[b] Repurchase of the non-controlling interest
A group of non-controlling shareholders of a subsidiary of La Coop holding 22% of the shares
of said subsidiary has, commencing on October 31, 2012, the right to sell all of its shares to
La Coop, which is obligated to buy them back. The sale of the shares as well as the payment
of their sale price may be made in ten annual instalments according to a predetermined
repurchase agreement whose terms and conditions are defined in the partnership agreement
of the subsidiary, or sooner, at La Coop’s discretion. This same group of non-controlling
shareholders will retain all of its rights until the transfer of the last portion of its shares.
[c]
Claims and lawsuits
In the normal course of business, various claims and lawsuits are brought against La Coop.
Legal proceedings are often subject to numerous uncertainties and it is not possible to predict
the outcome of individual cases. In management’s opinion, La Coop has made adequate
provision for or has adequate insurance to cover all claims and lawsuits, and their settlement
should not have a significant negative impact on La Coop’s financial position.
25. GUARANTEES
In the normal course of business, La Coop has entered into agreements that contain features
which meet the definition of a guarantee. These agreements provide for indemnification and
guarantees to counterparties in transactions such as operating leases and security contracts.
These agreements may require La Coop to compensate third parties for costs and losses
incurred as a result of various events including breaches of representations and warranties,
loss of or damages to property, and claims that may arise while providing services.
Notes 17, 19, 20 and 24 to the consolidated financial statements provide information relating
to some of these agreements. The following constitutes additional disclosure.
Operating leases
La Coop and its subsidiaries have general indemnity clauses in most of their movable
and immovable property leases whereby they, as lessee, agree to indemnify the lessor
against liabilities related to the use of the leased property. These leases mature at
various dates through July 22, 2032. The nature of the agreements varies based on the
contracts and therefore prevents La Coop from estimating the total potential amount
it would have to pay to lessors. Historically, La Coop has not made any significant
payments under such agreements. Furthermore, La Coop and its subsidiaries have
property insurance protecting them against such potential situations.
23. NET CHANGE IN NON-CASH WORKING CAPITAL
The net change in non-cash working capital related to operations is determined as follows:
Accounts receivable
Inventories
Prepaid expenses
Income taxes payable
Deferred revenues
Patronage refunds payable
■
2011
6,750
(51,667)
5,237
6,855
7,978
20,773
5,000
$
926
$
Guarantee contracts
La Coop is committed under letters of guarantee with financial institutions and
insurance companies, in connection with obligations totalling $28,614,000 as at
October 27, 2012 [$27,593,000 in 2011 and $28,389,000 in 2010]. Furthermore,
La Coop is committed, under comfort letters with financial institutions and suppliers
regarding guarantees for interests in joint ventures. The balance of amounts due as at
October 27, 2012 rose to $36,139,000, for which La Coop is committed to repurchase
trade receivables and inventories, amounting to $101,316,000 as at October 27, 2012.
24.COMMITMENTS AND CONTINGENCIES
As at October 27, 2012, October 29, 2011 and October 31, 2010, no amounts were recognized
in respect of the above-mentioned agreements
[a]
.
Operating leases
La Coop has entered into long-term operating leases for buildings, machinery and automotive
equipment. The future minimum lease payments of La Coop under these leases total
$37,858,000 and are as follows for the coming years: 2013 – $11,458,000; 2014 – $7,416,000;
2015 – $5,020,000; 2016 – $3,650,000; 2017 – $2,317,000; 2018 and thereafter – $7,997,000.
La ........63
■
26.FINANCIAL INSTRUMENTS
[a] Derivative financial instruments
In the normal course of business, La Coop uses a number of derivative financial instruments, such as foreign exchange contracts, currency swaps, commodity forward contracts and interest rate
swaps to reduce its exposure to exchange rate, commodity price and interest rate fluctuations. These instruments are used exclusively for risk management purposes.
