EVENT: TIM HORTONS INC. ANNUAL SHAREHOLDERS MEETING

Transcription

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EVENT:
TIME:
LENGTH:
DATE:
TIM HORTONS INC.
ANNUAL SHAREHOLDERS MEETING
18H00 E.T.
APPROXIMATELY 63 MINUTES
MAY 14, 2010
RECORDED VOICE: Welcome to Tim Hortons Annual Meeting of
Shareholders.
Please welcome Tim Hortons’ Executive Chairman, Mr.
Paul House.
PAUL HOUSE (Executive Chairman, Tim Hortons Inc.): Thank you.
Good morning, and welcome to the Tim Hortons Annual Meeting of
Shareholders. It’s great to see so many familiar faces, and we look back
and report on the—as we look back and report on the past year, and as we
also look ahead to the year in front of us.
We are pleased to once again host our annual meeting at Ryerson’s
University School of Hospitality Management. This school plays a unique
role in the food service industry and we are delighted to be a supporter of
its work. We have such a strong presence and relationship with colleges
and universities across Canada, and increasingly in the United States, so
this is a very fitting venue for our annual shareholders meeting.
These past several months have been turbulent times and I am
pleased to report that, once again, your Company has demonstrated the
strength of our brand in tough times by growing our business. Now before
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we get going into the meeting content for today, I would like to
acknowledge several individuals who are here with us today. I will start
with my colleagues on our Board of Directors. If you would please stand
as I call your name: The Honourable Frank Iacobucci, who serves as our
Lead Director, Shan Atkins, Michael Endres, Moya Greene, John Lederer,
David Lees, Ron Osborne, Wayne Sales, Cathy Williams, and our
President and CEO, Don Schroeder.
I am proud to work with such a distinguished and hardworking group
as your Board of Directors. Individually, they have wide-ranging skills,
diverse perspectives and tremendous business experience. Collectively,
they work incredibly well together and add value to the Corporation and
our shareholders in immeasurable ways.
I would also like to acknowledge Board member Craig Miller, who is
not here with us today, for his service to our great Company. As indicated
in our management proxy circular, the Corporation and Mr. Miller agreed
that he would not stand for re-election to the Corporation’s Board as a
result of his decision to enter the race for the United States Congress. We
appreciate Mr. Miller’s service on the Board for the prior three years, and
we extend our best wishes to him.
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And I would also like to extend a special welcome to our Franchise
Advisory Board members who have joined us here today. Our restaurant
owners represent the face of Tim Hortons to our customer every day and
they are very, very special people.
Our Franchise Advisory Board
members play an important role and I’m delighted that several of them
have joined us today. So, if you will also stand to be recognized as your
name is called.
From Ontario, Mike Rail (phon), Mark Wafer (phon),
Graham Oliver (phon), Drew McLennan (phon) and Aileen Murphy (phon);
from Western Canada, Al Myers (phon), Scott Elliott (phon); from Quebec,
Mark Angelini (phon); and from Atlantic Canada, Fred Faulkner (phon);
and from the United States, Ray Miranda (phon).
Now let me introduce representatives from the Corporation here
today. Again, please stand as I call your name. Don Schroeder, President
and Chief Executive Officer; Cynthia Devine is our Chief Financial Officer;
Bill Moir is our Chief Brand and Marketing Officer; Roland Walton is our
Chief Operations Officer for Canada; David Clanachan is our Chief
Operations Officer for the United States and International Business; Steve
Johnston is our Senior Vice President of Development; Brigid Pelino is our
Senior Vice President of Human Resources; John Hemeon is our
Executive Vice President of Supply Chain; Scott Toop is our Executive
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Vice President and General Counsel; and Jill Aebker is our Deputy
General Counsel and Corporate Secretary; and Scott Bonikowsky is our
Vice President of Investor Relations.
Also here this morning… Thank you, gentlemen, and ladies. Also
here
this
morning,
representing
our
external
auditors,
PricewaterhouseCoopers, is Gino Scapillati. The Directors have appointed
Computershare as the Inspector of Elections for this meeting, and Lara
Donaldson, representing Computershare, is at the Inspector of Elections
table in the lobby.
Now before we get going on the business of the agenda items, Jill
has some initial comments on the information to be conveyed today. So,
Jill, if you would, please?
JILL AEBKER (Deputy General Counsel and Corporate Secretary,
Tim Hortons Inc.): Good morning. I hope you all received the agenda for
today’s meeting, as well as the rules of conduct. Mr. House is going to go
through the agenda shortly. With the agenda and code of conduct, each of
you would have received our Safe Harbour statement. I once again have
the privilege of providing the Safe Harbour statement this year, and I’ve got
to tell you, when I was thinking about it last night, I thought, you know, it’s
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always fresh, Timbit of information, and donut you just love it. We do so
here goes.
With respect to the Safe Harbour statement, certain information
conveyed this morning is forward-looking within the meaning of the
Canadian securities laws and the US Private Litigation Reform Act of 1995,
particularly information regarding future economic performance, finances,
objectives and expectations of management. Factors set forth and the risk
factors in the Corporation’s most recent Form 10-K filed with the Canadian
securities administrators and the US Securities and Exchange Commission
on March 4th, 2010, as well as factors described in our other securities
filings and in our Safe Harbour statement, in addition to other possible
factors not listed or described in these documents, could cause our actual
results to differ materially from those projected in forward-looking
statements.
Forward-looking statements are based on a number of
assumptions that may prove to be incorrect, including but not limited to
assumptions set forth in the agenda. As a result, you are cautioned not to
place undue reliance on forward-looking statements made today, which
speak only as of the date and time made.
