Cott Reports Third Quarter 2016 Results
(Unless stated otherwise, all third quarter 2016 comparisons are relative to the third quarter of 2015; all information is in U.S. dollars.)
(firmenpresse) - TORONTO, ON and TAMPA, FL -- (Marketwired) -- 11/10/16 -- Cott Corporation (NYSE: COT) (TSX: BCB) today announced its results for the third quarter ended October 1, 2016.
Cott completed the acquisitions of Eden Springs ("Eden") and S&D Coffee and Tea ("S&D") during the quarter, adding businesses with pro forma estimated 2016 revenues of approximately $950 million.
Cott revenue during the quarter was higher by 17% (20% on a foreign exchange neutral basis) at $885 million compared to $756 million.
Gross profit increased to $306 million compared to $233 million and gross margin as a percentage of revenue increased to 34.5% compared to 30.8%.
Net cash provided by operating activities of $92 million less $39 million of capital expenditures resulted in free cash flow of $53 million, or $67 million on an adjusted basis when excluding $14 million of acquisition, integration and transaction related costs.
"During the quarter we made significant progress in the continued transformation of our business towards a more diversified and higher margin beverage company with the closing of both the Eden and S&D acquisitions," commented Jerry Fowden, Cott''s Chief Executive Officer.
Revenue of $885 million was higher by 17% (20% on a foreign exchange neutral basis) primarily as a result of the additions of S&D and Eden, offset in part by the competitive landscape and mix shift within our traditional business.
Gross profit increased 32% to $306 million, with gross margins of 34.5% compared to 30.8%, driven primarily by the additions of Eden and S&D as well as cost and efficiency initiatives within our traditional business, offset in part by the negative impact of foreign exchange rates and increased new customer costs and other operational costs at DS Services.
Operating income increased 21% to $35 million. Excluding step up in inventory as well as acquisition, integration and transaction costs, adjusted operating income increased 27% to $48 million.
Income tax expense was $6 million compared to income tax benefit of $6 million as we recorded $9 million of tax expense associated with placing a valuation allowance against our existing Canadian net operating loss carryovers and other tax assets as a result of the structuring of the Eden acquisition during the quarter. Cash taxes paid during the period were consistent with the prior year at less than $1 million.
Reported net loss and net loss per diluted share were $4 million and $0.03, respectively, compared to reported net income and net income per diluted share of $5 million and $0.04, respectively. Adjusted net income and adjusted net income per diluted share (including adjustments for acquisition, integration and transaction costs as well as a tax valuation allowance) were $13 million and $0.09, respectively, compared to adjusted net income and adjusted net income per diluted share of $10 million and $0.09, respectively.
Reported EBITDA increased 17% to $101 million compared to $86 million in the prior year. Adjusted EBITDA increased 17% to $111 million including the partial quarter addition from Eden and S&D, offset in part by $3 million of incremental investment in home and office delivery ("HOD") customer programs, $4 million from reduced sales at DS Services of case pack water, office coffee services and retail products, and $5 million of adverse foreign exchange.
Net cash provided by operating activities of $92 million, less $39 million of capital expenditures resulted in free cash flow of $53 million. On an adjusted basis, free cash flow was $67 million compared to $70 million as the additions of Eden and S&D were offset by increased capital expenditures and the impact of adverse foreign exchange rates.
During the quarter, Cott completed the acquisitions of both Eden and S&D. Subsequent to the closing of the acquisitions, these businesses were added to Cott''s DSS reporting segment which was renamed "Water & Coffee Solutions". Our Cott North America, Cott U.K. and All Other reporting segments will continue to be referred to as our "traditional business".
Revenue of $437 million was higher by 63% driven primarily by the additions of Eden and S&D. Gross profit increased to $241 million from $164 million due primarily to the additions of Eden and S&D, offset by reduced sales at DS Services (excluding Aquaterra) and higher operational costs primarily associated with the DS Services higher level of customer growth.
DS Services organic new customer additions increased approximately 20% in the United States compared to the third quarter of 2015 driving year to date net new organic additions to 68,000 compared to 7,000 in the prior year. DS Services revenue increased 4% to $279 million due primarily to the addition of the Aquaterra business. Excluding Aquaterra, revenue decreased 2% due primarily to organic customer growth in HOD water being offset by reduced sales in office coffee services, retail supermarkets, and HOD case pack water. DS Services gross profit increased to $171 million from $164 million as the addition of Aquaterra and volume growth in HOD water offset increased operational costs primarily associated with organic customer growth as well as reduced sales in office coffee services, retail supermarkets, and HOD case pack water.
Cott acquired Eden on August 2, 2016 and, in line with expectations, $70 million of revenue and $45 million of gross profit was included in Cott''s third quarter consolidated financial results.
Cott acquired S&D on August 11, 2016 and $87 million of revenue and $25 million of gross profit was included in Cott''s third quarter consolidated financial results. S&D is off to a good start winning a number of new customer contracts during the quarter for production starting at the end of 2016 and early 2017.
Cott North America reporting segment volume increased 2% in actual cases (down 4% in serving equivalent cases) due primarily to 19% growth in value added water products and 9% growth in contract manufacturing, offset by declines in carbonated soft drinks and shelf stable juices. Revenue was lower by 4% at $326 million due primarily to the ongoing product mix shifts into contract manufacturing (where the revenue per case is lower as the brand owner typically provides the majority of the ingredients and packaging materials).
Gross profit increased to $44 million or 13.7% of revenue compared to $43 million or 12.8% of revenue due primarily to our "War on Waste" program driving improved operational costs at certain plant locations.
