Premium Brands Holdings Corporation (PBH) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. My name is Bruce Hodge, and I'm the Chairman of the Board of Directors of Premium Brands Holdings Corporation. I will be chairing this meeting. Welcome to the Annual General Meeting of the Shareholders of Premium Brands Holdings Corporation. In order to ensure that this meeting covers all required business in an efficient manner, we have prearranged with Doug Goss and Will Kalutycz to move and to second, respectively, the motions of business at this meeting. This procedure is in no way intended to discourage any comments or questions from shareholders who are present today. Please note that questions can only be submitted through the virtual meeting platform. Please note that only eligible shareholders are entitled to vote at this meeting. Eligible shareholders are defined as registered shareholders who held their shares in their name as at the close of business on Monday, March 23, 2020, the record date of this meeting or their validly appointed proxy holders. The meeting will now come to order. Douglas Goss will be acting as secretary counsel for this meeting. Sandy Hunter of TSX Trust Company will be acting as scrutineer. The notice and access notification to shareholders, respecting this meeting, was mailed to the shareholders of the corporation in accordance with instrument 54-101 on April 7, 2020, as evidenced by the affidavit of mailing of Paula Pedro of TSX Trust Company, the registrar and transfer agent of the corporation. The affidavit of mailing of Paula Pedro will be annexed to the minutes of this meeting as Appendix 1. As you have all received a copy of the notice of this meeting, I would request a motion dispensing with the reading of the notice.

Mr. Chairman, I move the meeting of the notice be dispensed with.

I second the motion.

Are there any objections to this motion?

No objections, Mr. Chairman.

As no objections have been raised, I declare the motion carried and with proof of service and notice calling this meeting duly tabled, I direct a copy of the notes together with proof of service be kept by the secretary with the records of this meeting. The bylaws of the corporation provide that a quorum for the transaction of business at any meeting of shareholders shall be 2 persons present in person or by means of telephonic, electronic or other communication facility that permits all participants to communicate adequately with each other during the meeting. And each entitled to vote at the meeting and holding or representing a proxy not less than 10% of the votes entitled to be cast at the meeting. I received the scrutineer's report on attendance and can confirm that this criteria has been satisfied. I therefore declare that there is a quorum present at this meeting. The scrutineer's report will be attached to the minutes of this meeting as Appendix 2. I now declare that this meeting is regularly called and properly constituted for the transaction of business. There will be an opportunity to ask questions on each resolution in turn, noting that questions may only be submitted through the virtual meeting platform. As Chair, I will pause for the appropriate amount of time to allow shareholders to submit their questions. Once discussion on all items of business have been concluded, I will give you a minute to enter your votes and then declare voting closed on all resolutions. The results of the meeting will be released today and available on our website. We will run through each of the items on the agenda in turn, respond to questions on that item of business, while it is before the meeting. I now declare the polls open on all resolutions. The next item of business is the presentation of the corporation's audited financial statements for the financial year ended December 28, 2019, together with the accompanying report of the auditors. The corporation's financial statements for the financial year ended December 28, 2019, together with the auditor's report thereon and management's discussion and analysis regarding same were filed on SEDAR on March 12, 2020, and are available for viewing and/or printing at no charge on the SEDAR website at www.sedar.com. Copies of the corporation's financial statements, together with the auditor's report were also made available on the corporation's transfer agent, TSX Trust Company's website. As you know though, if I have had an opportunity to review this material, I would request a motion dispensing with the reading of the financial statements and auditor's report.

Mr. Chairman, I move the reading of the corporation's financial statements for the year ended December 28, 2019, together with the auditors' report thereon be dispensed with.

I second the motion.

Are there any objections to the motion?

No objections, Mr. Chairman.

As there are no objections to the motion, I declare the motion carried. The next item of business is the appointment of PricewaterhouseCoopers LLP as auditors of the corporation, and I ask for a motion in this regard.

Mr. Chairman, I move that PricewaterhouseCoopers, chartered accountants of Vancouver, British Columbia, be appointed as auditors of the corporation until the close of the next annual meeting or until a successor is appointed at a remuneration to be determined by the Board of Directors of the corporation.

I second the motion.

The motion is now open for discussion.

You can proceed, Mr. Chairman.

You have heard the motion and if there's no further discussion, I would ask that anyone who has not previously voted their shares in this regard, please do so. The results of this vote will be announced later in the meeting once all of the votes have been tabulated. The next item of business is fixing the number of positions on the corporation's Board of Directors. I would request a motion in this regard.

Mr. Chairman, I move that the number of directors of the corporation to be elected at this meeting be fixed at no more than 7.

I second the motion.

