Cott Corporation (NYSE: COT) (TSX: BCB) today announced its results
for the third quarter ended September 29, 2012, as well as the
declaration of a quarterly dividend of CAD$0.06 per share on common
shares, payable in cash on December 20, 2012 to shareowners of
record at the close of business on December 4, 2012.
Third Quarter 2012 Results
- Revenue of $584 million was lower by 5% (4% excluding the
impact of foreign exchange) compared to $611 million.
- Gross profit as a percentage of revenue increased 140 basis
points to 12.5% compared to 11.1%.
- Net income and earnings per diluted share were $15 million and
$0.15, respectively, compared to $16 million and $0.17,
respectively.
- EBITDA increased 6% to $55 million compared to $52 million.
Adjusted EBITDA increased 2% to $56 million compared to $55
million.
- Free cash flow was $45 million from $58 million of net cash
provided by operating activities less $13 million of capital
expenditures.
Jerry Fowden, Cott's Chief Executive Officer, commented, "The
third quarter saw an increase in Adjusted EBITDA and higher gross
margin of 140 basis points. I'm pleased with our gross margin
restoration strategy's progress and our consistent cash generation,
which coupled with our view of the future, allows me to take
pleasure in announcing a dividend to be paid later in 2012."
THIRD QUARTER 2012 PERFORMANCE SUMMARY
- Total filled beverage case volume in 8 oz. equivalent
(excluding concentrate sales) was 225 million cases compared to 250
million cases. The volume decline was due primarily to our decision
to exit certain low gross margin business in North America and the
United Kingdom / Europe ("U.K.") as well as a general decline in
the North American CSD and juice categories. Including concentrate
sales, volume was 328 million cases compared to 332 million cases.
Concentrate case sales grew 26% due primarily to increased volume
from a new customer in South America and the timing of shipments to
a customer in Asia.
- Revenue was lower by 5% (4% excluding the impact of foreign
exchange) to $584 million. An overall increase in average price per
case and favorable product mix in the 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 increased 140 basis
points to 12.5% compared to 11.1%. The margin improvement is due
primarily to an increase in average price per case and our exit
from certain low gross margin business.
- Selling, general and administrative ("SG&A") expenses were
$44 million compared to $38 million. The increase in SG&A
expenses was driven primarily by higher employee-related costs
compared to a lowering of the annual incentive and long-term
incentive accruals in the prior year.
- Income before income taxes increased to $17 million compared to
$13 million.
- EBITDA increased 6% to $55 million compared to $52 million.
Adjusted EBITDA increased 2% to $56 million compared to $55
million.
- Free cash flow was $45 million from $58 million of net cash
provided by operating activities less $13 million of capital
expenditures compared to $56 million of free cash flow from $64
million of net cash provided by operating activities less $8
million of capital expenditures.
THIRD QUARTER 2012 REPORTING SEGMENT
HIGHLIGHTS
- North America filled beverage case volume was 167 million cases
compared to 188 million cases. Revenue was lower by 6% to $439
million as an increase in average price per case was more than
offset by our exit from certain low gross margin business alongside
a general decline in the North American CSD and juice categories
and a product mix shift into juice drinks and sports drinks from
100% shelf-stable juice.
- U.K. filled beverage case volume was 51 million cases compared
to 53 million cases due primarily to our exit from certain low
gross margin business. Revenue increased 1% (3% excluding the
impact of foreign exchange) to $126 million as a result of an
increase in average price per case and positive product mix,
including growth in the energy and sports drinks categories.
- Mexico filled beverage case volume was 6 million cases compared
to 9 million cases. Revenue was lower by 24% (16% 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 was 78 million compared to 60 million.
Revenue increased 55% to $9 million due primarily to increased
volume from a new customer in South America and the timing of
shipments to a customer in Asia.
Declaration of Dividend Cott announced
today that it had declared a dividend of CAD$0.06 per share on
common shares. The dividend is payable in cash on December 20, 2012
to shareowners of record at the close of business on December 4,
2012.
Mr. Fowden continued, "We have a track record of strong cash
generation for the past three years and this coupled with our
increased confidence in our business model allow us to allocate
some of our cash generation to shareholders in the form of a
dividend. We believe this will be well received by our
shareholders."
