North West Company, Inc. (The). (NWTUF) CEO Edward Kennedy presents at Annual General and Special Meeting of Shareholders - (Transcript)

North West Company, Inc. (The). (OTC:NWTUF) Annual General and Special Meeting of Shareholders June 12, 2019 ET

Company Participants

Sandy Riley - Chairman of North West

Edward Kennedy - President and CEO

Amanda Sutton - VP, Legal and General Counsel

John King - EVP and CFO

Darcie Gault - Manager of Employee Relations Service Delivery

Phaedra Propp - Marketing Coordinator for ACC and Cull

Angela Berry - Employee Relations Specialist

Miracle Ehiremen - Assistant Category Meats and Frozen Foods

Beverly Winn - Executive Assistant

Curtis Keber - Regional Support Manager

Lois Kosowan - Employee Relations Specialist

John Clausen - Marketing Manager for ACC and Cull

Hannah Baxter - Associate Category Manager Meats

Heather Eselmont - Associate Category Manager Produce

Conference Call Participants

Sandy Riley

Okay, ladies and gentlemen, I’d like to welcome you to this Annual General Special Meeting of the shareholders of the North West Company Inc. My name is Sandy Riley, and I’m the Director of the North West Company and Chairman of the Board. And I will act as Chairman of today’s meeting. So I’ll now call the meeting to order.

I’d like to welcome all of our shareholders and guests especially to those who had travelled to Winnipeg to attend and also those who have joined us via webcast. I also thank those shareholders who submitted their proxies in advance of this meeting. So good morning and welcome everybody.

Before we begin, I'd like to acknowledge that we're meeting on Treaty territory and the traditional homeland of the Métis nation. I’d also like to introduce the people joining me at the head table.

To my left is Edward Kennedy, President and Chief Executive Officer and a Director of the Company. Also at the head table is John King, Executive Vice President and Chief Financial Officer and Amanda Sutton, Vice President, Legal and Corporate Secretary.

And I appoint Amanda Sutton to act as secretary of the meeting. Kirsten Dillon and Jennifer Villareal of AST Trust Company Canada will act as scrutineers for the meeting. I'll now ask Amanda Sutton to, I hope, briefly read a notice regarding forward-looking statements.

Amanda Sutton

Thank you. Certain information presented today may constitute forward-looking statements. Such statements reflect North West’s current expectations, estimates, projections and assumptions. These forward-looking statements are not guarantees of future performance and are subject to certain risks, which could cause actual performance and financial results in the future to vary materially from those contemplated in the forward-looking statements.

For additional information on these risks, please see North West’s Annual Information Form under the heading “Risk Factors”. This presentation will also refer to EBITDA and adjusted EBITDA, adjusted net earnings which are not recognized financial measures under international financial reporting standards.

North West method of calculating these measures may differ from other companies and may not be comparable to measures used by other companies. For further information, please see North West annual report under the heading “Non-GAAP Financial Measures”.

Sandy Riley

Thank you, Amanda. I’d now ask you to tell us what the -- what the attendance is.

Amanda Sutton

Mr. Chairman, as scrutineers’ preliminary report on attendance has been received, we confirm that a quorum is present. A copy of the report is available with myself for inspection after the meeting.

Sandy Riley

A notice calling a meeting together with a form of proxy management information circular and proxy statement, and annual report containing the financial statements of the North West Company for the year ended January 31, 2019 and the related orders report were provided to each intermediate intermediary and registered shareholder of record on the record date for the meeting.

Additional copies of these materials are also available at the meeting. We've received an affidavit, a mailing from AST Trust Company, Canada North West's transfer agent confirming the mailing of the notice. So I now declare this annual general and special meeting to be regularly convened and property constituted for the transaction of business.

Now just a bit about the format for todays meeting. First, I'm going to have some opening remarks from the perspective of the board and then we'll deal with the formal part of the meeting, following which I will ask John and Edward to speak about various aspects of the business, and our financial results.

Following that, I will open the floor to questions or comments from you. I just want to also remind all of you that as you leave today, as we always do, there is a coupon on the way out, which is designed to get you to go to one of our Giant Tiger stores, and then spend a lot more than that on the face value of the coupon. And you're going to again have a fashion show this year, so you'll get lots of ideas of what it is that you should be purchasing when you do go to Giant Tiger.

So first, I want to start by acknowledging and thanking the Winnipeg Art Gallery for allowing us to host our annual meeting here this year as we have for many years. These are very exciting times to the way which is in the process of giving life to Canada's Inuit art center.

As you probably all saw on the way in, there's a major construction project underway next door. The art gallery is constructing an iconic building, reminiscent of an ice floor, which will house one of the largest collections, in fact, the largest collections of Inuit art in the world.

Over 17,000 carvings, prints, drawing, ceramics and wall hangings, including the collection of the government of Nunavut will be on display in this building, which is expected to be completed in the middle of next year. But more important than the building, is the bridge that's being constructed between Canada's north and south.

The Inuit Art Center is designed to be a home for the Inuit and other indigenous people, a place where people of the North can come and see their culture on display and where people from the south can learn about life in the north. And I can say from a personal experience, one of the most moving things I've ever done, is to go down into the vaults of the Winnipeg Art Gallery with people from the north and to go and look at the collection of art that’s been created in their communities, because when they go in and they see that art, they're seeing their mothers, their uncles, their great uncles, or grandfathers all the work that they did. And the sense that that work of art has been treated with such reverence and such respect, is a very moving thing for someone from the north to see.

It's very very important to, too, to the sense of importance and identity and when you think about Canada's sovereignty, it's a very important and necessary recognition that we in the south have to make. The other thing I'd say is, that the building is being created. While it's a it's going to be a spectacular building, and will house tremendous art, it's really secondary to the programming that is now being developed. Things like artists and residents, curatorial trading, traveling in special exhibitions, shared craft retail stores. These are all things that are happening as a result of the partnerships that have been built between the Inuit art center here in Winnipeg, and many communities and individuals and the governments in the north.

So I think the art galleries initiative is really important for us at the North West Company because we do so much work in the north, and what's happening is that this -- this art centre is going to strengthen both the cultural heritage and economic potential of the north.