We are presenting this information this morning for the purpose of
informing you of management’s current expectations regarding certain
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matters and this information may not be appropriate for any other purpose.
Except as required by federal or provincial securities laws, the Corporation
undertakes no obligation to publicly release any revisions to forwardlooking statements made today, even if such information may, due to
future events, prove to be misleading.
You should also note that all references made today to financial
performance, trends and expectations relate only to results up to year end
2009 or quarter end 2010, and with respect to our 2010 targets,
information communicated with our 2009 annual report on Form 10-K.
Please note that all results presented today are made in accordance with
US generally accepted accounting principles and are reported in Canadian
dollars. If we refer to non-GAAP financial information during the meeting
today, we will post a reconciliation to the most directly comparable US
GAAP financial measures on our website as soon as practicable after
today’s meeting.
In a few minutes, I will present the proposals before the
shareholders for today’s meeting, but right now, it’s my pleasure to turn the
podium back over to our Executive Chairman, Mr. Paul House, who will
lead us through the business of today’s meeting. Paul?
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PAUL HOUSE:
Thanks, Jill, and that was certainly entertaining
again. Our agenda for today includes the following items: We will begin
the meeting by conducting the formal business portion, with Jill addressing
the two programs for shareholder action this year. Following that, senior
management will provide perspectives on the Corporation that we hope
you will find interesting. Don Schroeder will outline the Corporation’s major
initiatives and accomplishments in 2009, as well as outline our strategic
direction.
Cynthia Devine will provide a financial overview of our 2009
performance and our results for the first quarter. She will also discuss our
outlook for 2010 and future years. Bill Moir will provide highlights of our
new
sustainability
and
responsibility
framework,
including
our
commitments and goals. For our shareholder Q&A, Don, Cynthia, Bill, the
rest of the management team and I will take questions from the audience.
And we will close the meeting with the announcement of the voting results
of
the
election
of
the
directors
and
the
reappointment
of
PricewaterhouseCoopers LLP as our independent director.
So let’s begin. Jill, if you would present the proposals before the
shareholders this year.
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JILL AEBKER: Thanks, Paul. We’re now ready to begin the formal
business section of the meeting. The representatives of the Inspector of
Election have advised that we have a quorum for today’s meeting. A list of
shareholders of the Corporation certified by the Inspector of Election show
approximately 175.4 million common shares outstanding as of the close of
business of the record date, of which approximately 175.1 million are
entitled to vote on the two proposals.
The remaining approximately
300,000 shares are owned by the TDL RSU Plan Trust and are not eligible
to vote.
Approximately 78 percent of the shares eligible to vote are
present or represented by proxy at today’s meeting. Since a quorum is
present, I now declare the meeting to be duly convened and ready to
transact business.
Will any shareholder who intends to vote at the meeting and still
needs a ballot or proxy please raise your hand?
Okay.
We have
representatives coming down the aisle who will provide a ballot, okay?
And then after you’ve completed your ballot, the representatives will be
back. Pina, we need one down front here. Okay. Anyone else? Sorry,
you’ll have to keep your hands up for the representative. Okay? Okay,
great. So after you’ve completed your ballot, again, the folks will come
around and pick them up. Okay.
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Before we consider the two business items for discussion, I would
like you to know that, for efficiency and convenience of our shareholders,
we have arranged for a few of our employee shareholders to make the
formal motions on the two proposals. And this is by no means intended to
limit discussion but simply to facilitate voting on the two motions.
So the first order of business today is the election of the 11
incumbent directors, each of them to serve until the next annual meeting or
until their successors are duly elected and qualified.
directors are:
The nominated
Paul House, the Honourable Frank Iacobucci, Michael
Endres, David Lees, Wayne Sales, Shan Atkins, John Lederer, Moya
Greene, Ron Osborne, Cathy Williams and Don Schroeder. Is there a
motion for their election?
KYONG WAH (phon):
Good morning, Ms. Aebker, my name is
Kyong Wah. I move for the election of the 11 incumbent directors named
in the Corporation’s management proxy circular, to act as directors of the
Corporation until the next annual meeting or until their successors are duly
elected or appointed. Thank you.
JILL AEBKER: Great. Thank you, Ms. Wah. May I have a second,
please?
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KATIE MURDOCH (phon): Ms. Aebker, my name is Katie Murdoch.
I second the motion.
JILL AEBKER: Thank you, Ms. Murdoch. For the second proposal,
the Board of Directors has recommended the reappointment of
PricewaterhouseCoopers LLP as the independent auditor of the
Corporation for the current fiscal year ending January 2nd, 2011. Is there a
motion to that effect?
DAVID THORPE (phon): Ms. Aebker, my name is David Thorpe. I
move for the reappointment of PricewaterhouseCoopers LLP as the
Corporation’s independent auditor for the current fiscal year.
JILL AEBKER: Great, thank you, Mr. Thorpe. May I have a second,
please?
LAURIE FARRELL (phon): Ms. Aebker, my name is Laurie Farrell. I
second the motion.
JILL AEBKER: Thank you, Ms. Farrell. For those of you who may
not have had a chance to do so, you can hand in your ballots and proxies
now and, again, the representatives can come down the aisle to pick them
up. You may also turn in the ballots at the Inspector of Election table in the
lobby during the business presentations.
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So this concludes the consideration of the proposals before the
shareholders at today’s meeting, and I look forward to joining you later to
share the election results.
Now, let me turn the meeting over to our President and CEO, Don
Schroeder. Don?
