Notes to Financial Statements
December 31, 2012 and
2011
General
The following description of The Restated Cott USA 401(k) Savings & Retirement Plan (the Plan) is provided for
general information purposes only. Participants should refer to the Plan document for a more complete description of the Plans provisions. The Plan is a defined contribution savings and investment plan under Section 401(k) of the Internal
Revenue Code (IRC) covering substantially all full-time employees 18 years or older who have completed 90 days of service with Cott Beverages, Inc. (formerly Cott Beverages USA, Inc.), a wholly-owned subsidiary of Cott Corporation (the
Company). The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
Effective June 1, 2011, the Company merged the Cliffstar Corporation Profit Sharing and 401(k) Plan (Cliffstar) with and into
the Plan. Total plan assets transferred in June of 2011 from the Cliffstar plan was $35,196,694.
Participant Accounts
Participant accounts are credited with units by investment for participant contributions, employer contributions, fund transfers and
participant loan repayments. Unit values are calculated daily to reflect the gains or losses of the underlying investments and expenses. Each participants account is credited with the participants contribution and allocation of Plan
earnings (losses). Allocations are based on account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the units in the participants account by investment multiplied by the appropriate
unit values on the valuation date.
Contributions
Participation in the Plan is voluntary. Active participants can contribute up to 50% of earnings, to a maximum of $17,000 for 2012 and $16,500 for 2011 to the Plan in the form of basic contributions. Contributions
in excess of those allowed by IRC Section 401(k)(3) are reflected as excess participant contributions. Participants who have attained age 50 before the end of the Plan year are eligible to make catch-up contributions. The Company matched the
employee contributions dollar for dollar on the first 1% of the participants earnings, and 50% of the next 5% of the participants earnings for the years ended December 31, 2012 and 2011. Investment in Cott Corporation Common Stock
is optional for Plan participants. Non-matching Company contributions may be made at the discretion of the Board of Directors of the Company. There were no non-matching contributions for the years ended December 31, 2012 and 2011.
Vesting
Participants are
immediately vested in their contributions plus actual earnings thereon. Vesting in the Companys matching and discretionary contribution portion of their accounts, plus actual earnings thereon, is at a rate of 20% for the first year based on
eligibility date. A participant is 100% vested after 2 years of credited service.
Investment Options
The Plan provides participants with twenty-one diverse mutual funds, one common collective investment trust fund and Cott Corporation Common Stock
fund, as investment options in which to invest their contributions.
Notes Receivable from Participants
Participants may borrow from their accounts up to a maximum of the lesser of $50,000, or 50% of their account balance. The term of the loan shall
not exceed 5 years except for loans to
4
The Restated Cott USA 401(k) Savings & Retirement Plan
Notes to Financial Statements
December 31, 2012 and 2011
purchase a primary residence, in which case the term of the loan shall not exceed 15 years. The loans are secured by the balance in the participants account and bear interest at a rate of
prime plus 1% as of the date of loan origination. Principal and interest is paid ratably through payroll deductions.
Benefit
Payments
Vested benefits of retired, disabled, or terminated employees are distributed in several methods as elected by the
participant or, when applicable, the participants beneficiary. The methods of distribution include single lump-sum payments; or provided the participants vested account exceeds $5,000, in periodic monthly, quarterly or annual
installments; or in periodic partial-sum payments, in accordance with nondiscriminatory and objective standards and procedures consistently applied by the administrator; or to the extent the participants vested account is invested in employer
securities, in a single payment in the form of whole shares of stock, with any fractional shares, and the cash and cash equivalent portions of the underlying unitized stock account, being distributed in cash.
2.
|
Summary of Significant Accounting Policies
|
Basis of Presentation
The
accompanying financial statements have been prepared on the accrual basis of accounting.
Recently Issued Accounting Pronouncements
ASU No. 2011-04 Amendments to Achieve Common Fair Value Measurement
and
Disclosure Requirements in U.S.
GAAP
and
IFRSs
In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update
(ASU) No. 2011-04,
Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs
(ASU 2011-04). ASU 2011-04 was issued to provide a consistent definition of
fair value and to ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards. ASU 2011-04 also changes certain fair value measurement principles and enhances the
disclosure requirements, particularly for Level 3 fair value measurements. We adopted this standard update during the first quarter of 2012. The adoption of this standard update did not have a significant impact on the Plans financial
statements.
In 2012, the FASB issued various ASUs which are not expected to have an impact on the Plans net assets
available for benefits.
Investment Valuation and Income Recognition
The Plans investments are stated at fair value. Fair value is the price that would be received to sell our asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date. See Note 9 for further discussion.
As
described in Accounting Standards Codification (ASC) No. 962-325-35 (ASC 962)
,
Plan Accounting Defined Contribution Pension Plans
, investment contracts held in a defined-contribution plan
are required to be reported at fair value. However, contract value is the relevant measurement attribute for that portion of the net assets available for benefits of a defined-contribution plan attributable to fully benefit-responsive investment
contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under terms of the Plan. The Plan invests in investment contracts through a common collective investment trust. As required by
ASC 962, the Statements of Net Assets Available for Benefits
5
The Restated Cott USA 401(k) Savings & Retirement Plan
Notes to Financial Statements
December 31, 2012 and 2011
present the fair value of the investment in the common collective investment trust as well as the adjustment of the investment in the common collective investment trust from fair value to
contract value relating to the investment contracts. The Statements of Changes in Net Assets Available for Benefits are prepared on a contract value basis. Therefore, the presentation of the December 31, 2012 and 2011 financial statement
amounts include the presentation of fair value with an adjustment to contract value for such investments.
Purchases and sales of
securities are recorded on a trade date basis. Interest income is recorded on an accrual basis. Dividends are recorded on the ex-dividend date. The Plan presents in the Statements of Changes in Net Assets Available for Benefits the net appreciation
(depreciation) in fair value of its investments which consists of the realized gains and losses and the unrealized appreciation (depreciation) on those investments.
Contributions
Participant and employer contributions are recorded in the period during which
payroll deductions are made from the participants earnings.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of increases and decreases
in net assets during the reporting periods. Actual results could differ from those estimates.
Administrative Costs
Substantially all administrative expenses of the Plan are paid by the Plan. Additionally, participant returns are reported net of investment
management fees and other administrative expenses.
Risks and Uncertainties
The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market and credit
risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect
participants account balances and the amounts reported in the Statements of Net Assets Available for Benefits.
Although it has not
expressed any intent to do so, the Company has the right under the Plan to discontinue contributions and terminate the Plan. Upon a complete or partial termination of the Plan, the account of each affected participant will fully vest. The form and
timing of payment will be as determined under the Plan at the time of Plan termination.
Effective January 1, 2008,
the Plan was amended to be an automatic enrollment 401(k) safe-harbor plan. The Internal Revenue Service has determined and informed the Company by a letter dated July 7, 2010, that the Plan, and the related trust, are designed in accordance
with the applicable sections of the IRC and therefore, the Plan is qualified and the related trust is tax
6
The Restated Cott USA 401(k) Savings & Retirement Plan
Notes to Financial Statements
December 31, 2012 and 2011
exempt under the applicable sections of the IRC. The Plan has adopted amendments since receiving the determination letter from the Internal Revenue Service. The Plan administrator believes that
the Plan is currently designed and being operated in compliance with the applicable requirements of the IRC.
Accounting principles
generally accepted in the United States of America require the Plans management to evaluate tax positions taken by the Plan and recognize a tax liability or asset if the Plan has taken an uncertain position that more likely than not would not
be sustained upon examination by the Internal Revenue Service. The Plan administrator has analyzed the tax positions by the Plan, and has concluded that as of December 31, 2012 and 2011, there are no uncertain positions taken or expected to be
taken that would require recognition of a liability or asset or disclosure in the financial statements. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. The Plan
administrator believes it is no longer subject to income tax examinations for years prior to 2009.
Forfeited nonvested amounts at
December 31, 2012 and 2011 were $27,121 and $39,272, respectively. These are included in the Plans investments and are available to reduce future employer contributions and pay administrative expenses. Forfeited nonvested amounts used to
reduce employer contributions and pay administrative expenses were $118,211 and $340,412 for the years ended December 31, 2012 and 2011, respectively.
6.
|
Common Collective Investment Trust
|
The New
York Life Anchor Account II Fund (the Anchor Fund) offered to participants of the Plan is a common collective investment trust fund managed by NY Life. The Anchor Fund consists of a diversified portfolio of high quality stable value
investment contracts issued by life insurance companies, banks and other financial institutions. Income is accrued daily and reinvested in the fund. The accrual of income is reflected in each funds unit price which is priced daily and is not
held constant.
The key factors that impact the crediting rate under the contract are the timing and magnitude of the cash flows in and
out of the Anchor Fund as well as prevailing market rates on fixed income assets available for investment by the Anchor Fund. The interest crediting rate may be reset not more frequently than daily and not less frequently than quarterly. The
interest crediting rate reflects the book yield on the Anchor Fund, adjusted to reflect amortization of any realized gains and losses. The minimum crediting rate is zero, as provided in the contract.
The annualized gross crediting rate under the contract was 2.37% and 3.17% as of December 31, 2012 and 2011, respectively. The annualized net
crediting rate under the contract (i.e. the rate credited to participants in the Plan) was 1.73% and 2.67% as of December 31, 2012 and 2011, respectively.
The contract limits the ability of the Plan to transact at contract value upon the occurrence of certain events. These events include:
|
|
|
The Plans failure to qualify under Section 401(a) or Section 401(k) of the IRC.
|
|
|
|
Any substantive modification of the Plan that would have a potential adverse financial, legal or administrative impact on the obligations of the Anchor Fund to
the Plan.
|
7
The Restated Cott USA 401(k) Savings & Retirement Plan
Notes to Financial Statements
December 31, 2012 and 2011
|
|
|
Any transfer of assets from the Anchor Fund directly to a competing investment option.
|
|
|
|
Withdrawals due to events initiated by the Plan including, but not limited to, total or partial Plan termination, mergers, spin-offs, lay-offs, early retirement
incentive programs, sales or closings of all or part of the Companys operations, bankruptcy or receivership.
|
The contract may be terminated by the contract holder at any time with 30 days written notice to NY Life. NY Life will pay a single amount equal to
the Anchor Fund account balance as of the termination date projected for a two-year period at an interest rate equal to the effective annual rate applicable, as of the termination date, pursuant to the contract, and discounted back to the
termination date at a rate equal to the greater of 1) the effective annual interest rate pursuant to the contract as of the termination date or 2) the yield quoted or estimated by Salomon Brothers Bond Market Roundup for New Issues
Industrials (long term) rated BBB as of the Friday preceding the termination date, or, if such yield is not quoted by Salomon Brothers, such other recognized independent public source of interest rates as NY Life may reasonably select.
7.
|
Related-Party Transactions
|
Fees paid by the
Plan for trustee management services amounted to $175,135 and $43,611 for the years ended December 31, 2012 and 2011, respectively. These fees qualify as party-in-interest transactions and are recorded in administrative costs in the
accompanying Statements of Changes in Net Assets Available for Benefits.
The Plans investments include shares of Cott Corporation
Common Stock and mutual funds managed by the trustee and therefore these transactions qualify as party-in-interest transactions. Shares of Cott Corporation Common Stock purchased by the Plan during 2012 and 2011 were 7,700 and 69,700, respectively.
Shares of Cott Corporation Common Stock sold by the Plan during 2012 and 2011 were 25,850 and 250,470, respectively. Additionally, loans to participants qualify as party-in-interest transactions.
The following table presents
the Plans investments that represent 5% or more of the Plans net assets available for benefits as of December 31, 2012 and 2011:
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
2011
|
|
New York Life Anchor Acct II Fund
|
|
$
|
12,555,983
|
|
|
$
|
11,673,781
|
|
JP Morgan SmartRet 2015 Fund A
|
|
|
5,505,253
|
|
|
|
5,421,470
|
|
JP Morgan SmartRet 2020 Fund A
|
|
|
10,683,093
|
|
|
|
9,492,534
|
|
JP Morgan SmartRet 2025 Fund A
|
|
|
11,925,945
|
|
|
|
9,344,246
|
|
JP Morgan SmartRet 2030 Fund A
|
|
|
8,643,027
|
|
|
|
7,137,691
|
|
JP Morgan SmartRet 2035 Fund A
|
|
|
7,618,192
|
|
|
|
5,965,215
|
|
JP Morgan SmartRet 2040 Fund A
|
|
|
5,676,092
|
|
|
|
4,496,958
|
|
8
The Restated Cott USA 401(k) Savings & Retirement Plan
Notes to Financial Statements
December 31, 2012 and 2011
During 2012 and 2011, the Plans investments (including gains and losses on investments
bought and sold, as well as held during the year) appreciated (depreciated) in value as follows:
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
2011
|
|
Collective Investment Trust Fund
|
|
$
|
122,272
|
|
|
$
|
216,449
|
|
Common stocks
|
|
|
699,594
|
|
|
|
(1,198,577
|
)
|
Mutual funds
|
|
|
7,909,351
|
|
|
|
(3,267,156
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8,731,217
|
|
|
$
|
(4,249,284
|
)
|
|
|
|
|
|
|
|
|
|
9.
|
Fair Value Measurements
|
ASC No. 820
establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in
active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under ASC No. 820 are described below:
Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Plan
has the ability to access.
Level 2 Inputs to the valuation methodology include:
|
|
|
Quoted prices for similar assets or liabilities in active markets;
|
|
|
|
Quoted prices for identical or similar assets or liabilities in inactive markets;
|
|
|
|
Inputs other than quoted prices that are observable for the asset or liability;
|
|
|
|
Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
|
If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or
liability.
Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The assets or liabilitys fair value measurement level within the fair value hierarchy is based on the lowest level of any
input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.
Following is a description of the valuation methodologies used for assets measured at fair value:
|
|
|
Common stocks: Valued at the closing price reported on the active market on which the individual securities are traded and as such are generally categorized as
level 1.
|
|
|
|
Mutual funds: Valued at the net asset value (NAV) of shares held by the Plan at year end and as such are generally categorized as level 1.
|
9
The Restated Cott USA 401(k) Savings & Retirement Plan
Notes to Financial Statements
December 31, 2012 and 2011
|
|
|
Common Collective Investment Trust fund: Value based on the fair value of the underlying investments (Refer to Note 2
Investment Valuation and Income
Recognition
) and as such is generally categorized as level 2.
|
The methods described above may produce a
fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of
different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
The following table sets forth by level, within the fair value hierarchy, the Plans assets at fair value as of December 31, 2012 and 2011. There have been no changes in methodologies used at
December 31, 2012 and 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets at Fair Value as of December 31, 2012
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Mutual funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
$
|
7,508,420
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
7,508,420
|
|
International Equity
|
|
|
2,798,157
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,798,157
|
|
Fixed Income
|
|
|
2,881,243
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,881,243
|
|
Balanced
|
|
|
56,379,882
|
|
|
|
-
|
|
|
|
-
|
|
|
|
56,379,882
|
|
Money Market
|
|
|
117,681
|
|
|
|
-
|
|
|
|
-
|
|
|
|
117,681
|
|
Common Stock
|
|
|
2,864,454
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,864,454
|
|
Common Collective Investment Trust
|
|
|
-
|
|
|
|
12,798,313
|
|
|
|
-
|
|
|
|
12,798,313
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at fair value
|
|
$
|
72,549,837
|
|
|
$
|
12,798,313
|
|
|
$
|
-
|
|
|
$
|
85,348,150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets at Fair Value as of December 31, 2011
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Mutual funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
$
|
6,611,270
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
6,611,270
|
|
International Equity
|
|
|
2,204,193
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,204,193
|
|
Fixed Income
|
|
|
2,283,958
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,283,958
|
|
Balanced
|
|
|
46,728,162
|
|
|
|
-
|
|
|
|
-
|
|
|
|
46,728,162
|
|
Money Market
|
|
|
73,347
|
|
|
|
-
|
|
|
|
-
|
|
|
|
73,347
|
|
Common Stock
|
|
|
2,347,888
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,347,888
|
|
Common Collective Investment Trust
|
|
|
-
|
|
|
|
11,673,781
|
|
|
|
-
|
|
|
|
11,673,781
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at fair value
|
|
$
|
60,248,818
|
|
|
$
|
11,673,781
|
|
|
$
|
-
|
|
|
$
|
71,922,599
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
The Restated Cott USA 401(k) Savings & Retirement Plan
Notes to Financial Statements
December 31, 2012 and 2011
10.
|
Reconciliation of Financial Statements to Form 5500
|
The following is a reconciliation of Net Assets Available for Benefits per the financial statements to the Form 5500, which was prepared on a cash basis, as of December 31, 2012 and 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
2011
|
|
Net Assets Available for Benefits per the financial statements
|
|
$
|
89,854,846
|
|
|
$
|
76,805,148
|
|
Plus:
|
|
Current year excess contributions payable to participants
|
|
|
10,599
|
|
|
|
700
|
|
Less:
|
|
Adjustment from contract value to fair value for interest in collective investment trust relating to fully benefit-responsive investment contract *
|
|
|
-
|
|
|
|
(120,240
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net Assets Available for Benefits per Form 5500
|
|
$
|
89,865,445
|
|
|
$
|
76,685,608
|
|
|
|
|
|
|
|
|
|
|
|
|
* The December 31, 2012 Form 5500 states the common collective investment trust fund at contract value.
11
The Restated Cott USA 401(k) Savings & Retirement Plan
Notes to Financial Statements
December 31, 2012 and 2011
The following is a reconciliation of additions to net assets per the financial statements to the
Form 5500 as of December 31, 2012 and 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
2011
|
|
Participant contributions per the financial statements
|
|
$
|
5,804,313
|
|
|
$
|
4,507,992
|
|
Less:
|
|
Additional prior year excess contributions payable to participants
|
|
|
(700
|
)
|
|
|
(8,270
|
)
|
Plus:
|
|
Current year excess contributions payable to participants per the financial statements
|
|
|
10,599
|
|
|
|
700
|
|
Plus:
|
|
Prior year participant contributions receivable
|
|
|
-
|
|
|
|
304,645
|
|
|
|
|
|
|
|
|
|
|
|
|
Participant contributions per Form 5500
|
|
$
|
5,814,212
|
|
|
$
|
4,805,067
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employer contributions per the financial statements
|
|
$
|
2,676,663
|
|
|
$
|
1,729,642
|
|
Plus:
|
|
Prior year employer contributions receivable
|
|
|
-
|
|
|
|
168,171
|
|
|
|
|
|
|
|
|
|
|
|
|
Employer contributions per Form 5500
|
|
$
|
2,676,663
|
|
|
$
|
1,897,813
|
|
|
|
|
|
|
|
|
|
|
|
|
The following is a reconciliation of net appreciation (depreciation) in fair value of investments per the financial
statements to the Form 5500 as of December 31, 2012 and 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
2011
|
|
Net appreciation (depreciation) in fair value of investments per the financial statements
|
|
$
|
8,731,217
|
|
|
$
|
(4,249,284
|
)
|
Plus:
|
|
Prior year adjustment from contract value to fair value for interest in collective investment trust relating to fully benefit-responsive investment contract
|
|
|
120,240
|
|
|
|
99,105
|
|
Less:
|
|
Current year adjustment from contract value to fair value for interest in collective investment trust relating to fully benefit-responsive investment contract *
|
|
|
-
|
|
|
|
(120,240
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net appreciation (depreciation) in fair value of investments per Form 5500
|
|
$
|
8,851,457
|
|
|
$
|
(4,270,419
|
)
|
|
|
|
|
|
|
|
|
|
|
|
* The December 31, 2012 Form 5500 states the common collective investment trust fund at contract value.
12