So as I said, at the North West Company, we see how important this is initiative is for our key group of communities in which we do business. We're delighted to support these efforts and later today, we’ll be making an exciting announcement about our support and support of a number of our former senior officers for the Inuit Arts Center.

Now in that regard, I am delighted to welcome back to Winnipeg one of our former CEOs and one of our founders in fact, Ian Sutherland and his wife Judy. They'll be a big part of that announcement this afternoon, and Ian or Judy, could do this. I know we don't want to. Please stand, so that we can recognize you. I also want to say a few words about the development of a sustainability roadmap for the company.

We live in a world in which increasingly customers, employees and shareholders are asking corporations to explain how their actions can positively impact important societal issues such as climate change, sustainability, efficient stewardship of resources, issues of individual equity, and community economic and social development.

Corporations are now expected to be accountable for how they address these issues, because the long term financial consequences of not taking these matters seriously are significant. At the North West Company, we face many of the same types of environmental, social, cultural and technological issues that other corporations do. However, we also have a couple of very unique challenges that highlight the importance for us of having a proper strategy for long term sustainability.

First, a number of the communities in which we do business are directly feeling the effects of climate change, whether through the increased incidence of forest fires, the melting effect of the polar ice cap in the north, or the increased incidence of hurricanes in the Caribbean. We're obviously making adjustments on an operating basis to deal with these changes as they evolve. But it's also important that there be an effective long term global strategy for addressing these climate issues.

While we cannot individually change the course of the globe's climate conditions, if we who are directly affected do not take this matter seriously. Then why should others do so? Second, I've talked at length at the last few annual general meetings of the North West Company about the challenges that the indigenous communities that we operate within face and a call for action both from governments and others in the private sector to start to address their legitimate concerns. But again, if we who operate within these communities are not prepared to address these issues ourselves, why should we expect others to do so.

And so, the board of directors of the North West Company decide this year to endorse management's plan to develop a sustainability roadmap, which sets us on a course to address major issues of long term sustainability for North West. And when you read the report, I think you will see that we've done an awful lot already. But it's also apparent that we have a lot that we need to have a plan to make further improvements in the ways in which we do our business, and we need to hold ourselves accountable for making them happen.

We started on a journey that will last for many years. Our expectation is that every year we will report to shareholders and other stakeholders on our key sustainability and governance issues, and that over time, there will be a -- there will be significant improvements and I invite all shareholders to take the time to look at our roadmap, which is located on our corporate website, and you'll be hearing more about it later on the video and from Edward.

Finally, a few words about our board of directors. North West is a company of diverse business operations in a variety of geographic locations. We recognize that if we're to maintain our local focus, our board needs to be populated with people, who have a bias to understanding not just large global business trends, but also how those trends can affect small communities in different ways.

With this in mind, I'm delighted to welcome Jennefer Nepinak to our Board of Directors. Jennefer is originally from Northern Manitoba and is a member of the Anishinaabe First Nation. She trained as a lawyer, was for a number of years a senior advisor to the President for the Indigenous relations at the Canadian Museum for Human Rights and currently is the Associate Vice President Indigenous engagement at the University of Winnipeg. I believe Jennefer’s perspective on a number of the key community issues that we are addressing on a regular basis will be an invaluable addition to our board.

So with that, -- with that sort of general or specific comments but Jennefer, I'd like to now introduce all of the members of the board of directors who will be standing for re-election this year, and ask -- I'd ask that they stand as their names are called so that you know who to speak to the reception following this meeting, and then hold your flaws to lead.

Brock Bulbuck is from Winnipeg and is the Chief Executive Officer of Boyd Group Income Fund. Deepak Chopra is from Toronto and is the past President and Chief Executive Officer of Canada Post. Unfortunately Frank Coleman, who's from Cornerbrook, Newfoundland and runs one of Canada's last remaining regional food retailers. Coleman who is not able to be here today, he got halfway here and then got sick in Toronto, and is unfortunately not available. Wendy Evans is from Toronto and is a leading Canadian consultant for retail firms of all types. She's the chair of our governance and nominating committee.

Stewart Glendinning is from Ocean Ridge, Florida but he really is from Bentonville Arkansas. And he's the Executive Vice President, Chief Financial Officer of Tyson Foods. Bob Kennedy is from Winnipeg and has had an active career as an entrepreneur especially in retailing and technology. Annalisa King is from Vancouver is the past Senior Vice President Chief Financial Officer of Best Buy Canada.

Vi Konkle is from Fenwick Ontario, is the past President and Chief Executive Officer of The Brick Ltd and she chairs our compensation committee. Jennefer Nepinak who I have already said some words about, Eric Stefanson from Winnipeg who’s well known to many of you. Eric's a chartered account by training and serves as the chair of our audit committee. Victor Tootoo from Iqaluit Nunavut is the Vice President of NVision Insight Group. Victor has an extensive and diverse career in business and consulting throughout northern Canada and is involved with a number of successful local businesses, and has a CGA designation. And you've got to get a load of his bowtie. And after going say a lot of wisdom, it's sealskin bowtie and it look fabulous.

And then of course is myself and Edward Kennedy, our Chief Executive Officer. Thank you all. You may all sit down.

Needless to say, I didn't introduce him with the intention of not recommending them for election. So with those comments, I would now like to move to the formal part of the meeting. And to make the best use of our time today, certain shareholders and proxy holders have been asked to move in second all motions, which are called for in the notice of meeting. As I said earlier, you have an opportunity to take a gift card and go off to Giant Tiger and fill your baskets with some great offers, and in order to encourage you to do that, as we have done in prior years, we've asked folks from the company who are going to be making the motions to go off to a GT and shop, and they'll all be wearing clothing that they purchase there, and they're going to tell us what they got, and how much -- how much they spent and as always, knocks people's socks off, and they realize what kind of quality you get, what kind of style you can get, at such a low price.

So, okay. The first item of business is the presentation of the consolidated financial statements of the North West Company for the year ended January 31, 2019 and the related orders report copy of the financial statements was made available to all shareholders with a notice of meeting.

Shareholders are not asked to take any action regarding the financial statements, but if any shareholder has questions relating to the financial statements, I request that they be asked later in the meeting after Mr King and Mr. Kennedy complete their presentations.