DON SCHROEDER (President and Chief Executive Officer, Tim
Hortons Inc.): Thank you, Jill, and good morning, everyone. It’s great to
be back here with you again this year.
As individuals, as business leaders and as investors, over the last
couple of years, we’ve all had to cope with significant change. And while
some stability seems to be returning, the new normal that everybody is
craving has yet to clearly emerge for many companies but a few things
have become clear.
Conventional wisdom no longer applies, old
assumptions are being cast aside and new truths are being sought. In
2009, the industry inside joke throughout the year was, flat is the new up.
Unfortunately, many in the restaurant sector found the implications of that
attempt at humour to be no laughing matter, as they struggled with
challenges and restaurant closures, negative same-store sales and
shrinking margins.
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Meanwhile, at Tim Hortons, I’m pleased to say that that kind of dry
humour did not apply. For us, up continued to be just that, up. Our growth
trajectory may not be at historic levels, but in the face of historic negatives
in the broader economy, our healthy up trend was truly up. But I’ll go even
farther than that. Tim Hortons’ performance in 2009 was positive, not only
in comparison to those who have fallen behind, but I also believe that
we’ve been successful on our own terms. We did not conduct business as
usual in unusual times. We chose to be proactive. So how did we act?
Well we put our intensely loyal customers at the centre of our focus. The
success of our menu additions, pricing discipline, promotions and new
locations all reinforced Tim Hortons’ unprecedented brand leadership.
Now it’s difficult to capture something as special as a relationship
with numbers, but still, I believe these numbers tell a dramatic story. In
Canada, eight out of 10 cups of coffee that are poured outside of the home
are served by Tim Hortons. Forty percent of all visits by Canadians to a
quick service restaurant are hosted by Tim Hortons. Ninety-nine out of
every 100 people across Canada know the Tim Hortons brand and that’s
probably one of the main reasons why we were recently recognized for
having the best corporate reputation in Canada.
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In Canada, we have the number one market share in coffee by a
wide margin. We lead the breakfast day part. We lead snacking day
parts. And we are a serious competitor at lunch. We have a very strong
relationship with our core customers, who recognize and appreciate our
value proposition and come back again and again. Customers trading
down, looking to economize, soon recognize a good thing when they taste
it and become part of the Tim Hortons family of customers.
So what has made our business consistently successful?
restaurant store owners.
Our
They are the front line of the enterprise and
embody the brand in literally millions of transactions every single day.
These talented and committed restaurant owners are key to the success of
our business model, and we work very hard to strengthen and preserve
this special relationship that has served both of us so well over the years.
So just what does all that customer loyalty and restaurant owner
engagement add up to? It combines to make Tim Hortons North America’s
fourth largest publicly traded restaurant by market cap, which now stands
at about $6 billion. But we’re not resting on our laurels. Last year, we
made significant changes, including bringing our Corporation back to
Canada.
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Cynthia Devine, our CFO, who I’m very proud to say was recently
recognized by the Financial Executive International of Canada as
Canada’s CFO of the year, is going to share our financial results with you
in just a minute. But by way of introduction, let me assure you that the
strength of our balance sheet that Cynthia will describe for you is the very
solid foundation upon which our strategic plan for 2010 through to the end
of 2013 has been built.
Four major themes of our strategic plan reinforce the fact that Tim
Hortons is more than a great brand. I don’t think anybody disputes the fact
that we are a great brand. But we’ve already embarked on becoming so
much more than that. How? Well first of all, we’re going to attack certain
focus day parts, the menu and marketing opportunities that drive samestore sales growth.
There’s no question that we already have the
commanding share in the morning and snacking day parts in Canada, but
we’re convinced there’s even more opportunity to be found.
Menu
innovation, menu expansion, including the addition of attractive—or new
products at attractive price points can create new activity, which will also
build momentum in the hot and cold beverage category. Driving samestore sales is the oxygen of our business, and the more oxygen we
produce for ourselves, the less oxygen left for our competitors.
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But another way to drive that all important same-store sales is by
building scale and our brand in new and existing markets. We believe
there is plenty of room to develop from our current level of about 3,000 to
about 4,000 restaurants here in Canada. And this second strategic theme
includes pushing the envelope with a flexible restaurant design that will
allow us to right size the restaurants, which in turn will allow us to
successfully enter smaller markets, especially in the province of Quebec.
In the US, our focus will be on profitable growth in our Northeast and
Midwest home base, as we continue to push into contiguous markets,
while building Tim Hortons’ scale and awareness level in existing markets.
Our third strategic theme is also based on growth, but growth
through re-imagining.
The recent economic meltdown demands that
business create the vision of the future seen with new eyes and driven by
new ideas. We’ve taken that reality check and applied it to ourselves. Tim
Hortons will remain true to our distinct cultural values while we explore new
ideas that will allow us to remain always fresh and always relevant to our
customers.
Re-imagining to us includes an exciting hospitality program that will
establish our service leadership even further. In the United States, we’re
piloting an innovative restaurant concept, (inaudible) design, style and
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menu has the potential, we believe, to differentiate Tim Hortons as a café
and bake shop destination.
Our Cold Stone creamery co-branding,
strategic alliances with companies like Tops, partnerships with the US
military and strategies for international development will continue to unfold
and provide us with what we believe will be significant long-term growth
opportunities.
The fourth theme, which is fundamental to our strategic direction, is
our commitment to leverage our core business strength and franchise
system advantages, beginning with our family of restaurant owners.