Foreign exchange contracts, currency swaps and futures
The following table sets out the nominal amounts at the reporting dates with respect to foreign exchange contracts with maturities of less than one year:
Type
Country
Nominal amount in currency [thousands]
Average exchange rate
Sale
United States
US$85,337 [US$44,574 in 2011 and US$63,160 in 2010]
Purchase
United States
US$67,400 [US$53,600 in 2011 and US$31,100 in 2010]
Sale
Japan
¥3,595,479 [¥4,113,183 in 2011 and ¥3,055,480 in 2010]
Sale
Australia
A$25,358 [A$14,720 in 2011 and A$20,063 in 2010]
Sale
New Zealand
NZ$2,588 [NZ$2,729 in 2011 and NZ$2,903 in 2010]
2012
2011
2010
0.9861
1.0172
1.0245
0.9910
1.0040
1.0262
0.012477
0.013030
0.012255
1.0100
1.0251
0.9620
0.7972
0.8104
0.7594
In fiscal 2012 and 2011, no amounts were recognized in the consolidated statement of earnings for the ineffective portion of foreign exchange contracts and currency swaps.
Interest rate swaps
In 2012, drawn lines of credit totalling $10,000,000 were subject to an interest rate swap at an
interest rate of 3.6%, maturing in May 2013 [$10,000,000 in 2011 at an interest rate of 3.6%,
maturing in May 2013, and $25,000,000 in 2010 at interest rates ranging from 3.6% to 3.84%,
maturing between June 2011 and May 2013].
Grain forward contracts
In the normal course of business, La Coop has entered into purchase and sale contracts
expiring in less than one year with its clients to set various grain prices. As at October 27, 2012,
La Coop was committed to buy 52,474 net metric tonnes of grain [110,493 net metric tonnes
in 2011] in the amount of $3,994,000 [$45,000 in 2011]. La Coop has recognized a gain of
$4,953,000 [$2,677,000 in 2011] relating to grain price fluctuations in the consolidated
statement of earnings. La Coop has sufficient grain in inventory to deliver on these
commitments.
La Coop also entered into forward contracts on the price of various grains expiring in less
than one year to reduce its exposure to fluctuations in grain prices. As at October 27, 2012,
La Coop was committed to sell 327,567 metric tonnes of grain [142,865 metric tonnes in 2011]
in the amount of $100,147,000 [$42,669,000 in 2011]. La Coop recorded a gain of $197,000
[gain of $3,065,000 in 2011] in the consolidated statement of earnings for the year ended
October 27, 2012.
[b] Fair value of derivative financial instruments
The fair value of the derivative financial instruments reflects the estimated amounts La Coop
would receive (or pay) to terminate open contracts at year-end. The prices obtained by
La Coop’s bankers are compared with closing capital market prices.
The fair value of foreign exchange contracts, currency swaps, interest rate swaps and
commodity forward contracts is as follows:
Derivatives
Derivatives designated as hedges
Foreign exchange contracts and currency swaps $
Interest rate swap
Other derivatives
Commodity forward contracts
Interest rate swap
La ........64
2012
2011
2010
(486)
$ (1,309)
$ (2,255)
—
— (225)
5,151
(229)
5,742
(472)
[c] Nature and extent of risks arising from financial instruments and related risk management
Credit risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss for
La Coop by failing to discharge its obligations. The maximum exposure to credit risk for
La Coop is equal to the carrying amount of the following financial instruments:
Loans and receivables
In the normal course of business, La Coop evaluates the financial position of its clients
on a regular basis and examines the credit history of new clients. To protect itself
against financial losses related to credit risk, La Coop has a policy that sets out credit
conditions for various areas of operations. Specific credit limits are set for each segment
and client and reviewed periodically. The allowance for doubtful accounts is based on
the client’s specific credit risk and historical trends. Moreover, La Coop holds security on
the assets and investments of certain clients in the event of default. La Coop believes its
credit risk exposure to receivables to be minimal due to client and sector diversification.
