Cott Reports Q3 Results

- Reported loss per share of $0.08 - $15.1 million pre-tax charges for previously announced restructuring - Gross margin of 9.8% - International business unit revenue up 14.1% over prior year third quarter - Update on strategic review process

TORONTO, CANADA--(Oct. 25, 2007) - 

(All information in U.S. dollars)

Cott Corporation (NYSE:COT)(TSX:BCB), the world's largest retailer brand soft drink provider, announced today its results for the third quarter ended September 29, 2007.

THIRD QUARTER CONSOLIDATED RESULTS

Third quarter volume was 309.9 million eight-ounce equivalent cases, up 0.7% compared to the third quarter of 2006, with international growth being partially offset by declines in North America. The North American volume decline was primarily due to continued softness in the carbonated soft drink segment, the impact of price increases and increased promotional activity by national brands. Also impacting volume was unseasonably wet weather and a voluntary product recall related to the start-up of a second aseptic line, both in the U.K.

Revenues in the quarter were $464.6 million, down 2.3% from $475.5 million in the third quarter of the prior fiscal year. Excluding the impact of foreign exchange, revenues declined 5% compared to the prior year period. The revenue decline was driven by North America.

Third quarter gross margin was 9.8%, compared to 13.0% in the prior year third quarter. The decline was the result of high ingredient and packaging costs in the quarter, which were not offset by sufficient price increases, higher operating costs related to the transition of production out of recently closed plants, and the impact of the voluntary product recall in the U.K.

Restructuring and asset impairment charges for the quarter amounted to $15.1 million pre-tax. This related to the previously announced closure of the plant in Wyomissing, Pennsylvania and office consolidations.

Net loss in the third quarter was $5.8 million (or $0.08 per diluted share), compared to net income of $6.6 million (or $0.09 per diluted share) in the third quarter of 2006.
 



---------------------------------------------------------------------
                         Key Indicators At-A-Glance
---------------------------------------------------------------------
                             3rd Quarter               Year-to-Date
---------------------------------------------------------------------
                           2007       2006          2007        2006
---------------------------------------------------------------------
Volume (8oz MM)           309.9      307.6         967.9       966.2
---------------------------------------------------------------------
Revenue ($MM)          $  464.6    $ 475.5     $ 1,363.2   $ 1,371.7
---------------------------------------------------------------------
Gross Margin                9.8%      13.0%         11.6%       13.6%
---------------------------------------------------------------------
Restructuring, Assets
 Impairment & Other    
 Charges ($MM)         $   15.1    $   9.3     $    24.4   $    15.0
---------------------------------------------------------------------
Operating (Loss) 
 Income ($MM)             ($3.8)   $  11.9     $    18.1   $    42.6
---------------------------------------------------------------------
Reported EPS             ($0.08)   $  0.09     $    0.05   $    0.17
---------------------------------------------------------------------



"We are disappointed by our performance in the third quarter," said Brent Willis, Cott's Chief Executive Officer. "As a result, we are focusing our efforts in North America on fewer, more impactful initiatives, including our new water strategy, selected new channel and product opportunities, and pricing actions that should further the North American business unit turnaround and reignite growth."

THIRD QUARTER BUSINESS UNIT HIGHLIGHTS

North American revenues declined 7.7% when compared to the third quarter of 2006, due to continued softness in the carbonated soft drink segment, the impact of price increases, increased promotional activity by national brands and delays in the introduction of new products.

The International business unit continued to deliver strong revenue growth, up 14.1% compared to the same period last year, or up 7.1% excluding the impact of foreign exchange. International growth was hindered by underperformance in the U.K. driven by aseptic line start-up issues, a voluntary product recall and unseasonably wet weather.

"Execution of our new product and new channel expansion in North America was slower in the quarter than we had anticipated," added Willis. "However, with our recent shift to Customer Development Solution Teams in North America and focused leadership under Rick Dobry, we are starting to see traction in these two critical areas."