Vertical integration opportunities will always be considered, provided they
offer both a positive benefit to our franchise system and a reasonable rate
of return on the capital invested by the Company.
Our strong relationship with our restaurant owners has taken years
to build and we recognize this heritage as one of Tim Hortons’ most
valuable assets. It may be one of those so-called intangible assets, but
the incredible contribution this amazing group of businessmen and women
has made to the development of our brand, to the overall success of our
system and to the communities in which they operate, is extremely tangible
and highly regarded by myself and the entire leadership team.
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In my many years with this wonderful Company, I’ve had the
privilege to participate in and to be part of the genesis of the great success
story that Tim Hortons has become. We’re now embarking on the next
chapter, to continue the Tim Hortons story and Tim Hortons success in
Canada, to continue to develop our brand in the United States, and
potentially, to develop the brand internationally. But we will never accept
that flat is the new up. My incredible leadership team and I are committed
to up being the only direction when it comes to our growth, our productivity
and our reach.
Four years from now, I believe the Tim Hortons you know today will
be improved, re-imagined and dramatically different. But when it comes to
industry leadership, sector innovation and brand strength, the more we
change, the more Tim Hortons and the tremendous value that we
represent will remain the same.
And now I’m pleased and proud to introduce to you Canada’s CFO
of the Year, our own Cynthia Devine.
CYNTHIA DEVINE (Chief Financial Officer, Tim Hortons Inc.):
Getting tired of that? No, I’m just kidding. Thank you very much, Don.
It was very special to be recognized, especially as it reflects on my
entire finance team. And it’s also very satisfying to play a role on a great
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executive team that leads such a dynamic and distinctive Company. It’s
also very satisfying to be able to share with everyone today our strong
2009 results, and our Q1 results and, our 2010 targets as outlined in
March, and some longer term aspirational goals.
Tim Hortons distinction—is distinctive beyond our iconic brand
status.
Last year, that distinction meant continuing to confront the
toughest economic environment in recent history while still growing our
business in both our segments. Many in the restaurant industry saw a
decline and some of those declines were pretty significant.
Our
distinctively positive performance was the result of many drivers, including
promotional programs, new menu options, operational initiatives and
disciplined expansion. And overriding it all was a sensitivity to consumer
pressures.
So even in all the global turbulence, our franchise system-wide
restaurant sales exceeded $5.2 billion in 2009. And that success helped
drive growth, which placed Tim Hortons among the restaurant—the North
American restaurant industry leaders. We were pleased to report that the
results of those robust sales numbers continued Tim Hortons almost two
decade long tradition of same-store sales growth across our operations in
both Canada and the United States.
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And as you can see, in four out of the five metrics, we delivered at or
above our targeted range, and we only fell short in the fifth by a tenth of a
percent. That goal was for our Canadian same-store sales and we believe
that our healthy performance of 2.9 percent growth still placed us among a
select few high performing companies that delivered similar solid growth in
2009.
Overall restaurant openings were impressive, especially in a
contracting economy. Last year, we opened 131 locations in Canada, with
45 launched in the United States, for a total of 176. As they ramp up and
mature, we believe that these additional restaurants should help to
contribute to the future growth of the Company.
In the US, we achieved a very strong 3.2 percent same-store sales
growth in 2009.
As well, even in the face of more rigorous economic
stress, our business in the United States exceeded our break-even target
by delivering 4.8 million in segment operating income.
We’re pleased that Tim Hortons’ overall operating income was up 11
percent. Adjusted operating income grew by 7.5 percent, a strong result
relative to our target of 6 to 8 percent growth. That target excludes costs
and expenses incurred from our 2008 impairment charge and our 2009
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public company restructuring.
Our earnings benefitted from positive
system-wide sales growth, good cost control and strong execution.
So how are things shaping up so far this year? Q1 results were also
a solid up. Canadian same-store sales were up an impressive 5.2 percent.
US same-store sales were also up, a very solid 3 percent. Total revenues,
at 583 million, have increased by nearly 5 percent. And our operating
income has also shown strong growth, just shy of 15 percent, to reach 128
million for the first quarter of 2010.
With all that activity trending very well, let’s take a look at our
balance sheet, which is strong and offers significant flexibility for future
growth. At the end of Q1 2010, we had over 100 million in cash and cash
equivalents and only about 300 million held in bank debt, which means,
compared to many of our peers, our leverage is quite low. And the $2
billion in assets on our balance sheet reflects the advantages and the
depth of our multi-layered business model. This fiscal strength provides
scale and flexibility to insulate against fluctuating markets, while remaining
well positioned to invest in and grow our business.
In addition to our financial strength, we have historically proven our
ability to generate strong cash flows. This has provided sufficient capital to
return value to shareholders through programs such as our dividends and
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our $200 million share repurchase program, which commenced in March.
Our dividend increased by 30 percent to $0.13 a share as a result of our
new targeted payout range.
Our commitment to dividends reflects our
confidence in the potential of our strategic plan.
So what specific targets did we set earlier this year for 2010? Tim
Hortons’ earnings per share for 2010 is targeted at $1.95 to $2.05.
Beyond 2010, our strategic plan EPS target for 2011 through to 2013 is for
EPS growth of 12 to 15 percent. Our EPS growth for both 2010 and our
strategic plan period is supported by an operating income growth target of
8 to 10 percent. Propelling these metrics in 2010 are same-store sales
growth targets of 3 to 5 percent in Canada and 2 to 4 percent in the United
States.
I’d also like to point out, as previously outlined, that we are
anticipating that our Canadian franchise system chain sales alone will crest
$5 billion in 2010.