Derivatives
Credit risk related to derivative financial instruments is limited to unrealized gains, if
any. La Coop is likely to incur losses if parties fail to meet their commitments related to
these instruments. However, La Coop views this risk as minimal or non-existent, as it
deals only with highly rated financial institutions.
Liquidity risk
Liquidity risk is the risk that La Coop will encounter difficulty in meeting obligations associated
with financial liabilities.
La Coop manages this risk by drawing up detailed financial projections and developing a
long-term acquisition strategy. Treasury management at the consolidated level requires
constant monitoring of expected cash inflows and outflows based on projections of La Coop’s
consolidated financial position. Liquidity risk is evaluated using historical volatility, seasonal
needs, current financial obligations and long-term debt obligations.
2,870
(488)
■
26.FINANCIAL INSTRUMENTS [cont’d]
[c] Nature and extent of risks arising from financial instruments and related risk management [cont’d]
Market risk
Foreign exchange risk
La Coop often makes purchases and sales abroad. La Coop’s policy is to maintain the
purchase costs and selling prices of its business transactions by hedging its positions
using derivative financial instruments. To manage foreign exchange risk, La Coop uses
foreign exchange contracts and currency swaps.
La Coop’s main foreign exchange risks are covered by a centralized treasury department.
Foreign exchange risk is managed in accordance with the foreign exchange risk
management policy. The policy aims to protect La Coop’s operating earnings
by eliminating the exposure to currency fluctuations. The foreign exchange risk
management policy prohibits speculative transactions.
Centralized treasury management aims to match and bring about an appropriate
combination of fixed- and variable-rate borrowings to minimize the impact of interest
rate fluctuations. La Coop uses derivative financial instruments, namely interest rate
swaps. La Coop held an interest rate swap in the amount of $10,000,000 in 2012
[$10,000,000 in 2011 and $25,000,000 in 2010] for cash flow management purposes.
Other price risks
Interest rate risk
Interest rate risk relating to financial assets and liabilities results from changes in
interest rates that La Coop may experience. La Coop believes that mortgage loans and
notes receivable, bank overdrafts, bank borrowings, obligations under capital leases and
variable-rate long-term debt give rise to cash flow risk as La Coop could be adversely
affected in the event of changes in interest rates.
Input price fluctuation risks
Input prices are determined by several external factors. Extreme price volatility results
from constant changes in supply markets. La Coop often buys and sells grain. La Coop’s
policy is to maintain the purchase costs and selling prices of its business transactions
by hedging its positions using derivative financial instruments. To manage exposure to
changes in commodity prices, La Coop uses forward contracts.
27. RELATED PARTY TRANSACTIONS
La Coop enters into transactions with its joint ventures in the normal course of business. Those transactions, measured at the exchange amount, are summarized as follows:
Revenues
Cost of sales and selling and administrative expenses
Advances to joint ventures
Accounts receivable
Deferred revenues
Advances payable to joint ventures
$
2012
422,401
122,910
2012
$
2011
341,848
96,090
2011
2010
$
14,281
31,081
5,817
43,972
—
$
16,772
$
27,007
1,718
39,530
1,774
12,026
28,893
3,011
21,083
—
$
$
5,860
8,421
14,281
$
$
8,351
$
8,421
16,772
$
3,605
8,421
12,026
$
—
$
Advances to joint ventures, reported under interests in joint ventures, are detailed as follows:
Non-interest bearing advances, without specific terms of repayment Interest bearing advance, at a fixed rate of 15%, without specific terms of repayment
Advances payable to joint ventures, reported under interests in joint ventures, are detailed as follows:
Non-interest bearing advances, without specific terms of repayment
1,774
$
—
28.SUBSEQUENT EVENT
On December 24, 2012, the subsidiary Olymel L.P. received confirmation that its bid to acquire the assets of Big Sky Farms Inc., a large hog producer in Western Canada, was selected in the public
sale process. The transaction with a minimum price of $65,250,000 should be approved by Saskatchewan regulatory authorities on January 19, 2013.
