Published: May 05, 2010
Cott Reports First Quarter 2010 Results
Cott Corporation (NYSE: COT) (TSX: BCB)
-- Revenue was $363 million, a decline of 1.1%
-- Gross margin as a percentage of sales was 15.8%
-- Operating income increased 13% to $25 million
-- EBITDA was flat at $39 million (see accompanying reconciliation
of GAAP net income to non-GAAP EBITDA and adjusted EBITDA)
(All information in U.S. dollars; all first quarter 2010
comparisons are relative to the first quarter of 2009.)
Cott Corporation (NYSE: COT) (TSX: BCB) today announced its results for the
first quarter ended April 3, 2010. First quarter 2010 revenue was $363
million compared to $367 million, a decline of 1.1%, or 4.4% excluding the
impact of foreign exchange. Operating income increased 13% to $25 million
from $22 million. Net income and earnings per diluted share were $12
million and $0.14, respectively, compared to $20 million and $0.28,
respectively. The decline in net income and earnings per diluted share was
due to an income tax expense of $4 million in the first quarter of 2010
compared to an income tax benefit of $6 million in the first quarter of
2009.
"I am pleased with another quarter of improvement in operating income which
benefited from strong performances from the UK and Royal Crown
International," commented Cott's Chief Executive Officer, Jerry Fowden. "In
what we had previously communicated would be a challenging quarter for
volume comparisons, lower North America volumes were more than offset by
strong contributions from our other operating segments and lower overhead
expenses. Our North America volume comparisons become easier as the year
progresses, and we were pleased to see a stronger North America volume
performance in April," added Fowden.
FIRST QUARTER 2010 PERFORMANCE SUMMARY
-- Revenue declined 1.1%, or 4.4% excluding the impact of foreign
exchange. Volume growth in the United Kingdom / Europe operating
segment ("U.K."), Mexico and Royal Crown International ("RCI") more
than offset lower volumes in North America.
-- Gross margin as a percentage of sales was 15.8% compared to 15.9%,
driven by the ongoing benefit of operational efficiencies, cost savings
and improved pricing from late 2008.
-- Selling, general and administrative ("SG&A") expenses declined to 8.9%
of sales from 9.5%, primarily as a result of lower information
technology costs and reduced bad debt expense.
-- Operating income was $25 million compared to $22 million as higher
operating income in the U.K., RCI and Mexico more than offset lower
operating income in North America.
-- The Company's income tax expense was $4 million compared to a tax
benefit of $6 million in 2009.
FIRST QUARTER 2010 SEGMENT HIGHLIGHTS
-- North America revenue declined 8.9%, or 10.8% excluding the impact of
foreign exchange. North America filled beverage case volume declined
7.9% to 131 million cases. The volume decline was attributable to
national brand promotional activity as well as the effect of
competitive price increases late in 2008 which temporarily increased
the price gap during the first and second quarters of 2009, creating
an unfavourable volume comparison for the first quarter of 2010.
Operating income declined to $21 million from $26 million, as the
impact of lower volumes was partially offset by operational cost
reductions and SG&A savings.
"We continue to focus on improving the volume trend in North America.
We saw the results of this focus with an improved volume trend in
April," commented Cott's Chief Financial Officer, Neal Cravens.
-- U.K. revenue increased 24.5%, or 15.2% excluding the impact of foreign
exchange. Filled beverage case volume increased 9.8% to 39 million
cases. The volume increase was due to the continued growth in energy,
sports and isotonic products as well as a weak prior year volume
performance as a result of the timing of competitive price increases
late in 2008. U.K. operating income increased by $6 million to $3
million from a loss of $3 million due to a more profitable sales mix
and operational cost savings.
-- Revenue in Mexico increased 20.4%, or 8.3% excluding the impact of
foreign exchange. Mexico filled beverage case volume increased 48.2%
to 8 million cases, primarily as a result of new business in the retail
channel as well as the commencement of shipments to a new 2010 contract
bottled water customer. Under this new contract, the Company receives
a portion of final case revenue through a co-pack fee, resulting in a
decline in average selling price per case in Mexico.