When that happens, Tim Hortons will be the first
restaurant company in Canada to ever hit and surpass that significant
milestone.
One other area that will generate some activity this year is our bank
debt.
In February 2011, our current bank debt will expire.
We have
announced that we’re planning a private debt offering in Canada of 200 to
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250 million, which we intend to use to pay down a significant portion of our
existing debt and for other general corporate purposes.
So now, let’s take a more detailed look at our capital priorities.
Going forward in 2010, we are investing between 180 and 200 million in
new restaurant development and existing restaurant renovations. As well,
some of this investment spending will be directed at vertical integration for
our recently announced Kingston distribution centre. Other assumptions
that frame our 2010 operating goals include restaurant openings, which
are in the 170 to 210 unit range, with 130 designated for Canada and 40 to
60 new units planned for the United States.
Finally, I’m pleased to say that, last year, we accomplished the
significant milestone of bringing our Company home to Canada. Value
from that move is already being realized in that we expect our 2010 tax
rate to be approximately 32 percent before any discreet items.
If there’s one thing that all these results clearly demonstrate, it’s that
Tim Hortons really is distinctive. We have shown a positive track record of
delivering on our commitments.
Last year’s numbers, this year’s Q1
results, and our aspirational goals for the future all show that we are more
than a great brand, we are a confident, strong and disciplined enterprise. I
look forward to sharing our progress with all of you again next year.
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And now, it is my distinct pleasure to introduce Bill Moir, our Chief
Brand and Marketing Officer and the President of the Tim Hortons
Children’s Foundation, to share some of our new sustainability framework
and commitments. Bill?
BILL MOIR (Chief Brand and Marketing Officer, Tim Hortons Inc.):
Thank you, Cynthia. I have a long title. Anyway, it’s great to be back with
you again this year. And it’s probably no secret that, at Tim Hortons, we
are known for making a great cup of coffee, but we’re also known for
making great quality products and providing them at reasonable prices.
And we also like to think Tim Hortons makes a great place to work and
invest. And with the creation of our new sustainability and responsibility
framework, recently published in our Annual Report, we can now also say
that Tim Hortons is working to make a true difference, a true difference
which is true to our heritage and our spirit of corporate responsibility.
Our organization has long recognized the connection between
serving our customers and serving our same customers’ needs as
individuals, as members of communities, and increasingly as people who
care about our planet. And I’m proud to say that our commitment and that
of our store owners to support individuals, communities and the planet is
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matched by our commitment to making a true difference through taking
accountable action every day.
We have created a sustainability and responsibility framework that
outlines clear commitments and goals, and we’ve put in place the structure
and resources necessary to help us achieve our goals. And next spring, in
March 2011, we plan to issue a full sustainability and responsibility report
to let you know how we did in 2010. And we believe that transparency and
openness are important, and we plan to let you know how we are making a
true difference. And until then, I’d like to take a few moments to outline our
goals and actions in each of our key sustainability and responsibility pillars
and there are three: individuals, communities, and the planet.
So let me start with our first pillar, individuals. And that framework
includes three groups of individuals: customers, employees and partners.
Customers are the centre of the Tim Hortons world for us and for our
restaurant owners. We appreciate their loyalty and work extremely hard to
provide a welcoming and hospitable atmosphere that respects and
reinforces the longstanding relationship that we have and have had with
our customers, which is why we have set the goal of 100 percent response
rate to customer service inquiries, so that every customer gets a personal
and direct response to resolve those issues.
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And in an age of growing health consciousness, we are certainly
conscious of our customers’ need for menu options which provide
balanced choices. Tim Hortons meets or exceeds nutritional guidelines
and keeps our customers informed of nutritional updates. For example,
recently we reduced sodium by over 19 percent on average in our soup
offering, and we eliminated or reduced trans fat levels well before required
and continue to make further progress. Food safety. It’s paramount to Tim
Hortons and so we have enhanced our already comprehensive and
rigorous food safety plan, and that food safety plan requires safety training
and certification, as well as two mandatory food safety audits each year at
our restaurants.
You know, and when it comes to our team, the one thing that has
always made a true difference at Tim Hortons is that we know that our
employees are unique people, they have individual talents and aspirations.
And that’s why we champion a culture that treats people fairly and creates
an environment for personal development.
And our plan is for every
permanent full-time corporate employee to have their own customized
development plan and receive an annual review to track their progress
towards those goals. We also place great value on consistent training
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regarding our standards of business practices to ingrain our ethical
expectations and behaviours as part of our culture.
Another foundation in our commitment to our unique culture is
continuing to maintain the business leading levels of pride we enjoy among
our corporate employees, who rate their level of pride in working at Tim
Hortons at over 90 percent, which is higher than almost any other
companies that are out there.
Our third set of individuals in our framework is our partners. And we
are incredibly fortunate when it comes to the partners and stakeholders we
work with at Tim Hortons, including our primary partners, our restaurant
owners. Honesty, transparency and respect are fundamental aspects in
the exchange that we work to have with our stakeholders. And to illustrate,
this year, we are working with external experts to help us give feedback on
our sustainability programs and initiatives.
And plus, as I’ve already
mentioned, the process of developing our sustainability and responsibility
report for 2011 is ongoing, and it will involve the global reporting initiative
guidelines which will help us continue our dialogue with stakeholders.
The second major pillar of our making a true difference framework is
communities. Addressing community needs is close to our heart at Tim
Hortons, you know, whether supporting local projects and programs, or our
27
coffee partnership program in South and Central America. Working with
communities provides ways for us to do our part and really give back to the
communities where we operate.