"We are working to accelerate our international scale and growth to be more substantial contributors to the overall company. We are continuing to fill key positions and to add new talent to our international team to enable Cott to capture the many opportunities available to us."

OTHER THIRD QUARTER FINANCIAL INFORMATION

Selling, general and administrative (SG&A) expenses decreased 16% to $34.2 million, as compared to $40.8 million in last year's third quarter. During the quarter the Company reversed $6.2 million of accruals related to its pay-for-performance compensation plans as it is no longer probable that these incentives will be paid.

Third quarter operating loss was $3.8 million, compared to operating income of $11.9 million in the prior year third quarter.

YEAR-TO-DATE PERFORMANCE

On a year-to-date basis, volume was flat and revenue was down 1% compared to the same period in the prior year. North American volume and revenue declines were partially offset by gains in the International business unit, where there was continued growth despite operational issues in the U.K. When foreign exchange is excluded, revenue for the first nine months of 2007 declined 3%.

Gross margin for the first nine months of 2007 was 11.6% compared to 13.6% in 2006, primarily due to higher ingredient and packaging costs. SG&A expenses decreased in the first nine months of the year to $116.5 million, compared to $129.4 million in the same period last year.

Year-to-date operating income was $18.1 million, compared to $42.6 million in the first nine months of the prior year. Restructuring, asset impairments and other charges in the period were $24.4 million due to the Wyomissing plant closure and office consolidations, compared to $15 million in the prior year.

Cott recorded an income tax benefit of $8.5 million for the nine months of 2007, compared to a provision of $4.4 million for the nine months of 2006.

Net income in the first nine months of the year was $3.7 million or $0.05 per diluted share, compared to $12.1 million or $0.17 per diluted share in the first nine months of 2006.

PERFORMANCE AGAINST BUSINESS MODEL

Cott remains confident in its long-term business model. This is supported by the progress in four key areas:

1. We proactively covered most of our commodity costs for the bulk of 2008. This will reduce our exposure to commodity price volatility.

2. We continue to implement pricing programs with our retail partners to address the current commodity cost environment.

3. We are rolling out our new product portfolio, which is focused on the high growth, high margin categories of teas, energy drinks and flavored waters. As an example, we recently started distribution of an exclusive energy drink to a large North American convenience store operator.

4. We are currently acquiring and installing new equipment to support our bottled water business, which will result in significantly lower production costs. This program is expected to be completed by mid-to-late 2008.

"We are closely tracking these key initiatives to achieve the planned growth and profit objectives," added Brent Willis, Cott's CEO.

UPDATE ON STRATEGIC REVIEW PROCESS

Cott also announced that the Board's previously disclosed strategic review process, which was commenced earlier this year in the context of anticipated soft drink industry consolidation, has been concluded. The Company does not currently expect that any transaction will result from that process.

"Having completed its review of strategic alternatives, the Board endorses management's direction and believes in management's capability to deliver planned results and position the Company for future growth," said Frank Weise, Cott's Chairman.

Third Quarter Results Conference Call

Cott Corporation will host a conference call today, Thursday, October 25, at approximately 10 AM ET to discuss third quarter financial results.

For those who wish to listen to the presentation, there is a listen-only, dial-in telephone line, which can be accessed as follows:
 



     North America:    (866) 249-1964
     International:    (416) 644-3417



Webcast

To access Cott's third quarter conference call with analysts over the Internet, please visit the Company's website at http://www.cott.com. Please log on 15 minutes early to register, download, and install any necessary audio/video software. For those who are unable to access the live broadcast, a replay will be available at Cott's website until November 8, 2007.

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. The Company commercializes its business in over 60 countries worldwide, with its principal markets being the United States, Canada, the United Kingdom and Mexico. Cott markets or supplies over 200 retailer and licensed brands, and Company-owned brands including Cott, RC, Vintage, Vess and So Clear. Its products include carbonated soft drinks, sparkling and flavored waters, energy drinks, sports drinks, juices, juice drinks and smoothies, ready-to-drink teas, and other non-carbonated beverages. The Company's website is www.cott.com. The brand names and trademarks referenced in this press release are trademarks of Cott Corporation, its affiliated companies, our customers, or other third parties.

Safe Harbor Statements

This press release contains or refers to forward-looking statements reflecting management's current expectations regarding future results of operations, economic performance, financial condition and achievements of the Company. The forward-looking statements are based on the assumption that volume and revenue will be consistent with historical trends, that margins will improve through a balance of revenue realization and cost containment, and that interest rates will remain constant and debt levels will decline, and, in the case of the statements relating to new product introductions and capacity increases, 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. Forward-looking statements, specifically those concerning future performance such as those relating to the success of the Company's measures to increase volume and revenue, reduce costs and increase operating income, obtain capacity increases, and introduce new products are subject to certain risks and uncertainties, and actual results may differ materially. These risks and uncertainties are detailed from time to time in the Company's filings with the appropriate securities commissions, and include, without limitation, stability of procurement costs for raw and packaging materials, the Company's ability to restore plant efficiencies and reduce logistics and other costs, adverse weather conditions, competitive activities by other brand beverage manufacturers, the Company's ability to develop new products that appeal to consumer tastes, the Company's ability to identify acquisition candidates, successfully consummate acquisitions and integrate acquired businesses into its operations, fluctuations in currency versus the U.S. dollar, the uncertainties of litigation and regulatory review, loss of key customers and retailers' continued commitment to their Company-supplied beverage programs. The foregoing list of factors is not exhaustive. The Company undertakes no obligation to publicly update or revise any forward-looking statements.

(Financial tables in Exhibits 1-5 attached)
 



COTT CORPORATION                                                 EXHIBIT 1
CONSOLIDATED STATEMENTS OF (LOSS) INCOME
(in millions of US dollars except per share amounts, US GAAP)
Unaudited


                  For the three months ended     For the nine months ended
                -----------------------------------------------------------
                September 29,   September 30,   September 29, September 30,
                        2007            2006            2007          2006
                -----------------------------------------------------------
                -----------------------------------------------------------


Revenue            $   464.6       $   475.5      $  1,363.2    $  1,371.7
Cost of sales          418.9           413.5         1,204.4       1,184.7
                -----------------------------------------------------------


Gross profit            45.7            62.0           158.8         187.0


Selling, 
 general and
 administrative
 expenses               34.2            40.8           116.5         129.4
Loss (gain)
 on disposal
 of property,
 plant & 
 equipment               0.2               -            (0.2)            -
Restructuring, 
 asset
 impairments 
 and other 
 charges
 Restructuring          14.2             9.4            23.5          11.2
 Asset impairments 
 (recovery)              0.9            (0.1)            0.9           1.2
 Other                     -               -               -           2.6
                -----------------------------------------------------------


Operating (loss)
 income                 (3.8)           11.9            18.1          42.6


Other income, net       (0.8)           (0.2)           (3.1)         (0.4)
Interest 
 expense, net            8.4             7.8            24.1          23.5
Minority interest        0.4             0.9             1.9           3.0
                -----------------------------------------------------------


(Loss) income
 before income
 taxes                 (11.8)            3.4            (4.8)         16.5


Income tax 
 (recovery) 
 expense                (6.0)           (3.2)           (8.5)          4.4
                -----------------------------------------------------------


Net (loss) 
 income               $ (5.8)        $   6.6          $  3.7        $ 12.1
                -----------------------------------------------------------
                -----------------------------------------------------------


Volume - 
 8 oz 
 equivalent
 cases                 309.9           307.6           967.9         966.2
 - Filled 
  Beverage             220.8           238.0           650.6         688.5


Net (loss)
 income per
 common
 share
 Basic               $ (0.08)         $ 0.09          $ 0.05        $ 0.17
 Diluted             $ (0.08)         $ 0.09          $ 0.05        $ 0.17


Weighted 
 average 
 outstanding
 shares
 Basic            71,871,330      71,731,245      71,818,002    71,719,322
 Diluted          71,883,264      71,988,667      71,845,899    71,765,858





COTT CORPORATION                                                EXHIBIT 2
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions of US dollars, US GAAP)
Unaudited


                  For the three months ended     For the nine months ended
                -----------------------------------------------------------
                September 29,   September 30,   September 29, September 30,
                        2007            2006            2007          2006
                -----------------------------------------------------------
                -----------------------------------------------------------


Operating 
 Activities
 Net (loss)
  income              $ (5.8)          $ 6.6           $ 3.7        $ 12.1
 Depreciation and
  amortization          17.7            19.0            53.3          57.4
 Amortization of
  financing fees         0.3             0.3             0.8           0.8
 Share-based
  compensation 
  expense               (2.3)            2.8             2.6           7.4
 Deferred 
  income taxes           2.0            (3.4)            5.4           3.2
 Increase in other
  income tax
  liabilities            3.4               -             3.9             -
 Minority interest       0.4             0.9             1.9           3.0
 Loss (gain) on
  disposal of
  property, plant &
  equipment              0.2               -            (0.2)            -
 Asset 
  impairments
  (recovery)             0.9            (0.1)            0.9           1.2
 Non-cash 
  contract loss         12.5             4.4            12.5           4.4
 Other non-cash 
  items                  1.0             1.8             1.6           2.3
 Net change in
  non-cash 
  working
  capital                7.0            23.3           (38.4)         (8.1)
                -----------------------------------------------------------


 Cash provided
  By operating
  activities            37.3            55.6            48.0          83.7
                -----------------------------------------------------------
Investing 
 Activities


 Additions to
  property,
  plant and
  equipment            (14.1)           (6.8)          (50.4)        (23.5)
 Additions to
  intangibles 
  and other 
  assets                (1.3)           (1.3)           (3.0)         (7.0)
 Proceeds from
  disposal of
  property,
  plant &
  equipment             (0.1)            0.4             0.7           1.9
                -----------------------------------------------------------


 Cash used in
  investing 
  activities           (15.5)           (7.7)          (52.7)        (28.6)
                -----------------------------------------------------------
Financing 
 Activities


 Payments of
  long-term debt        (0.6)           (0.3)           (2.2)         (0.8)
 Short-term
  borrowings           (21.0)          (26.3)            1.1         (43.0)
 Distributions to
  subsidiary 
  minority
  shareowner            (1.6)           (1.8)           (2.9)         (3.6)
 Issue of 
  common shares            -             0.3             0.5           0.3
 Other financing
  activities            (0.1)              -            (0.3)         (0.1)
                -----------------------------------------------------------


 Cash used in
  financing 
  activities           (23.3)          (28.1)           (3.8)        (47.2)
                -----------------------------------------------------------


Effect of 
 exchange
 rate changes
 on cash                   -             0.1               -           0.1
                -----------------------------------------------------------


Net (decrease)
 increase 
 in cash                (1.5)           19.9            (8.5)          8.0


Cash, beginning 
 of period               6.4             9.8            13.4          21.7
                -----------------------------------------------------------


Cash, end
 of period             $ 4.9          $ 29.7           $ 4.9        $ 29.7
                -----------------------------------------------------------
                -----------------------------------------------------------





COTT CORPORATION                                                EXHIBIT 3
CONSOLIDATED BALANCE SHEETS
(in millions of US dollars, US GAAP)
Unaudited


                                    September 29, 2007  December 30, 2006
                                    --------------------------------------
ASSETS


Current assets
Cash                                $              4.9  $            13.4
Accounts receivable                              211.0              187.0
Income taxes recoverable                          37.3               17.8
Inventories                                      145.3              131.2
Prepaid and other expenses                        12.3               10.3
Deferred income taxes                             13.8               11.7
                                    --------------------------------------