Copies of the annual financial report are placed on the table at the entrance to this meeting for anyone to take if they don't already have one. So, who is making the motion? We don't make motion? I just keep going? Okay. That's not a motion. Okay. I go to too many annual meetings, and there's usually a motion there. Special resolution. Plan an arrangement to amend North West articles and bylaw No. 1.

The next item is to adopt a special resolution to approve a plan of arrangement to effect amendments to North West articles of arrangement relating to the voting rights of North West variable voting shares into North West mandated restated bylaw No. 1. This reading relates to the fact that we now have an airline, and in certain environments, we have to fall in order to comply with government regulation. So, I'm gonna call on Darcie Gault, who's a manager of employee relations service delivery to move the motion.

And Phaedra Propp, who's a mar -- I hope I pronounced your name properly, Phaedra. If I didn't, please correct me -- who's marketing coordinator for ACC and Cull, if you'd please second the motion. Darcie and Phaedra, before you do bring forward the motion, make sure you tell us what you're wearing and how much it cost?

Darcie Gault

Right. Thank you.

Sandy Riley

And whether you buy bread, when you were there as well.

Darcie Gault

I brought milk I bought milk and some cream for my coffee this morning, but I am wearing this lovely Lily Morgan outfit that I purchased at the GT boutique. I spent a total of $49.72 and I also bought a skirt to go with it.

Sandy Riley

Wonderful. Great.

Darcie Gault

I moved to adopt a special resolution, the full text in which is attached to the management information circular. With or without amendments to approve a plan of arrangement to effect amendments to North West's articles of arrangement relating to the voting rights of North West's variable voting shares and to North West's amended and restated byelaw number one.

Sandy Riley

Thank you, Darcie. And it's a tough job to be asked not just to read all that stuff but to go out and do this. Well done. Okay. Phaedra, did I pronounce it properly?

Phaedra Propp

It's Phaedra.

Sandy Riley

Phaedra. Won’t make that mistake, again.

Phaedra Propp

I'm also wearing a Lily Morgan. My blouse was $14. I got these pants were $7 dollars, regularly $25, and my shoes for $12. And I second the motion.

Sandy Riley

Okay. Thank you very much Phaedra. Okay, based on the proxies received in favor of management, a ballot vote was conducted on this matter at least 99% of the votes eligible cast, its meaning would be voted in favor of the plan of arrangement to effect amendments to North West's articles of arrangement relating to the voting rights of North West variable voting shares and to North West amended and restated bylaw number one.

This resolution is required to be passed by two-thirds of the votes cast at this meeting. And I propose to take this vote by a show of hands unless a registered shareholder or proxy holder demands a ballot. Only registered shareholders and proxy holders, of course, will put their hands up. Okay. All those in favor of the resolution, please so signify by raising your hand. Contrary, if any. Okay. I declare the motion stayed to carry. Okay. The next item of business is the election of directors of the North West Company for the ensuing year.

Now this is the part that gets a bit long, I’ve been trying to shorten it up, but I just can't seem to persuade Amanda that we could do it in one resolution, so we're going to have to do a series of resolutions. Apart from the directors listed in the management information circular, and proxy statement for this meeting, no additional individuals have been nominated for election.

I'll now entertain a motion with respect to the election of directors Angie Berry, Employee Relations Specialist has been asked to place before the names of those persons proposed to be nominated. And Miracle Ehiremen -- I'm going to ask you -- Miracle, you're going to come and tell me exactly how I say your last name -- assistant category meats and frozen foods has been asked to second the motion. And don't forget, we want to hear what you purchased and what else? I want your class.

Angela Berry

So I was at the Stafford Giant Tiger location. I got this blouse for $16, my skirt for $14, and my most comfortable shoes for $10. So I spent $40 and I had $10 left to bring salty snacks back to our HR Group to keep us energized.

Sandy Riley

Good for you.

Angela Berry

I move that each of the persons whose names are listed under the heading, election of directors in the management information circular, who are Sandy Riley, Brock Bulbuck, Deepak Chopra, Frank Coleman, Wendy Evans, Stewart Glendinning, Edward Kennedy, Robert Kennedy, Annalisa King, Violet Konkle, Jennefer Nepinak, Eric Stefanson, Victor Totoo be elected as directors of the North West Company Inc. for the ensuing year or until their successors are appointed.

Sandy Riley

Thank you Angie. Okay, Miracle.

Miracle Ehiremen

Hi. It's pronounced, Ehiremen.

Sandy Riley

Ehiremen. Got it. Thank you.

Miracle Ehiremen

So I went to GT on Fermor [ph] and I ended up buying four outfits, and two earrings, and a necklace. And I spent $63 with taxes and everything. So this is $7. This beautiful skirt is $5 and I managed to put together three more outfits. I saw this really nice bling and I'm like you're coming home with me. And so overall, it was an amazing experience and I second the motion.

Sandy Riley

We're all retailers in this company, selling stuff. Based on the proxies received in favor of management, if a ballot vote was conducted on this matter, at least 89% of the votes will be cast at this meeting would you voted in favor of each of the directors named. This resolution is required to be passed by majority, the votes cast at this meeting and therefore I propose to take this vote by a show of hands unless a registered shareholder or a proxy holder demands a ballot. Only registered shareholders and each proxy holder is entitled to vote at this meeting today. I'm going to state the name of each nominee, and ask for a vote, or withheld on the election of that nominee following the statement of their name.

Okay. Well, it's different before than normal years. Sandy Riley. All in favor? Withheld? Carry. Brock Bulbuck. Those in favor? Withheld? Deepak Chopra. Favor? Withheld? Frank Coleman. Those in favor? Withheld? Wendy Evans. Okay. Favor? Yes. Anybody withholding? Stewart Glendinning. Those in favor, withheld. I’ll go slowly and see if you can put your hands up too early. Edward Kennedy. Make sure you put your hands on this one, those in favor, withheld. I was a little late. I’m not to put it up. And I was in favor. Bob Kennedy. In favor? Withheld? Annalisa King. In favor? Withheld? Violet Konkle; in favor. Withheld, Jennefer Nepinak; in favor. Withheld. Eric Steffensen; in favor? Withheld, Victor Tootoo; in favor, put your hands up Victor for yourself. Withheld? Okay. I declare the motion carried as stated.

