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

Ladies and gentlemen, welcome to the Annual Meeting of Premium Brands Holdings Corporation. Please note, this meeting will be recorded. I would like to introduce Bruce Hodge, Chairman of the Board. Mr. Hodge, the floor is yours.

Thank you, Oliver. Good afternoon, ladies and gentlemen. My name is Bruce Hodge, and I am 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 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 at the close of business on Friday, March 19, 2021, the record date of this meeting, or their validity appointed -- sorry, validly appointed as 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 National Instrument 54-101 on April 1, 2021, as evidenced by the affidavit of mailing of [ Lency Posttestka ] of TSX Trust Company and the registrar transfer agent of the corporation. The affidavit of mailing of [ Lency Posttestka ] will be annexed to the minutes of this meeting as Appendix 1. As you have all received a copy of the notice calling this meeting, I would request a motion dispensing with the reading of the notice.

Mr. Chair, I move the reading of the notice of this meeting be dispensed with.

I second the motion.

Are there any objections to this motion? As no objectives have been raised, I declare the motion carried. And with proof of service of the notice calling this meeting duly tabled, I direct a copy of the notice, together with proof of service, to 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 in present or by means of a telephonic, electronic or other communications 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 by proxy not less than 10% of the votes entitled to be cast at the meeting. I have received the scrutineer's report on attendance and confirm that this criteria has been satisfied. Therefore, I 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 regarding 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 has been concluded, I'll 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 will be available on our website. We will run through each of the items on the agenda in turn, responding to questions that an item of business -- on that item of business while it is before the meeting. I now declare the polls open on all resolutions. The next item of the business is the presentation of the corporation's audited financing for the financial year ended December 26, 2020, together with the accompanying report of the auditors. The corporation's financial statements for the financial year ended December 26, 2020, together with the auditor's report thereon and management's discussion and analysis regarding same were filed on SEDAR on March 11, 2021 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 no doubt 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. Chair, I move the reading of the corporation's financial statements for the financial year ended December 26, 2020, together with the auditor's report thereon be dispensed with.

I second the motion.

Are there any objections to the motion? As there are no objection 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. Chair, I move that PricewaterhouseCoopers, chartered professional 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 remuneration to be determined by the Board of Directors of the corporation.

I second the motion.

The motion is open for discussion. 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 the vote will be announced later in the meeting once all the votes have been tabulated. The next item of business is fixing the number of positions on the corporation of the Board of Directors. I would require the motion in this regard.

Mr. Chair, I move that the number of directors of the corporation be elected at this meeting be fixed at no more than 8.

I second the motion.

You have heard the motion. And if there's no further discussion, I would ask anyone who has not previously voted their share 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 cast. 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 the Page 17 through 24 of the corporation's information circular. They are Sean Cheah, Johnny Ciampi, myself, Kathleen Keller-Hobson, Hugh McKinnon, George Paleologou, Mary Wagner and John Zaplatynsky. The shareholders of the corporation have been asked to either vote for or to withhold their vote for the election of each of 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 management's nominees. If shareholders present have other nominees they wish to propose for consideration, the Board will be pleased to receive their names for consideration for future election. In light of this, are there any further nomination?

Mr. Chair, the virtual platform would suggest there are no nominations -- no further nominations.

Thank you. I now declare the nominations closed. Mr. Goss?

I move that Sean Cheah, Johnny Ciampi, Bruce Hodge, Kathleen Keller-Hobson, Hugh McKinnon, George Paleologou, Mary Wagner 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 are elected or appointed.

This is George Paleologou. 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 the 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's 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 their 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 the meeting, I would request the motion dispensing with the formal reading of this resolution.

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

I second the motion.

Are there any objection to this motion? 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. 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 poll. It is 1:45 p.m. Pacific time. I will close the polls with respect to all resolutions in 30 seconds to allow online votes to catch up. [Voting]

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, and -- our President and Chief Executive Officer; and Will Kalutycz, our Chief Financial Officer.

