Cott Reports First Quarter 2016 Results and Significant Organic Growth in New Home and Office Customers
May 05, 2016
FIRST QUARTER 2016 HIGHLIGHTS
- DS Services achieves 42% first quarter increase in organic new customer additions in the
U.S.
- DS Services extends in store retail booth partnership through the end of 2021.
- Gross profit increased to
$214 million and gross margin was 30.6% compared to gross profit of$201 million and gross margin of 28.4%.
- Adjusted EBITDA was
$71 million (after incremental new customer investment expenses of over$3 million and$3 million adverse foreign exchange impact) compared to$74 million . Reported EBITDA was$69 million .
(Unless stated otherwise, all first quarter 2016 comparisons are relative to the first quarter of 2015; all information is in
“I am very pleased with the quarter’s strong new customer additions across our entire Home and Office business as well as the overall increase in our gross margin and improved free cash flow” commented
FIRST QUARTER 2016 GLOBAL PERFORMANCE
- Adjusted free cash flow improved by
$10 million or 17% to($48) million compared to($58) million . Free cash flow was($48) million , reflecting$19 million of net cash used in operating activities less$29 million of capital expenditures. Management continues to target full year adjusted free cash flow of$135 to$145 million .
- Adjusted EBITDA of
$71 million was lower by 4% (after over$3 million of incremental new home and office customer investment expenses,$3 million of adverse foreign exchange impact and additional cost associated with a product launch for a range of new age sparkling flavored waters for a key customer) compared to$74 million . Reported EBITDA was$69 million compared to$75 million in the prior year ($64 million in the prior year when excluding unrealized intercompany foreign exchange gains).
- Revenue of
$698 million was lower by 2% (flat on a foreign exchange neutral basis) as a result of the mix shift from private label to contract manufacturing in our traditional business, offset by the growth of DS Services and the addition of the Aquaterra business.
Revenue Bridge
------------------------------------
2015 Q1 Revenue $ 709.8
Aquaterra 14.2
DS Services growth 4.9
Growth/Volume 1.5
Energy surcharge (2.1)
Foreign exchange impact (11.2)
Price/Mix (18.7)
----------
2016 Q1 Revenue $ 698.4
==========
- Gross profit increased 6% to
$214 million , with gross margin of 30.6% compared to 28.4%, driven primarily by the ongoing operational leverage of DS Services, the addition of the Aquaterra business, and cost and efficiency initiatives within our traditional business, offset in part by the negative impact of foreign exchange rates, increased operational costs driven by unscheduled plant downtime as well as costs associated with a new age beverage product launch.
- Adjusted net loss and adjusted loss per diluted share were
$3 million and$0.02 , respectively, compared to adjusted net loss of$8 million and adjusted loss per diluted share of$0.08 . Reported net loss and loss per diluted share were$3 million and$0.03 , respectively, compared to reported net loss and loss per diluted share of$6 million and$0.06 , respectively.
FIRST QUARTER 2016 REPORTING SEGMENT PERFORMANCE
- DS Services revenue increased 7% to
$257 million due primarily to the addition of the Aquaterra business, growth in home and office delivery water, single cup coffee delivery and retail sales, offset in part by a declining energy surcharge as a result of lower diesel fuel prices and reduced sales in traditional brew basket coffee. Revenue on an energy surcharge neutral basis increased 8% (2% excluding Aquaterra). DS Services gross profit increased by 10% to$154 million while gross profit as a percentage of revenue increased to 60.0% from 58.2%. DS Services EBITDA of$35 million was up 21% from$29 million while DS Services adjusted EBITDA decreased by$1 million to$36 million compared to$37 million , as DS Services invested over$3 million driving strong first quarter organic growth in new customer additions and incurred higher than expected first quarter fleet maintenance and operational manufacturing costs.
DS Services Revenue Bridge
-----------------------------------
2015 Q1 Revenue $ 240.3
Aquaterra 14.2
Growth 4.9
Energy surcharge (2.1)
---------
2016 Q1 Revenue $ 257.3
=========
North America volume increased 2% in actual cases and was lower by 3% in servings with 11% growth in the sparkling water and mixer category and 8% growth in contract manufacturing offset by declines in private label carbonated soft drinks and shelf stable juices. Revenue was lower by 5% (lower by 4% on a foreign exchange neutral basis) at$313 million due primarily to an overall product mix shift into contract manufacturing. Gross profit as a percentage of revenue decreased to 11.4% compared to 12.8% due primarily to approximately$2 million of adverse foreign exchange impact, operational costs driven by unscheduled plant downtime and additional cost associated with a product launch for a range of new age sparkling flavored waters for a key customer.
