Cott Corporation (NYSE: COT) (TSX: BCB) today announced its results for the
first quarter ended March 29, 2014, the declaration of a quarterly dividend of
$0.06 per common share now denominated in US currency (thereby removing the
adverse foreign exchange impact of the US dollar strengthening against the
Canadian dollar since the dividend was introduced), and the renewal of its share
repurchase program.
First Quarter 2014 Results
Following the redemption of $200 million of its 2017 Senior Notes during the
fourth quarter of 2013, Cott redeemed the remaining outstanding $15 million on
February 19, 2014 (recognizing an expense of $0.9 million associated with the
redemption).
As part of its strategic planning process, Cott announced the closure of two
smaller manufacturing plants during 2014 and associated SG&A restructuring
as part of ongoing cost review.
Revenue of $475 million was lower by 6% (7% excluding the impact of foreign
exchange) compared to $505 million.
Gross profit as a percentage of revenue was 10.6% compared to 11.2%.
Selling, general and administrative ("SG&A") expenses of $42 million were
higher by 2% compared to $41 million.
Interest expense decreased by 26% to $10 million.
Adjusted EBITDA was $34 million compared to $40 million. Reported EBITDA was $32
million compared to $40 million.
Adjusted net loss and adjusted loss per diluted share were $2.5 million and
$0.03, respectively, compared to adjusted net income of $0.4 million and
adjusted earnings per diluted share of nil in the prior year. Reported net loss
and loss per diluted share were $3.9 million and $0.04, respectively, compared
to reported net income and earnings per diluted share of nil and nil,
respectively, in the prior year.
Free cash flow improved $18 million.
"The carbonated soft drink market continued to decline during the quarter, which
alongside deeply discounted national brand promotional activity, adversely
affected volumes and margins," commented Jerry Fowden, Cott's Chief Executive
Officer. "While the quarter was challenging as expected, we continued to focus
on cash generation and contract manufacturing growth, both of which performed
well during the quarter. Having now achieved our debt reduction targets, we plan
to accelerate the diversification of our business via acquisitions in both
beverage and beverage adjacencies, as well as increase our return of funds to
shareholders over the next 12 months."
FIRST QUARTER 2014 PERFORMANCE SUMMARY
Total volume declined 5% in actual cases and 8% in 8oz equivalent cases. The
volume decline was due primarily to the prolonged aggressive promotional
activity from the national brands in North America, the general market decline
in the North America carbonated soft drink ("CSD") category, as well as the
exiting of case pack water, offset in part by a combination of increased hot
fill and juice volumes with additional contract manufacturing business wins and
the Calypso business.
Revenue was lower by 6% (7% excluding the impact of foreign exchange) at $475
million. The revenue decline was due primarily to lower North American volumes.
Gross profit as a percentage of revenue was 10.6% compared to 11.2%. The gross
margin decline was due primarily to the competitive environment and lower North
America volume alongside additional freight and operating costs caused by
inclement weather in North America.
SG&A expenses were higher by 2% at $42 million compared to $41 million. The
increase in SG&A was due primarily to an increase in employee-related costs.
Interest expense decreased by 26% to $10 million.
Loss before income taxes was $3.4 million compared to income before income taxes
of $1.5 million.
Income tax benefit was $0.9 million compared to income tax expense of $0.5 million.
Adjusted EBITDA was $34 million compared to $40 million. Reported EBITDA was $32
million compared to $40 million.
Adjusted net loss and adjusted loss per diluted share were $2.5 million and
$0.03, respectively, compared to adjusted net income of $0.4 million and
adjusted earnings per diluted share of nil in the prior year. Reported net loss
and loss per diluted share were $3.9 million and $0.04, respectively, compared
to reported net income and earnings per diluted share of nil and nil,
respectively, in the prior year.
Free cash flow improved $18 million to ($61 million) compared to ($79 million).
FIRST QUARTER 2014 REPORTING SEGMENT HIGHLIGHTS
North America volume was lower by 10% in actual and 8oz equivalent cases due
primarily to lower market share for the private label segment within the overall
CSD category as a result of prolonged aggressive promotional activity from the
national brands, as well as a reduction in case pack water volume, offset in
part by a combination of increased hot fill and juice volumes with additional
contract manufacturing business wins.
U.K. volume increased 9% in actual cases and 4% in 8oz equivalent cases. Revenue
was higher by 19% (12% excluding the impact of foreign exchange) at $116 million
due primarily to additional revenues from the Calypso business.