You have heard the motion, and if there's no further discussion, I would ask that anyone who has not previously voted their shares in this regard, please do so. The results of this vote will be announced later in the meeting once all of the votes have been tabulated. It is now in order to proceed with the election of directors. Management's nominees for election as directors of the corporation are listed on Pages 17 through 23 of the corporation's information circular. They are Sean Cheah, Johnny Ciampi, myself, Kathleen Keller-Hobson, Hugh McKinnon, George Paleologou and John Zaplatynsky. The shareholders of the corporation have been asked to vote to either vote for or withhold their vote for the election of each of the management's individual nominees. Each director elected today will hold office effective as of the completion of this meeting until the close of the next Annual Meeting of Shareholders or until his or her successor is duly elected or appointed unless his or her office is earlier vacated in accordance with the articles of the corporation or unless he or she becomes disqualified to act as a director. Proxies have been received sufficient to elect all of the management's nominees. If any shareholders present have other nominees that they wish to propose for consideration, the Board would be pleased to receive their names for consideration for future elections. In light of this, are there any further nominations?

No further nominations, Mr. Chairman.

Thank you. I now declare the nominations closed.

Mr. Chairman, I move that Sean Cheah, Johnny Ciampi, Bruce Hodge, Kathleen Keller-Hobson, Hugh McKinnon, George Paleologou and John Zaplatynsky be appointed as Directors of the corporation to hold office until the close of the next Annual Meeting of Shareholders or until each of their successors is elected or appointed.

I second the motion.

You have heard the motion, and I would ask that anyone who has not previously voted their shares in this regard, please do so now. The results of this vote will be announced later in the meeting once all of the votes have been tabulated. The next item of business is approval of the advisory resolution respecting corporation's approach to executive compensation. As outlined on Pages 7 and 8 of the information circular, the Board, through the Compensation and Human Resources Committee is responsible for formulating and monitoring the effectiveness of the corporation's executive compensation program. The Board believes that the corporation shareholders should have an opportunity to express their opinion on the corporation's executive compensation program by voting for or against the resolution set out on Page 7 of the information circular. As this is an advisory vote, the results of this vote will not be binding upon the Board. However, the Board and the Compensation and Human Resources Committee will consider the outcome of the vote as part of its ongoing review of the corporation's executive compensation program. In order to meet the requirements of the Canada Business Corporations Act, this resolution must be passed by a majority of votes cast by the shareholders of the corporation. As you have all had a chance to review the resolution prior to this meeting, I would request the motion dispensing the pro forma reading of this resolution.

Mr. Chair, I move the formal reading of the resolution approving votes to executive compensation, found on Page 7 of the information circular be dispensed with.

I second the motion.

Are there any objections to the motion?

I see no objections, Mr. Chair.

Thank you. As there are no objections to the motion, I declare the motion carried. I would ask that anyone who has not previously voted their shares regarding this resolution, please do so now. The results of this vote will be announced later in the meeting once all of the votes have been tabulated. I would now advise that we are closing the polls. It is 1:42 p.m. Pacific Time. I will close the polls with respect to all resolutions in 30 seconds to allow all online votes to catch up. The polls are now closed. While the ballots are being tallied, we will receive a brief update on the corporation's operations from George Paleologou, our President and Chief Executive Officer; and William Kalutycz, our Chief Financial Officer. To follow along with the corporate presentation, please click on the link entitled Corporate Presentation on the home page of the virtual voting platform for this meeting. I'll hand this over to George and Will.