Okay. We'll now proceed with the appointed auditors and the authorization of the Board of Directors to fix their remuneration. Beverly Winn who’s an Executive Assistant to Executive Vice President -- to our Executive Vice President and Chief Development Officer, Gary Merasty. May I have a motion to appoint the orders of the North West Company. And Curtis Kuiper, again I pronounce it properly. Regional Support Manager of Giant Tiger; would you please second the motion and oh, boy Curtis, are those shorts you got? Pretty good. Okay. Beverly. Let's hear about you.

Beverly Winn

Thank you. I was tasked to do this shopping job and I thought, how much do I get to spend. So I went to visit my Giant Tiger which is the Ellice Avenue location and I started off with a women's blouse for $18 or $16 the tropical women's blouse and my women's seasonal Capri is $18. So then I thought, well, I still have a little bit more money left. I went looking around getting little hungry. I bought a delicious pizza for $5.69 and I did get the BV Homestyle loafs of bread to them. So I was still had $2.31 left on my card and saw a nice package of sour candies. I grabbed two of those and I left with $0.05. So I think under budget.

Sandy Riley


Beverly Winn

Thank you. I moved that PricewaterhouseCoopers LLP be appointed as the auditors of the Northwest Company Inc to hold office until the next annual meeting of shareholders or until their successor is duly appointed and that the Board of Directors be authorized to fix their remuneration.

Sandy Riley

Thank you very much Beverly. Curtis, your shorts look fabulous.

Curtis Keber

I was in Swan River yesterday. So I picked up an outfit. Even though my wife would say I don't have the legs to pull this off. I went with the sale away collection from Mountain Ridge in menswear. The entire outfit was $51. The super soft airlock sandals were $19, the cargo shorts were 20 and the striped polo was $12. And I second the motion.

Sandy Riley

Thank you, Curtis. Based on the proxies received in favor of management the ballot vote was conducted on this matter. Looks like we have a catwalk here now, isn’t it. It's fantastic. At least 89% of the votes eligible to be cast at this meeting would be voted in favor of the reappointment of PricewaterhouseCoopers LLP as the Northwest Company's auditors. This resolution is required to be passed by majority of the votes cast at this meeting and therefore I propose to take this vote by a show of hands. Unless a registered shareholder or proxy holder demands a ballot. And of course only registered shareholders and proxy holders are entitled to vote. So, all those in favor of the resolution please signify by raising your hand. Anybody opposed. I declare the motion is stated carried.

We’ll now consider a non-binding advisory vote on the approach for executive compensation which was outlined in the 2019 management information circular that was previously sent to all shareholders. We should have more these resolutions that we'll see more and more people coming up here with more and more clothes which is really what's great. But Lois Kosowan who’s and I may have done it again. Employee Relations Specialist may have a motion regarding the compensation of Northwest executives and John Clawson, Marketing Manager for ACC and CUL, would you please second that motion and let's hear what you got.

Lois Kosowan

Okay. So I also shocked lots. I went to the Regent Giant Tiger and I bought the same skirt Miracle has. So we have to message if we’re in same skirt to work. And a blouse and this lovely purse and that was $50.85. But then I went with Angie to Stafford,, and then I bought three other outfits. So when I dug through everything I chose this one. So I paid $16 for my skirt and it stretches so we can do part workouts in it and everything squats and jumping jacks. And then the blouse is a Lily Morgan blouse, skirt blouse was $16 -- $14, so $30, and then the purse it's got multiple pockets. I lost my bus passing here somewhere today, $20 and it's a classic additions. So I did well.

I moved in an on advisory basis and not to diminish the roles and responsibilities of the board that the shareholders accept the approach to executive compensation disclosed in the Northwest Company’s 2019 management information circular delivered in advance of this 2019 Annual General and Special Meeting of the Shareholders.

Sandy Riley

Thank you, Lois. And you know I think if you if you like the Lily Morgan I think you better get out there, because it seems to be a popular item with the ladies that come forward. So, okay, John.

John Clausen

So from the floor up, I got some boat shoes that were from the Mountain Ridge line for $17 and the pants I got were $25 from the Rivet61 line. I went a little over budgets because I also bought a shovel. And I threw on my own blazer for good luck. But I'm also excited to show you this T-shirt I'm wearing. This T-shirt is from a new supplier to the Northwest Company called Neechie Gear. Neechie is an Ojibwe word meaning partner or friend. We are excited to partner with Kendal Netmaker from Sweetgrass First Nation, Saskatchewan and his company with inspiration from his childhood and support from his community Kendal set out to create a company that would give back.

Today Neechie Gear is committed to giving a portion of its proceeds to help underprivileged kids play sports and we're thrilled to support indigenous enterprises like Neechie Gear. It'll be available in our Northern stores beginning in August. And I second the motion.

Sandy Riley

Thank you, John. Based on the proxies received in favor of management, if a ballot vote was conducted on this matter at least 86% of the votes eligible cast at this meeting would be voted in favor of the approach executive compensation. This resolution is required to be passed by a majority of the votes cast at the meeting and therefore I propose to take this vote again by a show of hands unless a registered shareholder or proxy holder demands a ballet. All those in favor? Opposed. Carried. I declare that the motion that state is passed. And this is I would reiterate is a non-binding advisory vote only. The board will take into consideration results of the vote when determining the compensation of the named executive officers.

So ladies and gentlemen, we have one more group of movers and seconders because we come to the end of the formal part of the meeting. There's no further business and bearing in mind that we will have a question and answer session after Edward and John is spoken. I'm going to ask Kenneth Baxter, an Associate Category Manager for meats, for a motion to terminate the formal part of the meeting, and Heather Eselmont who's an Associate Category Manager and produced a second the motion. Heather and Hannah, starting with Hannah, you start first.

Hannah Baxter

So, I bought this outfit at my local Giant Tiger on Pembina. All total the entire outfit was $50.90. So for playing by Price is Right Rules, I went over. So the blouse is Lily Morgan and it was $14. The skirt was $16 and I got some nice slip on for $8. They do not fall off when I run which is great. And I got some hearings for $7. And I move that the meeting be terminated.