For example, take our longstanding
commitment and partnership with our restaurant owners to enrich the lives
of economically disadvantaged children through the Tim Hortons
Children’s Foundation camps and programs.
And by renovating and
expanding our existing six camps and creating new sites in Manitoba and
BC, we and our restaurant owners plan to have 17,000 children annually
benefiting by 2013.
When it comes to the kind of community programs that our owners
are involved in, I think the positive effects are easy to see in those
communities. With Smile Cookie, Free Skate/Swim events, Food Drives,
Earn-a-Bike, our restaurant owners will invest a minimum of $15 million in
2010 alone across the country. Plus this year, more than 275,000 children
across Canada and the US who love hockey, soccer, lacrosse, t-ball,
baseball, ringette, will benefit from the Timbits Minor Sports program. We
know that making a true difference is also important when it comes to
aboriginal communities.
And it’s our goal to establish a long-term
partnership with aboriginal communities that proactively addresses four
28
key areas:
education, empowering youth, economic development and
employment.
And Tim Hortons has already seen incredible benefit in helping
entire communities become more productive and improve the quality of
their lives through our coffee partnership program in Guatemala, Colombia
and Brazil. And this program is designed to help small holder famers, their
families and communities become more self sufficient, by them helping
them address critical business, environmental and social needs. And this
year alone, 2,500 small holder farmers will have 10,000 hectares of land
under environmentally responsible management practices.
But what about our responsibilities to the world at large?
Tim
Hortons understands that impacts on the planet need to be managed, and
we are ready, embracing our responsibility to do our part. Environmental
stewardship involves sustainability initiatives that we believe can have
positive impacts on both the environment and the bottom line. We are
striving to minimize waste from all aspects of our business. One aim is to
reduce packaging by 5 percent across our operations by 2012, through
waste auditing and supplier collaboration.
And we are committed to
increasing the number of restaurants with recycling options for our paper
cups beyond the 400 plus restaurants today.
29
Our vision at Tim Hortons is also to have a smaller environmental
footprint when it comes to energy and water use. In our supply chain,
we’re also increasing our fleet’s fuel efficiency. We pegged the goal of a 5
percent reduction in our use of all of these resources by the end of 2011.
This year, we are also piloting two LEED—two restaurants for LEED
registration, and LEED means Leadership in Energy and in Environmental
Design. What we can learn from the LEED experience—from this LEED
experience will help us explore new green building practices in our future
restaurant development.
We also believe that environmental awareness can and should be
brought right back to our relationship with our customers. That’s why we
encourage our customers to go green, grab a handle, and if they do, by
bringing in their own Tim mug, they get a $0.10 discount on a refill of their
cup of Tim’s coffee.
And there are other opportunities to do our part. In 2010, we will
develop a business partner and supplier code of conduct that will include
an auditing program.
This will help us foster business best practices
across our supply chain.
We believe a company can have a positive
impact, provided that those intentions have definite goals supported by
action and accountability. And I think it’s pretty clear that we’re committed
30
to walk the talk when it comes to our commitments and goals about
individuals, communities and the planet.
Be confident that we will be true to our pledge to make a true
difference, now and in the future. Thank you.
PAUL HOUSE: Thanks, Bill. Being a responsible corporate citizen
has always been core to our values and our Company. And we appreciate
your overview of the commitments and goals we are setting in place for
2010 and for the next few years.
In my annual report letter to shareholders, I stated that great
companies are often defined as much by how they perform in tough times
as by how successful they are when things are going well. 2009 was a
year of tough times for most businesses and consumers. And once again,
your great Company rose to those challenges, as Don and Cynthia
outlined in their presentation.
A great franchise system, strong brand
position and competitive advantages such as our multi-layered business
model are among the many reasons we tend to perform well in good times
and in bad times.
I also attribute our success to the exceptional leadership team we
have in place to guide our great Company.
Led by our CEO, Don
Schroeder, we have an incredibly talented, committed, and an experienced
31
senior executive group, and I would like to acknowledge their continuing
contribution to the Corporation’s success.
As a Board, we believe strong governance also plays a key role in
the Company’s long-term success. Since becoming a public company in
2006, Tim Hortons has worked to foster a culture of good governance.
And we have continued to evolve our governance practices to suit the
needs of a unique and changing company. For example, except for Don
Schroeder and myself, all of our directors are independent. We have an
independent lead director, and independent chairs and members on each
of the three main Board committees.
In addition, our public company
reorganization has led to many investor-focused governance changes in
2009, which include a repeal of our staggered Board structure, proxy
access and shareholders’ rights to call meetings.
We also have a progressive track record in the area of executive
compensation, including a commitment to solid pay for performance
practices. Most importantly, since our IPO, we have fostered a culture of
active engagement and participation within the Board itself, where all
perspectives and contributions are sought and expected. This culture is
essential for proper Board functioning, particularly in the context of the
Board’s responsibilities, such as the oversight of strategic planning. Your
32
Board plays an active role in strategic and business planning processes,
and I believe the Board provides tremendous value to the Corporation and
the shareholders.
And with that, I would now like to move to the question and answer
portion of the meeting. Would the rest of the executive management team
please join us on stage?
Now for the Q&A session, if you have a question, please go to the
nearest microphone on either of the far side of the aisles, and if you have
difficulty getting to the microphone, please flag one of our volunteers and
we will bring a microphone to you.
It is important that you use a
microphone if you have a question as we are broadcasting this meeting
live over the Internet. If you keep it to just one question at a time please,
and then turn the microphone over to the next person, so that we can have
an orderly process. We will be here for about 15 minutes of Q&A, and
then we will announce the results of the election.