Thank you, Bruce. Good afternoon, everyone. We hope that everyone is healthy and safe during these unusual times. I would like to start today by thanking the entire PB team for their hard work and dedication during this difficult time. The entire PB ecosystem has worked very hard over the past few weeks to keep customers' shelf full and to help nourish our fellow citizens. What makes Premium Brands a unique company, it's our great people and our great culture. For this reason, this year's shareholder letter, which was posted yesterday on our website, is a tribute to what differentiate us from the rest and what makes us resilient during these difficult times. As a co-founder of PB, I'm proud of what we have accomplished over the past 15 years. Thanks to our core values, we have grown from a small regional company with $200 million in sales to about $4 billion with operations across North America. We're especially proud that our free cash flow per share has grown from $0.78 per share to $5.03 per share over this time. Over the past 15 years, we have shared some of our value creation with our shareholders by paying in excess of $500 million back to our shareholders as dividends. Our vision is simple. We love passionate food entrepreneurs. We love great quality foods made with wholesome ingredients, and we're really passionate about our local communities and in leaving the world at large better than the way we found it. At PB, we believe that the process of introducing better food to consumers is irreversible. At PB, we believe that it is not about price and it is not about marketing gimmicks. Instead, it is about uncompromising quality every step of the way. We are really proud of the fact that we ranked in the top 10 companies on the TSX for creating the most shareholder value over the past 10 years. This is a testament to our core values and a testament to our great people. COVID-19 has brought formidable challenges to our business. We're confident that our core business strategies, including our diversification, our great culture, our entrepreneurial teams, our focus on the long term and our focus on running modern, state-of-the-art production facilities will see us to the other side of the pandemic and scale and possibly even stronger. Our guiding principles is our common DNA across the entire company. At PB, we want to do the right thing for the environment and our communities. We also want to do it in a low key humble way that respects and supports the underprivileged around us. We have and we will continue to do our best to make our communities stronger and healthier. And now the issue of our time may be the issue of our lifetimes, the COVID-19 pandemic. The pandemic means operating in a crisis management mode, 7 days a week, 24 hours a day. The list outlines some of the special measures that we had to take to ensure that our plants continue to operate. Our #1 objective has been the health and safety of our people, and we spare no expense or action to ensure that we keep everybody safe. COVID-19 is out there. It is pervasive and it has not been easy to keep it out of our plants. To the extent that it did, we acted quickly and diligently always prioritizing the health and welfare of our staff. We list the many reasons why we feel good about our ability to get to the other side of the pandemic with minimal disruption of service to our customers. Perhaps our biggest point of difference is our decentralized management structure, which enables our partners to act quickly and effectively. Once again, we have taken the long view and we have kept layoffs to a minimum. And now for some slides demonstrating some of the additional measures taken at our facilities to manage the pandemic risk. You see on some of the pictures they're taking of temperatures prior to people entering plants; employees wearing helmets and visors to protect their eyes; increased sanitation; and, of course, social distancing in our facilities; glass dividers, helmets, visors and social distancing in all of our facilities; and some of the slides coming up also demonstrate those attributes; extra glass dividers in our welfare facilities and offices. In 2019, we launched our comprehensive ESG strategy. We will track and report on our progress on our environmental, social and governance objectives. We will be releasing a condensed PB sustainability report and GRI index this year, while a comprehensive ESG report, including feasible targets, will be published in 2021. We create value by investing in good companies, and we work with them to make them great companies. The list here provides examples of areas where the PB ecosystem can provide value to a portfolio company once it joins the PB family. With all the disruptions at primary plants, it is good to be diversified across different commodities and species. Our supply chain is both local and global. And despite the primary planned shutdowns, we have been business as usual and have maintained relatively good service levels to our customers. COVID-19 has devastated our foodservice customers as out-of-home eating has come to a complete stop. Thankfully, our exposure to retail is saving the day. After a tough April, we're pleased to see some activity, particularly in QSR channel, where some customers' orders are close to pre-COVID-19 levels.

Sorry to interrupt, George. We need to be telling the slide number. The shareholders can't see what you're doing on the screen. So we're on Slide 23 currently.