Cott North America Revenue Bridge
-----------------------------------
2015 Q1 Revenue $ 328.7
Growth/Volume 5.0
Foreign exchange impact (3.3)
Price/Mix (17.1)
---------
2016 Q1 Revenue $ 313.3
=========
U.K. volume decreased 8% in actual cases and was flat in servings. Revenue decreased 9% (4% on a foreign exchange neutral basis) to$121 million due primarily to the competitive landscape and an adverse product mix shift. Gross profit as a percentage of revenue increased to 16.3% from 11.8% due primarily to lower inventory levels and tighter cost controls.
- All Other revenue was
$14 million while gross profit was$5 million compared to$4 million , which resulted in gross profit as a percentage of revenue of 36.8% compared to 33.1%.
2016 FULL YEAR FREE CASH FLOW OUTLOOK
FIRST QUARTER RESULTS CONFERENCE CALL
International: (913) 312-0678
Passcode: 9463425
A live audio webcast will be available through
COTT CORPORATION EXHIBIT 1 CONSOLIDATED STATEMENTS OF OPERATIONS (in millions ofU.S. dollars, except share and per share amounts,U.S. GAAP) Unaudited For the Three Months Ended ---------------------- April 2, April 4, 2016 2015 ---------- ---------- Revenue, net$ 698.4 $ 709.8 Cost of sales 484.4 508.5 ---------- ---------- Gross profit 214.0 201.3 Selling, general and administrative expenses 197.0 188.5 Loss on disposal of property, plant & equipment 0.9 1.4 Acquisition and integration expenses 1.4 4.7 ---------- ---------- Operating income 14.7 6.7 Other income, net (2.2) (10.4) Interest expense, net 27.8 27.7 ---------- ---------- Loss before income taxes (10.9) (10.6) Income tax benefit (9.0) (9.4) ---------- ---------- Net loss$ (1.9) $ (1.2) Less: Net income attributable to non-controlling interests 1.4 1.3 Less: Accumulated dividends on convertible preferred shares - 2.7 Less: Accumulated dividends on non-convertible preferred shares - 0.8 ---------- ---------- Net loss attributed to Cott Corporation$ (3.3) $ (6.0) ========== ========== Net loss per common share attributed toCott Corporation Basic$ (0.03) $ (0.06) Diluted$ (0.03) $ (0.06) Weighted average common shares outstanding (millions) Basic 113.3 93.2 Diluted 113.3 93.2 Dividends declared per common share$ 0.06 $ 0.06 COTT CORPORATION EXHIBIT 2 CONSOLIDATED BALANCE SHEETS (in millions ofU.S. dollars, except share amounts,U.S. GAAP) Unaudited ---------------------- April 2, January 2, 2016 2016 ---------- ---------- ASSETS Current assets Cash & cash equivalents$ 55.1 $ 77.1 Accounts receivable, net of allowance 320.4 293.3 Income taxes recoverable 0.9 1.6 Inventories 254.7 249.4 Prepaid expenses and other current assets 20.9 17.2 ---------- ---------- Total current assets 652.0 638.6 Property, plant & equipment, net 774.6 769.8 Goodwill 779.8 759.6 Intangibles and other assets, net 710.9 711.7 Deferred tax assets 10.3 7.6 ---------- ---------- Total assets$ 2,927.6 $ 2,887.3 ========== ========== LIABILITIES AND EQUITY Current liabilities Short-term borrowings$ 62.8 $ 122.0 Current maturities of long-term debt 3.4 3.4 Accounts payable and accrued liabilities 420.7 437.6 ---------- ---------- Total current liabilities 486.9 563.0 Long-term debt 1,524.1 1,525.4 Deferred tax liabilities 65.9 76.5 Other long-term liabilities 71.8 76.5 ---------- ---------- Total liabilities 2,148.7 2,241.4 Equity Common shares, no par - 122,676,770 (January 2, 2016 - 109,695,435) shares issued 682.2 534.7 Additional paid-in-capital 50.8 51.2 Retained earnings 119.0 129.6 Accumulated other comprehensive loss (78.8) (76.2) ---------- ---------- Total Cott Corporation equity 773.2 639.3 Non-controlling interests 5.7 6.6 ---------- ---------- Total equity 778.9 645.9 ---------- ---------- Total liabilities and equity$ 2,927.6 $ 2,887.3 ========== ========== COTT CORPORATION EXHIBIT 