Cott intends to pay a regular quarterly dividend on its common
shares subject to, among other things, the best interests of its
shareholders, Cott's results of operations, cash balances and
future cash requirements, financial condition, statutory
regulations and covenants set forth in Cott's asset-based credit
lending facility and indentures governing the senior notes due in
2017 and senior notes due in 2018, as well as other factors that
the Board of Directors may deem relevant from time to time.
Third Quarter Results Conference Call Cott
Corporation will host a conference call today, November 1, 2012, at
10:00 a.m. EDT, to discuss third 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 producers of beverages on behalf of retailers,
brand owners and distributors. Cott produces multiple types of
beverages in a variety of packaging formats and sizes, including
carbonated soft drinks, 100% shelf stable juice and juice-based
products, clear, still and sparkling flavored waters, energy
products, new age beverages, and ready-to-drink teas, as well as
alcoholic beverages for brand owners. Cott's large manufacturing
footprint, substantial research and development capability and
high-level of quality and customer service enables Cott to offer
its customers a strong value-added proposition of low cost, high
quality products. With approximately 4,000 employees, Cott operates
manufacturing facilities in the United States, Canada, the United
Kingdom and Mexico. Cott also develops and manufactures beverage
concentrates which it exports to 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 declaration of
future dividends, 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 Ended For the Nine Months Ended
-------------------------- --------------------------
September 29, October 1, September 29, October 1,
2012 2011 2012 2011
------------- ----------- ------------- -----------
Revenue, net $ 583.8 $ 611.3 $ 1,733.4 $ 1,785.4
Cost of sales 510.6 543.7 1,504.5 1,560.2
------------- ----------- ------------- -----------
Gross profit 73.2 67.6 228.9 225.2
Selling, general and
administrative
expenses 43.8 38.1 134.4 128.3
Loss on disposal of
property, plant &
equipment 0.8 0.5 1.7 0.5
------------- ----------- ------------- -----------
Operating income 28.6 29.0 92.8 96.4
Other (income)
expense, net (1.5) 1.3 (2.2) 2.1
Interest expense,
net 13.1 14.4 40.6 43.4
------------- ----------- ------------- -----------
Income before income
taxes 17.0 13.3 54.4 50.9
Income tax expense
(benefit) 1.2 (4.0) 5.5 (1.7)
------------- ----------- ------------- -----------
Net income $ 15.8 $ 17.3 $ 48.9 $ 52.6
Less: Net income
attributable to
non-controlling
interests 1.3 1.1 3.4 3.1
------------- ----------- ------------- -----------
Net income
attributed to Cott
Corporation $ 14.5 $ 16.2 $ 45.5 $ 49.5
============= =========== ============= ===========
Net income per
common share
attributed to Cott
Corporation
Basic $ 0.15 $ 0.17 $ 0.48 $ 0.53
Diluted $ 0.15 $ 0.17 $ 0.48 $ 0.52
Weighted average
outstanding shares
(millions)
attributed to Cott
Corporation
Basic 94.5 94.3 94.5 94.2
Diluted 95.6 95.1 95.6 95.0
COTT CORPORATION EXHIBIT 2
CONSOLIDATED BALANCE SHEETS
(in millions of U.S. dollars, except share amounts, U.S.
GAAP)
Unaudited
------------- -------------
September 29, December 31,
2012 2011
------------- -------------
ASSETS
Current assets
Cash & cash equivalents $ 88.1 $ 100.9
Accounts receivable, net of allowance of $7.0
($5.7 as of December 31, 2011) 252.1 210.8
Income taxes recoverable 2.9 9.9
Inventories 219.1 210.0
Prepaid expenses and other assets 25.0 19.3
------------- -------------
Total current assets 587.2 550.9
Property, plant & equipment 488.1 482.2
Goodwill 130.8 129.6
Intangibles and other assets 324.1 341.1
Deferred income taxes 2.8 4.1
Other tax receivable 1.0 1.0
------------- -------------
Total assets $ 1,534.0 $ 1,508.9
============= =============
LIABILITIES AND EQUITY
Current liabilities
Current maturities of long-term debt $ 1.8 $ 3.4
Accounts payable and accrued liabilities 247.1 281.1
------------- -------------
Total current liabilities 248.9 284.5
Long-term debt 602.1 602.1
Deferred income taxes 37.5 34.1
Other long-term liabilities 15.4 20.0
------------- -------------
Total liabilities 903.9 940.7
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 46.1 42.6
Retained earnings 189.5 144.1
Accumulated other comprehensive loss (11.4) (24.7)
------------- -------------
Total Cott Corporation equity 617.8 555.8
Non-controlling interests 12.3 12.4
------------- -------------
Total equity 630.1 568.2
------------- -------------
Total liabilities and equity $ 1,534.0 $ 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 Ended For the Nine Months Ended
-------------------------- --------------------------
September 29, October 1, September 29, October 1,
2012 2011 2012 2011
------------- ----------- ------------- -----------
Operating Activities
Net income $ 15.8 $ 17.3 $ 48.9 $ 52.6
Depreciation &
amortization 24.7 24.0 72.2 71.4
Amortization of
financing fees 0.8 1.1 2.9 2.9
Share-based
compensation
expense 1.3 (1.6) 3.5 2.2
Increase
(decrease) in
deferred income
taxes 0.6 (4.2) 4.6 (2.3)
Gain on bargain
purchase - - (0.9) -
Loss on disposal
of property,
plant & equipment 0.8 0.5 1.7 0.5
Contract
termination
payments - (3.1) - (3.1)
Other non-cash
items (1.4) (0.1) (0.8) 1.7
Change in
operating assets
and liabilities,
net of
acquisition:
Accounts
receivable 15.0 29.5 (36.8) (41.5)
Inventories 17.1 23.1 (5.9) 0.4
Prepaid expenses
and other
assets 0.4 2.1 (5.5) 0.9
Other assets (0.2) 0.9 0.7 0.2
Accounts payable
and accrued
liabilities (22.1) (25.8) (38.4) (22.9)
Income taxes
recoverable 5.2 0.2 6.8 (3.4)
------------- ----------- ------------- -----------
Net cash
provided by
operating
activities 58.0 63.9 53.0 59.6
------------- ----------- ------------- -----------
Investing Activities
Acquisition (4.7) (25.7) (9.7) (25.7)
Additions to
property, plant &
equipment (13.2) (8.1) (50.6) (31.4)
Additions to
intangibles and
other assets (1.0) (1.4) (4.7) (3.9)
Proceeds from sale
of property,
plant & equipment 1.3 0.1 2.3 0.1
Proceeds from
insurance
recoveries 1.7 - 1.7 -
Other investing
activities - (0.1) - (1.8)
------------- ----------- ------------- -----------
Net cash used
in investing
activities (15.9) (35.2) (61.0) (62.7)
------------- ----------- ------------- -----------
Financing Activities
Payments of long-
term debt (0.2) (1.8) (2.8) (5.2)
Borrowings under
ABL - 80.7 24.5 224.1
Payments under ABL - (100.7) (24.5) (231.9)
Distributions to
non-controlling
interests (1.9) (1.7) (3.3) (4.2)
Exercise of
options - 0.2 - 0.3
Common share
repurchase - - (0.3) -
Financing fees (1.2) - (1.2) (0.1)
------------- ----------- ------------- -----------
Net cash used
in financing
activities (3.3) (23.3) (7.6) (17.0)
------------- ----------- ------------- -----------
Effect of exchange
rate changes on
cash 2.2 (1.2) 2.8 0.1
------------- ----------- ------------- -----------
Net increase
(decrease) in cash
& cash equivalents 41.0 4.2 (12.8) (20.0)
Cash & cash
equivalents,
beginning of period 47.1 24.0 100.9 48.2
------------- ----------- ------------- -----------
Cash & cash
equivalents, end of
period $ 88.1 $ 28.2 $ 88.1 $ 28.2
============= =========== ============= ===========
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 Ended For the Nine Months Ended
-------------------------- --------------------------
September 29, October 1, September 29, October 1,