We're on Slide 23. Slide 24. As mentioned earlier, we have many smaller facilities across North America. This provides us with some redundancy, which is a competitive advantage during uncertain times. Larger plants in our industry tend to be more fragile as demonstrated by issues at large primary plants in the industry. The table on the right provides you the split between Canadian and U.S. sales. Our U.S. platforms are well positioned and growing and will soon close in to reaching 50% of our sales. Page 25. Multiple specialty brands mean better risk diversification. Our portfolio of great specialty brands continues to grow every year in both Canada and the U.S. We recently added the La Felinese brand, which is our first brand and investment in Europe. Page 26. Our acquisitions pipeline remains full, and we have already completed 3 transactions in 2020. We continue to enjoy a very robust pipeline of acquisition opportunities, and we look forward to the continued growth of our portfolio of great companies. In many ways, COVID-19 has accelerated the intent of food entrepreneurs to join the PB ecosystem. Page 27. This is the way we view the business from an internal perspective. We're building 6 platforms organically and by acquisition. All platforms are building North American businesses. Page 28. The protein platform is our legacy platform and where we started this journey. It is our largest group and includes both Canadian and U.S. operations. It has world-class management teams in place, operates state-of-the-art facilities, and features some of the best and most iconic brands in North America. I would say that the protein platform, its resilience, its diversity, its size and its operations are truly best-in-class and probably our best kept secret. Page 29. Oberto's joined the group in 2018, and after a year in the PB family is truly a transformed company. Page 30. This 100-year-old company and brands have now positioned themselves as a premium value-added protein company, introducing its loyal consumers to authentic Italian meat and best-in-class sticks and sausages. It has also completed multiple acquisitions to grow and diversify its portfolio of products and brands. Page 31. Oberto's Cattleman's Cut is the fastest-growing brand in [ sister ] in the U.S., driven by some great innovations and new product launchings into this channel. Page 32. Belmont is the leading premium burger company in Canada. It's purely crafted brand continues to grow as they add a lot of innovative products to their extensive portfolio. The no sugar bacon at the bottom there launched last year under the Leadbetter brand was a great success. Page 33. Concord has been a prolific innovator in the protein industry for a number of years. Their best-in-class fresh skewers are legendary, and they launched their fresh additions line in the U.S. with great success. On the right-hand side of the page is their first meal kit box to be launched this year in the club channel, featuring Gyro Pork (sic) [ Pork Gyro ] made at the recently expanded facility just outside of Montreal. Our investment in Yorkshire Valley Farms positions us very well in the organic poultry segment of the market. Yorkshire Valley is leveraging other PB ecosystem companies to launch many organic value-added products into the marketplace. Expresco is a North American leader in ready-to-eat meat on a stick products. We recently completed a 30,000-foot addition to their facility and have quickly launched a number of innovative new products and flavors. These products combine quality and convenience and great taste and are changing the way consumers consume chicken breast. More product innovations for our partners at Expresco. PB has led the growth of dry-cured meat in Canada and its Freybe brand is considered the gold standard. The picture showcases the new taste of Europe line coming to a store near you, featuring German-style charcuterie meat and leveraging its rich German heritage. Page 38. Lou's Kitchen is the #1 brand in cooked ribs in Canada. They're expanding their ready-to-eat meat portfolio of products, carrying to consumers who are looking for convenience and quality when consuming protein. Piller's has transformed its business over the past few years from commodity processed meat to meat snacks and charcuterie dry-cured products. They're also making progress in growing their business in the U.S. by introducing German-style cured meat and snacks to the U.S. marketplace. Over the past few years, the growth of our sandwich platform, that is on Page 40, has been phenomenal. They continue to invest in best-in-class facilities and processes. If you click on the link on the next slide, you will see a video of their fully automated breakfast sandwich line recently installed in the Phoenix facility. Page 42, a picture of their new fully automated line, leveraging robotics and other state-of-the-art equipment. Page 43, again, more pictures of the new fully automated line. Page 44, same, showing the packaging area of this line. Finally, some Raybern's sandwiches launched into the retail and club channels this past year.

Page 45.

Page 46, Ready has commissioned a brand-new lobster processing facility in Saco, Maine this fall. They have launched a number of value-added lobster products into the retail channel over the past few months. A picture of the facility and some of their new packaging. On Page 48, their facility is state-of-the-art and best-in-class, processing both raw and cooked value-added lobster. Page 49. I'm sure you'll agree with me that their packaging looks amazing and captures the uniqueness of the Ready Seafood story and their legacy. Page 50, some value-added smoked seafood products from our new facility on Vancouver Island. Our distribution platform on Page 51 provides protein solutions to hotel, restaurants and institutions across Canada. It also services large retailers as well as specialty retailers. Page 52. During 2019, we commissioned our new 45,000 square foot seafood facility in Montreal, Frandon Seafood is expanding rapidly in this key market. Also in 2019, we commissioned our new meat and seafood facility in Richmond Hill in the Toronto area. Page 54, Viandex joined the PB family during 2019. Viandex is a leading distributor located in Quebec City. Page 55. Our bakery group has made tremendous progress in expanding into the U.S. market. We're in the process of doubling the capacity of our facility in Langley. Some pictures showing you the amazing bread that they're producing and now selling extensively in the U.S. market. Also, best-in-class products recently launched by our partners at Shaw Baker (sic) [ Shaw Bakers ] in San Francisco. I will now pass it on to our CFO, William Kalutycz.