Okay, so for the first question, I’ll go over here to the right, please, if
you would.
UNIDENTIFIED SPEAKER: In regards to the HST that’s coming into
effect in a couple of months in Ontario, how do you think this is going to
affect sales?
33
DON SCHROEDER:
Well the HST in Ontario, we were very
successful last year in working with the government to recognize the fact
that they—to preserve that $4 exemption that is in place currently, that that
should be preserved.
So that was a major win for our customers;
otherwise, they were looking at a, you know, a significant price increase
with the introduction of HST. So I think the government recognized the
importance of preserving that, and both levels of government worked
together to preserve that.
PAUL HOUSE: Okay, next please?
MATTHEW PRESCOTT (phon): Hi, good morning. My name is
Matthew Prescott and I’m here representing an organization called
Humane Society International and also the Humane Society of the United
States.
We’re the world’s largest animal protection organization, with
about 11 million supporters, and we’re also a shareholder. And I don’t
have a question, really; I just wanted to thank you guys for working with us
on animal welfare initiatives and we’re proud to be your partner in that
area. And I look forward to learning more about what you guys are going
to be doing in that area with the March 2011 sustainability report so thank
you.
PAUL HOUSE: Thank you.
34
Yes, sir.
CARL ANDERSON (phon): Carl Anderson, a shareholder, and I
have a question and suggestion. You have an $0.11 donut problem at the
moment, I understand. Would you care to comment?
DON SCHROEDER: I think you’re referring to the class action or
the proposed class action lawsuit. Again, that is before the courts. There
was a hearing yesterday; the court will determine on some of the
preliminary motions, but it is scheduled to be heard later this year. We are
proceeding on—in the normal course, and at this point, our position
remains unchanged that we believe that the action is without merit and
that, ultimately, the Company will succeed.
CARL ANDERSON: Was there an $0.11 difference between the old
way of making donuts and then having frozen donuts brought in?
DON SCHROEDER: I can’t comment. That is something that’s in
the pleadings contained by the plaintiff and is something that will be
reviewed by the court at the appropriate time.
CARL ANDERSON: Thank you. One other suggestion, that I notice
that you always feature your growers of coffee in Central and South
America, I gather. Would there be publicity advantage in bringing half a
dozen of those up here and using them for publicity purposes and for, also
35
for a chance for them to see the value that you place and that we, as
shareholders, place on their endeavours to produce coffee at a good price
and a fair price?
DON SCHROEDER: We communicate with the small farmers that
we’re working with on a regular basis, and I can tell you that the impact of
the coffee partnership that we have in Central and South America,
specifically Guatemala, Brazil and Colombia, has had a very positive
impact on their lives and their wellbeing. They’re very proud of the fact
that, as a result of the program, they are now becoming businessmen and
that’s very important to them on an ongoing basis.
PAUL HOUSE: Do we have a question up there, in the centre?
JOHN GREEN (phon):
Yes, hello, good morning.
John Green,
shareholder. I’d like to just compliment you, first of all, on the activities that
you do with the community and the camps. It’s really well appreciated,
especially by the participants.
Just have two quick questions.
First
question that’s bothering me a bit is, something seems to be holding back
the share price of Tim Hortons. What is it? If you can comment on that.
And the supplemental question that I have is, where—what kind of sources
are you using to identify that eight out of 10 coffees drunk outside the
home are from Tim Hortons? Thank you.
36
BILL MOIR: Well, the stat on the coffee, there’s an independent
research group called NPD Cress, which has been around for probably, I
don’t know, 30 to 40 years actually; it started in the US and has been in
Canada for not quite as long but certainly a long time. And they have an
online format; they’re kind of the respected folks in the industry that
everybody—you buy that independent research. So they ask consumers
questions about their eating habits and that’s information that comes out of
that research. So it’s ongoing research and it’s a lot of folks and so it’s
fairly rigorous. Is it totally… if says point seven, does that mean it’s point
seven? But it certainly reflects, I think, pretty accurately what exists in the
marketplace.
CYNTHIA DEVINE:
With respect to your question on the share
price, well I can’t comment specifically on share price or share value.
What I can say is that, last year—or sorry, at the beginning of this year, the
investor conference I think was a great way to give investors insight into
the future strategic plan of the Company. And I think that’s helped a lot
because they understand the significant plans and goals that we have set
for ourselves over the next four years, and I think that has gone a long way
to people getting confidence in the future growth of the business.
PAUL HOUSE: Okay, question over here, please.
37
UNIDENTIFIED SPEAKER:
Okay, my question is laughable if it
wasn’t so frustrating. About two months ago, I started to do my income
tax. And (inaudible) you saying that, to bring the company to Canada and
your average cost base has to be based on the Canadian price. Well I
didn’t have that price, so I proceeded to call your head office. I explained
to the receptionist who I wanted to talk to, someone that knew the price.
She said she didn’t know anyone and they don’t have a finance
department. I said, well, you must have a finance department. She said,
nope, no finance department.
So she says, I’ll put you through to
someone.
So after 10, 11 rings, I gave up. Back to the telephone book again,
phoned the number again. Got a different receptionist and I told her my
problem. She says, well, who can we ask? So she talked to one or two
other people, I guess at her desk, and then I says, well what about client
services, or customer relations? She says, oh we’ve got that department,
so they put me through. After 10 or 11 rings, nobody picking the telephone
up, I hung up.