                                                 424.6              371.4


Property, plant and equipment                    391.8              360.2
Goodwill                                         165.6              158.4
Intangibles and other assets                     236.1              250.7
Deferred income taxes                             13.3                  -
                                    --------------------------------------


                                    $          1,231.4  $         1,140.7
                                    --------------------------------------
                                    --------------------------------------


LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities
Short-term borrowings               $            114.5  $           107.7
Current maturities of long-term
 debt                                              2.0                2.0
Income taxes payable                               0.7                  -
Accounts payable and accrued
 liabilities                                     200.0              186.5
                                    --------------------------------------


                                                 317.2              296.2


Long-term debt                                   275.8              275.2
Other long-term liabilities                       12.4                  -
Deferred income taxes                             56.4               48.2
Other tax liabilities                             39.3               11.5
                                    --------------------------------------


                                                 701.1              631.1


Minority interest                                 19.9               20.9


Shareowners' equity
Capital stock                                    275.0              273.4
Restricted shares                                 (0.5)              (0.7)
Additional paid-in-capital                        27.4               29.8
Retained earnings                                168.1              168.7
Accumulated other comprehensive
 income                                           40.4               17.5
                                    --------------------------------------


                                                 510.4              488.7
                                    --------------------------------------


                                    $          1,231.4  $         1,140.7
                                    --------------------------------------
                                    --------------------------------------





COTT CORPORATION                                                  EXHIBIT 4
SEGMENT INFORMATION
(in millions of US dollars, US GAAP)
Unaudited


                    For the three months ended  For the nine months ended
                    ------------------------------------------------------
                    September 29, September 30,     September   September
                            2007          2006       29, 2007    30, 2007
                    ------------------------------------------------------
                    ------------------------------------------------------


Revenue
 North America      $        329.9  $    357.5  $       990.0  $  1,053.4
 International               134.7       118.0          373.2       318.3
                    ------------------------------------------------------


                    $        464.6  $    475.5  $     1,363.2  $  1,371.7
                    ------------------------------------------------------
                    ------------------------------------------------------


Operating (loss) 
 income
 North America      $        (10.2) $      6.7  $        (6.5) $     24.6
 International                 6.4         5.2           24.6        18.0
                    ------------------------------------------------------


                    $         (3.8) $     11.9  $        18.1  $     42.6
                    ------------------------------------------------------
                    ------------------------------------------------------





COTT CORPORATION                                                 EXHIBIT 5
SUPPLEMENTARY INFORMATION - NON GAAP MEASURES
(in millions of US dollars, except per share amounts)
Unaudited 



Change in revenue excluding 
 foreign exchange              


               For the three months ended        For the nine months ended
             --------------------------------------------------------------
                       September 29, 2007               September 29, 2007
             --------------------------------------------------------------
             --------------------------------------------------------------
                Cott      North  Internat-    Cott       North   Internat-
                        America      ional             America       ional
             --------------------------------------------------------------
             --------------------------------------------------------------



Change in 
 revenue      $(10.9)   $ (27.6)    $ 16.7  $ (8.5)    $ (63.4)    $  54.9
Impact of
 foreign 
 exchange      (11.8)      (4.1)      (7.7)  (28.1)       (4.9)      (23.2)
             --------------------------------------------------------------


Change 
 excluding 
 foreign 
 exchange    $ (22.7)    $(31.7)    $  9.0  $(36.6)    $ (68.3)    $  31.7
             --------------------------------------------------------------
Percentage 
 change 
 excluding
 foreign 
 exchange        (5%)       (9%)        7%     (3%)        (6%)         9%
             --------------------------------------------------------------
             --------------------------------------------------------------
For further information: Edmund O'Keeffe, (905) 672-1900 x 19216 / Website: www.cott.com