-- RCI revenue increased 95.2% to $8 million, primarily as a result of
increased volume as well as ordering patterns in certain key
geographies. RCI concentrate volumes increased 71.7% to 84 million
cases compared to 49 million cases in the first quarter of 2010.
First Quarter Conference Call
Cott Corporation will host a conference call today, May 5, 2010, at 10:00
a.m. ET, 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 the Company'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 Corporation ("Cott" or the "Company") is one of the world's largest
non-alcoholic beverage companies and the world's largest retailer brand
soft drink company. With approximately 2,800 employees, the Company
operates bottling facilities in the United States, Canada, the United
Kingdom and Mexico. Cott markets non-alcoholic beverage concentrates in
over 50 countries around the world.
Non-GAAP Measures
Cott supplements its reporting of revenue determined in accordance with
GAAP by excluding the impact of foreign exchange to separate the impact of
currency exchange rate changes from the Company's results of operations.
Additionally, Cott supplements its reporting of earnings before interest,
taxes, depreciation & amortization in accordance with GAAP by excluding the
impact of certain items to separate the impact of these items from
underlying business. Since the Company 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 the performance of the Company's management
and its core business performance. The non-GAAP financial measures
described above are in addition to, and not meant to be considered superior
to, or a substitute for, the Company'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 the
Company makes the statements. Forward-looking statements involve inherent
risks and uncertainties and the Company 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 statements related to
future financial operating results and related matters. The forward-looking
statements are based on assumptions that volume and revenue will be
consistent with recent historical trends, that interest rates will remain
constant and debt levels will decline, and, in certain cases, on
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: the Company's
ability to compete successfully; changes in consumer tastes and preferences
for existing products and the Company'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 Wal-Mart; fluctuations in commodity prices and the Company's
ability to pass on increased costs to its customers, and the impact of
those increased prices on the Company's volumes; the Company's ability to
maintain favorable arrangements and relationships with its suppliers; the
Company'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; the Company's substantial debt levels and the Company's
ability to service and reduce its debt; the Company's ability to maintain
compliance with the covenants and conditions under its debt agreements;
fluctuations in interest rates; credit rating changes; further
deterioration of the capital markets; the Company's ability to fully
realize the expected cost savings and/or operating efficiencies from its
restructuring activities; any disruption to production at the Company's
beverage concentrates or other manufacturing facilities; the Company's
ability to protect its intellectual property; the impact of regulation and
regulatory, investigative and legal actions; the impact of proposed taxes
on soda and other sugary drinks; unseasonably cold or wet weather, which
could reduce the demand for the Company's beverages; the impact of
national, regional and global events, including those of a political,
economic, business and competitive nature; the Company's ability to
recruit, retain, and integrate new management and a new management
structure; the Company's exposure to intangible asset risk; the volatility
of the Company's stock price; the Company's ability to maintain compliance
with the listing requirements of the New York Stock Exchange; the Company's
ability to renew its collective bargaining agreements on satisfactory
terms; and disruptions in the Company's information systems.
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 the Company's Annual Report on Form 10-K for the year ended
January 2, 2010 and its quarterly reports on Form 10-Q, as well as other
periodic reports filed with the securities commissions. The Company does
not undertake to update or revise any of these statements in light of new
information or future events.