Sandy Riley

Thank you. Thank you very much, Henna. Heather?

Heather Eselmont

Okay. So I got this beautiful outfit from Giant Tiger on Fermor. This skirt is Lily Morgan was $16. This blouse was $20 at Simon Chang, the beautiful sleeves, I really like that. That's a total of $36. I had some money left over, so I bought some milk because I was out of milk. Some blueberries because that's my category and some double bubble gum balls because they are on multi buy and gum is like my favorite thing. And I second the motion.

Sandy Riley

Thank you. Now, before we terminate the meeting moved to Edward and John, I just want to say one more time to all of the people who agreed to come up and describe their shopping experience. And what a wonderful job they all did. They look fabulous. And I'm really proud of all of them. So congratulations. So with that I declare the motion carried – no, pardon me, all in favor of the termination of this meeting. Anybody opposed. Carried. So I declare the motion carried in the Annual General and Special Meeting shareholders of the Northwest Company is terminated. The formal part. On behalf of managing the Board of Directors I'd like to thank you all for attending today. And we will be having a lunch shortly. But before that you have to spend some time and listen to what we've been up to. And if you have any questions feel free to ask them at the end. I'll be up to moderate that discussion.

Those of you on the webcast are welcome to submit any questions at anytime during the presentations by typing in the question in the box displayed on the screen and clicking the submit button. Okay. We'll start with John King.

John King

Thank you, Sandy and good morning. This morning I will comment on the financial highlights and key performance factors from 2018 and review our 2019 first quarter results. In 2018 we made considerable progress in our Pure Retail initiatives to eliminate low-value work and streamline processes in our stores. This enabled our store associates to invest more time in merchandising and serving our customers and contributed to the increase in sales for the year.

Our retail businesses in Northern Canada and Alaska had delivered acceptable sales and earnings in spite of some disruptions in key markets. In Northern Canada we were impacted by three store fires which destroyed one store and significantly damaged two of our largest stores in Happy Valley [Indiscernible]. In Alaska we were negatively impacted by a community decision to eliminate liquor sales in our largest market.

Insurance had both the positive and negative affect on earnings. On the upside, the settlement of hurricane insurance claims resulted in earnings gains. On the downside though the hurricane and fire-related losses combined with poor global insurance market conditions resulted in our insurance premiums increasing by more than $3 million.

After considering all of these factors the company's financial results in 2018 were satisfactory on a number of measures. Consolidated sales increased 1.4% to $2 billion, our 19th consecutive year of top line growth. Canadian sales were up 3.9% led by same store sales gains in northern Canada, three new Giant Tiger stores and a full year of operations at North Star Air.

Our international operations delivered a 4.2% increase in same store sales which benefited from a construction driven economy and tourism in the Caribbean and improving economic conditions in Alaska. However, these factors were more than offset by the hurricane related store closures which negatively impacted sales by approximately $46 million.

Consolidated EBITDA increased 11.6% to $89 million primarily due to a $17 million dollar hurricane related insurance gain this year and the impact of $6.3 million in acquisition costs last year in our international operations. These factors were partially offset by mark-to-market adjustments on share-based compensation, higher insurance costs and the loss of the liquor business in Alaska.

In addition to the sales, expense and insurance gain factors I just referred to, net earnings was also impacted by higher amortization and interest expense, and a $5.8 million increase in income tax last year related to the implementation of U.S. tax reform. The net impact of these factors resulted in a 30% increase in net earnings to $90.6 million.

In addition to these measures of our operating results, I would like to briefly highlight some key financial performance measures related to capital investment, financial capacity and shareholder returns. The strategies at Northwest are based on a balanced approach of investing to sustain and grow the business while providing our shareholders with increasing dividend payments and superior returns over the long term.

Over the past five years we've invested $483 million in the business. These investments strike the right balance between taking advantage of attractive growth opportunities through acquisitions and new stores and investing in our existing business to deliver our earnings and cash flow growth. The return on net assets as shown on the graph and has averaged 18.3% over the past five years, and just under 19% over the past 10 years. This highlights the company's track record of delivering an attractive return on investment over the long term.

Making the capital investments I just referred to requires financial capacity. This graph shows that although the company's debt has increased as a result of the acquisitions and capital investments the ratio of debt to EBITDA is at a very manageable level of 1.9 and the debt to equity ratio has remained at less than one. Northwest cash flow relatively low leverage and available credit provide the financial capacity to support the business, take advantage of growth opportunities and make dividend payments to shareholders.

Our shareholder value offer reflects a total return approach to investment performance with an equal emphasis on share price growth and increasing dividend payments. Total returns to shareholders over the past five years were 8.9% on a compound basis driven by a 23% increase in the share price and the benefit of dividend reinvestment. Dividend payments have resulted in an average yield of 4.4% and represent approximately half of total returns to shareholders. From a longer term perspective, $10,000 invested 10 years ago would be worth over $32,000 today which is a 12.5% compound annual return.

I will now provide an overview of the first quarter results that were approved by our Board of Directors earlier today. Before I review the financial performance I want to provide some context on the quarter, as there were a number of operating and non-operating factors that impacted our results. On the upside we settled our hurricane related insurance claim which resulted in a $10.7 million pre-tax gain.

From an operating perspective our stores in Northern Canada had a strong quarter with sales and earnings gains and our airline business delivered improved earnings in both EBIT and EBITDA through higher utilization of our ATR aircraft. In our international operations, our RTW business and the British Virgin Islands continue to build on the momentum from 2018 generating solid topline and bottomline growth.

On the downside, our insurance costs were up $1.4 million in the quarter and are expected to be up over $4 million for the year. In our international operations we also incurred $1.2 million in costs relating to the pending closure of our support office in Bellevue Washington and the cost of this restructuring is expected to be approximately $4 million.

The office restructuring costs are one time in nature and are expected to drive future benefits from having our support offices located in Anchorage Alaska and South Florida to be closer to the markets we serve. However the insurance expense is ongoing. To help manage insurance costs and reduce the risk of future losses we are upgrading our facilities in the Caribbean to increase resiliency to a Category five hurricane level, as well as completing fire prevention audits and upgrading our facilities in Northern Canada to reduce the risk of fire related losses.