3 CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions ofU.S. dollars) Unaudited For the Three Months Ended ---------------------- April 2, April 4, 2016 2015 ---------- ---------- Operating Activities Net loss$ (1.9) $ (1.2) Depreciation & amortization 52.5 57.4 Amortization of financing fees 1.2 1.3 Amortization of senior notes premium (1.4) (1.5) Share-based compensation expense 2.4 2.4 Benefit for deferred income taxes (10.8) (11.7) Loss on disposal of property, plant & equipment 0.9 1.4 Other non-cash items (1.7) (10.2) Change in operating assets and liabilities, net of acquisitions: Accounts receivable (21.7) (41.3) Inventories (3.3) (11.0) Prepaid expenses and other current assets (4.4) 30.3 Other assets 2.4 (2.4) Accounts payable and accrued liabilities, and other liabilities (30.0) (15.2) Income taxes recoverable (2.9) 0.6 ---------- ---------- Net cash used in operating activities (18.7) (1.1) ---------- ---------- Investing Activities Acquisitions, net of cash received (44.4) - Additions to property, plant & equipment (29.5) (27.3) Additions to intangibles and other assets (2.3) (2.1) Proceeds from sale of property, plant & equipment 2.7 0.4 ---------- ---------- Net cash used in investing activities (73.5) (29.0) ---------- ---------- Financing Activities Payments of long-term debt (1.1) (0.8) Borrowings under ABL 497.2 94.8 Payments under ABL (558.3) (102.8) Distributions to non-controlling interests (2.3) (2.0) Issuance of common shares 144.1 - Proceeds from the exercise of options for common stock, net - 0.1 Common shares repurchased and cancelled (1.1) (0.7) Dividends paid to common and preferred shareholders (7.3) (9.0) ---------- ---------- Net cash provided by (used in) financing activities 71.2 (20.4) ---------- ---------- Effect of exchange rate changes on cash (1.0) (1.2) ---------- ---------- Net decrease in cash & cash equivalents (22.0) (51.7) Cash & cash equivalents, beginning of period 77.1 86.2 ---------- ---------- Cash & cash equivalents, end of period$ 55.1 $ 34.5 ========== ========== COTT CORPORATION EXHIBIT 4 SEGMENT INFORMATION - NON-GAAP (in millions ofU.S. dollars) Unaudited For the Three Months Ended April 2, 2016 --------------------------------------------------------------------------- (in millions Cott of U.S. North Cott All dollars) DSS America U.K. Other Corporate Elimination Total ------ -------- ------ ----- --------- ----------- ------ Revenue, net Private label retail$ 16.9 $ 248.5 $ 51.0 $ 0.5 $ -$ (0.4) $316.5 Branded retail 24.3 26.8 36.6 0.8 - (0.3) 88.2 Contract packaging - 31.4 28.3 4.7 - (2.1) 62.3 Home and office bottled water delivery 162.0 - - - - - 162.0 Office coffee services 31.5 - - - - - 31.5 Concentrate and other 22.6 6.6 4.7 7.6 - (3.6) 37.9 ------ -------- ------ ----- --------- ----------- ------ Total$257.3 $ 313.3 $120.6 $13.6 $ -$ (6.4) $698.4 ====== ======== ====== ===== --------- =========== ====== Gross Profit (1)$154.4 $ 34.9 $ 19.7 $ 5.0 $ - $ -$214.0 ====== ======== ====== ===== ========= =========== ====== Gross Margin % (2) 60.0% 11.4% 16.3% 36.8% - - 30.6% ====== ======== ====== ===== ========= =========== ====== Operating income (loss)$ 5.7 $ 0.6 $ 9.9 $ 2.5 $ (4.0) $ -$ 14.7 ====== ======== ====== ===== ========= =========== ====== For the Three Months Ended April 4, 2015 --------------------------------------------------------------------------- (in millions Cott of U.S. North Cott All dollars) DSS America U.K. Other Corporate Elimination Total ------ -------- ------ ----- --------- ----------- ------ Revenue, net Private label retail$ 15.6 $ 267.5 $ 60.5 $ 1.2 $ -$ (0.3) $344.5 Branded retail 19.7 27.1 41.2 1.1 - (0.4) 88.7 Contract packaging - 25.7 28.4 4.0 - (0.2) 57.9 Home and office bottled water delivery 149.6 - - - - - 