Cott Reports Second Quarter 2009 Results

TORONTO and TAMPA, FL--(July 27, 2009) - Cott Corporation (NYSECOT) (TSX: BCB)

 

--  Earnings per share increased to $0.48 from a net loss of $0.03
--  Revenue declined 5.9% (2.3% increase excluding the impact of foreign
    exchange)
--  Global beverage case volume declined 2.5%
--  Operating income increased to $34.3 million from $5.3 million
    

 

   (All information in U.S. dollars; all second quarter 2009 comparisons
              are relative to the second quarter of 2008)

Cott Corporation (NYSECOT) (TSX: BCB) today announced its results for the second quarter ended June 27, 2009. Second quarter 2009 revenue was $438.8 million, as compared to $466.5 million. Net income was $33.7 million, or $0.48 per share, as compared to a net loss of $1.8 million, or $0.03 per share.

"We are pleased with our second quarter results which were driven by the steady improvement of our North American operations and a stronger volume performance in our U.K. business," commented Cott's Chief Executive Officer, Jerry Fowden. "We also benefited from the improved U.S. carbonated soft drink category performance and a favorable tax benefit in the quarter," added Fowden.

"We will continue to support our customers' efforts to increase private label penetration, while executing our plan to reduce operating costs and optimize capital expenditures. Our focus remains on improving year-over-year cash flow and reducing our level of debt, thereby allowing us to strengthen our position as a low cost, high service supplier," continued Fowden. "While our performance in the first half of 2009 has been encouraging, we are mindful of challenges that may still lie ahead, such as heavy summer promotions from the national brands, higher commodity costs compared to the first half of 2009, and a changing competitive landscape," cautioned Fowden.

SECOND QUARTER 2009 PERFORMANCE SUMMARY

 

--  Revenue declined 5.9%. Excluding the impact of foreign exchange,
    revenue increased 2.3%. See the accompanying reconciliation of revenue
    excluding the impact of foreign exchange to GAAP revenue.
    
--  Gross margin increased to 16.7% of sales, as compared to 12.2%, as
    improved average net selling prices per beverage case and lower operating
    costs offset the adverse impact of foreign exchange and lower beverage case
    volume.
    
--  Selling, general and administrative ("SG&A") expenses declined to 8.0%
    of sales from 9.5% of sales, primarily due to lower compensation expenses
    resulting from headcount reductions implemented under the refocus plan and
    the favorable impact of foreign exchange. Compensation and benefit costs
    (which included a $0.9 million decline in stock compensation) declined by
    $2.9 million or 15.4%.
    
--  Operating income increased to $34.3 million, as compared to $5.3
    million. The second quarter of 2009 included $3.8 million of restructuring
    charges and asset impairments.
    
--  Cott's income tax benefit was $5.4 million, as compared to an income
    tax expense of $3.3 million. The tax benefit includes an $8.7 million
    benefit resulting from the reversal of accruals related to previously
    uncertain tax positions.
    

SECOND QUARTER 2009 SEGMENT HIGHLIGHTS

 

--  North America beverage case volume was essentially flat as positive
    volumes in carbonated soft drinks were offset by declines in the bottled
    water category and the impact from the sale of a Canadian bottled water
    facility in 2008. Revenue decreased 1.4% to $323.5 million. Excluding the
    impact of foreign exchange, revenue increased 1.3%, primarily driven by
    improved average net selling prices per beverage case and product mix.
    
--  U.K. beverage case volume declined 2.5% to 47.1 million cases,
    compared to declines of 9.8% in the first quarter of 2009 and 17.1% in the
    fourth quarter of 2008, in each case compared to the prior year periods.
    Revenue decreased 14.0% to $99.0 million, primarily due to the impact of
    foreign exchange. Excluding the impact of foreign exchange, revenue in the
    U.K. increased 9.8%, primarily due to improved product mix and improved
    average net selling prices per beverage case.
    
--  Mexico beverage case volume declined 32.5% to 5.6 million cases, as
    Company actions taken to stabilize the business and difficult economic
    conditions were further exacerbated by the impact of the H1N1 virus.
    Revenue decreased 41.1% to $10.6 million.  Excluding the impact of foreign
    exchange, revenue decreased 24.8%.
    
--  Royal Crown International concentrate volumes increased 1.2% to 57.3
    million cases, primarily due to the stabilization of customer order
    patterns. As a result of higher pricing, revenue increased 9.6% to $5.7
    million.
    

Second Quarter Results Conference Call

Cott Corporation will host a conference call today, July 27th, 2009, at 11:00 AM EDT, to discuss second quarter results, which can be accessed as follows:

 

North America: (800) 732-9303
International: (416) 644-3416

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 is one of the world's largest non-alcoholic beverage companies and the world's largest retailer brand soft drink company. With over 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 60 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. Since 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 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 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 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, and the commitment of the Company's customers to their own Cott-supplied beverage programs; 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; further credit rating downgrades; further deterioration of the capital markets; 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; 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 exposure to intangible asset risk; the Company's ability to manage its operations successfully; 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; 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 volatility of the Company's stock price; disruptions in the Company's information systems; and interruption in transportation systems, labor strikes, work stoppages and other interruptions or difficulties in the employment of labor or transportation in the Company's markets.

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 December 27, 2008 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   For the Six Months
                                        Ended                 Ended
                                --------------------  --------------------
                                June 27,   June 28,   June 27,   June 28,
                                  2009       2008       2009       2008
                                ---------  ---------  ---------  ---------

Revenue, net                    $   438.8  $   466.5  $   805.8  $   856.2
Cost of sales                       365.5      409.5      674.3      758.4
                                ---------  ---------  ---------  ---------

Gross profit                         73.3       57.0      131.5       97.8

Selling, general and
 administrative expenses             35.1       44.5       69.8       97.3
Loss on disposal of property,
 plant & equipment                    0.1        0.1          -        0.3
Restructuring, asset and
 goodwill impairments
    Restructuring                     0.4        6.7        1.6        6.7
    Asset impairments                 3.4        0.4        3.5        0.4
                                ---------  ---------  ---------  ---------

Operating income (loss)              34.3        5.3       56.6       (6.9)

Other income, net                    (2.8)      (4.8)      (2.7)      (6.2)
Interest expense, net                 7.5        8.0       15.1       15.7
                                ---------  ---------  ---------  ---------

Income (loss) before income
 taxes                               29.6        2.1       44.2      (16.4)

Income tax (benefit) expense         (5.4)       3.3      (11.6)       5.7
                                ---------  ---------  ---------  ---------

Net income (loss)               $    35.0  $    (1.2) $    55.8  $   (22.1)

Less: Net income attributable
 to the non-controlling
 interests                            1.3        0.6        2.2        1.0
                                ---------  ---------  ---------  ---------

Net income (loss) attributed to
 Cott Corporation               $    33.7  $    (1.8) $    53.6  $   (23.1)
                                =========  =========  =========  =========

Net income (loss) per common
 share attributed to Cott
 Corporation
   Basic                        $    0.48  $   (0.03) $    0.76  $   (0.32)
   Diluted                      $    0.48  $   (0.03) $    0.76  $   (0.32)

Weighted average outstanding
 shares (thousands) attributed
 to Cott Corporation
   Basic                           70,472     71,136     70,472     71,502
   Diluted                         70,529     71,136     70,491     71,502





COTT CORPORATION                                                 EXHIBIT 2
CONSOLIDATED BALANCE SHEETS
(in millions of U.S. dollars, U.S. GAAP)
Unaudited


                                                  June 27,    December 27,
                                                    2009          2008
                                                ------------  ------------
ASSETS
Current assets
Cash & cash equivalents                         $       13.2  $       14.7

Accounts receivable, net of allowance of $6.8
 ($5.5 as of December 27, 2008)                        207.4         164.4
Income taxes recoverable                                 7.7           7.7
Inventories                                            119.7         111.1
Prepaid and other expenses                              12.6           9.3
Deferred income taxes                                    3.0           3.0
Other current assets                                     2.2             -
                                                ------------  ------------

                                                       365.8         310.2

Property, plant and equipment                          346.4         346.8
Goodwill                                                28.3          27.0
Intangibles and other assets                           156.9         169.6
Deferred income taxes                                   20.5          10.3
Other tax receivable                                     9.7           9.2
                                                ------------  ------------

                                                $      927.6  $      873.1
                                                ============  ============

LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities
Short-term borrowings                           $       66.6  $      107.5
Current maturities of long-term debt                     8.0           7.6
Income taxes payable                                     0.9           0.1
Accounts payable and accrued liabilities               195.7         166.7
                                                ------------  ------------

                                                       271.2         281.9

Long-term debt                                         290.7         294.4
Other long-term liabilities                             15.0          16.0
Other tax liabilities                                   11.2          18.3
Deferred income taxes                                   21.4          16.0
                                                ------------  ------------