Finally, the results in the first quarter were also negatively impacted by poor results in our Giant Tiger Stores related to lower sales, margin pressures in food and markdowns on seasonal merchandise. Edward will comment on the actions that we're taking to achieve the earnings we expect from this business in his remarks. So with that backdrop I will now review the first quarter financial results.

First quarter sales increased 6% to $495 million driven by strong sales gains in our Caribbean stores and a 4% same-store sales increase in Northern Canada. Our international sales at $192 million are still below 2017 levels due to the hurricane related closure of our store in St. Thomas U.S. V.I. which is our largest Cost-U-Less store. We are rebuilding this store and expect to open in the fourth quarter of this year.

EBITDA increased 25% to $58 million due to the impact of the insurance gain in our international operations and share-based compensation costs in Canada. Excluding these non operating items, adjusted EBITDA was down 1.2% compared to last year largely due to our Giant Tiger store performance, higher insurance costs and the office restructuring charge in our international operations.

The net impact of all of these factors resulted in a 42% increase in net earnings to $26 million. Excluding the insurance gain and the share-based compensation costs adjusted net earnings decreased $2.3 million due to the operating factors I previously mentioned and the impact of higher amortization and interest costs.

Board of Directors has declared a quarterly dividend of $0.33 per share which is consistent with the company's current dividend and represents an annualized yield of approximately 4.4% based upon the current share price. Management and the board will continue to assess future dividend increases based on the earnings and cash flow growth.

Despite the headwinds in our Giant Tiger business, 2019 is off to a good start, supported by improving economic conditions in Northern Canada and Alaska and tourism and construction activity in the Caribbean. We are pleased with the progress we have made on our key priorities and we're confident this work will lay the foundation for earnings and cash flow growth.

Before Edward Kennedy presents his remarks, we'd like to show a video that provides context with key work priorities that will help deliver the earnings and cash flow growth I referred to. Thank you.

[Video Presentation]

Edward Kennedy

Good morning and a special welcome to all the new employees. We have a great turnout today. I know there's several dozen first time employees who after John's pitch on the returns, will become shareholders soon because we also have hundreds of employees shareholders, many have been shareholders for decades.

So I’m just thinking Sandy, we're going to have to give you 50 bucks next year to buy some Giant Tiger stuff. You've really fallen in love with that part of the meeting.

Sandy Riley

They don't have my size.

Edward Kennedy

If you'd said, well. You're doing a lot of cycling. You're getting smaller. He also has great calves. We saw them in BVI. So we'll get him in the shorts. I’d just like to call out a few people that are here because they come so far. And there's also some important transitions that they represent.

A guy more [Indiscernible] because he's come so far and he's doing such a great job. Guy if you could stand up for a second. He's my doppelganger. When he's walking around like, he says he's Edward. So, guy’s business is -- he's the Managing Director of our British Virgin Islands retail wholesale distribution arm out of Tortola in the BVI. And he's running sales increases that are double digit and have been for almost 18 months now.

Post hurricane guy, pre hurricane and then through the hurricane was there. It's a remarkable story. You could write a book about it. And the survival of the island and the rejuvenation or revitalization of it and guy has really stood tall on behalf of all Northwest stakeholders and investors included.

Next I want to slide down a bit to Rex Wilhelm. Rex, if you could stand for a second. So, Rex. Rex is the longest and unfortunate the last continuing executive because he's retiring today officially as Vice Chairman of Alaska Commercial Company. Rex started in the early 80s with Alaska Commercial Company before Northwest acquired it. He started in the stores. Came with a master's degree from the lower 48 and was looking for a place probably to make some money and a sense of adventure and here he built an entire career serving the rural peoples of Alaska.

He moved through the organization after we acquired the business in 1991. Rex became shortly an Executive, then became President, then became President of our entire international division and moved five years ago to a Vice Chairman role of the Alaska Group and has been a constant source of advice and working on projects in the Alaska market that he knows so well is now a lifetime Alaskan. So thanking Rex for your service. Next to Rex is Bob Cain. Bob could you stand. Bob is a very eloquent man. And I'm not going to give him the mike or you could stay -- it's a long enough meeting.

But last evening we had, we heard some very wise words from Bob at our dinner and the reason he could have asked him to speak any time. But he got the mike because he's retiring. And Bob's the last connection Cost-U-Less pre and post acquisition. So I'm going to register. So him and Rex share those things in common in terms of our connection are our history to our present. We've owned Cost-U-Less for 12 years. Bob had worked six years I think prior with Cost-U-Less and has been a real constant for us and holding the glue on when you -- I'll talk a bit about that later on acquisitions with for example the airline, you integrate and optimize, it sounds like a lot of buzzwords but it's about people working together and they come from different backgrounds.

Bob has been there for us and with us to help those connections work. On top of that he's a consummate logistics professional. He knows containerized shipping better than anyone and we've been very privileged to have him on our team and we're going miss him. Thank you very much, Bob. So 25 years ago I was racing out the door to go to a board meeting of North West Company and then the annual meeting that follows afterwards and I was running late, in a rush, playing with our oldest daughter, Grace. She was five, now she's 30, so that’s 25 years and I had to go, I had to move along and I wasn't making a lot of progress because I kept getting dragged into just playing.

Anyway, so I became very officious, which I can do sometimes and I said, Grace I have to go, I have my board meeting. And that didn't really carry the day. She just looked at me and said, Dad why are you going to get bored? And you can tell from the video the last thing we do at North West is get bored. And that's what I want to talk about today is preventing the opposite that we're running off in so many different directions that it's frantic and frenetic, it's not. But you can see incense in this room today are lot of employee, employee shareholders and there's a lot of key initiatives going on.

So, one of my roles with the board's oversight is to channel energy and to make right choices and where our focus needs to be going forward. I'm also going to talk at the end about the sustainability roadmap that Sandy introduced and Gary talked so well about. So we always start with our purpose and the vision to be the best at serving people who live in hard to reach communities and then our mission to help the people we serve for their better lives.