Thank you, George. So on Slide 58. Overall, 2019 was a solid year for the company. We continue to post record sales, record EBITDA and steady dividend growth. For the presentation, I'll walk you through 2019, a summary of 2019, and then we'll look at our long-term outlook out to 2023. So turning to Slide 59, showing our revenue trend. Again, as I mentioned, 2019 was a record year, generating $3.65 billion in sales, up from a little over $3 billion the year before. If you look on the chart, the gold line represents our organic growth rate for the applicable year, and then the gold bar is our targeted growth rate range of 6% to 8%. So overall, for 2019, we generated organic growth of about 6%. It was a little bit below our expectations for the year, but the good news was it was a year of traction. So our seafood or sandwich and protein platforms, all we've invested heavily in over the previous several years. In 2019 for all of them was a year of traction, whereby over the course of the year, we saw good, steady increases in their growth rates, and I'm going to show you that on a following slide. The black line shows you our overall growth rate for the year, which includes acquisitions. And for the year, we came in at about just a little under 21%, which is in line with our 9-year compound annual growth rate of 23.8%. Turning over to Slide 60. This is the slide I was referring to. You can see it shows you our growth rate for each of the quarters during the year. First quarter of the year, we started with a growth rate of about 2%, and we exited the year with a growth rate of about 8.6%, and we're particularly pleased with the Q4 growth rate because Q4 is a seasonally challenged quarter for many of our businesses, so we don't generally expect a very high rate of growth. So to come in at that rate is a significant positive and shows you the traction that was building in our various businesses and business platforms. Turning to Slide 61 and our EBITDA trend. You can see in the blue bars, while I'll explain the bars a little bit first. The blue bar represents our EBITDA in pre-IFRS terms. IFRS 16 was an accounting standard we implemented in 2019. It essentially removes lease payments from our EBITDA, and it replaces it with imputed interest and amortization below that. So once you normalize for that, that's the blue charts and then the green addition to the bar shows you the impact of IFRS. So looking at 2018 compared to 2019, you can see we generated good growth year-over-year, $308 million of EBITDA versus $280 million in 2018. However, 2019 had, prior to COVID, probably one of the biggest challenges we've ever faced in our business. In the second quarter of the year, in China, there was a major outbreak of African swine fever in their hog herds that essentially reduced their pork production by about 50%. And China represents about 50% of the world's pork supply. So that was about 25% of the world's pork supply was eliminated and it created tremendous amount of disruption in the protein industry across the globe and a tremendous amount of inflation. So despite dealing with that challenge, we continued to generate the solid EBITDA growth. The gold adjustment in the final bar, where we adjust 2019 for the ASF impact, shows you the -- our EBITDA normalized for ASF, which we estimate is about $15.4 million. So on a normalized basis, you can see it would have been a stellar year if it had not been for that challenge. The black line on the chart represents our EBITDA margin. You can see leading up to 2019, we showed tremendous progress in growing our margin. 2019 was the first year. And since 2014, that it declined, and that was effectively all due to -- or primarily due to ASF as well as we've been investing heavily in a number of our platforms in 2016 to 2018, and that has added costs. And we're just starting to generate the synergies and benefits from those. So in the short term, that's created some pressure on our margins as well. So but normalizing for ASF, we came out at about a 9% EBITDA margin. And longer term, our target is 10%. I'll talk a bit more about that later. But we still expect to achieve that target in the next couple of years. Turning over to Slide 61, adjusted earnings and earnings per share. Again, the blue bar represents pre-IFRS numbers and green adjust for IFRS here. IFRS is actually a negative for us. I'm sorry, sorry, let me correct that. All of these numbers are actually pre-IFRS. And the green bar is adjusting 2019 for the ASF impact. So you can see, despite ASF, we had a good solid trend in our earnings, up slightly from 2018, but once the normalization for ASF is done, you can see good increases from 2018 to 2019. And the black line represents our earnings per share. Again, similar to our EBITDA, the earnings per share was impacted by ASF, which brought us down for the first time in our history, a decrease in our EPS, adjusted EPS. Normalizing for ASF, we would have been relatively flat year-over-year with the rest of the impact coming from equity issuance we did mid -- or in the third quarter of 2019. That capital had not yet been put to work by the end of the year, and as a result, was a bit of a weighting on our EPS for the year. Turning to Slide 63, our free cash flow. Again, 2019 was a record free cash flow, the blue bar, $178 million, up from $165 million in 2018. The normalized bar with the green addition shows you the impact of ASF after tax. And on that basis, we would have been about $190 million. So great continued growth in our free cash flow. The gold line represents our free cash flow per share. And similar to our EPS, it was impacted by ASF and the share issuance. Normalizing for that, 2019 would have been another record year. As it was, it was fairly in line with 2018. In terms of our dividends, for 2019, we paid out $2.10 per share, which was a 10.5% increase from our dividend rate in 2018 and resulted in a payout ratio of about 43%. Subsequent to the year, we announced a 10% increase in our dividend, so our current annualized dividend rate is $2.31 a share. You can see from the chart that for 6 years now, we have consistently increased our dividend by more than 10% or more. Next thing I want to point out is our free cash flow per share growth over the last 9 -- last 9 years from 2010 to 2019. You can see we've grown at a compounded annual growth rate of close to 12%, just a little under 12%, which is in line with our long-term target of 12% to 13%. Kind of our financial metric here is we want to grow our free cash flow of about 12% to 13% per year, pay a 2% to 3% dividend yield and thereby generate, hopefully, with valuation metrics staying stable, a 15% return for our shareholders. And you'll see that 15% number is a magic number