Back to the telephone again, phoned up your head office, and
explained to the receptionist – this is the third receptionist I got – she says,
oh, well I’ll put you back through to someone else in customer relations.
38
After the fourth ring, someone answered.
Now, I think his name was
Dennis, but I’m not quite sure. Anyway, he knew; not only did he know the
price for the US stock, he knew the price for the Canadian stock and he
knew the date. So at least the client services knew, even if the receptionist
doesn’t know—recognize your (inaudible), you’re not recognized by your
front desk. Thank you.
CYNTHIA DEVINE: Okay, I’ll try to get out to the front desk more
frequently.
UNIDENTIFIED SPEAKER: Yes.
CYNTHIA DEVINE: But thank you for your feedback. We did have
a number of calls and so I am a little bit surprised because I know that we
fielded a considerable number of calls to help people through
understanding the cost basis of it. And I suspect the name of the person,
you said… I think it was probably Chris that helped you, maybe not, but we
do have the information so if anyone is confused by that, please give us a
call and we’d be happy to help you.
PAUL HOUSE: Okay, thanks, Cynthia. Thank you. And we do
apologize for the numerous times that you had to call, but at least you
finally did get the right answer so that’s the main thing.
One last question up here, please. Okay, two last questions.
39
Yes, I was wondering if you could
explore the possibility of a different prize for next spring’s Roll up the Rim
promotion? I question if a great company such as Tim Hortons should be
associating itself with Toyota given the difficulty they’re having at this time.
UNIDENTIFIED SPEAKER: Well, I think that, you know, if you look
at, certainly Toyota had some difficulties, but so did all the other car
companies. We have an agreement in place with Toyota for another year.
We gave away all—there was 40 cars available to be won this year, 40
cars seeded in 250 million game cups. We gave away every single car.
We did not have one complaint from the consumer about the fact that they
were Toyotas, so…
PAUL HOUSE: Okay, Dianne (phon), do we have somebody over
there? Thank you.
UNIDENTIFIED SPEAKER: Hi. As a shareholder of Tim Hortons,
I’ve been very happy with the share performance and the execution. Nice
job to the executive and the staff and the employees and everybody. I
applaud your efforts to reduce waste; however, allowing customers to use
their own mugs is going to introduce a serious concern with crosscontamination. How are you going to deal with that issue?
40
UNIDENTIFIED SPEAKER: I’m assuming you’re referencing when
we receive the cups to be refilled. We have, you know, we have very clear
operating procedures in terms of, you know, how those cups are to be
handled so that we avoid cross-contamination. So we’re very aware of the
risk but have very clear and well executed standards to avoid them.
You’re still going to get the odd
employee that forgets that the tip of the carafe should not touch the cup,
and you are going to get the potential for serious cross-contamination of
serious illnesses. I think you should reconsider or have some method of
ensuring that you sterilize the mugs that are being brought in. You know,
this happens at all-inclusive resorts and you get hundreds of people ill.
Thank you.
UNIDENTIFIED SPEAKER: Okay, thank you.
PAUL HOUSE: Thank you. I think we have one last question up
here.
Thanks very much for taking my
question. First, I need—I’m a proxy shareholder for my wife and daughter.
I just have a question, or point of clarification, please. That item that you’re
serving outside, I hadn’t seen it before, the rectangular one; it’s a sugared
41
item and has some kind of stuff on top. I don’t know (inaudible)… What is
that item, the name of it?
UNIDENTIFIED SPEAKER: Candy Bar donut.
UNIDENTIFIED SPEAKER: Candy Bar. It’s in the stores.
UNIDENTIFIED SPEAKER: What’s it called?
UNIDENTIFIED SPEAKER: Well, it’s flying off the shelves, so you
may not see it there.
UNIDENTIFIED SPEAKER: Okay. But what is the name, candy
bar?
UNIDENTIFIED SPEAKER: Candy Bar, Candy Bar donut.
UNIDENTIFIED SPEAKER: Candy Bar Supreme or whatever, or…
UNIDENTIFIED SPEAKER: (Unintelligible).
UNIDENTIFIED SPEAKER: My only question then is, why would
you introduce such a heavily-sugared item to the menu? And that’s the
only question I have. Thanks.
BILL MOIR: Well, don’t forget, though, I mean there’s a balance of
products that are out there, I mean if you look across the, you know, the
piece. We’re not going to apologize, I mean for our roots and for those
products, and people are looking for those products. And I mentioned in
what I talked about is that it’s our—we need to provide options for people
42
on the other side, and those options are there as well, so I think it’s that
continual balance. And the fact that people are buying them indicates that
they still want those items.
PAUL HOUSE:
session.
Okay, thanks, Bill.
That concludes our Q&A
And feel free to contact Scott Bonikowsky in our Investor
Relations department after today’s meeting.
And if you have any
additional questions, or you may complete a written question comment
card and turn it in at the registration table in the lobby.
Now, for the last agenda item, the election results. I have been
advised that the Inspector of Elections is prepared to make their report. Jill
will now provide the report of the Inspector of Elections. Jill, if you would?
JILL AEBKER: I am pleased to report that each of the 11 nominees
for director has been elected.
And PricewaterhouseCoopers has been
reappointed as our independent auditor for the current fiscal year. Thank
you.
PAUL HOUSE:
All right, thank you, Jill, and thank all of you
immensely for all your great support over the year and we look forward to a
wonderful year in 2010 and we’ll see you here back next year in May.
Thank you very much. Enjoy the day.
*****

EVENT: TIM HORTONS INC. ANNUAL SHAREHOLDERS MEETING

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