All Other revenue was flat at $15 million due to increased sales to new RCI
customers, offset by lower concentrate volumes and the exiting of low gross
margin business in Mexico. Our All Other reporting segment includes our Mexico
operating segment, Royal Crown International operating segment and other
miscellaneous expenses (prior year information has been updated to reflect this
change in our reporting segments).
Declaration of Dividend
Cott's Board of Directors has declared a dividend of $0.06 per common share now
denominated in US currency (thereby removing the adverse foreign exchange impact
of the US dollar strengthening against the Canadian dollar since the dividend
was introduced), payable in cash on June 18, 2014 to shareowners of record at
the close of business on June 6, 2014.
Share Repurchase Program
Cott's Board of Directors has approved the renewal of its share repurchase
program, subject to compliance with the annual limits established by the Toronto
Stock Exchange ("TSX"), which gives management the authority to
opportunistically repurchase up to 5% of Cott's outstanding common shares over a
12-month period commencing upon the expiration of Cott's currently effective
share repurchase program on May 21, 2014. Cott may repurchase its common shares
under the program in open market transactions and privately negotiated
repurchases through either a 10b5-1 automatic trading plan or at management's
discretion in compliance with regulatory requirements, and given market, cost
and other considerations.
"We are pleased to announce the renewal of our share repurchase program by our
Board of Directors. We intend to manage this program opportunistically, and
based on our current view of the operating environment, expect to return up to
50% of our free cash flows to our shareowners over the next 12 months via our
ongoing dividend and an increase in share repurchases," continued Mr. Fowden.
Subject to completion of appropriate filings with and approval by the TSX,
repurchases will be made through the facilities of the TSX, the New York Stock
Exchange ("NYSE"), or by such other means as may be permitted by the TSX and/or
the NYSE. The rules and policies of the TSX contain restrictions on the number
of shares that can be repurchased over a 12-month period, and also contain
restrictions on the number of shares that can be purchased on any given day,
based on the average daily trading volumes of the common shares on the TSX.
Similarly, the safe harbor conditions of Rule 10b-18 impose certain limitations
on the number of shares that can be purchased on the NYSE per day.
There can be no assurance as to the precise number of shares, if any, that will
be repurchased under the share repurchase program, or the aggregate dollar
amount of the shares actually purchased. Cott may discontinue purchases at any
time, subject to compliance with applicable regulatory requirements. Shares
purchased pursuant to the share repurchase program will be cancelled.
First Quarter Results Conference Call
Cott Corporation will host a conference call today, May 7, 2014, at 10:00 a.m.
EDT, to discuss first 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 drinks, sports 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 approximately 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. "Adjusted Net Income
(Loss)" means GAAP earnings (loss) excluding purchase accounting adjustments,
integration expenses, restructuring expenses and bond redemption costs.
"Adjusted Earnings (Loss) Per Diluted Share" means Adjusted Net Income (Loss)
divided by diluted weighted average outstanding shares. "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 expenses and bond redemption costs. See the accompanying
reconciliations of these non-GAAP measures to the corresponding GAAP measures,
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 Adjusted
Net Income (Loss), Adjusted Earnings (Loss) Per Diluted Share, 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
to present free cash flow, 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, paying
dividends, 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 and operating trends and 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: our ability to compete
successfully; changes in consumer tastes and preferences for existing products
and our ability to develop and timely launch new products that appeal to such
changing consumer tastes and preferences; a loss of or a reduction in business
with key customers, particularly Walmart; fluctuations in commodity prices and
our ability to pass on increased costs to our customers, and the impact of those
increased prices on our volumes; our ability to manage our operations
successfully; our ability to fully realize the potential benefit of strategic
opportunities we pursue; currency fluctuations that adversely affect the
exchange between the U.S. dollar and the British pound sterling, the Euro, the
Canadian dollar, the Mexican peso and other currencies; our ability to maintain
favorable arrangements and relationships with our suppliers; the significant
amount of our outstanding debt and our ability to meet our obligations under our
debt agreements; our ability to maintain compliance with the covenants and
conditions under our debt agreements; fluctuations in interest rates, which
could increase our borrowing costs; credit rating changes; the impact of global
financial events on our financial results; our ability to fully realize the
expected cost savings and/or operating efficiencies from our restructuring
activities; any disruption to production at our beverage concentrates or other
manufacturing facilities; our ability to protect our 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 our reputation as a result of litigation or legal proceedings; changes in the
legal and regulatory environment in which we operate; the impact of 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 our beverages; the impact of national, regional and global
events, including those of a political, economic, business and competitive
nature; our ability to recruit, retain, and integrate new management; our
exposure to intangible asset risk; our ability to renew our collective
bargaining agreements on satisfactory terms; disruptions in our information
systems; or the volatility of our stock price.
The foregoing list of factors is not exhaustive. Readers are cautioned not to
place undue reliance on any 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 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
--------------------------------
March 29, 2014 March 30, 2013
--------------- ---------------
Revenue, net $ 475.1 $ 505.4
Cost of sales 424.8 449.0
--------------- ---------------
Gross profit 50.3 56.4
Selling, general and administrative
expenses 42.3 41.3
Loss on disposal of property, plant &
equipment 0.1 -
Restructuring and asset impairments
Restructuring 2.2 -
Asset impairments 1.6 -
--------------- ---------------
Operating income 4.1 15.1
Other (income) expense, net (2.3) 0.3
Interest expense, net 9.8 13.3
--------------- ---------------
(Loss) income before income taxes (3.4) 1.5
Income tax (benefit) expense (0.9) 0.5
--------------- ---------------
Net (loss) income $ (2.5) $ 1.0
Less: Net income attributable to non-
controlling interests 1.4 1.0
--------------- ---------------
Net loss attributed to Cott Corporation $ (3.9) $ -
=============== ===============
Net loss per common share attributed to
Cott Corporation
Basic $ (0.04) $ -
Diluted $ (0.04) $ -
Weighted average outstanding shares
(millions) attributed to Cott Corporation
Basic 94.3 95.4
Diluted 94.3 95.8
Dividends declared per share $ 0.06 $ 0.06
COTT CORPORATION EXHIBIT 2
CONSOLIDATED BALANCE SHEETS
(in millions of U.S. dollars, except share amounts, U.S. GAAP)
Unaudited
--------------- ---------------
December 28,
March 29, 2014 2013
--------------- ---------------
ASSETS
Current assets
Cash & cash equivalents $ 40.6 $ 47.2
Accounts receivable, net of allowance 237.9 204.4
Income taxes recoverable 1.1 1.1
Inventories 249.0 233.1
Prepaid expenses and other current assets 19.1 19.3
--------------- ---------------
Total current assets 547.7 505.1
Property, plant & equipment, net 472.6 483.7
Goodwill 136.5 137.3
Intangibles and other assets, net 292.1 296.2
Deferred income taxes 4.9 3.6
Other tax receivable 0.4 0.2
--------------- ---------------
Total assets $ 1,454.2 $ 1,426.1
=============== ===============
LIABILITIES AND EQUITY
Current liabilities
Short-term borrowings $ 130.9 $ 50.8
Current maturities of long-term debt 3.9 3.9
Accounts payable and accrued liabilities 273.8 298.2
--------------- ---------------
Total current liabilities 408.6 352.9
Long-term debt 387.8 403.5
Deferred income taxes 41.8 41.5
Other long-term liabilities 20.8 22.3
--------------- ---------------
Total liabilities 859.0 820.2
Equity
Capital stock, no par - 94,325,432
(December 28, 2013 - 94,238,190) shares
issued 393.6 392.8
Additional paid-in-capital 44.2 44.1
Retained earnings 167.3 176.3
Accumulated other comprehensive loss (18.5) (16.8)
--------------- ---------------
Total Cott Corporation equity 586.6 596.4
Non-controlling interests 8.6 9.5
--------------- ---------------
Total equity 595.2 605.9
--------------- ---------------
Total liabilities and equity $ 1,454.2 $ 1,426.1
=============== ===============
COTT CORPORATION EXHIBIT 3
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions of U.S. dollars)
Unaudited
For the Three Months Ended
--------------------------------
March 29, 2014 March 30, 2013
--------------- ---------------
Operating Activities
Net (loss) income $ (2.5) $ 1.0
Depreciation & amortization 25.3 24.7
Amortization of financing fees 0.6 0.7
Share-based compensation expense 1.3 0.7
Decrease in deferred income taxes (1.1) -
Write-off of financing fees and discount 0.3 -
Loss on disposal of property, plant &
equipment 0.1 -
Asset impairments 1.6 -
Other non-cash items (0.2) 0.3
Change in operating assets and
liabilities, net of acquisition:
Accounts receivable (33.3) (28.2)
Inventories (16.5) (13.2)
Prepaid expenses and other current
assets 0.2 (0.6)
Other assets 0.2 (0.1)
Accounts payable and accrued
liabilities, and other liabilities (28.5) (44.1)
Income taxes recoverable - 0.2
--------------- ---------------
Net cash used in operating
activities (52.5) (58.6)
--------------- ---------------
Investing Activities
Additions to property, plant & equipment (8.8) (19.9)
Additions to intangibles and other
assets (1.5) (0.2)
Proceeds from insurance recoveries - 0.4
--------------- ---------------
Net cash used in investing
activities (10.3) (19.7)
--------------- ---------------
Financing Activities
Payments of long-term debt (16.0) (0.5)
Borrowings under ABL 95.0 -
Payments under ABL (15.1) -
Distributions to non-controlling
interests (2.3) (2.1)
Common shares repurchased and cancelled (0.4) (2.9)
Dividends to shareholders (5.1) -
--------------- ---------------
Net cash provided by (used in)
financing activities 56.1 (5.5)
--------------- ---------------
Effect of exchange rate changes on cash 0.1 (2.6)
--------------- ---------------
Net decrease in cash & cash equivalents (6.6) (86.4)
Cash & cash equivalents, beginning of
period 47.2 179.4
--------------- ---------------
Cash & cash equivalents, end of period $ 40.6 $ 93.0
=============== ===============
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 Ended
--------------------------------
March 29, 2014 March 30, 2013
--------------- ---------------
Revenue
North America $ 344.7 $ 393.2
United Kingdom 115.6 97.4
All Other 14.8 14.8
--------------- ---------------
Total $ 475.1 $ 505.4
=============== ===============
Operating income (loss)
North America $ 2.3 16.7
United Kingdom 2.2 -
All Other 2.5 1.3
Corporate (2.9) (2.9)
--------------- ---------------
Total $ 4.1 $ 15.1
=============== ===============
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) March 29, 2014
--------------------------------------------------
North United
Cott(1) America Kingdom All Other
----------- ----------- ----------- -----------
Change in revenue $ (30.3) $ (48.5) $ 18.2 $ -
Impact of foreign
exchange(2) (3.3) 3.2 (6.7) 0.2
----------- ----------- ----------- -----------
Change excluding foreign
exchange $ (33.6) $ (45.3) $ 11.5 $ 0.2
----------- ----------- ----------- -----------
Percentage change in
revenue -6.0% -12.3% 18.7% 0.0%
----------- ----------- ----------- -----------
Percentage change in
revenue excluding
foreign exchange -6.6% -11.5% 11.8% 1.4%
----------- ----------- ----------- -----------
(1) Cott includes the following reporting segments: North America, United
Kingdom and All Other.
(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
--------------------------------
March 29, 2014 March 30, 2013
--------------- ---------------
Net loss attributed to Cott Corporation $ (3.9) $ -
Interest expense, net 9.8 13.3
Income tax (benefit) expense (0.9) 0.5
Depreciation & amortization 25.3 24.7
Net income attributable to non-controlling
interests 1.4 1.0
--------------- ---------------
EBITDA $ 31.7 $ 39.5
Restructuring and asset impairments 3.8 -
Bond redemption costs 0.9 -
Tax reorganization and regulatory costs 0.1 -
Acquisition and integration (2.4) 0.6
--------------- ---------------
Adjusted EBITDA $ 34.1 $ 40.1
=============== ===============
COTT CORPORATION EXHIBIT 7
SUPPLEMENTARY INFORMATION - NON-GAAP - FREE CASH FLOW
(in millions of U.S. dollars)
Unaudited
For the Three Months Ended
--------------------------------
March 29, 2014 March 30, 2013
--------------- ---------------
Net cash used in operating activities $ (52.5) $ (58.6)
Less: Capital expenditures (8.8) (19.9)
--------------- ---------------
Free Cash Flow $ (61.3) $ (78.5)
=============== ===============
COTT CORPORATION EXHIBIT 8
SUPPLEMENTARY INFORMATION - NON-GAAP - ADJUSTED NET INCOME
(in millions of U.S. dollars, except share and per share amounts)
Unaudited
For the Three Months Ended
--------------------------------
March 29, 2014 March 30, 2013
--------------- ---------------
Net loss attributed to Cott Corporation $ (3.9) $ -
Restructuring and asset impairments, net of
tax 2.9 -
Bond redemption costs, net of tax 0.9 -
Tax reorganization and regulatory costs,
net of tax 0.1 -
Acquisition and integration, net of tax (2.5) 0.4
--------------- ---------------
Adjusted net (loss) income attributed to
Cott Corporation $ (2.5) $ 0.4
=============== ===============
Adjusted net (loss) income per common share
attributed to Cott Corporation
Basic $ (0.03) $ -
Diluted $ (0.03) $ -
Weighted average outstanding shares
(millions) attributed to Cott Corporation
Basic 94.3 95.8
Diluted 94.3 95.8
FOR FURTHER INFORMATION PLEASE CONTACT:
Jarrod Langhans
Investor Relations
Tel: (813) 313-1732
Investorrelations@cott.com
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