in the PB culture. I'll talk a bit about it more in our investment slide. Last thing I want to point out on this slide is a bit of a milestone for the company. We've now surpassed paying to our shareholders over $500 million in dividends since we started declaring them back in July 2005. Turning to investments on Page 65. So I'm skipping a page there. So what we -- what -- the blue bar includes what we consider investments and what we include investments are acquisitions and capital expenditures that meet a certain threshold, which is the same threshold we set for when we make an acquisition. We expect on any investment we make to generate a minimum 15% internal rate of return after tax unlevered on that investment. And that's what we use to categorize a capital expenditure between a maintenance CapEx and a project CapEx. So this slide essentially shows all investments where we expected to generate about a 15% IRR or greater. And the rationale behind that 15% is we assume if we make 75% or better of our targets, that will result in a return on our assets of about 11%. And we view our weighted average cost of capital at about 11% and built into that weighted average cost is a 15% return for our shareholders, so if we can hit 75% of our targeted investments, we'll return 15% for our shareholders, which is our target. So you can see, looking at the chart for 2019, it was a relatively quiet year. We invested about $190 million. A $119 million in acquisitions, 7 acquisitions, which are listed to the side there and $70 million in project CapEx, some of the bigger projects also listed to the right side of the chart. I referenced earlier the heavy investments from 2016 to 2018 because this is really important to understanding premium brands because this is a really heavy-investment period for us. And we are just -- all these investments are done on these 15% models. They're 10-year or longer investment horizon. So quite often, in the interim, they have a negative impact on our EBITDA margins. They have a negative impact on our returns on net assets. But ultimately, longer term, we -- as the model plays out, we expect that to generate the returns we want to generate for our shareholders. So if you look back at 2011 to 2013, that actually, in our history was a really heavy-investment period as well. That was close to 1.5, 2x our EBITDA back then. It doesn't look as significant now because the company has grown so much. But it was back then. And really, it was those investments that drove the improvement you saw in our RONA from 2014 through to 2018. And that was a similar trend you saw in our EBITDA margins on an earlier slide. That's our expectations today on the investments we've made from 2016 to 2018. We start -- we're starting to see, especially on the sales initiatives and leveraging the capacity we've built, some of the synergies, George talked about all the great things happening in some of our recent investments with Oberto's and Ready Seafood, all that is what we expect to drive our growth going forward. And again, I'm going to come back and talk to that a little bit more on a later slide. In terms of our actual RONA, which is the gold line on this chart and the black line is our targeted RONA. Our targeted RONA is 15%. Again, the idea there being that, that is a before tax concept, you tax -- you tax adjusted, that's about 11%, which is our weighted average cost of capital, which ties to our 15% we're trying to generate for our shareholders. So our objective is to -- obviously to be at or above that 15% target. Again, for 2018, 2019, you see us falling below that as those investments weigh down on us. And we've yet to start generating the returns from them. But the good news here is the blue line shows you the 5-year average in our RONA. And you can see that, as the company matures, gets larger, we make these investments in future growth, future cash flow, the ones from the past are sort of carrying us through. And you can see our 5-year average has continued to stick around that 15% RONA. Turning to Slide 66 -- sorry, I'm going to jump to 67. Just looking at our balance sheet, we're going into the COVID crisis with a very strong balance sheet. The 2 key metrics or 2 most important metrics we track is our available credit facilities and our senior debt-to-EBITDA ratio. Both of those are very strong at the end of the year. We had $348 million in unutilized credit capacity, which is close to a record level for us. That was driven in part by the equity issuance we did in the third quarter of last year. And our senior debt-to-EBITDA ratio, which is the gold line, was about 2.2:1, which is well below our long-term target of 2.5 to 3:1. So going into this, we're a very strong position. And we have -- just give you a bit of a -- we'll be announcing our first quarter results on Monday, and we'll be going into a lot about our expectations around COVID. But out of an abundance caution we have in the time being put our acquisitions activity on hold and holding back on any major new capital projects, but solely out of it abundance of caution because as you can see from the chart, we're going into this very well positioned. The third metric on there, the green line is our total debt-to-EBITDA ratio. And that is -- the only difference between that and our senior debt is our convertible debentures, which I'm going to turn over to Slide 68 and just talk a little bit about that. Our convertible debentures, for us, has really been an equity strategy. Our objective is when we issue these convertible debentures, they're convertible into shares at a defined price and that defined price is usually about a 60% premium to where our shares are trading. And then our goal is if we can deliver our 15% return for our shareholders, then we should easily grow into that conversion price. These instruments generally have a 5- to 7-year term. And then force conversion and thereby effectively raise equity at a 60% premium. So we really view this as an equity strategy. You can see looking, we've done 8 of these issuances, 5 of them were effectively fully converted. We've got 3 currently outstanding that make up that difference between our total debt and our senior debt. One of them, the one that's nearest to maturity, which is next April, a year from -- it's a little under a year from now. It's got a conversion price of about $86 and assuming some normalcy comes to the capital markets and our share price, in particular, we fully expect that to have that converted this year as well. Then the 2 remaining issuances, both of them are very far out to the future. The nearest one is a convert price of $107 is 3.5 years from maturity. And then higher conversion price one is 5 years out. So again, we're very