Thank you, Bruce, and welcome, everyone, to our 2021 AGM. Hopefully, you all have the presentation in front of you. Our CFO, Will Kalutycz, and I are going to take you through a formal presentation followed by Q&A. This is the second AGM by video conference, and hopefully, the last as we love meeting you, our fellow shareholders, in person. Slides 2 and 3 are standard disclaimers as usual, on Slides 2 and 3. Slide 4. As you can see, it's been quite a journey over the past 16 years. We've grown substantially from humble beginnings. We began with 8 operations located mainly in Western Canada, and we have now expanded across Canada and the U.S. Our overall platform now includes an investment in a dry-cured meats company located in Parma, Italy and also includes seafood assets in the U.K. and in Argentina via our investment in Clearwater Seafoods. Slide 5, our vision is very simple and straightforward. We want to invest in and support companies that are doing really good things in the food space. Slide 6, making great quality food and taking care of our people, our communities and the environment is also good for business. Over the past 16 years, we have delivered a 23% compounded annual return to our long-term shareholders. As you can see in this chart, our stock chart correlates well with the growth in our free cash flow per share. Slide 7, we invest our capital carefully and responsibly. We're diversified across many parts of the food space, and we sell our products globally. We back incredibly talented people, and we support them over the long term. We don't buy businesses to flip them, and we're not afraid to invest in state-of-the-art technology and best-in-class operations. Slide 8. Our core values and guiding principles, our are common DNA, as we call it. We understand our responsibilities to our communities and to the environment. We support regenerative agriculture, the humane treatment of animals, the sustainable stewardship of our fisheries, and most importantly, we prioritize the well-being of our people. Slide 9, 2020 was a year like no other. Crisis management every day. Everything that could go wrong did. We were stress tested to the maximum every day. But thanks to our unique culture and great people, we persevered. We're emerging from this nightmare stronger and more resilient. Our first comprehensive ESG report is due to come out in June of this year. We are committed to achieving carbon neutrality, and we'll be disclosing targets and objectives in our upcoming ESG report. We're also committed to producing authentic food that is healthy and nourishing. We understand that climate change represents a significant existential risk to our business and to the world as we know it. We believe that our passion for regenerative agricultural practices, combined with our stated objectives to help reduce food waste while producing satiating nutrient-dense food, will improve both the environment and human health and also help reduce food insecurity. We believe strongly that humans cannot thrive when nature around them suffers. Our company, Yorkshire Valley, is a proud sponsor of various organic and regenerative agriculture initiatives, including being the lead sponsor of the Canadian Eco-Scholar Award. The following video introduces you to some brilliant student contestants and gives you an idea of why we're so excited to support the regenerative agricultural movement. Video? [Presentation]

Slide 14. Sales channel diversification remains a key objective. Our progress over the years in this area was a key factor in helping us pivot our capacity to new customers on the pandemic-decimated demand in certain foodservice-related channels. A map of the locations of our various operations in North America. For next year's AGM presentation, we will replace this map with a more global map showing some of our operations around the world that came with our recent investment in Clearwater Seafood (sic) [ Clearwater Seafoods ]. Our U.S.-based sales continued to grow. With Q1 2021, our U.S.-based sales in our Specialty Foods division exceeded our Canadian-based sales for the first time. We have tremendous runway to grow our business in the U.S. for many years to come. Slide 16. We were very active with acquisitions during 2020, and we remain very active in 2021. We're very well positioned to take advantage of the various opportunities that will be created from the great reopening of the various economies around the world. We're emerging out of the pandemic stronger, bigger and more resilient. Many of our platforms have reached or are close to the $1 billion mark in terms of sales. Our platforms are well positioned for further growth by expanding capacity and by driving great innovation. Slides 18 to 23, our protein group thrived during 2020 as consumers prioritize quality and convenience. The next few slides show you some of our exciting new products we launched during 2020 and 2021. Slide 24. Our sandwich platform had a rough start to the year in 2020 but rebounded nicely as the QSR channel came roaring back. We are continuing to invest in automation and robotics as a way of building on our many competitive advantages in this area. The next slide shows you some of our artisan panino wrapped in sandwich products followed by 2 videos that demonstrate the progress we're making in automating our panino and sandwich lines in the U.S. [Presentation]

The Generation 3 line in our Spanish group. [Presentation]