149.6 Office coffee services 32.0 - - - - - 32.0 Concentrate and other 23.4 8.4 2.1 6.7 - (3.5) 37.1 ------ -------- ------ ----- --------- ----------- ------ Total$240.3 $ 328.7 $132.2 $13.0 $ -$ (4.4) $709.8 ====== ======== ====== ===== ========= =========== ====== Gross Profit (1)$139.9 $ 41.5 $ 15.6 $ 4.3 $ - $ - 201.3 ====== ======== ====== ===== ========= =========== ====== Gross Margin % (2) 58.2% 12.8% 11.8% 33.1% - - 28.4% ====== ======== ====== ===== ========= =========== ====== Operating (loss) income$ (1.5) $ 7.2 $ 3.9 $ 1.6 $ (4.5) $ -$ 6.7 ====== ======== ====== ===== ========= =========== ====== (1) Gross profit from external revenues. (2)Cott North America gross margin relative to external revenues. COTT CORPORATION EXHIBIT 5 SUPPLEMENTARY INFORMATION - NON-GAAP - Analysis of Revenue by Reporting Segment Unaudited For the Three Months Ended ------------------------------------------------------ (in millions ofU.S. dollars, except percentage amounts) April 2, 2016 ------------------------------------------------------ Cott North Cott All Cott DSS America U.K. Other Elimination (1) ------ --------- ------ ------ ----------- ------ Change in revenue$ 17.0 $ (15.4) $(11.6) $ 0.6 $ (2.0) $(11.4) Impact of foreign exchange (2) $ -$ 3.3 $ 6.9 $ 1.0 $ - 11.2 ------ --------- ------ ------ ----------- ------ Change excluding foreign exchange$ 17.0 $ (12.1) $ (4.7) $ 1.6 $ (2.0) $ (0.2) ------ --------- ------ ------ ----------- ------ Percentage change in revenue 7.1% -4.7% -8.8% 4.6% 45.5% -1.6% ------ --------- ------ ------ ----------- ------ Percentage change in revenue excluding foreign exchange 7.1% -3.7% -3.6% 12.3% 45.5% 0.0% ------ --------- ------ ------ ----------- ------ (1)Cott includes the following reporting segments: DSS,Cott North America , CottU.K. and All Other. (2) Impact of foreign exchange is the difference between the current period revenue translated utilizing the current period average foreign exchange rates less the current period revenue translated utilizing the prior period average foreign exchange rates. COTT CORPORATION EXHIBIT 6 SUPPLEMENTARY INFORMATION - NON-GAAP - EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION & AMORTIZATION (EBITDA) (in millions ofU.S. dollars) Unaudited For the Three Months Ended ---------------------- April 2, April 4, 2016 2015 ---------- ---------- Net loss attributed to Cott Corporation$ (3.3) $ (6.0) Interest expense, net 27.8 27.7 Income tax benefit (9.0) (9.4) Depreciation & amortization 52.5 57.4 Net income attributable to non-controlling interests 1.4 1.3 Accumulated dividends on preferred shares - 3.5 ---------- ---------- EBITDA$ 69.4 $ 74.5 Acquisition and integration costs, net 1.4 4.7 Purchase accounting adjustments, net 0.5 4.2 Unrealized commodity hedging gain, net - (0.3) Unrealized foreign exchange and other gains, net (2.6) (10.9) Loss on disposal of property, plant & equipment 0.9 1.5 Other adjustments 1.3 - ---------- ---------- Adjusted EBITDA$ 70.9 $ 73.7 ========== ========== COTT CORPORATION EXHIBIT 7 SUPPLEMENTARY INFORMATION - NON-GAAP - FREE CASH FLOW (in millions ofU.S. dollars) Unaudited For the Three Months Ended ---------------------- April 2, April 4, 2016 2015 ---------- ---------- Net cash used in operating activities$ (18.7) $ (1.1) Less: Additions to property, plant & equipment (29.5) (27.3) ---------- ---------- Free Cash Flow$ (48.2) $ (28.4) ========== ========== Plus: Cash collateral (1) - (29.4) ---------- ---------- Adjusted Free Cash Flow$ (48.2) $ (57.8) ========== ========== (1) In connection with the DSS Acquisition,$29.4 million of cash was required to collateralize certain DSS self-insurance programs. The$29.4 million was funded with borrowings under our ABL facility, and the cash collateral