comfortable with this instrument. It's got very debtor-friendly terms, no principal payments until maturity, unsecured, unsubordinated no financial metric covenants and our senior lenders view it as equity. So a very positive instrument for our balance sheet. Turning now to our outlook for the year. I'm going to jump to Slide 70. So we've got 2 key objectives we set financial objectives in our 5-year plan. $6 billion in sales from our current $3.6 billion, $3.7 billion and $600 million in EBITDA, roughly representing a 10% EBITDA margin. So this slide on Page 70 shows you how we expect to get to our $6 billion target. There's 3 elements to it. The first one there, acquisitions annualized. These are acquisitions we completed in 2019. If you just annualize the full year sales for those, that's about $107 million of growth for 2020. And then that leaves the bulk of the growth coming from our organic growth initiatives. Over the next 4 years, that works out to an average growth rate of about 7.7%. To put that in general contracts -- or context, our average for the last 5 years has been 8.3%. So given the investments we've made in the last couple of years and all the things that are in the works and the traction we're starting to see gain in them, we feel very confident that, that's a conservative number and comfortable with that growth rate. Now with the COVID challenge upon us, it's going to probably change the trajectory a little bit, flatten the curve per se with -- our original model had very high-growth rates in the early years and very conservative growth in the latter years. So that probably will be a little bit flatter. But again, we still remain very bullish on that target. And then the final component of our growth strategy is acquisitions. It's a core part of our strategy, our business model, and that's about $1 billion or about an average of $250 million a year, which is very, very conservative given our pipeline. And I'm going to go into details a little bit more -- give you a little more color on our acquisitions pipeline in a future slide. So turning over to the next slide, Slide 71. This just gives you a bit of a sense of the broad base of the growth initiatives that we're looking to drive or achieve that $1.2 billion, $1.3 billion of organic growth over the next 4 years. All of these initiatives are -- relate to investments we've made in the last couple of years. And all are as valid or as sound today as they were 6 months ago. And in fact, some of them are proceeding ahead -- slightly ahead of plan. Again, supporting that outlook of us being able to achieve that $1.2 billion to $1.3 billion of organic growth. Turning over to Slide 72. This gives you a little bit of color on our acquisitions pipeline. So we categorize our acquisition pipeline into 5 key buckets. The first bucket advanced. These are transactions where we've actually reached the negotiated terms, and we're in due diligence or some level of detailed process in the transaction. So you can see there alone, we've got 5 active transactions in that group, representing about $300 million in sales. And so we view those as highly probable at closing. But like I said earlier, we have -- we're sort of treading water right now with acquisitions until we get a little more clarity on the impacts of COVID-19. The next bucket is what we call active acquisitions. And these are acquisitions we're in active discussions with an owner that we like their business. They like us. We want to reach a deal, and we're just trying to figure out how that's going to look. We've put the probability these at medium to high. And we've got 16 of those in the pipeline right now we're representing about $1.9 billion in sales. Again, these are all actively being worked on and discussed. The next group of acquisitions is -- in our pipeline is what we call early stages. And these are businesses where we're in active discussions with the entrepreneur, but the entrepreneur is not quite ready to sell. So we're just guarding, developing the relationship. And so when that entrepreneur is ready to sell, we're there to sit down and negotiate a transaction. And that's our -- almost the -- certainly by transaction-wise, the biggest part of our pipeline. 25 owners we're in discussions with, representing about $3.3 billion in sales. And then the next category is what we call opportunities. These are businesses that we've identified we like. We think they'd be a great fit with our company, but there's been no discussions as of this point. So there's 8 of those right now, representing $3.5 billion in sales. And then the final bucket in active acquisitions. These are transactions where we've had active discussions in the past. Haven't been able to come to a resolution. Quite often, it's on valuation. And as a result, we've sort of said, well, let's keep in touch. And when things change, then maybe we can resume discussions. So we've let them on a friendly basis. We're still interested. They're still interested. And hopefully, at some point, they move up to being active. And that's 12 transactions representing $1.8 billion in sales. So you can see in total in our pipeline right now, 66 potential transactions representing over close to $11 billion in sales. So that's why we feel very confident that, that $1 billion built into our 5-year plan is achievable. The last slide in my presentation, Slide 73, just talks about our EBITDA target. Roughly, again, it's 10% of our sales or $600 million. The key driver of that from a percentage basis, I mentioned earlier, we're normalized for ASF. We're -- we were at about a 9% EBITDA margin for 2019. So that's about 100 basis points, 1% over the next 4 years or 25 basis points per year. Again, we're very comfortable with that growth rate. If you go back to our previous investment history and then what we were able to achieve as we leverage the capacity we built and generated synergies from the acquisitions. That averaged about 75 basis points per year. So again, very comfortable with that 25 basis points. And we've listed here what some of the key drivers are probably the most key driver is sales growth deleveraging effectively on the investments we've made in production capacity to distribution capacity and selling and marketing capacity. Our intercompany PB ecosystem initiatives. George referenced that earlier. Again, that's something that is really starting to gain some great momentum with some of our recent acquisitions. And that will be a big driver of our margin improvement as we go forward. And then the last 2, just continuous improvement, automation and then acquisition synergies. So that presents -- that concludes the presented financial presentation for the year. I'll now pass it back to, I believe, Doug.

