Cott Corporation (NYSE: COT) (TSX: BCB) today announced its results
for the second quarter ended June 30, 2012.
Second Quarter 2012 Results
- Revenue of $626 million was lower by 2% (1% excluding the
impact of foreign exchange) compared to $640 million.
- Gross profit as a percentage of revenue increased by 260 basis
points to 14.7% compared to 12.1% in the first quarter of 2012 and
increased by 90 basis points compared to 13.8% in the second
quarter of 2011.
- Net income and earnings per diluted share were $25 million and
$0.26, respectively, compared to $27 million and $0.28,
respectively.
- EBITDA increased 1% to $67 million. Adjusted EBITDA increased
3% to $68 million compared to $66 million.
- Free cash flow was $18 million from $38 million of net cash
provided by operating activities less $20 million of capital
expenditures.
Jerry Fowden, Cott's Chief Executive Officer, commented, "I'm
pleased with our overall financial performance during the quarter.
Gross margin improved 260 basis points from the first quarter of
2012, reflecting the continued implementation of our 2012 strategy
of gross margin restoration. Lower volume and revenue reflected a
combination of this previously communicated shift in prioritizing
margin restoration versus volume and revenue growth as well as poor
weather in the UK. Overall, I believe we had another solid quarter
as we continue to improve the business and margin mix."
SECOND QUARTER 2012 PERFORMANCE
SUMMARY
- Filled beverage case volume was 240 million cases compared to
264 million cases. The volume decline was due primarily to our
decision to exit certain low gross margin case pack water business
and other low gross margin business in North America, consistent
with our previously highlighted strategy of gross margin
restoration, as well as poor weather in the UK.
- Revenue was lower by 2% (1% excluding the impact of foreign
exchange) to $626 million. An increase in average price per case
and favorable product mix in the United Kingdom / Europe ("U.K.")
was offset by lower volumes and a product mix shift into juice
drinks and sports drinks from 100% shelf-stable juice in North
America.
- Gross profit as a percentage of revenue was 14.7% compared to
12.1% in the first quarter of 2012 and 13.8% in the second quarter
of 2011. The margin improvement versus both the first quarter of
2012 and the prior year was due primarily to an increase in average
price per case, our exit from certain low gross margin business and
continued operating efficiencies in North America as well as
favorable product mix in the U.K.
- Selling, general and administrative ("SG&A") expenses were
$49 million compared to $45 million. The increase in SG&A
expenses was driven primarily by higher employee-related costs
compared to a lowering of the annual incentive accrual in the prior
year.
- Operating income increased 1% to $43 million.
- EBITDA increased 1% to $67 million. Adjusted EBITDA increased
3% to $68 million compared to $66 million.
- Free cash flow was $18 million from $38 million of net cash
provided by operating activities less $20 million of capital
expenditures compared to $10 million from $21 million of net cash
provided by operating activities less $11 million of capital
expenditures.
- Under the previously announced share repurchase program of up
to $35 million in common shares over a 12-month period,
approximately 35,000 shares totaling $0.3 million were repurchased
in the quarter. Because repurchases under the program are subject
to management's discretion in compliance with regulatory
requirements, and given market, cost and other considerations,
there can be no assurance as to the precise number of shares that
will be repurchased under the program or the aggregate dollar
amount of the shares actually purchased.
SECOND QUARTER 2012 REPORTING SEGMENT
HIGHLIGHTS
- North America filled beverage case volume declined 8% to 182
million cases. Revenue was lower by 3% to $476 million as an
increase in average price per case was offset by our exit from
certain low gross margin business and a product mix shift into
juice drinks and sports drinks from 100% shelf-stable juice.
- U.K. filled beverage case volume declined 4% to 52 million
cases due primarily to the poor weather experienced during the
quarter. Revenue increased 4% (7% excluding the impact of foreign
exchange) to $132 million as a result of positive product mix
including growth in the energy and sports drinks categories.