Next we have financial targets. We want to grow our core business EBIT by 5% a year. We want to invest in that core business at a rate about equal to our depreciation which is $65 million now. John showed a higher rate of annual CapEx than we've had catch up with our top markets program. And that got sort of super turbo charged by insurance driven CapEx. So, on the one hand we're very happy that we've invested in these markets and it's completely coincidental, if any insurance company is here, that those were also top market stores that were damaged or destroyed. But we've covered a lot of bases going forward. So foundationally we feel very confident that we can keep the efficient capital investment out of depreciation level.

And third as you see we want to generate free cash flow to pay a growing dividend and to source and fund new growth ideas that I want to talk about. We also have guiding principles on what fits with our business. We want to focus on everyday staple products and services that's really literally are our bread and butter. Our core capabilities that I want to talk about need to bring a significant advantage to anything that's extending from our core such that those non core businesses become part of our core within a medium timeframe. And third all of our businesses have to meet a higher stability, lower risk benchmark that was set by the standard of our Alaska and our Northern Canada, Northern banner stores.

These two groups of stores are really at the core of Northwest and have been for the past 30 years, actually 32 years in Canada and 28 in Alaska, not counting of course the predecessor trading in merchant companies that that own those businesses tracing back several 100 years. Besides solid financial returns, AC and Northern give us three core capabilities; on the ground operations skills, superior logistics and indigenous relationships at both the community and at the customer level, this is what we know and do best. It's also that we're constantly improving on AC and the priorities that were spoken on in the video.

Over time, we've expanded from this and we've added almost a $1 billion in revenue and it's grown up all around our northern core business. A major part of this growth has been as shown here. Thirty two NorthMart Quick Stops, and those on the one hand extend our range of products or they condense it in a convenience sense serving Northern markets. We have 45 Giant Tiger stores that enable us to give us scale in our food business and we have 19 Cost-U-Less and Riteway stores in the Pacific and the Caribbean that check off most of our core capability boxes.

So I’m going to stop here and talk about Giant Tiger because it's been 18 years since we opened our first store in Thompson Manitoba and that store by the way is still the largest store in Giant Tiger across Canada. Since that time we've never had a negative performance trend or a quarter for that matter like we have right now where our giant tiger sales were down 4% on a comp basis and our the rest of our business all of others stores were up 5%. That's an unacceptable divergence. We certainly want to keep the growth on the other side, but we have to do a better job addressing Giant Tiger.

Our Giant Tiger People are working. They never work harder when times are difficult like this. That's what tends to happen. So it's not for a lack of effort. What we need now is to do a better job outside of the stores. We need more value from our relationship with our master franchise and that goes both ways. Giant Tiger Stores Ltd. We also need to set a clear direction on where Giant Tiger really fits in terms of our core business and how we optimize it going forward.

John said I was going to talk more about it. That's it for now. This is going to be a situation that we fix. It's going to take some time and we're going to report on it regularly as a priority. As important as new formats are the in-store brands and products that we bring to our stores and customers these include over 25 Tim Hortons outlets, 156 WE Financial counters, over 300 ATMs, all part of our financial service offer, 64 Canada Post outlets and 18 pharmacies. Each one enhances, as you can imagine the one stop convenience of our stores just like it would for you shopping here and went to pick out where you live. But there's also a real important difference. The reason these are in our stores is because we know how to make them not just valued but viable. And it's that simple. It's actually that complicated to master. And every time we see a fit between our core capabilities and an underserved or unmet market need it, it represents pure retail opportunity for us whether inside our store or outside the four walls. And I want to take a few minutes to talk about some areas outside the four walls the store where we're growing today.

The biggest one is in transportation. I referred to the North Star where John did at the beginning. We've also -- here we apply our freight volumes, our relationship skills. We've gone into both sea and air cargo this way. We started back actually in 1993 with knees that's northeastern Arctic shipping. It's a joint venture we have with Logistic Corp. That was soon after join with Marketing Corp and with development group from Nunavut and Northern Quebec.

As a brief update next week and today here I see Lyle Sherrier [ph] our Chairman who's former CFO of Northwest Company. We're going to be launching two new vessels into the fleet and really getting and be just in time for an extremely busy Arctic shipping season which is indicative of extremely robust economic growth at Nunavut. The compound growth rate forecasted is the highest in Canada right through to 2025 depending what you read between 5% and 8% driven largely by infrastructure investment both natural resources and government.

So, we're well-positioned there with the shipping, the cargo airline and of course with our retail stores. We're coming up to the two year anniversary of North Star Air's acquisition and after some turbulence and I'm sorry that's the right metaphor, NSA is growing into Northern Canada's most innovative and largest dedicated cargo carrier. Both John and Frank Coleman in the video mentioned that we're hitting our financial and operating targets, and that's great. And I guess if there's a lesson learned from this is that, even when we see a space that looks like a great fit. There still is that time to learn, adjust, to integrate and then to optimize.

Our next growth channel. Our next growth area, our new channels. Today, these are smaller digital store storefronts, some of them that are just recently been launched. Others have been around for some time. We're shipping using any comp platform direct to retail and business customers in Northern Canada, Alaska and the Caribbean. We're offering an extended range, lower prices and for the market segments that really want to shop this way, because there are different types of customer needs and preferences when it comes to online. The online convenience.

Driving more growth and profit from this is, certainly lies ahead of us. But so far, the greatest potential has been to refine and optimize our on the ground bricks and mortar presence. Where e-commerce will get more interest is, when we can really lean into the core capabilities that I have described. Later this year, we plan to test some stores in Northern Canada on a real leaned out, clean sheet, pure retail approach. We want to drive down prices, encourage more local shopping, move slower moving items to our online platform and leverage in our in-store pickup. Are we financial to finance the purchase and of course our NSA Advantage.

Finally, we're looking at growth in new complementary businesses. It should be -- it is a blank sheet. There are some like North West Telepharmacy and I've talked about this at other annual meetings. It's drawn from one Telepharmacy operation to serving over 60 with a 100 telepharmacists that work with us on our team. But above and beyond that, we are looking today at how we can stretch and extend naturally our core capabilities. What we actually do and what we actually find will depend. I mean, we're at a stage of investigation and will also depend on how our core business is doing in terms of performance and potential.