Cott U.K. reporting segment volume decreased 6% in actual cases (1% in serving equivalent cases) due primarily to the previously announced loss of volume from a large retail customer offset by growth at Aimia and good seasonal weather assisting the total beverage category in September.
Revenue decreased 17% (2% on a foreign exchange neutral basis) at $116 million due primarily to the post Brexit adverse foreign exchange impact on the British Pound.
Gross profit as a percentage of revenue was slightly down at 14% as adverse foreign exchange and lower volumes were largely offset by growth at Aimia and tight cost controls.
Based upon the immediate post-Brexit USDGBP and EURGBP exchange rates, we previously estimated that the adverse translational and transactional foreign exchange impact on 2016 EBITDA would be $15 to $18 million. As of the date of this release, we expect that the adverse foreign exchange impact on 2016 EBITDA will be $18 to $19 million.
Based on current USDGBP and EURGBP exchange rates and the 2017 forecasts of various major financial institutions, we expect the adverse impact on full year 2017 EBITDA to be $12 to $18 million.
Cott has targeted full year 2016 cash flow from operations of approximately $275 to $280 million and capital expenditures in the range of $135 to $140 million, resulting in adjusted free cash flow of $135 to $145 million (when excluding acquisition, integration and transaction costs) as the part year free cash flow contribution from Eden and S&D is expected to more than offset the further devaluation of the British Pound.
Our current fiscal year ending December 31, 2016 includes 52 weeks of activity and a fourth quarter of 13 weeks of activity for all reporting segments with the exception of our S&D business unit which will have a 12 week fourth quarter. Our prior fiscal year ended January 2, 2016 included 53 weeks of activity and a fourth quarter of 14 weeks of activity for DS Services within our Water & Coffee Solutions reporting segment.
Cott Corporation will host a conference call today, November 10, 2016, at 10:00 a.m. EST, to discuss third quarter results, which can be accessed as follows:
North America: (888) 427-9421
International: (719) 325-2298
Passcode: 5027008
A live audio webcast will be available through Cott''s website at . 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.
Cott is a diversified beverage company with the largest volume-based national presence in the North America and European home and office bottled water delivery industry, a leader in custom coffee roasting and blending of iced tea for the U.S. foodservice industry, and one of the world''s largest producers of beverages on behalf of retailers, brand owners and distributors. Our platform reaches over 2.3 million customers or delivery points across North America and Europe supported by strategically located sales and distribution facilities and fleets, as well as wholesalers and distributors. This enables us to efficiently service residences, businesses, restaurant chains, hotels and motels, small and large retailers, and healthcare facilities.
To supplement its reporting of financial measures determined in accordance with GAAP, Cott utilizes certain non-GAAP financial measures. Cott excludes from GAAP revenue the impact of foreign exchange and the impact of energy surcharges to separate the impact of these factors from Cott''s results of operations. Cott utilizes adjusted pre-tax income (loss), adjusted net income (loss), adjusted earnings (loss) per diluted share, and EBITDA and adjusted EBITDA (on a global, and in some cases, business unit, basis) to separate the impact of certain items from the underlying business. Because 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 Cott''s underlying business performance and the performance of its management. Additionally, Cott supplements its reporting of net cash provided by (used in) operating activities determined in accordance with GAAP by excluding additions to property, plant & equipment to present free cash flow, and by excluding DSS integration capital expenditures, acquisition and integration cash costs and cash collateral deposits to present adjusted free cash flow, which management believes provides useful information to investors about the amount of cash generated by the business that, after the acquisition of property and equipment as well as after bond redemption costs, can be used for strategic opportunities, including investing in our business, making strategic acquisitions, paying dividends, and strengthening the balance sheet. The non-GAAP financial measures described above are in addition to, and not meant to be considered superior to, or a substitute for, Cott''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.
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 Cott makes the statements. Forward-looking statements involve inherent risks and uncertainties and Cott 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, but are not limited to, statements related to the execution of our strategic priorities, future financial and operating trends and results (including the impact of foreign exchange on 2016 and 2017 results) and related matters. The forward-looking statements are based on assumptions regarding 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: 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 Walmart; consolidation of retail customers; 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 acquisitions or other strategic opportunities that we pursue; our ability to realize the expected benefits of the acquisitions of DS Services, Eden and S&D because of integration difficulties and other challenges; the limited nature of our indemnification rights under the DS Services, Eden and S&D acquisition agreements; the incurrence of substantial indebtedness to finance the DS Services, Eden and S&D acquisitions; our exposure to intangible asset risk; 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; our substantial indebtedness and our ability to meet our obligations under our debt agreements, and risks of further increases to our indebtedness; 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 maintain access to our water sources; our ability to adequately address the challenges and risks associated with our international operations and acquisition strategy and address difficulties in complying with laws and regulations including the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act of 2010; 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 proposed taxes on soda and other sugary drinks; enforcement of compliance with the Ontario Environmental Protection Act; the seasonal nature of our business and the effect of adverse weather conditions; 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 ability to renew our collective bargaining agreements on satisfactory terms; disruptions in our information systems; our ability to securely maintain our customers'' confidential or credit card information, or other private data relating to our employees or our company; our ability to use net operating losses to offset future taxable income; our historical and pro forma financial information may not be indicative of our future financial performance; or our ability to maintain our quarterly dividend.
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 Cott''s Annual Report on Form 10-K and its quarterly reports on Form 10-Q, as well as other filings with the securities commissions. Cott does not undertake to update or revise any of these statements in light of new information or future events, except as expressly required by applicable law.
Website:
Jarrod Langhans
Investor Relations
Tel: (813) 313-1732
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Datum: 10.11.2016 - 06:30 Uhr
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