- Mexico filled beverage case volume declined 43% to 7 million
cases. Revenue was lower by 37% (24% excluding the impact of
foreign exchange) to $10 million due primarily to the loss of a
regional brand license at the end of its term, partially offset by
increased contract manufacturing volume.
- RCI concentrate volume increased 16% to 72 million. Revenue
increased 29% to $8 million due primarily to the timing of
shipments to a customer in Asia and increased volume from a new
customer in South America.
Second Quarter Results Conference Call
Cott Corporation will host a conference call today, August 3, 2012,
at 10:00 a.m. EDT, to discuss second quarter results, which can be
accessed as follows:
North America: (877) 407-8031 International: (201) 689-8031
A live audio webcast will be available through Cott's website at
http://www.cott.com. The earnings conference call will be recorded
and archived for playback on the investor relations section of the
website for a period of two weeks following the event.
About Cott Corporation Cott is one of the
world's largest beverage companies focusing on private-label and
contract manufacturing. With approximately 4,000 employees, Cott
operates soft drink, juice, water and other beverage bottling
facilities in the United States, Canada, the UK and Mexico. Cott
markets beverage concentrates in over 50 countries around the
world.
Defined Terms Certain defined terms used
in this press release include the following. "GAAP" means U.S.
generally accepted accounting principles. "EBITDA" means GAAP
earnings (loss) before interest, taxes, depreciation and
amortization. "Adjusted EBITDA" means GAAP earnings (loss) before
interest, taxes, depreciation and amortization, excluding purchase
accounting adjustments, integration expenses, restructuring and
asset impairments. "Free cash flow" means GAAP net cash provided by
operating activities less capital expenditures. See the
accompanying reconciliation of Cott's EBITDA and Adjusted EBITDA to
its GAAP net income, and Cott's free cash flow to its GAAP net cash
provided by operating activities, as well as the "Non-GAAP
Measures" paragraph below.
Non-GAAP Measures To supplement its
reporting of financial measures determined in accordance with GAAP,
Cott utilizes certain non-GAAP financial measures. Cott excludes
from GAAP revenue the impact of foreign exchange to separate the
impact of currency exchange rate changes from Cott's results of
operations. Cott utilizes EBITDA and Adjusted EBITDA to separate
the impact of certain items from the underlying business. Because
Cott uses these adjusted financial results in the management of its
business, management believes this supplemental information is
useful to investors for their independent evaluation and
understanding of Cott's underlying business performance and the
performance of its management. Additionally, Cott supplements its
reporting of net cash provided by operating activities determined
in accordance with GAAP by excluding capital expenditures, which
management believes provides useful information to investors about
the amount of cash generated by the business that, after the
acquisition of property and equipment, can be used for strategic
opportunities, including investing in our business, making
strategic acquisitions, and strengthening the balance sheet. The
non-GAAP financial measures described above are in addition to, and
not meant to be considered superior to, or a substitute for, Cott's
financial statements prepared in accordance with GAAP. In addition,
the non-GAAP financial measures included in this earnings
announcement reflect management's judgment of particular items, and
may be different from, and therefore may not be comparable to,
similarly titled measures reported by other companies.
Safe Harbor Statements This press release
contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 conveying management's expectations as to the
future based on plans, estimates and projections at the time Cott
makes the statements. Forward-looking statements involve inherent
risks and uncertainties and Cott cautions you that a number of
important factors could cause actual results to differ materially
from those contained in any such forward-looking statement. The
forward-looking statements contained in this press release include,
but are not limited to, statements related to the amount of shares
that may be repurchased under the share repurchase program, future
financial operating results and related matters. The
forward-looking statements are based on assumptions regarding
management's current plans and estimates. Management believes these
assumptions to be reasonable but there is no assurance that they
will prove to be accurate.