La ........65
Financial review
■
Part II
Part V
Accounting Standards for Private
Enterprises
UNAUDITED
2012
2011
Pre-changeover Accounting Standards
2010
2009
2008
2007
2006
2005
2004
2003
Operations
Revenues
Financial expenses
Amortization
Earnings (loss) before patronage refunds and
income taxes Patronage refunds
Income taxes
Net earnings (loss) attributable to members
of La Coop
Financial position
$4,867,113
$4,442,438
$ 3,947,871
$3,919,963
$ 3,606,101
$ 3,286,795
$ 3,175,705 $ 3,141,860
$ 2,908,842
$ 2,755,096
12,063
11,100
10,083
14,683
14,976
20,604
18,717
12,965
9,925
12,714
51,637
54,355
56,698
53,710
49,403
49,522
53,197
41,969
36,165
38,100
Working capital
Property, plant and equipment, net book value
Total assets
Preferred shares and equity
Financial ratios
Working capital ratio
Interest coverage*
Debt/equity ratio* **
Earnings (loss) before patronage refunds and
income taxes*/revenues
Reserve/preferred shares and equity**
Preferred shares and equity**/total assets
Number of employees
$ 212,606
$ 170,068
$ 92,898
$ 191,178
$ 181,421
$
43,846
$ 164,721 $ 197,750
$
446,903 459,458 454,586 459,860
445,157
428,953
442,865
451,177
1,517,054 1,393,285 1,291,237 1,221,516 1,143,503 1,014,948 1,004,006 1,058,252
590,372 457,121 440,518 412,482
383,528
338,754
305,890
321,928
96,585
32,216
10,476
92,686
36,500
11,914
36,077
11,500
5,854
53,346
15,000
10,746
70,992
30,000
10,602
40,587
10,000
7,770
(21,599)
— (11,408)
42,463
8,500
1,551
35,456
12,000
7,887
26,136
8,203
4,348
39,649
31,652
18,723
27,600
30,390
22,817
(10,191)
32,412
15,569
13,585
139,486
$
305,328
808,765
284,711
127,981
309,145
762,288
261,689
1.4
7.8
24:76
1.3
8.2
36:64
1.2
4.6
36:64
1.4
4.6
36:64
1.4
5.7
33:67
1.1
3.0
41:59
1.6
(0.2)
49:51
1.7
4.3
47:53
1.5
4.6
40:60
1.5
3.1
45:55
1.9%
55.5%
38.9%
9,583
1.8%
68.7%
32.8%
9,662
0.9%
72.8%
34.1%
10,429
1.4%
73.2%
33.8%
11,336
2.0%
71.5%
33.5%
11,175
1.2%
72.0%
33.4%
11,072
(0.7)%
72.2%
30.5%
11,895
1.4%
71.8%
30.4%
12,287
1.2%
69.8%
35.2%
9,587
0.9%
70.0%
34.3%
9,644
* For the purposes of ratio calculations, the non-controlling interest is included in earnings before patronage refunds and income taxes.
** Accumulated other comprehensive income and the related financial instruments were excluded from ratio calculations for the fiscal years prior to 2011. The non-controlling interest is excluded from equity calculations.