Website: www.cott.com
COTT CORPORATION EXHIBIT 1
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions of U.S. dollars except per share amounts, U.S. GAAP)
Unaudited
For the Three Months Ended
April 3, 2010 March 28, 2009
------------- --------------
Revenue, net $ 362.9 $ 367.0
Cost of sales 305.7 308.8
------------- -------------
Gross profit 57.2 58.2
Selling, general and administrative expenses 32.4 34.7
Loss (gain) on disposal of property, plant &
equipment 0.2 (0.1)
Restructuring and asset impairments
Restructuring (0.5) 1.2
Asset impairments - 0.1
------------- -------------
Operating income 25.1 22.3
Other expense, net 1.8 0.1
Interest expense, net 6.2 7.6
------------- -------------
Income before income taxes 17.1 14.6
Income tax expense (benefit) 4.4 (6.2)
------------- -------------
Net income $ 12.7 $ 20.8
Less: Net income attributable to
non-controlling interests 1.2 0.9
------------- -------------
Net income attributed to Cott Corporation $ 11.5 $ 19.9
============= =============
Net income per common share attributed to
Cott Corporation
Basic $ 0.14 $ 0.28
Diluted $ 0.14 $ 0.28
Weighted average outstanding shares
(thousands) attributed to Cott Corporation
Basic 80,374 70,472
Diluted 80,840 70,472
COTT CORPORATION EXHIBIT 2
CONSOLIDATED BALANCE SHEETS
(in millions of U.S. dollars, except share amounts U.S. GAAP)
Unaudited
April 3, 2010 January 2, 2010
--------------- ---------------
ASSETS
Current assets
Cash & cash equivalents $ 23.2 $ 30.9
Accounts receivable, net of allowance of
$5.8 ($5.9 as of January 2, 2010) 172.6 152.3
Income taxes recoverable 5.8 20.8
Inventories 112.4 99.7
Prepaid and other expenses 10.6 11.4
Deferred income taxes 3.3 3.2
Other current assets 2.1 2.2
--------------- ---------------
Total current assets 330.0 320.5
Property, plant and equipment 335.6 343.0
Goodwill 31.7 30.6
Intangibles and other assets 151.0 155.5
Deferred income taxes 6.1 5.4
Other tax receivable 18.8 18.8
--------------- ---------------
Total assets $ 873.2 $ 873.8
=============== ===============
LIABILITIES AND EQUITY
Current liabilities
Short-term borrowings $ 27.9 $ 20.2
Current maturities of long-term debt 5.8 17.6
Income taxes payable 4.3 2.1
Accounts payable and accrued liabilities 160.6 166.8
Deferred income taxes 0.4 0.4
--------------- ---------------
Total current liabilities 199.0 207.1
Long-term debt 232.2 233.2
Deferred income taxes 17.3 17.5
Other tax liabilities 0.5 0.5
Other long-term liabilities 10.5 14.2
--------------- ---------------
Total liabilities 459.5 472.5
Contingencies and Commitments
Equity
Capital stock, no par - 81,331,330
(January 2, 2010 - 81,331,330) shares
issued 322.5 322.5
Treasury stock (3.3) (4.4)
Additional paid-in-capital 37.5 37.4
Retained earnings (deficit) 63.3 51.8
Accumulated other comprehensive loss (20.9) (21.3)
--------------- ---------------
Total Cott Corporation equity 399.1 386.0
Non-controlling interests 14.6 15.3
--------------- ---------------
Total equity 413.7 401.3
--------------- ---------------
Total liabilities and equity $ 873.2 $ 873.8
--------------- ---------------
COTT CORPORATION EXHIBIT 3
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions of U.S. dollars, U.S. GAAP)
Unaudited
For the Three Months Ended
--------------------------
April 3, March 28,
2010 2009
------------ ------------
Operating Activities
Net income $ 12.7 $ 20.8
Depreciation and amortization 15.9 17.0
Amortization of financing fees 0.5 0.3
Share-based compensation expense 0.5 0.1
(Decrease) increase in deferred income
taxes (0.1) 2.2
Decrease in other income tax
liabilities - (7.8)
Loss (gain) on disposal of property,
plant & equipment 0.2 (0.1)
Loss on buyback on notes 0.1 -
Asset impairments - 0.1
Lease contract termination gain (0.4) -
Lease contract termination payments (3.9) (0.9)
Other non-cash items 3.0 0.6
Change in accounts receivable (21.9) (6.6)
Change in inventories (12.7) (3.0)
Change in prepaid expenses and other
current assets 0.8 2.7
Change in other assets (0.5) 0.1
Change in accounts payable and accrued
liabilities (3.4) (4.0)
Change in income taxes receivable, net 17.4 (0.5)
------------ ------------
Net cash provided by operating
activities 8.2 21.0
------------ ------------
Investing Activities
Additions to property, plant and
equipment (7.6) (5.9)
Additions to intangibles (1.1) -
Proceeds from disposal of property,
plant & equipment and held-for-sale
assets 0.1 1.2
------------ ------------
Net cash used in investing
activities (8.6) (4.7)
------------ ------------
Financing Activities
Payments of long-term debt (13.2) (1.8)
Short-term borrowings, ABL 58.6 344.4
Short-term repayments, ABL (50.8) (361.3)
Distributions to non-controlling
interests (1.9) (1.4)
Deferred financing fees (0.2) -
Other financing activities - (0.1)
------------ ------------
Net cash (used in) provided by
financing activities (7.5) (20.2)
------------ ------------
Effect of exchange rate changes on cash 0.2 (0.2)
------------ ------------
Net increase (decrease) in cash & cash
equivalents (7.7) (4.1)
Cash & cash equivalents, beginning of period 30.9 14.7
------------ ------------
Cash & cash equivalents, end of period $ 23.2 $ 10.6
============ ============
COTT CORPORATION EXHIBIT 4
SEGMENT INFORMATION
(in millions of U.S. dollars, U.S. GAAP)
Unaudited
For the Three Months Ended
------------------------------
April 3, 2010 March 28, 2009
-------------- --------------
Revenue
North America $ 263.2 $ 289.0
United Kingdom 79.7 64.0
Mexico 11.8 9.8
RCI 8.2 4.2
-------------- --------------
$ 362.9 $ 367.0
============== ==============
Operating income (loss)
North America $ 20.9 $ 26.3
United Kingdom 3.0 (2.6)
Mexico (1.8) (2.3)
RCI 3.0 0.9
-------------- --------------
$ 25.1 $ 22.3
============== ==============
Volume - 8 oz equivalent cases - Total
Beverage (including concentrate)
North America 152.0 160.8
United Kingdom 44.5 39.6
Mexico 8.3 5.6
RCI 84.3 49.1
-------------- --------------
289.1 255.1
============== ==============
Volume - 8 oz equivalent cases - Filled
Beverage
North America 130.6 141.8
United Kingdom 39.2 35.7
Mexico 8.3 5.6
RCI - -
-------------- --------------
178.1 183.1
-------------- --------------
COTT CORPORATION EXHIBIT 5
Analysis of Revenue by Geographic Region
(in millions of U.S. dollars, U.S. GAAP)
Unaudited
For the Three Months Ended
------------------------------------------------
April 3, 2010
------------------------------------------------
(In millions of U.S. North United
dollars) Cott(1) America Kingdom Mexico RCI
-------- -------- -------- -------- --------
Change in revenue $ (4.1) $ (25.8) $ 15.7 $ 2.0 $ 4.0
Impact of foreign
exchange (12.5) (6.2) (5.2) (1.1) -
-------- -------- -------- -------- --------
Change excluding foreign
exchange $ (16.6) $ (32.0) $ 10.5 $ 0.9 $ 4.0
======== ======== ======== ======== ========
Percentage change in
revenue -1.1% -8.9% 24.5% 20.4% 95.2%
-------- -------- -------- -------- --------
Percentage change in
revenue excluding
foreign exchange -4.4% -10.8% 15.2% 8.3% 95.2%
-------- -------- -------- -------- --------
(1) Cott includes the following operating segments: North America, United
Kingdom, Mexico, RCI and All Other
COTT CORPORATION EXHIBIT 6
SUPPLEMENTARY INFORMATION - NON-GAAP - EARNINGS BEFORE INTEREST,
TAXES, DEPRECIATION & AMORTIZATION
(in millions of U.S. dollars except per share amounts, U.S. GAAP)
Unaudited
For the Three Months Ended
------------------------------
April 3, 2010 March 28, 2009
-------------- --------------
Net income (loss) $ 11.5 $ 19.9
Interest expense, net 6.2 7.7
Income tax benefit 4.4 (6.2)
Depreciation and amortization 15.9 17.0
Net income attributable to non-controlling
interests 1.2 0.9
-------------- --------------
EBITDA $ 39.2 $ 39.3
Restructuring, goodwill and asset
impairments, and loss on buyback of notes
Restructuring (0.5) 1.2
Asset impairments - 0.1
-------------- --------------
Adjusted EBITDA $ 38.7 $ 40.6
-------------- --------------
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