Factors that could cause actual results to differ materially
from those described in this press release include, among others:
Cott's ability to compete successfully; changes in consumer tastes
and preferences for existing products and Cott's ability to develop
and timely launch new products that appeal to such changing
consumer tastes and preferences; a loss of or reduction in business
with key customers, particularly Walmart; fluctuations in commodity
prices and Cott's ability to pass on increased costs to its
customers, and the impact of those increased prices on Cott's
volumes; Cott's ability to manage its operations successfully;
currency fluctuations that adversely affect the exchange between
the U.S. dollar and the pound sterling, the Euro, the Canadian
dollar, the Mexican peso and other currencies; Cott's ability to
maintain favorable arrangements and relationships with its
suppliers; Cott's ability to realize the expected benefits of the
Cliffstar acquisition because of integration difficulties and other
challenges; risks associated with the asset purchase agreement
entered into in connection with the Cliffstar acquisition; the
significant amount of Cott's outstanding debt and Cott's ability to
meet its obligations under its debt agreements; Cott's ability to
maintain compliance with the covenants and conditions under its
debt agreements; fluctuations in interest rates; credit rating
changes; the impact of global financial events on Cott's financial
results; Cott's ability to fully realize the expected cost savings
and/or operating efficiencies from its restructuring activities;
any disruption to production at Cott's beverage concentrates or
other manufacturing facilities; Cott's ability to protect its
intellectual property; compliance with product health and safety
standards; liability for injury or illness caused by the
consumption of contaminated products; liability and damage to
Cott's reputation as a result of litigation or legal proceedings;
changes in the legal and regulatory environment in which Cott
operates; the impact of proposed taxes on soda and other sugary
drinks; enforcement of compliance with the Ontario Environmental
Protection Act; unseasonably cold or wet weather, which could
reduce the demand for Cott's beverages; the impact of national,
regional and global events, including those of a political,
economic, business and competitive nature; Cott's ability to
recruit, retain, and integrate new management and a new management
structure; Cott's exposure to intangible asset risk; Cott's ability
to renew its collective bargaining agreements on satisfactory
terms; disruptions in Cott's information systems; compliance with
product health and safety standards; the volatility of Cott's stock
price; and Cott's ability to maintain compliance with the listing
requirements of the New York Stock Exchange.
The foregoing list of factors is not exhaustive. Readers are
cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. Readers are
urged to carefully review and consider the various disclosures,
including but not limited to risk factors contained in Cott's
Annual Report on Form 10-K for the fiscal year ended December 31,
2011 and its quarterly reports on Form 10-Q, as well as other
periodic reports filed with the securities commissions. Cott does
not undertake to update or revise any of these statements in light
of new information or future events, except as expressly required
by applicable law.
Website: www.cott.com
COTT CORPORATION EXHIBIT 1
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions of U.S. dollars, except share and per share amounts, U.S. GAAP)
Unaudited
For the Three Months For the Six Months
Ended Ended
-------------------- --------------------
June 30, July 2, June 30, July 2,
2012 2011 2012 2011
--------- --------- --------- ---------
Revenue, net $ 625.8 $ 640.0 $ 1,149.6 $ 1,174.1
Cost of sales 533.5 552.0 993.9 1,016.5
--------- --------- --------- ---------
Gross profit 92.3 88.0 155.7 157.6
Selling, general and
administrative expenses 48.8 45.1 90.6 90.2
Loss on disposal of property,
plant & equipment 0.3 - 0.9 -
--------- --------- --------- ---------
Operating income 43.2 42.9 64.2 67.4
Other (income) expense, net (0.5) - (0.7) 0.8
Interest expense, net 13.5 14.6 27.5 29.0
--------- --------- --------- ---------
Income before income taxes 30.2 28.3 37.4 37.6
Income tax expense 3.9 0.7 4.3 2.3
--------- --------- --------- ---------
Net income $ 26.3 $ 27.6 $ 33.1 $ 35.3
Less: Net income attributable to
non-controlling interests 1.2 1.1 2.1 2.0
--------- --------- --------- ---------
Net income attributed to Cott
Corporation $ 25.1 $ 26.5 $ 31.0 $ 33.3
========= ========= ========= =========
Net income per common share
attributed to Cott Corporation
Basic $ 0.27 $ 0.28 $ 0.33 $ 0.35
Diluted $ 0.26 $ 0.28 $ 0.32 $ 0.35
Weighted average outstanding
shares (millions) attributed to
Cott Corporation
Basic 94.5 94.1 94.4 94.1
Diluted 95.5 95.5 95.5 95.4
COTT CORPORATION EXHIBIT 2
CONSOLIDATED BALANCE SHEETS
(in millions of U.S. dollars, except share amounts, U.S. GAAP)
Unaudited
----------------- -----------------
June 30, 2012 December 31, 2011
----------------- -----------------
ASSETS
Current assets
Cash & cash equivalents $ 47.1 $ 100.9
Accounts receivable, net of allowance
of $6.6 ($5.7 as of December 31,
2011) 262.4 210.8
Income taxes recoverable 8.3 9.9
Inventories 234.0 210.0
Prepaid expenses and other current
assets 25.1 19.3
----------------- -----------------
Total current assets 576.9 550.9
Property, plant & equipment 488.8 482.2
Goodwill 129.6 129.6
Intangibles and other assets 329.1 341.1
Deferred income taxes 3.3 4.1
Other tax receivable 1.0 1.0
----------------- -----------------
Total assets $ 1,528.7 $ 1,508.9
================= =================
LIABILITIES AND EQUITY
Current liabilities
Current maturities of long-term debt $ 1.8 $ 3.4
Accounts payable and accrued
liabilities 265.0 281.1
----------------- -----------------
Total current liabilities 266.8 284.5
Long-term debt 602.2 602.1
Deferred income taxes 37.2 34.1
Other long-term liabilities 20.2 20.0
----------------- -----------------
Total liabilities 926.4 940.7
Equity
Capital stock, no par - 95,161,968
(December 31, 2011 - 95,101,230)
shares issued 395.7 395.9
Treasury stock (2.1) (2.1)
Additional paid-in-capital 44.8 42.6
Retained earnings 175.0 144.1
Accumulated other comprehensive loss (24.1) (24.7)
----------------- -----------------
Total Cott Corporation equity 589.3 555.8
Non-controlling interests 13.0 12.4
----------------- -----------------
Total equity 602.3 568.2
----------------- -----------------
Total liabilities and equity $ 1,528.7 $ 1,508.9
================= =================
COTT CORPORATION EXHIBIT 3
Consolidated Statements of Cash Flows
(in millions of U.S. dollars, U.S. GAAP)
Unaudited
For the Three Months For the Six Months
Ended Ended
-------------------- --------------------
June 30, July 2, June 30, July 2,
2012 2011 2012 2011
--------- --------- --------- ---------
Operating Activities
Net income $ 26.3 $ 27.6 $ 33.1 $ 35.3
Depreciation & amortization 23.7 23.8 47.5 47.4
Amortization of financing fees 0.9 0.9 2.1 1.8
Share-based compensation
expense 1.4 2.7 2.2 3.8
Increase in deferred income
taxes 4.0 1.0 4.0 1.9
Gain on bargain purchase (0.9) - (0.9) -
Loss on disposal of property,
plant & equipment 0.3 - 0.9 -
Other non-cash items 1.0 1.6 0.6 1.8
Change in operating assets and
liabilities, net of
acquisition:
Accounts receivable (31.3) (41.6) (51.8) (71.0)
Inventories (6.5) (16.6) (23.0) (22.7)
Prepaid expenses and other
current assets (4.1) (1.5) (5.9) (1.2)
Other assets (0.1) (0.6) 0.9 (0.7)
Accounts payable and accrued
liabilities 22.1 24.8 (16.3) 2.9
Income taxes recoverable 1.3 (0.8) 1.6 (3.6)
--------- --------- --------- ---------
Net cash provided by (used
in) operating activities 38.1 21.3 (5.0) (4.3)
--------- --------- --------- ---------
Investing Activities
Acquisition - - (5.0) -
Additions to property, plant &
equipment (19.7) (10.8) (37.4) (23.3)
Additions to intangibles and
other assets (1.0) (2.5) (3.7) (2.5)
Proceeds from sale of Assets
Held for Sale 1.0 - 1.0 -
Other investing activities - (1.8) - (1.7)
--------- --------- --------- ---------
Net cash used in investing
activities (19.7) (15.1) (45.1) (27.5)
--------- --------- --------- ---------
Financing Activities
Payments of long-term debt (1.4) (2.1) (2.6) (3.4)
Borrowings under ABL 17.5 43.6 24.5 143.4
Payments under ABL (17.5) (58.7) (24.5) (131.2)
Distributions to non-
controlling interests (0.3) (0.9) (1.4) (2.5)
Common share repurchase (0.3) - (0.3) -
--------- --------- --------- ---------
Net cash (used in)
provided by financing
activities (2.0) (18.1) (4.3) 6.3
--------- --------- --------- ---------
Effect of exchange rate changes
on cash (0.9) 0.1 0.6 1.3
--------- --------- --------- ---------
Net increase (decrease) in cash
& cash equivalents 15.5 (11.8) (53.8) (24.2)
Cash & cash equivalents,
beginning of period 31.6 35.8 100.9 48.2
--------- --------- --------- ---------
Cash & cash equivalents, end of
period $ 47.1 $ 24.0 $ 47.1 $ 24.0
========= ========= ========= =========
COTT CORPORATION EXHIBIT 4
SEGMENT INFORMATION
(in millions of U.S. dollars or 8 oz equivalent cases, U.S. GAAP)
Unaudited
For the Three Months For the Six Months
Ended Ended
-------------------- --------------------
June 30, July 2, June 30, July 2,
2012 2011 2012 2011
--------- --------- --------- ---------
Revenue
North America $ 475.7 $ 491.3 $ 883.8 $ 920.1
United Kingdom 131.5 126.0 230.7 212.3
Mexico 10.2 16.2 19.3 27.6
RCI 8.4 6.5 15.8 14.1
--------- --------- --------- ---------
$ 625.8 $ 640.0 $ 1,149.6 $ 1,174.1
========= ========= ========= =========
Operating income (loss)
North America $ 31.2 $ 30.0 $ 48.5 $ 50.8
United Kingdom 10.5 11.4 13.7 14.4
Mexico (0.9) (0.6) (2.2) (2.1)
RCI 2.4 2.1 4.2 4.3
--------- --------- --------- ---------
$ 43.2 $ 42.9 $ 64.2 $ 67.4
========= ========= ========= =========
Volume - 8 oz equivalent cases -
Total Beverage (including
concentrate)
North America 204.2 217.7 383.8 412.8
United Kingdom 55.7 58.2 100.6 101.7
Mexico 6.7 11.8 12.6 20.2
RCI 71.7 61.6 142.7 144.1
--------- --------- --------- ---------
338.3 349.3 639.7 678.8
========= ========= ========= =========
Volume - 8 oz equivalent cases -
Filled Beverage
North America 181.9 198.6 338.3 369.2
United Kingdom 51.7 53.7 92.6 92.8
Mexico 6.7 11.8 12.6 20.2
RCI - - - -
--------- --------- --------- ---------
240.3 264.1 443.5 482.2
========= ========= ========= =========