La ........66
2012
La Coop Agrilait
Saint-Guillaume
La Coop Agriscar
Trois-Pistoles
La Coop Agrivert
Saint-Barthélemy
La Coop Agrivoix
La Malbaie
La Coop Agrodor
Thurso
La Coop Alliance
Saint-Éphrem-de-Beauce
La Coop des Appalaches
Laurierville
Coopérative agricole de la Baie des
Chaleurs
Caplan
La Coopérative de Baie Ste-Anne Ltée
Baie-Sainte-Anne (New Brunswick)
La Coop des Bois-Francs
Victoriaville
La Coopérative de Caraquet Ltée
Caraquet (New Brunswick)
La Coopérative Cartier Ltée
Richibucto (New Brunswick)
La Coop Chambord
Chambord
Citadelle, coopérative de producteurs
de sirop d’érable
Plessisville
La Coop Comax
Saint-Hyacinthe
La Coop Compton
Compton Village
La Coop des Cantons
Coaticook
La Coop Excel
Granby
La Coop Covilac
Baie-du-Febvre
La Coop des Frontières
Sainte-Martine
La Coop des deux rives
Normandin
La Coop Dupuy et Ste-Jeanne d’Arc
Dupuy
La Coop Fermes du Nord
Mont-Tremblant
La Coop Frampton
Frampton
La Coop Gracefield
Gracefield
Groupe coopératif Dynaco
La Pocatière
La Coop Ham Nord
Ham-Nord
Magasin Co-op de Havre-aux-Maisons
Havre-aux-Maisons
La Coop Île-aux-Grues
L’Isle-aux-Grues
La Coop Jonquière
Jonquière
Société coopérative de Lamèque Ltée
Lamèque (New Brunswick)
La Coop Langevin
Sainte-Justine
La Coop Matapédienne
Amqui
La Coop Lac-Mégantic Lambton
Lac-Mégantic
La Coop Montmagny
Montmagny
La Coop Nominingue
Nominingue
Nutrinor, coopérative agro-alimentaire du
Saguenay Lac St-Jean
St-Bruno-Lac-Saint-Jean
La Coop Parisville
Parisville
La Coop La Patrie
La Patrie
Magasin CO-OP de Plessisville
Plessisville
La Coop Pré-Vert
Tingwick
La Coop Profid’Or
Joliette
La Coop Purdel
Bic
La Coop Rivière-du-Sud
St-François-de-Montmagny
La Coopérative de Rogersville Ltée
Rogersville (New Brunswick)
La Coop Seigneurie
Saint-Narcisse-de-Beaurivage
La Coop Squatec
Squatec
Société coopérative agricole de SaintAdrien d’Irlande
Saint-Adrien-d’Irlande
La Fromagerie coopérative St-Albert inc.
St-Albert (Ontario)
La Coop Saint-Alexandre-de-Kamouraska
St-Alexandre-de-Kamouraska
Coopérative de consommation de
Saint-Alexis
Saint-Alexis-de-Matapédia
La Coop St-André d’Acton
Acton Vale
La Coop St-Côme-Linière
Saint-Côme-Linière
La Coop Saint-Damase
Saint-Damase
La Coop Ste-Catherine
Sainte-Catherine-de-la-Jacques-Cartier
La Coop Sainte-Hélène
Sainte-Hélène-de-Bagot
La Coop Sainte-Julie
Sainte-Julie
La Coop Ste-Justine
Sainte-Justine
La Coop Ste-Marthe
Sainte-Marthe
Magasin CO-OP de Ste-Perpétue
Ste-Perpétue-de-L’Islet
La Coop St-Fabien
Saint-Fabien
Magasin CO-OP St-Gédéon
Saint-Gédéon-de-Beauce
La Coop Saint-Hubert
Saint-Hubert-de-Rivière-du-Loup
La Coop St-Jacques-de-Leeds
St-Jacques-de-Leeds
La Coopérative de St-Louis Ltée
Saint-Louis-de-Kent (New Brunswick)
Magasin CO-OP de St-Ludger
Saint-Ludger
La Coop St-Méthode
Adstock
La Coop St-Pamphile
Saint-Pamphile