was included within prepaid and other current assets on our Consolidated Balance Sheet atJanuary 3, 2015 . Subsequent toJanuary 3, 2015 , additional letters of credit were issued from our available ABL facility capacity, and the cash collateral was returned to the Company and used to repay a portion of our outstanding ABL facility. COTT CORPORATION EXHIBIT 8 SUPPLEMENTARY INFORMATION - NON-GAAP - ADJUSTED NET INCOME (1) (in millions ofU.S. dollars, except share and per share amounts) Unaudited For the Three Months Ended ---------------------- April 2, April 4, 2016 2015 ---------- ---------- Net loss attributed to Cott Corporation$ (3.3) $ (6.0) Acquisition and integration costs, net of tax 0.9 3.0 Purchase accounting adjustments, net of tax 0.4 2.7 Unrealized commodity hedging gain, net of tax - (0.2) Unrealized foreign exchange and other gains, net of tax (1.8) (8.1) Loss on disposal of property, plant & equipment, net of tax 0.3 0.9 Other adjustments, net of tax 1.0 - ---------- ---------- Adjusted net loss attributed to Cott Corporation$ (2.5) $ (7.7) ========== ========== Adjusted net loss per common share attributed toCott Corporation Basic$ (0.02) $ (0.08) Diluted$ (0.02) $ (0.08) Weighted average common shares outstanding (millions) Basic 113.3 93.2 Diluted 113.3 93.2 (1) Adjustments are tax effected based on the statutory tax rate within the applicable tax jurisdiction. COTT CORPORATION - DS SERVICES EXHIBIT 9 SUPPLEMENTARY INFORMATION - NON-GAAP - ADJUSTED REVENUES (in millions ofU.S. dollars) Unaudited ----------- ----------- For the For the Three Three Months Months Ended Ended April 2, April 4, 2016 2015 ----------- ----------- Revenue, net$ 257.3 $ 240.3 Energy surcharge adjustment (1) 2.1 Less: Aquaterra revenue, net (14.2) ----------- ----------- Adjusted Revenue excluding Aquaterra, net$ 245.2 $ 240.3 Percentage change in revenue 2.0% (1) Represents the impact of the energy surcharge on current period operations assuming prior period average rate. COTT CORPORATION - DS SERVICES EXHIBIT 10 SUPPLEMENTARY INFORMATION - NON-GAAP - EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION & AMORTIZATION (EBITDA) (in millions ofU.S. dollars) Unaudited For the Three Months Ended ---------------------- April 2, April 4, 2016 2015 ---------- ---------- Operating income (loss)$ 5.7 $ (1.5) Other income (1.0) (0.2) ---------- ---------- EBIT - DS SERVICES$ 6.7 $ (1.3) Depreciation & amortization 28.4 30.2 ---------- ---------- EBITDA - DS SERVICES$ 35.1 $ 28.9 Acquisition and integration costs, net 1.1 3.0 Purchase accounting adjustments, net 0.5 4.2 Unrealized other gains, net (1.0) (0.2) Loss on disposal of property, plant & equipment 1.8 1.1 Other adjustments (1.1) - ---------- ---------- Adjusted EBITDA - DS SERVICES$ 36.4 $ 37.0 ========== ========== COTT CORPORATION EXHIBIT 11 SUPPLEMENTARY INFORMATION - NON-GAAP - 2016 FREE CASH FLOW OUTLOOK (in millions ofU.S. dollars) UnauditedCott reaffirmed its 2016 adjusted free cash flow outlook for the year. Fiscal 2016 ------------ Projected adjusted free cash flow (1)$135 -$145 Projected capital expenditures$120 -$125 Projected cash flow from operations (2)$255 -$270 (1) Adjusted free cash flow equals cash flow from operations less capital expenditures plus/minus one-time adjustments. (2) Net of any one-time adjustments.
ABOUT
With the acquisition of
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 in the markets in which we operate; 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 in our traditional business with key customers, particularly
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
Image Available: http://www2.marketwire.com/mw/frame_mw?attachid=3002518
CONTACT:Jarrod Langhans Investor Relations Tel: (813) 313-1732 Email Contact
Source: