Cott Reports First Quarter 2014 Results, Declares Dividend and Announces Renewal of Share Repurchase Program
May 07, 2014
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 onFebruary 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
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 theNorth 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 inNorth 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 inMexico . Our All Other reporting segment includes ourMexico 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
Share Repurchase Program
“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
Subject to completion of appropriate filings with and approval by the TSX, repurchases will be made through the facilities of the TSX, the
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.
First Quarter Results Conference Call
International: (201) 689-8031
A live audio webcast will be available through
About
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,
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
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
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
CONTACT:Jarrod Langhans Investor Relations Tel: (813) 313-1732 Email Contact
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