La Coop St-Patrice
Saint-Patrice-de-Beaurivage
Coopérative de Saint-Quentin ltée
Saint-Quentin (New Brunswick)
Magasin CO-OP de St-Samuel
Lac-Drolet
La Coop Saint-Ubald
Saint-Ubalde
Magasin CO-OP de St-Victor
Saint-Victor
La Coop Unicoop
Sainte-Hénédine
La Coop Uniforce
Napierville
■
La Coop Univert
Saint-Narcisse
La Coop Val-Nord
La Sarre
La Coop Verchères
Verchères
La Coop Weedon
Weedon
Auxiliary Members
Coop Atlantique
Moncton (New Brunswick)
Coopérative d’utilisation de machinerie
agricole du Saguenay
Chicoutimi
Coopérative d’utilisation de matériel
agricole de la Petite-Nation et de la Lièvre
Plaisance
agricole des Basses-Laurentides
Mirabel
Coopérative des producteurs de pommes
de terre de Péribonka-Ste-Marguerite-Marie
Péribonka
agricole de la Rivière du Bic
Rimouski (Le Bic)
agricole de Laurierville
Laurierville
agricole de l’Érable
Plessisville
agricole de l’Or Blanc
Saint-Georges-de-Windsor
agricole de Saint-Fabien
Saint-Fabien
agricole de St-Cyprien
Saint-Cyprien
agricole de Ste-Croix, St-Édouard
Saint-Édouard-de-Lotbinière
agricole des Rivières
Sainte-Anne-de-la-Pérade
agricole Estrie-Mont
Saint-Joachim-de-Shefford
agricole et forestière du Lac
Alma
agricole Franco-Agri
Sainte-Anne-de-Prescott (Ontario)
agricole Jeannoise
Saint-Gédéon
agricole de la région de Coaticook
Coaticook
agricole de Leclercville
Leclercville
agricole de St-Sylvère
Deschaillons
agricole des Aulnaies
Saint-Jean-Port-Joli
agricole l’Oie Blanche
Saint-Pierre
La ........67
List of locations
■
SUPPLY OPERATIONS
La Coop fédérée
9001 de l’Acadie Boulevard
Montréal, Québec
H4N 3H7
ANIMAL PRODUCTION SECTOR
Office
Montréal
Feedmills and warehouses
Joliette
Lévis
New Liskeard, Ontario
Micro premix plant
Lévis
Sogeporc genetic hog farms
Laurierville
Notre-Dame-de-Lourdes
La Rédemption
Saint-Apollinaire
Saint-Narcisse-de-Rimouski
Saint-Romain
Trinité-des-Monts
Research farms
Adstock (hog)
Frampton (hog)
Mirabel (hog)
Saints-Anges (hog)
Saint-Jean-Baptiste-de-Rouville (poultry)
Hatchery
Victoriaville
Breeding farms (poultry)
Saint-Jude
Wickham
Victoriaville
Breeding farms (broiler breeders)
Lanoraie
Saint-Germain-de-Grantham
Saint-Jean-Baptiste-de-Rouville
Saint-Lin-Laurentides
Wickham
Joint venture enterprises
Ferme avi-nord inc. (50 %)
Volaille Acadia (30 %)
2012
CROP PRODUCTION SECTOR
HARDWARE AND FARM MACHINERY SECTOR
Office
Montréal
Distribution centre
Trois-Rivières
Research farm
Saint-Hyacinthe
Sales outlets
177 hardware and renovation centres
(La Coop or Unimat)
27 garden centres
16 industrial clients
190 farm machinery and forestry dealers
200 agricultural parts dealers
38 Inov decoration centers
10 training stores
Distribution centres
Longueuil
Sainte-Catherine
Québec
Companies
6 Agrocentres (50 %)
Agrico Canada Limited/Limitée
Agronomy Company of Canada Ltd
SQS inc.
BUSINESS DEVELOPMENT AND COMMUNICATIONS SECTOR
Seed laboratory
Longueuil
Office
Montréal
GRAINS SECTOR
Coop agricultural centre
The Coop AgriEst, St.Isidore de Prescott and
St.Albert, Ontario
Offices
Montréal
Québec
Sillery Distribution Centre Inc. (50%)
Jefo Logistique s.e.c. (40%)
Subsidiaries
Elite Grain s.e.c., Napierville
Grower Direct Export (Mitchell, Ontario)
SONIC ENERGY SECTOR
Sales and customer support offices
Bromptonville
Saint-Jovite
Brossard
Montréal
Rivière-du-Loup
Saint-Hyacinthe
Lévis (Saint-Romuald)
Trois-Rivières
Victoriaville
65 distribution agents
6 oil bulk stations
3 propane bulk stations
185 service stations
Groupe pétrolier Norcan inc. (50 %)
Propane Québec inc. (51 %)
MARKETING OPERATIONS
Olymel L.P.
2200 Pratte Avenue, Suite 400
Saint-Hyacinthe, Québec
J2S 4B6
Sales offices
Boucherville
Brampton, Ontario
Red Deer, Alberta
Seoul, South Korea
Sydney, Australia
Tokyo, Japan
Distribution centres
Boucherville
Brampton, Ontario
Red Deer, Alberta
Saint-Bruno-de-Montarville
Saint-Jean-sur-Richelieu
HOG SECTOR
Farms
OlySky Big Sky Farms (Saskatchewan)
Slaughterhouses and cutting plants
Princeville
Red Deer, Alberta
Saint-Esprit de Montcalm
Saint-Hyacinthe
Vallée-Jonction
Processing plants
Anjou
Cornwall, Ontario
Drummondville
Princeville
Saint-Henri (Bellechasse)
Trois-Rivières
POULTRY SECTOR
Slaughterhouses and cutting plants
Berthierville
Clair, New-Brunswick (Partnership)
Saint-Cuthbert (Partnership)
Saint-Damase
Saint-Jean-Baptiste-de-Rouville (Partnership)
Processing plants
Saint-Hyacinthe
Brampton, Ontario
Sunnymel GP Inc.
Unidindon Inc.
Volaille Giannone Inc.
Other operations
Transport Transbo Inc.
Machinerie Olymel (1998) Inc.
Transbo exportation Inc
La ........68
Notes
La ........69
Head Office
La Coop fédérée
9001 de l’Acadie Blvd.
Suite 200
Montréal, Québec H4N 3H7
Telephone: 514 384-6450
Fax: 514 858-2025
Website
www.lacoop.coop
Twitter (@LaCoop_federee)
YouTube (LaCoop)
Vime (La Coop fédérée)
LinkedIn (La Coop fédérée)
On peut obtenir la version française de
ce rapport sur le site Internet de La Coop
fédérée à l’adresse www.lacoop.coop
ou obtenir une copie imprimée
en communiquant avec le Service
des communications au 514 384-6450.
Contents
6
Denis Duquet
Creative director
16
Cooperative overview
22
34
Olymel overview
42
Management report
43
44
45
45
46
47
64
Financial review
65
66
Our locations
Bernard Diamant
Artistic director/graphic designer
Pierre Cadoret
Graphic designer
Martine Doyon
Photographer
(www.martinedoyon.com)
Text
Ben Marc Diendéré
Communications manager
Stéphanie Couturier
Communication advisor
Guylaine Gagnon
Patrick Dupuis
Le Cooperateur agricole
Mont-Roy L’Imprimeur
Colour separation and printing
106888_02-13
La Coop fédérée’s Creative Services
IMAGINE WHAT WE COULD ACHIEVE TOGETHER
Annual Report 2012 ■
IMAGINE WHAT WE COULD
ACHIEVE TOGETHER
Founded in 1922, La Coop is a provider of agricultural supplies and food products
with a focus on the well-being of communities. Guided by the values and principles of
the cooperative movement, La Coop evolves, innovates and grows to improve the quality
of life of its members and the fair and sustainable development of our resources.
IMAGINE
WHAT WE
COULD ACHIEVE
TOGETHER
Annual Report 2012

Annual report 2012

Transcription

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