Like the airline investment, I talked about that for at least a couple of years as a potential before it actually happened. So I can't tell you when, except that we're actively looking and learning. Now I'd like to conclude by talking about some of the elements in the sustainability roadmap that Sandy and Gary touched on.

As Gary noted, North West may already be the definition of historical sustainability when you consider the uninterrupted commercial presence of our store with [Indiscernible] and 1668. It's really hard to get your head around that when you consider the hundreds of retailers, thousands that have come and gone since then. This year alone, the United States the forecast is that 36 retail chains and 6000 stores will close their doors for good. So if there was ever any doubt, customer loyalty and retail today is only the absence of a better alternative.

So you need a sustainability roadmap for that reason alone to keep us adapting to change and the disruptions that have been fatal to so many retailers. As well, a sustainable roadmap for us leading to our first report next spring is about transparency, on our pillars of customer, community environment in our employee practices. We need to be better at explaining what we do to all of our stakeholder constituencies. Mistakes we've made and learnt from, and measures and targets going forward. Here are a few examples within each pillar that we see today.

An important community responsibility noted by Gary and Sandy is a thoughtful, deeper response to the calls to action established by the Canadian Truth and Reconciliation Commission. Today we believe, we authentically practice many of the TRC calls for economic reconciliation, including over 50 business agreements and the latest with niche wear and adventures with indigenous entities across Canada and the United States.

Going forward, our emphasis will be on greater understanding for differences, aspirations and rights. We want to renew relationships in a truthful partnership on a collective Indigenous community North West strength basis, not one above the other, but side by side bringing the best of what we know and can to the table to create something better for both.

Aligned to this closely is our advocacy role. You're going to hear more from North West in the future, speaking out on issues that affect the communities that we serve. Especially where we have firsthand on the ground insights to offer and where local voices are trying to be heard, but can be amplified by us.

Our next pillar is quality of life for our customers, and it ties right back to our mission and hold us accountable. And I'd say here, one of the elephants in the room for us are that the top thing we hear about is prices. And I think more accountability and transparency on how we can reduce prices, why we can't sometimes it's going to be part of that agenda.

Related to that at Nutrition North, it's a food subsidy program that North West advocated for, and it falls clearly on this pillar. We've shown clearly and factually maybe not, enough, not effectively enough, because it still gets highly politicized that healthy food purchases have increased significantly as a direct result of this program. Dollar for dollar, it's been highly effective and very transparent.

Pillar 3 is respect for our environment. This approach and Sandy is starting to talk about it affects an area that is very complex and with competing values, where we do business, the natural environment is especially fragile and exposure to global climate change is high. Whether hurricane intensity in the Caribbean or permafrost melting in the far north, we and our communities are living this right now. Resiliency is improving. And resiliency will happen. Well we've got to be careful on the price, because the price is expensive, out of the gates, relative to low economic capacity for the average small community that we serve in region. There's an imbalance there.

So, regulations imposed on remote regions, without weighing these factors can often unjustly raise already high living costs. With these circumstances and considerations in mind, our commitment is to find tailored, enterprising ways to minimize our footprint, and be a partner in broader solutions that work effectively, and equitably.

Our record indicates that we can make a difference as the stakes get higher. We're working now to transition from diesel, which is a big dependency as most of us know whether you're on an island economy or in the far north. Diesel generator power to solar power, wherever we can, our cost of the stores are going that way. And I'm pleased to say that, we've signed the first agreement that we're aware of to install solar panels in a retail store in Northern Canada in Inuvik Northwest territories.

In construction, our techniques and standards mitigate hurricane and permafrost risk as well as minimizing powered energy use while maximizing natural heats light, sources and cold. And I hardly a few months goes by, if someone suggests again, why can't we just hang the freezer outside and let us use the 50 below weather instead of using 70 kilowatt an hour energy to do the same thing. Why not?

In plastics, we signed on 77 communities to limit or reduce plastic bag usage. And since 2001 we've reinvested every cent of plastic bags we've collected. A total of $2.5 million all going back to locally prioritized and locally led sustainability programs.

Looking ahead, we expect all these environmental areas and more to accelerate within our existing business footprint and as possible new venture opportunities that linked to our capabilities. Our fourth, last and not least pillar is our employees. We recognize that great work starts with the roles in the work environment that we create. We take this very seriously as Alex highlighted in the video on his comments regarding our key store roles.

Across over 8000 associates, we encourage open dialogue and a healthy balance between a focus on task and people. Inclusiveness and work flexibility our strengths at North West and I’ll mention the norm – our nominator with no snow socks. That's a normal occurrence that works for him, the lots of flexibility. But we can be better if that store worked for us. Not that they don't need to wear socks, but there's more serious things going on in our stores. And in our sustainability report, going forward we're going to update on real important priorities this year, including retention, effective career planning and the the wage and compensation levels we pay in our stores.

At North West, we have several hundred associates with more than 20 years service, and each month I write many recognition letters celebrating anniversary milestones. I try my best to personalize them, but in my head, I've got a rough template that starts with a thank you for caring service to the community and the customers who are their friends and neighbors that they've spent these dozens of years serving and working with. I thank them for their wisdom, share that they've shared with their co-workers who have come and gone perhaps or being with them through that time and then at the end, I thank them for helping us remain a successful enterprise. I think writing these letters, reinforces for me every day, and should be a reassurance to all of our investors, including the hearts of employee’s shareholders that are strong, a sustainability pillar is what it should be. It's the ability and the dedication of our people. Thank you.

Sandy Riley

Well thank you, Edward. We'll now entertain questions from our shareholders. We have a microphone here and a microphone over there. So if you have a question, please come forward identify yourself confirm that you're a shareholder and we'll do our best to answer the question.

To do this thing I'm going to count down. Doesn't look like there are any other -- off the. No, no questions from the folks who are listening online. Okay, everyone's hungry. I want to thank everybody for attending this annual meeting. We look forward to seeing you all again next year. Please join us outside for lunch and refreshments and of those there's an announcement as well if you want to come see that. Thank you all.

Question-and-Answer Session

End of Q&A

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