Thanks, Will. George, can you do the wrap up?

No. I think we move to the Q&A segment, Doug.

Okay. I'm monitoring the questions. So if there's any questions to come in online, please submit them. In the meantime, as secretary for the meeting, I'll give the ballot results from the shareholders on the various motions that were before them. I should point out that we're pleased that 72% of the outstanding shares of the corporation were voted at this meeting. I think it's a new high for us. So great to see the participation from the shareholders. With regard to the various motions, the shareholders have voted by a margin of at least 9.67% (sic) [ 99.67 % ] to fix the number of -- shareholders have voted by a margin of 100% to approve the appointment of PricewaterhouseCoopers.

Doug, Doug, sorry, you cut out there. So maybe can you start with that first resolution passed?

Yes. Sorry. The shareholders voted by a margin of 99 point -- somebody is rattling some papers there. I think that's probably what's caused the problem. But anyway, the shareholders have voted by a margin of 99.67% to fix the number of directors to be elected at no more than 7. The shareholders have voted by a margin of at least 100 -- of 100%, not at least, 100 to approve the appointment of PricewaterhouseCoopers LLP as auditors for the ensuing year at the remuneration to be fixed by the Board of Directors. Each of our director nominees has been elected by a margin of at least 87%. The ranges were 87% to 99% and accordingly effective upon completion of the meeting, each of the nominees will hold office until the Annual Meeting of Shareholders -- the next Annual Meeting of Shareholders or until his or her successor is appointed. And I'd like to congratulate Sean Cheah, Johnny Ciampi, Bruce Hodge, Kathleen Keller-Hobson, Hugh McKinnon, George Paleologou and John Zaplatynsky on the reappointment to the Corporation's Board of Directors. With regard to executive compensation, I'm also pleased that the shareholders have approved the corporation's approach to executive compensation by a margin of over 95%, which meets the majority standard required for the passage of the resolution. So accordingly, I declare that resolution carried and would ask for a copy of the resolutions attached to the minutes as Appendix 3, and I would -- a full and complete report of voting results will be with respect to this meeting, prepared and filed on SEDAR shortly after the conclusion of this meeting. So Mr. Chair, I still don't see any questions that have been submitted at this point. So I'll turn the podium back to you.

Thank you, Doug. And I would ask the secretary of this meeting to attach the direction of votes received by proxy from TSX Company -- Trust Company to the minutes of this meeting as Appendix 4. And George and Will, just before we formally adjourn this meeting and in the face of this COVID crisis, on behalf of our Board of Directors and all of our stakeholders, I want to express our sincere thank you to the both of you, our management team and, of course, all of our incredible employees. Your leadership dedication and commitment has been absolutely outstanding and your success has not gone unnoticed. Again, thank you. So if there is no further business to be brought before the meeting, I would ask a motion to terminate the meeting.

Mr. Chair, seeing no further questions online, I'll move that the meeting be terminated.

I second that motion.

Are there any objections?

I see no objections, Mr. Chair.

As there are no objections, I declare the motion carried, I declare the meeting terminated, and I thank you all for participating in this meeting today.

Thank you. We'll be signing off.