We are now on Slide 28. Our seafood platform took tremendous strides over the past few months with our investments in Allseas, Starboard and, of course, Clearwater Seafood. Our seafood platform is very well positioned to grow as economies around the world reopen. In fact, that overall seafood group delivered a record quarter in Q1 2021, driven by the reopening of foodservice channels in the U.S. and in China. Slide 29. This slide demonstrates our unique vertical integration capabilities from ocean to plate. We have access to best-in-class seafood resources that are highly coveted around the world. We're also leaders in traceability and in sustainability. Slides 30 to 33. These slides show you some of the progress we're making in value adding and branding some of our seafood products. We believe that we have a unique opportunity to connect the end consumer with the entire supply chain, demonstrating environmental stewardship, sustainability and traceability in an area that often lacks these important attributes. Slide 34, our distribution platform demonstrated its resilience during 2020 by pivoting to other sales channels while continuing to support its foodservice customers that were impacted greatly by the various lockdowns. This platform continues to operate in a difficult environment, but it is very well positioned to benefit from the reopening of the economy and the return of the out-of-home dining. Slides 35 and 36. As the picture show, our various distribution businesses continued to add capacity during 2020 and are very well positioned for growth as the pandemic subsides. Slide 37. Our bakery platform continues to grow and is currently investing in doubling its capacity and enhancing its ability to service its growing business in the Western U.S. And finally, on Slide 39, our culinary group welcomed Global Gourmet into its ecosystem during 2020. Global Gourmet is a leading soup, protein mix and sauce business with exciting opportunities to leverage PB ecosystem resources to grow its business in Asia and in the U.S. I will now pass it back to Will for the financial part of the presentation. Will?

Thanks, George, and welcome, everyone. I'm going to start my presentation by talking about the single largest challenge our company has ever had to face, and that is the COVID-19 pandemic. This first slide shows you the impact in 2020 of COVID on our company by quarter. You can see starting in the first quarter was actually a positive impact as the bump we saw in our retail sales of about $15.9 million was offset by only about a $9.3 million impact from lost foodservice sales, so a net positive impact of $6.6 million. But then going into the second quarter of the year, you can see the dramatic impact it had on us, George referred to it earlier, $132 million. Almost all our sales channels were impacted: QSR; retail, due to logistics challenges; c-store; foodservice; airlines and cruise This quarter accounted for 62% of the impact of COVID on our company in 2020. Then as we move to the third quarter, you can see quite a quick recovery, driven a lot by QSR and some normalization in the boots of the retail channel and c-store channel. And then a bit of a bump back up in the fourth quarter as a result of foodservice-related events being canceled, year-end events being canceled. So overall, for the year, roughly a $212 million impact on the company. And like I mentioned earlier, certainly the greatest challenge we've ever faced. Next slide. The good news is that when you strip away the impact of the pandemic, many of our businesses generated very strong organic growth in 2020. The chart illustrates the solid blue line, our actual organic growth rate. And then the dotted line normalizes for the impact of COVID, the businesses impacted by COVID. So you can see that when you look at the businesses normalized for COVID, we had pretty consistent growth of high single digits, low double digits over the last 5 quarters. And this is really showing the underlying strength of many of our businesses that's been masked by COVID. There's been 4 main drivers of this growth. One is our strategic focuses on -- our focus on product categories benefiting from a number of consumer trends. These include meat snacks, artisan sandwiches, seafood, charcuterie, cooked protein, artisan breads, all the categories that George went through earlier. They're benefiting from consumers' demand for convenience, high quality, protein-rich diets and healthier eating. The next driver has been investments we've made in capacity in the last several years. We've invested about $230 million in incremental capacity supporting those categories. And late 2019, 2020 were the years where we started gaining traction many -- from many of those investments. Thirdly has been our U.S. expansion, which has been a tremendous success. Essentially, it's taking all of our unique differentiated products and into a bigger market that's being driven by the same trends that has driven our past success in Canada. And as George mentioned earlier, with the success in our Specialty Foods segment, we are seeing tremendous growth there. And then finally, acquisitions. We've invested about $1.2 billion in acquisitions over the last several years. And generally with them come a whole host of organic growth opportunities, from accessing new products with existing products and brands, to new products for our distribution networks, to leveraging the brands of the newly acquired companies. Next slide. Talking about our revenue for the quarter. We generated sales of $4,068.9 million in the -- for the year, sorry, representing about $420 million of growth or an 11.5% increase. Stripping away acquisitions, our organic growth for the year was about 5.9%, despite the impacts of the pandemic. If you look at the bar that's labeled 2020N2, in that bar, we've normalized for the COVID impact, the $212 million I talked about earlier. And you can see, on that basis, we would have generated about $4.3 billion in sales, and which would translate to about 11.6% in organic growth; again, reflecting the traction we're gaining in those underlying businesses and the investments we've made in the last several years. Another normalization we've added to the chart, we call it 2020N1, which is very interesting is all we take or normalized for this number is for the impact of Q2, as you saw earlier, which accounted for 62% of the COVID impact in 2020. Normalizing for just that, we would have had $4.159 billion in sales, representing a 14% increase from 2019. And interestingly, if you compare that number to our original guidance for the year -- and I should say in that normalized number, we also stripped out the impact of acquisitions made during 2020. And so when you look at that number and compare it to our original guidance for the year, you can see we're well above the $4.075 billion top end of our range. Again, just another indicator of the strong fundamental growth going under -- happening beneath the noise of the pandemic. In terms of our CAGR, over the last 10 years, you can see we've grown our sales at about 22.5%, again, a combination of organic and acquisitions growth. And last comment on the slide is on the far right, we show our 2023 targeted sales. This is from the 5-year targets we set back in 2018, $6 billion in sales. And with that, I'll flip to the next slide, which gives you a bit of a road map of how we see getting to that $6 billion in sales, a number we're very comfortable with. We start with our 2020 actual sales of $4.068 billion. We normalize for the COVID impact, which we are very bullish on, once the economy starts opening up, seeing a nice recovery there in our foodservice businesses. And then we annualized for acquisitions completed in 2020 or announced in 2021, which is about $325 million. And then the next number is a bit of a calculated number. We looked at starting from our $4.068 billion in sales, we added 6% compounding growth for the next 3 years, '21, '22 and '23, to take us to our 2023 sales target. That gave us about another $840 million in growth. And to put that 6% target in context, that's a volume target. In the last 2 years, normalizing for COVID, we've grown at about 9.7%. And if you look over the last 10 years, our nominal growth rate has been about 7% to 8%. So we're very comfortable with that 6%, a nice conservative number. And then finally, the plug to get us to our $6 billion target is acquisitions. We need about $550 million in acquisitions. The reality is when you look at our acquisitions pipeline today, in what we call our advanced bucket, these are acquisitions where we have a term sheet, we're well down the road in negotiations and are very confident on closing the transaction. That accounts for about $342 million in revenue. So a good chunk of that $554 million, which, again, is a 3-year number we need to achieve. And then also to give a little context to that number. Over the last 3 years, we've added about $422 million in annual sales per year from acquisitions. So again, very confident in that number. And that gets us to that $6 billion number that we are very comfortable in achieving. Next slide, I wanted to talk a bit about the entrepreneurial culture that George mentioned earlier. George went through sort of some of the strategic initiatives we built into the Premium Brands business model to risk mitigate business diversification, channel diversification, customer, product, geographical diversification. And then George also touched on entrepreneurial. This one really kind of focuses and shows you the power of entrepreneurship and how it mitigates risks and creates value within our company. The gold highlighted column is the sales and EBITDA numbers metrics associated with our foodservice-focused businesses. And then the next 3 columns are 3 of the public broadline foodservice-focused businesses in North America. And then the final column is a niche specialty foodservice-focused distributor, Chefs' Warehouse. So probably the most similar to our businesses because ours are, again, niche-focused foodservice distribution businesses. And you can see the organic impact of the pandemic on our foodservice business is only about a 4% contraction in their sales relative to anywhere from 12% to 30% in the case of Chefs' Warehouse. So again, showing just how amazingly -- what an amazing job our foodservice businesses did in pivoting to the pandemic. And we list on the right-hand side of the slide some of the things they did, their shift in focus to retail, they developed online initiatives, cash and carry initiatives, developed new relationships with home meal solution providers, developed school lunch programs, and developed co-packing and procurement opportunities with sister companies. So just an absolutely amazing job done by these businesses and their ability to pivot in a very tough set of circumstances. And it's a similar story on the EBITDA margins. You can see how much better our foodservice group fared relative to the comparatives. And I should mention, our foodservice margins are also being hampered by investments we've made in infrastructure over the last couple of years. That's added a lot of overhead that had positioned them to be growing in 2020, but unfortunately, didn't see that foodservice growth because of the impacts of the pandemic. The reality is this group should be a 7% to 8% EBITDA margin growth. Flipping over to the next slide on EBITDA. For the year, we generated $312.6 million in EBITDA, a $4.9 million increase from 2019, modestly 1.6% increase. Again, the big story is COVID and the impacts of COVID. If you normalize for COVID -- and we've got 3 buckets we look at when normalizing for COVID. One was the sales impact, which was about a $47 million hit to our EBITDA during the year. Then we incurred about $9.6 million in direct costs related to COVID. These are additional PPE inefficiencies associated with spacing and other -- and logistical disruptions relating to COVID, thank you bonuses paid to our employees and inventory issues resulting from changes in demand patterns. There was some offsetting benefits from reduced marketing, travel and a little bit of government subsidies resulting in that net $9.6 million. But then we also net out, we had some unusual commodity benefits because we went into the COVID situation with some heavy inventory positions. We're able to benefit from some of the disruption that happened in supply channels. So overall, we're looking at about an impact of $50 million from COVID. So you normalize for that, that would have given us EBITDA for the year of about $363 million, just slightly above the top end of our guidance for the year of $360 million. So sort of within our expectations for the year. From a CAGR perspective, over the last 10 years, we've grown our EBITDA at about just a little under 21%. So relatively similar to our sales of 22%, a little bit lower because of the impacts on our margins, recent investments in infrastructure, some ASF impacts and, obviously, the lack of deleveraging from the COVID impacts. In terms of our 5-year targets and our outlook for 2023. We've got the bar on there showing our $600 million target. And if we flip over to the next slide, similar to the sales bridge we provided on our targets, here's a bridge for our 5-year adjusted EBITDA target of $600 million. So we start with the 2020 adjusted EBITDA of $312.6 million, normalized for the pandemic sales impact I talked about earlier. We didn't normalize for the cost impact because once you normalize -- once you net the commodity benefits from the incremental costs and you take into account some of the ongoing PPE costs we will -- we expect to continue to incur post pandemic, it all sort of netted out to about 0. Then we added an amount for the annualization of acquisitions completed in 2020 or announced in 2021. We added in the investment income and management fees associated with our recent investment in Clearwater Seafood. And then we added the EBITDA, our contribution margin associated with the incremental organic sales growth I talked about earlier. We used a contribution margin of 20%, which is very conservative. When you look at our mix of businesses, that number runs anywhere from 15% for some of our distribution business, missed businesses, to up to 35% plus for some of our value-added branded businesses. And for sort of a comparison, you can see on the pandemic sales impact, it was about a 22% blend. And that was lower than our general average just because a lot of the impact was in the foodservice channel, which is sort of at the lower end of our contribution margin spectrum. So 20%, very conservative estimate there. We've added in some expected efficiency gains for 2021. We're budgeting roughly $20 million. We took half of that. And just to give some context to that, in the first quarter of the year, we generated $5.8 million in efficiency improvements. So again, a conservative number. And then the final adjustment is for acquisitions. We used an 8.5% EBITDA margin on acquisitions that we've assumed. The reality is our acquisitions tend to generate 10% to 20% EBITDA margins in the specialty food group and 5% to 10% EBITDA margins in the distribution group. So 8.5% is, again, should be a fairly conservative number. So with that, you can see we easily exceed our $600 million target, $665 million, giving us an 11% plus EBITDA margin. Again, very confident in hitting our EBITDA target for 2023. Next slide is on our adjusted earnings. For the quarter -- sorry, for the year, $122.7 million. You can see for the last 3 years, it's been -- our earnings have been relatively flat. In 2019, we were heavily impacted by ASF-related issues, African swine fever, which broke out in China and disrupted the protein complex across the globe. And then this year, clearly, COVID has been the big factor. If you normalize for COVID, you can see our earnings would have been about $165 million. So a nice increase there. And even with COVID, the CAGR in our -- our 10-year CAGR in our earnings growth is about 22%. Looking at earnings per share year-over-year. Our earnings for the year were $3.06 per share. That was a slight decrease from last year. And that's again COVID. But also, we really strengthened our balance sheet. During the year, we did 2 equity issuances. That diluted our earnings, while that capital had still -- much of that capital had not been put to use by the end of the year. You'll see later on, we have now put a lot of that capital for work. So that weighed on our EPS, and we should see some significant improvement in that in the quarters to come. Normalizing for COVID, our EPS would have been about $4 a share, which would have been, even with the share dilution, a nice increase of about 20% year-over-year from 2019. Next slide is capital allocations for the year. For 2020, you can see we allocated about $255 million in capital. Most of that was for acquisitions, $145 million and then the balance for 6 major capital projects as well as $35 million for a range of smaller project CapEx. Of the 6 major projects, 3 were completed by the end of the year. Our Harvest Yorkton meat snack capacity expansion and the new panino line at SK Food Group, which George showed you a video of, and the new Gen 2 automated sandwich line, also which you saw a video of earlier. So total spend in 2020 because some of those capital projects will carry over to 2021 was 65 -- was $210 million, $145 million in acquisitions and $66 million in project CapEx. Subsequent to the year, you can see much of that capital we raised in 2021 was put to work. Acquisitions, we've invested $485 million and announced 3 major capital projects, including a major expansion of meat snack and premium processed meats capacity, our Ferndale plant in Washington and 2 brand-new, third-generation sandwich lines in our sandwich group, again, which were shown in the video. So that will bring our total capital allocation for 2020 and the first part of 2021 to about $800 million -- a little over $800 million. And I should note, our expectations around this investment is a 15% internal rate of return, and we calculate that on an after-tax basis unlevered using 10-year-plus models. So what tends to happen is in the early years, until these initiatives gain traction, they tend to weigh on our returns, on our earnings per share, our cash flow per share, our return on net assets. And then as the investment develops, then you see those returns coming in the later years. Flipping over to RONA. Four lines on this chart, I'll just give a quick explanation of them. The black flat line at the top is our targeted long-term average RONA, which is 15%. The bottom blue flat line is our weighted average cost of capital, above 11%. And in that weighted average cost of capital, we use a 15% cost of capital for equity. That's what we want as a minimum return for our shareholders. The gold line is our RONA by year, and then the green line is a rolling 5-year average. So for 2020, you can see, unfortunately, our RONA fell below our weighted average cost of capital. It came in at 10.2%. Again, 3 major factors contributing to that is our recent investments, a lot of capital is invested in from 2017 to 2020. A lot of those investments are just starting to gain traction. 2020 was a key year. You saw that in that underlining growth when we stripped away the COVID impact. So we should see those returns starting to pick up in our RONA in coming years. And then also COVID was obviously a major impacting -- impact on our return on net assets for the year. In terms of normalizing for that in the year. If you take out the COVID impact as well as a couple of capital projects that were still in progress during the year, our normalized RONA is about 12.5%. So nicely above our WACC, our weighted average cost of capital, but still some work to do to get to that 15% target. On a 5-year rolling basis, we finished the year at about 13.7%. Or normalizing for the COVID and capital projects I mentioned earlier, it'd be about 14.1%. So approaching back to that 15% level. Turning now to our balance sheet and our liquidity. We finished the year in an extremely strong financial position. Again, this is what was weighting on our earnings per share, weighting on our RONA. We had almost $900 million of excess credit capacity at the end of the year. Our senior debt-to-EBITDA ratio was 0.6:1. The target for that ratio for us is 2.5:1 to 3.0:1 over the longer term. And then our total debt-to-EBITDA ratio at the end of the year was 2.2:1. Our target for that ratio is 4.0:1 to 4.5:1. The difference between those 2 ratios are our convertible debentures, and I'll talk a bit about those in the next slide. Normalizing for the capital we put to work after year-end, which I talked about on the earlier slide, we still come out with a very strong balance sheet. We would have $600 million in available credit capacity, a senior debt-to-EBITDA ratio of 1.9:1 and a total debt-to-EBITDA ratio of 3.3:1. So the company is in extremely good financial health. Turning to the next slide. This is sort of the follow-up pro forma calculation to the bridges we did on the 5-year targets. This is kind of reflecting the capital associated with the -- some of the assumptions behind those bridges. So what we've done here is we started with our opening -- our 2020 closing balance sheet. So we had roughly $194 million in senior funded debt, our 0.6 senior debt-to-EBITDA ratio and $883 million in unused credit capacity. We added in the financing associated with the announcement, the announced acquisitions after year-end, some capital associated with our plant efficiency initiatives. And then based on the assumed acquisitions number and an 8.5x multiple paid for those acquisitions, what it would cost to purchase them, that worked out to about $400 million. That would leave us with about $1.1 billion in debt, a 2.7 senior debt-to-EBITDA ratio and still about $200 million of excess credit capacity as well as the ability to expand our credit facilities given the fact of the acquired and growth EBITDA. So very well positioned still even after completing out on those capital expenditures. So again, the basic message being that we are in a position to execute on our $6 billion plan without going back to the market. Next slide, just a few comments on our convertible debentures. For this, for us, we view convertible debentures as an equity strategy. Effectively, we're raising equity at a premium, i.e., the convert price on the convertible debenture when we raise it versus doing a straight equity issuance, which is generally at a discount to the market. So we have done 9 of those so far. Our objective is, it is an equity strategy, so our objective is to force conversion as soon as we can. We've done that with 6 of the 9 issuances. They're almost entirely converted to equity. You can see on the list there, our seventh issuance, series F, is now well into the money, the -- or the conversion price of $107, well below our current trading value. Unfortunately, we can't force conversion until the end of the year, or if sooner, we have to have a 125% share price relative to the conversion price. So our shares would be needing to trade at about $134 in order to do that. That prerequisite goes away at the end of the year. So we fully do expect to be converting these shares in the relatively near future, or at worst-case scenario, earlier next year, leaving us with only the 2 remaining series of converts. Turning to the next slide, free cash flow, last slide of the presentation. Our free cash flow for 2020 was about $189 million. That was a $11 million increase from 2019 or about 6.2%. We're pretty pleased with that, considering the challenges of COVID. From a free cash flow per share basis, there was actually a -- there was a slight decline. Our free cash flow per share was $4.87 versus $4.97 last year or in 2019. So that was about a $0.10 per share decrease or 2%. And again, that was driven by the dilutive impacts of the share issuances we did in 2020 as well as COVID, as we've talked about earlier. In terms of dividends, our dividend rate for 2020 was $2.31. And that resulted in a payout ratio for the year of about 48.7%, so below our general guideline of 50%. And then subsequent to the year, we increased our dividend by 10% to $2.54 per share on an annualized basis. That is the seventh dividend increase in the double-digit increase in a row, going all the way back to 2015. And with that, that concludes the financial presentation. Back to you Doug. Doug? Bruce, do you want to take it from there?

Yes. I need to know that this is the tally of the votes, which Doug must be collecting right now. I have them.

As an interlude, said George sing a song to them, the shareholders?

I'm just here.

Sorry. We apologize for the technical problems, everyone. Just give us a second while we get them back on the line.

Ladies and gentlemen, please stand by. [Technical Difficulty]

You're on the speakerphone next to the mic.

Okay. Thank you, folks. I'm sorry. I'm not sure what's going on with the -- with our platform here, but it doesn't let me in. But I will -- I'm pleased to advise, as secretary of the meeting, of the results. The shareholders have voted by a margin of 99.49% to fix the number of directors elected at this meeting at no more than 8. The shareholders have voted by a margin of 99.86% to approve the appointment of PricewaterhouseCoopers as auditors and have authorized the directors of the corporation to fix the remuneration of such auditors. Each of our director nominees have been elected by a margin of at least 90% and accordingly effective upon completion of the annual meeting, each will hold office until the next annual meeting of shareholders or until his or her successor is duly elected or appointed, unless his or her office is vacated in accordance with the articles, unless he or she becomes disqualified. And I'd like to congratulate like Sean Cheah, Johnny Ciampi, Bruce Hodge, Kathleen Keller-Hobson, Hugh McKinnon, George Paleologou, Mary Wagner and John Zaplatynsky to their reappointment to the corporation's Board. The shareholders have also approved the corporation's approach to executive compensation by a margin of 99 -- 94.4%, which means the required standard required for the passage of the resolution. Currently, I'll declare that resolution to be carried and would ask a copy of the resolution be attached to the minutes. I'll also state that a full and complete report of voting results with respect to the meeting will be prepared and filed on SEDAR later this afternoon. Mr. Chair, back to you.

Thanks, Doug. I would ask the secretary of this meeting to attach the direction of votes received by proxy from TSX Trust Company to the minutes of this meeting as Appendix 4. Before I ask for a resolution to terminate this meeting, I have the pleasure, on behalf of the Board of Directors and all of our stakeholders, to extend a special thank you to George, our management team, all of our 11,000 employees and of course, the patience and support of our employee families for guiding our company through the most challenging year of operations in its history. Your collective performance has been truly remarkable. Thank you again. If there is no further business to be brought before the meeting, I would ask for a motion to terminate this meeting.

Mr. Chair, I move the meeting be terminated.

I second the motion.

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

Ladies and gentlemen, thank you for attending today's meeting. You may now disconnect.