                                                       609.5         626.6
Contingencies and Commitments

Shareowners' equity
Capital stock, no par - 71,871,330 (December
 27, 2008 - 71,871,330) shares issued                  275.0         275.0
Treasury stock                                          (5.3)         (6.4)
Additional paid-in-capital                              37.7          38.1
Accumulated earnings (deficit)                          23.9         (29.7)
Accumulated other comprehensive loss                   (30.4)        (47.8)
                                                ------------  ------------
Total Cott Corporation shareowners' equity             300.9         229.2
Non-controlling interests                               17.2          17.3
                                                ------------  ------------

Total shareowners' equity                              318.1         246.5
                                                ------------  ------------

                                                $      927.6  $      873.1
                                                ============  ============





COTT CORPORATION                                                 EXHIBIT 3
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions of U.S. dollars, U.S. GAAP)
Unaudited


                                For the Three Months   For the Six Months
                                        Ended                 Ended
                                --------------------  --------------------
                                June 27,   June 28,   June 27,   June 28,
                                  2009       2008       2009       2008
                                ---------  ---------  ---------  ---------

Operating Activities
   Net income (loss)            $    35.0  $    (1.2) $    55.8  $   (22.1)
   Depreciation and
    amortization                     16.3       19.9       33.3       40.8
   Amortization of financing
    fees                              0.3        0.4        0.6        0.6
   Share-based compensation
    expense                           0.7        1.5        0.8        5.1
   Increase in deferred income
    taxes                             0.7        2.5        2.9        1.5
   Decrease in other income tax
    liabilities                      (8.7)      (2.1)     (16.5)      (1.0)
   Loss on disposal of
    property, plant & equipment       0.1        0.1          -        0.3
   Asset impairments                  3.4        0.4        3.5        0.4
   Lease contract termination
    loss                                -        0.3          -        0.3
   Lease contract termination
    payments                         (1.0)      (0.4)      (1.9)      (0.4)
   Other non-cash items              (1.7)       0.8       (1.1)       0.6
   Change in accounts
    receivable                      (28.7)     (25.1)     (35.3)     (25.4)
   Change in inventories             (2.5)       1.8       (5.5)      (4.6)
   Change in prepaid expenses
    and other current assets         (5.7)      (6.0)      (3.0)      (6.6)
   Change in other assets            (0.3)      (0.4)      (0.2)      (0.4)
   Change in accounts payable
    and accrued liabilities          28.2       29.3       24.2       26.8
   Change in income taxes
    recoverable                       1.3        2.9        0.8        7.7
                                ---------  ---------  ---------  ---------
     Net cash provided by
      operating activities           37.4       24.7       58.4       23.6
                                ---------  ---------  ---------  ---------

Investing Activities
   Additions to property, plant
    and equipment                    (7.7)      (7.1)     (13.6)     (24.2)
   Additions to intangibles             -       (1.3)         -       (3.3)
   Proceeds from disposal of
    property, plant & equipment
    and held-for-sale assets          0.1        2.6        1.3        2.6
                                ---------  ---------  ---------  ---------
     Net cash used in investing
      activities                     (7.6)      (5.8)     (12.3)     (24.9)
                                ---------  ---------  ---------  ---------

Financing Activities
   Payments of long-term debt        (1.9)      (0.4)      (3.7)      (1.5)
   Issuance of long-term debt           -        8.1          -       16.6
   Borrowings on credit
    facility, net                       -     (140.9)         -     (127.5)
   Short-term borrowings, net           -       (3.8)         -       (8.4)
   Short-term borrowings, ABL       286.1      595.4      630.5      595.4
   Short-term repayments, ABL      (311.3)    (464.2)    (672.6)    (464.2)
   Distributions to
    non-controlling interests        (0.9)      (0.5)      (2.3)      (1.6)
   Issuance of common shares            -          -          -          -
   Purchase of treasury shares          -       (6.4)         -       (6.4)
   Deferred financing fees              -       (4.3)         -       (4.3)
   Other financing activities        (0.1)       0.5       (0.2)       0.1
                                ---------  ---------  ---------  ---------
     Net cash used in financing
      activities                    (28.1)     (16.5)     (48.3)      (1.8)
                                ---------  ---------  ---------  ---------

Effect of exchange rate changes
 on cash                              0.9        0.1        0.7       (0.4)
                                ---------  ---------  ---------  ---------

Net increase (decrease) in cash
 & cash equivalents                   2.6        2.5       (1.5)      (3.5)

Cash & cash equivalents,
 beginning of period                 10.6       21.4       14.7       27.4
                                ---------  ---------  ---------  ---------

Cash & cash equivalents, end of
 period                         $    13.2  $    23.9  $    13.2  $    23.9
                                =========  =========  =========  =========




COTT CORPORATION                                                 EXHIBIT 4
SEGMENT INFORMATION
(in millions of U.S. dollars, U.S. GAAP)
Unaudited


                                For the Three Months   For the Six Months
                                        Ended                 Ended
                                --------------------  --------------------
                                June 27,   June 28,   June 27,   June 28,
                                  2009       2008       2009       2008
                                ---------  ---------  ---------  ---------

Revenue
  North America                 $   323.5  $   328.1  $   612.5  $   602.7
  United Kingdom                     99.0      115.1      163.0      208.0
  Mexico                             10.6       18.0       20.4       34.1
  RCI                                 5.7        5.2        9.9       11.0
  All Others                            -        0.1          -        0.4
                                ---------  ---------  ---------  ---------
                                $   438.8  $   466.5  $   805.8  $   856.2
                                =========  =========  =========  =========


Operating income (loss)
  North America                 $    26.6  $    (1.5) $    52.9  $   (15.5)
  United Kingdom                      8.3        6.7        5.7        8.9
  Mexico                             (1.2)      (1.2)      (3.5)      (3.6)
  RCI                                 0.6        1.5        1.5        3.6
  All Others                            -       (0.2)         -       (0.3)
                                ---------  ---------  ---------  ---------
                                $    34.3  $     5.3  $    56.6  $    (6.9)
                                =========  =========  =========  =========


Volume - 8 oz equivalent cases
 - Total Beverage (including
 concentrate)
  North America                     175.7      183.8      336.5      340.7
  United Kingdom                     52.7       53.8       92.3       98.2
  Mexico                              5.6        8.3       11.2       15.9
  RCI                                57.3       56.6      106.4      119.2
  All Other                             -          -          -        0.2
                                ---------  ---------  ---------  ---------
                                    291.3      302.5      546.4      574.2
                                =========  =========  =========  =========


Volume - 8 oz equivalent cases
 - Filled Beverage
  North America                     157.2      158.6      299.0      294.2
  United Kingdom                     47.1       48.3       82.8       87.9
  Mexico                              5.6        8.3       11.2       15.9
  RCI                                 0.1          -        0.1          -
  All Other                             -        0.1          -        0.3
                                ---------  ---------  ---------  ---------
                                    210.0      215.3      393.1      398.3
                                =========  =========  =========  =========






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
                ----------------------------------------------------------
                                      June 27, 2009
                ----------------------------------------------------------
(in millions of             North    United                          All
 U.S. dollars)   Cott (1)  America   Kingdom   Mexico     RCI       Other
                --------  --------  --------  --------  --------  --------
Change in
 revenue        $  (27.7) $   (4.6) $  (16.1) $   (7.4) $    0.5  $   (0.1)
Impact of
 foreign
 exchange           37.5       8.7      24.9       3.9         -       0.0
                --------  --------  --------  --------  --------  --------
Change
 excluding
 foreign
 exchange       $    9.8  $    4.1  $    8.8  $   (3.5) $    0.5  $   (0.1)
                ========  ========  ========  ========  ========  ========
Percentage
 change in
 revenue            -5.9%     -1.4%    -14.0%    -41.1%      9.6%   -100.0%
                --------  --------  --------  --------  --------  --------
Percentage
 change in
 revenue
 excluding
 foreign
 exchange            2.3%      1.3%      9.8%    -24.8%      9.6%   -100.0%
                --------  --------  --------  --------  --------  --------


                                 For the Six Months Ended
                ----------------------------------------------------------
                                      June 27, 2009
                ----------------------------------------------------------
(in millions of             North    United                          All
U.S. dollars)    Cott (1)  America   Kingdom   Mexico     RCI       Other
                --------  --------  --------  --------  --------  --------
Change in
 revenue        $  (50.4) $    9.8  $  (45.0) $  (13.7) $   (1.1) $   (0.4)
Impact of
 foreign
 exchange           75.2      17.1      50.4       7.8         -      (0.1)
                --------  --------  --------  --------  --------  --------
Change
 excluding
 foreign
 exchange       $   24.8  $   26.9  $    5.4  $   (5.9) $   (1.1) $   (0.5)
                ========  ========  ========  ========  ========  ========
Percentage
 change in
 revenue            -5.9%      1.6%    -21.6%    -40.2%    -10.0%   -100.0%
                --------  --------  --------  --------  --------  --------
Percentage
 change in
 revenue
 excluding
 foreign
 exchange            3.2%      4.6%      3.4%    -22.4%    -10.0%   -100.0%
                --------  --------  --------  --------  --------  --------


(1) Cott includes the following operating segments: North America, United
    Kingdom, Mexico, RCI and All Other
For further information: Kimball Chapman, Investor Relations, Tel: (813) 313-1840