COTT CORPORATION EXHIBIT 5
SUPPLEMENTARY INFORMATION - NON-GAAP - Analysis of Revenue by Reporting
Segment
Unaudited
For the Three Months Ended
-------------------------------------------
(in millions of U.S. dollars,
except percentage amounts) June 30, 2012
-------------------------------------------
North United
Cott(1) America Kingdom Mexico RCI
------- ------- ------- ------- -------
Change in revenue $ (14.2) $ (15.6) $ 5.5 $ (6.0) $ 1.9
Impact of foreign exchange(2) 8.5 2.7 3.7 2.1 -
------- ------- ------- ------- -------
Change excluding foreign
exchange $ (5.7) $ (12.9) $ 9.2 $ (3.9) $ 1.9
------- ------- ------- ------- -------
Percentage change in revenue -2.2% -3.2% 4.4% -37.0% 29.2%
------- ------- ------- ------- -------
Percentage change in revenue
excluding foreign exchange -0.9% -2.6% 7.3% -24.1% 29.2%
------- ------- ------- ------- -------
For the Six Months Ended
-------------------------------------------
(in millions of U.S. dollars,
except percentage amounts) June 30, 2012
-------------------------------------------
North United
Cott(1) America Kingdom Mexico RCI
------- ------- ------- ------- -------
Change in revenue $ (24.5) $ (36.3) $ 18.4 $ (8.3) $ 1.7
Impact of foreign exchange(2) 11.7 3.4 5.4 2.9 -
------- ------- ------- ------- -------
Change excluding foreign
exchange $ (12.8) $ (32.9) $ 23.8 $ (5.4) $ 1.7
------- ------- ------- ------- -------
Percentage change in revenue -2.1% -3.9% 8.7% -30.1% 12.1%
------- ------- ------- ------- -------
Percentage change in revenue
excluding foreign exchange -1.1% -3.6% 11.2% -19.6% 12.1%
------- ------- ------- ------- -------
(1) Cott includes the following reporting segments: North America, United
Kingdom, Mexico and RCI.
(2) Impact of foreign exchange is the difference between the current year's
revenue translated utilizing the current year's average foreign exchange
rates less the current year's revenue translated utilizing the prior
year's average foreign exchange rates.
COTT CORPORATION EXHIBIT 6
SUPPLEMENTARY INFORMATION - NON-GAAP - EARNINGS BEFORE INTEREST, TAXES,
DEPRECIATION & AMORTIZATION
(EBITDA)
(in millions of U.S. dollars)
Unaudited
For the Three For the Six Months
Months Ended Ended
------------------- -------------------
June 30, July 2, June 30, July 2,
2012 2011 2012 2011
--------- --------- --------- ---------
Net income attributed to Cott
Corporation $ 25.1 $ 26.5 $ 31.0 $ 33.3
Interest expense, net 13.5 14.6 27.5 29.0
Income tax expense 3.9 0.7 4.3 2.3
Depreciation & amortization 23.7 23.8 47.5 47.4
Net income attributable to non-
controlling interests 1.2 1.1 2.1 2.0
--------- --------- --------- ---------
EBITDA $ 67.4 $ 66.7 $ 112.4 $ 114.0
Acquisition adjustments
Inventory step-down - (0.9) - (4.1)
Integration costs 0.8 0.4 1.8 1.1
--------- --------- --------- ---------
Adjusted EBITDA $ 68.2 $ 66.2 $ 114.2 $ 111.0
========= ========= ========= =========
COTT CORPORATION EXHIBIT 7
SUPPLEMENTARY INFORMATION - NON-GAAP - Free Cash Flow
(in millions of U.S. dollars)
Unaudited
For the Three Months For the Three Months
Ended Ended
--------------------- ---------------------
June 30, 2012 July 2, 2011
--------------------- ---------------------
Net cash provided by operating
activities $ 38 $ 21
Less: Capital expenditures 20 11
--------------------- ---------------------
Free Cash Flow $ 18 $ 10
===================== =====================
CONTACT: Michael C. Massi Investor Relations Tel: (813)
313-1786 Email Contact
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