2012 2011 2012 2011
------------- ----------- ------------- -----------
Revenue
North America $ 439.3 $ 468.1 $ 1,323.1 $ 1,388.2
United Kingdom 125.5 124.5 356.2 336.8
Mexico 9.7 12.7 29.0 40.3
RCI 9.3 6.0 25.1 20.1
------------- ----------- ------------- -----------
$ 583.8 $ 611.3 $ 1,733.4 $ 1,785.4
============= =========== ============= ===========
Operating income
(loss)
North America $ 18.9 $ 19.8 $ 67.4 $ 70.6
United Kingdom 7.8 8.3 21.5 22.7
Mexico (1.0) (0.9) (3.2) (3.0)
RCI 2.9 1.8 7.1 6.1
------------- ----------- ------------- -----------
$ 28.6 $ 29.0 $ 92.8 $ 96.4
============= =========== ============= ===========
Volume - 8 oz
equivalent cases -
Total Beverage
(including
concentrate)
North America 190.1 207.5 573.9 620.3
United Kingdom 53.9 55.6 154.5 157.3
Mexico 6.4 8.7 19.0 28.9
RCI 77.5 60.2 220.2 204.3
------------- ----------- ------------- -----------
327.9 332.0 967.6 1,010.8
============= =========== ============= ===========
Volume - 8 oz
equivalent cases -
Filled Beverage
North America 167.3 188.1 505.6 557.3
United Kingdom 50.5 53.0 143.1 145.8
Mexico 6.4 8.7 19.0 28.9
RCI 0.3 - 0.3 -
------------- ----------- ------------- -----------
224.5 249.8 668.0 732.0
============= =========== ============= ===========
EXHIBIT
COTT CORPORATION 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) September 29, 2012
---------------------------------------------
North United
Cott(1) America Kingdom Mexico RCI
------- -------- -------- ------- -------
Change in revenue $ (27.5) $ (28.8) $ 1.0 $ (3.0) $ 3.3
Impact of foreign exchange(2) 5.5 1.6 2.9 1.0 -
------- -------- -------- ------- -------
Change excluding foreign
exchange $ (22.0) $ (27.2) $ 3.9 $ (2.0) $ 3.3
======= ======== ======== ======= =======
Percentage change in revenue -4.5% -6.2% 0.8% -23.6% 55.0%
======= ======== ======== ======= =======
Percentage change in revenue
excluding foreign exchange -3.6% -5.8% 3.1% -15.7% 55.0%
======= ======== ======== ======= =======
For the Nine Months Ended
---------------------------------------------
(in millions of U.S. dollars,
except percentage amounts) September 29, 2012
---------------------------------------------
North United
Cott(1) America Kingdom Mexico RCI
------- -------- -------- ------- -------
Change in revenue $ (52.0) $ (65.1) $ 19.4 $ (11.3) $ 5.0
Impact of foreign exchange(2) 17.2 5.0 8.3 3.9 -
------- -------- -------- ------- -------
Change excluding foreign
exchange $ (34.8) $ (60.1) $ 27.7 $ (7.4) $ 5.0
======= ======== ======== ======= =======
Percentage change in revenue -2.9% -4.7% 5.8% -28.0% 24.9%
======= ======== ======== ======= =======
Percentage change in revenue
excluding foreign exchange -1.9% -4.3% 8.2% -18.4% 24.9%
======= ======== ======== ======= =======
(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 Months Ended For the Nine Months Ended
-------------------------- --------------------------
September 29, October 1, September 29, October 1,
2012 2011 2012 2011
------------- ------------ ------------- ------------
Net income
attributed to Cott
Corporation $ 14.5 $ 16.2 $ 45.5 $ 49.5
Interest expense,
net 13.1 14.4 40.6 43.4
Income tax expense
(benefit) 1.2 (4.0) 5.5 (1.7)
Depreciation &
amortization 24.7 24.0 72.2 71.4
Net income
attributable to
non-controlling
interests 1.3 1.1 3.4 3.1
------------- ------------ ------------- ------------
EBITDA $ 54.8 $ 51.7 $ 167.2 $ 165.7
Acquisition
adjustments
Earnout adjustment - 0.9 - 0.9
Inventory step-up
(step-down) - 0.3 0.1 (3.8)
Integration costs 1.3 1.9 3.1 3.0
------------- ------------ ------------- ------------
Adjusted EBITDA $ 56.1 $ 54.8 $ 170.4 $ 165.8
============= ============ ============= ============
COTT CORPORATION EXHIBIT 7
SUPPLEMENTARY INFORMATION - NON-GAAP - FREE CASH FLOW
(in millions of U.S. dollars)
Unaudited
For the Three Months Ended
----------------------------
September 29, October 1,
2012 2011
------------- -------------
Net cash provided by operating activities $ 58.0 $ 63.9
Less: Capital expenditures (13.2) (8.1)
------------- -------------
Free Cash Flow $ 44.8 $ 55.8
============= =============
CONTACT: Michael C. Massi Investor Relations Tel: (813)
313-1786 Email Contact
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